Smith & Wesson Brands, Inc. Reports Third Quarter Fiscal 2022 Financial Results
Third Quarter Fiscal 2022 Financial Highlights
- Net sales were
$177.7 million , a decrease of$79.9 million , or 31.0%, from the comparable quarter last year, but$50.3 million , or 139.5%, higher than the third quarter in fiscal 2020. - Gross margin was 39.6% versus 42.6% in the comparable quarter last year and 28.0% in the third quarter in fiscal 2020.
- Quarterly GAAP net income was
$30.5 million , or$0.65 per diluted share, compared with$62.3 million , or$1.12 per diluted share, for the comparable quarter last year. - Quarterly non-GAAP net income was
$32.9 million , or$0.69 per diluted share, compared with$62.4 million , or$1.12 per diluted share, for the comparable quarter last year. GAAP to non-GAAP adjustments for income exclude costs related to the planned relocation of our headquarters and certain manufacturing and distribution operations toTennessee , the spin-off of the outdoor products and accessories business in fiscal 2021, COVID-19 related expenses, and other costs. For a detailed reconciliation, see the schedules that follow in this release. - Quarterly non-GAAP Adjusted EBITDAS was
$51.9 million , or 29.2% of net sales, compared with$89.8 million , or 34.9% of net sales, for the comparable quarter last year. - During the quarter, we purchased 2,788,152 shares of our common stock for
$50.0 million , utilizing cash on hand.
Conference Call and Webcast
The company will host a conference call and webcast on
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, we consider and use these supplemental measures of operating performance in order to provide the reader with an improved understanding of underlying performance trends. We believe it is useful for us and the reader to review, as applicable, both (1) GAAP measures that include (i) interest expense, (ii) income tax expense, (iii) depreciation and amortization, (iv) stock-based compensation expense, (v) COVID-19 expenses, (vi) transition costs, (vii) amortization of acquired intangible assets, (viii) spin related stock compensation, (ix) Relocation expense, and (x) the tax effect of non-GAAP adjustments; and (2) the non-GAAP measures that exclude such information. We present these non-GAAP measures because we consider them an important supplemental measure of our performance. Our definition of these adjusted financial measures may differ from similarly named measures used by others. We believe 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 our GAAP measures. The principal limitations of these measures are that they do not reflect our 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 belief that (i) the firearms market seems to now be following pre-pandemic historical demand patterns; (ii) the macro demand pattern is exactly what our business model is designed to accommodate; (iii) we have set a very solid business foundation for long-term success; (iv) that our long-term commitment is to continue to return value to stockholders through regular fixed dividends and share repurchases and, as a result of certain accomplishments, we are well positioned to do so; and (v) our response to the surge in demand over the last two years has strengthened our foundation, creating an agile business model that optimizes profitability to drive long-term value. We caution that these statements are qualified by important risks, uncertainties, and other factors that could cause actual results to differ materially from those reflected by such forward-looking statements. Such factors include, among others, economic, social, political, legislative, and regulatory factors; the potential for increased regulation of firearms and firearm-related products; actions of social activists that could have an adverse effect on our business; the impact of lawsuits; the demand for our products; the state of the
Contact:
investorrelations@smith-wesson.com
