Smith & Wesson Holding Corporation Reports Record Fourth Quarter and Full Year Fiscal 2013 Financial Results - Record Fiscal Fourth Quarter 2013 Net Sales of $179 Million, Up 38% Year-Over-Year

- Record Quarterly Net Income from Continuing Operations of $29 Million, or $0.44 Per Diluted Share

- Record Annual Fiscal 2013 Net Sales of $588 Million, Up 43% Year-Over-Year

- Record Annual Net Income From Continuing Operations of $81 Million, or $1.22 Per Diluted Share

- Record Cash of $101 Million

SPRINGFIELD, Mass., June 25, 2013 /PRNewswire/ -- Smith & Wesson Holding Corporation (NASDAQ Global Select: SWHC), a leader in firearm manufacturing and design, today announced record financial results for the fiscal fourth quarter and full year periods ended April 30, 2013.

Fourth Quarter Fiscal 2013 Financial Highlights

  • Net sales for the fourth quarter were $178.7 million, up 37.6% from the fourth quarter last year. Although the company continued to increase its production capacity, it was unable to meet the ongoing demand across most of its firearm product lines, resulting in additional growth in the company's order backlog.
  • Gross profit for the fourth quarter was $68.5 million, or 38.3% of net sales, compared with gross profit of $46.9 million, or 36.1% of net sales, for the comparable quarter last year.  Gross profit improved as a result of increased sales volume, leveraging of fixed costs, and a planned favorable product mix.
  • Operating expenses for the fourth quarter were $21.6 million, or 12.1% of net sales, compared with operating expenses of $21.2 million, or 16.3% of net sales, for the fourth quarter last year.  The decline in operating expenses as a percentage of net sales was primarily driven by higher sales combined with controlled spending in sales and marketing.
  • The increased net sales and leverage in expenses resulted in operating income for the fourth quarter of $46.9 million, or 26.2% percent of net sales, compared with operating income of $25.7 million, or 19.8% percent of net sales, for the comparable quarter last year. 
  • Income from continuing operations for the fourth quarter was $28.6 million, or $0.44 per diluted share, compared with net income from continuing operations of $17.8 million, or $0.27 per diluted share, for the fourth quarter last year. Income from continuing operations for the fourth quarter of fiscal 2013 includes the impact of a $3.0 million charge, or $0.03 per diluted share, related to anticipated expenses associated with a Thompson/Center product recall.
  • Non-GAAP Adjusted EBITDAS from continuing operations for the fourth quarter increased to $52.7 million compared with $31.2 million for the fourth quarter last year.
  • Operating cash flow of $51.3 million and capital spending of $13.0 million for the fourth quarter resulted in free cash flow of $38.3 million.

Full Year Fiscal 2013 Financial Highlights

  • Net sales for the full fiscal year were a record $587.5 million compared with $412.0 million for the prior fiscal year, an increase of 42.6%.  Firearm unit production for the year increased by 40.4%.
  • Gross profit was 37.2% compared with 31.1% for fiscal 2012.
  • Operating expenses were $85.6 million, or 14.6% of net sales, for fiscal 2013 compared with operating expenses of $83.1 million, or 20.2% of net sales, for fiscal 2012.
  • Income from continuing operations was $81.4 million, or $1.22 per diluted share, compared with income from continuing operations of $26.4 million, or $0.40 per diluted share, for last year. 
  • Non-GAAP Adjusted EBITDAS from continuing operations for the full fiscal year totaled $154.2 million compared with $68.4 million for fiscal 2012.
  • Operating cash flow was $98.1 million and capital spending was $41.4 million for fiscal 2013, resulting in full year free cash flow of $65.2 million, which includes $8.5 million from the sale of discontinued operations.
  • During fiscal 2013, the company repurchased 2.1 million shares of its common stock for $20.0 million utilizing cash on hand. 
  • Cash and cash equivalents as of April 30, 2013 totaled $100.5 million, up from $56.7 million a year ago.  

