Smith & Wesson Holding Corporation Reports Third Quarter Fiscal 2013 Financial Results
Third Quarter Fiscal 2013 Financial Highlights
- Net sales from continuing operations for the third quarter were
$136.2 million , up 38.8% from the third quarter last year. The company continued to increase its production capacity during the third quarter and has operated its plant at essentially full capacity for the last four quarters. Despite these capacity increases, the company was unable to meet the ongoing demand across all of its firearm product lines. - Gross profit for the third quarter was
$50.1 million , or 36.8% of net sales, compared with gross profit of$30.0 million , or 30.6% of net sales, for the comparable quarter last year. Gross profit improved as a result of increased sales volume, leveraging of fixed costs, and a favorable product mix. - Operating expenses for the third quarter were
$22.1 million , or 16.2% of net sales, compared with operating expenses of$19.7 million , or 20.1% of net sales, for the third quarter last year. The increase in operating expenses was primarily related to higher general and administrative costs associated with the ongoing implementation of the company's new ERP system and incentive compensation. The decline in operating expenses as a percentage of net sales was primarily driven by increased sales volume and controlled spending in sales and marketing. - Operating income from continuing operations for the third quarter was
$28.0 million , or 20.6% percent of net sales, compared with operating income from continuing operations of$10.3 million , or 10.5% percent of net sales, for the comparable quarter last year. - Income from continuing operations for the third quarter was
$17.5 million , or$0.26 per diluted share, more than triple the net income from continuing operations of$5.4 million , or$0.08 per diluted share, for the third quarter last year. - Non-GAAP Adjusted EBITDAS from continuing operations for the third quarter increased to
$33.3 million compared with$14.8 million for the third quarter last year. Fiscal year-to-date non-GAAP Adjusted EBITDAS was$101.5 million compared with$37.2 million for the comparable prior year period. - Operating cash flow of
$33.0 million and net capital spending of$12.6 million for the third quarter resulted in free cash flow of$20.4 million . - During the third quarter of fiscal 2013, the company's Board of Directors approved a program to repurchase up to
$35.0 million ofSmith & Wesson 's common stock, subject to certain conditions, in the open market or privately negotiated transactions on or prior toJune 30, 2013 . The company repurchased 2.1 million shares of its common stock for$20.0 million through this program during the third quarter of fiscal 2013 utilizing cash on hand.
Financial Outlook for Continuing Operations
The company expects net sales from continuing operations for the fourth quarter of fiscal 2013 to be between
The company is raising its full year fiscal 2013 financial guidance. The company currently 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 Financial Measures
In this press release, certain non-GAAP financial measures, including "Adjusted EBITDAS" and "free cash flow" are presented. From time-to-time, the company considers and uses Adjusted EBITDAS and free cash flow as supplemental measures 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 compensation expense, plant consolidation costs, DOJ and
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
