8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): March 3, 2022

Smith & Wesson Brands, Inc.

(Exact Name of Registrant as Specified in Charter)

Nevada	001-31552	87-0543688
(State or other jurisdiction<br> <br>of incorporation)	(Commission<br> <br>File Number)	(IRS Employer<br> <br>Identification No.)

2100 Roosevelt Avenue

Springfield, Massachusetts 01104

(Address of principal executive offices) (Zip Code)

(800) 331-0852

(Registrant’s telephone number, including area code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

☐	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
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☐	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
---	---
☐	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
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Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading<br> <br>Symbol(s)	Name of each exchange<br> <br>on which registered
Common Stock, Par Value $0.001 per Share	SWBI	Nasdaq Global Select Market

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 §CFR 230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).

Emerging growth company  ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

Item 2.02.	Results of Operations and Financial Condition.

We are furnishing the disclosure in this Item 2.02 in connection with the disclosure of information in the form of the textual information from a press release issued on March 3, 2022.

The information in this Item 2.02 (including Exhibit 99.1) is furnished pursuant to Item 2.02 and shall not be deemed to be “filed” for the purpose of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section.

We do not have, and expressly disclaim, any obligation to release publicly any updates or any changes in our expectations or any change in events, conditions, or circumstances on which any forward-looking statement is based.

The text included with this Current Report on Form 8-K is available on our website at www.smith-wesson.com, although we reserve the right to discontinue that availability at any time.

Item 9.01.	Financial Statements and Exhibits.
(d)	Exhibits.
---	---
Exhibit<br>Number	Exhibits
---	---
99.1	Press release from Smith & Wesson Brands, Inc., dated March 3, 2022, entitled “Smith & Wesson Brands, Inc. Reports Third Quarter Fiscal 2022 Financial Results”
104	Cover Page Interactive Data File (embedded within the Inline XBRL document)

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	SMITH & WESSON BRANDS, INC.
Date: March 3, 2022	By:	/s/ Deana L. McPherson
		Deana L. McPherson
		Executive Vice President, Chief Financial Officer, Treasurer, and Assistant Secretary

EX-99.1

Contact:

investorrelations@smith-wesson.com

(413) 747-3448

Smith & Wesson Brands, Inc. Reports

Third Quarter Fiscal 2022 Financial Results

-	Two-Year Compounded Sales Growth of more than 118% <br>
-	Gross Margin of 39.6%
---	---
-	EPS of $0.65/Share and EBITDAS Margin of 29.2%
---	---
-	2.8 Million Shares Repurchased
---	---
-	$107 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.

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<br>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<br>2020.
---	---
•	Quarterly GAAP net income was $30.5 million, or $0.65 per diluted share, compared with $62.3 million,<br>or $1.12 per diluted share, for the comparable quarter last year.
---	---
•	Quarterly non-GAAP net income was $32.9 million, or $0.69 per<br>diluted share, compared with $62.4 million, or $1.12 per diluted share, for the comparable quarter last year. GAAP to non-GAAP adjustments for income exclude costs related to the planned relocation of our<br>headquarters and certain manufacturing and distribution operations to Tennessee, the spin-off of the outdoor products and accessories business in fiscal 2021, COVID-19<br>related expenses, and other costs. For a detailed reconciliation, see the schedules that follow in this release.
---	---
•	Quarterly non-GAAP Adjusted EBITDAS was $51.9 million, or 29.2% of<br>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<br>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 non-GAAP 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 non-GAAP adjustments; and (2) the non-GAAP measures that exclude such information. We present these non-GAAP 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 non-GAAP 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^®^, M&P^®^, 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 pre-pandemic 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 10-K for the fiscal year ended April 30, 2021 and our Quarterly Report on Form 10-Q for the fiscal quarter ended October 31, 2021.

