American Outdoor Brands, the parent of Smith & Wesson, reported earnings before special items tumbled 58.2 percent in the fourth quarter ended April 30 on a 24.9 percent drop in revenues.
Fourth Quarter Fiscal 2018 Financial Highlights
- Quarterly net sales were $172.0 million compared with $229.2 million for the fourth quarter last year, a decrease of 24.9 percent.
- Gross margin for the quarter was 33.4 percent compared with 39.6 percent for the fourth quarter last year.
- Quarterly GAAP net income was $7.7 million, or 14 cents per diluted share, compared with $27.7 million, or 50 cents per diluted share, for the comparable quarter last year.
- Quarterly non-GAAP net income was $13.3 million, or 24 cents per diluted share, compared with $31.8 million, or 57 cents per diluted share, for the comparable quarter last year. GAAP to non-GAAP adjustments to net income exclude a number of acquisition-related costs, certain product recall related costs and other costs.
- Quarterly non-GAAP Adjusted EBITDA was $33.4 million, or 19.4 percent of net sales, compared with $60.5 million, or 26.4 percent of net sales, for the comparable quarter last year.
Results came in above Wall Street’s targets. The adjusted earnings of 24 cents compares with Wall Street’s consensus estimate of 10 cents a share. Sales were expected to come in at $165.6 million on average.
Full Year Fiscal 2018 Financial Highlights
- Full year net sales were $606.9 million compared with $903.2 million a year ago, a decrease of 32.8 percent.
- Full year gross margin was 32.3 percent compared with 41.5 percent last year.
- Full year GAAP net income was $20.1 million, or $0.37 per diluted share, compared with $127.9 million, or $2.25 per diluted share, last year.
- Full year non-GAAP net income was $25.1 million, or $0.46 per diluted share, compared with $146.5 million, or $2.58 per diluted share last year.
- Full year non-GAAP Adjusted EBITDAS was $89.5 million, or 14.7 percent of net sales, compared with $266.3 million, or 29.5 percent of net sales, last year.
James Debney, American Outdoor Brands Corporation president and chief executive officer, commented, “Fiscal 2018 was a year characterized by lower consumer demand for firearms, heightened levels of inventory in the consumer channel and a host of aggressive, industry-wide promotions. Despite those challenges, we achieved a number of accomplishments in the year that marked important progress toward our long-term strategy of being the leading provider of quality products for the shooting, hunting and rugged outdoor enthusiast.”
“In our Firearms segment, we added several exciting products to our next generation M&P 2.0 polymer pistol platform, which we launched in the prior fiscal year. In fact, new products–which we define as products launched within the last twelve months–accounted for 29 percent of our firearms revenue in fiscal 2018 and strong adoption rates across our growing M&P family helped us retain our leadership position in the consumer market for handguns. During the year we also made significant progress on market penetration with our T/C Compass bolt action hunting rifle. Finally, we expanded our firearms segment inorganically with the acquisition of Gemtech, a provider of high quality suppressors and accessories for the consumer, law enforcement and military markets, providing us access to new technology for use in our future new product development processes.”
“Our Outdoor Products & Accessories segment generated 26 percent of our total revenue in fiscal 2018 compared to just 14 percent in fiscal 2017. Our Outdoor Products and Accessories Division launched nearly 150 new products across categories, including: shooting, cutlery, tools and survival products. Our Electro-Optics Division, Crimson Trace, also launched several new products in fiscal 2018, and entered the large and diverse flashlight category. We were very pleased with the organic growth we achieved in the Outdoor Products & Accessories segment, given that it was a challenging year for the outdoor retail industry overall. In addition, our new product launches–namely handheld flashlights in our Outdoor Products and Accessories Division and firearm-mounted lights from our Electro-Optics Division–demonstrate that we have the ability to enter new markets organically with multiple brands. In fiscal 2018, we supplemented organic growth with revenue from acquisitions, including the acquisition of the popular Bubba Blade fishing tool brand. Both of our acquisitions in fiscal 2018 helped us expand into new markets that resonate with our core firearms consumers, many of whom also have a passion for the rugged outdoors,” Debney concluded.
Jeff Buchanan, executive vice president, chief financial officer, and chief administrative officer, commented, “The strength of our balance sheet in fiscal 2018 supported a number of initiatives throughout the year, including two acquisitions designed to facilitate our strategic growth and the refinancing of our Senior Notes at their existing interest rate with an extended maturity. During the year, we had a peak balance of $125 million outstanding on our revolving line of credit, which we have since repaid in full, leaving available to us the entire capacity, which is expandable up to $500 million. We had strong free cash flow in our fourth quarter of $61.2 million and ended the year with net debt of $138.8 million. In fiscal 2019, we expect to continue employing the strength of our balance sheet to fuel additional growth opportunities, both organic and inorganic.”