UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
September 3, 2014
Date of Report (Date of earliest event reported)
Smith & Wesson Holding Corporation
(Exact Name of Registrant as Specified in Charter)
| Nevada | 001-31552 | 87-0543688 | ||
| (State or Other Jurisdiction of Incorporation) |
(Commission File Number) |
(IRS Employer Identification No.) |
2100 Roosevelt Avenue
Springfield, Massachusetts
01104
(Address of Principal Executive Offices) (Zip Code)
(800) 331-0852
(Registrant’s telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
| ¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
| Item 7.01 | Regulation FD Disclosure. |
We are furnishing this Current Report on Form 8-K in connection with the disclosure of information, in the form of the textual information from a PowerPoint presentation to be given at meetings with institutional investors or analysts. This information may be amended or updated at any time and from time to time through another Form 8-K, a later company filing, or other means. The PowerPoint presentation attached as Exhibit 99.1 to this Current Report on Form 8-K updates and replaces in its entirety all prior PowerPoint presentations filed by us, including the PowerPoint presentation filed as Exhibit 99.1 to the Current Report on Form 8-K dated June 20, 2014, which was filed with the Securities and Exchange Commission on June 20, 2014.
The information in this Current Report on Form 8-K (including the exhibit) is furnished pursuant to Item 7.01 and shall not be deemed to be “filed” for the purpose of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section. This Current Report on Form 8-K will not be deemed an admission as to the materiality of any information in the Report that is required to be disclosed solely by Regulation FD.
We do not have, and expressly disclaim, any obligation to release publicly any updates or any changes in our expectations or any change in events, conditions, or circumstances on which any forward-looking statement is based.
The text included with this Report on Form 8-K is available on our website located at www.smith-wesson.com, although we reserve the right to discontinue that availability at any time.
| Item 9.01. | Financial Statements and Exhibits. |
| (a) | Financial Statements of Business Acquired. |
Not applicable.
| (b) | Pro Forma Financial Information. |
Not applicable.
| (c) | Shell Company Transactions. |
Not applicable.
| (d) | Exhibits. |
| Exhibit |
Exhibits | |
| 99.1 | Smith & Wesson Investor Presentation dated September 2014 | |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| SMITH & WESSON HOLDING CORPORATION | ||||||
| Date: September 3, 2014 |
By: |
/s/ Jeffrey D. Buchanan | ||||
| Jeffrey D. Buchanan | ||||||
| Executive Vice President, Chief Financial Officer, and Treasurer | ||||||
EXHIBIT INDEX
| 99.1 | Smith & Wesson Investor Presentation dated September 2014 |
Exhibit 99.1
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I N V E S T O R P R E S E N T A T I O N
September 2014
WWW.SMITH-WESSON.COM NASDAQ | SWHC
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SAFE HARBOR
Certain statements contained in this presentation 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 but are not limited to statements regarding the Company_s vision and mission; the Company_s strategic corporate objectives and rules for success; the demand for the Company_s products and services; inventory growth and channel conditions in the Company_s industry; the Company_s new products and strategic product development; operational and financial benefits of vertical integration and timing and impact of investments in flexible production; returning value to the Company_s stockholders; the Company_s business plan and strategic roadmap; the Company_s markets and opportunities for growth as well as market drivers; the Company_s focus and strategies; anticipated revenue, GAAP earnings per share, tax rate, share count and capital expenditures for the Company in future periods; and scalability and performance from the Company_s ERP system. 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 success of new products, the potential for increased regulation of firearms and firearm-related products, and other risks detailed from time to time in the Company_s reports filed with the SEC.
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OUR VISION IS TO BE THE LEADING FIREARMS MANUFACTURER
“Our mission is to enable our employees to design, produce, and market high quality, innovative firearms that meet the needs and desires of our consumer and professional customers.”