(413) 747-3448
|
||||
CONDENSED CONSOLIDATED BALANCE SHEETS |
||||
(Unaudited) |
||||
As of: |
||||
|
|
|||
(In thousands, except par value and share data) |
||||
ASSETS |
||||
Current assets: |
||||
Cash and cash equivalents |
$ 107,268 |
$ 113,017 |
||
Accounts receivable, net of allowances for credit losses of |
49,386 |
67,442 |
||
Inventories |
134,268 |
78,477 |
||
Prepaid expenses and other current assets |
7,521 |
8,408 |
||
Income tax receivable |
2,233 |
909 |
||
Total current assets |
300,676 |
268,253 |
||
Property, plant, and equipment, net |
134,540 |
141,612 |
||
Intangibles, net |
4,257 |
4,417 |
||
Goodwill |
19,024 |
19,024 |
||
Other assets |
10,808 |
13,082 |
||
Total assets |
469,305 |
446,388 |
||
LIABILITIES AND STOCKHOLDERS' EQUITY |
||||
Current liabilities: |
||||
Accounts payable |
$ 36,060 |
$ 57,337 |
||
Accrued expenses and deferred revenue |
26,857 |
33,136 |
||
Accrued payroll and incentives |
16,223 |
17,381 |
||
Accrued income taxes |
362 |
1,157 |
||
Accrued profit sharing |
11,502 |
14,445 |
||
Accrued warranty |
2,040 |
2,199 |
||
Total current liabilities |
93,044 |
125,655 |
||
Deferred income taxes |
904 |
904 |
||
Finance lease payable, net of current portion |
37,930 |
38,786 |
||
Other non-current liabilities |
11,118 |
14,659 |
||
Total liabilities |
142,996 |
180,004 |
||
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, 74,550,885 issued and 45,510,515 shares outstanding on |
75 |
74 |
||
Additional paid-in capital |
276,389 |
273,431 |
||
Retained earnings |
472,147 |
325,181 |
||
Accumulated other comprehensive income |
73 |
73 |
||
|
(422,375) |
(332,375) |
||
Total stockholders' equity |
326,309 |
266,384 |
||
Total liabilities and stockholders' equity |
$ 469,305 |
$ 446,388 |
|
||||||||
CONDENSED CONSOLIDATED STATEMENTS OF INCOME |
||||||||
(Unaudited) |
||||||||
For the Three Months Ended |
For the Nine Months Ended |
|||||||
2022 |
2021 |
2022 |
2021 |
|||||
(In thousands, except per share data) |
||||||||
Net sales |
$ 177,738 |
$ 257,634 |
$ 682,826 |
$ 736,247 |
||||
Cost of sales |
107,339 |
147,955 |
380,490 |
433,073 |
||||
Gross profit |
70,399 |
109,679 |
302,336 |
303,174 |
||||
Operating expenses: |
||||||||
Research and development |
1,716 |
1,757 |
5,269 |
5,518 |
||||
Selling, marketing, and distribution |
11,518 |
10,487 |
33,575 |
32,095 |
||||
General and administrative |
17,443 |
17,054 |
58,491 |
62,061 |
||||
Total operating expenses |
30,677 |
29,298 |
97,335 |
99,674 |
||||
Operating income from continuing operations |
39,722 |
80,381 |
205,001 |
203,500 |
||||
Other income/(expense), net: |
||||||||
Other income/(expense), net |
751 |
952 |
2,244 |
1,711 |
||||
Interest expense, net |
(594) |
(550) |
(1,605) |
(3,356) |
||||
Total other income/(expense), net |
157 |
402 |
639 |
(1,645) |
||||
Income from operations before income taxes |
39,879 |
80,783 |
205,640 |
201,855 |
||||
Income tax expense |
9,337 |
18,520 |
47,281 |
47,176 |
||||
Income from continuing operations |
$ 30,542 |
$ 62,263 |
$ 158,359 |
$ 154,679 |
||||
Discontinued operations: |
||||||||
Income from discontinued operations, net of tax |
— |
127 |
— |
8,334 |
||||
Net income |
$ 30,542 |
$ 62,390 |
$ 158,359 |
$ 163,013 |
||||
Net income per share: |
||||||||
Basic - continuing operations |
$ 0.65 |
$ 1.13 |
$ 3.32 |
$ 2.79 |
||||
Basic - net income |
$ 0.65 |
$ 1.13 |
$ 3.32 |
$ 2.94 |
||||
Diluted - continuing operations |
$ 0.65 |
$ 1.12 |
$ 3.28 |
$ 2.75 |
||||
Diluted - net income |
$ 0.65 |
$ 1.12 |
$ 3.28 |
$ 2.90 |
||||
Weighted average number of common shares outstanding: |
||||||||
Basic |
46,763 |
55,137 |
47,769 |
55,515 |
||||
Diluted |
47,175 |
55,702 |
48,307 |
56,258 |
|
||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS |
||||
(Unaudited) |
||||
For the Nine Months Ended |
||||
|
|
|||
(In thousands) |
||||
Cash flows from operating activities: |
||||
Income from continuing operations |
