Smith & Wesson Holding Corporation Reports Fourth Quarter and Full Year Fiscal 2014 Financial Results

SPRINGFIELD, Mass., June 19, 2014 /PRNewswire/ -- Smith & Wesson Holding Corporation (NASDAQ Global Select: SWHC), a leader in firearm manufacturing and design, today announced financial results for the fiscal fourth quarter and full fiscal year ended April 30, 2014.

Full Year Fiscal 2014 Financial Highlights

• Net sales for the full fiscal year were a record $626.6 million compared with $587.5 million for the prior fiscal year, an increase of 6.7%. Excluding Walther products that were sold in the prior year pursuant to an agreement that has since ended, net sales increased 13.8% over the prior fiscal year. Firearm unit production for fiscal year 2014 increased by 16.2%.
• Gross profit was 41.3% compared with 37.1% for fiscal 2013.
• Operating expenses were $108.1 million, or 17.3% of net sales, for fiscal 2014 compared with operating expenses of $85.2 million, or 14.5% of net sales, for fiscal 2013.
• Income from continuing operations was $88.6 million, or $1.47 per diluted share, compared with income from continuing operations of $81.4 million, or $1.22 per diluted share, a year ago.
• Non-GAAP Adjusted EBITDAS from continuing operations for the full fiscal year totaled $179.5 million compared with $154.2 million for fiscal 2013.
• For the full year, operating cash generated was $90.2 million, net cash generated from the issuance of Senior Notes was $56.4 million, capital spending totaled $53.3 million, and cash disbursed related to the stock buyback program totaled $115.9 million.
• Cash and cash equivalents as of April 30, 2014 totaled $68.9 million, down from $100.5 million a year ago.

Fourth Quarter Fiscal 2014 Financial Highlights

• Net sales for the fourth quarter were $170.4 million, a decline of 4.6% from the fourth quarter last year. Excluding Walther products that were sold in the prior year pursuant to an agreement that has since ended, net sales declined 1.5%, reflecting strong handgun sales offset by lower long gun sales.
• Gross profit for the fourth quarter was $69.7 million, or 40.9% of net sales, compared with gross profit of $68.4 million, or 38.3% of net sales, for the comparable quarter last year. Gross profit improved as a result of a favorable product mix, absorption, and manufacturing efficiencies, as well as reduced promotions and the absence of lower-margin Walther product sales.
• Operating expenses for the fourth quarter were $26.7 million, or 15.6% of net sales, compared with operating expenses of $21.6 million, or 12.1% of net sales, for the fourth quarter last year. The increase in operating expenses as a percentage of net sales was primarily driven by higher sales and marketing expense, ERP implementation costs, and employee-related costs.
• Operating income for the fourth quarter was $43.1 million, or 25.3% of net sales, compared with operating income of $46.9 million, or 26.2% of net sales, for the comparable quarter last year.
• Income from continuing operations for the fourth quarter was $24.9 million, or $0.44 per diluted share, compared with net income from continuing operations of $28.6 million, or $0.44 per diluted share, for the fourth quarter last year.
• Non-GAAP Adjusted EBITDAS from continuing operations for the fourth quarter was $50.0 million compared with $52.7 million for the fourth quarter last year.
• Operating cash generated for the fourth quarter was $36.0 million, and capital spending totaled $17.0 million.

James Debney, Smith & Wesson Holding Corporation President and Chief Executive Officer, stated, "We are very pleased with our record results for fiscal 2014, which include the highest sales, gross margin, and profits in the company's history.  Our successful performance was driven by robust consumer demand for our products, combined with carefully managed increases in our manufacturing capacity.  Our achievements aligned directly with our growth strategy, which is underpinned by a focus on our core firearm business.  That focus is further reflected in the vertical integration of a key manufacturing process by acquiring the assets of our principal injection molding supplier.  This asset acquisition, completed in May 2014, strengthens our firearm business with increased flexibility, lower production costs, reduced risk in our supply chain, and more efficient new product development processes. We believe that by executing on our strategy, we are well positioned to continue to take market share and deliver profitability, even as the consumer market for firearms returns to a more normal environment."

Jeffrey D. Buchanan, Smith & Wesson Holding Corporation Executive Vice President and Chief Financial Officer, stated, "Our record profitability and robust cash flows in fiscal 2014 allowed us to invest in our business, optimize our capital structure, and generate increased value for our stockholders.  We invested $30.4 million to upgrade our ERP system, providing improved scalability and operational flexibility for our business. We also leveraged the strength of our cash flows to generate value for our stockholders though an active share repurchase program. Since December 2012, we have repurchased a total of 12.3 million shares of our common stock valued at $135.0 million, representing a total reduction in shares outstanding of nearly 19.0%.  In March of 2014, our Board of Directors approved the repurchase of an addition $30 million of our common stock, and we presently have $27.0 million available for share repurchases under that program."

Financial Outlook

The company expects net sales for the first quarter of fiscal 2015 to be between $130.0 million and $135.0 million and GAAP earnings per diluted share from continuing operations of between $0.23 and $0.25 for the first quarter of fiscal 2015. It should be noted approximately one week of the company's annual two week shutdown will occur in the first quarter, reducing production by approximately $6 to $8 million.

Fiscal 2015 net sales are anticipated to be between $585.0 million and $600.0 million. The company anticipates GAAP earnings per diluted share from continuing operations of between $1.30 and $1.40 for fiscal 2015.

Conference Call and Webcast

The company will host a conference call and webcast today, June 19, 2014, to discuss its fourth quarter and full year fiscal 2014 financial and operational results. Speakers on the conference call will include James Debney, President and Chief Executive Officer, and Jeffrey D. Buchanan, Executive Vice President and Chief Financial Officer. 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 (617) 614-3449 and reference conference code 28349692.  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. 

Analyst Day Conference Call

The company will host an analyst day tomorrow, June 20, 2014, at its Springfield, Massachusetts headquarters, which will include a presentation by management at 12:30 p.m. Eastern Time (9:30 a.m. Pacific Time), which may include forward-looking statements. The presentation audio webcast can be accessed live on the company's website at www.smith-wesson.com under the Investor Relations section. Those interested in listening to the presentation via telephone may call 617 614-4909 and reference conference code 29202061.  No RSVP is necessary. 

Reconciliation of U.S. GAAP to Non-GAAP Financial Measures

In this press release, certain non-GAAP financial measures, including "Adjusted EBITDAS" are presented.  From time-to-time, the company considers and uses Adjusted EBITDAS 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 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 full year periods ended April 30, 2014 and April 30, 2013. 

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, Maine, and Connecticut. 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 belief that its May 2014 asset acquisition strengthened its firearm business with increased flexibility, lower production costs, reduced supply chain risk, and more efficient new product development processes; the company's belief that by executing its strategy, it will be well positioned to continue to take market share and deliver profitability, even as the consumer market for firearms returns to a more normal environment; the company's belief that the upgrade of its ERP system provides improved scalability and operational flexibility for its business; the company's belief that it has leveraged the strength of its cash flows to generate value for its stockholders through an active share repurchase program; and the company's expectations for net sales and GAAP earnings per diluted share from continuing operations for the first quarter of fiscal 2015 as well as net sales and GAAP earnings per diluted share from continuing operations for fiscal 2015.  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, 2014.

Contact: Liz Sharp, VP Investor Relations
Smith & Wesson Holding Corp.
(413) 747-3304
[email protected]

SOURCE Smith & Wesson Holding Corporation