Jeffrey D. Buchanan, Smith & Wesson Holding Corporation Executive Vice President and Chief Financial Officer, stated, "Building on the strength of our record profitability, robust cash flows, and rising cash position in fiscal 2013, we recently accelerated a number of steps to optimize our capital structure and generate increased value for our stockholders. On June 13, 2013, we announced that we had repurchased our outstanding 9.5% notes for $49.2 million and that we had issued $75.0 million of new 5.875% notes.  Since that date, we have sold an additional $25.0 million of the 5.875% notes, which will bring the total new note issuance to $100.0 million.  Also on June 13, 2013, we announced that we initiated a $100.0 million stock buyback, a portion of which is expected to be purchased through a $75.0 million tender offer for $10.00 per share, which commenced on June 17, 2013. Overall, we believe that these changes provide a solid foundation upon which to continue to grow our core firearms business, while giving us the financial flexibility to be strategically opportunistic in the market."

James Debney, Smith & Wesson Holding Corporation President and Chief Executive Officer, stated, "We are pleased with our results, which include record fourth quarter and annual net sales and profits and a substantial expansion of our gross margins.  Our successful performance was driven by solid marketing, innovative new products, disciplined manufacturing execution, and strict financial management.  Significant increases in our manufacturing capacity, combined with continued robust consumer demand for firearms, resulted in higher sales of our most popular M&P® products.  Our achievements over the year aligned directly with our growth strategy, which is underpinned by a focus on our core firearm business.  Having completed another year of successfully executing our strategy, we are today issuing our financial outlook for the first quarter and full fiscal year 2014."

Financial Outlook

The company expects net sales for the first quarter of fiscal 2014 to be between $162.0 million and $167.0 million, which would represent year-over-year growth of approximately 21% at the midpoint. The company anticipates GAAP earnings per share from continuing operations of between $0.34 and $0.37 for the first quarter of fiscal 2014. Included in this first quarter outlook are estimated expenses of approximately $0.06 per share associated with the bond and stock repurchases.

The company anticipates net sales for fiscal 2014 of between $605.0 million and $615.0 million, which would represent year-over-year growth of approximately 4% at the midpoint. It should be noted that the company ended its Walther distribution agreement at the end of fiscal 2013. Therefore, when Walther is excluded from the full year 2013 results, estimated net sales for 2014 would represent year-over-year growth of 12% at the mid-point.  The company anticipates GAAP earnings per share from continuing operations of between $1.30 and $1.35 for fiscal 2014, and Adjusted EBITDAS of between $160.0 million and $170.0 million.

Conference Call and Webcast

The company will host a conference call and webcast today, June 25, 2013, to discuss its fourth quarter and full year fiscal 2013 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 (857) 244-7551 and reference conference code 34472188. 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 Financial Measures

In this press release, certain non-GAAP financial measures, including "Adjusted EBITDAS" and "free cash flow" are presented.  From time-to-time, the company considers and uses Adjusted EBITDAS and free cash flow as supplemental measures 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 compensation expense, plant consolidation costs, DOJ and SEC investigation costs, and certain other transactions.  See the attached "Reconciliation of GAAP Net Income 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 full year periods ended April 30, 2013 and April 30, 2012 and the company's guidance for full year fiscal 2014.  Free cash flow is defined as cash flow provided by operating activities less capital expenditures, which include purchases of property, equipment, and software.

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 the company's anticipated expenses associated with the Thompson/Center product recall; the company's assessment that it recently executed a number of steps to optimize its capital structure and generate increased value for its stockholders building on the strength of its record profitability, robust cash flows, and rising cash position in fiscal 2013; the company's belief that its repurchases of outstanding notes and the issuance of new notes as well as the announced stock buyback will increase the company's financial flexibility and provide a solid foundation upon which to continue to grow its core firearm business while being strategically opportunistic in the market; the company's belief that its successful performance was driven by solid marketing, innovative new products, disciplined manufacturing execution, and strict financial management; the company's belief that significant increases in the company's manufacturing capacity, combined with continued robust consumer demand for firearms resulted in higher sales of its most popular M&P products; and the company's expectations for net sales, GAAP earnings per share from continuing operations, and estimated expenses associated with bond and stock repurchases for the first quarter of fiscal 2014 as well as net sales, GAAP earnings per share from continuing operations and Adjusted EBITDAS for fiscal 2014.  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 regulation of firearms and firearm-related products; 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; 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, 2013.

