8-K
SMITH & WESSON BRANDS, INC. (SWBI)
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): June 18, 2020
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) |
| --- | --- |
| ☐ | 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)) |
| --- | --- |
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 $.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 §CRF 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 released on June 18, 2020.
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 located at www.aob.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 June 18, 2020, entitled “Smith & Wesson Brands, Inc. Reports Fourth Quarter and Full Year Fiscal 2020 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: June 18, 2020 | By: | /s/ Robert J. Cicero |
| Robert J. Cicero | ||
| Senior Vice President, General Counsel, Chief<br> <br>Compliance Officer, and Secretary |
EX-99.1
Exhibit 99.1
Contact: Liz Sharp, VP Investor Relations
Smith & Wesson Brands, Inc.
(413) 747-6284
lsharp@aob.com
Smith & Wesson Brands, Inc. Reports
Fourth Quarter and Full Year Fiscal 2020 Financial Results
SPRINGFIELD, Mass., June 18, 2020 – Smith & Wesson Brands, Inc. (NASDAQ Global Select: SWBI), one of the world’s leading providers of firearms and quality products for the shooting, hunting, and rugged outdoor enthusiast, today announced 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,<br>an increase of 32.9%. 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 favorably impacted net sales in the quarter by<br>$16.7 million. That change had no impact on gross margin dollars or operating expenses. |
|---|---|
| • | Gross margin for the quarter was 34.8% compared with 36.1% for the comparable quarter last year. Excluding the<br>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%, 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<br>$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)<br>impact on basic and diluted earnings per share. |
| --- | --- |
| • | Quarterly non-GAAP net income was $31.9 million, or $0.57 per<br>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<br>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% of<br>net sales, compared with $31.9 million, or 18.1% 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<br>quarter would have been 26.0%. |
| --- | --- |
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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%<br>from the prior year. The change related to the timing of federal excise tax favorably 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% compared with 35.4% last year. Excluding the change related to the timing of<br>federal excise tax, gross margin for the year would have been 36.7%, 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<br>$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<br>$1.79. |
| --- | --- |
| • | Full year non-GAAP net income was $45.5 million, or $0.82 per<br>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<br>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<br>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% of<br>net sales, compared with $111.3 million, or 17.4% 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<br>18.1%. |
| --- | --- |
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 favorably 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-defense pistols in fiscal 2020. During our fourth quarter, we were able to keep our factories and distribution center 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%, as consumers responded to retail store closures by seeking out our popular brands and products online.“
Spin-Off Update andFinancial 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
Page 2 of 9
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.”
Conference Call andWebcast
The company will host a conference call and webcast today, June 18, 2020, to discuss its fourth quarter and full year fiscal 2020 financial and operational results. Speakers on the conference call will include Brian Murphy, Co-President and Co-Chief Executive Officer, Mark Smith, Co-President and Co-Chief Executive Officer, and Jeffrey D. Buchanan, 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 4395365. No RSVP is necessary. The conference call audio webcast can also be accessed live on the company’s website at www.aob.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, 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) fair value inventory step-up expense, (iv) recall related expenses, (v) change in contingent consideration, (vi) goodwill impairment, (vii) CEO separation, (viii) acquisition related costs, (ix) the tax effect of non-GAAP adjustments, (x) COVID-19 expenses, (xi) net cash used in investing activities, (xii) receipts from note receivable, (xiii) interest expense, (xiv) income tax expense, (xv) depreciation and amortization, and (xvi) stock-based compensation expenses; and (2) the non-GAAP measures that exclude such information. The company presents these non-GAAP 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 non-GAAP 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 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 molding 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. This segment produces innovative, top quality products under the brands Caldwell^®^; Crimson Trace^®^; Wheeler^®^; Tipton^®^; Frankford Arsenal^®^; Lockdown^®^; BOG^®^; Hooyman^®^; Smith & Wesson^®^ Accessories; M&P^®^ Accessories; Thompson/Center Arms^™^ Accessories; Performance Center^®^ Accessories; Schrade^®^; Old Timer^®^; Uncle Henry^®^; Imperial^®^; BUBBA^®^; UST^®^; and LaserLyte^®^. For more information call (844) 363-5386 or log on to www.aob.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 proposed spin-off of our outdoor products and accessories business as a tax-free stock distribution to stockholder, which 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); and our expectation that the spin-off is on track for completion in August. 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; the impact of protectionist tariffs and trade wars; speculation surrounding fears of terrorism and crime; our anticipated growth and growth opportunities; our ability to increase demand for our products in various markets, including consumer, law enforcement, and military channels, domestically and internationally; our penetration rates in new and existing markets; our strategies; the completion of our proposed spin-off and the operations and performance of the two separate companies thereafter; our ability to maintain and enhance brand recognition and reputation; risks associated with the establishment of our new 630,000 square foot Logistics & Customer Services facility in Missouri; our ability to introduce new products; the success of new products; our ability to expand our markets; our ability to integrate acquired businesses in a successful manner; the general growth of our outdoor products and accessories business; the potential for cancellation of orders from our backlog; and other risks detailed from time to time in our reports filed with the SEC, including our Annual Report on Form 10-K for the fiscal year ended April 30, 2020.