PROUDLY MADE IN THE USA
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A U.S. MARKET LEADER IN FIREARMS SINCE 1852
Springfield, MA / 1,700 U.S. Employees
Growing Market Share Within an Expanding Base of Consumers Healthy Balance Sheet Seasoned Management Team
CONSUMER MARKET PROFESSIONAL MARKET
85% of Q1 FY15 Firearm Sales 15% of Q1 FY15 Firearm Sales
§ Sport/Competition § Personal Protection § Law Enforcement § Military § Hunting § Concealed Carry § Government § International
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STRATEGIC
CORPORATE
OBJECTIVES
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Protect and grow our core firearm business 2 Focus on profitable growth |
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Streamline and standardize our business operations 4 Emphasize customer satisfaction and loyalty |
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Pursue strategic relationships & acquisitions relating to our current business |
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RULES FOR SUCCESS
§ Concentrate on firearm industry _ stay focused, keep it simple§ Protect and sustain the iconic Smith & Wesson brand § Be a consumer-centric marketing-led company
“ Compliance: Fanatical pursuit of excellence “ Brand/Product: Invest in our brands “ Channel: U.S. sporting goods “ Customer: Consumer “ Assets: High utilization
§ Launch new products strategically
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Q1 Fiscal 2015 Highlights
(July 31, 2014 _ From Continuing Operations)
“Sales of $131.9M: -22.9% Y/Y, results within guidance “Long gun sales: MSRs drove 87% of sales decline “Handgun sales slightly lower Y/Y at -3.2%
“Professional sales of $20M: Growth in international and law enforcement “Gross margin 37.2% vs. 42.6% Y/Y
“Income of $14.6M vs. $26.5M Y/Y
“EPS of $0.26 per diluted share vs. $0.40 per diluted share Y/Y “Non-GAAP Adjusted EBITDAS of $33.6M vs. $55.2M Y/Y “Cash of $83.5M
“ New products: M&P®22 Compact, M&P BODYGUARD® with Crimson Trace® laser
“ Vertical integration through Deep River Plastics subsidiary; accretive in Q1FY15
“ On track to complete Houlton, ME conversion to precision machining center, Fall 2014
“ Attended 2nd Industry Day for U.S. Army modular handgun—M&P pistol
“ Completed $30M stock repurchase _ returning value to stockholders
“ Industry-wide inventory + summer slowness = unfavorable channel conditions
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Business Plan Supported by Detailed Strategic Roadmap
FISCAL YEAR 2012 FISCAL YEAR 2013 FISCAL YEAR 2014 FISCAL YEAR 2015 FISCAL YEAR 2016 FISCAL YEAR 2017
SUSTAIN & SCALE &
FOCUS GROW OPTIMIZE SOLIDIFY ACCELERATE LEVERAGE
Compliance Continuous Improvement: Moving to Best in Class Compliance Systems in a Highly Regulated Environment
Launch Grow International
M&P Shield Launch Launch M&P
M&P 10 Bodyguard and New
Continuous Cycle of Major Product Launches When Ready and at Regular Intervals
Establish Vision Revolvers
Deep Strategy Vertical Integration Strategy
Planning
Process
Focus on M&P Take Market Share Gains and Ramping M&P Revenue; Continuous Analysis of Strategic versus Non-Strategic Product Categories
Finalize TC
Integration Convert Houlton to State-of-the-Art Review Further Expansion
Precision Machining Center
Make decision
Restructure Implement New ERP: Go Live Date Aug 2013—Phase I ERP Phases II and III
LofC & on ERP
Pay $30mm
Convert Aggressively Deploy Lean and Implement Better Process Effectiveness Including Implementing Cellular Layout
Debt Go To Market
Strategy IR Strategy: Governance
(Consumer)
Review and Transparency Assess Accessories Market and Potential for Expansion/Growth
Strategic
Options re: Move SWSS To Exit Walther Create Acquisition
SWSS Discontinued Ops and Process and
Execute Sales Process Integration Team Assessment and Potential Pursuit of Opportunities to Supply
Military
$20M Share Debt Re- $ Share 115M $ Share 30M
Repurchase Purchase Repurchase Repurchase Assessment of Best Use of Excess Capital ( Share Repurchase, Debt
Repurchase, Dividend)
FOCUS GROW: OPTIMIZE BUSINESS SOLIDIFY BUSINESS SUSTAIN BUSINESS SCALE AND
SYSTEMS: MODEL: MODEL: LEVERAGE:
Core Firearms Business Aggressive Investment in Create Deeper Create Stable Platform for Leverage Stable Business Focus and Accelerate on
with Emphasis on Capacity and Populate Understanding to Organic and Platform for Organic and Inorganic Growth
Profitability via New Product Pipeline Enhance Acquisitive Growth Inorganic Growth
Opex Cost Reductions Decision Making
and Gross Margin
Improvement
Note: Strategic roadmap is assessed regularly and timing is subject to change. 8
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A LEADING FIREARM & BRAND PORTFOLIO
§ For sport, recreation, protection, and professional use, you can feel confident standing behind 162 years of reliability and accuracy. Smith & Wesson® knows firearms and the world knows Smith & Wesson. Only the best will do.
