SMITH & WESSON BRANDS, INC. - FORM 8-K

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EX-99.1 - EX-99.1 - SMITH & WESSON BRANDS, INC.	d408290dex991.htm

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

September 6, 2012

Date of Report (Date of earliest event reported)

Smith & Wesson Holding Corporation

(Exact Name of Registrant as Specified in Charter)

Nevada

001-31552

87-0543688

(State or Other Jurisdiction

of Incorporation)

(Commission

File Number)

(IRS Employer

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))

Item 2.02. Results of Operations and Financial Condition.

As described in Item 7.01, we are furnishing this Report on Form 8-K in connection with the disclosure of information during a conference call and webcast on September 6, 2012 discussing our first quarter fiscal 2013 financial results. The disclosure provided in Item 7.01 of this Report on Form 8-K is hereby incorporated by reference into this Item 2.02.

The information in this Report on Form 8-K (including the exhibit) 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.

Item 7.01. Regulation FD Disclosure.

We are furnishing this Report on Form 8-K in connection with the disclosure of information during a conference call and webcast on September 6, 2012 discussing our first quarter fiscal 2013 financial results. The transcript of the conference call and webcast is included as Exhibit 99.1 to this Report on Form 8-K.

The information in this Report on Form 8-K (including the exhibit) is furnished pursuant to Item 7.01 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. This Report on Form 8-K will not be deemed an admission as to the materiality of any information in the Report that is required to be disclosed solely by Regulation FD.

The text included with this Report on Form 8-K and the replay of the conference call and webcast on September 6, 2012 is available on our website located at www.smith-wesson.com, although we reserve the right to discontinue that availability at any time.

Certain statements contained in this Report on Form 8-K 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, but are not limited to, statements regarding our belief that we have the key components in place to deliver on opportunities for future profitable growth, including a strong portfolio of products that consumers desire, an operations team and suppliers that can deliver excellent performance, and an organization that has an ongoing commitment to lowering our costs and increasing our efficiency; our current outlook for our business; increasing our full year fiscal 2013 guidance; our expectation for our gross margins for the rest of the year; our expectation to see future increases in our selling and marketing expense as we focus on increasing market share; our expectations regarding capital expenditure spending in this fiscal year, including for capacity expansion investments as well as significant investments in the maintenance and health of our infrastructure and systems, particularly in operations and IT; our expectation that we will further intensify our efforts on capacity expansion and our outlook for capital expenditure spending in fiscal 2013; our plan to continue to look for more opportunities to purchase our bonds; our expectation that our working capital needs will increase as we continue to grow; our belief that our efforts to satisfy the requirements of our professional and international users translates to higher product performance for consumers as well; our expectations beyond fiscal 2013, including remaining focused on our core firearm business and our belief that multiple

opportunities exist for increasing revenue and reducing cost as well as implementing efficiency enhancements across our business; our success in achieving our goal of taking market share by stepping-up our presence and visibility with the U.S. consumer through a number of incremental advertising and marketing activities that will occur in the balance of the fiscal year; our ability to replenish buffer inventories of finished parts for our most popular products; our intent to remain focused on executing against clearly defined strategic initiatives that we believe will further enhance the performance of our firearms business; our belief regarding our ability to deliver particular levels of gross margins and operating income; our outlook for sales and earnings per diluted share for the second quarter of fiscal 2013 and for full year fiscal 2013 and for quarter-over-quarter and year-over-year revenue growth, including our belief that revenue in the second quarter of fiscal 2013 will nearly equal the first quarter of fiscal 2013; our expectations regarding our capacity in the second and third quarters of fiscal 2013; our outlook for our tax rate and share count; our expectation that we will be attending the CL King Best Ideas Conference in New York in September 2012 and will hold our annual shareholder meeting in Phoenix in October 2012; our outlook regarding our capacity, including our use of our hybrid model to achieve capacity increases and the factors enabling us to increase capacity; our outlook for gross margins; our success in achieving our goal of becoming the top polymer pistol provider; our expectation regarding run rate, including that it will be higher than in prior quarters; our plan to be fairly aggressive to gain market share; our expectations regarding firearm demand; our belief our pipeline of new products is very robust; our expectations regarding using cash going forward; our strategy to launch new products strategically; and our expectations regarding pricing actions. We caution that these statements are qualified by important factors that could cause actual results to differ materially from those reflected by such forward-looking statements. Such factors include the demand for our products; the costs and ultimate conclusion of certain legal matters, including the DOJ and SEC matters; the state of the U.S. economy; general economic conditions, and consumer spending patterns; the potential for increased gun control; speculation surrounding fears of terrorism and crime; our growth opportunities; our anticipated growth; our ability to increase demand for our products in various markets, including consumer, law enforcement, and military channels, domestically and internationally; the position of our hunting products in the consumer discretionary marketplace and distribution channel; our penetration rates in new and existing markets; our strategies; our ability to introduce new products; the success of new products; our ability to expand our markets; the potential for cancellation of orders from our backlog; the effects of the divestiture of our security solutions business on our core firearm business; and other risks detailed from time to time in our reports filed with the SEC, including our Form 10-K Report for the fiscal year ended April 30, 2012.

