SPRINGFIELD, Mass.--(BUSINESS WIRE)--Dec. 9, 2004--Smith & Wesson
Holding Corporation (AMEX:SWB), announced today that net income for
the three months ended October 31, 2004 was $2.2 million, or $0.07 per
diluted share, compared with net income of approximately $671,000, or
$0.02 per diluted share, for the three months ended October 31, 2003.
Net product sales for the second quarter were $29.1 million, a slight
increase over net product sales of $28.9 million for the quarter ended
October 31, 2003.
Net income for the six months ended October 31, 2004 was $3.7
million, or $0.11 per diluted share, compared with net income of $1.3
million, or $0.03 per diluted share, for the six months ended October
31, 2003. Net product sales for the six months ended October 31, 2004
were $56.8 million, an $820,100, or 1.4%, decrease from net product
sales for the six months ended October 31, 2003.
Firearms sales, the Company's core business, were $26.4 million
for the quarter, an increase of $1.8 million, or 7.4%, versus the
comparable quarter last year. Non-firearms sales were $2.6 million, a
decline of $1.6 million. Firearms sales for the six months ended
October 31, 2004 were $51.8 million, a $2.4 million, or 4.8%, increase
over the six months ended October 31, 2003. Non-firearms sales for the
six-month period were $5.1 million, down $3.2 million, or 38.5%, from
the previous year. Non-firearms sales were lower in both the three-
and six-month periods as a result of lower handcuff sales and the
discontinued optics and third-party machining businesses.
The substantial increase in net income in the second quarter was
attributable to an agreement reached with one of the Company's
insurance carriers regarding municipal litigation costs. The carrier
agreed to reimburse the Company for certain past litigation costs
incurred by the Company and agreed to pay a portion of ongoing costs.
As a result of the settlement, the profit for the second quarter
includes the net refund of $2.0 million and an additional increase in
insurance receivables of $2.1 million to reflect the agreement to pay
ongoing costs for which the Company has previously provided reserves.
Earnings for the quarter were adversely impacted by a provision for
severance costs for the Company's former CEO and recruiting costs for
his replacement. The total of the severance and recruiting costs was
$626,000. These items, after consideration of profit sharing, had an
after-tax impact of approximately $1.8 million, or $0.05 per diluted
share.
John Kelly, CFO of Smith & Wesson Holding Corporation, said,
"Firearms sales were up for the quarter as we continue to grow the
core business. We experienced some production difficulties in the
second quarter that had an adverse impact on sales and profits. Those
problems have been corrected as additional capacity will be coming on
line in the next quarter."
For the six months ended October 31, 2004, the Company had a cash
outflow of $1.1 million, compared with an outflow of $1.7 million for
the six months ended October 31, 2003. The cash flow for the six
months included $2.0 million in repayment of existing debt, compared
with $1.0 million for the six months ended October 31, 2003. Cash flow
from operating activities was $2.0 million for the six months ended
October 31, 2004, as compared with $1.1 million for the six months
ended October 31, 2003.
Outlook for the Remainder of Fiscal Year 2005
In July of this year, the Company retained Merriman, Curhan, Ford
& Company to assist in the restructuring of its existing debt. The
Company noted that its current debt structure contains restrictive
covenants that are no longer consistent with its growth plans. The
Company has received proposals from a number of financial institutions
and is now in final negotiations on a $40 million credit facility.
Upon completion of the restructuring, the Company expects to reduce
significantly its outstanding debt through utilization of the cash
currently collateralizing the existing debt. The Company also expects
interest costs to decrease by over $1.5 million on an annual basis as
a result of the lower debt level and a lower interest rate than is
currently being paid by the Company. The Company expects to complete
the debt restructuring by the end of December.
The Company currently expects sales for the fiscal year ending
April 30, 2005 to increase by approximately 5% over the $117.9 million
reported for the fiscal year ended April 30, 2004. The Company
continues to expect net income to be in the range of $5.4 million to
$6.4 million, or between $0.16 and $0.19 per diluted share, compared
with $1.4 million, or $0.04 per diluted share, for the fiscal year
ended April 30, 2004.
Commenting on the annual projections, John Kelly said, "The
decline in the dollar has increased the cost of our Walther imports,
which accounts for about 10% of our sales. Thus, we will be forced to
increase prices on our Walther products in the second half in order to
maintain acceptable margins. As a result of the increased prices, we
are forecasting a decline in Walther sales in the remainder of the
fiscal year. Despite that reduction in sales, our profit projections
for the year are unchanged because we expect the results of the
insurance agreement will offset the lost profits from the lower sales
and the one-time severance and recruiting costs that we have incurred
this year."
