Smith & Wesson Brands, Inc. Reports First Quarter Fiscal 2021 Financial Results
- Record Quarterly Revenue of $230 Million
- Zero Net Debt at Quarter End
- Initiating Regular, Quarterly Cash Dividend of $0.05 Per Share
SPRINGFIELD, Mass., Sept. 3, 2020 /PRNewswire/ -- Smith & Wesson Brands, Inc. (NASDAQ Global Select: SWBI), a U.S.-based leader in firearm manufacturing and design, today announced financial results for the first quarter fiscal 2021, ended July 31, 2020. The financial results for the period are reported in two segments: Firearms and Outdoor Products & Accessories. On August 24, 2020, the company announced that it had completed the previously announced spin-off of its Outdoor Products & Accessories segment. Therefore, first quarter fiscal 2021 represents the final period in which the Smith & Wesson Brands, Inc. financial results will include the financial results of the Outdoor Products & Accessories segment.
First Quarter Fiscal 2021 Consolidated Financial Highlights
- Quarterly net sales were $278.0 million compared with $123.7 million for the first quarter last year, an increase of 124.8%. Firearms segment gross sales were $229.9 million, which included $1.0 million of inter-segment revenue, an increase of $134.4 million, or 140.9%, over the comparable quarter last year. Outdoor Products & Accessories segment gross sales were $50.6 million, which included $1.5 million of inter-segment revenue, an increase of $17.4 million, or 52.3%, over the comparable quarter last year.
- Gross margin for the quarter was 42.0% compared with 38.7% for the comparable quarter last year.
- Quarterly GAAP net income was $48.4 million, or $0.86 per diluted share, compared with a GAAP net loss of $(2.1) million, or $(0.04) per diluted share, for the comparable quarter last year.
- Quarterly non-GAAP net income was $54.9 million, or $0.97 per diluted share, compared with $1.7 million, or $0.03 per diluted share, for the comparable quarter last year. GAAP to non-GAAP adjustments for net income exclude costs related to the spin-off of the Outdoor Products & Accessories segment, COVID-19 related expenses, and other costs. For a detailed reconciliation, see the schedules that follow in this release.
- Quarterly non-GAAP Adjusted EBITDAS was $84.2 million, or 30.3% of net sales, compared with $17.5 million, or 14.1% of net sales, for the comparable quarter last year.
Mark Smith, President and Chief Executive Officer, commented, "Today, I am pleased to report record-breaking first quarter financial results for Smith & Wesson Brands, Inc. These results could not have been possible without our dedicated employees, who not only worked diligently to manufacture and fulfill the strong flow of customer orders with a broad assortment of our highly sought-after firearms, but did so with a heightened commitment to the health and safety protocols that our operations management team put in place at the start of the pandemic. Our record revenue and unit sales during the quarter demonstrates our ability to rapidly respond to increased demand through our flexible manufacturing model and our state-of-the-art distribution facility, delivering outstanding products that resonate with the firearms consumer."
Smith continued, "With the successful spin-off of our Outdoor Products & Accessories segment last week, we have now returned to our heritage as a pure-play firearms company, with a focus on organic growth and returning excess capital to our stockholders. As such, our Board of Directors has authorized the company to declare a regular, quarterly cash dividend of $0.05 per share. Our first quarterly dividend will be payable on October 1, 2020 to shareholders of record as of the market close on September 17, 2020."
Deana McPherson, Executive Vice President and Chief Financial Officer, commented, "Our strong financial performance enabled us to generate operating cash flow of $83.5 million during the quarter, which, combined with our cash on hand, allowed us to pay down $135.0 million on our revolving line of credit and end the quarter with zero net debt. After the end of the first quarter, as part of the spin-off process, we restructured our credit facility for a new, five-year term that enables us to maintain an unsecured $100 million line of credit for the foreseeable future."
