Smith & Wesson Holding Corporation Reports Second Quarter Fiscal 2017 Financial Results

SPRINGFIELD, Mass., Dec. 1, 2016 /PRNewswire/ -- Smith & Wesson Holding Corporation (NASDAQ Global Select: SWHC), one of the world's leading providers of firearms and quality products for the shooting, hunting, and rugged outdoor enthusiast, today announced financial results for the fiscal second quarter 2017, ended October 31, 2016.

Second Quarter Fiscal 2017 Financial Highlights

• Quarterly net sales were $233.5 million compared with $143.2 million for the second quarter last year, an increase of 63.0%.
• Gross margin for the quarter was 41.8% compared with 39.2% for the second quarter last year. 
• Quarterly GAAP net income was $32.5 million, or $0.57 per diluted share, compared with $12.5 million, or $0.22 per diluted share, for the comparable quarter last year.
• Quarterly non-GAAP net income was $39.1 million, or $0.68 per diluted share, compared with $14.2 million, or $0.25 per diluted share, for the comparable quarter last year. GAAP to non-GAAP adjustments in net income exclude a number of acquisition-related costs, including amortization, one-time transaction costs, and inventory valuation adjustments.  For a detailed reconciliation, see the schedules that follow in this release.
• Quarterly non-GAAP Adjusted EBITDAS was $72.4 million, or 31.0% of net sales.
• The company acquired substantially all of the net assets of Taylor Brands, LLC ("Taylor Brands") and all of the issued and outstanding stock of Crimson Trace Corporation ("Crimson Trace") for an aggregate of $178.1 million, subject to certain adjustments, utilizing cash on hand.
• The company's unsecured revolving credit line commitment was increased to $500 million from $225 million.

James Debney, Smith & Wesson Holding Corporation President and Chief Executive Officer, said, "We are very pleased with our second quarter results, which exceeded our financial guidance. In our Firearms Segment, we believe higher revenue was driven by strong consumer demand as reflected in adjusted background checks from the National Instant Criminal Background Check System (NICS) as well as our own market share gains.  In our Outdoor Products & Accessories Segment, we completed the acquisitions of Taylor Brands and Crimson Trace, both of which were accretive to our non-GAAP earnings."

"Subsequent to the end of the quarter, we completed the acquisition of substantially all of the net assets of Ultimate Survival Technologies, Inc. ("UST"), a provider of high-quality survival and camping products. UST delivered compound annual revenue growth of 49% from 2012 through 2015, maintained healthy gross margins, and developed hundreds of high quality products.  We believe the UST distribution network will create incremental opportunities for our existing accessory product lines." 

"Overall, we are well on our way to achieving our vision of being a leading provider of high-quality products for the shooting, hunting, and rugged outdoor enthusiast.  By executing our strategy, we have successfully grown from a single operating division to four operating divisions that serve a large addressable market and represent more than 18 respected consumer brands.  Accordingly, on January 1, 2017, our holding corporation will become American Outdoor Brands Corporation, pending shareholder approval.  We believe this name better represents our broad range of product offerings and our plan to continue building upon our portfolio of strong American brands.  American Outdoor Brands Corporation will serve as the holding corporation for Smith & Wesson Corp., Battenfeld Technologies, Inc., and Crimson Trace Corporation, which represent our company's firearms, manufacturing services, accessories, and electro-optics divisions.  With a commitment to creating, preserving, and acquiring strong brands, we remain committed to our future growth, focusing on brands and products that best meet the needs and lifestyle of our target consumers," concluded Debney.

Jeffrey D. Buchanan, Executive Vice President, Chief Financial Officer, and Chief Administrative Officer, said, "During the quarter, we secured a commitment to increase our revolving line of credit to $500 million from $225 million.  This expansion of our unsecured credit line provides us with greater opportunities to invest in our future growth, both organically and through strategic acquisitions. Our increased access to capital is a clear reflection of the confidence our bankers have in our company as well as the overall strength of our business."

Financial Outlook

Conference Call and Webcast

The company will host a conference call and webcast today, December 1, 2016, to discuss its second quarter fiscal 2017 financial and operational results. Speakers on the conference call will include James Debney, President and Chief Executive Officer, and Jeffrey D. Buchanan, Executive Vice President, Chief Financial Officer, and Chief Administrative 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 code 22558234.  No RSVP is necessary.  The conference call audio webcast can also be accessed live and for replay on the company's website at www.smith-wesson.com, under the Investor Relations section. The company will maintain an audio replay of this conference call on its website for a period of time after the call. No other audio replay will be available.