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.

In this Report on Form 8-K, a non-GAAP financial measure known as “Adjusted EBITDAS” is presented. From time-to-time, we consider and use Adjusted EBITDAS as a supplemental measure of operating performance in order to provide the reader with an improved understanding of underlying performance trends. Adjusted EBITDAS excludes the effects of interest expense, income taxes, depreciation of tangible fixed assets, amortization of intangible assets, stock-based employee compensation expense, loss on the sale of discontinued operations, DOJ and SEC investigation costs, and certain other transactions. See the reconciliations of GAAP Net Income below for detailed explanations of the amounts excluded from and included in net income to arrive at Adjusted EBITDAS for the three, six, and 12-month periods ended July 31, 2012 and July 31, 2011. Adjusted or non-GAAP financial measures provide investors and us with supplemental measures of operating performance and trends that facilitate comparisons between periods before, during, and after certain items that would not otherwise be apparent on a GAAP basis. Adjusted financial measures are not, and should not be viewed as, a substitute for GAAP results. Our definition of these adjusted financial measures may differ from similarly named measures used by others.

SMITH & WESSON HOLDING CORPORATION AND SUBSIDIARIES

RECONCILIATION OF GAAP NET INCOME TO NON-GAAP ADJUSTED EBITDAS (Unaudited)


	For the Three Months Ended July 31, 2012:									For the Three Months Ended July 31, 2011:
	GAAP			Adjustments			Adjusted			GAAP			Adjustments			Adjusted
Net sales	$	135,995		$	—		$	135,995		$	91,730		$	—		$	91,730
Cost of sales		84,702			(3,369	)(1)		81,333			65,213			(3,971	)(9)		61,242

Gross profit		51,293			3,369			54,662			26,517			3,971			30,488

Operating expenses:
Research and development		1,143			(28	)(1)		1,115			1,338			(59	)(9)		1,279
Selling and marketing		6,828			(62	)(1)		6,766			8,125			(84	)(9)		8,041
General and administrative		12,026			(1,339	)(2)		10,687			11,520			(2,477	)(3)		9,043

Total operating expenses		19,997			(1,429	)		18,568			20,983			(2,620	)		18,363

Operating income from continuing operations		31,296			4,798			36,094			5,534			6,591			12,125

Other income/(expense):
Other income/(expense), net		—			—			—			34			—			34
Interest income		368			(317	)(6)		51			403			(320	)(6)		83
Interest expense		(1,987	)		1,987	(4)		—			(1,941	)		1,941	(4)		—

Total other income/(expense), net		(1,619	)		1,670			51			(1,504	)		1,621			117

Income from continuing operations before income taxes		29,677			6,468			36,145			4,030			8,212			12,242
Income tax expense		10,807			(10,807	)(5)		—			1,753			(1,753	)(5)		—

Income from continuing operations		18,870			17,275			36,145			2,277			9,965			12,242
Discontinued operations:
Loss from operations of discontinued security solutions division		(1,682	)		1,161	(7)		(521	)		(2,702	)		723	(8)		(1,979	)
Income tax benefit		(599	)		599	(5)		—			(1,216	)		1,216	(5)		—

Loss on discontinued operations		(1,083	)		562			(521	)		(1,486	)		(493	)		(1,979	)

Net income/comprehensive income	$	17,787		$	17,837		$	35,624		$	791		$	9,472		$	10,263

(1)	To exclude depreciation and amortization.

(2)	To exclude depreciation, amortization, stock-based compensation expense, and DOJ/SEC costs and related profit sharing impacts of DOJ/SEC.

(3)	To exclude depreciation, amortization, stock-based compensation expense, plant consolidation costs, and DOJ/SEC costs and related profit sharing impacts of DOJ/SEC.

(4)	To exclude interest expense.

(5)	To exclude income tax expense.

(6)	To exclude intercompany interest income.

(7)	To exclude loss on sale of discontinued operations, interest expense, and stock-based compensation expense.

(8)	To exclude depreciation, amortization, interest expense, and stock-based compensation expense.

(9)	To exclude depreciation, amortization, and plant consolidation costs.

SMITH & WESSON HOLDING CORPORATION AND SUBSIDIARIES

RECONCILIATION OF GAAP NET INCOME TO ADJUSTED EBITDAS (Unaudited)


	Trailing Six Months Ended, July 31, 2012									Trailing Twelve Months Ended, July 31, 2012
	GAAP			Adjustments			Adjusted			GAAP			Adjustments			Adjusted
Net sales	$	265,838			—		$	265,838		$	456,262			—		$	456,262
Cost of sales		167,682		$	(7,104	)(1)		160,578			303,496		$	(13,952	)(1)		289,544

Gross profit		98,156			7,104			105,260			152,766			13,952			166,718

Operating expenses:
Research and development		2,116			(41	)(1)		2,075			4,349			(126	)(1)		4,223
Selling and marketing		13,323			(118	)(1)		13,205			30,021			(255	)(1)		29,766
General and administrative		25,755			(3,007	)(3)		22,748			47,716			(7,108	)(2)		40,608

