2014

Smith & Wesson Holding Corporation Reports Third Quarter Fiscal 2013 Financial Results - Fiscal Third Quarter 2013 Net Sales from Continuing Operations of $136.2 Million, Up 38.8% Year-Over-Year

- Fiscal Third Quarter 2013 Net Income from Continuing Operations of $17.5 Million, or $0.26 Per Diluted Share

- Increasing Guidance for Fiscal 2013 Full Year Net Sales from Continuing Operations to Between $575.0 Million and $580.0 Million

SPRINGFIELD, Mass., March 5, 2013 /PRNewswire/ -- Smith & Wesson Holding Corporation (NASDAQ Global Select: SWHC), a leader in firearm manufacturing and design, today announced financial results for the fiscal 2013 third quarter ended January 31, 2013.

Third Quarter Fiscal 2013 Financial Highlights

  • Net sales from continuing operations for the third quarter were $136.2 million, up 38.8% from the third quarter last year.  The company continued to increase its production capacity during the third quarter and has operated its plant at essentially full capacity for the last four quarters. Despite these capacity increases, the company was unable to meet the ongoing demand across all of its firearm product lines.
  • Gross profit for the third quarter was $50.1 million, or 36.8% of net sales, compared with gross profit of $30.0 million, or 30.6% 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 favorable product mix.
  • Operating expenses for the third quarter were $22.1 million, or 16.2% of net sales, compared with operating expenses of $19.7 million, or 20.1% of net sales, for the third quarter last year.  The increase in operating expenses was primarily related to higher general and administrative costs associated with the ongoing implementation of the company's new ERP system and incentive compensation. The decline in operating expenses as a percentage of net sales was primarily driven by increased sales volume and controlled spending in sales and marketing.
  • Operating income from continuing operations for the third quarter was $28.0 million, or 20.6% percent of net sales, compared with operating income from continuing operations of $10.3 million, or 10.5% percent of net sales, for the comparable quarter last year.
  • Income from continuing operations for the third quarter was $17.5 million, or $0.26 per diluted share, more than triple the net income from continuing operations of $5.4 million, or $0.08 per diluted share, for the third quarter last year.
  • Non-GAAP Adjusted EBITDAS from continuing operations for the third quarter increased to $33.3 million compared with $14.8 million for the third quarter last year. Fiscal year-to-date non-GAAP Adjusted EBITDAS was $101.5 million compared with $37.2 million for the comparable prior year period.
  • Operating cash flow of $33.0 million and net capital spending of $12.6 million for the third quarter resulted in free cash flow of $20.4 million.
  • During the third quarter of fiscal 2013, the company's Board of Directors approved a program to repurchase up to $35.0 million of Smith & Wesson's common stock, subject to certain conditions, in the open market or privately negotiated transactions on or prior to June 30, 2013. The company repurchased 2.1 million shares of its common stock for $20.0 million through this program during the third quarter of fiscal 2013 utilizing cash on hand.

James Debney, Smith & Wesson Holding Corporation President and Chief Executive Officer, stated, "Our success in the third quarter was highlighted by significant year-over-year improvements in net sales, margin expansion, and bottom line profitability as we successfully executed our growth strategy, which is underpinned with a focus on firearms.  Performance gains were driven by continued robust consumer demand for firearms as well as increased sales of our M&P® polymer pistols and modern sporting rifles. Based on incremental improvements in expanding our production capacity, which will be further deployed in the fourth quarter, we are increasing our financial guidance for the full fiscal year 2013."

Jeffrey D. Buchanan, Executive Vice President and Chief Financial Officer, stated, "The strength of our balance sheet continues to provide us enhanced flexibility to invest in our core firearm business and fuel our growth initiatives. At the end of the quarter, we had no borrowings under our credit facility and a cash balance of $62.0 million.  Robust free cash flow also allowed us to return value to our stockholders by buying back shares of our common stock in the fiscal third quarter for a total of $20.0 million."

Financial Outlook for Continuing Operations

The company expects net sales from continuing operations for the fourth quarter of fiscal 2013 to be between $165.0 million and $170.0 million, which would represent year-over-year growth from continuing operations of 29.0% at the midpoint. The company anticipates GAAP earnings per diluted share from continuing operations of between $0.38 and $0.40 for the fourth quarter of fiscal 2013.

The company is raising its full year fiscal 2013 financial guidance.  The company currently anticipates net sales from continuing operations for fiscal 2013 of between $575.0 million and $580.0 million, which would represent year-over-year growth from continuing operations of approximately 40.0% at the midpoint. The company anticipates fiscal 2013 GAAP earnings per diluted share from continuing operations of between $1.17 and $1.19, income from continuing operations of between $78.0 million and $79.5 million, and non-GAAP Adjusted EBITDAS from continuing operations of between $148.4 million and $150.7 million.