Conference Call and Webcast
The company will host a conference call and webcast today, September 3, 2020, to discuss its first quarter fiscal 2021 financial and operational results. Speakers on the conference call will include Mark Smith, President and Chief Executive Officer, and Deana L. McPherson, Executive Vice President and Chief Financial Officer. The conference call may include forward-looking statements. The conference call and webcast will begin at 5:00 p.m. Eastern Time (2:00 p.m. Pacific Time). Those interested in listening to the conference call via telephone may call directly at (844) 309-6568 and reference conference identification number 7047608. No RSVP is necessary. The conference call audio webcast can also be accessed live on the company's website at www.smith-wesson.com, under the Investor Relations section.
Reconciliation of U.S. GAAP to Non-GAAP Financial Measures
In this press release, certain non-GAAP financial measures, including "non-GAAP net income," "Adjusted EBITDAS," and "free cash flow" are presented. From time-to-time, the company considers and uses these supplemental measures of operating performance in order to provide the reader with an improved understanding of underlying performance trends. The company believes it is useful for itself and the reader to review, as applicable, both (1) GAAP measures that include (i) amortization of acquired intangible assets, (ii) transition costs, (iii) recall related expenses, (iv) the tax effect of non-GAAP adjustments, (v) COVID-19 expenses, (vi) net cash used in investing activities, (vii) interest expense, (viii) income tax expense, (ix) depreciation and amortization, and (x) stock-based compensation expenses; and (2) the non-GAAP measures that exclude such information. The company presents these non-GAAP measures because it considers them an important supplemental measure of its performance. The company's definition of these adjusted financial measures may differ from similarly named measures used by others. The company believes these measures facilitate operating performance comparisons from period to period by eliminating potential differences caused by the existence and timing of certain expense items that would not otherwise be apparent on a GAAP basis. These non-GAAP measures have limitations as an analytical tool and should not be considered in isolation or as a substitute for the company's GAAP measures. The principal limitations of these measures are that they do not reflect the company's actual expenses and may thus have the effect of inflating its financial measures on a GAAP basis.
About Smith & Wesson Brands, Inc.
Smith & Wesson Brands, Inc. (NASDAQ Global Select: SWBI) is a U.S.-based leader in firearm manufacturing and design, delivering a broad portfolio of quality handgun, long gun, and suppressor products to the global consumer and professional markets under the iconic Smith & Wesson®, M&P®, Thompson/Center Arms™, and Gemtech® brands. The company also provides manufacturing services including forging, machining, and precision plastic injection molding services. For more information call (844) 363-5386 or visit www.smith-wesson.com.
Safe Harbor Statement
Certain statements contained in this press release may be deemed to be forward-looking statements under federal securities laws, and we intend that such forward-looking statements be subject to the safe-harbor created thereby. Such forward-looking statements include, among others, our intent to pay a regular, quarterly cash dividend. We caution that these statements are qualified by important risks, uncertainties, and other factors that could cause actual results to differ materially from those reflected by such forward-looking statements. Such factors include, among others, economic, social, political, legislative, and regulatory factors; the potential for increased regulation of firearms and firearm-related products; actions of social activists that could have an adverse effect on our business; the impact of lawsuits; the demand for our products; the state of the U.S. economy in general and the firearm industry in particular; general economic conditions and consumer spending patterns; our competitive environment; the supply, availability, and costs of raw materials and components; the impact of protectionist tariffs and trade wars; speculation surrounding fears of terrorism and crime; our anticipated growth and growth opportunities; our ability to increase demand for our products in various markets, including consumer, law enforcement, and military channels, domestically and internationally; our penetration rates in new and existing markets; our strategies; our ability to maintain and enhance brand recognition and reputation; our ability to introduce new products; the success of new products; our ability to expand our markets; the potential for cancellation of orders from our backlog; and other risks detailed from time to time in our reports filed with the SEC, including our Annual Report on Form 10-K for the fiscal year ended April 30, 2020.
