Smith & Wesson Holding Corporation raised its guidance for the fiscal year after reporting gross margins improved more than expected in the fiscal first quarter ended July 31 due to rising production of firearms and the acquisition by its accessories division.  

The firearms company reported net sales grew 12.1 percent to $147.8 million.

Firearms division net sales of $134.4 million increased by 1.9 percent from the comparable quarter last year.  Accessories division net sales of $13.3 million increased by 29.9 percent from the comparable quarter last year, which was prior to the company's acquisition of Battenfeld Technologies, Inc. (BTI) on Dec. 11, 2014.

Gross margin for the quarter was 39.8 percent compared with 37.2 percent in the prior year.

Quarterly GAAP net income was $14.4 million, or $0.26 per diluted share, compared with $14.6 million, or $0.26 per diluted share, for the first quarter last year.  First quarter 2016 GAAP net income per diluted share included an expense of $0.08 related to the previously announced redemption of the company's 5.875 percent Senior Notes, an expense of $0.04 for acquisition amortization related to the acquisition of BTI, an expense reduction of $0.03 related to an insurance settlement, and a tax benefit for the foregoing items of $0.03.

Quarterly non-GAAP net income was $17.7 million, or $0.32 per diluted share, compared with $14.9 million, or $0.27 per diluted share, for the first quarter last year.

Quarterly non-GAAP Adjusted EBITDAS was $38.8 million, or 26.3 percent of net sales.

“Our first quarter results exceeded our expectations for sales and net income in both our firearms and accessories divisions,” said James Debney, Smith & Wesson Holding Corporation President and Chief Executive Officer. “Higher revenue in our firearms division was driven by strong orders for our M&P15 Sport rifles, our Thompson/Center Venture bolt-action rifles and our M&P Shield polymer pistols.  Our accessories division, which was established less than one year ago, also continued to deliver excellent results, with revenue and gross margins that were positive from the year-ago quarter.”

During the quarter, the company launched limited edition models of its M&P Bodyguard 380 pistol and Model 642 J-Frame Revolver, and continued to prepare several new products and extensions for launch at SHOT Show 2016.

Based upon the first quarter results and its current outlook for the remainder of fiscal 2016, the company raised its full year revenue and net income guidance.

“Strong gross margins in the quarter were driven by a number of factors, including favorable standard margins in the accessories division and increased production volumes in the firearms division,” said Jeff Buchanan, Executive Vice President, Chief Financial Officer, and Chief Administrative Officer.  “Operating cash flow was positive at $16.6 million despite our seasonal inventory build as we prepare for the upcoming fall hunting and holiday shopping seasons. As a result, cash during the quarter increased by $13.2 million to $55.4 million.  We ended the first quarter with no borrowings on our $175.0 million revolving line of credit.”

Smith & Wesson's firearms division brands include Smith & Wesson, M&P, and Thompson/Center Arms. As a leading provider of shooting, reloading, gunsmithing, and gun cleaning supplies, the company's accessories division produces innovative, high-quality products under several brands, including Caldwell Shooting Supplies, Wheeler Engineering, Tipton Gun Cleaning Supplies, Frankford Arsenal Reloading Tools, Lockdown Vault Accessories, and Hooyman Premium Tree Saws. Smith & Wesson facilities are located in Massachusetts, Maine, Connecticut, and Missouri.

Smith & Wesson Holding Corporation and Subsidiaries
Consolidated Statements of Income