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 outlook for fiscal 2013 full year net sales from continuing operations; the outcome of the ongoing implementation of our new ERP system; potential future repurchases of our common stock under our stock repurchase program; our belief regarding robust consumer demand for firearms; our belief that our expanded production capacity will be further deployed in the fourth quarter of fiscal 2013; increasing our full year fiscal 2013 financial guidance; our belief regarding our enhanced flexibility to invest in our core firearm business and fuel our growth initiatives; 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 fourth quarter of fiscal 2013 and the full 2013 fiscal year; and our outlook for income from continuing operations and non-GAAP Adjusted EBITDAS from continuing operations for the full 2013 fiscal year, including the amounts excluded from and included in net income to arrive at Adjusted EBITDAS for our guidance for full year 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
Contact:
(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: |
For the Nine Months Ended: |
||||||||||||||
January 31, 2013 |
January 31, 2012 |
January 31, 2013 |
January 31, 2012 |
||||||||||||
(In thousands, except per share data) |
|||||||||||||||
Net sales |
$ |
136,242 |
$ |
98,125 |
$ |
408,797 |
$ |
282,154 |
|||||||
Cost of sales |
86,143 |
68,121 |
258,882 |
201,028 |
|||||||||||
Gross profit |
50,099 |
30,004 |
149,915 |
81,126 |
|||||||||||
Operating expenses: |
|||||||||||||||
Research and development |
942 |
992 |
3,363 |
3,571 |
|||||||||||
Selling and marketing |
8,333 |
8,062 |
23,203 |
24,823 |
|||||||||||
General and administrative |
12,776 |
10,666 |
37,381 |
33,483 |
|||||||||||
Total operating expenses |
22,051 |
19,720 |
63,947 |
61,877 |
|||||||||||
Operating income from continuing operations |
28,048 |
10,284 |
85,968 |
19,249 |
|||||||||||
Other income/(expense): |
|||||||||||||||
Other income/(expense), net |
— |
8 |
39 |
62 |
|||||||||||
Interest income |
48 |
394 |
750 |
1,196 |
|||||||||||
Interest expense |
(1,240) |
(1,629) |
(4,571) |
(6,044) |
|||||||||||
Total other income/(expense), net |
(1,192) |
(1,227) |
(3,782) |
(4,786) |
|||||||||||
Income from continuing operations before income taxes |
26,856 |
9,057 |
82,186 |
14,463 |
|||||||||||
Income tax expense |
9,350 |
3,664 |
29,410 |
5,845 |
|||||||||||
Income from continuing operations |
17,506 |
5,393 |
52,776 |
8,618 |
|||||||||||
Discontinued operations: |
|||||||||||||||
Loss from operations of discontinued security solutions division |
(601) |
(1,600) |
(3,150) |
(8,306) |
|||||||||||
Income tax expense/(benefit) |
2,329 |
(645) |
(3,921) |
(3,326) |
|||||||||||
Income/(loss) from discontinued operations |
(2,930) |
(955) |
771 |
(4,980) |
|||||||||||
Net income/comprehensive income |
$ |
14,576 |
$ |
4,438 |
$ |
53,547 |
$ |
3,638 |
|||||||
Net income per share: |
|||||||||||||||
Basic - continuing operations |
$ |
0.27 |
$ |
0.08 |
$ |
0.81 |
$ |
0.13 |
|||||||
Basic - net income |
$ |
0.22 |
$ |
0.07 |
$ |
0.82 |
$ |
0.06 |
|||||||
Diluted - continuing operations |
$ |
0.26 |
$ |
0.08 |
$ |
0.79 |
$ |
0.13 |
|||||||
Diluted - net income |
$ |
0.22 |
$ |
0.07 |
$ |
0.80 |
$ |
0.06 |
|||||||
Weighted average number of common shares outstanding: |
|||||||||||||||
Basic |
65,149 |
64,874 |
65,457 |
64,700 |
|||||||||||
Diluted |
66,421 |
66,582 |
66,909 |
65,154 |
SMITH & WESSON HOLDING CORPORATION AND SUBSIDIARIES |
|||||||||
CONSOLIDATED BALANCE SHEETS |
|||||||||
(Unaudited) |
|||||||||
As of: |
|||||||||
January 31, 2013 |
April 30, 2012 |
||||||||
(In thousands, except par value and share data) |
|||||||||
ASSETS |
|||||||||
Current assets: |
|||||||||
Cash and cash equivalents, including restricted cash of $3,342 on January 31, 2013 and $3,334 on April 30, 2012 |
$ |
61,999 |
$ |
56,717 |
|||||
Accounts receivable, net of allowance for doubtful accounts of $785 on January 31, 2013 and $1,058 on April 30, 2012 |
38,871 |
48,313 |
|||||||
Inventories |
69,208 |
55,296 |
|||||||
Prepaid expenses and other current assets |
5,689 |
4,139 |
|||||||
Assets held for sale |
— |
13,490 |
|||||||
Deferred income taxes |
12,759 |
12,759 |
|||||||
Income tax receivable |
5,800 |
— |
|||||||
Total current assets |
194,326 |
190,714 |
