Smith & Wesson Holding Corporation Reports First Quarter Fiscal 2014 Financial Results

Smith & Wesson Holding Corporation Reports First Quarter Fiscal 2014 Financial
                                   Results

- Net Sales of $171 Million for the First Quarter of Fiscal 2014, Up 25.8%
Year-Over-Year

- Quarterly Gross Margin of 42.6% in the First Quarter of Fiscal 2014 vs.
37.7% a Year Ago

- Quarterly Operating Income Margin of 28.1% in the First Quarter of Fiscal
2014 vs. 23.0% a Year Ago

- Company Raising Full Fiscal Year 2014 Revenue Guidance

PR Newswire

SPRINGFIELD, Mass., Sept. 5, 2013

SPRINGFIELD, Mass., Sept. 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 first quarter
ended July 30, 2013.

First Quarter Fiscal 2014 Financial Highlights

  oNet sales for the first quarter were $171.0 million, up 25.8% from the
    first quarter last year, as the company continued to operate at maximum
    production capacity. Excluding last year's sales of Walther products
    pursuant to a distribution agreement that Smith & Wesson ended in April
    2013, net sales grew by 36.4%.
  oGross profit for the first quarter was $72.8 million, or 42.6% of net
    sales, compared with gross profit of $51.2 million, or 37.7% 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 to meet the needs of consumers.
  oOperating expenses for the first quarter were $24.8 million, or 14.5% of
    net sales, compared with operating expenses of $19.9 million, or 14.7% of
    net sales, for the first quarter last year.
  oOperating income for the first quarter was 28.1% percent, compared with
    23.0% percent for the first quarter last year.
  oIncome from continuing operations for the first quarter was $26.5 million,
    or $0.40 per diluted share, compared with net income from continuing
    operations of $18.9 million, or $0.28 per diluted share, for the first
    quarter last year. Income from continuing operations for the first quarter
    of fiscal 2014 included $5.1 million, or approximately $0.05 per diluted
    share, of one-time expense associated with the retirement of 9.5% senior
    notes and the issuance of 5.875% senior notes.
  oNon-GAAP Adjusted EBITDAS from continuing operations for the first quarter
    increased to $55.2 million compared with $36.1 million for the first
    quarter last year.
  oOperating cash flow of $19.0 million and capital spending of $12.0 million
    for the first quarter resulted in free cash flow of $7.0 million.

James Debney, Smith & Wesson Holding Corporation President and Chief Executive
Officer, stated, "Our results for the first quarter of fiscal 2014 reflect the
continued successful execution of our growth strategy. We delivered
improvements across all of our key metrics, including a meaningful increase in
year-over-year sales and significant expansion of our gross margins. Ongoing
increases in our manufacturing capacity, combined with strong consumer demand
for firearms, resulted in increased market share and higher sales of our most
popular M&P® products. Amidst that robust growth, we drove a number of
significant initiatives in the quarter designed to strengthen our business and
return increased value to our stockholders."

First Quarter Fiscal 2014 Balance Sheet Highlights

  oSmith & Wesson issued $100 million of new 5.875% senior notes due in 2017
    and used $49.2 million of the proceeds to repurchase the company's
    outstanding 9.5% senior notes.
  oThe Board of Directors approved and the company initiated a $100 million
    common stock repurchase program, replacing the $15 million remaining from
    the authorization in December, 2012.
  oUnder the common stock repurchase program, Smith & Wesson purchased
    approximately 1.4 million shares of common stock for $15.6 million through
    a stock tender offer, leaving a balance of $84.4 million dollars available
    for repurchases in the open market.
  oThe company ended the first quarter with a cash balance of $146.5 million,
    $100 million of outstanding senior notes, and no borrowings under the
    company's credit facility.