§ Designed to be the most accurate, reliable, and ergonomically superior, M&P® firearms are built to meet your demanding standards. Durable and comfortable, they are capable of handling as many rounds as you are.
§ For hunting and shooting enthusiasts passionate about firearms. Since 1967, Thompson / Center Arms has been synonymous with firearms that stand up in the toughest situations and perform when it counts.
Performance Center® models offer sophisticated shooters limited run, uniquely designed, special-featured firearms under the Smith & Wesson® and M&P® brands.
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THE #1 FIREARM BRAND IN AMERICA
Smith & Wesson
92% §Leads all firearm manufacturers in total brand awareness 59% §Leads in critical attribute ratings: Reliability, durability, and accuracy §Most owned and considered revolver brand in the market: 1 of every 2 revolvers owned is a Smith & Wesson §Endorser brand to M&P
Unaided Aided
Source: Smith & Wesson Handgun A&U Research—December 2011 & 10 Smith & Wesson Awareness Tracking _ Gen Pop _ December 2012
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ADJUSTED NICS
UP AVG. 9.6% ANNUALLY OVER 7 YEARS*
2,500,000
2,000,000
1,500,000
1,000,000
14,796,872
13,780,285 +7.4% Y/Y
500,000 9,436,182 10,791,275 +27.7% Y/Y
9,534,131 +14.4% Y/Y
8,993,964 -1.0% Y/Y
8,083,470 +6.0% Y/Y
+11.3% Y/Y
+1.6% Y/Y
0
2007 2008 2009 2010 2011 2012 2013 2014
Actual Adj NICS Linear (Actual Adj NICS)
*CY07 _ CY14
Source: National Shooting Sports Foundation (NSSF)
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ADJUSTED NICS JULY RD 2014
3RD HIGHEST JULY ON RECORD
2,500,000 2,000,000 1,500,000 1,000,000 500,000
FYQ1 FYQ2 FYQ3 FYQ4
Jul ‘14 compared to Jul ‘13 shows a 4.5% decrease while jul ‘14 was a 4.3% decrease from Jul ‘12.
0 MAY June July August September October November December January February March April TOTAL
FY’10 662,956 602,191 602,353 687,252 726,572 841,631 861,575 1,031,344 715,309 848,036 861,408 731,955 9,172, 582
FY’11 625,763 602,908 628,125 718,971 770,310 854,563 945,463 1,133,371 784, 856 963,746 990,840 843,484 9,862,400
FY’12 696,947 679,810 680,258 815,858 878,315 945,088 1,101,076 1,410,937 920,810 1,266,344 1,189,152 931,600 11,516,345
FY’13 840,412 846,437 853,355 1,042,924 1,007,259 1,118,994 1,525,177 2,237,731 1,790,154 1,634,309 1,501,730 1,185,231 15,583,713
FY’14 974,457 872,025 855,259 1,016,559 1,034,701 1,113,818 1,308,100 1,510,529 970,510 1,264,010 1,224,705 988,726 13,133,399
FY’15 877,655 805,571 816,588 2,499,814
Smith&Wesson. Source: NSSF. The NSSF adjusts FBI NICS data to eliminate background checks associated with permit applications and checks onactive CCW permit databases. NSSF adjusted NICS data provides a more accurate picture of market conditions.
