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): September 1, 2021

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))
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☐	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 September 1, 2021.

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 September 1, 2021, entitled “Smith & Wesson Brands, Inc. Reports First 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: September 1, 2021	By:	/s/ Deana L. McPherson
		Deana L. McPherson
		Executive Vice President, Chief Financial Officer,<br> <br>Treasurer, and Assistant Secretary

EX-99.1

Exhibit 99.1

Contact:

investorrelations@smith-wesson.com

(413) 747-3448

Smith & Wesson Brands, Inc. Reports

First Quarter Fiscal 2022 Financial Results

-	Record Gross Margin of 47.3%
-	Record Q1 Net Sales of $274.6M
---	---
-	Two-Year Compounded Sales Growth of Nearly 170% <br>
---	---
-	EPS of $1.57/Share and EBITDAS of 39.9%
---	---

SPRINGFIELD, Mass., September 1, 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 first quarter of fiscal 2022, ended July 31, 2021. Unless otherwise indicated, any reference to income statement items refers to results from continuing operations.

First Quarter Fiscal 2022 Financial Highlights

•	Net sales were $274.6 million, an increase of $44.7 million, or 19.5%, over the comparable quarter last<br>year.
•	Gross margin was 47.3%, compared with gross margin of 40.2% for the comparable quarter last year.<br>
---	---
•	Quarterly GAAP net income was $76.9 million, or $1.57 per diluted share, compared with $43.3 million,<br>or $0.77 per diluted share, for the comparable quarter last year.
---	---
•	Quarterly non-GAAP net income was $77.1 million, or $1.57 per<br>diluted share, compared with $46.8 million, or $0.83 per diluted share, for the comparable quarter last year. GAAP to non-GAAP adjustments for income exclude costs related to the spin-off 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<br>release.
---	---
•	Quarterly non-GAAP Adjusted EBITDAS was $109.6 million, or 39.9% of<br>net sales, compared with $72.5 million, or 31.5% of net sales, for the comparable quarter last year.
---	---

Mark Smith, President and Chief Executive Officer, commented, “Our flexible manufacturing model and strong consumer preference for our products at the retail counter combined to deliver the highest first quarter net revenue in the company’s history, marking the fifth consecutive quarter of top line records. Even more remarkable, our team has been able to deliver nearly 170% two-year compounded growth, significantly outpacing the competition, while simultaneously lowering operating costs over this same timeframe. This is a direct result of significant strides the team has made in executing our strategy to streamline business operations and increase flexibility, and has driven an incredible EBITDAS margin of nearly 40% in the quarter. But more importantly, we believe we are well positioned for the ever-changing market conditions in our industry, to maintain our leadership position in the industry, and continue delivering impressive profitability in any environment.”

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Smith continued, “We are also thrilled to introduce our new M&P12 shotgun, which marks our entry into a brand-new category for the iconic Smith & Wesson brand, and presents a significant opportunity to continue capitalizing on the momentum we’ve built over the past year with the consumer. Within the first 24 hours of the announcement, we had tallied over 3 million consumer impressions and 300,000 engagements on social media, already making this one of our most widely viewed and most successful launches to date. We are excited to continue innovating in this category and look forward to its growth potential.”

Deana McPherson, Executive Vice President and Chief Financial Officer, commented, “Our first quarter results continue to demonstrate our ability to react to the changing needs of the market, delivering a 19.5% increase over last year’s results and securing a two-year compounded growth rate of nearly 170%. This increase in sales, combined with strong expense containment, resulted in a record gross margin of 47.3% for the quarter while also generating $109.1 million in cash. We believe our ability to grow our top line without adding significant fixed costs, while also leveraging synergies from the spin-off, have been key contributors to our profitability and position us well for the adjusting market. As we begin to replenish inventory in the channel and in our warehouse, we believe the flexibility of our operations and the strength of our balance sheet, combined with the hard work and ingenuity of our R&D and marketing teams will enable us to continue to invest in our business and capture market share, while returning capital to our stockholders. Our Board of Directors has again authorized our $0.08 per share quarterly dividend, which will be paid to stockholders of record on September 14th with payment to be made on September 28th.”