About Smith & Wesson
Smith & Wesson Holding Corporation is the parent company of Smith
& Wesson Corp., one of the world's leading producers of quality
handguns, law enforcement products and firearm safety and security
products. Law enforcement personnel, military personnel, target
shooters, hunters, collectors, and firearms enthusiasts throughout the
world have used the Company's products with confidence for more than
150 years. Smith & Wesson Corp. also manufactures and markets Smith &
Wesson branded handcuffs. For more information, visit
http://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
the Company intends that such forward-looking statements be subject to
the safe-harbor created thereby. Such forward-looking statements
include statements regarding the Company's sales and earnings
projections for the fiscal year ending April 30, 2005, the Company's
debt restructuring efforts, future interest rate savings, the
Company's strategies, and the demand for the Company's products,
especially the Walther imports. The Company cautions 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 the
Company's products, the Company's growth opportunities, the ability of
the Company to obtain operational enhancements, the ability of the
Company to increase its production capacity, the ability of the
Company to engage additional key employees, and other risks detailed
from time to time in the Company's reports filed with the SEC.
SMITH & WESSON HOLDING CORPORATION and Subsidiaries
CONSOLIDATED UNAUDITED STATEMENTS OF OPERATIONS
AND OTHER COMPREHENSIVE INCOME
Three months ended Six months ended
October 31, October 31, October 31, October 31,
2004 2003 2004 2003
---------------------------------------------------
Net product sales $29,078,039 $28,874,158 $56,846,914 $57,667,014
License revenue 526,018 362,701 922,768 786,004
Cost of goods sold 19,178,562 19,808,888 37,950,629 40,070,608
Cost of services 4,663 57,496 33,821 57,496
------------ ------------ ------------ ------------
Gross profit 10,420,832 9,370,475 19,785,232 18,324,914
------------ ------------ ------------ ------------
Operating expenses:
Research and
development, net 38,184 169,145 75,323 497,763
Selling and
marketing 3,160,186 3,319,079 6,021,436 6,275,980
General and
administrative 4,799,717 4,580,365 8,400,258 7,900,073
---------------------------------------------------
Total operating
expenses 7,998,087 8,068,589 14,497,017 14,673,816
---------------------------------------------------
Income from
operations 2,422,745 1,301,886 5,288,215 3,651,098
------------ ------------ ------------ ------------
Other
income/(expense):
Other
income/(expense) 1,860,313 494,836 2,175,306 (184,784)
Interest income 101,049 73,225 183,299 169,896
Interest expense (819,261) (827,499) (1,654,638) (1,679,312)
------------ ------------ ------------ ------------
1,142,101 (259,438) 703,967 (1,694,200)
------------ ------------ ------------ ------------
Income before
income taxes 3,564,846 1,042,448 5,992,182 1,956,898
Income tax expense 1,321,639 371,783 2,256,329 700,985
------------ ------------ ------------ ------------
Net income $2,243,207 $670,665 $3,735,853 $1,255,913
Other comprehensive
income:
Unrealized gain
on marketable
securities - 15,738 -- 3,465
------------ ------------ ------------ ------------
Comprehensive
income $2,243,207 $686,403 $3,735,853 $1,259,378
------------ ------------ ------------ ------------
Weighted average
number of common
equivalent shares
outstanding, basic 31,279,739 30,673,786 31,144,761 30,647,088
------------ ------------ ------------ ------------
Net income per
share, basic $0.07 $0.02 $0.12 $0.04
------------ ------------ ------------ ------------
Weighted average
number of common
equivalent shares
outstanding,
diluted 34,381,103 37,126,451 34,215,049 37,098,420
------------ ------------ ------------ ------------
Net income per
share, diluted $0.07 $0.02 $0.11 $0.03
------------ ------------ ------------ ------------
The accompanying notes are an integral part of these consolidated
financial statements.