Source: NSSF. The NSSF adjusts FBI NICS data to eliminate background checks associated with permit applications and checks on active CCW permit databases. NSSF adjusted NICS data provides a more accurate picture of market conditions. 12
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OPPORTUNITY TO INCREASE PISTOL SALES TO FURTHER ALIGN WITH MARKET
U.S. Consumer Handgun Market CY 2010 CY 2012
Pistols to Revolvers Ratio 4.0 : 1 5.7 : 1
Smith & Wesson Handgun Unit Sales FY 2010 FY 2014
Pistols to Revolvers Ratio 1.4 : 1 4.1 : 1
Note: Excludes former Walther sales
Source: 2012 BATF and U.S. Int_l. Trade Commission, includes manufacture plus imports, excludes exports 13
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KEY MARKET DRIVERS
_Who_s buying?
§ New Shooters
“ Of those who have been sport shooting in 2012, 20% were new to shooting
within the past 5 years1. That included 11% who just began shooting in 2012
§ Repeat Customers
“ 90% of 10,511 respondents who own a handgun own multiple firearms2 “ 8.1 = The average number of handguns owned by those respondents2 “ Nearly 25% of first-time buyers bought at least one more firearm within the
first year after their first purchase3
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Source: NSSF—An Analysis Of Sport Shooting Participation Trends In The United States 2008—2012 |
(2) Source: NSSF—Handguns—2011 Consumer Study On Ownership And Usage 14 (3) Source: NSSF—First-Time Gun Buyers 2012
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KEY MARKET DRIVERS
§ What Are The Top Reasons For Gun Ownership? 1
1. Personal Safety/ Protection 60%
2. Hunting 36%
3. Recreation/ Sport 13%
4. Target Shooting 8%
§ Personal Protection 2
“ Home protection and personal protection are top drivers for first time and existing owners of handguns
“ Concealed carry and state legislative trends: Illinois became 50th state to issue concealed carry permits
§ Sport and Target Shooters 3
“ Over 17% or 41M adults participated in any type of target or sport shooting in 2012, an increase from the 15% participation rate in 2009
“Customer-centric: Users_ needs drive new product features
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Source: Gallup Poll Social Series: Crime _ October 2013 |
(2) Source: NSSF—First-Time Gun Buyers 2012, and Smith & Wesson Research 15 (3) Source: NSSF—An Analysis Of Sport Shooting Participation Trends In The U.S. 2008—2012
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NEW TARGET/SPORT SHOOTERS
Less than 5 years experience
§ Younger
“ 18-34 year old age group makes up about two-thirds of new shooters1
§Sport Shooting More Often
“ First-time buyers are active, 60% shooting once or more a month2
§ Increasingly Urban/Suburban
“ 47% of new shooters are urban / suburban versus rural consumers1
§ Women Increasingly Represented
“ Women represent 37% of new shooters versus 22% of established shooters1
(1) Source: NSSF—An Analysis Of Sport Shooting Participation Trends In The United States 2008—2012 16 (2) Source: NSSF—First-Time Gun Buyers 2012
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ROBUST RESEARCH
NEW DEFINED CONSUMER PROFILES EXPERIENCED
§ Process: In-depth S&W attitude, usage, and segmentation studies
“ Systematic & quantitative review to track industry brands and consumer shifts
“ In-depth multi-city focus groups to gain deeper understanding of consumer needs
“ In-field research with consumers using our products as well as competitive products
§ Yield: Proprietary info and deep understanding of our targeted consumer segments
“ Average number and type of firearms owned
“ Income, gender, brand perceptions, needs, wants, and desires
§ Result: Superior knowledge of where to play in market and how to win with the consumer
Note: Smith & Wesson Internal Research
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CONNECTING WITH NEW WOMEN SHOOTERS
§ Lead sponsor of NRA Women_s Network and _Love at First Shot_
§ Television and digital marketing geared toward women § Equipping NRA certified women instructors _ Eyes & Ears § Products designed with the needs of women shooters in mind
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STRATEGIC PRODUCT DEVELOPMENT
Market research drives product development
§ Concepts market-tested with firearm owners & purchase intenders§ Results benchmarked against database of prior concepts/sales § Leading concepts financially modeled as key component of overall business case § Further consumer studies conducted to finalize most desired designs/features
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2014 NEW PRODUCTS
Smith & Wesson
Model 69 Combat Magnum _ Smith & Wesson_s first L-Frame revolver in powerful .44 Magnum
Model 66 Combat Magnum _ .357 Magnum
K-Frame revolver returns to the product lineup
Governor® _ Multi-caliber revolver now offered in popular matte silver finish
SDVE 9 and 40 _ Value driven pistols now available in California compliant models
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2014 NEW PRODUCTS _ SHOT SHOW
Smith & Wesson M&P
M&P BODYGUARD 380 _ A sub-compact .380 ACP pistol enhanced with M&P style features
M&P15-22 (Multi-color) _ Popular M&P15-22 rifle now in four new camouflage finishes
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2014 NEW PRODUCTS® _ SHOT SHOW
Performance Center & ProSeries Products
M929 _ A 9mm competition revolver inspired by renowned, multi-record holder Jerry Miculek
M686 _ A classic, time-tested .357 Magnum enhanced with popular self-defense features
M629 _ A purpose built hunting package based on the renowned .44 Magnum cartridge
M460XVR _ A multi-caliber and multi-purpose revolver built on the Smith & Wesson X-Frame
M986 Pro Series _ A Pro Series 9mm revolver
ready for any course of fire
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OUR NEWEST PRODUCTS
M&P22 Compact — A tactical rimfire pistol that
delivers the popular features of our M&P
centerfire pistol in a smaller scale version. A
great first firearm for new participants in the
shooting sports.