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SMITH & WESSON BRANDS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
| April 30, 2019 | |||||
| ASSETS | |||||
| Current assets: | |||||
| Cash and cash equivalents | 125,398 | $ | 41,015 | ||
| Accounts receivable, net of allowance for doubtful accounts of 1,438 on April 30, 2020 and<br>1,899 on April 30, 2019 | 93,433 | 84,907 | |||
| Inventories | 164,191 | 163,770 | |||
| Prepaid expenses and other current assets | 8,838 | 6,528 | |||
| Deferred income taxes | 2,396 | — | |||
| Income tax receivable | 1,595 | 2,464 | |||
| Total current assets | 395,851 | 298,684 | |||
| Property, plant, and equipment, net | 157,417 | 183,268 | |||
| Intangibles, net | 73,754 | 91,840 | |||
| Goodwill | 83,605 | 182,269 | |||
| Other assets | 18,334 | 10,728 | |||
| 728,961 | $ | 766,789 | |||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||
| Current liabilities: | |||||
| Accounts payable | 39,196 | $ | 35,584 | ||
| Accrued expenses and deferred revenue | 64,602 | 39,322 | |||
| Accrued payroll and incentives | 14,623 | 21,473 | |||
| Accrued income taxes | 5,503 | 175 | |||
| Accrued profit sharing | 2,414 | 2,830 | |||
| Accrued warranty | 3,633 | 5,599 | |||
| Current portion of notes and loans payable | — | 6,300 | |||
| Total current liabilities | 129,971 | 111,283 | |||
| Deferred income taxes | — | 9,776 | |||
| Notes and loans payable, net of current portion | 159,171 | 149,434 | |||
| Finance lease payable, net of current portion | 39,873 | 45,400 | |||
| Other non-current liabilities | 12,828 | 6,452 | |||
| Total liabilities | 341,843 | 322,345 | |||
| Commitments and contingencies (Note 18) | |||||
| 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, 73,526,790 issued and<br>55,359,928 shares outstanding on April 30, 2020 and 72,863,624 shares issued and 54,696,762 shares outstanding on April 30, 2019 | 74 | 73 | |||
| Additional paid-in capital | 267,630 | 263,180 | |||
| Retained earnings | 341,716 | 402,946 | |||
| Accumulated other comprehensive income | 73 | 620 | |||
| Treasury stock, at cost (18,166,862 shares on April 30, 2020 and April 30, 2019) | (222,375 | ) | (222,375 | ) | |
| Total stockholders’ equity | 387,118 | 444,444 | |||
| 728,961 | $ | 766,789 |
All values are in US Dollars.