Conference Call and Webcast

The company will host a conference call and webcast today, March 5, 2013, to discuss its third quarter 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 (866) 804-6928 and reference conference code 35129271. 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 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 nine-month periods ended January 31, 2013 and January 31, 2012 and the attached "Reconciliation of Estimated GAAP Income from Continuing Operations to Estimated Adjusted EBITDAS" for a full detailed explanation of the amounts excluded from and included in income from continuing operations to arrive at estimated Adjusted EBITDAS for full year fiscal 2013.  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 our outlook for fiscal 2013 full year net sales from continuing operations; the outcome of the ongoing implementation of our new ERP system; potential future repurchases of our common stock under our stock repurchase program; our belief regarding robust consumer demand for firearms; our belief that our expanded production capacity will be further deployed in the fourth quarter of fiscal 2013; increasing our full year fiscal 2013 financial guidance; our belief regarding our enhanced flexibility to invest in our core firearm business and fuel our growth initiatives; our outlook for net sales from continuing operations, year-over-year growth from continuing operations, and GAAP earnings per diluted share from continuing operations for the fourth quarter of fiscal 2013 and the full 2013 fiscal year; and our outlook for income from continuing operations and non-GAAP Adjusted EBITDAS from continuing operations for the full 2013 fiscal year, including the amounts excluded from and included in net income to arrive at Adjusted EBITDAS for our guidance for full year fiscal 2013.  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, 2012.

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

(Unaudited)




For the Three Months Ended:


For the Nine Months Ended:




January 31, 2013


January 31, 2012


January 31, 2013


January 31, 2012




(In thousands, except per share data)

Net sales


$

136,242


$

98,125


$

408,797


$

282,154

Cost of sales



86,143



68,121



258,882



201,028

Gross profit



50,099



30,004



149,915



81,126

Operating expenses:














 Research and development



942



992



3,363



3,571


 Selling and marketing



8,333



8,062



23,203



24,823


 General and administrative



12,776



10,666



37,381



33,483


 Total operating expenses



22,051



19,720



63,947



61,877

Operating income from continuing operations



28,048



10,284



85,968



19,249

Other income/(expense):














 Other income/(expense), net





8



39



62


 Interest income



48



394



750



1,196


 Interest expense



(1,240)



(1,629)



(4,571)



(6,044)


 Total other income/(expense), net



(1,192)



(1,227)



(3,782)



(4,786)

Income from continuing operations before income taxes



26,856



9,057



82,186



14,463

Income tax expense



9,350



3,664



29,410



5,845

Income from continuing operations



17,506



5,393



52,776



8,618

Discontinued operations:














 Loss from operations of discontinued security solutions division



(601)



(1,600)



(3,150)



(8,306)


 Income tax expense/(benefit)



2,329



(645)



(3,921)



(3,326)


Income/(loss) from discontinued operations



(2,930)



(955)



771



(4,980)

Net income/comprehensive income


$

14,576


$

4,438


$

53,547


$

3,638















Net income per share:














Basic - continuing operations


$

0.27


$

0.08


$

0.81


$

0.13


Basic - net income


$

0.22


$

0.07


$

0.82


$

0.06


Diluted - continuing operations


$

0.26


$

0.08


$

0.79


$

0.13


Diluted - net income


$

0.22


$

0.07


$

0.80


$

0.06

Weighted average number of common shares outstanding:














Basic



65,149



64,874



65,457



64,700


Diluted



66,421



66,582



66,909



65,154

 

 

SMITH & WESSON HOLDING CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)











As of:





January 31, 2013


April 30, 2012





(In thousands, except par value and share data)

 ASSETS

 Current assets:








Cash and cash equivalents, including restricted cash of $3,342 on January 31, 2013 and $3,334 on April 30, 2012

$

61,999


$

56,717



Accounts receivable, net of allowance for doubtful accounts of $785 on January 31, 2013 and $1,058 on April 30, 2012


38,871



48,313



Inventories


69,208



55,296



Prepaid expenses and other current assets


5,689



4,139



Assets held for sale




13,490



Deferred income taxes


12,759



12,759



Income tax receivable


5,800






 Total current assets


194,326



190,714

 Property, plant, and equipment, net


77,807



60,528

 Intangibles, net


4,075



4,532

 Other assets


5,333



5,900


$

281,541


$

261,674
















 LIABILITIES AND STOCKHOLDERS' EQUITY

 Current liabilities:








 Accounts payable

$

24,377


$

28,618



 Accrued expenses


13,677



20,685



 Accrued payroll


11,474



9,002



 Accrued income taxes




291



 Accrued taxes other than income


4,859



4,270



 Accrued profit sharing


7,131



8,040



 Accrued product/municipal liability


1,517



1,397



 Accrued warranty


5,014



5,349



Liabilities held for sale




5,693




 Total current liabilities


68,049



83,345

 Deferred income taxes


4,537



4,537

 Notes payable, net of current portion


43,559



50,000

 Other non-current liabilities


10,782



10,948




 Total liabilities


126,927



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, 67,459,468 shares issued and  64,159,865 shares outstanding on January 31, 2013 and 66,512,097 shares issued and 65,312,097 shares outstanding on April 30, 2012


67



67


Additional paid-in capital 


197,602



189,379


Accumulated deficit


(16,732)



(70,279)


Accumulated other comprehensive income


73



73


Treasury stock, at cost (3,299,603 common shares on January 31, 2013 and 1,200,000 on April 30, 2012)


(26,396)



(6,396)




 Total stockholders' equity


154,614



112,844


$

281,541


$

261,674

  

 

SMITH & WESSON HOLDING CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)





For the Nine Months Ended:


January 31, 2013


January 31, 2012





(In thousands)

 Cash flows from operating activities:







 Net income

$

53,547


$

3,638


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








Amortization and depreciation


12,023



11,286



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


1,222



241



Loss on sale/disposition of assets


277



251



Provisions for/(recoveries of) losses on accounts receivable


378



(326)



Change in disposal group assets and liabilities


(1,215)



5,241



Stock-based compensation expense


3,086



1,797



Excess book deduction of stock-based compensation



(266)



Changes in operating assets and liabilities:








 Accounts receivable


9,064



15,555



 Inventories


(13,912)



(9,988)



 Other current assets


(1,150)



1,578



 Income tax receivable/payable


(6,091)



1,239



 Accounts payable


(4,241)



(13,519)



 Accrued payroll


1,867



2,785



 Accrued taxes other than income


589



(8,000)



 Accrued profit sharing


(909)



(459)



 Accrued other expenses


(7,795)



(5,348)



 Accrued product/municipal liability


120



(149)



 Accrued warranty


(335)



1,687



 Other assets


(45)



(64)



 Other non-current liabilities


284



599




 Net cash provided by operating activities


46,764



7,778

 Cash flows from investing activities:







Proceeds from sale of business including discontinued operations


7,500



500


 Receipts from note receivable


55




 Payments to acquire patents and software


(36)



(124)


 Proceeds from sale of property and equipment


1,037



15


 Payments to acquire property and equipment


(28,399)



(10,067)




 Net cash used in investing activities


(19,843)



(9,676)

 Cash flows from financing activities:







Proceeds from loans and notes payable


1,753



1,532


Cash paid for debt issue costs




(1,859)


Proceeds from energy efficiency incentive programs




225


Payments on capital lease obligation


(450)




Cash paid for redemption of convertible notes




(30,000)


Payments on loans and notes payable


(8,034)



(1,264)


Payments to acquire treasury stock


(20,000)




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


4,095



717


Excess tax benefit of stock-based compensation


997






 Net cash used in financing activities


(21,639)



(30,649)

 Net increase/(decrease) in cash and cash equivalents


5,282



(32,547)

 Cash and cash equivalents, beginning of period


56,717



58,292

 Cash and cash equivalents, end of period

$

61,999


$

25,745

Supplemental disclosure of cash flow information







Cash paid for:








Interest

$

5,252


$

5,745



Income taxes


30,976



1,524

 

  

 

SMITH & WESSON HOLDING CORPORATION AND SUBSIDIARIES

RECONCILIATION OF GAAP NET INCOME TO ADJUSTED EBITDAS (Unaudited)

























For the Three Months Ended January 31, 2013:



For the Three Months Ended January 31, 2012:






GAAP


Adjustments


Adjusted



GAAP


Adjustments


Adjusted


(In thousands)

 Net sales

$

136,242


$



$

136,242



$

98,125


$



$

98,125

 Cost of sales


86,143



(3,414)

(8)



82,729




68,121



(3,185)

(1)



64,936

 Gross profit


50,099



3,414




53,513




30,004



3,185




33,189

 Operating expenses:






















Research and development


942



(29)

(8)



913




992



(42)

(1)



950


Selling and marketing


8,333



(44)

(8)



8,289




8,062



(51)

(1)



8,011


General and administrative


12,776



(1,739)

