Smith & Wesson Holding Corporation said net sales for the fiscal second quarter ended Oct. 31 were up 48.6% to $108.8 million from $73.2 million in the year ago period. Management for the company said strong demand for firearms and perimeter security products had driven sales to a record quarterly revenue.

 

In a conference call with analysts, President and CEO Michael Golden said overall firearms sales surged 31.9% for the quarter on growth from pistols (+29.2%), revolvers (39.2%) and tactical rifles (+80.9%). Sales for hunting rifles were essentially flat for the quarter.


Golden added that the majority of the growth came from surging sales from tactical rifles, polymer pistols and small frame revolvers.
Firearms sales to the consumer channel were up by more than 30% to over $75 million while law enforcement sales grew by over 29% in the quarter. The International Firearms business – which includes the company’s military segment – was up 13% to $8.5 million.


Smith & Wesson reported a second quarter net income of $13.3 million, or 21 cents per diluted share, as compared to $76.2 million, or $1.62 per share, in the year-ago period. Net income for the quarter included a non-cash, fair value adjustment to the contingent liability related to the company’s acquisition of Universal Safety Response that increased diluted EPS by 11 cents per share. Excluding the adjustment, net income would have been $6.1 million, or 10 cents per diluted share.


Firearms backlog was $95.8 million at the end of the quarter, but management warned that the firearms business “continues to move towards more normal levels of demand…” and that cancellations had accounted for 30% of the quarter-over-quarter decline. Inventory levels increased by about $3.8 million for the quarter almost solely due to the inclusion of USR inventory. Accounts receivable increased by $15.6 million over year-end levels to $63.8 million, due to the inclusion of $18.1 million in USR accounts receivable. At the end of the quarter, the company had approximately $46.4 million in cash and had no borrowings under its revolving line of credit.


Following the end of the quarter, the company paid off $4.8 million of debt, which carried interest costs in excess of 6%. The company also expanded its revolving line of credit with TD Bank from $40 million to $60 million, but has no current plan to draw on that line.


Regarding outlook, management said it expects sales for the third quarter to be between $90 million and $95 million – an increase of 8% and 14% over the prior year. The company said it expects gross margins to be between 25% and 27% for the quarter.