American Outdoor Brands Corporation Reports Third Quarter Fiscal 2020 Financial Results
Third Quarter Fiscal 2020 Financial Highlights
- Quarterly net sales were
$166.7 million compared with$162.0 million for the third quarter last year, an increase of 2.9%. It should be noted that a change required by theTax andTrade Bureau related to the timing of federal excise tax assessment within the company's Firearms segment favorably impacted net sales in the quarter by$10.1 million . That change had no impact on gross margin dollars or operating expenses. Further details related to that change are outlined in the company's Form 10-Q filed concurrently with this press release. - Gross margin for the quarter was 33.1% compared with 33.4% for the comparable quarter last year. Excluding the change required by the
Tax andTrade Bureau related to the timing of federal excise tax assessment within the company's Firearms segment, gross margin for the quarter would have been 35.3%, or an increase of 190 basis points over the comparable quarter last year. - Quarterly GAAP net income was
$5.7 million , or$0.10 per diluted share, compared with a GAAP net loss of$5.7 million , or$(0.10) per diluted share, for the comparable quarter last year. Results for the comparable quarter last year included a$10.4 million , non-cash impairment of goodwill in our Outdoor Products & Accessories segment, which had a$(0.19) impact on basic and diluted earnings per share. - Quarterly non-GAAP net income was
$6.9 million , or$0.13 per diluted share, compared with$8.9 million , or$0.16 per diluted share, for the comparable quarter last year. GAAP to non-GAAP adjustments for net income exclude a number of acquisition-related costs and other costs. For a detailed reconciliation, see the schedules that follow in this release. - Quarterly non-GAAP Adjusted EBITDAS was
$22.4 million , or 13.4% of net sales, compared with$24.4 million , or 15.0% of net sales, for the comparable quarter last year. Excluding the change required by theTax andTrade Bureau related to the timing of federal excise tax assessment within the company's Firearms segment, non-GAAP Adjusted EBITDAS for the quarter would have been 14.3%.
During the quarter, the company announced that its Board of Directors named
Financial Outlook
|
||||||||
NET SALES AND EARNINGS PER SHARE GUIDANCE, INCLUDING GAAP TO NON-GAAP RECONCILIATION |
||||||||
Range for the Three Months Ending |
Range for the Year Ending |
|||||||
Net sales (in thousands) |
|
|
|
|
||||
GAAP income per share - diluted |
$ 0.17 |
$ 0.21 |
$ 0.25 |
$ 0.29 |
||||
Amortization of acquired intangible assets |
0.09 |
0.09 |
0.35 |
0.35 |
||||
Diode recall |
— |
— |
(0.01) |
(0.01) |
||||
CEO separation |
0.03 |
0.03 |
(0.04) |
(0.04) |
||||
Transition costs |
0.12 |
0.12 |
0.17 |
0.17 |
||||
Tax effect of non-GAAP adjustments |
(0.07) |
(0.07) |
(0.14) |
(0.14) |
||||
Non-GAAP income per share - diluted |
$ 0.33 |
* |
$ 0.37 |
* |
$ 0.58 |
$ 0.62 |
* Does not foot due to rounding. |
The company is also providing full year revenue guidance for each of its business segments. Accordingly, the company expects full year revenue for its Firearms segment to be between
Conference Call and Webcast
The company will host a conference call and webcast today,
Reconciliation of
In this press release, certain non-GAAP financial measures, including "non-GAAP net income," "Adjusted EBITDAS," and "free cash flow" are presented. From time-to-time, the company considers and uses these supplemental measures of operating performance in order to provide the reader with an improved understanding of underlying performance trends. The company believes it is useful for itself and the reader to review, as applicable, both (1) GAAP measures that include (i) amortization of acquired intangible assets, (ii) transition costs, (iii) fair value inventory step-up expense, (iv) recall related expenses, (v) change in contingent consideration, (vi) goodwill impairment, (vii) CEO separation, (viii) acquisition related costs, (ix) the tax effect of non-GAAP adjustments, (x) net cash (used in)/provided by operating activities, (xi) net cash used in investing activities, (xii) interest expense, (xiii) income tax expense, (xiv) depreciation and amortization, and (xv) stock-based compensation expenses, ; and (2) the non-GAAP measures that exclude such information. The company presents these non-GAAP measures because it considers them an important supplemental measure of its performance. The company's definition of these adjusted financial measures may differ from similarly named measures used by others. The company believes these measures facilitate operating performance comparisons from period to period by eliminating potential differences caused by the existence and timing of certain expense items that would not otherwise be apparent on a GAAP basis. These non-GAAP measures have limitations as an analytical tool and should not be considered in isolation or as a substitute for the company's GAAP measures. The principal limitations of these measures are that they do not reflect the company's actual expenses and may thus have the effect of inflating its financial measures on a GAAP basis.