Contact:
[email protected]
(413) 747-3448
SMITH & WESSON BRANDS, INC. AND SUBSIDIARIES |
|||
CONDENSED CONSOLIDATED BALANCE SHEETS |
|||
(Unaudited) |
|||
As of: |
|||
July 31, 2020 |
April 30, 2020 |
||
(In thousands, except par value and share data) |
|||
ASSETS |
|||
Current assets: |
|||
Cash and cash equivalents |
$ 65,271 |
$ 125,398 |
|
Accounts receivable, net of allowances for credit losses of $1,411 on July 31, 2020 and $1,438 on April 30, 2020 |
101,358 |
93,433 |
|
Inventories |
149,567 |
164,191 |
|
Prepaid expenses and other current assets |
11,015 |
8,838 |
|
Income tax receivable |
656 |
1,595 |
|
Total current assets |
327,867 |
393,455 |
|
Property, plant, and equipment, net |
156,785 |
157,417 |
|
Intangibles, net |
69,842 |
73,754 |
|
Goodwill |
83,605 |
83,605 |
|
Deferred income taxes |
2,396 |
2,396 |
|
Other assets |
17,674 |
18,334 |
|
$ 658,169 |
$ 728,961 |
||
LIABILITIES AND STOCKHOLDERS' EQUITY |
|||
Current liabilities: |
|||
Accounts payable |
$ 53,829 |
$ 39,196 |
|
Accrued expenses and deferred revenue |
49,987 |
64,602 |
|
Accrued payroll and incentives |
13,241 |
14,623 |
|
Accrued income taxes |
18,905 |
5,503 |
|
Accrued profit sharing |
5,877 |
2,414 |
|
Accrued warranty |
3,462 |
3,633 |
|
Total current liabilities |
145,301 |
129,971 |
|
Notes and loans payable, net of current portion |
24,311 |
159,171 |
|
Finance lease payable, net of current portion |
39,610 |
39,873 |
|
Other non-current liabilities |
11,882 |
12,828 |
|
Total liabilities |
221,104 |
341,843 |
|
Commitments and contingencies |
|||
Stockholders' equity: |
|||
Preferred stock, $.001 par value, 20,000,000 shares authorized, no shares issued or outstanding |
— |
— |
|
Common stock, $.001 par value, 100,000,000 shares authorized, 73,864,745 issued and 55,697,883 shares outstanding on July 31, 2020 and 72,526,790 shares issued and 55,359,928 shares outstanding on April 30, 2020 |
74 |
74 |
|
Additional paid-in capital |
269,192 |
267,630 |
|
Retained earnings |
390,101 |
341,716 |
|
Accumulated other comprehensive income |
73 |
73 |
|
Treasury stock, at cost (18,166,862 shares on July 31, 2020 and April 30, 2020) |
(222,375) |
(222,375) |
|
Total stockholders' equity |
437,065 |
387,118 |
|
$ 658,169 |
$ 728,961 |
||
SMITH & WESSON BRANDS, INC. AND SUBSIDIARIES |
||||
CONDENSED CONSOLIDATED STATEMENTS OF INCOME/(LOSS) |
||||
(Unaudited) |
||||
For the Three Months Ended |
||||
July 31, 2020 |
July 31, 2019 |
|||
(In thousands, except per share data) |
||||
Net sales |
$ 277,965 |
$ 123,665 |
||
Cost of sales |
161,199 |
75,811 |
||
Gross profit |
116,766 |
47,854 |
||
Operating expenses: |
||||
Research and development |
2,965 |
3,229 |
||
Selling, marketing, and distribution |
19,269 |
16,773 |
||
General and administrative |
29,080 |
26,709 |
||
Total operating expenses |
51,314 |
46,711 |
||
Operating income |
65,452 |
1,143 |
||
Other income/(expense), net: |