Jeffrey D. Buchanan, Smith & Wesson Holding Corporation Executive Vice
President and Chief Financial Officer, stated, "During the first quarter, we
took several meaningful steps to optimize our capital structure. These actions
have increased the strength and flexibility of our balance sheet, providing a
solid foundation to support the further development and growth of our
business. In addition to the 1.4 million shares of common stock purchased in
the tender offer, we have so far purchased an additional 1.82 million shares
in the open market utilizing cash on hand. In addition, after the end of the
first quarter, we completed a new $75 million unsecured revolving line of
credit, which includes an accordion feature for up to $175 million, and which
replaced our $55 million credit facility.

"Early in the second quarter we 'went live' with our new SAP enterprise
resource planning (ERP) system, a key strategic building block that will
provide our business with the scalability and visibility required for future
growth. While we have worked through what we believe are most of the issues
surrounding the implementation, the initial impact of going live will amount
to several days of lost production in the second quarter. Despite that
short-term impact, which is factored into our guidance, today we are raising
our full year sales outlook," concluded Buchanan.

Financial Outlook

The company estimates net sales for the second quarter of fiscal 2014 to be
between $135.0 million and $140.0 million and GAAP earnings per diluted share
from continuing operations of between $0.20 and $0.22. It should be noted
that the company ended its Walther distribution agreement at the end of fiscal
2013 and therefore the second quarter of fiscal 2014 will not contain Walther
sales, which amounted to $9.7 million in the comparable quarter a year ago.

The company is increasing its previously issued full year fiscal 2014 revenue
guidance and now anticipates net sales for fiscal 2014 of between $610.0
million and $620.0 million. The company expects GAAP earnings per diluted
share from continuing operations of between $1.30 and $1.35 for fiscal 2014.

All guidance takes into account the expected impact of the implementation of
the company's new ERP system throughout fiscal 2014.

Conference Call and Webcast

The company will host a conference call and webcast today, September 5, 2013,
to discuss its first quarter 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) 399-5123 and reference conference code 71726404. 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-months ended July 30, 2013 and 2012. 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 belief that
its results for the first quarter of fiscal 2014 reflect the continued
successful execution of its growth strategy; the company's belief that steps
taken to optimize its capital structure during the first quarter have
increased the strength and flexibility of its balance sheet, providing a solid
foundation to support the further development and growth of its business; the
company's expectation that its new ERP system will be a key strategic building
block that will provide the company's business with the scalability and
visibility required for future growth; the company's anticipation that while
it has worked through what it believes are most of the issues surrounding the
implementation of the new ERP system, the initial impact of going live will
amount to several days of lost production in the second quarter; the company's
expectations for net sales and GAAP earnings per share from continuing
operations for the second quarter of fiscal 2014; and the company's
expectations for net sales, and GAAP earnings per share from continuing
operations 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
(Unaudited)
                                           For the Three Months Ended
                                           July 31, 2013     July 31, 2012
                                         (In thousands, except per share data)
Net sales                                  $    171,020      $    135,995
Cost of sales                                   98,247            84,768
Gross profit                                    72,773            51,227
Operating expenses:
  Research and development                     1,358             1,172
  Selling and marketing                        7,548             6,838
  General and administrative                   15,853            11,921
  Total operating expenses                     24,759            19,931
Operating income from continuing                48,014            31,296
operations
Other income/(expense):
  Other income/(expense), net                  5                 —
  Interest income                              102               368
  Interest expense                             (6,673)           (1,987)
  Total other income/(expense), net            (6,566)           (1,619)
Income from continuing operations before        41,448            29,677
income taxes
Income tax expense                              14,922            10,807
Income from continuing operations               26,526            18,870
Discontinued operations:
  Loss from operations of discontinued         (52)              (1,682)
  security solutions division
  Income tax benefit                           (3)               (599)
  Loss from discontinued operations            (49)              (1,083)
Net income/comprehensive income            $    26,477       $    17,787
Net income per share:
  Basic - continuing operations            $    0.41         $    0.29
  Basic - net income                       $    0.41         $    0.27
  Diluted - continuing operations          $    0.40         $    0.28
  Diluted - net income                     $    0.40         $    0.27
Weighted average number of common shares
outstanding:
  Basic                                         64,235            65,352
  Diluted                                       65,622            66,798