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, among others, our expectation to complete the spin-off of our outdoor products and accessories business as a tax-free stock dividend to our stockholders in the second half of calendar 2020, thereby creating two independent, publicly traded companies:
Contact: Liz Sharp, VP Investor Relations
(413) 747-6284
lsharp@aob.com
AMERICAN OUTDOOR BRANDS CORPORATION AND SUBSIDIARIES |
||||
CONDENSED CONSOLIDATED BALANCE SHEETS |
||||
(Unaudited) |
||||
As of: |
||||
|
|
|||
(In thousands, except par value and share data) |
||||
ASSETS |
||||
Current assets: |
||||
Cash and cash equivalents |
$ 46,101 |
$ 41,015 |
||
Accounts receivable, net of allowance for doubtful accounts of |
101,822 |
84,907 |
||
Inventories |
201,536 |
163,770 |
||
Prepaid expenses and other current assets |
9,575 |
6,528 |
||
Income tax receivable |
4,749 |
2,464 |
||
Total current assets |
363,783 |
298,684 |
||
Property, plant, and equipment, net |
164,341 |
183,268 |
||
Intangibles, net |
78,346 |
91,840 |
||
Goodwill |
182,267 |
182,269 |
||
Other assets |
19,410 |
10,728 |
||
$ 808,147 |
$ 766,789 |
|||
LIABILITIES AND STOCKHOLDERS' EQUITY |
||||
Current liabilities: |
||||
Accounts payable |
$ 31,843 |
$ 35,584 |
||
Accrued expenses and deferred revenue |
43,131 |
39,322 |
||
Accrued payroll and incentives |
14,189 |
21,473 |
||
Accrued income taxes |
265 |
175 |
||
Accrued profit sharing |
1,699 |
2,830 |
||
Accrued warranty |
4,208 |
5,599 |
||
Current portion of notes and loans payable |
- |
6,300 |
||
Total current liabilities |
95,335 |
111,283 |
||
Deferred income taxes |
9,595 |
9,776 |
||
Notes and loans payable, net of current portion |
199,034 |
149,434 |
||
Finance lease payable, net of current portion |
40,202 |
45,400 |
||
Other non-current liabilities |
13,482 |
6,452 |
||
Total liabilities |
357,648 |
322,345 |
||
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, 73,234,996 issued and 55,068,134 shares outstanding on |
73 |
73 |
||
Additional paid-in capital |
264,866 |
263,180 |
||
Retained earnings |
407,862 |
402,946 |
||
Accumulated other comprehensive income |
73 |
620 |
||
|
(222,375) |
(222,375) |
||
Total stockholders' equity |
450,499 |
444,444 |
||
$ 808,147 |
$ 766,789 |
AMERICAN OUTDOOR BRANDS CORPORATION AND SUBSIDIARIES |
||||||||
CONDENSED CONSOLIDATED STATEMENTS OF INCOME/(LOSS) |
||||||||
For the Three Months Ended |
For the Nine Months Ended |
|||||||
|
|
|
|
|||||
(Unaudited) |
||||||||
(In thousands, except per share data) |
||||||||
Net sales |
$ 166,695 |
$ 162,008 |
$ 444,753 |
$ 462,544 |
||||
Cost of sales |
111,492 |
107,949 |
291,390 |
299,677 |
||||
Gross profit |
55,203 |
54,059 |
153,363 |
162,867 |
||||
Operating expenses: |
||||||||
Research and development |
3,192 |
3,297 |
9,410 |
9,358 |
||||
Selling, marketing, and distribution |
19,294 |
15,373 |
55,419 |
42,279 |
||||
General and administrative |
21,810 |
27,026 |
71,601 |
78,065 |
||||
Goodwill Impairment |
