Smith & Wesson Holding Corp Reports Operating Results (10-Q)
Smith & Wesson Holding Corp has a market cap of $231.4 million; its shares were traded at around $3.86 with a P/E ratio of 9 and P/S ratio of 0.6. SWHC is in the portfolios of Carl Icahn of Icahn Capital Management LP.
Highlight of Business Operations: Net product sales for the three months ended July 31, 2010 were $94,884,000, a $6,804,000, or 6.7%, decrease from net product sales of $101,688,000 for the three months ended July 31, 2009. Firearm product sales decreased for the three months by $22,107,000, or 23.3%, from the three months ended July 31, 2009. Within firearms, all handgun and tactical rifle product lines were flat or reduced from the prior year quarter as the consumer market has now returned to more normal levels following the significant increase in demand that started in our second quarter of fiscal 2009. Hunting products increased 2.4% over the prior year quarter on improved black powder product sales. Perimeter security sales were $17,121,000 for the three months ended July 31, 2010 compared with $2,115,000 for the three months ended July 31, 2009. The three months ended July 31, 2009 included only the 11 days subsequent to our July 20, 2009 acquisition of USR.
Net income for the three months ended July 31, 2010 was $6,211,000, or $0.10 per fully diluted share, compared with $12,349,000, or $0.21 per fully diluted share, for the three months ended July 31, 2009.
The order backlog as of July 31, 2010 was $99,269,000, of which $74,849,000 related to firearms, with the balance remaining attributed to perimeter security. The firearm order backlog was $102,643,000 lower than at the end of the comparable quarter last year as a result of the return to more normal consumer demand levels than experienced in the year ago period. Firearm order backlog declined $33,153,000 while perimeter security backlog declined $10,676,000 during the quarter.
Sales into our sporting goods distribution channel were approximately $65,920,000 for the three months ended July 31, 2010, a decrease of 20.9% over the comparable quarter last year. Law enforcement firearm sales of $5,612,000 were 21.5% lower than in the comparable quarter last year. Federal government firearm sales of $1,061,000 were flat to the comparable quarter last year. International firearm sales for the three months ended July 31, 2010 of $4,445,000 decreased 41.9% from the comparable quarter last year. Perimeter security corporate sales were $2,533,000 while federal government sales were $14,028,000 for the three months ended July 31, 2010.
Operating expenses in the firearm division for the three months ended July 31, 2010 increased over the comparable quarter last year because of spending on our investigation of the FCPA and SEC matters and, to a lesser extent, on improvements made to our customer acceptance process, which totaled $2,629,000. The remaining increase was due to $598,000 of increased advertising and marketing in support of new product launches, $493,000 of increased bad debt expense, $178,000 of increased computer applications maintenance and upgrades, and $39,000 of increased research and development testing materials, offset by $1,413,000 of reduced profit sharing.
Other income for the three month period ended July 31, 2010 included $2,530,000 in fair value adjustments related to the contingent consideration recorded in connection with our acquisition of USR, a $671,000 reduction from the amount recorded during the comparable period last year. In addition, during the current quarter, we recorded a $499,000 unrealized gain on foreign currency hedges.
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