$ 158,359 |
$ 154,679 |
||
Adjustments to reconcile net income to net cash provided by operating activities: |
||||
Depreciation and amortization |
22,413 |
24,133 |
||
Loss on sale/disposition of assets |
31 |
148 |
||
Provision for losses/(recoveries) on notes and accounts receivable |
678 |
(693) |
||
Impairment of long-lived tangible assets |
86 |
— |
||
Deferred income taxes |
— |
316 |
||
Stock-based compensation expense |
3,565 |
3,392 |
||
Changes in operating assets and liabilities: |
||||
Accounts receivable |
17,378 |
8 |
||
Inventories |
(55,791) |
19,295 |
||
Prepaid expenses and other current assets |
887 |
(1,018) |
||
Income taxes |
(2,119) |
(12,831) |
||
Accounts payable |
(21,209) |
17,299 |
||
Accrued payroll and incentives |
(1,158) |
2,040 |
||
Accrued profit sharing |
(2,943) |
8,663 |
||
Accrued expenses and deferred revenue |
(6,322) |
(19,950) |
||
Accrued warranty |
(159) |
421 |
||
Other assets |
2,188 |
1,226 |
||
Other non-current liabilities |
(3,609) |
1,309 |
||
Cash provided by operating activities - continuing operations |
112,275 |
198,437 |
||
Cash used in operating activities - discontinued operations |
— |
(2,129) |
||
Net cash provided by operating activities |
112,275 |
196,308 |
||
Cash flows from investing activities: |
||||
Refunds on machinery and equipment |
— |
310 |
||
Payments to acquire patents and software |
(218) |
(502) |
||
Proceeds from sale of property and equipment |
97 |
— |
||
Payments to acquire property and equipment |
(15,090) |
(18,378) |
||
Cash used in investing activities - continuing operations |
(15,211) |
(18,570) |
||
Cash used in investing activities - discontinued operations |
— |
(1,143) |
||
Net cash used in investing activities |
(15,211) |
(19,713) |
||
Cash flows from financing activities: |
||||
Proceeds from loans and notes payable |
— |
25,000 |
||
Cash paid for debt issuance costs |
— |
(450) |
||
Payments on finance lease obligation |
(813) |
(736) |
||
Payments on notes and loans payable |
— |
(185,000) |
||
Distribution to AOUT |
— |
(25,000) |
||
Payments to acquire treasury stock |
(90,000) |
(50,000) |
||
Dividend distribution |
(11,393) |
(5,594) |
||
Proceeds from exercise of options to acquire common stock, including employee stock purchase plan |
846 |
2,217 |
||
Payment of employee withholding tax related to restricted stock units |
(1,453) |
(2,201) |
||
Cash used in by financial activities - continuing operations |
(102,813) |
(241,764) |
||
Cash used in financial activities - discontinued operations |
— |
(166) |
||
Net cash used inprovided by financing activities |
(102,813) |
(241,930) |
||
Net decrease in cash and cash equivalents |
(5,749) |
(65,335) |
||
Cash and cash equivalents, beginning of period |
113,017 |
125,011 |
||
Cash and cash equivalents, end of period |
$ 107,268 |
$ 59,676 |
||
Supplemental disclosure of cash flow information |
||||
Cash paid for: |
||||
Interest |
$ 1,670 |
$ 2,745 |
||
Income taxes |
$ 49,402 |
$ 63,525 |
|
||||||||||||||||
For the Three Months Ended |
For the Nine Months Ended |
|||||||||||||||
|
|
|
|
|||||||||||||
$ |
% of Sales |
$ |
% of Sales |
$ |
% of Sales |
$ |
% of Sales |
|||||||||
GAAP gross profit |
$ 70,399 |
39.6% |
|
42.6% |
|
44.3% |
|
41.2% |
||||||||
Relocation expenses |
1,243 |
0.7% |
— |
— |
2,330 |
0.3% |
— |
— |
||||||||
COVID-19 |
1 |
0.0% |
22 |
0.0% |
32 |
0.0% |
517 |
0.1% |
||||||||
Non-GAAP gross profit |
$ 71,643 |
40.3% |
|
42.6% |
|
44.6% |
|
41.2% |
||||||||
GAAP operating expenses |
$ 30,677 |
17.3% |
$ 29,298 |
11.4% |
$ 97,335 |
14.3% |
$ 99,674 |
13.5% |
||||||||
Amortization of acquired intangible assets |
(72) |
0.0% |
(83) |
0.0% |
(214) |
0.0% |
(248) |
0.0% |
||||||||
Transition costs |
— |
— |
(20) |
0.0% |
80 |
0.0% |
(7,953) |
-1.1% |
||||||||
COVID-19 |
(37) |
0.0% |
(58) |
0.0% |
(137) |
0.0% |
(617) |
-0.1% |
||||||||
Spin related stock-based compensation |