— |
10,396 |
— |
10,396 |
||||
Total operating expenses |
44,296 |
56,092 |
136,430 |
140,098 |
||||
Operating income |
10,907 |
(2,033) |
16,933 |
22,769 |
||||
Other (expense)/income, net: |
||||||||
Other income, net |
(18) |
47 |
73 |
38 |
||||
Interest expense, net |
(2,885) |
(2,548) |
(8,551) |
(6,822) |
||||
Total other (expense), net |
(2,903) |
(2,501) |
(8,478) |
(6,784) |
||||
Income from operations before income taxes |
8,004 |
(4,534) |
8,455 |
15,985 |
||||
Income tax expense |
2,273 |
1,191 |
3,539 |
7,399 |
||||
Net Income/(loss) |
$ 5,731 |
$ (5,725) |
$ 4,916 |
$ 8,586 |
||||
Net Income/(loss) per share: |
||||||||
Basic |
$ 0.10 |
$ (0.10) |
$ 0.09 |
$ 0.16 |
||||
Diluted |
$ 0.10 |
$ (0.10) |
$ 0.09 |
$ 0.16 |
||||
Weighted average number of common shares outstanding: |
||||||||
Basic |
55,064 |
54,544 |
54,919 |
54,444 |
||||
Diluted |
55,744 |
54,544 |
55,641 |
55,132 |
AMERICAN OUTDOOR BRANDS CORPORATION AND SUBSIDIARIES |
||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS |
||||
(Unaudited) |
||||
For the Nine Months Ended |
||||
|
|
|||
(In thousands) |
||||
Cash flows from operating activities: |
||||
Net income |
$ 4,916 |
$ 8,586 |
||
Adjustments to reconcile net income to net cash (used in)/provided by operating activities: |
||||
Depreciation and amortization |
41,083 |
39,624 |
||
Loss/(gain) on sale/disposition of assets |
780 |
(1,033) |
||
Provision for losses on notes and accounts receivable |
551 |
832 |
||
|
— |
10,396 |
||
Deferred income taxes |
(18) |
(1,519) |
||
Change in fair value of contingent consideration |
100 |
(60) |
||
Stock-based compensation expense |
1,344 |
6,070 |
||
Changes in operating assets and liabilities: |
||||
Accounts receivable |
(17,466) |
(19,347) |
||
Inventories |
(37,766) |
(20,186) |
||
Prepaid expenses and other current assets |
(3,047) |
(591) |
||
Income taxes |
(2,195) |
1,146 |
||
Accounts payable |
(3,610) |
664 |
||
Accrued payroll and incentives |
(7,284) |
5,815 |
||
Accrued profit sharing |
(1,131) |
297 |
||
Accrued expenses and deferred revenue |
529 |
(8,532) |
||
Accrued warranty |
(1,391) |
(1,550) |
||
Other assets |
2,429 |
10 |
||
Other non-current liabilities |
(2,865) |
123 |
||
Net cash (used in)/provided by operating activities |
(25,041) |
20,745 |
||
Cash flows from investing activities: |
||||
Acquisition of businesses, net of cash acquired |
— |
(1,791) |
||
Payments to acquire patents and software |
(551) |
(355) |
||
Proceeds from sale of property and equipment |
— |
1,223 |
||
Payments to acquire property and equipment |
(11,751) |
(25,989) |
||
Net cash used in investing activities |
(12,302) |
(26,912) |
||
Cash flows from financing activities: |
||||
Proceeds from loans and notes payable |
228,225 |
50,000 |
||
Payments on finance lease obligation |
(875) |
(1,025) |
||
Cash paid for debt issuance costs |
(663) |
— |
||
Payments on notes and loans payable |
(184,600) |
(54,725) |
||