SMITH & WESSON HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
                                          As of:
                                          July 31, 2013      April 30, 2013
                                          (In thousands, except par value and
                                          share data)
ASSETS
Current assets:
    Cash and cash equivalents, including
    restricted cash of $3,348 on July 31, $     146,455      $    100,487
    2013 and $3,345 on April 30, 2013
    Accounts receivable, net of allowance
    for doubtful accounts of $953 on July       53,756            46,088
    31, 2013 and $1,128 on April30, 2013
    Inventories                                 63,232            62,998
    Prepaid expenses and other current          7,070             4,824
    assets
    Deferred income taxes                      12,076            12,076
    Income tax receivable                       4,592             3,093
              Total current assets             287,181           229,566
Property, plant, and equipment, net            93,876            86,382
Intangibles, net                               3,759             3,965
Other assets                                   14,055            7,076
                                          $     398,871      $    326,989
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
    Accounts payable                     $     33,534       $    31,220
    Accrued expenses                           16,556            16,033
    Accrued payroll                            7,964             13,096
    Accrued taxes other than income            4,600             5,349
    Accrued profit sharing                     12,435            9,587
    Accrued product/municipal liability        1,623             1,551
    Accrued warranty                           5,913             5,757
    Current portion of notes payable           1,269             —
              Total current liabilities        83,894            82,593
Deferred income taxes                         7,863             7,863
Notes payable, net of current portion          100,000           43,559
Other non-current liabilities                  12,525            11,675
              Total liabilities                204,282           145,690
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,
 67,717,348 shares issued and 63,000,512       68                68
 shares outstanding on July 31, 2013 and
 67,596,716shares issued and 64,297,113
 shares outstanding on April30, 2013
 Additional paid-in capital                    201,926           199,120
 Retained earnings                              34,911            8,434
 Accumulated other comprehensive income         73                73
 Treasury stock, at cost (4,716,836
 common shares on July 31, 2013 and             (42,389)          (26,396)
 3,299,603 common shares on April 30,
 2013)
              Total stockholders' equity       194,589           181,299
                                          $     398,871      $    326,989



SMITH & WESSON HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
                                                For the Three Months Ended
                                                July 31, 2013  July 31, 2012
                                                (In thousands)
Cash flows from operating activities:
 Net Income                                     $   26,477     $   17,787
 Adjustments to reconcile net income to net
 cash provided by operating activities:
   Amortization and depreciation                    5,683          3,985
   Loss on sale of business including loss on
   sale of discontinued operations, including       —              798
   $45 of stock-based compensation expense
   Loss/(gain) on sale/disposition of assets        74             (14)
   Provisions for/(recoveries of) losses on         (192)          75
   accounts receivable
   Change in disposal group assets and              —              (1,112)
   liabilities
   Stock-based compensation expense                 2,202          853
   Changes in operating assets and liabilities:
   Accounts receivable                             (7,476)        (5,051)
   Inventories                                     (234)          (7,531)
   Prepaid expenses and other current assets       (2,246)        (2,447)
   Income tax receivable/payable                   (1,499)        7,857
   Accounts payable                                2,314          (3,296)
   Accrued payroll                                 (5,132)        (1,600)
   Accrued taxes other than income                 (749)          (268)
   Accrued profit sharing                          2,848          2,175
   Accrued other expenses                          311            (3,430)
   Accrued product/municipal liability             72             32
   Accrued warranty                                156            (131)
   Other assets                                    (4,598)        174
   Other non-current liabilities                   1,000          423
             Net cash provided by operating        19,011         9,279
             activities
Cash flows from investing activities:
 Proceeds from sale of business                    —              5,500
 Receipts from note receivable                     19             18
 Payments to acquire patents and software          (41)           —
 Proceeds from sale of property and equipment      12             14
 Payments to acquire property and equipment        (12,035)       (6,278)
             Net cash used in investing            (12,045)       (746)
             activities
Cash flows from financing activities:
 Proceeds from loans and notes payable              101,584        1,753
 Cash paid for debt issue costs                     (3,167)        —
 Payments on capital lease obligation               (150)          (150)
 Payments on loans and notes payable                (43,876)       (6,925)
 Payments to acquire treasury stock                 (15,993)       —
 Proceeds from exercise of options to acquire       534            527
 common stock
 Taxes paid related to restricted stock             (11)           —
 issuance
 Excess tax benefit of stock-based compensation     81             88
             Net cash used in financing            39,002         (4,707)
             activities
Net increase in cash and cash equivalents          45,968         3,826
Cash and cash equivalents, beginning of period     100,487        56,717
Cash and cash equivalents, end of period       $   146,455    $   60,543
Supplemental disclosure of cash flow
information
 Cash paid for:
   Interest                                     $   4,573      $   2,974
   Income taxes                                     16,329         2,397