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SMITH & WESSON BRANDS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME/(LOSS)
| For the Three Months Ended | For the Years Ended | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| April, 2020 | April, 2019 | April 30, 2020 | April 30, 2019 | |||||||||
| (In thousands, except per share data) | ||||||||||||
| (Unaudited) | ||||||||||||
| Net sales | $ | 233,638 | $ | 175,734 | $ | 678,390 | $ | 638,277 | ||||
| Cost of sales | 152,294 | 112,369 | 443,685 | 412,046 | ||||||||
| Gross profit | 81,344 | 63,365 | 234,705 | 226,231 | ||||||||
| Operating expenses: | ||||||||||||
| Research and development | 2,952 | 3,508 | 12,362 | 12,866 | ||||||||
| Selling, marketing, and distribution | 19,096 | 14,985 | 74,515 | 57,263 | ||||||||
| General and administrative | 26,383 | 29,583 | 97,985 | 107,650 | ||||||||
| Goodwill Impairment | 98,662 | — | 98,662 | 10,396 | ||||||||
| Total operating expenses | 147,093 | 48,076 | 283,524 | 188,175 | ||||||||
| Operating (loss)/income | (65,749 | ) | 15,289 | (48,819 | ) | 38,056 | ||||||
| Other income/(expense), net: | ||||||||||||
| Other income/(expense), net | 10 | (6 | ) | 83 | 33 | |||||||
| Interest expense, net | (2,663 | ) | (2,529 | ) | (11,213 | ) | (9,351 | ) | ||||
| Total other (expense)/income, net | (2,653 | ) | (2,535 | ) | (11,130 | ) | (9,318 | ) | ||||
| (Loss)/Income from operations before income taxes | (68,402 | ) | 12,754 | (59,949 | ) | 28,738 | ||||||
| Income tax expense/(benefit) | (2,258 | ) | 2,929 | 1,281 | 10,328 | |||||||
| Net (loss)/income | $ | (66,144 | ) | $ | 9,825 | $ | (61,230 | ) | $ | 18,410 | ||
| Net (loss)/income per share: | ||||||||||||
| Basic | $ | (1.20 | ) | $ | 0.18 | $ | (1.11 | ) | $ | 0.34 | ||
| Diluted | $ | (1.20 | ) | $ | 0.18 | $ | (1.11 | ) | $ | 0.33 | ||
| Weighted average number of common shares outstanding: | ||||||||||||
| Basic | 55,177 | 54,604 | 54,983 | 54,483 | ||||||||
| Diluted | 55,177 | 55,286 | 54,983 | 55,216 |
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SMITH & WESSON BRANDS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
| For the Years Ended | ||||||
|---|---|---|---|---|---|---|
| April 30, 2020 | April 30, 2019 | |||||
| (In thousands) | ||||||
| Cash flows from operating activities: | ||||||
| Net (loss)/income | $ | (61,230 | ) | $ | 18,410 | |
| Adjustments to reconcile net (loss)/income to net cash provided by operating activities: | ||||||
| Depreciation and amortization | 54,058 | 53,859 | ||||
| Loss/(gain) on sale/disposition of assets | 991 | (454 | ) | |||
| Provision for losses on notes and accounts receivable | 104 | 1,060 | ||||
| Impairment of long-lived tangible assets | 976 | — | ||||
| Goodwill impairment | 98,662 | 10,396 | ||||
| Deferred income taxes | (12,009 | ) | (2,795 | ) | ||
| Change in fair value of contingent consideration | 100 | (60 | ) | |||
| Stock-based compensation expense | 2,921 | 7,992 | ||||
| Changes in operating assets and liabilities: | ||||||
| Accounts receivable | (8,630 | ) | (28,997 | ) | ||
| Inventories | (421 | ) | (10,533 | ) | ||
| Prepaid expenses and other current assets | (2,310 | ) | 359 | |||
| Income taxes | 6,197 | 1,780 | ||||
| Accounts payable | 3,681 | 3,392 | ||||
| Accrued payroll and incentives | (6,850 | ) | 10,959 | |||
| Accrued profit sharing | (416 | ) | 1,547 | |||
| Accrued expenses and deferred revenue | 21,908 | (7,193 | ) | |||
| Accrued warranty | (1,966 | ) | (1,224 | ) | ||
| Other assets | 2,719 | (671 | ) | |||
| Other non-current liabilities | (3,524 | ) | (377 | ) | ||
| Net cash provided by operating activities | 94,961 | 57,450 | ||||