M&P BODYGUARD — Our popular line of
BODYGUARD handguns now upgraded with
enhanced, integrated lasers from Crimson
Trace, an industry leader in laser sighting
systems and tactical lighting for firearms.
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THREE WAYS TO U.S. SPORTING GOODS MARKET
14 DISTRIBUTORS 10,000+
independent ( Inventory ) firearm retailers
72% of Consumer Channel Sales
Academy Sports
Bass Pro Shops
DIRECT 5 BIG BOX RETAILERS Cabela_s
Dick_s Sporting Goods
Gander Mountain
Buying Groups: 600
DIRECT 2 BUYING GROUPS Member Firearm
Retailers
Diverse path to market = Enhanced insight into retail environment
Note: Additional non big-box, direct retail relationships not included
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ACTIVE RETAIL ENGAGEMENT PROGRAM
§ Retail associate incentive rewards program § Two-way dialogue opportunity with retail associates § Ability to quickly assess market conditions through surveys, and communicate key product initiatives § Key element in go-to-market strategy
“ Intuitive graphic interface, easy to use & register sales
“ Points never expire and are transportable
“ Extensive catalog of products & experiences, including select
Smith & Wesson, M&P, and T/C® firearms
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PROFESSIONAL MARKET
Demands Highest Standards for Performance
§ Law Enforcement / Federal Government
“ Focus: Top-tier agencies in high-volume NICS states “ LA County Sheriff, Fresno County Sheriffs Office, Texas DPS
§ International
“ Focus: Large agency opportunities “ Belgium, Australia, Canada, Puerto Rico
§ U.S. Army Modular Handgun (9mm) Replacement
“ Attended 2nd industry day
“ M&P pistols strongly positioned to compete
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SMART INVESTMENTS
Houlton, ME
IN FLEXIBLE PRODUCTION High Volume CNC
§ Strategic investment in Springfield, MA basic capacity and in tooling Corporate HQ for production flexibility Primary Manufacturing § Selective outsourcing of parts production to better meet market demand and optimize internal capacity § Conversion of Houlton, ME operation into a dedicated precision machining center § Fiscal Year 2015 CapEx Estimate:$35.0 M
Deep River, CT Plastic Injection Molding
Map source: Ecozones
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150,000 leased square feet
VERTICAL INTEGRATION Full 45 injection molding machines tool-building capabilities
Deep River Plastics
MAY 2014
Asset purchase of key polymer supplier for $24 M in cash delivers in-house custom plastic injection molding, rapid prototyping, and tooling
[Graphic Appears Here]
Operational Benefits:
“ Integrates a key manufacturing process
“ Increases flexibility
“ Lowers production costs
“ Reduces risk within supply chain
“ Enhances new product development
Financial Benefits:
“ Accretive in fiscal 2015
“ Positive impact on gross margin in Q1 FY15
“ Planned payback: 4-5 years
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FINANCIAL REVIEW
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REVENUE—ANNUAL
U.S.$ Millions _ Continuing Operations
$627
$700 $588
$530-$540(E2)
$600
$500 $412
+13.8%1
$400
+43.7%1 $621
$300 $546
$200 $380
$100
$0
FY12 FY13 FY14 FY15(Est)
Walther Smith & Wesson
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Note: Excludes prior year Walther sales _ an agreement which ended in Fiscal 2013 |
