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Smith & Wesson Brands - Fourth Quarter and Full Year Fiscal 2020 Financial Results



Smith & Wesson Brands, one of the world's leading providers of firearms and quality products for the shooting, hunting, and rugged outdoor enthusiast, has announced its financial results for the fourth quarter and full year fiscal 2020, ended April 30, 2020.

Fourth Quarter Fiscal 2020 Financial Highlights

Quarterly net sales were $233.6 million compared with $175.7 million for the fourth quarter last year, an increase of 32.9 per cent. It should be noted that a change required by the Tax and Trade Bureau related to the timing of federal excise tax assessment within the company’s Firearms segment favourably impacted net sales in the quarter by $16.7 million. That change had no impact on gross margin dollars or operating expenses.

· Gross margin for the quarter was 34.8 per cent compared with 36.1 per cent for the comparable quarter last year. Excluding the change related to the timing of federal excise tax within the company’s Firearms segment, gross margin for the quarter would have been 37.5 per cent, or an increase of 140 basis points over the comparable quarter last year.

· Quarterly GAAP net loss was $(66.1) million, or $(1.20) per diluted share, compared with GAAP net income of $9.8 million, or $0.18 per diluted share, for the comparable quarter last year. During the quarter, the company’s Outdoor Products & Accessories segment was negatively impacted by several factors related to the COVID-19 pandemic, constituting a triggering event under Accounting Standards Codification No. 350, Intangible-Goodwill and Other (ASC 350), requiring the company to take a $98.7 million, non-cash impairment charge in its Outdoor Products & Accessories segment. Results for the recent quarter include the non-cash impairment charge, which had a $(1.79) impact on basic and diluted earnings per share.

· Quarterly non-GAAP net income was $31.9 million, or $0.57 per diluted share, compared with $14.2 million, or $0.26 per diluted share, for the comparable quarter last year. GAAP to non-GAAP adjustments for net income exclude a non-cash impairment of goodwill in the Outdoor Products & Accessories segment as well as costs related to the planned spin-off of that 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 $56.4 million, or 24.1 per cent of net sales, compared with $31.9 million, or 18.1 per cent of net sales, for the comparable quarter last year. Excluding the change related to the timing of federal excise tax, non-GAAP Adjusted EBITDAS for the quarter would have been 26.0 per cent.

Full Year Fiscal 2020 Financial Highlights

· Full year net sales were $678.4 million compared with $638.2 million last year, an increase of 6.3 per cent from the prior year. The change related to the timing of federal excise tax favourably impacted net sales in the year by $37.5 million. That change had no impact on gross margin dollars or operating expenses.

· Gross margin for the year was 34.6 per cent compared with 35.4 per cent last year. Excluding the change related to the timing of federal excise tax, gross margin for the year would have been 36.7 per cent, or an increase of 120 basis points over last year.

· Full year GAAP net loss was $(61.2) million, or $(1.11) per diluted share, compared with GAAP net income of $18.4 milliion, or $0.33 per diluted share, for last year. The $98.7 million non-cash impairment charge taken in the fourth fiscal quarter negatively impacted basic and diluted earnings per share by $1.79.

· Full year non-GAAP net income was $45.5 million, or $0.82 per diluted share, compared with $45.9 million, or $0.83 per diluted share, for last year. GAAP to non-GAAP adjustments to net income exclude a non-cash impairment of goodwill in the Outdoor Products & Accessories segment as well as costs related to the planned spin-off of that segment, COVID-19 related expenses, and other costs. For a detailed reconciliation, see the schedules that follow in this release.

· Full year non-GAAP Adjusted EBITDAS was $116.3 million, or 17.1 per cent of net sales, compared with $111.3 million, or 17.4 per cent of net sales, for last year. Excluding the change related to the timing of federal excise tax, non-GAAP Adjusted EBITDAS for the year would have been 18.1 per cent.

Firearms Segment

Mark Smith, co-President and co-Chief Executive Officer, commented, “Strong consumer demand for firearms, as reflected by adjusted National Instant Criminal Background Check System (“NICS”) results, combined with a consumer preference for our innovative products, helped us deliver growth and market share gains in our firearms business in fiscal 2020. Our results were favourably impacted by changes in the timing of our excise tax assessment, as well as strong consumer acceptance of our M&P9 Shield EZ pistol, an expansion of our award-winning line of self-defence pistols in fiscal 2020. During our fourth quarter, we were able to keep our factories and distribution centre operating, while our operational management teams implemented a broad range of safety procedures and cleaning protocols, which remain in place today, to significantly reduce risk of COVID-19 transmission and keep our employees safe. In addition, our internal inventory levels allowed us to address the sudden increase in customer demand for our firearms in the quarter, while we simultaneously engaged our component outsourcing partners and reactivated our flexible manufacturing model in preparation for ongoing strength in the consumer market for firearms.”

Outdoor Products & Accessories Segment

Brian Murphy, co-President and co-Chief Executive Officer, commented, “While fiscal 2020 presented challenges that included the impact of increased tariffs and disruptions caused by a global pandemic, we saw consistent point-of-sale growth for our hunting, shooting, and cutlery products with brick-and-mortar customers, as well as strong growth from our newly implemented e-commerce platform. In addition, we achieved a number of key objectives in our Outdoor Products & Accessories segment and made significant progress on our preparations to spin-off the business as a standalone, publicly traded company in August. During the year, we launched over 300 new products and extensions, some of which represent our entry into completely new product categories, such as meat processing. We believe our strong brand portfolio and new e-commerce platform were instrumental in allowing us to deliver fourth quarter revenue growth of 2.4 per cent, as consumers responded to retail store closures by seeking out our popular brands and products online.”

Spin-Off Update and Financial Highlights

Jeffrey D. Buchanan, Chief Financial Officer, commented, “During the quarter, we changed our company name from American Outdoor Brands Corporation to Smith & Wesson Brands, Inc. and our ticker symbol from AOBC to SWBI in preparation for the spin-off of our outdoor products and accessories business as a tax-free stock distribution to stockholders. On track for completion in August, and subject to final approval by our Board of Directors and customary regulatory approvals, the spin-off will create two independent, publicly traded companies: Smith & Wesson Brands, Inc. (the firearm business) and American Outdoor Brands, Inc. (the outdoor products and accessories business).

“During the fourth quarter, we had operating cash flow of $120.0 million, thus reducing our net debt by that amount. As a result, at the end of our fiscal year, our balance sheet remained very strong with approximately $125.0 million of cash and $160.0 million outstanding on our revolving line of credit, resulting in net debt of only $34.0 million. Since the end of the quarter, we have used our strong cash position to pay down an additional $65.0 million on our revolving line of credit.”

About

Smith & Wesson Brands 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, long gun, and suppressor products sold under the iconic Smith & Wesson, M&P, Thompson/Center Arms, and Gemtech brands, as well as provides forging, machining, and precision plastic injection moulding services. Outdoor Products & Accessories is an industry leading provider of shooting, reloading, gunsmithing and gun cleaning supplies, specialty tools and cutlery, and electro-optics products and technology for firearms.

W: www.aob.com

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