PR Newswire | Jun 17, 2021 04:06PM EDT

Financial Results

06/17 15:05 CDT

Smith & Wesson Brands, Inc. Reports Fourth Quarter and Full Year Fiscal 2021 Financial Results- Annual Net Sales of $1.1 Billion; Net Income of $243.6 Million- Annual EPS of $4.40/Share (GAAP)- Q4 Net Sales of $322.9 million; Net Income of $89.2 Million- Q4 EPS of $1.70/Share (GAAP)- New $50M Share Buyback Program and a 60%/Share Quarterly Dividend Increase SPRINGFIELD, Mass., June 17, 2021

SPRINGFIELD, Mass., June 17, 2021 /PRNewswire/ -- Smith & Wesson Brands, Inc.(NASDAQ Global Select: SWBI), a U.S.-based leader in firearm manufacturing and design, today announced financial results for the fourth quarter and full fiscal year 2021, ended April 30, 2021. On August 24, 2020, the company completed the previously announced spin-off of its outdoor products and accessories business. Therefore, as of the second quarter, all historical financial information for that business is reported as discontinued operations. Unless otherwise indicated, any reference to income statement items refers to results from continuing operations.

Fourth Quarter Fiscal 2021 Financial Highlights

* Quarterly net sales were $322.9 million compared with $193.0 million for the comparable quarter last year, an increase of 67.3%. * Gross margin for the quarter was 45.1% compared with 32.2% for the comparable quarter last year. * Quarterly GAAP net income was a record $89.2 million, or $1.70 per diluted share, compared with $20.9 million, or $0.38 per diluted share, for the comparable quarter last year. * Quarterly non-GAAP net income was $89.6 million, or $1.71 per diluted share, compared with $27.5 million, or $0.50 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 release. * Quarterly non-GAAP Adjusted EBITDAS was $125.6 million, or 38.9% of net sales, compared with $51.6 million, or 26.7% of net sales, for the comparable quarter last year.

Full year Fiscal 2021 Financial Highlights

* Full year net sales were $1.1 billion compared with $529.6 million for the prior year, an increase of 100%. * Gross margin of 42.4% compared with 31.3% for the prior year. * Full year GAAP net income was $243.6 million, or $4.40 per diluted share, compared with GAAP net income of $27.7 million, or $0.50 per diluted share, for the prior year. * Full year non-GAAP net income was $251.5 million, or $4.54 per diluted share, compared with $32.1 million, or $0.58 per diluted share, for the prior 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 release. * Full year non-GAAP Adjusted EBITDAS was $366.6 million, or 34.6% of net sales, compared with $92.7 million, or 17.5% of net sales, for the prior year.

Mark Smith, President and Chief Executive Officer, commented, "The results of the past year, in spite of the unthinkable challenges that we faced as a nation and as a company, are a tremendous testament to the resolve of our dedicated employees, the power of the Smith & Wesson brand, and the strength of the partnerships we have with our customers. Our employees more than doubled the prior year sales, passed a milestone of $1 billion in revenue, and by every financial and operating metric, have delivered the most successful year in the 169 year history of the company. But most importantly, we have set a rock solid foundation for the long term success of the company, with astounding market share growth. During the past fiscal year, the US firearms market experienced record growth of 42%, meanwhile shipments from Smith & Wesson far surpassed the industry, growing by 70%. Strong consumer preference for our products combined with our ability to rapidly react to the increased demand has placed us in a clear leadership position as we enter into our first full fiscal year as a standalone pure-play firearms company."

Deana McPherson, Executive Vice President and Chief Financial Officer, commented, "The hard work and dedication of all of our employees, combined with record-breaking demand for our high-quality products drove equally record-breaking financial results for the year, including record revenue, net income, earnings per share, and cash generation. We began our first year as a pure-play firearm company with clear strategic priorities, and we have delivered on our strategy. During fiscal 2021, we invested in our business and our people, we repaid all of our bank debt, we repurchased over 10% of our outstanding common stock, and we began paying our stockholders a quarterly dividend for the first time in company history. Continuing with our capital allocation strategy, I am pleased to announce that our Board has authorized a new $50 million share repurchase program as well as a 60% increase in our quarterly dividend to 8 cents per share. This quarter's dividend will be paid to stockholders of record on July 1st with payment to be made on July 6th."

The amount and timing of any repurchases will depend on a number of factors, including price, trading volume, general market conditions, legal requirements, and other factors. The repurchases may be made on the open market, in block trades, or in privately negotiated transactions. Any shares of common stock repurchased under the program will be considered issued but not outstanding shares of the company's common stock.