Proceeds from exercise of options to acquire common stock, including employee stock purchase plan |
936 |
1,158 |
||
Payment of employee withholding tax related to restricted stock units |
(594) |
(631) |
||
Net cash provided by/(used in) financing activities |
42,429 |
(5,223) |
||
Net increase/(decrease) in cash and cash equivalents |
5,086 |
(11,390) |
||
Cash and cash equivalents, beginning of period |
41,015 |
48,860 |
||
Cash and cash equivalents, end of period |
$ 46,101 |
$ 37,470 |
||
Supplemental disclosure of cash flow information |
||||
Cash paid for: |
||||
Interest |
$ 8,422 |
$ 5,554 |
||
Income taxes |
$ 5,755 |
$ 6,885 |
AMERICAN OUTDOOR BRANDS CORPORATION AND SUBSIDIARIES RECONCILIATION OF GAAP FINANCIAL MEASURES TO NON-GAAP FINANCIAL MEASURES |
||||||||||||||||
For the Three Months Ended |
For the Nine Months Ended |
|||||||||||||||
|
|
|
|
|||||||||||||
$ |
% of Sales |
$ |
% of Sales |
$ |
% of Sales |
$ |
% of Sales |
|||||||||
GAAP gross profit |
|
33.1% |
|
33.4% |
|
34.5% |
|
35.2% |
||||||||
Diode recall |
(180) |
-0.1% |
— |
— |
(769) |
-0.2% |
— |
— |
||||||||
Fair value inventory step-up |
— |
— |
92 |
0.1% |
— |
— |
362 |
0.1% |
||||||||
Transition costs |
— |
— |
— |
— |
872 |
0.2% |
— |
— |
||||||||
Non-GAAP gross profit |
|
33.0% |
|
33.4% |
|
34.5% |
|
35.3% |
||||||||
GAAP operating expenses |
|
26.6% |
|
34.6% |
|
30.7% |
|
30.3% |
||||||||
Amortization of acquired intangible assets |
(4,697) |
-2.8% |
(5,445) |
-3.4% |
(14,242) |
-3.2% |
(16,335) |
-3.5% |
||||||||
|
— |
— |
(10,396) |
-6.4% |
— |
— |
(10,396) |
-2.2% |
||||||||
Transition costs |
(990) |
-0.6% |
(369) |
-0.2% |
(1,889) |
-0.4% |
(751) |
-0.2% |
||||||||
CEO separation |
3,844 |
2.3% |
— |
— |
3,844 |
0.9% |
— |
— |
||||||||
Acquisition-related costs |
— |
— |
(6) |
0.0% |
— |
— |
(6) |
0.0% |
||||||||
Non-GAAP operating expenses |
|
25.5% |
|
24.6% |
|
27.9% |
|
24.3% |
||||||||
GAAP operating income |
|
6.5% |
$ (2,033) |
-1.3% |
$ 16,933 |
3.8% |
$ 22,769 |
4.9% |
||||||||
Fair value inventory step-up |
— |
— |
92 |
0.1% |
— |
— |
362 |
0.1% |
||||||||
Diode recall |
(180) |
-0.1% |
— |
— |
(769) |
-0.2% |
— |
— |
||||||||
Amortization of acquired intangible assets |
4,697 |
2.8% |
5,445 |
3.4% |
14,242 |
3.2% |
16,335 |
3.5% |
||||||||
|
— |
— |
10,396 |
6.4% |
— |
— |
10,396 |
2.2% |
||||||||
Transition costs |
990 |
0.6% |
369 |
0.2% |
2,761 |
0.6% |
751 |
0.2% |
||||||||
CEO separation |
(3,844) |
-2.3% |
— |
— |
(3,844) |
-0.9% |
— |
— |
||||||||
Acquisition-related costs |
— |
— |
6 |
0.0% |
— |
— |
6 |
0.0% |
||||||||
Non-GAAP operating income |
|
7.5% |
|
8.8% |
$ 29,323 |
6.6% |
$ 50,619 |
10.9% |
||||||||
GAAP net income/(loss) |
$ 5,731 |
3.4% |
$ (5,725) |
-3.5% |
$ 4,916 |
1.1% |
$ 8,586 |
1.9% |
||||||||
Fair value inventory step-up |
— |
— |
92 |
0.1% |
— |
— |
362 |
0.1% |
||||||||
Amortization of acquired intangible assets |
4,697 |
2.8% |
5,445 |
3.4% |
14,242 |
3.2% |
16,335 |
3.5% |
||||||||
|
— |
— |
10,396 |
6.4% |
— |
— |
10,396 |