| Cash flows from investing activities: | ||||||
| Acquisition of businesses, net of cash acquired | — | (1,772 | ) | |||
| Receipts from note receivable | 786 | 74 | ||||
| Payments to acquire patents and software | (812 | ) | (516 | ) | ||
| Proceeds from sale of property and equipment | — | 1,336 | ||||
| Payments to acquire property and equipment | (13,932 | ) | (33,949 | ) | ||
| Net cash used in investing activities | (13,958 | ) | (34,827 | ) | ||
| Cash flows from financing activities: | ||||||
| Proceeds from loans and notes payable | 228,225 | 50,000 | ||||
| Cash paid for debt issuance costs | (875 | ) | — | |||
| Payments on finance lease obligation | (900 | ) | (741 | ) | ||
| Payments on notes and loans payable | (224,600 | ) | (81,300 | ) | ||
| Proceeds from exercise of options to acquire common stock, including employee stock purchase<br>plan | 2,127 | 2,222 | ||||
| Payment of employee withholding tax related to restricted stock units | (597 | ) | (649 | ) | ||
| Net cash provided by/(used in) financing activities | 3,380 | (30,468 | ) | |||
| Net increase/(decrease) in cash and cash equivalents | 84,383 | (7,845 | ) | |||
| Cash and cash equivalents, beginning of period | 41,015 | 48,860 | ||||
| Cash and cash equivalents, end of period | $ | 125,398 | $ | 41,015 | ||
| Supplemental disclosure of cash flow information | ||||||
| Cash paid for: | ||||||
| Interest | $ | 11,103 | $ | 9,473 | ||
| Income taxes | $ | 6,935 | $ | 10,567 |
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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 Year Ended | |||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| April 30, 2020 | April 30, 2019 | April 30, 2020 | April 30, 2019 | |||||||||||||||||
| % of Sales | % of Sales | % of Sales | % of Sales | |||||||||||||||||
| GAAP gross profit | 34.8 | % | 36.1 | % | 34.6 | % | 35.4 | % | ||||||||||||
| Diode recall | — | — | ) | -0.1 | % | — | ||||||||||||||
| Fair value inventory step-up | — | 0.1 | % | — | 0.1 | % | ||||||||||||||
| COVID-19 | 0.8 | % | — | 0.3 | % | — | ||||||||||||||
| Transition costs | — | — | 0.1 | % | — | |||||||||||||||
| Non-GAAP gross profit | 35.7 | % | 36.1 | % | 34.9 | % | 35.5 | % | ||||||||||||
| GAAP operating expenses | 63.0 | % | 27.4 | % | 41.8 | % | 29.5 | % | ||||||||||||
| Amortization of acquired intangible assets | ) | -2.0 | % | ) | -3.1 | % | ) | -2.8 | % | ) | -3.4 | % | ||||||||
| Goodwill impairment | ) | -42.2 | % | — | ) | -14.5 | % | ) | -1.6 | % | ||||||||||
| Transition costs | ) | -2.4 | % | ) | -0.2 | % | ) | -1.1 | % | ) | -0.2 | % | ||||||||
| CEO separation | ) | -1.0 | % | — | 0.3 | % | — | |||||||||||||
| COVID-19 | ) | -0.2 | % | — | ) | -0.1 | % | — | ||||||||||||
| Acquisition-related costs | — | ) | 0.0 | % | — | ) | 0.0 | % | ||||||||||||
| Non-GAAP operating expenses | 15.2 | % | 24.0 | % | 23.6 | % | 24.2 | % | ||||||||||||
| GAAP operating (loss)/income | ) | -28.1 | % | 8.7 | % | ) | -7.2 | % | 6.0 | % | ||||||||||
| Fair value inventory step-up | — | 0.1 | % | — | 0.1 | % | ||||||||||||||
| Diode recall | — | — | ) | -0.1 | % | — | ||||||||||||||
| Amortization of acquired intangible assets | 2.0 | % | 3.1 | % | 2.8 | % | 3.4 | % | ||||||||||||
| Goodwill impairment | 42.2 | % | — | 14.5 | % | 1.6 | % | |||||||||||||
| Transition costs | 2.4 | % | 0.2 | % | 1.2 | % | 0.2 | % | ||||||||||||
| CEO separation | 1.0 | % | — | ) | -0.3 | % | — | |||||||||||||
| COVID-19 | 1.1 | % | — | 0.4 | % | — | ||||||||||||||
| Acquisition-related costs | — | 0.0 | % | — | 0.0 | % | ||||||||||||||
| Non-GAAP operating income | 20.5 | % | 12.1 | % | 11.3 | % | 11.3 | % | ||||||||||||