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Note: FY2015 estimates provided August 26, 2014 |
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REVENUE—QUARTERLY
U.S.$ Millions _ Continuing Operations
$169.4
$180
$160 $131.4
$124.2
$140
$120
$85.0
$100
$80
$60
$40
$20
$0
1Q12 1Q13 1Q14 1Q15
Note: Excludes Walther sales _ an agreement which ended in Fiscal 2013
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ANNUAL MARGIN EXPANSION
GROSS MARGIN OPERATING PROFIT MARGIN
32
24.1%
22.6%
37.1% 41.3%
31.0%
10.9%
FY12 FY13 FY14 FY12 FY13 FY14
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MARGINS—QUARTERLY
GROSS MARGIN OPERATING PROFIT MARGIN
33
28.1%
42.6% 23.0%
37.7% 37.2% 19.5%
28.9%
6.0%
1Q12 1Q13 1Q14 1Q15 1Q12 1Q13 1Q14 1Q15
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INCREASED PROFITABILITY—ANNUAL
NET INCOME
(Continuing Operations, U.S.$ Millions)
EARNINGS PER DILUTED SHARE
(Continuing Operations)
$88.6 $1.47
$81.4
$1.22
+ 8.9% + 20.5%
$26.4 $0.40
2012 2013 2014 2012 2013 2014
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PROFITABILITY—QUARTERLY
NET INCOME EARNINGS PER DILUTED SHARE
(Continuing Operations, U.S.$ Millions) (Continuing Operations)
$0.40 $26.5 $0.28 $0.26 $18.9 $14.6
$2.3 $0.04
1Q12 1Q13 1Q14 1Q15 1Q12 1Q13 1Q14 1Q15
[Graphic Appears Here]
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BALANCE SHEET & CASH FLOW
CONDENSED BALANCE SHEET CONDENSED CASH FLOWS
For the period ending: (U.S.$ Thousands) For the three months ended: (U.S.$ Thousands)
July 31, 2014 April 30, 2014 July 31, 2014 July 31, 2013
Cash $ 83,458 $ 68,860 Net cash provided by operating activities $ 10,780 $ 19,011
AR 53,411 55,890 Net cash used in investing activities (38,696) (12,045)
Inventory 101,317 86,742 Net cash used in financing activities 42,514 (39,002)
Other current assets 25,077 27,679 Net increase/(decrease) in cash $ 14,598 $ 45,968
Total current assets 263,263 239,171
Long-term assets 172,492 142,332 Net cash provided by operating activities $ 10,780 $ 19,011
Total assets $ 435,755 $ 381,503 CAPEX, including machine deposits (14,588) (12,035)
Free cash flow $ (3,808) $ 6,976
Current liabilities $ 85,563 $ 92,543
Other non-current 22,233 22,137
Notes payable 175,000 100,000
Total liabilities 282,796 214,680
Total equity 152,959 166,823
Total liabilities & equity $ 435,755 $ 381,503
§ July 2014—Company issued $75 million of new 5.000% Senior Notes due 2018§ No borrowings under $75 million credit facility
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STOCK REPURCHASES RETURNING TO OUR VALUE
STOCKHOLDERS
$165M in shares repurchased Dec. 2012 _ July 2014
§ 14.4M shares repurchased § $11.49 average price § Share reduction of 21.7%
§ MAXIMUM shares allowed to be repurchased under loan covenants
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RETURN ON INVESTED CAPITAL _ ROIC
Weighted Average Cost of Capital _ WACC
(Trailing Four Quarters)
70%
Q1 FY
60% 2015
ROIC
50% 34.1%
40%
30% Q1 FY
2015
20% WACC
14.0%
10%
0%
Q4 FY09 Q4 FY10 Q4 FY11 Q4 FY12 Q4 FY13 Q4 FY14 Q1 FY15
ROIC WACC
§ Efficient allocation of capital generating solid returns
The ROIC presented above excludes all impairment charges and all non-recurring items. The WACC presented above is an average between the beginning and end of the respective period. Please see appendix for additional assumptions used.