||||
Other income/(expense), net |
151 |
5 |
||
Interest expense, net |
(1,316) |
(2,627) |
||
Total other (expense)/income, net |
(1,165) |
(2,622) |
||
Income/(loss) from operations before income taxes |
64,287 |
(1,479) |
||
Income tax expense |
15,902 |
629 |
||
Net income/(loss) |
$ 48,385 |
$ (2,108) |
||
Net income/(loss) per share: |
||||
Basic |
$ 0.87 |
$ (0.04) |
||
Diluted |
$ 0.86 |
$ (0.04) |
||
Weighted average number of common shares outstanding: |
||||
Basic |
55,494 |
54,783 |
||
Diluted |
56,277 |
54,783 |
||
SMITH & WESSON BRANDS, INC. AND SUBSIDIARIES |
|||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS |
|||
(Unaudited) |
|||
For the Three Months Ended |
|||
July 31, 2020 |
July 31, 2019 |
||
(In thousands) |
|||
Cash flows from operating activities: |
|||
Net income/(loss) |
$ 48,385 |
$ (2,108) |
|
Adjustments to reconcile net income/(loss) to net cash provided by/(used in) operating activities: |
|||
Depreciation and amortization |
12,888 |
14,346 |
|
Loss/(gain) on sale/disposition of assets |
3 |
— |
|
Provision for losses on notes and accounts receivable |
136 |
634 |
|
Stock-based compensation expense |
1,041 |
1,588 |
|
Changes in operating assets and liabilities: |
|||
Accounts receivable |
(6,811) |
14,031 |
|
Inventories |
14,624 |
(31,678) |
|
Prepaid expenses and other current assets |
(2,177) |
(2,822) |
|
Income taxes |
14,341 |
397 |
|
Accounts payable |
14,061 |
(6,015) |
|
Accrued payroll and incentives |
(1,382) |
(10,875) |
|
Accrued profit sharing |
3,463 |
686 |
|
Accrued expenses and deferred revenue |
(14,640) |
(6,675) |
|
Accrued warranty |
(171) |
(612) |
|
Other assets |
660 |
428 |
|
Other non-current liabilities |
(946) |
(463) |
|
Net cash provided by/(used in) operating activities |
83,475 |
(29,138) |
|
Cash flows from investing activities: |
|||
Payments to acquire patents and software |
(292) |
(123) |
|
Payments to acquire property and equipment |
(7,343) |
(3,695) |
|
Net cash used in investing activities |
(7,635) |
(3,818) |
|
Cash flows from financing activities: |
|||
Proceeds from loans and notes payable |
— |
25,000 |
|
Payments on finance lease obligation |
(238) |
(214) |
|
Payments on notes and loans payable |
(135,000) |
(1,575) |
|
Proceeds from exercise of options to acquire common stock |
268 |
— |
|
Payment of employee withholding tax related to restricted stock units |
(997) |
(538) |
|
Net cash (used in)/provided by financing activities |
(135,967) |
22,673 |
|
Net decrease in cash and cash equivalents |
(60,127) |
(10,283) |
|
Cash and cash equivalents, beginning of period |
125,398 |
41,015 |
|
Cash and cash equivalents, end of period |
$ 65,271 |
$ 30,732 |
|
Supplemental disclosure of cash flow information |
|||
Cash paid for: |
|||
Interest |
$ 1,556 |
$ 1,690 |
|
Income taxes |
$ 1,689 |
$ 235 |
|
SMITH & WESSON BRANDS, INC. AND SUBSIDIARIES |
|||||||