Contact: 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 INCOME AND COMPREHENSIVE INCOME




For the Three Months Ended April 30:


For the Years Ended April 30,



2013 (Unaudited)


2012 (Unaudited)


2013


2012



(In thousands, except per share data)

Net sales

$

178,717


$

129,843


$

587,514


$

411,997

Cost of sales


110,229



82,980



369,111



284,008

Gross profit


68,488



46,863



218,403



127,989

Operating expenses:













 Research and development


1,388



973



4,751



4,543


 Selling and marketing


6,817



6,495



30,020



31,317


 General and administrative


13,416



13,729



50,798



47,213


 Total operating expenses


21,621



21,197



85,569



83,073

Operating income from continuing operations


46,867



25,666



132,834



44,916

Other income/(expense):













 Other income/(expense), net




16



39



78


 Interest income


64



309



814



1,505


 Interest expense


(1,210)



(1,439)



(5,781)



(7,484)


 Total other income/(expense), net


(1,146)



(1,114)



(4,928)



(5,901)

Income from continuing operations before income taxes


45,721



24,552



127,906



39,015

Income tax expense


17,090



6,735



46,500



12,582

Income from continuing operations


28,631



17,817



81,406



26,433

Discontinued operations:













Loss from operations of discontinued security solutions division


(455)



(7,639)



(3,605)



(15,945)


Income tax expense/(benefit)


3,010



(2,290)



(912)



(5,617)


Loss from discontinued operations


(3,465)



(5,349)



(2,693)



(10,328)

Net income/comprehensive income

$

25,166


$

12,468


$

78,713


$

16,105














Net income per share:













Basic - continuing operations

$

0.45


$

0.27


$

1.25


$

0.41


Basic - net income

$

0.39


$

0.19


$

1.21


$

0.25


Diluted - continuing operations

$

0.44


$

0.27


$

1.22


$

0.40


Diluted - net income

$

0.38


$

0.19


$

1.18


$

0.25

Weighted average number of common shares outstanding:













Basic


64,217



65,057



65,155



64,788


Diluted


65,450



66,418



66,642



67,277

 

 

SMITH & WESSON HOLDING CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS





As of:


April 30, 2013


April 30, 2012


(In thousands, except par value and share data)

 ASSETS

 Current assets:







Cash and cash equivalents, including restricted cash of $3,345 on April 30, 2013 and $3,334 on April 30, 2012

$

100,487


$

56,717


Accounts receivable, net of allowance for doubtful accounts of $1,128 on April 30, 2013 and $1,058 on April 30, 2012


46,088



48,313


Inventories


62,998



55,296


Prepaid expenses and other current assets


4,824



4,139


Assets held for sale




13,490


Deferred income taxes 


12,076



12,759


Income tax receivable


3,093





 Total current assets


229,566



190,714

 Property, plant, and equipment, net


86,382



60,528

 Intangibles, net


3,965



4,532

 Other assets


7,076



5,900


$

326,989


$

261,674













 LIABILITIES AND STOCKHOLDERS' EQUITY

 Current liabilities:







Accounts payable

$

31,220


$

28,618


Accrued expenses


16,033



20,685


Accrued payroll


13,096



9,002


Accrued income taxes




291


Accrued taxes other than income


5,349



4,270


Accrued profit sharing


9,587



8,040


Accrued product/municipal liability


1,551



1,397


Accrued warranty


5,757



5,349


Liabilities held for sale




5,693



 Total current liabilities


82,593



83,345

 Deferred income taxes 


7,863



4,537

 Notes payable, net of current portion


43,559



50,000

 Other non-current liabilities


11,675



10,948


 Total liabilities


145,690



148,830

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, 67,596,716 shares issued and  64,297,113 shares outstanding on April 30, 2013 and 66,512,097 shares issued and 65,312,097 shares outstanding on April 30, 2012


68



67


Additional paid-in capital 


199,120



189,379


Retained earnings/(accumulated deficit) 


