American Outdoor: Smith & Wesson Brands, Inc. Reports

The following excerpt is from the company's SEC filing.
Third Quarter Fiscal 2022 Financial Results
Two-Year
Compounded Sales Growth of more than 118%
Gross Margin of 39.6%
EPS of $0.65/Share and EBITDAS Margin of 29.2%
2.8 Million Shares Repurchased
 million of Cash on Hand
SPRINGFIELD, Mass., March
 3, 2022 – Smith
 & Wesson Brands, Inc. (NASDAQ Global Select: SWBI)
, a
U.S.-based leader in firearm manufacturing and design, today announced financial results for the third quarter of fiscal 2022, ended January 31, 2022. Unless otherwise indicated, any reference to income statement items refers to results from
continuing operations. < br>Third Quarter Fiscal 2022 Financial Highlights
Net sales were $177.7 million, a decrease of $79.9 million, or 31.0%, from the comparable quarter last
year, but $50.3 million, or 139.5%, higher than the third quarter in fiscal 2020.
Gross margin was 39.6% versus 42.6% in the comparable quarter last year and 28.0% in the third quarter in fiscal
2020.
Quarterly GAAP net income was $30.5 million, or $0.65 per diluted share, compared with $62.3 million,
or $1.12 per diluted share, for the comparable quarter last year.
non-GAAP
net income was $32.9 million, or $0.69 per
diluted share, compared with $62.4 million, or $1.12 per diluted share, for the comparable quarter last year. GAAP to
adjustments for income exclude costs related to the planned relocation of our
headquarters and certain manufacturing and distribution operations to Tennessee, the
spin-off
of the outdoor products and accessories business in fiscal 2021,
COVID-19

related expenses, and other costs. For a detailed reconciliation, see the schedules that follow in this release.
Adjusted EBITDAS was $51.9 million, or 29.2% of
net sales, compared with $89.8 million, or 34.9% of net sales, for the comparable quarter last year.
During the quarter, we purchased 2,788,152 shares of our common stock for $50.0 million, utilizing cash on
hand.
Mark Smith, President and Chief Executive Officer, commented, “I am very proud of our team for demonstrating
Smith & Wesson’s ability to deliver meaningful profitability no matter the overall market conditions. Although the firearms market remains elevated and healthy with new entrants, it has cooled significantly from the height of the
pandemic surge and seems to now be following
pre-pandemic
historical demand patterns. This macro demand pattern is very familiar to us, and is exactly what our business model is designed to accommodate. Our
ability to ramp production aggressively to meet surging demand over the past couple of years fueled significant market share gains for Smith & Wesson and provided a demonstrable proof point for our flexible manufacturing strategy. Our
manufacturing team increased throughput by over
Page 1 of 8

82% during the surge, which has enabled us to not only gain impressive market share, but also to set a very solid business foundation for long-term success. Since the demand surge began in March
of 2020, we have paid down $160 million of debt and are now debt-free, bought back $200 million of stock, which reduced our outstanding shares by nearly 20%, paid nearly $20 million in dividends, invested nearly $40 million into
our business, and today have a strong and healthy balance sheet with over $107 million in cash. Our long-term commitment is to continue to return value to stockholders through regular fixed dividends and share repurchases and, as a result of
these accomplishments, we are well positioned to do so.”
Deana McPherson, Executive Vice President and Chief Financial Officer, commented
“Looking back to where we were during the same quarter in fiscal 2020, you can see how our response to the surge in demand over the last two years has strengthened our foundation, creating an agile business model that optimizes profitability to
drive long-term value. Revenue for our third quarter grew from $127.4 million in fiscal 2020 to $257.6 million in fiscal 2021, or a 202.6% increase, and is now at $177.7 million in fiscal 2022. While this represents a 31% decrease
from the historic levels recorded last year, it is truly remarkable that we were able to achieve a $50.3 million increase in revenue this quarter versus two years ago on nearly the same number of units shipped. Further, gross margin was 39.6%
in the third quarter, which was 300 basis points below the 42.6% realized in the prior year comparable quarter, but 1,160 basis points above the 28% realized in the third quarter of fiscal 2020. Our Board of Directors has again authorized our $0.08
per share quarterly dividend, which will be paid to stockholders of record on March 17, 2022 with payment to be made on March 31, 2022.”
Conference Call and Webcast
The company will host
a conference call and webcast on March 3, 2022, to discuss its third quarter fiscal 2022 financial and operational results. Speakers on the conference call will include Mark Smith, President and Chief Executive Officer, and Deana 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 2710778. 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

