American Outdoor: Smith & Wesson Brands, Inc. Reports

The following excerpt is from the company's SEC filing.
Third Quarter Fiscal 2021 Financial Results
Record Quarterly Net Sales of $257.6 Million
Record Net Income of $62.3 Million
GAAP/non-GAAP
EPS of $1.12/Share
$100M Share Buyback Program and $0.05/Share Quarterly Dividend
SPRINGFIELD, Mass., March
 4, 2021 – 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 2021 ended January 31, 2021. On August 24, 2020, the company completed the previously announced
spin-off
of its outdoor products and accessories business. Therefore, as of the second quarter, all historical financial information for that business is reported as discontinued operations. Unless otherwise
indicated, any reference to income statement items refers to results from continuing operations.
Third Quarter Fiscal 2021 Consolidated Financial
Highlights
Quarterly net sales were $257.6 million compared with $127.4 million for the comparable quarter last
year, an increase of 102.2%.
Gross margin for the quarter was 42.6% compared with 28% for the comparable quarter last year.

Quarterly GAAP net income was a record $62.3 million, or $1.12 per diluted share, compared with
$4.2 million, or $0.08 per diluted share, for the comparable quarter last year.
net income was $62.4 million, or $1.12 per
diluted share, compared with $7.8 million, or $0.14 per diluted share, for the comparable quarter last year. GAAP to
adjustments for income exclude costs related to the
of the outdoor products and accessories business,
COVID-19
related expenses, and other costs. For a detailed reconciliation, see the schedules that follow in this
release.
Adjusted EBITDAS was $89.8 million, or 34.9% of
net sales, compared with $15.0 million, or 11.8% of net sales, for the comparable quarter last year.
Mark Smith, President and
Chief Executive Officer, commented, “I could not be more proud of our dedicated American workforce as, for the third time in a row, they delivered a record-breaking quarter for our great historic company. Over the past year, millions of our
fellow Americans from all walks of life have chosen to empower themselves by exercising their 2nd Amendment rights for the first time, and our loyal employees have risen to the challenge – delivering over 1.8 million units in the first
three quarters of our fiscal year alone, ensuring that these new members of the shooting sports community were able to choose the highest quality, innovative firearms that Smith & Wesson has been known for since 1852. All of this was
accomplished while implementing and maintaining aggressive safety measures and process changes to keep safe in the midst of the COVID pandemic.”
Page 1 of 7
Deana McPherson, Executive Vice President and Chief Financial Officer, commented, “Smith &
Wesson’s record-breaking financial performance enabled us to generate $60 million of cash from operations during the quarter. This allowed us to complete a $50 million dollar share-repurchase program, pay our second quarter dividend,
and continue to invest in capital, all while growing our cash on hand by $4.1 million during the quarter. I am pleased to announce that our Board has authorized a new $100 million dollar share repurchase program and a $0.05 per share
dividend to stockholders of record as of March 17, 2021, with payment to be made on March 31, 2021.”
The amount and timing of any
repurchases will depend on a number of factors, including price, trading volume, general market conditions, legal requirements, and other factors. The repurchases may be made on the open market, in block trades, or in privately negotiated
transactions. Any shares of common stock repurchased under the program will be considered issued but not outstanding shares of the company’s common stock.
Conference Call and Webcast
The company will host
a conference call and webcast on March 4, 2021, to discuss its third quarter fiscal 2021 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 1056738. 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,
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) change in contingent consideration, (iv) CEO separation, (v) the tax effect of
adjustments,
(vi) COVID-19
expenses, (vii) net
cash used in investing activities, (viii) interest expense, (ix) income tax expense, (x) depreciation and amortization, and (xi) stock-based compensation expenses; and (2) the