8,434



(70,279)


Accumulated other comprehensive income


73



73


Treasury stock, at cost (3,299,603 common shares on April 30, 2013 and 1,200,000 on April 30, 2012)


(26,396)



(6,396)




 Total stockholders' equity


181,299



112,844


$

326,989


$

261,674

 

SMITH & WESSON HOLDING CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS






For the Years Ended April 30,


2013


2012





(In thousands)

 Cash flows from operating activities:







Net Income

$

78,713


$

16,105


 Adjustments to reconcile net income to net cash provided by operating activities:








Amortization and depreciation


16,730



15,487



Loss on sale of business including loss on sale of discontinued operations, including $45 of stock-based compensation expense 


1,222



5,688



Loss on sale/disposition of assets


315



285



Provisions for/(recoveries of) losses on accounts receivable


720



(465)



Change in disposal group assets and liabilities


(1,215)



5,467



Deferred income taxes


4,009



(1,558)



Stock-based compensation expense


4,073



2,484



Excess book deduction of stock-based compensation



(144)



Changes in operating assets and liabilities:








 Accounts receivable


1,505



5,089



 Inventories


(7,702)



(9,235)



 Other current assets


(285)



950



 Income tax receivable/payable


(3,384)



4,804



 Accounts payable


2,602



(8,716)



 Accrued payroll


3,489



3,693



 Accrued taxes other than income


1,079



(7,151)



 Accrued profit sharing


1,547



3,959



 Accrued other expenses


(5,279)



(877)



 Accrued product/municipal liability


154



(1,187)



 Accrued warranty


408



2,169



 Other assets


(1,930)



(189)



 Other non-current liabilities


1,327



714




 Net cash provided by operating activities


98,098



37,372

 Cash flows from investing activities:







Proceeds from sale of business including discontinued operations


7,500



500


 Receipts from note receivable


73



19


 Payments to acquire patents and software


(102)



(164)


 Proceeds from sale of property and equipment


1,040



26


 Payments to acquire property and equipment


(41,421)



(13,770)




 Net cash used in investing activities


(32,910)



(13,389)

 Cash flows from financing activities:







Proceeds from loans and notes payable


1,753



1,532


Cash paid for debt issue costs




(1,850)


Proceeds from energy efficiency incentive programs




225


Payments on capital lease obligation


(600)




Cash paid for redemption of convertible notes




(30,000)


Payments on loans and notes payable


(8,195)



(1,532)


Proceeds from Economic Development Incentive Program




4,400


Payments to acquire treasury stock


(20,000)




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


4,808



1,667


Taxes paid related to restricted stock issuance


(209)




Excess tax benefit of stock-based compensation


1,025






 Net cash used in financing activities


(21,418)



(25,558)

Net increase/(decrease) in cash and cash equivalents


43,770



(1,575)

Cash and cash equivalents, beginning of period


56,717



58,292

Cash and cash equivalents, end of period

$

100,487


$

56,717

Supplemental disclosure of cash flow information







Cash paid for:








Interest

$

5,295


$

5,865



Income taxes


44,087



3,963

 

SMITH & WESSON HOLDING CORPORATION AND SUBSIDIARIES

RECONCILIATION OF GAAP NET INCOME TO ADJUSTED EBITDAS (Unaudited)

























For the Three Months Ended April 30, 2013:



For the Three Months Ended April 30, 2012:






GAAP


Adjustments


Adjusted



GAAP


Adjustments


Adjusted


(In thousands)

 Net sales

$

178,717


$



$

178,717



$

129,843


$



$

129,843

 Cost of sales


110,229



(4,026)

(8)



106,203




82,980



(3,735)

(1)



79,245

 Gross profit


68,488



4,026




72,514




46,863



3,735




50,598

 Operating expenses:






















 Research and development


1,388



(29)

(8)



1,359




973



(13)

(1)



960


 Selling and marketing


6,817



(79)

(8)



6,738




6,495



(56)

(1)



6,439


 General and administrative


13,416



(1,668)

(2)



11,748




13,729



(1,668)

(4)



12,061


 Total operating expenses


21,621



(1,776)