SMITH & WESSON HOLDING CORPORATION AND SUBSIDIARIES
RECONCILIATION OF GAAP NET INCOME TO ADJUSTED EBITDAS (Unaudited)
                     For the Three Months Ended July 31,    For the Three Months Ended July 31,
                     2013:                                  2012:
                     GAAP       Adjustments     Adjusted    GAAP       Adjustments     Adjusted
                     (In thousands)
Net sales           $ 171,020  $ —             $ 171,020   $ 135,995  $ —             $ 135,995
Cost of sales         98,247     (4,173)  (1)    94,074      84,768     (3,435)  (1)    81,333
Gross profit          72,773     4,173           76,946      51,227     3,435           54,662
Operating expenses:
  Research and        1,358      (68)     (1)    1,290       1,172      (57)     (1)    1,115
  development
  Selling and         7,548      (65)     (1)    7,483       6,838      (72)     (1)    6,766
  marketing
  General and         15,853     (2,807)  (2)    13,046      11,921     (1,234)  (2)    10,687
  administrative
  Total operating     24,759     (2,940)         21,819      19,931     (1,363)         18,568
  expenses
Operating income
from continuing        48,014     7,113           55,127      31,296     4,798           36,094
operations
Other
income/(expense):
  Other
  income/(expense),    5          —               5           —          —               —
  net
  Interest income     102        —               102         368        (317)    (5)    51
  Interest expense    (6,673)    6,673    (3)    —           (1,987)    1,987    (3)    —
  Total other
  income/(expense),    (6,566)    6,673           107         (1,619)    1,670           51
  net
Income from
continuing             41,448     13,786          55,234      29,677     6,468           36,145
operations before
income taxes
Income tax expense    14,922     (14,922) (4)    —           10,807     (10,807) (4)    —
Income from
continuing             26,526     28,708          55,234      18,870     17,275          36,145
operations
Discontinued
operations:
Loss from operations
of discontinued        (52)       —               (52)        (1,682)    1,161    (6)    (521)
security solutions
division
Income tax benefit     (3)        3        (4)    —           (599)      599      (4)    —
Income/(loss) on
discontinued           (49)       (3)             (52)        (1,083)    562             (521)
operations
Net
income/comprehensive $ 26,477   $ 28,705        $ 55,182    $ 17,787   $ 17,837        $ 35,624
income

(1) To exclude depreciation, amortization, and stock-based compensation
    expense.
(2) To exclude depreciation, amortization, stock-based compensation expense,
    and DOJ/SEC costs and related profit sharing impacts of DOJ/SEC.
(3) To exclude interest expense.
(4) To exclude income tax expense/(benefit).
(5) To exclude intercompany interest income.
(6) To exclude loss on sale of discontinued operations, depreciation,
    amortization, interest expense, and stock-based compensation expense.

SOURCE Smith & Wesson

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