Conference Call and WebcastThe company will host a conference call and webcast on June 17, 2021, to discuss its fourth quarter and full fiscal 2021 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 1173799. 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 MeasuresIn 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) change in contingent consideration, (iv) CEO separation, (v) the tax effect of non-GAAP adjustments, and (vi) COVID-19 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 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(r), M&P(r), and Gemtech(r) brands. The company also provides manufacturing services including forging, machining, and precision plastic injection molding services. For more information call (844) 363-5386 or visit www.smith-wesson.com.

Safe Harbor StatementCertain 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 we have set a rock solid foundation for the long-term success of the company, with astounding market share growth; and our belief that strong consumer preference for our products combined with our ability to rapidly react to the increased demand has placed us in a clear leadership position as we enter into our first full fiscal year as a standalone pure-play firearms company. 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.

Contact:investorrelations@smith-wesson.com(413) 747-3448

SMITH & WESSON BRANDS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

As of:

April 30, 2021 April 30, 2020

(In thousands, except par value and share data)

ASSETS

Current assets:

Cash and cash equivalents $ 113,017 $ 125,011

Accounts receivable, net ofallowances for credit losses of 67,442 60,879$107 on April 30, 2021 and$1,038 on April 30, 2020

Inventories 78,477 103,741

Prepaid expenses and other 8,408 7,556current assets

Current assets of discontinued - 94,673operations

Income tax receivable 909 1,595

Total current assets 268,253 393,455

Property, plant, and 141,612 147,739equipment, net

Intangibles, net 4,417 4,375

Goodwill 19,024 19,024

Other assets of discontinued - 148,485operations

Other assets 13,082 16,437

446,388 729,515

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Accounts payable $ 57,337 $ 31,476

Accrued expenses and deferred 33,136 57,678revenue

Accrued payroll and incentives 17,381 12,448

Accrued income taxes 1,157 5,503

Accrued profit sharing 14,445 2,197

Accrued warranty 2,199 3,297

Current liabilties of - 17,372discontinued operations

Total current liabilities 125,655 129,971

Deferred income taxes 904 457

Notes and loans payable, net - 159,171of current portion

Finance lease payable, net of 38,786 39,873current portion

Other non-current liabilities - 2,299of discontinued operations

Other non-current liabilities 14,659 10,626

Total liabilities 180,004 342,397

Commitments and contingencies

Stockholders' equity:

Preferred stock, $.001 parvalue, 20,000,000 shares - -authorized, no shares issued oroutstanding

Common stock, $.001 par value,100,000,000 shares authorized,74,222,127 issued and49,937,329 shares outstanding 74 74on April 30, 2021 and73,526,790 shares issued and55,359,928 shares outstandingon April 30, 2020

Additional paid-in capital 273,431 267,630

Retained earnings 325,181 341,716

Accumulated other comprehensive 73 73income

Treasury stock, at cost(24,284,798 shares on April 30, (332,375) (222,375)2021 and 18,166,862 on April30, 2020)

Total stockholders' equity 266,384 387,118

$ 446,388 $ 729,515

SMITH & WESSON BRANDS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME/(LOSS)

For the Three Months Ended April 30, For the Years Ended April 30,

2021 2020 2021 2020

(Unaudited)

(In thousands, except per share data)

Net sales $322,947 $193,045 $1,059,195 $529,618

Cost of sales 177,139 130,941 610,212 363,929

Gross profit 145,808 62,104 448,983 165,689

Operatingexpenses:

Research and 1,963 1,863 7,480 7,364development

Selling,marketing, and 10,507 11,148 42,603 41,987distribution

General and 17,207 18,119 79,268 66,033administrative

Totaloperating 29,677 31,130 129,351 115,384expenses

Operatingincome from 116,131 30,974 319,632 50,305continuingoperations

Other income/(expense),net:

Other income/(expense), 540 67 2,252 495net

Interest (563) (2,705) (3,919) (11,625)expense, net

Total other(expense)/ (23) (2,638) (1,667) (11,130)income, net

Income fromoperations 116,108 28,336 317,965 39,175before incometaxes

Income tax 26,929 7,438 74,394 11,522expense

Income fromcontinuing $ 89,179 $ 20,898 $ 243,571 $ 27,653operations

Discontinuedoperations:

