Equibles

8-K

SMITH & WESSON BRANDS, INC. (SWBI)

8-K 2021-12-02 For: 2021-12-02
View Original
Added on April 04, 2026

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): December 2, 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)
--- ---
☐ 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 $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 December 2, 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> <br>Number Exhibits
99.1 Press release from Smith & Wesson Brands, Inc., dated December 2, 2021, entitled “Smith & Wesson Brands, Inc. Reports Second 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: December 2, 2021 By: /s/ Deana L. McPherson
Deana L. McPherson
Executive Vice President, Chief Financial Officer, Treasurer, and Assistant Secretary

EX-99.1

Exhibit 99.1

LOGO

Contact:

investorrelations@smith-wesson.com

(413) 747-3448

Smith & Wesson Brands, Inc. Reports

Second Quarter Fiscal 2022 Financial Results

- Two-Year Compounded Sales Growth of over 140% <br>
- Gross Margin of 44.3%
--- ---
- EPS of $1.05/Share and EBITDAS of 34.9%
--- ---

SPRINGFIELD, Mass., December 2, 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 second quarter of fiscal 2022, ended October 31, 2021. Unless otherwise indicated, any reference to income statement items refers to results from continuing operations.

Second Quarter Fiscal 2022 Financial Highlights

• Net sales were $230.5 million, a decrease of $18.3 million, or 7.3%, from the comparable quarter last<br>year.
• Gross margin was 44.3%, compared with 40.6% for the comparable quarter last year.
--- ---
• Quarterly GAAP net income was $50.9 million, or $1.05 per diluted share, compared with $49.1 million,<br>or $0.87 per diluted share, for the comparable quarter last year.
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• Quarterly non-GAAP net income was $55.3 million, or $1.13 per<br>diluted share, compared with $52.8 million, or $0.93 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 $80.4 million, or 34.9% of<br>net sales, compared with $78.9 million, or 31.7% of net sales, for the comparable quarter last year.
--- ---

Mark Smith, President and Chief Executive Officer, commented, “Throughout the past 18 months of unprecedented demand levels for our industry, our focus has continued to be on the long term – and our team has been hard at work positioning Smith & Wesson for continued impressive operating results and maintaining our market leadership regardless of market conditions. During our second quarter, as demand levels eased from historical highs experienced during the height of the pandemic, the results of those efforts and our flexible model were evident. Despite a year over year revenue decline, our operations team actually delivered higher gross profit, more than offsetting the decrease in the top line. Our sales, marketing, and new product teams continued our steady cadence of new product introductions, with the most recent being our brand new M&P 10MM introduced last month and we have great confidence going forward to continue being the brand of choice at retail by connecting with both the millions of new firearms owners and our loyal long time enthusiasts in new and innovative ways, continuing to introduce exciting new products, and leveraging our unique ability to adjust rapidly to market dynamics through our flexible manufacturing model.”

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Smith continued, “Late last quarter, we announced our intention to relocate our headquarters and certain of our operations to Maryville, Tennessee in 2023 and work on this project has begun in earnest. With a successful groundbreaking ceremony held on November 5th, we are excited about the opportunity to shape our company for generations to come. The new state-of-the-art facility will serve as our headquarters and will be the new home for our plastic injection molding, assembly, and logistics operations, and will solidify the future of Smith & Wesson – an innovative, nimble organization, whose dedicated employees leverage the latest technology to produce products that set the standard for firearms enthusiasts around the globe. We would like to thank the state of Tennessee and the Blount County community for such a warm welcome, and we look forward to calling Maryville, Tennessee home.”

Deana McPherson, Executive Vice President and Chief Financial Officer, commented, “Our second quarter results continue to demonstrate our ability to react to the changing needs of the market. We delivered a 370 basis point increase in gross margin that more than offset a 7.3% decrease in revenue compared with the prior year second quarter. Although below the prior year, the current quarter’s revenue represents a two-year compounded growth rate of over 140% and is one of the many examples of how our flexible manufacturing model allows our business to return impressive financial performance in both increasing and decreasing demand environments. Inventory in the channel has finally been restored in many of our product categories and we continue to replenish our internal inventories. We believe that our strong balance sheet, impressive product array, and commitment to be the market leader will enable us to continue to invest in our business and capture market share, as we fulfill our commitment to return 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 December 16th with payment to be made on January 4th.”

Conference Call and Webcast

The company will host a conference call and webcast on December 2, 2021, to discuss its second 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 9717968. 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.

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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, that (i) we have great confidence going forward to continue being the brand of choice at retail by connecting with both the millions of new firearms owners and our loyal long time enthusiasts in new and innovative ways, continuing to introduce exciting new products, and leveraging our unique ability to adjust rapidly to market dynamics through our flexible manufacturing model; (ii) we intend to relocate our headquarters and certain of our operations to Maryville, Tennessee in 2023; (iii) the new state-of-the-art facility will serve as our headquarters and will be the new home for our plastic injection molding, assembly, and logistics operations, and will solidify the future of Smith & Wesson – an innovative, nimble organization, whose dedicated employees leverage the latest technology to produce products that set the standard for firearms enthusiasts around the globe; and (iv) we believe that our strong balance sheet, impressive product array, and commitment to be the market leader will enable us to continue to invest in our business and capture market share, as we fulfill our commitment to return 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 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.