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FINANCIAL Fiscal Year Ending: April 30 GUIDANCE _ From continuing operations
FISCAL SECOND QUARTER 2015 Estimate
Revenue $100M to $ 110M
GAAP Earnings Per Share $0.04 to $ 0.08
FISCAL YEAR 2015 Estimate
Revenue $530M to $ 540M
GAAP Earnings Per Share $0.89 to $ 0.94
Tax Rate 37%
Share Count 55.5M
Note: All financial information and guidance reflects information as of August 26, 2014. The
Company is not updating this information to the present date nor does its inclusion constitute a 39
reiteration or modification of this information.
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INVESTMENT SUMMARY
§ Leading position in the U.S. firearm market
§ Iconic brand with customer driven product portfolio § Focus strategically on new product opportunities
§ Pure play strategy on growing market size & market share gains
§ Strong financial performance:
Profitable Growth
“ Long-term target of quarterly gross margins in the range of 37%—41% “ Long-term target of quarterly operating margins in the range of 20%—25%
“ Margins vary among quarters due to absorption impacts of seasonality, factory shutdowns, and holidays
“ Short-term headwinds for margins due to industry-wide excess inventories
§Focus on operating efficiencies & targeted vertical integration § New SAP ERP system, driving scalability & improved performance
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INVESTOR RELATIONS
Elizabeth Sharp Vice President Smith & Wesson 2100 Roosevelt Avenue Springfield, MA 01104 Phone: 413 747 3304
Email: lsharp@smith-wesson.com
WWW.SMITH-WESSON.COM
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APPENDICES
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EXPERIENCED LEADERSHIP
JAMES DEBNEY JEFFREY D. BUCHANAN PRESIDENT & EXECUTIVE VICE PRESIDENT & CHIEF EXECUTIVE OFFICER CHIEF FINANCIAL OFFICER
+ years: multinational consumer and business-to-business environments, cluding President of Presto Products Co., a 500 million business it of Alcoa Consumer Products
+ years: public nd private company xperience in nancial anagement and w; CFO for publicly aded, global anufacturing mpany; law firm rtner; public company board member
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KEY MARKET DRIVERS
_Who_s buying?
[Graphic Appears Here]
Rising percentage of U.S. households owning firearms
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JULY 2014 HANDGUN NICS BACKGROUND CHECKS
Source: FBI Total NICS Firearms Background Checks
July 2014 handgun nics background checks
1,000,000
900,000
800,000
700,000
600,000
500,000
400,000
300,000
200,000
100,000
Jul’14 compared to Jul’13 shows a 4.5% increase while Jul’14 was a 8.3% increase over Jul’12
FYQ1 FYQ2 FYQ3 FYQ4
FY’10 FY’11 FY’12 FY’13 FY’14 FY’15
May June July August September October November December January February March April Total
282,826 252,910 251,513 259,533 247,809 275,222 268,972 313,120 289,444 360,273 367,921 314,326
275,406 259,339 268,987 260,874 275,133 291,203 299,809 395,284 342,341 424,139 438,614 362,119
307,919
376,246
445,522
454,630
298,380
370,436
394,363
410,871
291,310
377,343
391,016
408,767
319,519
426,573
428,058
316,724
389,994
413,380
328,762
410,260
422,005
359,660
533,201
458,889
511,902
876,673
565,419
402,183
881,038
439,383
568,133
770,872
633,688
535,661
683,266
629,802
416,260
533,674
508,468
Source: FBI Total NICS Firearms Background Checks
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JULY 2014 LONG GUN NICS BACKGROUND CHECKS
Source: FBI Total NICS Firearms Background Checks
JULY 2014 LONG GUN NICS BACKGROUND CHECKS
1,400,000 1,200,000 1,000,000 800,000 600,000 400,000 200,000 0