SMITH & WESSON HOLDING CORPORATION and Subsidiaries
CONSOLIDATED BALANCE SHEETS
As of:
October 31, April 30,
2004 2004
Unaudited
------------ -------------
ASSETS
Current assets:
Cash and cash equivalents $4,391,418 $5,510,663
Marketable securities - 1,538,738
Accounts receivable, net of allowance for
doubtful accounts of $104,830 on
October 31, 2004 and $100,000 on
April 30, 2004 14,927,941 20,249,858
Inventories 17,480,834 15,986,705
Other current assets 4,711,028 1,823,181
Deferred income taxes 3,935,099 3,900,480
Income tax receivable 160,914 160,596
------------ -------------
Total current assets 45,607,234 49,170,221
------------ -------------
Property, plant, and equipment, net 13,835,601 11,021,174
Intangibles, net 323,118 351,908
Collateralized cash deposits 22,349,528 22,673,059
Notes receivable 1,051,404 1,072,359
Deferred income taxes 7,544,851 9,607,287
Other assets 6,049,009 7,379,099
------------ -------------
$96,760,745 $101,275,107
============ =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $8,580,103 $9,608,975
Accrued expenses 7,937,174 8,335,196
Accrued payroll 3,015,608 3,920,426
Accrued taxes other than income 1,049,116 1,055,506
Accrued profit sharing 1,577,879 2,272,030
Deferred revenue 34,889 442,291
Current portion of notes payable 4,206,744 4,039,456
------------ -------------
Total current liabilities 26,401,513 29,673,880
------------ -------------
Notes payable 35,725,062 37,870,046
------------ -------------
Other non-current liabilities 13,400,626 16,913,947
------------ -------------
Commitments and contingencies
Stockholders' equity:
Common stock, $.001 par value,
100,000,000 shares authorized, 31,499,193
shares on October 31, 2004 and 30,935,799
shares on April 30, 2004 issued and
outstanding 31,499 30,936
Additional paid-in capital 17,352,073 16,651,934
Retained earnings 3,849,972 114,119
Accumulated other comprehensive income - 20,245
------------ -------------
Total stockholders' equity 21,233,544 16,817,234
------------ -------------
$96,760,745 $101,275,107
============ =============
The accompanying notes are an integral part of these consolidated
financial statements.
SMITH & WESSON HOLDING CORPORATION and Subsidiaries
CONSOLIDATED UNAUDITED STATEMENTS OF CASH FLOWS
For the Six Months Ended:
October 31, October 31,
2004 2003
----------- ------------
Cash flows provided by (used
for) operating activities:
Net income $3,735,853 $1,255,913
Adjustments to reconcile net income to
cash provided by (used for) operating
activities:
Amortization and depreciation 1,095,054 741,073
Gain on disposal of product line (450,515) --
Gain on sale of assets (7,405) (8,307)
Write-off of patents 39,741 --
Provision for losses on accounts
receivable 6,500 15,300
Provision for excess and obsolete
inventory 385,713 375,865
Stock compensation for services -- 10,000
Changes in operating assets and liabilities:
(Increase) decrease in assets:
Accounts receivable 5,315,417 (244,542)
Inventories (1,879,842) (576,787)
Other current assets (2,887,847) 763,085
Deferred taxes 2,129,028 612,398
Income tax receivable (318) 40,670
Note receivable 20,955 (129,906)
Other assets 1,330,090 3,749,779
Increase (decrease) in liabilities:
Accounts payable (1,028,872) (1,872,746)
Accrued payroll (904,818) 99,989
Accrued profit sharing (694,151) 1,176,901
Accrued taxes other than income (6,390) 145,340
Accrued expenses (398,022) 66,231
Other non-current liabilities (3,513,321) (5,114,044)
Deferred revenue (256,887) (31,539)
----------- ------------
Net cash provided by operating
activities 2,029,963 1,074,673
----------- ------------
Cash flows (used for) investing activities:
Payments to acquire marketable securities -- (15,775)
Proceeds from sale of marketable securities 1,518,493 --
Reduction to collateralized cash deposits 323,531 140,033
Payments to acquire patents (17,306) (13,862)
Proceeds from sale of property and equipment 7,465 11,209
Proceeds from sale of product line 300,000 --
Payments to acquire property and equipment (3,903,186) (2,083,982)
----------- ------------
Net cash used for investing activities (1,771,003) (1,962,377)
----------- ------------
Cash flows (used for) financing activities:
Payment on notes payable, Tomkins (1,417,782) (1,000,000)
Proceeds from sale of common stock 123,307 133,593
Proceeds from exercise of
options to acquire common stock 476,184 28,700
Payments on loans and notes payable,
unrelated parties (559,914) --
----------- ------------
Net cash used for financing activities (1,378,205) (837,707)
----------- ------------
Net decrease in cash
and cash equivalents (1,119,245) (1,725,411)
Cash and cash equivalents, beginning of year 5,510,663 12,182,010
----------- ------------
Cash and cash equivalents, end of period $4,391,418 $10,456,599
=========== ============
The accompanying notes are an integral part of these consolidated
financial statements.
CONTACT: Smith & Wesson Holding Corporation
John A. Kelly, 413-747-3305
SOURCE: Smith & Wesson Holding Corporation