|||||||
Property, plant, and equipment, net |
77,807 |
60,528 |
|||||||
Intangibles, net |
4,075 |
4,532 |
|||||||
Other assets |
5,333 |
5,900 |
|||||||
$ |
281,541 |
$ |
261,674 |
||||||
LIABILITIES AND STOCKHOLDERS' EQUITY |
|||||||||
Current liabilities: |
|||||||||
Accounts payable |
$ |
24,377 |
$ |
28,618 |
|||||
Accrued expenses |
13,677 |
20,685 |
|||||||
Accrued payroll |
11,474 |
9,002 |
|||||||
Accrued income taxes |
— |
291 |
|||||||
Accrued taxes other than income |
4,859 |
4,270 |
|||||||
Accrued profit sharing |
7,131 |
8,040 |
|||||||
Accrued product/municipal liability |
1,517 |
1,397 |
|||||||
Accrued warranty |
5,014 |
5,349 |
|||||||
Liabilities held for sale |
— |
5,693 |
|||||||
Total current liabilities |
68,049 |
83,345 |
|||||||
Deferred income taxes |
4,537 |
4,537 |
|||||||
Notes payable, net of current portion |
43,559 |
50,000 |
|||||||
Other non-current liabilities |
10,782 |
10,948 |
|||||||
Total liabilities |
126,927 |
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, 67,459,468 shares issued and 64,159,865 shares outstanding on January 31, 2013 and 66,512,097 shares issued and 65,312,097 shares outstanding on April 30, 2012 |
67 |
67 |
|||||||
Additional paid-in capital |
197,602 |
189,379 |
|||||||
Accumulated deficit |
(16,732) |
(70,279) |
|||||||
Accumulated other comprehensive income |
73 |
73 |
|||||||
Treasury stock, at cost (3,299,603 common shares on January 31, 2013 and 1,200,000 on April 30, 2012) |
(26,396) |
(6,396) |
|||||||
Total stockholders' equity |
154,614 |
112,844 |
|||||||
$ |
281,541 |
$ |
261,674 |
SMITH & WESSON HOLDING CORPORATION AND SUBSIDIARIES |
||||||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS |
||||||||||
(Unaudited) |
||||||||||
For the Nine Months Ended: |
||||||||||
January 31, 2013 |
January 31, 2012 |
|||||||||
(In thousands) |
||||||||||
Cash flows from operating activities: |
||||||||||
Net income |
$ |
53,547 |
$ |
3,638 |
||||||
Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||||
Amortization and depreciation |
12,023 |
11,286 |
||||||||
Loss on sale of business including loss on sale of discontinued operations, including $45 of stock-based compensation expense |
1,222 |
241 |
||||||||
Loss on sale/disposition of assets |
277 |
251 |
||||||||
Provisions for/(recoveries of) losses on accounts receivable |
378 |
(326) |
||||||||
Change in disposal group assets and liabilities |
(1,215) |
5,241 |
||||||||
Stock-based compensation expense |
3,086 |
1,797 |
||||||||
Excess book deduction of stock-based compensation |
— |
(266) |
||||||||
Changes in operating assets and liabilities: |
||||||||||
Accounts receivable |
9,064 |
15,555 |
||||||||
Inventories |
(13,912) |
(9,988) |
||||||||
Other current assets |
(1,150) |
1,578 |
||||||||
Income tax receivable/payable |
(6,091) |
1,239 |
||||||||
Accounts payable |
(4,241) |
(13,519) |
||||||||
Accrued payroll |
1,867 |
2,785 |
||||||||
Accrued taxes other than income |
589 |
(8,000) |
||||||||
Accrued profit sharing |
(909) |
(459) |
||||||||
Accrued other expenses |
(7,795) |
(5,348) |
||||||||
Accrued product/municipal liability |
120 |
(149) |
||||||||
Accrued warranty |
(335) |
1,687 |
||||||||
Other assets |
(45) |
(64) |
||||||||
Other non-current liabilities |
284 |
599 |
||||||||
Net cash provided by operating activities |
46,764 |
7,778 |
||||||||
Cash flows from investing activities: |
||||||||||
Proceeds from sale of business including discontinued operations |
7,500 |
500 |
||||||||
Receipts from note receivable |
55 |
— |
||||||||
Payments to acquire patents and software |
(36) |
(124) |
||||||||
Proceeds from sale of property and equipment |
1,037 |
15 |
||||||||
Payments to acquire property and equipment |
(28,399) |
(10,067) |
||||||||
Net cash used in investing activities |
(19,843) |
(9,676) |
||||||||
Cash flows from financing activities: |
||||||||||
Proceeds from loans and notes payable |
1,753 |
