Following a second quarter that saw the company report record sales on its acquisition of Universal Safety Response, Smith & Wesson Holding Corp. said slipping demand for firearms had caused profits to stabilize, forcing the company to miss most analysts estimates for the fiscal third quarter ended January 31. Revenues for the Springfield, MA-based firearms manufacturer were $89.4 million, up 6.8% from net sales of $83.7 million in the year-ago period, but the companys firearms division sank 11.0% to $74.7 million as the market returns to a degree of normalcy following a 2009 that saw demand spike on a bad economy and the Obama-factor.
Predictably, pistol sales (-33%) and revolver sales (-19%) were the most significant decliners from Q3 figures. Bucking the trend however, was the companys emerging tactical line, which achieved 18% growth on the introduction of the M&P (military and police) 15-22. Likewise, new product offerings of the companys Performance Center Pro Series handguns helped drive Premium Product sales to growth of 40% while hunting products saw growth on sales of accessories. By channel, firearms sales declined by 18% in the sporting goods channel, increased by 32% in the law enforcement channels and grew by 28% in the international channel.
Firearms backlog was $74 million, down roughly 40% on a quarterly basis, which management said reflects cancellations as the market moved toward more normal levels of demand and production.
For its Perimeter Security business, Smith & Wessons recent acquisition of Universal Safety Response propelled sales more than 70% from the prior-year period to about $15 million. Backlog for the perimeter security business was $42.5 million at quarter-end, more than double backlog numbers from year earlier levels.
Gross margins were 28.0% of sales, up from 25.8% of sales, in the prior-year period. Net income for the quarter was $2.4 million, or 4 cents per diluted share, compared with earnings of $2.4 million, or 5 cents per diluted share, a year ago. Net income for the quarter included a non-cash, fair-value adjustment to the contingent consideration liability related to the companys acquisition of USR that increased diluted EPS by 2 cents.
Regarding outlook, EVP and CFO William Spengler said the company expects Q4 sales to be between $97 million and $101 million, with the firearms segment expected to contribute between $81 million and $84 million. Margins are expected to improve by about 29%.