2.2% |
||||||||
Diode recall |
(180) |
-0.1% |
— |
— |
(769) |
-0.2% |
— |
— |
||||||||
Transition costs |
990 |
0.6% |
369 |
0.2% |
2,761 |
0.6% |
751 |
0.2% |
||||||||
CEO separation |
(3,844) |
-2.3% |
— |
— |
(3,844) |
-0.9% |
— |
— |
||||||||
Acquisition-related costs |
— |
— |
6 |
0.0% |
— |
— |
6 |
0.0% |
||||||||
Change in contingent consideration |
— |
— |
(60) |
0.0% |
(100) |
0.0% |
(60) |
0.0% |
||||||||
Tax effect of non-GAAP adjustments |
(449) |
-0.3% |
(1,580) |
-1.0% |
(3,318) |
-0.7% |
(4,696) |
-1.0% |
||||||||
Non-GAAP net income |
$ 6,945 |
4.2% |
$ 8,943 |
5.5% |
$ 13,888 |
3.1% |
$ 31,680 |
6.8% |
||||||||
GAAP net income/(loss) per share - diluted |
$ 0.10 |
$ (0.10) |
$ 0.09 |
$ 0.16 |
||||||||||||
Fair value inventory step-up |
— |
— |
— |
0.01 |
||||||||||||
Amortization of acquired intangible assets |
0.08 |
0.10 |
0.26 |
0.30 |
||||||||||||
|
— |
0.19 |
— |
0.19 |
||||||||||||
Diode recall |
— |
— |
(0.01) |
— |
||||||||||||
Transition costs |
0.02 |
0.01 |
0.05 |
0.01 |
||||||||||||
CEO separation |
(0.07) |
— |
(0.07) |
— |
||||||||||||
Tax effect of non-GAAP adjustments |
(0.01) |
(0.03) |
(0.06) |
(0.09) |
||||||||||||
Non-GAAP net income per share - diluted (a) |
$ 0.13 |
$ 0.16 |
$ 0.25 |
$ 0.57 |
(a) Non-GAAP net income per share does not foot due to rounding. |
AMERICAN OUTDOOR BRANDS CORPORATION AND SUBSIDIARIES |
||||||||
RECONCILIATION OF NET OPERATING CASH FLOW TO FREE CASH FLOW |
||||||||
For the Three Months Ended |
For the Nine Months Ended |
|||||||
|
|
|
|
|||||
Net cash provided by/(used in) operating activities |
$ 9,565 |
$ 11,694 |
$ (25,041) |
$ 20,745 |
||||
Net cash used in investing activities |
(2,934) |
(8,323) |
(12,302) |
(26,912) |
||||
Acquisition of businesses, net of cash acquired |
— |
1,791 |
— |
1,791 |
||||
Free cash flow |
$ 6,631 |
$ 5,162 |
$ (37,343) |
$ (4,376) |
AMERICAN OUTDOOR BRANDS CORPORATION AND SUBSIDIARIES |
||||||||
RECONCILIATION OF GAAP NET INCOME/(LOSS) TO NON-GAAP ADJUSTED EBITDAS |
||||||||
(in thousands) |
||||||||
(Unaudited) |
||||||||
For the Three Months Ended |
For the Nine Months Ended |
|||||||
|
|
|
|
|||||
GAAP net income/(loss) |
$ 5,731 |
$ (5,725) |
$ 4,916 |
$ 8,586 |
||||
Interest expense |
2,869 |
2,661 |
8,898 |
7,043 |
||||
Income tax expense |
2,273 |
1,191 |
3,539 |
7,399 |
||||
Depreciation and amortization |
12,761 |
13,303 |
40,539 |
38,863 |
||||
Stock-based compensation expense |
1,762 |
2,118 |
4,778 |
6,070 |
||||
Impairment of long-lived tangible assets |
— |
10,396 |
— |
10,396 |
||||
Fair value inventory step-up |
— |
92 |
— |
362 |
||||
Acquisition-related costs |
— |
6 |
— |
6 |
||||
Transition costs |
990 |
369 |
2,761 |
751 |
||||
CEO separation |
(3,844) |
— |
(3,844) |
— |
||||
Diode recall |
(180) |
— |
(769) |
— |
||||
Change in contingent consideration |
— |
(60) |
(100) |
(60) |
||||
Non-GAAP Adjusted EBITDAS |
$ 22,362 |
$ 24,351 |
$ 60,718 |
$ 79,416 |
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