Total operating expenses		41,194			(3,166	)		38,028			82,086			(7,489	)		74,597

Operating income from continuing operations		56,962			10,270			67,232			70,680			21,441			92,121

Other income/(expense):
Other income/(expense), net		16			—			16			44			—			44
Interest income		677			(617	)(6)		60			1,470			(1,340	)(6)		130
Interest expense		(3,426	)		3,426	(4)		—			(7,532	)		7,531	(4)		(1	)

Total other income/(expense), net		(2,733	)		2,809			76			(6,018	)		6,191			173

Income from continuing operations before income taxes		54,229			13,079			67,308			64,662			27,632			92,294
Income tax expense		17,542			(17,542	)(5)		—			21,634			(21,634	)(5)		—

Income from continuing operations		36,687			30,621			67,308			43,028			49,266			92,294
Discontinued operations:
Income/(loss) from operations of discontinued security solutions division		(9,321	)		7,221	(7)		(2,100	)		(14,925	)		8,759	(7)		(6,166	)
Income tax benefit		(2,889	)		2,889	(5)		—			(4,999	)		4,999	(5)		—

Income/(loss) on discontinued operations		(6,432	)		4,332			(2,100	)		(9,926	)		3,760			(6,166	)

Net income/comprehensive income	$	30,255		$	34,953		$	65,208		$	33,102		$	53,026		$	86,128

(1)	To eliminate depreciation, amortization, and plant consolidation costs.

(2)	To eliminate depreciation, amortization, stock-based compensation expense, plant consolidation costs, severance benefits for our former President and CEO, and DOJ/SEC costs and related profit sharing impacts of DOJ/SEC.

(3)	To eliminate depreciation, amortization, stock-based compensation expense, plant consolidation costs, and DOJ/SEC costs and related profit sharing impacts of DOJ/SEC.

(4)	To eliminate interest expense.

(5)	To eliminate income tax expense.

(6)	To eliminate intercompany interest income.

(7)	To eliminate depreciation, amortization, interest expense, loss on sale of discontinued operations, and stock-based compensation expense.

SMITH & WESSON HOLDING CORPORATION AND SUBSIDIARIES

RECONCILIATION OF GAAP NET INCOME FOR TRAILING SIX AND TWELVE MONTHS (Unaudited)


	For the Three Months Ended,												Trailing Six Months Ended, July 31, 2012			Trailing Twelve Months Ended, July 31, 2012
	October 31, 2011			January 31, 2012			April 30, 2012			July 31, 2012			GAAP			GAAP
Net sales	$	92,299		$	98,125		$	129,843		$	135,995		$	265,838		$	456,262
Cost of sales		67,693			68,121			82,980			84,702			167,682			303,496

Gross profit		24,606			30,004			46,863			51,293			98,156			152,766

Operating expenses:
Research and development		1,241			992			973			1,143			2,116			4,349
Selling and marketing		8,636			8,062			6,495			6,828			13,323			30,021
General and administrative		11,295			10,666			13,729			12,026			25,755			47,716

Total operating expenses		21,172			19,720			21,197			19,997			41,194			82,086

Operating income from continuing operations		3,434			10,284			25,666			31,296			56,962			70,680

Other income/(expense):
Other income/(expense), net		20			8			16			—			16			44
Interest income		399			394			309			368			677			1,470
Interest expense		(2,477	)		(1,629	)		(1,439	)		(1,987	)		(3,426	)		(7,532	)

Total other income/(expense), net		(2,058	)		(1,227	)		(1,114	)		(1,619	)		(2,733	)		(6,018	)

Income from continuing operations before income taxes		1,376			9,057			24,552			29,677			54,229			64,662
Income tax expense		428			3,664			6,735			10,807			17,542			21,634

Income from continuing operations		948			5,393			17,817			18,870			36,687			43,028
Discontinued operations:
Income/(loss) from operations of discontinued security solutions division		(4,004	)		(1,600	)		(7,639	)		(1,682	)		(9,321	)		(14,925	)
Income tax benefit		(1,465	)		(645	)		(2,290	)		(599	)		(2,889	)		(4,999	)

Income/(loss) on discontinued operations		(2,539	)		(955	)		(5,349	)		(1,083	)		(6,432	)		(9,926	)

Net income/(loss)/comprehensive income/(loss)	$	(1,591	)	$	4,438		$	12,468		$	17,787		$	30,255		$	33,102

Item 9.01. Financial Statements and Exhibits.

(a)

Financial Statements of Business Acquired.

Not applicable.

(b)

Pro Forma Financial Information.

Not applicable.

(c)

Shell Company Transactions.

Not applicable.

(d)

Exhibits.


Exhibit Number		Exhibits

99.1		Transcript of conference call and webcast conducted on September 6, 2012.

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.

EXHIBIT INDEX

99.1	Transcript of conference call and webcast conducted on September 6, 2012.

SMITH & WESSON HOLDING CORPORATION

Date: September 6, 2012

/s/ Jeffrey D. Buchanan

Jeffrey D. Buchanan

Executive Vice President, Chief Financial Officer,

and Treasurer