financial measures, including
“non-GAAP
net income,” “Adjusted EBITDAS,” and “free cash flow” are presented. From

time-to-time,
we consider and use these supplemental measures of operating performance in order to provide the reader with an improved understanding of underlying
performance trends. We believe it is useful for us and the reader to review, as applicable, both (1) GAAP measures that include (i) interest expense, (ii) income tax expense, (iii) depreciation and amortization,
(iv) stock-based compensation expense,
(v) COVID-19
expenses, (vi) transition costs, (vii) amortization of acquired intangible assets, (viii) spin related stock compensation,
(ix) Relocation expense, and (x) the tax effect of
adjustments; and (2) the
measures that exclude such information. We present these
measures because we consider them an important supplemental measure of our performance. Our definition of these adjusted financial measures may differ from similarly named measures used by others. We
believe 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
measures have limitations as an analytical tool and should not be considered in isolation or as a substitute for our GAAP measures. The principal limitations of these measures are that they do not reflect
our 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
, and Gemtech
brands. The company also provides manufacturing services including forging, machining, and precision plastic injection
molding services. For more information call (800)
331-0852
or visit www.smith-wesson.com.
Page 2 of 8
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 belief that (i) the firearms market seems to now be following

historical demand patterns; (ii) the macro demand pattern is exactly what our business model is designed to accommodate; (iii) we have set a very solid business foundation for long-term
success; (iv) that our long-term commitment is to continue to return value to stockholders through regular fixed dividends and share repurchases and, as a result of certain accomplishments, we are well positioned to do so; and (v) our
response to the surge in demand over the last two years has strengthened our foundation, creating an agile business model that optimizes profitability to drive long-term value. 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; our anticipated growth and growth opportunities;
our strategies; our ability to maintain and enhance brand recognition and reputation; our ability to effectively manage and execute the planned relocation of our headquarters and certain of our operations to Tennessee; our ability to introduce new
products; the success of new products; the potential for cancellation of orders from our backlog; and other risks detailed from time to time in our reports filed with the Securities and Exchange Commission, including our Annual Report on Form
for the fiscal year ended April 30, 2021 and our Quarterly Report on Form
for the fiscal quarter ended October 31, 2021.
Page 3 of 8
SMITH & WESSON BRANDS, INC. AND SUBSIDIARIES    
CONDENSED CONSOLIDATED BALANCE SHEETS    
(Unaudited)    
As of:
  January 31, 2022  
  April 30, 2021  
(In thousands, except par value and share data)
ASSETS
Current assets:
Cash and cash equivalents
107,268
113,017
Accounts receivable, net of allowances for credit losses of $25 on January 31, 2022 and $107 on
April 30, 2021
49,386
67,442
Inventories
134,268
78,477
Prepaid expenses and other current assets
Income tax receivable
Total current assets
300,676
268,253
Property, plant, and equipment, net
134,540
141,612
Intangibles, net
Goodwill
19,024
Other assets
10,808
13,082
Total assets
469,305
446,388
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable
36,060
57,337
Accrued expenses and deferred revenue
26,857
33,136
Accrued payroll and incentives
16,223
17,381
Accrued income taxes
Accrued profit sharing
11,502
14,445
Accrued warranty
Total current liabilities
93,044
125,655
Deferred income taxes
Finance lease payable, net of current portion
37,930
38,786
non-current
11,118
14,659
Total liabilities
142,996
180,004
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, 74,550,885 issued and 45,510,515
shares outstanding on January 31, 2022 and 74,222,127 shares issued and 49,937,329 shares outstanding on April 30, 2021
Additional
paid-in
capital
276,389
273,431
Retained earnings
472,147
325,181
Accumulated other comprehensive income
Treasury stock, at cost (29,040,370 shares on January 31, 2022 and 24,284,798 on April 30,
2021)
(422,375
(332,375
Total stockholders’ equity
326,309
266,384
Total liabilities and stockholders’ equity
469,305
446,388
Page 4 of 8
SMITH & WESSON BRANDS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
For the Three Months Ended January 31,
For the Nine Months Ended January 31,
        2022     
   