1,532 |
||||||||
Cash paid for debt issue costs |
— |
(1,859) |
||||||||
Proceeds from energy efficiency incentive programs |
— |
225 |
||||||||
Payments on capital lease obligation |
(450) |
— |
||||||||
Cash paid for redemption of convertible notes |
— |
(30,000) |
||||||||
Payments on loans and notes payable |
(8,034) |
(1,264) |
||||||||
Payments to acquire treasury stock |
(20,000) |
— |
||||||||
Proceeds from exercise of options to acquire common stock, including employee stock purchase plan |
4,095 |
717 |
||||||||
Excess tax benefit of stock-based compensation |
997 |
— |
||||||||
Net cash used in financing activities |
(21,639) |
(30,649) |
||||||||
Net increase/(decrease) in cash and cash equivalents |
5,282 |
(32,547) |
||||||||
Cash and cash equivalents, beginning of period |
56,717 |
58,292 |
||||||||
Cash and cash equivalents, end of period |
$ |
61,999 |
$ |
25,745 |
||||||
Supplemental disclosure of cash flow information |
||||||||||
Cash paid for: |
||||||||||
Interest |
$ |
5,252 |
$ |
5,745 |
||||||
Income taxes |
30,976 |
1,524 |
SMITH & WESSON HOLDING CORPORATION AND SUBSIDIARIES |
||||||||||||||||||||||
RECONCILIATION OF GAAP NET INCOME TO ADJUSTED EBITDAS (Unaudited) |
||||||||||||||||||||||
For the Three Months Ended January 31, 2013: |
For the Three Months Ended January 31, 2012: |
|||||||||||||||||||||
GAAP |
Adjustments |
Adjusted |
GAAP |
Adjustments |
Adjusted |
|||||||||||||||||
(In thousands) |
||||||||||||||||||||||
Net sales |
$ |
136,242 |
$ |
— |
$ |
136,242 |
$ |
98,125 |
$ |
— |
$ |
98,125 |
||||||||||
Cost of sales |
86,143 |
(3,414) |
(8) |
82,729 |
68,121 |
(3,185) |
(1) |
64,936 |
||||||||||||||
Gross profit |
50,099 |
3,414 |
53,513 |
30,004 |
3,185 |
33,189 |
||||||||||||||||
Operating expenses: |
||||||||||||||||||||||
Research and development |
942 |
(29) |
(8) |
913 |
992 |
(42) |
(1) |
950 |
||||||||||||||
Selling and marketing |
8,333 |
(44) |
(8) |
8,289 |
8,062 |
(51) |
(1) |
8,011 |
||||||||||||||
General and administrative |
12,776 |
(1,739) |
(2) |
11,037 |
10,666 |
(1,228) |
(2) |
9,438 |
||||||||||||||
Total operating expenses |
22,051 |
(1,812) |
20,239 |
19,720 |
(1,321) |
18,399 |
||||||||||||||||
Operating income from continuing operations |
28,048 |
5,226 |
33,274 |
10,284 |
4,506 |
14,790 |
||||||||||||||||
Other income/(expense): |
||||||||||||||||||||||
Other income/(expense), net |
— |
— |
— |
8 |
— |
8 |
||||||||||||||||
Interest income |
48 |
— |
(6) |
48 |
394 |
(361) |
(6) |
33 |
||||||||||||||
Interest expense |
(1,240) |
1,240 |
(4) |
— |
(1,629) |
1,629 |
(4) |
— |
||||||||||||||
Total other income/(expense), net |
(1,192) |
1,240 |
48 |
(1,227) |
1,268 |
41 |
||||||||||||||||
Income from continuing operations before income taxes |
26,856 |
6,466 |
33,322 |
9,057 |
5,774 |
14,831 |
||||||||||||||||
Income tax expense |
9,350 |
(9,350) |
(5) |
— |
3,664 |
(3,664) |
(5) |
— |
||||||||||||||
Income from continuing operations |
17,506 |
15,816 |
33,322 |
5,393 |
9,438 |
14,831 |
||||||||||||||||
Discontinued operations: |
||||||||||||||||||||||
Loss from operations of discontinued security solutions division |
(601) |
424 |
(10) |
(177) |
(1,600) |
759 |
(7) |
(841) |
||||||||||||||
Income tax expense/(benefit) |
2,329 |
(2,329) |
(5) |
— |
(645) |
645 |
(5) |
— |
||||||||||||||
Loss on discontinued operations |
(2,930) |
2,753 |
(177) |
(955) |
114 |
(841) |
||||||||||||||||
Net income/comprehensive income |
$ |
14,576 |
$ |
18,569 |
$ |
33,145 |
$ |
4,438 |
$ |
9,552 |
$ |
13,990 |
||||||||||
SMITH & WESSON HOLDING CORPORATION AND SUBSIDIARIES |
||||||||||||||||||||||
RECONCILIATION OF GAAP NET INCOME TO ADJUSTED EBITDAS (Unaudited) |
||||||||||||||||||||||
For the Nine Months Ended January 31, 2013: |
For the Nine Months Ended January 31, 2012: |
|||||||||||||||||||||
GAAP |
Adjustments |
Adjusted |
GAAP |
Adjustments |
Adjusted |
|||||||||||||||||
(In thousands) |
||||||||||||||||||||||
