Smith & Wesson Holding Corp. posted solid sales growth for the fourth quarter ended April 30, although numerous one-time charges held the gun-makers profit down.


The company earned $1.1 million, or 2 cents per share, during the quarter, compared to $2.7 million, or 4 cents per share, in the year-ago period. After adjusting for expenses tied to investigations by the SEC and the Dept. of Justice, as well as a consolidation and other issues, the company earned 15 cents per share versus 8 cents per share in the year-ago period. Smith & Wesson confirmed in a recent SEC filing that the Dept. of Justice is trying to determine if the company violated Foreign Corrupt Practices Act laws. The Dept. of Justice reportedly notified the company at the end of fiscal 2010 that it was investigating a possible violation of federal security laws.


Total fiscal Q4 sales were up 7.7 percent to a record $111.8 million versus $103.8 million a year ago.  Gross margins were 30.2 percent of sales for the quarter, down 110 basis points from 31.3 percent in the year-ago period.

 

Management said margin contraction was associated with the consolidation of the Thompson/Center Arms operations.
The company recorded significant strength from its Firearms Division, which saw sales surge 12.7 percent to $101.7 million on higher sales across nearly all product lines. Management noted that Bodyguard products, price-repositioned polymer framed pistols and modern sporting rifles were the primary drivers during the quarter. Pistol sales grew 29.9 percent in the quarter as the consumer trend toward smaller firearms designed for concealed carry and personal protection appeared to continue. Gross margin for the division totaled 30.7 percent of sales, compared with 33.0 percent of sales, in the prior-year quarter.


Firearms backlog grew to $186.7 million at year-end, an increase of $112.9 million from the end of Q3 and $78.7 million higher than the end of the 2010 fiscal year.  Management said the increase reflected strong orders for Smith & Wesson products that were strategically price-repositioned, as well as several recently launched new products. 
Security Solutions division net sales were $10.1 million in Q4, down 25.6 percent from sales of $13.6 million in the prior-year period. Gross margin was 24.8 percent of sales, compared with 20.2 percent of sales, for the comparable quarter last year. Backlog was $20.6 million at year-end, a sequential increase of $1.6 million from the end of Q3, but a decrease of $14.5 million from the end of the prior fiscal year.


Management said the recent decision to re-brand the division to Smith & Wesson Security Solutions proved to be a positive move as the company has seen a measurable improvement in customer awareness, interest level, and inquiries.


Looking ahead, SWHC is currently forecasting total net sales for fiscal 2012 between $420.0 million and $440.0 million, which would represent growth of between 7 percent and 12 percent. Full-year Firearms division sales are expected to increase between 11 percent and 13 percent year-over-year, with Security Solutions division sales anticipated to be flat to down versus fiscal 2011.  The company expects total gross margin for fiscal 2012 to be approximately 30 percent, including expenses related to the Thompson/Center Arms consolidation and anticipated gross margin pressure in the security solutions division. 


Fiscal Q1 revenues are expected to reach $92.0 million to $95.0 million.  Gross margin is forecasted in the range of 28.0 percent to 29.0 percent of sales, inclusive of expenses relating to the Thompson/Center Arms consolidation, which are expected to cause about a one percent reduction in gross margin for the quarter.