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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 159,391 $ 113,017
Accounts receivable, net of allowances for credit losses of 38 on October 31, 2021 and 107<br>on April 30, 2021 44,226 67,442
Inventories 120,277 78,477
Prepaid expenses and other current assets 8,321 8,408
Income tax receivable 1,717 909
Total current assets 333,932 268,253
Property, plant, and equipment, net 136,932 141,612
Intangibles, net 4,322 4,417
Goodwill 19,024 19,024
Other assets 10,966 13,082
505,176 446,388
LIABILITIES AND STOCKHOLDERS’ EQUITY ****
Current liabilities:
Accounts payable 49,070 $ 57,337
Accrued expenses and deferred revenue 31,958 33,136
Accrued payroll and incentives 11,068 17,381
Accrued income taxes 1,722 1,157
Accrued profit sharing 7,777 14,445
Accrued warranty 2,142 2,199
Total current liabilities 103,737 125,655
Deferred income taxes 904 904
Finance lease payable, net of current portion 38,228 38,786
Other non-current liabilities 13,999 14,659
Total liabilities 156,868 180,004
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, 74,546,592 issued and<br>48,294,374 shares outstanding on October 31, 2021 and 74,222,127 shares issued and 49,937,329 shares outstanding on April 30, 2021 75 74
Additional paid-in capital 275,229 273,431
Retained earnings 445,306 325,181
Accumulated other comprehensive income 73 73
Treasury stock, at cost (26,252,218 shares on October 31, 2021 and 24,284,798 on<br>April 30, 2021) (372,375 ) (332,375 )
Total stockholders’ equity 348,308 266,384
505,176 $ 446,388

All values are in US Dollars.

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SMITH & WESSON BRANDS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

For the Three Months Ended October 31, For the Six Months Ended October 31,
2021 2020 2021 2020
(In thousands, except per share data)
Net sales $ 230,479 $ 248,729 $ 505,088 $ 478,614
Cost of sales 128,484 147,656 273,151 285,117
Gross profit 101,995 101,073 231,937 193,497
Operating expenses:
Research and development 1,744 1,855 3,552 3,761
Selling, marketing, and distribution 11,423 11,614 22,057 21,609
General and administrative 23,436 23,224 41,049 45,007
Total operating expenses 36,603 36,693 66,658 70,377
Operating income from continuing operations 65,392 64,380 165,279 123,120
Other income/(expense), net:
Other income/(expense), net 833 693 1,493 760
Interest expense, net (466 ) (1,490 ) (1,011 ) (2,806 )
Total other income/(expense), net 367 (797 ) 482 (2,046 )
Income from operations before income taxes 65,759 63,583 165,761 121,074
Income tax expense 14,824 14,465 37,944 28,657
Income from continuing operations $ 50,935 $ 49,118 $ 127,817 $ 92,417
Discontinued operations:
Income from discontinued operations, net of tax — 3,123 — 8,209
Net income $ 50,935 $ 52,241 $ 127,817 $ 100,626
Net income per share:
Basic—continuing operations $ 1.06 $ 0.88 $ 2.65 $ 1.66
Basic—net income $ 1.06 $ 0.93 $ 2.65 $ 1.81
Diluted—continuing operations $ 1.05 $ 0.87 $ 2.63 $ 1.64
Diluted—net income $ 1.05 $ 0.92 $ 2.63 $ 1.78
Weighted average number of common shares outstanding:
Basic 48,147 55,914 48,270 55,691
Diluted 48,692 56,531 48,524 56,475

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SMITH & WESSON BRANDS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

