Smith & Wesson Holding Corporation Reports Record Second Quarter Fiscal 2013 Financial Results

 Smith & Wesson Holding Corporation Reports Record Second Quarter Fiscal 2013
                              Financial Results

- Record Fiscal Second Quarter 2013 Net Sales from Continuing Operations of
$136.6 Million, Up 48.0% Year-Over-Year

- Fiscal Second Quarter 2013 Net Income from Continuing Operations of $16.4
Million, or $0.24 Per Diluted Share

- Company Raising Full Year Fiscal 2013 Financial Guidance

- Board of Directors Approves Plan to Repurchase Up to $20.0 Million in Common
Stock

PR Newswire

SPRINGFIELD, Mass., Dec. 6, 2012

SPRINGFIELD, Mass., Dec. 6, 2012 /PRNewswire/ --Smith & Wesson Holding
Corporation (NASDAQ Global Select: SWHC), a leader in firearm manufacturing
and design, today announced financial results for the fiscal 2013 second
quarter ended October 31, 2012.

Second Quarter Fiscal 2013 Financial Highlights

  oNet sales from continuing operations for the second quarter were a record
    $136.6 million, up 48.0% from the second quarter last year. The increase
    was led by continued strong sales across all of the company's firearm
    product lines, including M&P™ branded products, such as pistols, modern
    sporting rifles, and the recently launched Shield™ pistol designed for
    concealed carry and personal protection.
  oGross profit for the second quarter was $48.5 million, or 35.5% of net
    sales, compared with gross profit of $24.6 million, or 26.7% of net sales,
    for the comparable quarter last year. Increased sales volume of polymer
    pistols and modern sporting rifles positively impacted gross profit. In
    addition, gross margin last year reflected costs related to the
    consolidation of our Thompson/Center Arms business to Springfield,
    Massachusetts.
  oOperating expenses for the second quarter were $21.9 million, or 16.0% of
    net sales, compared with operating expense of $21.2 million, or 22.9% of
    net sales, for the second quarter last year. Increased profit sharing and
    incentive compensation expenses were almost entirely offset by savings
    resulting from an ongoing company-wide focus on cost reduction activities
    and the favorable impact in the current year of the Thompson/Center Arms
    consolidation that occurred in the prior year.
  oOperating income from continuing operations for the second quarter was
    $26.6 million, or 19.5% percent of net sales, compared with operating
    income from continuing operations of $3.4 million, or 3.7% percent of net
    sales for the comparable quarter last year.
  oNet income from continuing operations for the second quarter was $16.4
    million, or $0.24 per diluted share, compared with net income from
    continuing operations of $948,000, or $0.01 per diluted share, for the
    second quarter last year.
  oNon-GAAP Adjusted EBITDAS from continuing operations for the second
    quarter increased to $32.0 million compared with $10.2 million for the
    second quarter last year.
  oAt October 31, 2012, firearm backlog was $332.7 million, an increase of
    $182.8 million, or 122.0%, compared with the end of the second quarter
    last year, and a decrease of $59.7 million, or 15.2%, from the most recent
    sequential quarter.
  oOperating cash flow of $4.5 million and net capital spending of $9.6
    million for the second quarter resulted in free cash outflow of $5.1
    million. The sequentially lower operating cash flow reflected hunting
    seasonality, in which some receivables are extended until after the
    hunting season, as well as $8.0 million in early employee profit sharing
    payments. Profit sharing payments historically occurred in the company's
    third quarter. Despite the free cash outflow, cash and cash equivalents
    increased to $61.3 million at the end of the second quarter, primarily as
    a result of proceeds from the exercise of options.

The company also today announced that its Board of Directors has approved a
program to repurchase up to $20.0 million of the company's outstanding shares
of common stock from time to time until June 30, 2013. The amount and timing
of any repurchases will depend on a number of factors, including price,
trading volume, general market conditions, legal requirements, and other
factors. The repurchases may be made on the open market, in block trades, or
in privately negotiated transactions. Any shares of common stock repurchased
under the program will be considered issued but not outstanding shares of the
company's common stock.

