Smith & Wesson Holding Corporation announced financial results for the fiscal 2015 third quarter ended January 31, 2015. Total net sales were $130.6 million, a decrease of 10.5% from net sales of $145.9 million for Q3 last year.
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Revenue exceeded the high end of the company's stated guidance range as a result of order strength from distributors and key retailers in January 2015.
Firearm division net sales for the third quarter totaled $124.5 million, a decrease of 14.7% from the comparable quarter last year. The company believes that during the quarter a portion of the consumer demand for handguns and long guns was satisfied with excess industry channel inventory.
Accordingly, net sales of the company's handguns declined $6.8 million, or 6.8%, and net sales of the company's long guns declined $13.5 million, or 39.8%, from the comparable quarter last year.
Accessories division net sales for the third quarter were $6.1 million, or 4.6% of total net sales. The company's accessories division is comprised entirely of Battenfeld Technologies, Inc. (BTI), which was acquired on December 11, 2014. Therefore, accessories division net sales reflect only a partial quarter of revenue.
Gross profit margin for the third quarter was 33.6% compared with gross profit margin of 40.2% for the third quarter last year. The decline was a result of reduced firearm manufacturing volumes, unfavorable product mix changes, increased promotions, and decreased fixed-cost absorption, partially offset by favorable spending relative to sales volumes.
Amortization of the inventory step-up related to the acquisition of BTI caused a 1.4 percentage point reduction in gross profit. Excluding that accounting-related effect, gross margin for the quarter would have been 35%.
Operating expenses for the third quarter were $28.1 million, or 21.5% of total net sales, compared with operating expenses of $27.5 million, or 18.9% of net sales, for the third quarter last year when the company did not have an accessories division.
Third quarter operating expenses now include those ongoing operating expenses related to BTI operations as well as $2.9 million in amortization of acquired intangibles and other acquisition-related costs.
Operating income for the third quarter was $15.7 million, or 12.0% of total net sales, compared with $31.1 million, or 21.3% of net sales, for the third quarter last year. Excluding the $4.8 million in acquisition-related expenses noted above, total company operating income for the three months ended January 31, 2015 was $20.5 million, or 15.7% of total net sales.
Income from continuing operations for the third quarter was $8.2 million, or $0.15 per diluted share, compared with $20.1 million, or $0.35 per diluted share, for the third quarter last year.
Non-GAAP income from continuing operations for the third quarter was $0.20 per diluted share, compared with $0.35 per diluted share for the third quarter last year.
Adjusted EBITDAS from continuing operations for the third quarter was $28.7 million, or 22.0% of net sales, compared with $37.5 million, or 25.7% of net sales, for the third quarter last year.
Cash flow from operations was $33.4 million, although cash decreased by $5.4 million for the third quarter driven primarily by the $36.2 million of cash used for the BTI acquisition. ■