Conference Call andWebcast

The company will host a conference call and webcast on September 1, 2021, to discuss its first 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 2176794. 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, and (ix) 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.

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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 consumers have a strong preference for our products at the retail counter; our belief that we are well positioned for the ever-changing market conditions in our industry, to maintain our leadership position in the industry, and continue delivering impressive profitability in any environment; our significant opportunity to continue capitalizing on the momentum we’ve built over the past year with the consumer; our excitement to continue innovating in a new category and its growth potential; our belief that our ability to grow our top line without adding significant fixed costs, while also leveraging synergies from the spin-off, positions us well for the adjusting market; and our belief that as we begin to replenish inventory in the channel and in our warehouse, the flexibility of our operations and the strength of our balance sheet, combined with the hard work and ingenuity of our R&D and marketing teams will enable us to continue to invest in our business and capture market share, while returning capital to our stockholders. 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 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.

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SMITH & WESSON BRANDS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

			April 30, 2021
ASSETS					****
Current assets:
Cash and cash equivalents	171,413		$	113,017
Accounts receivable, net of allowances for credit losses of 52 on July 31, 2021 and 107 on April<br>30, 2021	41,198			67,442
Inventories	97,140			78,477
Prepaid expenses and other current assets	8,504			8,408
Income tax receivable	—			909
Total current assets	318,255			268,253
Property, plant, and equipment, net	139,626			141,612
Intangibles, net	4,360			4,417
Goodwill	19,024			19,024
Other assets	11,405			13,082
	492,670			446,388
LIABILITIES AND STOCKHOLDERS’ EQUITY					****
Current liabilities:
Accounts payable	54,583		$	57,337
Accrued expenses and deferred revenue	33,554			33,136
Accrued payroll and incentives	8,267			17,381
Accrued income taxes	22,236			1,157
Accrued profit sharing	18,279			14,445
Accrued warranty	1,902			2,199
Total current liabilities	138,821			125,655
Deferred income taxes	904			904
Finance lease payable, net of current portion	38,509			38,786
Other non-current liabilities	14,377			14,659
Total liabilities	192,611			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, 74,298,308 issued and 48,046,090<br>shares outstanding on July 31, 2021 and 74,222,127 shares issued and 49,937,329 shares outstanding on April 30, 2021	74			74
Additional paid-in capital	274,068			273,431
Retained earnings	398,219			325,181
Accumulated other comprehensive income	73			73
Treasury stock, at cost (26,252,218 shares on July 31, 2021 and 24,284,798 on April 30,<br>2021)	(372,375	)		(332,375	)
Total stockholders’ equity	300,059			266,384
	492,670		$	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 July 31,
	2021			2020
	(In thousands, except per share data)
Net sales	$	274,609		$	229,885
Cost of sales		144,667			137,461
Gross profit		129,942			92,424
Operating expenses:
Research and development		1,808			1,906
Selling, marketing, and distribution		10,634			9,995
General and administrative		17,614			21,780
Total operating expenses		30,056			33,681
Operating income from continuing operations		99,886			58,743
Other income/(expense), net:
Other income/(expense), net		660			67
Interest expense, net		(544	)		(1,316	)
Total other income/(expense), net		116			(1,249	)
Income from operations before income taxes		100,002			57,494
Income tax expense		23,120			14,193
Income from continuing operations	$	76,882		$	43,301
Discontinued operations:
Income from discontinued operations, net of tax		—			5,084
Net income	$	76,882		$	48,385
Net income per share:
Basic - continuing operations	$	1.59		$	0.78
Basic - net income	$	1.59		$	0.87
Diluted - continuing operations	$	1.57		$	0.77
Diluted - net income	$	1.57		$	0.86
Weighted average number of common shares outstanding:
Basic		48,394			55,494
Diluted		49,050			56,277

