Smith & Wesson Holding Corp. reported sales from continuing operations for the fourth quarter ended April 30 were a
record $129.8 million, up 27.7 percent from the fourth quarter last
year.  The increase was driven by strong sales of M&P polymer
pistols and M&P modern sporting rifles. 

Gross profit for the fourth quarter was $46.9 million, or 36.1 percent of net sales, compared with gross profit of $31.2 million, or 30.7 percent of net sales, for the comparable quarter last year.  Gross profit was positively impacted in the quarter by significant one-time benefits relating to reductions in inventory and legal reserves.  In addition, the higher production volume allowed for increased overhead absorption.  Higher sales volume, cost savings efforts, reduced promotion costs, and a favorable product mix also contributed to the improvement.
   
Operating expense for the fourth quarter totaled $21.2 million, or 16.3 percent of net sales, compared with operating expense of $23.2 million, or 22.9 percent of net sales, for the fourth quarter last year.  The decrease in operating expense reflected cost-savings efforts, including reduced legal expenses, and the impact of the consolidation of the Thompson/Center Arms operations to Springfield, Massachusetts.
   
Net income from continuing operations for the fourth quarter was $17.8 million, or $0.27 per diluted share, compared with net income from continuing operations of $4.4 million, or $0.07 per diluted share, for the fourth quarter last year.
   
Non-GAAP Adjusted EBITDAS from continuing operations for the fourth quarter increased to $31.2 million compared with $14.9 million for the fourth quarter last year.
   
At April 30, 2012, firearm backlog was $439.0 million, an increase of $252.3 million, or 135.1 percent, compared with the end of the fourth quarter last year, and an increase of $240.5 million, or 121.1 percent, from the most recent sequential quarter. 
   
Operating cash flow of $29.6 million and net capital spending of $3.7 million resulted in free cash flow of $25.8 million from continuing operations. Cash at year end was $56.7 million.

Full Year Fiscal 2012 Financial Highlights

Net sales from continuing operations for the full fiscal year were a record $412.0 million compared with $342.2 million for the prior fiscal year, an increase of 20.4 percent.

Gross profit was 31.1 percent compared with 30.6 percent for the prior fiscal year.

Operating expenses were $83.1 million for fiscal 2012, or 20.2 percent of net sales, compared with operating expenses of $86.9 million, or 25.4 percent of net sales, for fiscal 2011.

Income from continuing operations was a record $26.4 million, or $0.40 per diluted share, compared with income from continuing operations of $8.1 million, or $0.13 per diluted share, a year ago.

Non-GAAP Adjusted EBITDAS from continuing operations for the full fiscal year totaled $68.4 million compared with $42.1 million for fiscal 2011.

James Debney, Smith & Wesson Holding Corporation President and Chief Executive Officer, stated, “Our objective in fiscal 2012 was to streamline the company and focus on our position as a leading, pure-play firearm company.  We are very pleased with our results, which include record annual and fourth quarter net sales and profits.  In the fourth quarter, we continued to deliver strong sales growth with our world-class products, including our M&P polymer pistols and our M&P modern sporting rifles.  We continued to increase our manufacturing capacity and outsourcing capabilities, and our rapid acceleration of those efforts, combined with outstanding execution by our operations team, allowed us to capture incremental sales.  Our M&P brand continues to be well accepted by consumers.  We added a new member to the M&P family in the quarter with the highly successful launch of our new M&P Shield™.  The M&P Shield offers consumers a polymer pistol with an easily concealed one-inch profile, combined with professional-grade features, simple operation, and reliable performance.  Acceptance of the M&P Shield in the market has been fantastic.”  

Jeffrey D. Buchanan, Executive Vice President and Chief Financial Officer, stated, “In fiscal 2012, our growing cash position allowed us to pay down $30.0 million of debt and increase our manufacturing capacity without accessing our line of credit. As we move into fiscal 2013, we will use the strength of our balance sheet to continue investing in our business.  Recently, and after the end of the fiscal year, our strong cash position provided us the opportunity to enter the bond market and begin to repurchase our senior notes.  Thus far, we have purchased $6.4 million of the notes.  Overall, our growth in fiscal 2012 helped lay a solid fiscal foundation for the further expected improvement that is reflected in our financial guidance for fiscal 2013.”

Financial Outlook for Continuing Operations

The company expects net sales from continuing operations for the first quarter of fiscal 2013 to be between $125.0 million and $130.0 million, which would represent year-over-year growth from continuing operations of over 36.0 percent. The company anticipates GAAP earnings per share from continuing operations of between $0.16 and $0.19 for the first quarter of fiscal 2013.

The company anticipates net sales from continuing operations for fiscal 2013 of between $485.0 million and $505.0 million, which would represent year-over-year growth from continuing operations of over 17.0 percent. The company anticipates GAAP earnings per share from continuing operations of between $0.60 and $0.65 for fiscal 2013.

SMITH & WESSON HOLDING CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME/(LOSS)



For the Three Months Ended April 30,


For the Years Ended April 30,




2012 (unaudited)


2011 (unaudited)


2012


2011




(In thousands, except per share data)















Net sales

$

129,843


$

101,667


$

411,997


$

342,233


Cost of sales


82,980



70,427



284,008



237,545


Gross profit


46,863



31,240



127,989



104,688


Operating expenses:














 Research and development


973



1,264



4,543



4,363



 Selling and marketing


6,495



8,374



31,317



34,580



 General and administrative


13,729



13,609



47,213



47,954



 Total operating expenses


21,197



23,247



83,073



86,897


Operating income from continuing operations


25,666



7,993



44,916



17,791


Other income/(expense):














 Other income/(expense), net


16



(464)



78



228



 Interest income


309



348



1,505



1,198



 Interest expense


(1,439)



(2,024)



(7,484)



(5,683)



 Total other income/(expense), net


(1,114)



(2,140)



(5,901)



(4,257)


Income from continuing operations before income taxes


24,552



5,853



39,015



13,534


Income tax expense


6,735



1,460



12,582



5,454



Income from continuing operations


17,817



4,393



26,433



8,080


Discontinued operations:














Loss from operations of discontinued security solutions
division


(7,639)



(2,912)



(15,945)



(96,055)



Income tax expense/(benefit)


(2,290)



341



(5,617)



(5,206)



Loss from discontinued operations


(5,349)



(3,253)



(10,328)



(90,849)


Net income/(loss)/comprehensive income/(loss)

$

12,468


$

1,140


$

16,105


$

(82,769)






























Net income/(loss) per share:














Basic – continuing operations

$

0.27


$

0.07


$

About The Author

Thomas J. Ryan

Thomas J. Ryan Senior Business Editor | SGB Media tryan@sgbonline.com | 917.375.4699

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