James Debney, Smith & Wesson Holding Corporation President and Chief Executive
Officer, stated, "Our strong fiscal second quarter financial performance
reflects the ongoing successful execution of our strategic plan, and
accordingly today we are increasing our full year fiscal 2013 financial
guidance. During the second quarter, consumers continued to demonstrate their
desire for our products, driving strong demand for our M&P modern sporting
rifles and polymer pistols, including our M&P Shield pistol designed for
concealed carry and personal protection. Increases in internal production
capacity combined with improvements in our supply chain integration allowed us
to offset the impact of the annual two-week shutdown as well as exceed our
revenue and earnings guidance. As always, we engaged in product innovation
and marketing activities designed to support and expand our user base. We
unveiled several high-end pistols for our competitive and professional
customers, including our M&P™ Pro Series C.O.R.E. pistols. We also announced
our presenting sponsorship of the NRA Women's Network, a meaningful resource
for the growing number of female gun enthusiasts of all ages and skill
levels."

Jeffrey D. Buchanan, Executive Vice President and Chief Financial Officer,
stated, "By continuing to focus on our core firearm business, we delivered a
second consecutive quarter of record sales combined with strong net income
growth and earnings per share performance. In addition, our Board of
Directors has approved a program authorizing the repurchase of up to $20.0
million of our common stock. We believe that this program demonstrates the
confidence that our Board and management team have in the future of the
company and our ongoing commitment to enhancing stockholder value."

Financial Outlook for Continuing Operations

The company expects net sales from continuing operations for the third quarter
of fiscal 2013 to be between $126.0 million and $131.0 million, which would
represent year-over-year growth from continuing operations in excess of 30.0%.
The company anticipates GAAP earnings per diluted share from continuing
operations of between $0.19 and $0.21 for the third quarter of fiscal 2013.

The company is raising its full year fiscal 2013 financial guidance. The
company now anticipates net sales from continuing operations for fiscal 2013
of between $550.0 million and $560.0 million, which would represent
year-over-year growth from continuing operations of approximately 35.0% at the
midpoint. The company anticipates fiscal 2013 GAAP earnings per diluted share
from continuing operations of between $1.00 and $1.05.

Conference Call and Webcast

The company will host a conference call and webcast today, December 6, 2012,
to discuss its second 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 866-770-7129 and
reference conference code 97402682. 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 Adjusted EBITDAS

In this press release, a non-GAAP financial measure known as "Adjusted
EBITDAS" is presented. From time-to-time, the company considers and uses
Adjusted EBITDAS as a supplemental measure 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 employee compensation expense, loss on the sale of
discontinued operations, DOJ and SEC investigation costs, and certain other
transactions. See the attached "Reconciliation of GAAP Net Income/(Loss) 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 six-month periods ended October 31, 2012 and October 31,
2011. 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 success of our ongoing
company-wide focus on cost reduction activities; our expectation that some
hunting receivables will be extended until after the hunting season; future
repurchases of our common stock under our stock repurchase program, including
the amount, time, and manner of repurchases, if any; the success of our
strategic plan; increasing our full year fiscal 2013 financial guidance; our
belief regarding our Board's and management team's confidence in our future
and our ongoing commitment to enhancing stockholder value; and 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 third quarter of fiscal 2013 and the full 2013 fiscal year. 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 gun control;
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; the
effects of the divestiture of our security solutions business on our core
firearm business; 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.