(43) |
0.0% |
— |
— |
(104) |
0.0% |
(442) |
-0.1% |
||||||||
Relocation expenses |
(1,737) |
-1.0% |
— |
— |
(6,198) |
-0.9% |
— |
— |
||||||||
Non-GAAP operating expenses |
$ 28,788 |
16.2% |
$ 29,137 |
11.3% |
$ 90,762 |
13.3% |
$ 90,414 |
12.3% |
||||||||
GAAP operating income |
$ 39,722 |
22.3% |
$ 80,381 |
31.2% |
|
30.0% |
|
27.6% |
||||||||
Amortization of acquired intangible assets |
72 |
0.0% |
83 |
0.0% |
214 |
0.0% |
248 |
0.0% |
||||||||
Transition costs |
— |
— |
20 |
0.0% |
(80) |
0.0% |
7,953 |
1.1% |
||||||||
COVID-19 |
38 |
0.0% |
80 |
0.0% |
169 |
0.0% |
1,134 |
0.2% |
||||||||
Spin related stock-based compensation |
43 |
0.0% |
— |
— |
104 |
0.0% |
442 |
0.1% |
||||||||
Relocation expenses |
2,980 |
1.7% |
— |
— |
8,528 |
1.2% |
— |
— |
||||||||
Non-GAAP operating income |
$ 42,855 |
24.1% |
$ 80,564 |
31.3% |
|
31.3% |
|
29.0% |
||||||||
GAAP income from continuing operations |
$ 30,542 |
17.2% |
$ 62,263 |
24.2% |
|
23.2% |
|
21.0% |
||||||||
Amortization of acquired intangible assets |
72 |
0.0% |
83 |
0.0% |
214 |
0.0% |
248 |
0.0% |
||||||||
Transition costs |
— |
0.0% |
20 |
0.0% |
(80) |
0.0% |
7,953 |
1.1% |
||||||||
COVID-19 |
38 |
0.0% |
80 |
0.0% |
169 |
0.0% |
1,134 |
0.2% |
||||||||
Spin related stock-based compensation |
43 |
0.0% |
— |
— |
104 |
0.0% |
442 |
0.1% |
||||||||
Relocation expenses |
2,980 |
1.7% |
— |
— |
8,528 |
1.2% |
— |
— |
||||||||
Tax effect of non-GAAP adjustments |
(733) |
-0.4% |
(46) |
0.0% |
(2,054) |
-0.3% |
(2,444) |
-0.3% |
||||||||
Non-GAAP income from continuing operations |
$ 32,942 |
18.5% |
$ 62,400 |
24.2% |
|
24.2% |
|
22.0% |
||||||||
GAAP income from continuing operations per share - diluted |
$ 0.65 |
$ 1.12 |
$ 3.28 |
$ 2.75 |
||||||||||||
Amortization of acquired intangible assets |
— |
— |
— |
— |
||||||||||||
Transition costs |
— |
— |
— |
0.14 |
||||||||||||
COVID-19 |
— |
— |
— |
0.02 |
||||||||||||
Spin related stock-based compensation |
— |
— |
— |
0.01 |
||||||||||||
Relocation expenses |
0.06 |
— |
0.18 |
— |
||||||||||||
Tax effect of non-GAAP adjustments |
(0.02) |
— |
(0.04) |
(0.04) |
||||||||||||
Non-GAAP income from continuing operations per share - diluted |
$ 0.69 |
$ 1.12 |
$ 3.42 |
$ 2.88 |
||||||||||||
(a) Non-GAAP net income per share does not foot due to rounding. |
||||||||||||||||
|
177,738 |
257,634 |
682,826 |
736,247 |
||||||||||||
- |
- |
|||||||||||||||
Weighted average number of common shares outstanding - diluted |
47,175 |
55,702 |
48,307 |
56,258 |
|
||||||||
RECONCILIATION OF GAAP INCOME FROM CONTINUING OPERATIONS TO NON-GAAP ADJUSTED EBITDAS |
||||||||
(in thousands) |
||||||||
(Unaudited) |
||||||||
For the Three Months Ended |
For the Nine Months Ended |
|||||||
|
|
|
|
|||||
GAAP income from continuing operations |
$ 30,542 |
$ 62,263 |
$ 158,359 |
$ 154,679 |
||||
Interest expense |
639 |
592 |
1,740 |
3,471 |
||||
Income tax expense |
9,337 |
18,520 |
47,281 |
47,176 |
||||
Depreciation and amortization |
7,179 |
7,017 |
22,346 |
23,264 |
||||
Stock-based compensation expense |
1,199 |
1,317 |
3,565 |
3,392 |
||||
COVID-19 |
38 |
80 |
169 |
1,134 |
||||
Transition costs |
— |
20 |
(80) |
7,953 |
||||
Relocation expense |
2,980 |
— |
8,528 |
— |
||||
Non-GAAP Adjusted EBITDAS |
$ 51,914 |
$ 89,809 |
$ 241,908 |
$ 241,069 |
||||
29.2% |
34.9% |
|
||||||||
RECONCILIATION OF OPERATING CASH FLOW FROM CONTINUING OPERATIONS TO FREE CASH FLOW |
||||||||
For the Three Months Ended |
For the Nine Months Ended |
|||||||
|
|
|
|
|||||
Net cash (used in)/provided by operating activities |
$ 6,911 |
$ 60,349 |
$ 112,275 |
$ 198,437 |
||||
Net cash used in investing activities |
(5,012) |
(3,256) |
(15,211) |
(18,570) |
||||
Free cash flow |
$ 1,899 |
$ 57,093 |
$ 97,064 |
$ 179,867 |
View original content to download multimedia:https://www.prnewswire.com/news-releases/smith--wesson-brands-inc-reports-third-quarter-fiscal-2022-financial-results-301494534.html
SOURCE