For the Six Months Ended
October 31, 2021 October 31, 2020
(In thousands)
Cash flows from operating activities:
Income from continuing operations $ 127,817 $ 92,417
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 15,210 17,129
Loss on sale/disposition of assets 57 3
Provision for losses on notes and accounts receivable 781 29
Impairment of long-lived tangible assets 86 —
Stock-based compensation expense 2,366 2,075
Changes in operating assets and liabilities:
Accounts receivable 22,435 (7,787 )
Inventories (41,800 ) 24,852
Prepaid expenses and other current assets 87 (43 )
Income taxes (242 ) (8,267 )
Accounts payable (8,514 ) 28,331
Accrued payroll and incentives (6,313 ) (1,043 )
Accrued profit sharing (6,668 ) 4,613
Accrued expenses and deferred revenue (1,206 ) (16,212 )
Accrued warranty (57 ) 1,055
Other assets 2,030 2,561
Other non-current liabilities (705 ) (1,625 )
Cash provided by operating activities—continuing operations 105,364 138,088
Cash used in operating activities—discontinued operations — (2,225 )
Net cash provided by operating activities 105,364 135,863
Cash flows from investing activities:
Payments to acquire patents and software (156 ) (350 )
Proceeds from sale of property and equipment 70 —
Payments to acquire property and equipment (10,113 ) (14,964 )
Cash used in investing activities—continuing operations (10,199 ) (15,314 )
Cash used in investing activities—discontinued operations — (1,143 )
Net cash used in investing activities (10,199 ) (16,457 )
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 (531 ) (479 )
Payments on notes and loans payable — (185,000 )
Distribution to AOUT — (25,000 )
Payments to acquire treasury stock (40,000 ) —
Dividend distribution (7,692 ) (2,795 )
Proceeds from exercise of options to acquire common stock, including employee stock purchase<br>plan 831 2,195
Payment of employee withholding tax related to restricted stock units (1,399 ) (2,173 )
Cash used in by financial activities—continuing operations (48,791 ) (188,702 )
Cash used in financial activities—discontinued operations — (166 )
Net cash used inprovided by financing activities (48,791 ) (188,868 )
Net increase/(decrease) in cash and cash equivalents 46,374 (69,462 )
Cash and cash equivalents, beginning of period 113,017 125,011
Cash and cash equivalents, end of period $ 159,391 $ 55,549
Supplemental disclosure of cash flow information
Cash paid for:
Interest $ 1,116 $ 2,188
Income taxes $ 38,186 $ 40,888

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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 Six Months Ended
October 31, 2021 October 31, 2020 October 31, 2021 October 31, 2020
% of Sales % of Sales % of Sales % of Sales
GAAP gross profit 44.3 % 40.6 % 45.9 % 40.4 %
Relocation expenses 0.5 % — 0.2 % —
COVID-19 0.0 % 0.0 % 0.0 % 0.2 %
Non-GAAP gross profit 44.7 % 40.6 % 46.1 % 40.6 %
GAAP operating expenses 15.9 % 14.8 % 13.2 % 14.7 %
Amortization of acquired intangible assets ) 0.0 % ) 0.0 % ) 0.0 % ) 0.0 %
Transition costs 0.0 % ) -1.7 % 0.0 % ) -1.7 %
COVID-19 ) 0.0 % ) 0.0 % ) 0.0 % ) 0.0 %
Spin related stock-based compensation 0.0 % ) -0.2 % ) 0.0 % ) -0.1 %
Relocation expenses ) -1.9 % — ) -0.9 % —
Non-GAAP operating expenses 13.9 % 12.8 % 12.3 % 12.9 %
GAAP operating income 28.4 % 25.9 % 32.7 % 25.7 %
Amortization of acquired intangible assets 0.0 % 0.0 % 0.0 % 0.0 %
Transition costs ) 0.0 % 1.7 % ) 0.0 % 1.7 %
COVID-19 0.0 % 0.0 % 0.0 % 0.2 %
Spin related stock-based compensation ) 0.0 % 0.2 % 0.0 % 0.1 %
Relocation expenses 2.4 % — 1.1 % —
Non-GAAP operating income 30.8 % 27.9 % 33.9 % 27.7 %
GAAP income from continuing operations 22.1 % 19.7 % 25.3 % 19.3 %
Amortization of acquired intangible assets 0.0 % 0.0 % 0.0 % 0.0 %
Transition costs ) 0.0 % 1.7 % ) 0.0 % 1.7 %
COVID-19 0.0 % 0.0 % 0.0 % 0.2 %
Spin related stock-based compensation ) 0.0 % 0.2 % 0.0 % 0.1 %
Relocation expenses 2.4 % — 1.1 % —
Tax effect of non-GAAP adjustments ) -0.5 % ) -0.5 % ) -0.3 % ) -0.5 %
Non-GAAP income from continuing operations 24.0 % 21.2 % 26.2 % 20.8 %
GAAP income from continuing operations per share—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<br>share—diluted (a) (a) (a)

All values are in US Dollars.

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

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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 Six Months Ended
October 31, 2021 October 31, 2020 October 31, 2021 October 31, 2020
Net cash (used in)/provided by operating activities $ (3,723 ) $ 55,265 $ 105,364 $ 138,088
Net cash used in investing activities (4,431 ) (8,674 ) (10,199 ) (15,314 )
Free cash flow $ (8,154 ) $ 46,591 $ 95,165 $ 122,774

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 Six Months Ended
October 31, 2021 October 31, 2020 October 31, 2021 October 31, 2020
GAAP income from continuing operations $ 50,935 $ 49,118 $ 127,817 $ 92,417
Interest expense 516 1,517 1,101 2,879
Income tax expense 14,824 14,465 37,944 28,657
Depreciation and amortization 7,724 8,145 15,166 16,282
Stock-based compensation expense 914 1,191 2,366 2,075
COVID-19 55 102 131 1,055
Transition costs (80 ) 4,338 (80 ) 7,933
Relocation expense 5,548 — 5,548 —
Non-GAAP Adjusted EBITDAS $ 80,436 $ 78,876 $ 189,993 $ 151,298

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