Contacts:
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/(LOSS) AND COMPREHENSIVE INCOME/(LOSS)
(Unaudited)
                              For the Three Months      For the Six Months
                              Ended:                    Ended:
                              October 31,  October 31,  October 31,  October
                              2012         2011         2012         31, 2011
                              (In thousands, except per share data)
Net sales                     $  136,560   $  92,299    $  272,555   $ 184,029
Cost of sales                    88,037       67,693       172,739     132,907
Gross profit                     48,523       24,606       99,816      51,122
Operating expenses:
   Research and development     1,278        1,241        2,420       2,579
   Selling and marketing        8,042        8,636        14,870      16,761
   General and                  12,579       11,295       24,604      22,817
   administrative
   Total operating expenses     21,899       21,172       41,894      42,157
Operating income from            26,624       3,434        57,922      8,965
continuing operations
Other income/(expense):
   Other income/(expense),      39           20           39          54
   net
   Interest income              335          399          703         802
   Interest expense             (1,344)      (2,477)      (3,331)     (4,416)
   Total other                  (970)        (2,058)      (2,589)     (3,560)
   income/(expense), net
Income from continuing
operations before income         25,654       1,376        55,333      5,405
taxes
Income tax expense               9,253        428          20,061      2,182
   Income from continuing        16,401       948          35,272      3,223
   operations
Discontinued operations:
   Loss from operations of
   discontinued security         (867)        (4,004)      (2,550)     (6,706)
   solutions division
   Income tax benefit            (5,651)      (1,465)      (6,249)     (2,681)
   Income/(loss) from            4,784        (2,539)      3,699       (4,025)
   discontinued operations
Net
income/(loss)/comprehensive   $  21,185    $  (1,591)   $  38,971    $ (802)
income/(loss)
Net income/(loss) per share:
   Basic - continuing         $  0.25      $  0.01      $  0.54      $ 0.05
   operations
   Basic - net income/(loss)  $  0.32      $  (0.02)    $  0.59      $ (0.01)
   Diluted - continuing       $  0.24      $  0.01      $  0.53      $ 0.05
   operations
   Diluted - net              $  0.31      $  (0.02)    $  0.58      $ (0.01)
   income/(loss)
Weighted average number of
common shares outstanding:
   Basic                        65,871       64,697       65,611      64,613
   Diluted                       67,274       65,110       66,914      65,130





SMITH & WESSON HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
                                          As of:
                                          October 31, 2012     April 30, 2012
                                          (In thousands, except par value and
                                          share data)
ASSETS
Current assets:
    Cash and cash equivalents, including
    restricted cash of $3,340 on October  $     61,295         $   56,717
    31, 2012 and $3,334 on April 30, 2012
    Accounts receivable, net of allowance
    for doubtful accounts of $1,096 on          54,474             48,313
    October 31, 2012 and $1,058 on
    April30, 2012
    Inventories                                 65,335             55,296
    Prepaid expenses and other current          6,176              4,139
    assets
    Assets held for sale                        1,150              13,490
    Deferred income taxes                       12,759             12,759
    Income tax receivable                       8,771              —
             Total current assets              209,960            190,714
Property, plant and equipment, net             68,954             60,528
Intangibles, net                               4,225              4,532
Other assets                                   5,470              5,900
                                          $     288,609        $   261,674
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
    Accounts payable                      $     24,654         $   28,618
    Accrued expenses                            20,310             20,685
    Accrued payroll                             9,016              9,002
    Accrued income taxes                        —                  291
    Accrued taxes other than income             4,767              4,270
    Accrued profit sharing                      4,754              8,040
    Accrued product/municipal liability         1,365              1,397
    Accrued warranty                            5,047              5,349
    Liabilities held for sale                   —                  5,693
    Current portion of notes payable            789                —
             Total current liabilities         70,702             83,345
Deferred income taxes                          4,537              4,537
Notes payable, net of current portion          43,559             50,000
Other non-current liabilities                  10,977             10,948
             Total liabilities                 129,775            148,830
Commitments and contingencies
Stockholders' equity:
 Preferred stock, $.001par value,
 20,000,000shares authorized, no shares        —                  —
 issued or outstanding
 Common stock, $.001par value,
 100,000,000shares authorized,
 67,447,748 shares issued and 66,247,748
 shares outstanding on October 31, 2012         67                 67
 and 66,512,097shares issued and
 65,312,097 shares outstanding on
 April30, 2012
 Additional paid-in capital                     196,398            189,379
 Accumulated deficit                           (31,308)           (70,279)
 Accumulated other comprehensive income         73                 73
 Treasury stock, at cost (1,200,000             (6,396)            (6,396)
 common shares)
             Total stockholders' equity        158,834            112,844
                                          $     288,609        $   261,674