Jul’14 compared to Jul’13 shows a 17.5% decrease while Jul’14 was a 21.1% decrease from Jul’12
FYQ1 FYQ2 FYQ3 FYQ4
FY10 FY11 FY12 FY13 FY14 FY15
May June July August September October November December January February March April Total
314,167 290,452 320,995 384,767 436,674 323,738
288,478 279,249 307,659 389,413 392,666 301,023
286,545 288,281 312,214 393,993 376,846 310,767
362,310 367,074 413,312 510,406 497,092
405,883 415,323 464,594 521,050 523,292
479,436 475,736 522,471 597,561 578,973
515,135 550,450 642,790 863,265 732,270
614,226 660,116 803,733 1,224,465 844,356
349,597 364,202 431,649 788,328 430,930
387,244 423,556 565,414 703,223 470,225
421,264 466,407 556,028 700,873 482,925
349,370 404,033 438,214 554,003 382,978
4,773,677 4,9922,887 5,769,073 7,631,347 6,149,426 938,526
Source: FBI Total NICS Firearms Background Checks
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PISTOLS vs. REVOLVERS
Pistols and revolvers have different attributes, but pistols are preferred by both professionals and consumers
§ Pistol advantages:
“ Ergonomics/comfort
“ High tech/cutting edge
“ Modern shape
“ Trigger pull
“ Capacity
“ Safety features
§ Revolver advantages:
“ Simpler to use
“ Easy maintenance
“ Reliability
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MARKET PARTICIPANTS
Listed Alphabetically
RIMFIRE SEMI BLACK
SEMI AUTOMATIC CENTERFIRE RIMFIRE
AUTOMATIC REVOLVERS BOLT ACTION POWDER
PISTOLS MSR MSR
PISTOLS RIFLES
Smith & Wesson Smith & Wesson Smith & Wesson Smith & Wesson Smith & Wesson Smith & Wesson Smith & Wesson
Beretta Ruger Ruger Colt Colt Browning CVA
Glock Sig Sauer Taurus DPMS/Bushmaster Mossberg Marlin Traditions
H&K Walther Rock River Ruger Remington
Kimber Sig Sauer Sig Sauer Ruger
Ruger Savage Arms
Sig Sauer Weatherby
Springfield Winchester
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INDUSTRY INDICATORS
§ NICS
WWW.FBI.GOV
“ NICS background checks are conducted at the point of sale, tracked by the FBI, and reported monthly. NSSF adjusts the total to
eliminate permit-related checks and other _noise_
§ ADJUSTED NICS
WWW.NSSF.ORG
“ Adjusted NICS serves as a proxy for consumer sales since Smith & Wesson sells only to federally licensed firearm dealers who must, by law, conduct a background check on every firearm they sell
“ Applies to retail stores, gun shows, anywhere an FFL sells a firearm
§ FET Data www.TTB.GOV
“ Firearms and Ammunition Excise Tax Collections
“ Alcohol and Tobacco Tax and Trade Bureau
“ NSSF translates into manufacturer_s sales
“ Lagging data
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WACC ASSUMPTIONS
Weighted Average Cost of Capital
Q4 Q4 Q4 Q4 Q4 Q4 Q1
FY09 FY10 FY11 FY12 FY13 FY14 FY15
Market risk premium * 6.50% 6.70% 6.70% 6.62% 6.70% 6.96% 6.96%
Equity beta—end of period 1.36 1.74 1.25 1.68 1.67 1.48 1.67
Size premia * 3.74% 3.99% 4.07% 1.88% 1.85% 1.87% 1.87%
20-yr risk free rate—end of period 4.10% 4.36% 4.15% 2.73% 2.49% 3.22% 3.07%
Tax Rate ** 36.74% 38.14% 34.30% 38.38% 36.68% 34.67% 34.00%
*—Market risk premium and size premia are from Ibbotson® SBBI® Market Reports as of December 31st from the previous year
**—Tax rate for trailing four quarters based on Form 10-K/10-Q reporting, excluding discrete items
Note: Smith & Wesson research
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A DYNAMIC REGULATORY ENVIRONMENT
§ A solid history of making firearms that meet diverse state requirements, providing consumers with a choice
§ We will not comply with new California microstamping requirement for pistols
“ Flawed technology
“ Restricts rights of law-abiding citizens
§ Our grandfathered M&P Shield and SDVE” pistols remain available for sale in California
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HANK YOU