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Smith & Wesson Holding Corporation Reports Third Quarter Fiscal 2013 Financial Results
Submitted by admin on 3/5/2013 @ 1:05 PM
Companies mentioned in this article:
Smith & Wesson Holding Corporation
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(TM). 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