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Smith & Wesson Holding Corporation Reports Record Fourth Quarter and Full Year Fiscal 2012 Financial Results
- Record Fiscal Fourth Quarter 2012 Net Sales from Continuing Operations of $129.8 Million, Up 27.7% Year-Over-Year
- Record Fiscal Fourth Quarter 2012 Income from Continuing Operations of $17.8 Million or $0.27 per diluted share
- Record Annual Fiscal 2012 Income from Continuing Operations of $26.4 Million or $0.40 per diluted share
- Record Annual Units Produced
- Record Annual Cash Generated
- Company Issues Fiscal 2013 Financial Outlook

SPRINGFIELD, Mass., June 28, 2012 /PRNewswire/ -- Smith & Wesson Holding Corporation (NASDAQ Global Select: SWHC), a leader in firearm manufacturing and design, today announced record financial results for the fourth quarter and fiscal year ended April 30, 2012.

Fourth Quarter Fiscal 2012 Financial Highlights

  • Net sales from continuing operations for the fourth quarter were a record $129.8 million, up 27.7% from the fourth quarter last year.  The increase was driven by strong sales of M&P™ polymer pistols and M&P modern sporting rifles.  
  • Gross profit for the fourth quarter was $46.9 million, or 36.1% of net sales, compared with gross profit of $31.2 million, or 30.7% of net sales, for the comparable quarter last year.  Gross profit was positively impacted in the quarter by significant one-time benefits relating to reductions in inventory and legal reserves.  In addition, the higher production volume allowed for increased overhead absorption.  Higher sales volume, cost savings efforts, reduced promotion costs, and a favorable product mix also contributed to the improvement.
  • Operating expense for the fourth quarter totaled $21.2 million, or 16.3% of net sales, compared with operating expense of $23.2 million, or 22.9% of net sales, for the fourth quarter last year.  The decrease in operating expense reflected cost-savings efforts, including reduced legal expenses, and the impact of the consolidation of the Thompson/Center Arms operations to Springfield, Massachusetts.
  • Net income from continuing operations for the fourth quarter was $17.8 million, or $0.27 per diluted share, compared with net income from continuing operations of $4.4 million, or $0.07 per diluted share, for the fourth quarter last year.
  • Non-GAAP Adjusted EBITDAS from continuing operations for the fourth quarter increased to $31.2 million compared with $14.9 million for the fourth quarter last year.
  • At April 30, 2012, firearm backlog was $439.0 million, an increase of $252.3 million, or 135.1%, compared with the end of the fourth quarter last year, and an increase of $240.5 million, or 121.1%, from the most recent sequential quarter.  
  • Operating cash flow of $29.6 million and net capital spending of $3.7 million resulted in free cash flow of $25.8 million from continuing operations. Cash at year end was $56.7 million.

Full Year Fiscal 2012 Financial Highlights

  • Net sales from continuing operations for the full fiscal year were a record $412.0 million compared with $342.2 million for the prior fiscal year, an increase of 20.4%. 
  • Gross profit was 31.1% compared with 30.6% for the prior fiscal year.
  • Operating expenses were $83.1 million for fiscal 2012, or 20.2% of net sales, compared with operating expenses of $86.9 million, or 25.4% of net sales, for fiscal 2011.
  • Income from continuing operations was a record $26.4 million, or $0.40 per diluted share, compared with income from continuing operations of $8.1 million, or $0.13 per diluted share, a year ago. 
  • Non-GAAP Adjusted EBITDAS from continuing operations for the full fiscal year totaled $68.4 million compared with $42.1 million for fiscal 2011.

James Debney, Smith & Wesson Holding Corporation President and Chief Executive Officer, stated, "Our objective in fiscal 2012 was to streamline the company and focus on our position as a leading, pure-play firearm company.  We are very pleased with our results, which include record annual and fourth quarter net sales and profits.  In the fourth quarter, we continued to deliver strong sales growth with our world-class products, including our M&P polymer pistols and our M&P modern sporting rifles.  We continued to increase our manufacturing capacity and outsourcing capabilities, and our rapid acceleration of those efforts, combined with outstanding execution by our operations team, allowed us to capture incremental sales.  Our M&P brand continues to be well accepted by consumers.  We added a new member to the M&P family in the quarter with the highly successful launch of our new M&P Shield™.  The M&P Shield offers consumers a polymer pistol with an easily concealed one-inch profile, combined with professional-grade features, simple operation, and reliable performance.  Acceptance of the M&P Shield in the market has been fantastic."   