SMITH & WESSON HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
                                           For the Six Months Ended:
                                           October 31, 2012  October 31, 2011
                                           (In thousands)
Cash flows from operating activities:
 Net income/(loss)                        $    38,971       $     (802)
 Adjustments to reconcile net
 income/(loss) to net cash provided
 by/(used in) operating activities:
    Amortization and depreciation              8,074              7,881
    Loss on sale of discontinued
    operations, including $45 of                798                —
    stock-based compensation expense
    Loss on sale/disposition of assets          292                320
    Provision for/(recoveries of) losses       380                (636)
    on accounts receivable
    Change in disposal group assets and        (1,232)            5,005
    liabilities
    Stock-based compensation expense           1,906              1,124
    Excess book deduction of stock-based       —                  (240)
    compensation
    Changes in operating assets and
    liabilities:
    Accounts receivable                        (6,541)            7,828
    Inventories                                (10,039)           (8,346)
    Other current assets                       (1,213)            (1,460)
    Income tax receivable/payable              (9,062)            (1,417)
    Accounts payable                           (3,964)            (7,803)
    Accrued payroll                            (591)              1,297
    Accrued taxes other than income            497                (8,181)
    Accrued profit sharing                     (3,286)            1,974
    Accrued other expenses                     (1,175)            (1,349)
    Accrued product/municipal liability        (32)               (309)
    Accrued warranty                           (302)              2,351
    Other assets                               (39)               (79)
    Other non-current liabilities              329                306
               Net cash provided by/(used      13,771             (2,536)
               in) operating activities
Cash flows from investing activities:
 Proceeds from sale of discontinued             7,500              —
 operations
 Receipts from note receivable                  36                 —
 Payments to acquire patents and software       (22)               (64)
 Proceeds from sale of property and             13                 —
 equipment
 Payments to acquire property and               (15,836)           (6,086)
 equipment
               Net cash used in investing      (8,309)            (6,150)
               activities
Cash flows from financing activities:
 Proceeds from loans and notes payable          1,753              1,532
 Cash paid for debt issue costs                 —                  (1,887)
 Proceeds from energy efficiency incentive      —                  225
 programs
 Payments on capital lease obligation           (300)              —
 Payments on loans and notes payable            (7,405)            (990)
 Proceeds from exercise of options to
 acquire common stock, including employee       4,084              704
 stock purchase plan
 Excess tax benefit of stock-based              984                —
 compensation
               Net cash used in financing      (884)              (416)
               activities
Net increase/(decrease) in cash and cash       4,578              (9,102)
equivalents
Cash and cash equivalents, beginning of        56,717             58,292
period
Cash and cash equivalents, end of period  $    61,295       $     49,190
Supplemental disclosure of cash flow
information
 Cash paid for:
    Interest                               $    3,013        $     2,649
    Income taxes                                22,204             1,129





SMITH & WESSON HOLDING CORPORATION AND SUBSIDIARIES
RECONCILIATION OF GAAP NET INCOME/(LOSS) TO ADJUSTED EBITDAS (Unaudited)
                            For the Three Months Ended October    For the Three Months Ended October
                            31, 2012:                             31, 2011:
                            GAAP       Adjustments    Adjusted    GAAP       Adjustments    Adjusted
Net sales                   $ 136,560    —            $ 136,560   $ 92,299     —            $ 92,299
Cost of sales                88,037   $ (3,428) (9)    84,609      67,693   $ (3,659) (1)    64,034
Gross profit                 48,523     3,428          51,951      24,606     3,659          28,265
Operating expenses:
   Research and              1,278      (29)    (9)    1,249       1,241      (45)    (1)    1,196
   development
   Selling and marketing     8,042      (63)    (9)    7,979       8,636      (90)    (1)    8,546
   General and               12,579     (1,797) (2)    10,782      11,295     (2,871) (3)    8,424
   administrative
   Total operating           21,899     (1,889)        20,010      21,172     (3,006)        18,166
   expenses
Operating income from         26,624     5,317          31,941      3,434      6,665          10,099
continuing operations
Other income/(expense):
   Other income/(expense),   39         —       (4)    39          20         —       (4)    20
   net
   Interest income           335        (291)   (7)    44          399        (361)   (7)    38
   Interest expense          (1,344)    1,344   (5)    —           (2,477)    2,477   (5)    —
   Total other               (970)      1,053          83          (2,058)    2,116          58
   income/(expense), net
Income from continuing
operations before income      25,654     6,370          32,024      1,376      8,781          10,157
taxes
Income tax expense            9,253      (9,253) (6)    —           428        (428)   (6)    —
Income from continuing        16,401     15,623         32,024      948        9,209          10,157
operations
Discontinued operations:
   Loss from operations of
   discontinued security      (867)      1,020   (8)    153         (4,004)    779     (8)    (3,225)
   solutions division
Income tax benefit            (5,651)    5,651   (6)    —           (1,465)    1,465   (6)    —
Income/(loss)from            4,784      (4,631)        153         (2,539)    (686)          (3,225)
discontinued operations
Net
income/(loss)/comprehensive $ 21,185   $ 10,992       $ 32,177    $ (1,591)  $ 8,523        $ 6,932
income/(loss)