Page 3 of 8

SMITH & WESSON BRANDS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

			April 30, 2021
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<br>April 30, 2021	49,386			67,442
Inventories	134,268			78,477
Prepaid expenses and other current assets	7,521			8,408
Income tax receivable	2,233			909
Total current assets	300,676			268,253
Property, plant, and equipment, net	134,540			141,612
Intangibles, net	4,257			4,417
Goodwill	19,024			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	362			1,157
Accrued profit sharing	11,502			14,445
Accrued warranty	2,040			2,199
Total current liabilities	93,044			125,655
Deferred income taxes	904			904
Finance lease payable, net of current portion	37,930			38,786
Other non-current liabilities	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<br>outstanding	—			—
Common stock, .001 par value, 100,000,000 shares authorized, 74,550,885 issued and 45,510,515<br>shares outstanding on January 31, 2022 and 74,222,127 shares issued and 49,937,329 shares outstanding on April 30, 2021	75			74
Additional paid-in capital	276,389			273,431
Retained earnings	472,147			325,181
Accumulated other comprehensive income	73			73
Treasury stock, at cost (29,040,370 shares on January 31, 2022 and 24,284,798 on April 30,<br>2021)	(422,375	)		(332,375	)
Total stockholders’ equity	326,309			266,384
Total liabilities and stockholders’ equity	469,305		$	446,388

All values are in US Dollars.

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			2022			2021
	(In thousands, except per share data)
Net sales	$	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		1,716			1,757			5,269			5,518
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:
Other income/(expense), net		751			952			2,244			1,711
Interest expense, net		(594	)		(550	)		(1,605	)		(3,356	)
Total other income/(expense), net		157			402			639			(1,645	)
Income from operations before income taxes		39,879			80,783			205,640			201,855
Income tax expense		9,337			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		—			127			—			8,334
Net income	$	30,542		$	62,390		$	158,359		$	163,013
Net income per share:
Basic - continuing operations	$	0.65		$	1.13		$	3.32		$	2.79
Basic - net income	$	0.65		$	1.13		$	3.32		$	2.94
Diluted - continuing operations	$	0.65		$	1.12		$	3.28		$	2.75
Diluted - net income	$	0.65		$	1.12		$	3.28		$	2.90
Weighted average number of common shares outstanding:
Basic		46,763			55,137			47,769			55,515
Diluted		47,175			55,702			48,307			56,258

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SMITH & WESSON BRANDS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	For the Nine Months Ended
	January 31, 2022			January 31, 2021
	(In thousands)
Cash flows from operating activities:
Income from continuing operations	$	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		31			148
Provision for losses/(recoveries) on notes and accounts receivable		678			(693	)
Impairment of long-lived tangible assets		86			—
Deferred income taxes		—			316
Stock-based compensation expense		3,565			3,392
Changes in operating assets and liabilities:
Accounts receivable		17,378			8
Inventories		(55,791	)		19,295
Prepaid expenses and other current assets		887			(1,018	)
Income taxes		(2,119	)		(12,831	)
Accounts payable		(21,209	)		17,299
Accrued payroll and incentives		(1,158	)		2,040
Accrued profit sharing		(2,943	)		8,663
Accrued expenses and deferred revenue		(6,322	)		(19,950	)
Accrued warranty		(159	)		421
Other assets		2,188			1,226
Other non-current liabilities		(3,609	)		1,309
Cash provided by operating activities - continuing<br>operations		112,275			198,437
Cash used in operating activities - discontinued<br>operations		—			(2,129	)
Net cash provided by operating activities		112,275			196,308
Cash flows from investing activities:
Refunds on machinery and equipment		—			310
Payments to acquire patents and software		(218	)		(502	)
Proceeds from sale of property and equipment		97			—
Payments to acquire property and equipment		(15,090	)		(18,378	)
Cash used in investing activities - continuing<br>operations		(15,211	)		(18,570	)
Cash used in investing activities - discontinued<br>operations		—			(1,143	)
Net cash used in investing activities		(15,211	)		(19,713	)
Cash flows from financing activities:
Proceeds from loans and notes payable		—			25,000
Cash paid for debt issuance costs		—			(450	)
Payments on finance lease obligation		(813	)		(736	)
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<br>plan		846			2,217
Payment of employee withholding tax related to restricted stock units		(1,453	)		(2,201	)
Cash used in by financial activities - continuing<br>operations		(102,813	)		(241,764	)
Cash used in financial activities - discontinued<br>operations		—			(166	)
Net cash used inprovided by financing activities		(102,813	)		(241,930	)
Net decrease in cash and cash equivalents		(5,749	)		(65,335	)
Cash and cash equivalents, beginning of period		113,017			125,011
Cash and cash equivalents, end of period	$	107,268		$	59,676
Supplemental disclosure of cash flow information
Cash paid for:
Interest	$	1,670		$	2,745
Income taxes	$	49,402		$	63,525

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SMITH & WESSON BRANDS, INC. AND SUBSIDIARIES