Jeffrey D. Buchanan, Executive Vice President and Chief Financial Officer, stated, "In fiscal 2012, our growing cash position allowed us to pay down $30.0 million of debt and increase our manufacturing capacity without accessing our line of credit. As we move into fiscal 2013, we will use the strength of our balance sheet to continue investing in our business.  Recently, and after the end of the fiscal year, our strong cash position provided us the opportunity to enter the bond market and begin to repurchase our senior notes.  Thus far, we have purchased $6.4 million of the notes.  Overall, our growth in fiscal 2012 helped lay a solid fiscal foundation for the further expected improvement that is reflected in our financial guidance for fiscal 2013."

Financial Outlook for Continuing Operations

The company expects net sales from continuing operations for the first quarter of fiscal 2013 to be between $125.0 million and $130.0 million, which would represent year-over-year growth from continuing operations of over 36.0%. The company anticipates GAAP earnings per share from continuing operations of between $0.16 and $0.19 for the first quarter of fiscal 2013.

The company anticipates net sales from continuing operations for fiscal 2013 of between $485.0 million and $505.0 million, which would represent year-over-year growth from continuing operations of over 17.0%. The company anticipates GAAP earnings per share from continuing operations of between $0.60 and $0.65 for fiscal 2013.

Conference Call and Webcast

The company will host a conference call and webcast today, June 28, 2012, to discuss its fourth quarter and full year fiscal 2012 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 617-847-8709 and reference conference code 52713609. 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, impairment charge to goodwill and indefinite lived long-lived intangible assets related to the acquisition of Smith & Wesson Security Solutions™ (SWSS), DOJ and SEC investigation costs, and certain other transactions.  See the attached "Reconciliation of GAAP Net Income/(Loss) 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 and twelve-month periods ended April 30, 2012 and April 30, 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 our continued strong sales growth with our world-class products, including our M&P polymer pistols and our M&P modern sporting rifles; our continued increase in manufacturing capacity and outsourcing capabilities; our belief that our M&P brand continues to be well accepted by consumers; our belief regarding what our M&P Shield offers consumers and the market acceptance of the M&P Shield; our expectation that we will use the strength of our balance sheet to continue investing in our business in fiscal 2013; our expectation that we may repurchase some of our bonds; our belief that we have a solid fiscal foundation for the further expected improvement, which is reflected in our financial guidance for fiscal 2013; and our outlook for net sales from continuing operations, year-over-year growth from continuing operations, and GAAP earnings per share from continuing operations for fiscal 2013 and the first quarter of 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 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 success of the divestiture of our security solutions business and its effects 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 OPERATIONS AND COMPREHENSIVE INCOME/(LOSS)



For the Three Months Ended April 30,


For the Years Ended April 30,




2012 (unaudited)


2011 (unaudited)


2012


2011




(In thousands, except per share data)















Net sales

$

129,843


$

101,667


$

411,997


$

342,233


Cost of sales


82,980



70,427



284,008



237,545


Gross profit


46,863



31,240



127,989



104,688


Operating expenses:














 Research and development


973



1,264



4,543



4,363



 Selling and marketing


6,495



8,374



31,317



34,580



 General and administrative


13,729



13,609



47,213



47,954



 Total operating expenses


21,197



23,247



83,073



86,897


Operating income from continuing operations


25,666



7,993



44,916



17,791


Other income/(expense):














 Other income/(expense), net


16



(464)



78



228



 Interest income


309



348



1,505



1,198



 Interest expense


(1,439)



(2,024)



(7,484)



(5,683)



 Total other income/(expense), net


(1,114)



(2,140)



(5,901)



(4,257)


Income from continuing operations before income taxes


24,552



5,853



39,015



13,534


Income tax expense


6,735



1,460



12,582



5,454



Income from continuing operations


17,817



4,393



26,433



8,080


Discontinued operations:














Loss from operations of discontinued security solutions
division


(7,639)



(2,912)



(15,945)



(96,055)



Income tax expense/(benefit)


(2,290)



341



(5,617)



(5,206)



Loss from discontinued operations


(5,349)



(3,253)



(10,328)



(90,849)


Net income/(loss)/comprehensive income/(loss)

$

12,468


$

1,140


$

16,105


$

(82,769)






























Net income/(loss) per share:














Basic - continuing operations

$

0.27


$

0.07


$

0.41


$

0.13

















Basic - net income/(loss)

$

0.19


$

0.02


$

0.25


$

(1.37)

















Diluted - continuing operations

$

0.27


$

0.07


$

0.40


$

0.13

















Diluted - net income/(loss)

$

0.19


$

0.02


$

0.25


$

(1.30)
















Weighted average number of common shares outstanding:




























Basic 


65,057



62,285



64,788



60,622

















Diluted


66,418



67,762



67,277



63,621















SMITH & WESSON HOLDING CORPORATION AND SUBSIDIARIES


CONSOLIDATED BALANCE SHEETS


As of:












April 30, 2012


April 30, 2011






(In thousands, except par value and share data)


 ASSETS

 Current assets:









Cash and cash equivalents, including restricted cash of $3,334 on April 30, 2012
and $5,821 on April 30, 2011

$

56,717


$

58,292




Accounts receivable, net of allowance for doubtful accounts of $1,058 on April
30, 2012 and $2,147 on April 30, 2011


48,313



64,753




Inventories


55,296



51,720




Other current assets


4,139



10,212




Assets held for sale


13,490






Deferred income taxes


12,759



14,121




Income tax receivable




4,513





 Total current assets


190,714



203,611


 Property, plant and equipment, net


60,528



62,390


 Intangibles, net


4,532



8,692


 Other assets


5,900



6,804



$

261,674


$

281,497



















 LIABILITIES AND STOCKHOLDERS' EQUITY

 Current liabilities:









Accounts payable

$

28,618


$

40,119




Accrued expenses


20,685



25,356




Accrued payroll


9,002



5,309




Accrued income taxes


291






Accrued taxes other than income


4,270



11,421




Accrued profit sharing


8,040



4,081




Accrued product/municipal liability


1,397



2,584




Accrued warranty


5,349



3,424




Liabilities held for sale


5,693






Current portion of notes payable




30,000





 Total current liabilities


83,345



122,294


 Deferred income taxes


4,537



7,708


 Notes payable, net of current portion


50,000



50,000


 Other non-current liabilities


10,948



8,763





 Total liabilities


148,830



188,765


 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, 66,512,097 shares
issued and 65,312,097 shares outstanding on April 30, 2012 and 65,710,531 shares
issued and 64,510,531 shares outstanding on April 30, 2011


67



66



Additional paid-in capital


189,379



185,373



Accumulated deficit 


(70,279)



(86,384)



Accumulated other comprehensive income


73



73



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


(6,396)



(6,396)





 Total stockholders' equity


112,844



92,732



$

261,674


$

281,497


SMITH & WESSON HOLDING CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS






For the Years Ended April 30,



2012


2011






(In thousands)

 Cash flows from operating activities:








 Net income/(loss)

$

16,105


$

(82,769)



 Adjustments to reconcile net income/(loss) to net cash provided by operating activities:









 Amortization and depreciation


16,729



14,935




 Loss on sale of business, including loss on sale of discontinued operations


5,688






 Loss on sale of assets


324



234




 (Recoveries of)/provision for losses on accounts receivable


(439)



1,379




Impairment of long-lived assets




90,503




Deferred income taxes


(1,558)



(480)




 Stock-based compensation expense


2,484



1,680




 Change in contingent consideration




(3,060)




 Excess book deduction of stock-based compensation


(144)



(739)




 Changes in operating assets and liabilities:









Accounts receivable


7,803



7,327




 Inventories


(7,927)



(995)




 Other current assets


1,200



(1,717)




 Income tax receivable/payable


4,804



657




 Accounts payable


(8,521)



10,861




 Accrued payroll


3,693



(4,031)




 Accrued taxes other than income


(7,151)



8,892




 Accrued profit sharing


3,959



(3,118)




 Accrued other expenses


(2,554)



1,510




 Accrued product/municipal liability


(1,187)



(193)




 Accrued warranty


2,181



(341)




 Other assets


1,647



(1,453)




 Other non-current liabilities


714



206





 Net cash provided by operating activities


37,850



39,288


 Cash flows from investing activities:








Proceeds from sale of business


500





Receipts from note receivable


19





Payments to acquire patents and software


(193)



(562)



Proceeds from sale of property and equipment


199



53



Payments to acquire property and equipment


(14,392)



(20,353)





 Net cash used in investing activities


(13,867)



(20,862)


 Cash flows from financing activities:








Proceeds from loans and notes payable


1,532



51,365



Cash paid for debt issue costs


(1,850)



(1,145)



Cash paid for redemption of convertible notes


(30,000)





Payments on loans and notes payable


(1,532)



(51,365)



Proceeds from Economic Development Incentive Program


4,400





Proceeds from energy efficiency incentive programs


225





Proceeds from exercise of options to acquire common stock including employee stock purchase plan

1,667



1,206



Taxes paid related to restricted stock issuance




(50)





 Net cash (used in)/provided by financing activities


(25,558)



11


 Net (decrease)/increase in cash and cash equivalents


(1,575)



18,437


 Cash and cash equivalents, beginning of period


58,292



39,855


 Cash and cash equivalents, end of period

$

56,717


$

58,292


Supplemental disclosure of cash flow information








Cash paid for:









Interest

$

5,865


$

3,820




Income taxes


3,963



2,146


SMITH & WESSON HOLDING CORPORATION AND SUBSIDIARIES

RECONCILIATION OF GAAP NET INCOME/(LOSS) TO NON-GAAP ADJUSTED EBITDAS (Unaudited)


























For the Three Months Ended April 30, 2012:


