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Smith & Wesson Had Record Year
JUNE 16, 2006 --
(11:30) Smith & Wesson Holdings (SWB) reported revenues for fiscal 2006 increased 27.4% over the previous fiscal year. Firearms sales for the fiscal year grew 29.8% over the previous fiscal year, reflecting a 69.0% increase in pistol sales and a 13.7% increase in revolver sales.
FY06 net income of $8.7 million was $3.5 million higher than for the previous fiscal year. The results for FY06 also included $2.1 million in stock option expense relative to FAS 123® compared to $626,000 for FY05.
4Q net product sales were a record $51.9 million, a 44.1% increase. Net income for the quarter was $4.2 million, compared to $1.8 million in 4Q05.
Gross margin of 31.0% for FY06 was 150 basis points lower than FY05. However, FY05 gross profit included $4.1 million in one-time insurance benefits. Without the impact of that event, gross profit and margin for FY05 would have been 29.3%. The gross margin for the fourth quarter was 34.8%, a substantial improvement over the gross margin for the first three quarters of FY06. The improvement in 4Q06 was attributable to the first full quarter of M&P pistol shipments and increased handgun production, driven by improved labor efficiency.
Michael Golden, CEO, said, "Our results for the year reflected solid execution on the strategy to grow our core handgun business, to diversify our company, and to enter into new markets with new products. I am extremely pleased with our progress in establishing Smith & Wesson as a global supplier in the business of safety, security, protection and sport.
"Our 27.4% increase in revenue was driven by a number of initiatives. Our focus on securing business from the federal government was highly successful and resulted in four orders during the fiscal year from the United States military for shipment to the Afghanistan National Police. These orders intensified our drive to seek out opportunities with other federal government agencies.
"We restructured our law enforcement sales organization during the year and introduced the Military & Police (M&P) pistol and rifle lines. These actions were intended to further penetrate domestic law enforcement markets with a new line of products designed especially to address the needs of professionals. As of today, we have received commitments for the M&P pistol from 58 separate law enforcement agencies. Twenty-three of those agencies placed orders for the new M&P polymer pistol; another 29 have approved the M&P for purchase, pending budgetary considerations; and an additional six have placed the M&P on their approved lists for on- or off-duty carry.
"We delivered excellent results for fiscal 2006 in both the international and consumer markets. We continued to establish the Smith & Wesson brand, and our products with military and law enforcement agencies around the world, with international sales increasing by 58.7% for the year. On the consumer front, we transitioned from a sales network of independent manufacturer's representatives to a directly employed, Smith & Wesson sales force. Consumer sales grew 32% in the fourth quarter of fiscal 2006 and were up 19% for the fiscal year. We attribute growth in both of these key markets to a strong and expanding product portfolio, combined with a sales force dedicated to selling only Smith & Wesson products."
Golden's strategy calls for diversification into new markets with new products. Market research indicated that the Smith & Wesson brand could be successfully transferred into new markets, including the long-gun market for tactical rifles, hunting rifles and shotguns. SWB responded quickly by introducing its new M&P tactical rifle series in January 2006. Shortly after the new product launch, it received an initial order from the Las Vegas Police Department and continues to receive support from the sporting goods channel.
SWB signed three new licensing partners in FY06 for apparel, gun safes and gun cleaning equipment.
SWB increased its FY07 sales guidance to $180-$186 million, which would be a 14%-18% increase over FY06 sales. Net income is now anticipated to be $12.5-$13.5 million. This would represent a 44%-55% increase in net income over FY06.
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