19,845




21,197



(1,737)




19,460

 Operating income from continuing operations


46,867



5,802




52,669




25,666



5,472




31,138

 Other income/(expense):






















 Other income/(expense), net










16






16


 Interest income


64






64




309



(300)

(7)



9


 Interest expense


(1,210)



1,210

(5)






(1,439)



1,439

(5)




 Total other income/(expense), net


(1,146)



1,210




64




(1,114)



1,139




25






















 Income from continuing operations before income taxes


45,721



7,012




52,733




24,552



6,611




31,163

 Income tax expense


17,090



(17,090)

(6)






6,735



(6,735)

(6)



Income from continuing operations


28,631



24,102




52,733




17,817



13,346




31,163

Discontinued operations:





















Loss from operations of discontinued security solutions division


(455)






(455)




(7,639)



6,060

(9)



(1,579)

Income tax expense/(benefit)


3,010



(3,010)

(6)






(2,290)



2,290

(6)



Loss on discontinued operations


(3,465)



3,010




(455)




(5,349)



3,770




(1,579)

Net income/comprehensive income

$

25,166


$

27,112



$

52,278



$

12,468


$

17,116



$

29,584























SMITH & WESSON HOLDING CORPORATION AND SUBSIDIARIES

RECONCILIATION OF GAAP NET INCOME TO ADJUSTED EBITDAS (Unaudited)

























For the Year Ended April 30, 2013:



For the Year Ended April 30, 2012:






GAAP


Adjustments


Adjusted



GAAP


Adjustments


Adjusted


(In thousands)

 Net sales

$

587,514


$



$

587,514



$

411,997


$



$

411,997

 Cost of sales


369,111



(14,237)

(8)



354,874




284,008



(14,554)

(1)



269,454

 Gross profit


218,403



14,237




232,640




127,989



14,554




142,543

 Operating expenses:






















 Research and development


4,751



(116)

(8)



4,635




4,543



(157)

(1)



4,386


 Selling and marketing


30,020



(247)

(8)



29,773




31,317



(277)

(1)



31,040


 General and administrative


50,798



(6,542)

(2)



44,256




47,213



(8,246)

(3)



38,967


 Total operating expenses


85,569



(6,905)




78,664




83,073



(8,680)




74,393

 Operating income from continuing operations


132,834



21,142




153,976




44,916



23,234




68,150

 Other income/(expense):






















 Other income/(expense), net


39






39




78






78


 Interest income


814



(608)

(7)



206




1,505



(1,343)

(7)



162


 Interest expense


(5,781)



5,781

(5)






(7,484)



7,484

(5)




 Total other income/(expense), net


(4,928)



5,173




245




(5,901)



6,141




240






















 Income from continuing operations before income taxes


127,906



26,315




154,221




39,015



29,375




68,390

 Income tax expense


46,500



(46,500)

(6)






12,582



(12,582)

(6)



Income from continuing operations


81,406



72,815




154,221




26,433



41,957




68,390

Discontinued operations:





















Loss from operations of discontinued security solutions division


(3,605)



1,808

(9)



(1,797)




(15,945)



8,321

(9)



(7,624)

Income tax benefit


(912)



912

(6)






(5,617)



5,617

(6)



Loss on discontinued operations


(2,693)



896




(1,797)




(10,328)



2,704




(7,624)

 Net income/comprehensive income

$

78,713


$

73,711



$

152,424



$

16,105


$

44,661



$

60,766

(1)

To exclude depreciation, amortization, and plant consolidation costs.

(2)

To exclude depreciation, amortization, stock-based compensation expense, and DOJ/SEC costs and related profit sharing impacts of DOJ/SEC.

(3)

To exclude 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.

(4)

To exclude depreciation, amortization, stock-based compensation expense, plant consolidation costs, and DOJ/SEC costs and related profit sharing impacts of DOJ/SEC.

(5)

To exclude interest expense.

(6)

To exclude income tax expense.

(7)

To exclude intercompany interest income.

(8)

To exclude depreciation and amortization.

(9)

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

 

 

SOURCE Smith & Wesson Holding Corporation



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