RECONCILIATION OF GAAP FINANCIAL MEASURES TO NON-GAAP FINANCIAL MEASURES

(Dollars in thousands, except per share data)

(Unaudited)

	For the Three Months Ended										For the Nine Months Ended
	January 31, 2022					January 31, 2021					January 31, 2022					January 31, 2021
			% of Sales					% of Sales					% of Sales					% of Sales
GAAP gross profit				39.6	%				42.6	%				44.3	%				41.2	%
Relocation expenses				0.7	%				—					0.3	%				—
COVID-19				0.0	%				0.0	%				0.0	%				0.1	%
Non-GAAP gross profit				40.3	%				42.6	%				44.6	%				41.2	%
GAAP operating expenses				17.3	%				11.4	%				14.3	%				13.5	%
Amortization of acquired intangible assets		)		0.0	%		)		0.0	%		)		0.0	%		)		0.0	%
Transition costs				—			)		0.0	%				0.0	%		)		-1.1	%
COVID-19		)		0.0	%		)		0.0	%		)		0.0	%		)		-0.1	%
Spin related stock-based compensation		)		0.0	%				—			)		0.0	%		)		-0.1	%
Relocation expenses		)		-1.0	%				—			)		-0.9	%				—
Non-GAAP operating expenses				16.2	%				11.3	%				13.3	%				12.3	%
GAAP operating income				22.3	%				31.2	%				30.0	%				27.6	%
Amortization of acquired intangible assets				0.0	%				0.0	%				0.0	%				0.0	%
Transition costs				—					0.0	%		)		0.0	%				1.1	%
COVID-19				0.0	%				0.0	%				0.0	%				0.2	%
Spin related stock-based compensation				0.0	%				—					0.0	%				0.1	%
Relocation expenses				1.7	%				—					1.2	%				—
Non-GAAP operating income				24.1	%				31.3	%				31.3	%				29.0	%
GAAP income from continuing operations				17.2	%				24.2	%				23.2	%				21.0	%
Amortization of acquired intangible assets				0.0	%				0.0	%				0.0	%				0.0	%
Transition costs				0.0	%				0.0	%		)		0.0	%				1.1	%
COVID-19				0.0	%				0.0	%				0.0	%				0.2	%
Spin related stock-based compensation				0.0	%				—					0.0	%				0.1	%
Relocation expenses				1.7	%				—					1.2	%				—
Tax effect of non-GAAP adjustments		)		-0.4	%		)		0.0	%		)		-0.3	%		)		-0.3	%
Non-GAAP income from continuing operations				18.5	%				24.2	%				24.2	%				22.0	%
GAAP income from continuing operations per share -<br>diluted
Amortization of acquired intangible assets
Transition costs
COVID-19
Spin related stock-based compensation
Relocation expenses
Tax effect of non-GAAP adjustments		)										)					)
Non-GAAP income from continuing operations per share - diluted																	(a)

All values are in US Dollars.

(a)	Non-GAAP net income per share does not foot due to rounding.<br>

Page 7 of 8

SMITH & WESSON BRANDS, INC. AND SUBSIDIARIES

RECONCILIATION OF GAAP INCOME FROM CONTINUING OPERATIONS TO NON-GAAP ADJUSTED EBITDAS

(in thousands)

(Unaudited)

	For the Three Months Ended				For the Nine Months Ended
	January 31, 2022		January 31, 2021		January 31, 2022			January 31, 2021
GAAP income from continuing operations	$	30,542	$	62,263	$	158,359		$	154,679
Interest expense		639		592		1,740			3,471
Income tax expense		9,337		18,520		47,281			47,176
Depreciation and amortization		7,179		7,017		22,346			23,264
Stock-based compensation expense		1,199		1,317		3,565			3,392
COVID-19		38		80		169			1,134
Transition costs		—		20		(80	)		7,953
Relocation expense		2,980		—		8,528			—
Non-GAAP Adjusted EBITDAS	$	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)

(Unaudited)

	For the Three Months Ended						For the Nine Months Ended
	January 31, 2022			January 31, 2021			January 31, 2022			January 31, 2021
Net cash (used in)/provided by operating activities	$	6,911		$	60,349		$	112,275		$	198,437
Net cash used in investing activities		(5,012	)		(3,256	)		(15,211	)		(18,570	)
Free cash flow	$	1,899		$	57,093		$	97,064		$	179,867

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