measures that exclude such information. The company presents these
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
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
, 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
Page 2 of 7
SMITH & WESSON BRANDS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
As of:
January 31, 2021
April 30, 2020
(In thousands, except par value and share data)
ASSETS
Current assets:
Cash and cash equivalents
59,676
125,011
Accounts receivable, net of allowances for credit losses of $151 on January 31, 2021 and
$1,038 on April 30, 2020
61,564
60,879
Inventories
84,446
103,741
Prepaid expenses and other current assets
Current assets of discontinued operations
94,673
Income tax receivable
Total current assets
223,537
393,455
Property, plant, and equipment, net
145,398
147,739
Intangibles, net
Goodwill
19,024
Other assets of discontinued operations
148,485
13,456
16,437
405,851
729,515
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable
49,166
31,476
Accrued expenses and deferred revenue
37,805
57,678
Accrued payroll and incentives
14,488
12,448
Accrued income taxes
Accrued profit sharing
10,860
Accrued warranty
Current liabilties of discontinued operations
17,372
Total current liabilities
116,374
129,971
Deferred income taxes
Notes and loans payable, net of current portion
159,171
Finance lease payable, net of current portion
39,060
39,873
non-current
liabilities of discontinued
operations
11,935
10,626
Total liabilities
168,142
342,397
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, 74,153,528 issued and
53,249,177 shares outstanding on January 31, 2021 and 73,526,790 shares issued and 55,359,928 shares outstanding on April 30, 2020
Additional
paid-in
271,222
267,630
Retained earnings
238,715
341,716
Accumulated other comprehensive income
Treasury stock, at cost (20,904,351 shares on January 31, 2021 and April 30,
2020)
(272,375
(222,375
Total stockholders’ equity
237,709
387,118
405,851
729,515
Page 3 of 7
CONDENSED CONSOLIDATED STATEMENTS OF INCOME/(LOSS)
For the Three Months Ended January 31,
For the Nine Months Ended January 31,
(In thousands, except per share data)
Net sales
257,634
127,416
736,247
336,575
Cost of sales
147,955
91,729
433,073
232,989
Gross profit
109,679
35,687
303,174
103,586
Operating expenses:
Research and development
Selling, marketing, and distribution
10,487
10,465
32,095
30,839
General and administrative
17,054
14,603
62,061
47,915
Total operating expenses
29,298
26,877
99,674
84,255
Operating income from continuing operations
80,381
203,500
19,331
Other income/(expense), net:
Interest expense, net
(2,885
(3,356
(8,572
Total other income/(expense), net
(2,895
(1,645
(8,492
Income from operations before income taxes
80,783
201,855
10,839
Income tax expense
18,520
47,176
Income from continuing operations
62,263
154,679
Discontinued operations:
Income/(loss) from discontinued operations
(1,839
Net income
62,390
163,013
Net income per share:
Basic - continuing operations
Basic - net income
Diluted - continuing operations
Diluted - net income
Weighted average number of common shares outstanding:
55,137
55,064
55,515
54,919
55,702
55,744
56,258
55,641
Page 4 of 7
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
January 31, 2020
(In thousands)
Cash flows from operating activities:
154,679
6,755
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization
24,133
24,320
Loss on sale/disposition of assets
Provision for losses on notes and accounts receivable
Change in fair value of contingent consideration
Stock-based compensation expense
Changes in operating assets and liabilities:
(8,503
19,295
(31,687
(1,018
(3,797
Income taxes
(12,831
(2,196
17,299
(2,398
(6,754
(1,006
(19,950
(1,584
(1,777
Cash provided by/(used in) operating activities - continuing operations
198,437
(26,637
Cash (used in)/provided by operating activities - discontinued operations
(2,129
Net cash provided by/(used in) operating activities
196,308
(24,833
Cash flows from investing activities:
Refunds on machinery and equipment
Payments to acquire patents and software
Payments to acquire property and equipment
(18,378
(10,504
Cash used by investing activities - continuing operations
(18,570
(10,807
Cash used by investing activities - discontinued operations
(1,143
(1,495
Net cash used in investing activities
(19,713
(12,302
Cash flows from financing activities:
Proceeds from loans and notes payable
25,000
228,225
Cash paid for debt issuance costs
Payments on finance lease obligation
Payments on notes and loans payable
(185,000
(184,600
Distribution to AOUT
(25,000
Payments to acquire treasury stock
(50,000
Dividend distribution
(5,594
Proceeds from exercise of options to acquire common stock
Payment of employee withholding tax related to restricted stock units
(2,201
Cash (used in)/provided by financial activities - continuing operations
(241,764
42,429
Cash used in financial activities - discontinued operations
Net cash (used in)/provided by financing activities
(241,930
Net (decrease)/increase in cash and cash equivalents
(65,335
Cash and cash equivalents, beginning of period
40,853
Cash and cash equivalents, end of period
46,147
Supplemental disclosure of cash flow information
Cash paid for:
2,745
8,422
63,525
5,755
Page 5 of 7
RECONCILIATION OF GAAP FINANCIAL MEASURES TO
NON-GAAP
(Dollars in thousands, except per share data) (Unaudited)
% of Sales
GAAP gross profit
109,701
303,691
GAAP operating expenses
Amortization of acquired intangible assets
Transition costs
(1,025
(7,953
(1,189
Spin related stock-based compensation
(3,844
29,137
21,972
90,414
78,964
GAAP operating income
80,564
13,715
213,277
24,622
GAAP income from continuing operations
Change in contingent consideration
Tax effect of
(1,324
(2,444
(1,402
62,400
162,012
10,544
GAAP income from continuing operations per share - diluted
income from continuing operations per share -
diluted
net income per share does not foot due to rounding.

Page 6 of 7
RECONCILIATION OF OPERATING CASH FLOW FROM CONTINUING OPERATIONS TO FREE CASH FLOW
(In thousands)
Net cash (provided by)/used in operating activities
60,349
2,047
(3,256
(2,279
Free cash flow
57,093
179,867
(37,444
RECONCILIATION OF GAAP INCOME FROM CONTINUING OPERATIONS TO
ADJUSTED EBITDAS
4,227
23,264
23,776
89,809
15,028
241,069
45,154
Page 7 of 7

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

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