Net sales |
$ |
408,797 |
$ |
— |
$ |
408,797 |
$ |
282,154 |
$ |
— |
$ |
282,154 |
||||||||||
Cost of sales |
258,882 |
(10,211) |
(8) |
248,671 |
201,028 |
(10,815) |
(1) |
190,213 |
||||||||||||||
Gross profit |
149,915 |
10,211 |
160,126 |
81,126 |
10,815 |
91,941 |
||||||||||||||||
Operating expenses: |
||||||||||||||||||||||
Research and development |
3,363 |
(87) |
(8) |
3,276 |
3,571 |
(145) |
(1) |
3,426 |
||||||||||||||
Selling and marketing |
23,203 |
(168) |
(8) |
23,035 |
24,823 |
(225) |
(1) |
24,598 |
||||||||||||||
General and administrative |
37,381 |
(4,874) |
(2) |
32,507 |
33,483 |
(6,578) |
(3) |
26,905 |
||||||||||||||
Total operating expenses |
63,947 |
(5,129) |
58,818 |
61,877 |
(6,948) |
54,929 |
||||||||||||||||
Operating income from continuing operations |
85,968 |
15,340 |
101,308 |
19,249 |
17,763 |
37,012 |
||||||||||||||||
Other income/(expense): |
||||||||||||||||||||||
Other income/(expense), net |
39 |
— |
39 |
62 |
— |
62 |
||||||||||||||||
Interest income |
750 |
(608) |
(6) |
142 |
1,196 |
(1,043) |
(6) |
153 |
||||||||||||||
Interest expense |
(4,571) |
4,571 |
(4) |
— |
(6,044) |
6,044 |
(4) |
— |
||||||||||||||
Total other income/(expense), net |
(3,782) |
3,963 |
181 |
(4,786) |
5,001 |
215 |
||||||||||||||||
Income from continuing operations before income taxes |
82,186 |
19,303 |
101,489 |
14,463 |
22,764 |
37,227 |
||||||||||||||||
Income tax expense |
29,410 |
(29,410) |
(5) |
— |
5,845 |
(5,845) |
(5) |
— |
||||||||||||||
Income from continuing operations |
52,776 |
48,713 |
101,489 |
8,618 |
28,609 |
37,227 |
||||||||||||||||
Discontinued operations: |
||||||||||||||||||||||
Loss from operations of discontinued security solutions division |
(3,150) |
1,808 |
(9) |
(1,342) |
(8,306) |
2,261 |
(7) |
(6,045) |
||||||||||||||
Income tax benefit |
(3,921) |
3,921 |
(5) |
— |
(3,326) |
3,326 |
(5) |
— |
||||||||||||||
Income/(loss) on discontinued operations |
771 |
(2,113) |
(1,342) |
(4,980) |
(1,065) |
(6,045) |
||||||||||||||||
Net income/comprehensive income |
$ |
53,547 |
$ |
46,600 |
$ |
100,147 |
$ |
3,638 |
$ |
27,544 |
$ |
31,182 |
||||||||||
(1) |
To exclude depreciation, amortization, and plant consolidation costs. |
|||||||||||||||||||||
(2) |
To exclude depreciation, amortization, stock-based compensation expense, and DOJ/SEC costs and related profit sharing impacts of DOJ/SEC. |
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(3) |
To exclude 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. |
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(4) |
To exclude interest expense. |
|||||||||||||||||||||
(5) |
To exclude income tax expense. |
|||||||||||||||||||||
(6) |
To exclude intercompany interest income. |
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(7) |
To exclude depreciation, amortization, interest expense, and stock-based compensation expense. |
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(8) |
To exclude depreciation and amortization. |
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(9) |
To exclude loss on sale of discontinued operations, depreciation, amortization, interest expense, stock-based compensation expense. |
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(10) |
To exclude loss on sale of discontinued operations. |
SMITH & WESSON HOLDING CORPORATION AND SUBSIDIARIES |
|||||
RECONCILIATION OF ESTIMATED GAAP INCOME FROM CONTINUING OPERATIONS TO ESTIMATED ADJUSTED EBITDAS |
|||||
For the Year Ended April 30, 2013: |
|||||
Low Range |
High Range |
||||
(In thousands) |
|||||
Income from continuing operations |
$ |
78,000 |
$ |
79,500 |
|
Interest expense |
5,800 |
5,800 |
|||
Income tax expense |
43,900 |
44,700 |
|||
Depreciation and amortization |
15,500 |
15,500 |
|||
Stock-based compensation expense |
4,200 |
4,200 |
|||
DOJ/SEC costs, net of profit sharing impact |
1,000 |
1,000 |
|||
Adjusted EBITDAS |
$ |
148,400 |
$ |
150,700 |
SOURCE