S&W 2015 first quarter results have published. Long gun sales are down 67.2% from the same quarter last year. Decreased demand for “Modern Sporing Rifles” were identified as a cause of the decline in long gun sales. I expect hunting rifle demand stayed the same, and so AR-15 sales likely decreased more than 67.2%. Handgun sales were down just 3.2%. The total decrease in sales was 22.9%, a decrease of $39.2 million. The share price closed down 11.2% yesterday.
SPRINGFIELD, Mass., Aug. 26, 2014 /PRNewswire/ — Smith & Wesson Holding Corporation (NASDAQ Global Select: SWHC), a leader in firearm manufacturing and design, today announced its financial results for the fiscal 2015 first quarter ended July 31, 2014.
First Quarter Fiscal 2015 Financial Highlights
- Net sales for the first quarter were $131.9 million, a decrease of $39.2 million from the first quarter last year, primarily due to lower sales of long guns, including modern sporting rifles, which drove 87% of the first quarter decline. As expected, sales of long guns, including modern sporting rifles, were negatively impacted by lower consumer demand. Handgun sales showed continued consumer demand for the company’s small concealed carry polymer pistols and revolvers, although those sales were more than offset by lower sales of large frame polymer pistols.
- Gross profit for the first quarter was $49.1 million, or 37.2% of net sales, compared with gross profit of $72.8 million, or 42.6% of net sales, for the comparable quarter last year. While gross profit margin was favorably impacted by the company’s acquisition of the assets of its principal injection molding supplier in May, total gross profit declined as a result of reduced sales volumes of modern sporting rifles and related decreases in fixed-cost absorption, combined with three fewer production days versus the first quarter last year.
- Operating expenses for the first quarter were $23.3 million, or 17.7% of net sales, compared with operating expenses of $24.8 million, or 14.5% of net sales, for the first quarter of 2014.
- Operating income for the first quarter was $25.8 million, or 19.5% of net sales, compared with operating income of $48.0 million, or 28.1% of net sales, for the first quarter of 2014.
- Income from continuing operations for the first quarter was $14.6 million, or $0.26 per diluted share, compared with income from continuing operations of $26.5 million, or $0.40 per diluted share, for the first quarter of 2014.
- Non-GAAP Adjusted EBITDAS from continuing operations for the first quarter was $33.6 million, compared with $55.2 million for the first quarter last year.
- Operating cash generated for the first quarter was $10.8 million. Internal capital spending totaled $14.6 million, and the company used an additional $24.1 million of cash to acquire the assets of its principal injection molding supplier.
- Cash and cash equivalents as of July 31, 2014 were $83.5 million, up from $68.9 million at April 30, 2014.
Jeffrey D. Buchanan, Smith & Wesson Holding Corporation Executive Vice President and Chief Financial Officer, stated, “We continued to add flexibility to our balance sheet in the first quarter by raising $75.0 million in proceeds through the issuance of our new 5.000% Senior Notes due 2018. We also leveraged our strong cash position to generate value for our stockholders by completing all share repurchases authorized by our Board of Directors under our share repurchase program. During the quarter, we repurchased $30.0 million of our common stock. Since December 2012, we have repurchased a total of 14.4 million shares of our common stock for $165.0 million, representing a total reduction in shares outstanding of 21.7%.”
James Debney, Smith & Wesson Holding Corporation President and Chief Executive Officer, stated, “Our results for the first quarter met our expectations and reflected continued execution on our strategy. We launched our new M&P®22 Compact, a tactical rimfire pistol that delivers the popular features of our M&P centerfire pistol in a smaller scale version. We also joined forces with Crimson Trace® to introduce enhanced, integrated laser sighting systems for our popular line of M&P BODYGUARD® handguns. Operationally, we completed the acquisition of the assets of our principal injection molding supplier, an action that strengthened our business and contributed favorably to gross margin and net income in the quarter.”
Debney continued, “We believe that the current environment reflects high inventories industry-wide resulting from channel replenishment that occurred following an earlier surge in consumer buying. That environment, combined with typical seasonality that slows consumer buying activity during the summer, is causing us to lower our financial outlook for fiscal 2015. We expect that these conditions will have the largest impact on our second fiscal quarter, especially on sales of our modern sporting rifles, and that we will return to a more normalized environment in the second half of our current fiscal year. We believe that our operational and financial strength and flexibility will benefit us in the short term, and we remain focused on our strategy to take handgun market share. We expect the industry will continue to deliver growth over the long term.”
The company expects net sales for the second quarter of fiscal 2015 to be between $100.0 million and $110.0 million and GAAP earnings per diluted share from continuing operations of between $0.04 and $0.08.
Fiscal 2015 net sales are anticipated to be between $530.0 million and $540.0 million. The company anticipates GAAP earnings per diluted share from continuing operations of between $0.89 and $0.94 for fiscal 2015. The company believes that results within this range would generate a cash balance at the end of fiscal 2015 in excess of $125.0 million.