(Loss)/incomefrom (144) (87,044) 8,478 (88,883)discontinuedoperations

Net income/ $ 89,035 $ (66,146) $ 252,049 $ (61,230)(loss)

Net income/(loss) pershare:

Basic -continuing $ 1.72 $ 0.38 $ 4.46 $ 0.50operations

Basic - net $ 1.72 $ (1.20) $ 4.62 $ (1.11)income/(loss)

Diluted -continuing $ 1.70 $ 0.38 $ 4.40 $ 0.50operations

Diluted - net $ 1.70 $ (1.20) $ 4.55 $ (1.10)income/(loss)

Weightedaverage numberof commonsharesoutstanding:

Basic 51,816 54,983 54,613 54,983

Diluted 52,423 54,983 55,352 55,665

SMITH & WESSON BRANDS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Year Ended

April 30, 2021 April 30, 2020

(In thousands)

Cash flows from operating activities:

Income from continuing operations $ 243,571 $ 27,653

Adjustments to reconcile net income to netcash provided by operating activities:

Depreciation and amortization 31,575 31,972

(Gain)/loss on sale/disposition of assets 154 419

Provision for losses on notes and accounts (739) (585)receivable

Deferred income taxes 447 (260)

Change in fair value of contingent - 100consideration

Stock-based compensation expense 4,706 2,357

Changes in operating assets and liabilities:

Accounts receivable (5,824) (198)

Inventories 25,264 (911)

Prepaid expenses and other current (852) (3,124)assets

Income taxes (3,643) 6,196

Accounts payable 25,540 4,043

Accrued payroll and incentives 4,933 (5,831)

Accrued profit sharing 12,248 (355)

Accrued expenses and deferred revenue (24,633) 21,755

Accrued warranty (1,098) (1,126)

Other assets 1,579 1,131

Other non-current liabilities 4,032 (2,401)

Cash provided by operating activities - 317,260 80,835continuing operations

Cash (used in)/provided by operating (1,926) 13,901activities - discontinued operations

Net cash provided by operating activities 315,334 94,736

Cash flows from investing activities:

Refunds on machinery and equipment 310 -

Receipts from note receivable - 786

Payments to acquire patents and software (632) (429)

Proceeds from sale of property and equipment 113 -

Payments to acquire property and equipment (22,052) (12,441)

Cash used by investing activities - (22,261) (12,084)continuing operations

Cash used by investing activities - (1,143) (1,874)discontinued operations

Net cash used in investing activities (23,404) (13,958)

Cash flows from financing activities:

Proceeds from loans and notes payable 25,000 228,225

Cash paid for debt issuance costs (450) (875)

Payments on finance lease obligation (996) (900)

Payments on notes and loans payable (185,000) (224,600)

Distribution to AOUT (25,000) -

Payments to acquire treasury stock (110,000) -

Dividend distribution (8,223) -

Proceeds from exercise of options to acquirecommon stock, including employee stock 3,154 2,127repurchase plan

Payment of employee withholding tax related (2,243) (597)to restricted stock units

Cash (used in)/provided by financial (303,758) 3,380activities - continuing operations

Cash used in financial activities - (166) -discontinued operations

Net cash (used in)/provided by financing (303,924) 3,380activities

Net (decrease)/increase in cash and cash (11,994) 84,158equivalents

Cash and cash equivalents, beginning of 125,011 40,853period

Cash and cash equivalents, end of period $ 113,017 $ 125,011

Supplemental disclosure of cash flowinformation

Cash paid for:

Interest $ 3,306 $ 11,103

Income taxes $ 80,874 $ 6,935

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, 2021 April 30, 2020 April 30, 2021 April 30, 2020

$ % of Sales $ % of Sales $ % of Sales $ % of Sales

GAAP gross $ 145,808 45.1% $ 62,104 32.2% $ 448,983 42.4% $ 165,689 31.3%profit

COVID-19 43 0.0% 1,899 1.0% 560 0.1% 1,899 0.4%

Non-GAAP $ 145,851 45.2% $ 64,003 33.2% $ 449,543 42.4% $ 167,588 31.6%gross profit

GAAPoperating $ 29,677 9.2% $ 31,130 16.1% $ 129,351 12.2% $ 115,384 21.8%expenses

Amortizationof acquired (83) 0.0% (86) 0.0% (332) 0.0% (345) -0.1%intangibleassets