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SMITH & WESSON BRANDS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	For the Three Months Ended
	July 31, 2021			July 31, 2020
	(In thousands)
Cash flows from operating activities:
Income from continuing operations	$	76,882		$	43,301
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		7,466			8,244
Loss on sale/disposition of assets		57			3
Provision for losses on notes and accounts receivable		(56	)		38
Stock-based compensation expense		1,452			884
Changes in operating assets and liabilities:
Accounts receivable		26,300			1,851
Inventories		(18,663	)		23,767
Prepaid expenses and other current assets		(96	)		(973	)
Income taxes		21,988			14,340
Accounts payable		(2,443	)		7,769
Accrued payroll and incentives		(9,114	)		(1,664	)
Accrued profit sharing		3,834			3,405
Accrued expenses and deferred revenue		405			(18,638	)
Accrued warranty		(297	)		(175	)
Other assets		1,677			796
Other non-current liabilities		(305	)		(1,225	)
Cash provided by operating activities - continuing<br>operations		109,087			81,723
Cash provided by operating activities - discontinued<br>operations		—			2,507
Net cash provided by operating activities		109,087			84,230
Cash flows from investing activities:
Payments to acquire patents and software		(69	)		(187	)
Proceeds from sale of property and equipment		70			—
Payments to acquire property and equipment		(5,769	)		(6,465	)
Cash used by investing activities - continuing<br>operations		(5,768	)		(6,652	)
Cash used by investing activities - discontinued<br>operations		—			(995	)
Net cash used in investing activities		(5,768	)		(7,647	)
Cash flows from financing activities:
Payments on finance lease obligation		(264	)		(238	)
Payments on notes and loans payable		—			(135,000	)
Payments to acquire treasury stock		(40,000	)		—
Dividend distribution		(3,844	)		—
Proceeds from exercise of options to acquire common stock		—			268
Payment of employee withholding tax related to restricted stock units		(815	)		(997	)
Cash used in by financial activities - continuing<br>operations		(44,923	)		(135,967	)
Net cash used inprovided by financing activities		(44,923	)		(135,967	)
Net increase/(decrease) in cash and cash equivalents		58,396			(59,384	)
Cash and cash equivalents, beginning of period		113,017			125,011
Cash and cash equivalents, end of period	$	171,413		$	65,627
Supplemental disclosure of cash flow information
Cash paid for:
Interest	$	538		$	1,556
Income taxes	$	1,131		$	1,689

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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
	July 31, 2021					July 31, 2020
			% of Sales					% of Sales
GAAP gross profit				47.3	%				40.2	%
COVID-19				0.0	%				0.0	%
Non-GAAP gross profit				47.3	%				40.6	%
GAAP operating expenses				10.9	%				14.7	%
Amortization of acquired intangible assets		)		0.0	%		)		0.0	%
Transition costs				—			)		-1.6	%
COVID-19		)		0.0	%		)		0.0	%
Spin related stock-based compensation		)		0.0	%				—
Non-GAAP operating expenses				10.9	%				13.0	%
GAAP operating income				36.4	%				25.6	%
Amortization of acquired intangible assets				0.0	%				0.0	%
Transition costs				—					1.6	%
COVID-19				0.0	%				0.4	%
Spin related stock-based compensation				0.0	%				—
Non-GAAP operating income				36.5	%				27.6	%
GAAP income from continuing operations				28.0	%				18.8	%
Amortization of acquired intangible assets				0.0	%				0.0	%
Transition costs				—					1.6	%
COVID-19				0.0	%				0.4	%
Spin related stock-based compensation				0.0	%				—
Tax effect of non-GAAP adjustments		)		0.0	%		)		-0.5	%
Non-GAAP income from continuing operations				28.1	%				20.4	%
GAAP income from continuing operations per share -<br>diluted
Amortization of acquired intangible assets
Transition costs
COVID-19
Spin related stock-based compensation
Tax effect of non-GAAP adjustments							)
Non-GAAP income from continuing operations per share - diluted

All values are in US Dollars.

Page 7 of 8

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
	July 31, 2021			July 31, 2020
Net cash provided in operating activities	$	109,087		$	81,723
Net cash used in investing activities		(5,768	)		(6,652	)
Free cash flow	$	103,319		$	75,071

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
	July 31, 2021		July 31, 2020
GAAP income from continuing operations	$	76,882	$	43,301
Interest expense		584		1,357
Income tax expense		23,120		14,193
Depreciation and amortization		7,443		8,244
Stock-based compensation expense		1,452		884
COVID-19		76		952
Transition costs		—		3,595
Non-GAAP Adjusted EBITDAS	$	109,557	$	72,526

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