For the Three Months Ended April 30, 2011:


























GAAP


Adjustments


Adjusted



GAAP


Adjustments


Adjusted


Net sales

$

129,843


$



$

129,843



$

101,667


$



$

101,667


Cost of sales


82,980



(3,735)

(1)



79,245




70,427



(4,095)

(1)



66,332


Gross profit


46,863



3,735




50,598




31,240



4,095




35,335

























Operating expenses:























 Research and development


973



(13)

(1)



960




1,264



(107)

(1)



1,157



 Selling and marketing


6,495



(56)

(1)



6,439




8,374



(87)

(1)



8,287



 General and administrative


13,729



(1,668)

(3)



12,061




13,609



(2,562)

(3)



11,047



 Total operating expenses


21,197



(1,737)




19,460




23,247



(2,756)




20,491


Operating income from continuing operations


25,666



5,472




31,138




7,993



6,851




14,844
























Other income/(expense):























 Other income/(expense), net


16






16




(464)



433

(4)



(31)



 Interest income


309



(300)

(7)



9




348



(229)

(7)



119



 Interest expense


(1,439)



1,439

(5)






(2,024)



2,024

(5)





 Total other income/(expense), net


(1,114)



1,139




25




(2,140)



2,228




88
























Income from continuing operations before income taxes


24,552



6,611




31,163




5,853



9,079




14,932


Income tax expense


6,735



(6,735)

(6)






1,460



(1,460)

(6)




Income from continuing operations


17,817



13,346




31,163




4,393



10,539




14,932


Discontinued operations:























Loss from operations of discontinued security solutions division


(7,639)



6,060

(8)



(1,579)




(2,912)



715

(9)



(2,197)



Income tax benefit


(2,290)



2,290

(6)






341



(341)

(6)





Loss on discontinued operations


(5,349)



3,770




(1,579)




(3,253)



1,056




(2,197)


Net income/(loss)/comprehensive income/(loss)

$

12,468


$

17,116



$

29,584



$

1,140


$

11,595



$

12,735


SMITH & WESSON HOLDING CORPORATION AND SUBSIDIARIES

RECONCILIATION OF GAAP NET INCOME/(LOSS) TO NON-GAAP ADJUSTED EBITDAS (Unaudited)


























For the Year Ended April 30, 2012:


For the Year Ended April 30, 2011:


























GAAP


Adjustments


Adjusted



GAAP


Adjustments


Adjusted
























Net sales

$

411,997


$



$

411,997



$

342,233


$



$

342,233


Cost of sales


284,008



(14,554)

(1)



269,454




237,545



(11,848)

(1)



225,697


Gross profit


127,989



14,554




142,543




104,688



11,848




116,536

























Operating expenses:























 Research and development


4,543



(157)

(1)



4,386




4,363



(213)

(1)



4,150



 Selling and marketing


31,317



(277)

(1)



31,040




34,580



(271)

(1)



34,309



 General and administrative


47,213



(8,246)

(2)



38,967




47,954



(11,615)

(3)



36,339



 Total operating expenses


83,073



(8,680)




74,393




86,897



(12,099)




74,798


Operating income from continuing operations


44,916



23,234




68,150




17,791



23,947




41,738
























Other income/(expense):























 Other income/(expense), net


78






78




228



(186)

(4)



42



 Interest income


1,505



(1,343)

(7)



162




1,198



(882)

(7)



316



 Interest expense


(7,484)



7,484

(5)






(5,683)



5,683

(5)





 Total other income/(expense), net


(5,901)



6,141




240




(4,257)



4,615




358


Income from continuing operations before income taxes


39,015



29,375




68,390




13,534



28,562




42,096


Income tax expense


12,582



(12,582)

(6)






5,454



(5,454)

(6)




Income from continuing operations


26,433



41,957




68,390




8,080



34,016




42,096


Discontinued operations:























Loss from operations of discontinued security solutions division

(15,945)



8,321

(8)



(7,624)




(96,055)



90,428

(10)



(5,627)



Income tax benefit


(5,617)



5,617

(6)






(5,206)



5,206

(6)





Loss on discontinued operations


(10,328)



2,704




(7,624)




(90,849)



85,222




(5,627)


Net income/(loss)/comprehensive income/(loss)

$

16,105


$

44,661



$

60,766



$

(82,769)


$

119,238



$

36,469
















































(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 intercompany interest income.




















(8)

To eliminate depreciation, amortization, loss on sale of discontinued operations, interest expense, and stock-based compensation expense.


(9)

To eliminate depreciation, amoritzation, interest expense, and stock-based compensation expense.









(10)

To eliminate depreciation, amortization, impairment of long-lived assets, interest expense,  fair value of contingent consideration liability, and stock-based compensation expense.


 

SOURCE Smith & Wesson Holding Corporation