Transition (22) 0.0% (4,292) -2.2% (7,975) -0.8% (5,481) -1.0%costs

COVID-19 (67) 0.0% (460) -0.2% (685) -0.1% (460) -0.1%

Spin relatedstock-based (296) -0.1% - - (738) -0.1% - -compensation

CEO - - (2,252) -1.2% - - 2,002 0.4%separation

Non-GAAPoperating $ 29,209 9.0% $ 24,040 12.5% $ 119,621 11.3% $ 111,100 21.0%expenses

GAAPoperating $ 116,131 36.0% $ 30,974 16.0% $ 319,632 30.2% $ 50,305 9.5%income

Amortizationof acquired 83 0.0% 86 0.0% 332 0.0% 345 0.1%intangibleassets

Transition 22 0.0% 4,292 2.2% 7,975 0.8% 5,481 1.0%costs

COVID-19 110 0.0% 2,359 1.2% 1,245 0.1% 2,359 0.4%

Spin relatedstock-based 296 0.1% - - 738 0.1% - -compensation

CEO - - 2,252 1.2% - - (2,002) -0.4%separation

Non-GAAPoperating $ 116,642 36.1% $ 39,963 20.7% $ 329,922 31.1% $ 56,488 10.7%income

GAAP incomefrom $ 89,179 27.6% $ 20,898 10.8% $ 243,571 23.0% $ 27,653 5.2%continuingoperations

Amortizationof acquired 83 0.0% 86 0.0% 332 0.0% 345 0.1%intangibleassets

Transition 22 0.0% 4,292 2.2% 7,975 0.8% 5,481 1.0%costs

COVID-19 110 0.0% 2,359 1.2% 1,245 0.1% 2,359 0.4%

Change incontingent - - - - - - (100) 0.0%consideration

Spin relatedstock-based 296 0.1% - - 738 0.1% - -compensation

CEO - - 2,252 1.2% - - (2,002) -0.4%separation

Tax effect ofnon-GAAP (119) 0.0% (2,427) -1.3% (2,400) -0.2% (1,642) -0.3%adjustments

Non-GAAPincome from $ 89,571 27.7% $ 27,460 14.2% $ 251,461 23.7% $ 32,094 6.1%continuingoperations

GAAP incomefromcontinuing $ 1.70 $ 0.38 $ 4.40 $ 0.50operationsper share -diluted

Amortizationof acquired - - 0.01 0.01intangibleassets

Transition - 0.08 0.14 0.10costs

COVID-19 - 0.04 0.02 0.04

Change incontingent - - - -consideration

Spin relatedstock-based 0.01 - 0.01 -compensation

CEO - 0.04 - (0.04)separation

Tax effect ofnon-GAAP - (0.04) (0.04) (0.03)adjustments

Non-GAAPincome fromcontinuing $ 1.71 $ 0.50 $ 4.54 $ 0.58operationsper share -diluted

SMITH & WESSON BRANDS, INC. AND SUBSIDIARIES

RECONCILIATION OF OPERATING CASH FLOW FROM CONTINUING OPERATIONS TO FREE CASHFLOW

(In thousands)

(Unaudited)

For the Three Months Ended For the Year Ended

April 30, 2021 April 30, 2020 April 30, 2021 April 30, 2020

Net cash providedby in operating $ 118,823 $ 107,472 $ 317,260 $ 80,835activities

Net cash used ininvesting (3,691) (1,277) (22,261) (12,084)activities

Receipts from note - (786) - (786)receivable

Free cash flow $ 115,132 $ 105,409 $ 294,999 $ 67,965

SMITH & WESSON BRANDS, INC. AND SUBSIDIARIES

RECONCILIATION OF GAAP INCOME FROM CONTINUING OPERATIONS TO NON-GAAP ADJUSTEDEBITDAS

(in thousands)

(Unaudited)

For the Three Months Ended For the Year Ended

April 30, 2021 April 30, 2020 April 30, 2021 April 30, 2020

GAAP incomefrom $ 89,179 $ 20,898 $ 243,571 $ 27,653continuingoperations

Interest 585 2,663 4,056 11,625expense

Income tax 26,929 11,522 74,394 11,522expense

Depreciationand 7,420 7,433 30,685 31,209amortization

Stock-basedcompensation 1,314 1,416 4,706 2,357expense

Change incontingent - - - (100)consideration

COVID-19 110 2,359 1,245 2,359

Transition 22 4,292 7,975 5,481costs

CEO - 1,037 - 627separation

Non-GAAPAdjusted $ 125,559 $ 51,620 $ 366,632 $ 92,733EBITDAS

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SOURCE Smith & Wesson Brands, Inc.