For the Three Months Ended |
|||||||
July 31, 2020 |
July 31, 2019 |
||||||
$ |
% of Sales |
$ |
% of Sales |
||||
GAAP gross profit |
$ 116,766 |
42.0% |
$ 47,854 |
38.7% |
|||
Diode recall |
— |
— |
(589) |
-0.5% |
|||
COVID-19 |
1,109 |
0.4% |
— |
— |
|||
Transition costs |
— |
— |
620 |
0.5% |
|||
Non-GAAP gross profit |
$ 117,875 |
42.4% |
$ 47,885 |
38.7% |
|||
GAAP operating expenses |
$ 51,314 |
18.5% |
$ 46,711 |
37.8% |
|||
Amortization of acquired intangible assets |
(4,094) |
-1.5% |
(4,770) |
-3.9% |
|||
Transition costs |
(3,595) |
-1.3% |
(466) |
-0.4% |
|||
COVID-19 |
(67) |
0.0% |
— |
— |
|||
Non-GAAP operating expenses |
$ 43,558 |
15.7% |
$ 41,475 |
33.5% |
|||
GAAP operating income |
$ 65,452 |
23.5% |
$ 1,143 |
0.9% |
|||
Diode recall |
— |
— |
(589) |
-0.5% |
|||
Amortization of acquired intangible assets |
4,094 |
1.5% |
4,770 |
3.9% |
|||
Transition costs |
3,595 |
1.3% |
1,086 |
0.9% |
|||
COVID-19 |
1,176 |
0.4% |
— |
— |
|||
Non-GAAP operating income |
$ 74,317 |
26.7% |
$ 6,410 |
5.2% |
|||
GAAP net income/(loss) |
$ 48,385 |
17.4% |
$ (2,108) |
-1.7% |
|||
Amortization of acquired intangible assets |
4,094 |
1.5% |
4,770 |
3.9% |
|||
Diode recall |
— |
— |
(589) |
-0.5% |
|||
Transition costs |
3,595 |
1.3% |
1,086 |
0.9% |
|||
COVID-19 |
1,176 |
0.4% |
— |
— |
|||
Tax effect of non-GAAP adjustments |
(2,394) |
-0.9% |
(1,422) |
-1.1% |
|||
Non-GAAP net income |
$ 54,856 |
19.7% |
$ 1,737 |
1.4% |
|||
GAAP net income/(loss) per share - diluted |
$ 0.86 |
$ (0.04) |
|||||
Amortization of acquired intangible assets |
0.07 |
0.09 |
|||||
Diode recall |
— |
(0.01) |
|||||
Transition costs |
0.06 |
0.02 |
|||||
COVID-19 |
0.02 |
— |
|||||
Tax effect of non-GAAP adjustments |
(0.04) |
(0.03) |
|||||
Non-GAAP net income per share - diluted |
$ 0.97 |
$ 0.03 |
|||||
SMITH & WESSON BRANDS, INC. AND SUBSIDIARIES |
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RECONCILIATION OF NET OPERATING CASH FLOW TO FREE CASH FLOW |
|||
For the Three Months Ended |
|||
July 31, 2020 |
July 31, 2019 |
||
Net cash provided by/(used in) operating activities |
$ 83,475 |
$ (29,138) |
|
Net cash used in investing activities |
(7,635) |
(3,818) |
|
Free cash flow |
$ 75,840 |
$ (32,956) |
|
SMITH & WESSON BRANDS, INC. AND SUBSIDIARIES |
||||
RECONCILIATION OF GAAP NET INCOME/(LOSS) TO NON-GAAP ADJUSTED EBITDAS |
||||
For the Three Months Ended |
||||
July 31, 2020 |
July 31, 2019 |
|||
GAAP net income/(loss) |
$ 48,385 |
$ (2,108) |
||
Interest expense |
1,357 |
2,763 |
||
Income tax expense |
15,902 |
629 |
||
Depreciation and amortization |
12,748 |
14,092 |
||
Stock-based compensation expense |
1,041 |
1,588 |
||
COVID-19 |
1,176 |
— |
||
Transition costs |
3,595 |
1,086 |
||
Diode recall |
— |
(589) |
||
Non-GAAP Adjusted EBITDAS |
$ 84,204 |
$ 17,461 |
||
SOURCE Smith & Wesson Brands, Inc.
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