| GAAP net (loss)/income | ) | -28.3 | % | 5.6 | % | ) | -9.0 | % | 2.9 | % | ||||||||||
| Fair value inventory step-up | — | 0.1 | % | — | 0.1 | % | ||||||||||||||
| Amortization of acquired intangible assets | 2.0 | % | 3.1 | % | 2.8 | % | 3.4 | % | ||||||||||||
| Goodwill impairment | 42.2 | % | — | 14.5 | % | 1.6 | % | |||||||||||||
| Diode recall | — | — | ) | -0.1 | % | — | ||||||||||||||
| Transition costs | 2.4 | % | 0.2 | % | 1.2 | % | 0.2 | % | ||||||||||||
| CEO separation | 1.0 | % | — | ) | -0.3 | % | — | |||||||||||||
| COVID-19 | 1.1 | % | — | 0.4 | % | — | ||||||||||||||
| Acquisition-related costs | — | 0.0 | % | — | 0.0 | % | ||||||||||||||
| Change in contingent consideration | — | — | ) | 0.0 | % | ) | 0.0 | % | ||||||||||||
| Tax effect of non-GAAP adjustments | ) | -6.7 | % | ) | -0.9 | % | ) | -2.8 | % | ) | -1.0 | % | ||||||||
| Non-GAAP net income | 13.7 | % | 8.1 | % | 6.7 | % | 7.2 | % | ||||||||||||
| GAAP net income/(loss) per share - diluted | ) | ) | ||||||||||||||||||
| Fair value inventory step-up | ||||||||||||||||||||
| Amortization of acquired intangible assets | ||||||||||||||||||||
| Goodwill impairment | ||||||||||||||||||||
| Diode recall | ) | |||||||||||||||||||
| Transition costs | ||||||||||||||||||||
| CEO separation | ) | |||||||||||||||||||
| COVID-19 | ||||||||||||||||||||
| Acquisition-related costs | ||||||||||||||||||||
| Change in contingent consideration | ||||||||||||||||||||
| Effect of anti-dilutive shares | ) | ) | ||||||||||||||||||
| Tax effect of non-GAAP adjustments | ) | ) | ) | ) | ||||||||||||||||
| Non-GAAP net income 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 8 of 9
SMITH & WESSON BRANDS, INC. AND SUBSIDIARIES
RECONCILIATION OF NET OPERATING CASH FLOW TO FREE CASH FLOW
(In thousands)
(Unaudited)
| For the Three Months Ended | For the Years Ended | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| April 30, 2020 | April 30, 2019 | April 30, 2020 | April 30, 2019 | |||||||||
| Net cash provided by operating activities | $ | 120,002 | $ | 36,706 | $ | 94,961 | $ | 57,450 | ||||
| Net cash used in investing activities | (1,656 | ) | (7,915 | ) | (13,958 | ) | (34,827 | ) | ||||
| Acquisition of businesses, net of cash acquired | — | (19 | ) | — | 1,772 | |||||||
| Receipts from note receivable | (786 | ) | (74 | ) | (786 | ) | (74 | ) | ||||
| Free cash flow | $ | 117,560 | $ | 28,698 | $ | 80,217 | $ | 24,321 |
SMITH & WESSON BRANDS, INC. AND SUBSIDIARIES
RECONCILIATION OF GAAP NET (LOSS)/INCOME TO NON-GAAP ADJUSTED EBITDAS
(in thousands)
(Unaudited)
| For the Three Months Ended | For the Years Ended | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| April 30, 2020 | April 30, 2019 | April 30, 2020 | April 30, 2019 | ||||||||
| GAAP net (loss)/income | $ | (66,144 | ) | $ | 9,825 | $ | (61,230 | ) | $ | 18,410 | |
| Interest expense | 2,705 | 2,747 | 11,604 | 9,790 | |||||||
| Income tax expense | (2,258 | ) | 2,929 | 1,281 | 10,328 | ||||||
| Depreciation and amortization | 12,832 | 13,908 | 53,371 | 52,770 | |||||||
| Stock-based compensation expense | 1,571 | 1,922 | 2,921 | 7,992 | |||||||
| Goodwill impairment | 98,662 | — | 98,662 | 10,396 | |||||||
| Fair value inventory step-up | — | 92 | — | 454 | |||||||
| Acquisition-related costs | — | 22 | — | 28 | |||||||
| COVID-19 | 2,474 | — | 2,474 | — | |||||||
| Transition costs | 5,544 | 434 | 7,433 | 1,185 | |||||||
| CEO separation | 1,037 | — | 627 | — | |||||||
| Diode recall | — | — | (769 | ) | — | ||||||
| Change in contingent consideration | — | — | (100 | ) | (60 | ) | |||||
| Non-GAAP Adjusted EBITDAS | $ | 56,423 | $ | 31,879 | $ | 116,274 | $ | 111,293 |
Page 9 of 9