        2021     
   
(In thousands, except per share data)
177,738
257,634
682,826
736,247
Cost of sales
107,339
147,955
380,490
433,073
Gross profit
70,399
109,679
302,336
303,174
Operating expenses:
Research and development
Selling, marketing, and distribution
11,518
10,487
33,575
32,095
General and administrative
17,443
17,054
58,491
62,061
Total operating expenses
30,677
29,298
97,335
99,674
Operating income from continuing operations
39,722
80,381
205,001
203,500
Other income/(expense), net:
Interest expense, net
(1,605
(3,356
Total other income/(expense), net
(1,645
Income from operations before income taxes
39,879
80,783
205,640
201,855
Income tax expense
18,520
47,281
47,176
Income from continuing operations
30,542
62,263
158,359
154,679
Discontinued operations:
Income from discontinued operations, net of tax
Net income
62,390
163,013
Net income per share:
Basic
Diluted
Weighted average number of common shares outstanding:
46,763
55,137
47,769
55,515
47,175
55,702
48,307
56,258
Page 5 of 8
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended
  January 31, 2021  
(In thousands)
Cash flows from operating activities:
158,359
154,679
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization
22,413
24,133
Loss on sale/disposition of assets
Provision for losses/(recoveries) on notes and accounts receivable
Impairment of
long-lived
tangible assets
Stock-based
Changes in operating assets and liabilities:
17,378
(55,791
19,295
(1,018
Income taxes
(2,119
(12,831
(21,209
17,299
(1,158
(2,943
(6,322
(19,950
(3,609
Cash provided by operating activities
continuing
operations
112,275
198,437
Cash used in operating activities
discontinued
operations
(2,129
Net cash provided by operating activities
196,308
Cash flows from investing activities:
Refunds on machinery and equipment
Payments to acquire patents and software
Proceeds from sale of property and equipment
Payments to acquire property and equipment
(15,090
(18,378
Cash used in investing activities
(15,211
(18,570
(1,143
Net cash used in investing activities
(19,713
Cash flows from financing activities:
Proceeds from loans and notes payable
25,000
Cash paid for debt issuance costs
Payments on finance lease obligation
Payments on notes and loans payable
(185,000
Distribution to AOUT
(25,000
Payments to acquire treasury stock
(90,000
(50,000
Dividend distribution
(11,393
(5,594
Proceeds from exercise of options to acquire common stock, including employee stock purchase
plan
Payment of employee withholding tax related to restricted stock units
(1,453
(2,201
Cash used in by financial activities
(102,813
(241,764
Cash used in financial activities
Net cash used inprovided by financing activities
(241,930
Net decrease in cash and cash equivalents
(5,749
(65,335
Cash and cash equivalents, beginning of period
125,011
Cash and cash equivalents, end of period
59,676
Supplemental disclosure of cash flow information
Cash paid for:
1,670
2,745
49,402
63,525
Page 6 of 8
RECONCILIATION OF GAAP FINANCIAL MEASURES TO
NON-GAAP
FINANCIAL MEASURES    

(Dollars in thousands, except per share data)    
For the Three Months Ended
January 31, 2021
% of Sales
GAAP gross profit
Relocation expenses
71,643
109,701
304,698
303,691
GAAP operating expenses
29,298
97,335
99,674
Amortization of acquired intangible assets
Transition costs
(7,953
Spin related
(1,737
(6,198
28,788
29,137
90,762
90,414
GAAP operating income
80,381
42,855
80,564
213,936
213,277
GAAP income from continuing operations
Tax effect of
(2,054
(2,444
32,942
62,400
165,240
162,012
GAAP income from continuing operations per share
net income per share does not foot due to rounding.
    
Page 7 of 8
SMITH & WESSON BRANDS, INC. AND SUBSIDIARIES
RECONCILIATION OF GAAP INCOME FROM CONTINUING OPERATIONS TO
ADJUSTED EBITDAS
(in thousands)
22,346
23,264
compensation expense
51,914
89,809
241,908
241,069
SMITH & WESSON BRANDS, INC. AND SUBSIDIARIES
RECONCILIATION OF OPERATING CASH FLOW FROM CONTINUING OPERATIONS TO FREE CASH FLOW
(In thousands)
Net cash (used in)/provided by operating activities
6,911
60,349
(5,012
(3,256
Free cash flow
1,899
57,093
97,064
179,867
Page 8 of 8

The above information was disclosed in a filing to the SEC. To see the filing, click here.

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