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) TCA accessories transition costs, (iii) discontinued operations, (iv) DOJ and SEC costs including insurance recovery costs, (v) acquisition-related costs, (vi) fair value inventory step-up and backlog expense, (vii) bond premium paid, (viii) debt extinguishment costs, (ix) the tax effect of non-GAAP adjustments, (x) net cash provided by operating activities, (xi) net cash used in investing activities, (xii) acquisition of businesses, net of cash acquired, (xiii) receipts from note receivable, (xiv) interest expense (xv) income tax expense, (xvi) depreciation and amortization, and (xvii) stock-based compensation expense; 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

Smith & Wesson Holding Corporation (NASDAQ Global Select: SWHC) is a provider of quality products for shooting, hunting, and rugged outdoor enthusiasts in the global consumer and professional markets. The Company reports two segments: Firearms and Outdoor Products & Accessories.  Firearms manufactures handgun and long gun products sold under the Smith & Wesson®, M&P®, and Thompson/Center Arms™ brands as well as providing forging, machining, and precision plastic injection molding services. Outdoor Products & Accessories provides shooting, hunting, and outdoor accessories, including reloading, gunsmithing, and gun cleaning supplies, tree saws, vault accessories, knives, laser sighting systems, tactical lighting products, and survival and camping equipment. Brands in Outdoor Products & Accessories include Smith & Wesson®, M&P®, Thompson/Center Arms™, Crimson Trace®, Caldwell® Shooting Supplies, Wheeler® Engineering, Tipton® Gun Cleaning Supplies, Frankford Arsenal® Reloading Tools, Lockdown® Vault Accessories, Hooyman® Premium Tree Saws, BOG POD®, Golden Rod® Moisture Control, Schrade®, Old Timer®, Uncle Henry®, UST®, and Imperial™.  For more information on Smith & Wesson, call (800) 331-0852 or log on to 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 our belief that higher revenue was driven by strong consumer demand as reflected in adjusted background checks from the NICS system as well as our own market share gains; our belief that the Taylor Brands and Crimson Trace acquisitions were accretive to our non-GAAP earnings; our belief that the UST distribution network will create incremental opportunities for our existing accessory product lines; our belief that we are well on our way to achieving our vision of being a leading provider of high-quality products for the shooting, hunting, and rugged outdoor enthusiast; our expectation that our holding corporation will become American Outdoor Brands Corporation, pending shareholder approval; our belief that this name better represents our broad range of product offerings and our plan to continue building upon our portfolio of strong American brands; our commitment to creating, preserving, and acquiring strong brands and our commitment to our future growth, focusing on brands and products that best meet the needs and lifestyle of our target consumers; our belief that the expansion of our unsecured credit line provides us with greater opportunities to invest in our future growth, both organically and through strategic acquisitions; our belief that our increased access to capital is a clear reflection of the confidence our bankers have in our company as well as the overall strength of our business; and our expectations for net sales, GAAP income per diluted share, acquisition-related costs, amortization of acquired intangible assets, fair value inventory step-up and backlog expense, tax effect of non-GAAP adjustments, and non-GAAP income per diluted share for the third quarter of fiscal 2017 and for fiscal 2017.  We caution that these statements are qualified by important factors that could cause actual results to differ materially from those reflected by such forward-looking statements.  Such factors include the demand for our products; the costs and ultimate conclusion of certain legal matters; the state of the U.S. economy in general and the firearm industry in particular; general economic conditions and consumer spending patterns; the potential for increased regulation of firearms and firearm-related products; speculation surrounding fears of terrorism and crime; our growth opportunities; our anticipated growth; our ability to increase demand for our products in various markets, including consumer, law enforcement, and military channels, domestically and internationally; the position of our hunting products in the consumer discretionary marketplace and distribution channel; our penetration rates in new and existing markets; our strategies; our ability to introduce new products; the success of new products; our ability to expand our markets; our ability to integrate acquired businesses in a successful manner; the general growth of our outdoor products and accessories business; 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, 2016.

Contact:Liz Sharp, VP Investor Relations
Smith & Wesson Holding Corp.
(413) 747-6284
lsharp@smith-wesson.com  

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SOURCE Smith & Wesson Holding Corporation