(2)



11,037




10,666



(1,228)

(2)



9,438


Total operating expenses


22,051



(1,812)




20,239




19,720



(1,321)




18,399

 Operating income from continuing operations


28,048



5,226




33,274




10,284



4,506




14,790

 Other income/(expense):






















Other income/(expense), net










8






8


Interest income


48



(6)



48




394



(361)

(6)



33


Interest expense


(1,240)



1,240

(4)






(1,629)



1,629

(4)




Total other income/(expense), net


(1,192)



1,240




48




(1,227)



1,268




41






















Income from continuing operations before income taxes


26,856



6,466




33,322




9,057



5,774




14,831

Income tax expense


9,350



(9,350)

(5)






3,664



(3,664)

(5)



Income from continuing operations


17,506



15,816




33,322




5,393



9,438




14,831

Discontinued operations:





















Loss from operations of discontinued security solutions division


(601)



424

(10)



(177)




(1,600)



759

(7)



(841)

Income tax expense/(benefit)


2,329



(2,329)

(5)






(645)



645

(5)



Loss on discontinued operations


(2,930)



2,753




(177)




(955)



114




(841)

Net income/comprehensive income

$

14,576


$

18,569



$

33,145



$

4,438


$

9,552



$

13,990













































SMITH & WESSON HOLDING CORPORATION AND SUBSIDIARIES

RECONCILIATION OF GAAP NET INCOME TO ADJUSTED EBITDAS (Unaudited)

























For the Nine Months Ended January 31, 2013:



For the Nine Months Ended January 31, 2012:






GAAP


Adjustments


Adjusted



GAAP


Adjustments


Adjusted


(In thousands)

 Net sales

$

408,797


$



$

408,797



$

282,154


$



$

282,154

 Cost of sales


258,882



(10,211)

(8)



248,671




201,028



(10,815)

(1)



190,213

 Gross profit


149,915



10,211




160,126




81,126



10,815




91,941

 Operating expenses:






















Research and development


3,363



(87)

(8)



3,276




3,571



(145)

(1)



3,426


Selling and marketing


23,203



(168)

(8)



23,035




24,823



(225)

(1)



24,598


General and administrative


37,381



(4,874)

(2)



32,507




33,483



(6,578)

(3)



26,905


Total operating expenses


63,947



(5,129)




58,818




61,877



(6,948)




54,929

 Operating income from continuing operations


85,968



15,340




101,308




19,249



17,763




37,012

 Other income/(expense):






















Other income/(expense), net


39






39




62






62


Interest income


750



(608)

(6)



142




1,196



(1,043)

(6)



153


Interest expense


(4,571)



4,571

(4)






(6,044)



6,044

(4)




Total other income/(expense), net


(3,782)



3,963




181




(4,786)



5,001




215






















 Income from continuing operations before income taxes


82,186



19,303




101,489




14,463



22,764




37,227

 Income tax expense


29,410



(29,410)

(5)






5,845



(5,845)

(5)



Income from continuing operations


52,776



48,713




101,489




8,618



28,609




37,227

Discontinued operations:





















Loss from operations of discontinued security solutions division


(3,150)



1,808

(9)



(1,342)




(8,306)



2,261

(7)



(6,045)

Income tax benefit


(3,921)



3,921

(5)






(3,326)



3,326

(5)



Income/(loss) on discontinued operations


771



(2,113)




(1,342)




(4,980)



(1,065)




(6,045)

 Net income/comprehensive income

$

53,547


$

46,600



$

100,147



$

3,638


$

27,544



$

31,182













































(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 interest expense.

(5)

To exclude income tax expense.

(6)

To exclude intercompany interest income.

(7)

To exclude depreciation, amortization, interest expense, and stock-based compensation expense.

(8)

To exclude depreciation and amortization.

(9)

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

(10)

To exclude loss on sale of discontinued operations.

  

 

SMITH & WESSON HOLDING CORPORATION AND SUBSIDIARIES

RECONCILIATION OF ESTIMATED GAAP INCOME FROM CONTINUING OPERATIONS TO ESTIMATED ADJUSTED EBITDAS



For the Year Ended April 30, 2013:


Low Range


High Range


(In thousands)

Income from continuing operations

$

78,000


$

79,500

Interest expense


5,800



5,800

Income tax expense


43,900



44,700

Depreciation and amortization


15,500



15,500

Stock-based compensation expense


4,200



4,200

DOJ/SEC costs, net of profit sharing impact


1,000



1,000

Adjusted EBITDAS

$

148,400


$

150,700

 

SOURCE Smith & Wesson Holding Corporation



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