SMITH & WESSON HOLDING CORPORATION AND SUBSIDIARIES
RECONCILIATION OF GAAP NET INCOME/(LOSS) TO NON-GAAP ADJUSTED EBITDAS (Unaudited)
                            For the Six Months Ended October 31,   For the Six Months Ended October
                            2012:                                  31, 2011:
                            GAAP       Adjustments     Adjusted    GAAP       Adjustments    Adjusted
Net sales                   $ 272,555    —             $ 272,555   $ 184,029    —            $ 184,029
Cost of sales                 172,739  $ (6,796)  (9)    165,943     132,907  $ (7,630) (1)    125,277
Gross profit                  99,816     6,796           106,612     51,122     7,630          58,752
Operating expenses:
   Research and              2,420      (57)     (9)    2,363       2,579      (103)   (1)    2,476
   development
   Selling and marketing     14,870     (125)    (9)    14,745      16,761     (174)   (1)    16,587
   General and               24,604     (3,135)  (2)    21,469      22,817     (5,350) (3)    17,467
   administrative
   Total operating           41,894     (3,317)         38,577      42,157     (5,627)        36,530
   expenses
Operating income from         57,922     10,113          68,035      8,965      13,257         22,222
continuing operations
Other income/(expense):
   Other income/(expense),   39         —        (4)    39          54         —       (4)    54
   net
   Interest income           703        (608)    (7)    95          802        (681)   (7)    121
   Interest expense          (3,331)    3,331    (5)    —           (4,416)    4,416   (5)    —
   Total other               (2,589)    2,723           134         (3,560)    3,735          175
   income/(expense), net
Income from continuing
operations before income      55,333     12,836          68,169      5,405      16,992         22,397
taxes
Income tax expense            20,061     (20,061) (6)    —           2,182      (2,182) (6)    —
Income from continuing        35,272     32,897          68,169      3,223      19,174         22,397
operations
Discontinued operations:
   Loss from operations of
   discontinued security      (2,550)    1,383    (8)    (1,167)     (6,706)    1,501   (8)    (5,205)
   solutions division
   Income tax benefit         (6,249)    6,249    (6)    —           (2,681)    2,681   (6)    —
Income/(loss)from            3,699      (4,866)         (1,167)     (4,025)    (1,180)        (5,205)
discontinued operations
Net
income/(loss)/comprehensive $ 38,971   $ 28,031        $ 67,002    $ (802)    $ 17,994       $ 17,192
income/(loss)

(1) To eliminate depreciation, amortization, and plant consolidation costs.
(2) To eliminate depreciation, amortization, stock-based compensation expense,
    and DOJ/SEC costs and related profit sharing impacts of DOJ/SEC.
    To eliminate depreciation, amortization, stock-based compensation expense,
(3) plant consolidation costs, severance benefits for our former President and
    CEO, and DOJ/SEC costs and related profit sharing impacts of DOJ/SEC.
    To eliminate unrealized mark-to-market adjustments on foreign exchange
(4) contracts. We did not have any foreign exchange contracts that required
    mark-to-market adjustments for all periods presented.
(5) To eliminate interest expense.
(6) To eliminate income tax expense.
(7) To eliminate intercompany interest income.
(8) To eliminate depreciation, amortization, interest expense, and stock-based
    compensation expense.
(9) To eliminate depreciation and amortization.

SOURCE Smith & Wesson Holding Corporation

Website: http://www.smith-wesson.com
 
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