American Outdoor Brands Corporation Reports First Quarter Fiscal 2020 Financial Results

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August 29, 2019 at 4:05 PM EDT

American Outdoor Brands Corporation Reports First Quarter Fiscal 2020 Financial Results

SPRINGFIELD, Mass., Aug. 29, 2019 /PRNewswire/ -- American Outdoor Brands Corporation (NASDAQ Global Select: AOBC), one of the world's leading providers of firearms and quality products for the shooting, hunting, and rugged outdoor enthusiast, today announced financial results for the first quarter fiscal 2020, ended July 31, 2019.

American Outdoor Brands Corporation logo unveiled December 13, 2016.

First Quarter Fiscal 2020 Financial Highlights

  • Quarterly net sales were $123.7 million compared with $138.8 million for the first quarter last year, a decrease of  10.9%.
  • Gross margin for the quarter was 38.7% compared with 37.8% for the comparable quarter last year. 
  • Quarterly GAAP net loss was $2.1 million, or $(0.04) per diluted share, compared with net income of $7.6 million, or $0.14 per diluted share, for the comparable quarter last year.
  • Quarterly non-GAAP net income was $1.7 million, or $0.03 per diluted share, compared with $11.7 million, or $0.21 per diluted share, for the comparable quarter last year. GAAP to non-GAAP adjustments to net income exclude a number of acquisition-related costs and other costs. For a detailed reconciliation, see the schedules that follow in this release.
  • Quarterly non-GAAP Adjusted EBITDAS was $17.5 million, or 14.1% of net sales, compared with $28.4 million, or 20.4% of net sales, for the comparable quarter last year.

James Debney, American Outdoor Brands Corporation President and Chief Executive Officer, commented, "Our results for the first quarter reflected our ability to remain focused on executing our strategic plan, while addressing the challenges of ongoing softness in the firearms market.  During the quarter, we achieved significant milestones at our new Missouri Campus, which houses our Logistics & Customer Services Division and Outdoor Products & Accessories Division, and serves as the centralized logistics, warehousing, and distribution operation for our entire business.  Those milestones included the successful transfer of our entire firearms shipping operations to the new facility, as well as the consolidation and subsequent shuttering of our Jacksonville, Florida business.  Our Missouri Campus is an important strategic initiative that will ultimately allow us to lower our costs, better serve our customers, and achieve our objective to be the leading provider of quality products for the shooting, hunting, and rugged outdoor enthusiast."

Jeff Buchanan, Executive Vice President, Chief Financial Officer, and Chief Administrative Officer, commented, "At the end of the quarter, our balance sheet remained strong with cash of $30.7 million and total net borrowings of $149.1 million dollars. That, combined with our twelve-month trailing EBITDAS, translates to a net leverage ratio of just 1.5."

Financial Outlook

AMERICAN OUTDOOR BRANDS CORPORATION

NET SALES AND EARNINGS PER SHARE GUIDANCE, INCLUDING GAAP TO NON-GAAP RECONCILIATION
(Unaudited)











Range for the Three Months Ending October 31, 2019


Range for the Year Ending April 30, 2020


Net sales (in thousands)

$  140,000


$  150,000


$  630,000


$  650,000











GAAP (loss)/income per share - diluted

$      (0.04)


$           —


$        0.41


$        0.49


Amortization of acquired intangible assets

0.09


0.09


0.36


0.36


Diode recall



(0.01)


(0.01)


Transition costs

0.01


0.01


0.06


0.06


Tax effect of non-GAAP adjustments

(0.03)


(0.03)


(0.11)


(0.11)


Non-GAAP income per share - diluted

$        0.03


$        0.07


$        0.70

 * 

$        0.78

 * 










* Does not foot due to rounding.

Conference Call and Webcast
The company will host a conference call and webcast today, August 29, 2019, to discuss its first quarter fiscal 2020 financial and operational results. Speakers on the conference call will include James Debney, President and Chief Executive Officer, and Jeffrey D. Buchanan, Executive Vice President, Chief Financial Officer, and Chief Administrative Officer. The conference call may include forward-looking statements. The conference call and webcast will begin at 5:00 p.m. Eastern Time (2:00 p.m. Pacific Time). Those interested in listening to the conference call via telephone may call directly at (844) 309-6568 and reference conference identification number 3384868.  No RSVP is necessary.  The conference call audio webcast can also be accessed live  on the company's website at www.aob.com, under the Investor Relations section.

Reconciliation of U.S. GAAP to Non-GAAP Financial Measures
In this press release, certain non-GAAP financial measures, including "non-GAAP net income," "Adjusted EBITDAS," and "free cash flow" are presented. From time-to-time, the company considers and uses these supplemental measures of operating performance in order to provide the reader with an improved understanding of underlying performance trends.  The company believes it is useful for itself and the reader to review, as applicable, both (1) GAAP measures that include (i) amortization of acquired intangible assets, (ii) transition costs, (iii) fair value inventory step-up expense, (iv) recall related expenses, (v) the tax effect of non-GAAP adjustments, (vi) net cash (used in)/provided by operating activities, (vii) net cash used in investing activities, (viii) acquisition of businesses, net of cash acquired, (ix) receipts from note receivable, (x) interest expense (xi) income tax expense, (xii) depreciation and amortization, and (xiii) stock-based compensation expenses, ; and (2) the non-GAAP measures that exclude such information. The company presents these non-GAAP measures because it considers them an important supplemental measure of its performance. The company's definition of these adjusted financial measures may differ from similarly named measures used by others. The company believes these measures facilitate operating performance comparisons from period to period by eliminating potential differences caused by the existence and timing of certain expense items that would not otherwise be apparent on a GAAP basis.  These non-GAAP measures have limitations as an analytical tool and should not be considered in isolation or as a substitute for the company's GAAP measures.  The principal limitations of these measures are that they do not reflect the company's actual expenses and may thus have the effect of inflating its financial measures on a GAAP basis.

About American Outdoor Brands Corporation
American Outdoor Brands Corporation (NASDAQ Global Select: AOBC) is a provider of quality products for shooting, hunting, and rugged outdoor enthusiasts in the global consumer and professional markets. The Company reports two segments: Firearms and Outdoor Products & Accessories.  Firearms manufactures handgun, long gun, and suppressor products sold under the iconic Smith & Wesson®, M&P®, Thompson/Center Arms™, and Gemtech® brands, as well as provides forging, machining, and precision plastic injection molding services. AOB Outdoor Products & Accessories is an industry leading provider of shooting, reloading, gunsmithing, gun cleaning supplies, specialty tools and cutlery, and electro-optics products and technology for firearms. This segment produces innovative, top quality products under the brands Caldwell®; Crimson Trace®; Wheeler®; Tipton®; Frankford Arsenal®; Lockdown®; BOG®; Hooyman®; Smith & Wesson® Accessories; M&P® Accessories; Thompson/Center Arms™ Accessories; Performance Center® Accessories; Schrade®; Old Timer®; Uncle Henry®; Imperial®; BUBBA®; UST®; and LaserLyte.  For more information on American Outdoor Brands Corporation, call (844) 363-5386 or log on to www.aob.com.  

Safe Harbor Statement
Certain statements contained in this press release 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, among others, our long-term strategy of being the leading provider of quality products for the shooting, hunting, and rugged outdoor enthusiast market; our belief that our new Logistics & Customer Services facility in Missouri, which will serve as the centralized logistics, warehousing, and distribution operation for all of our products, will allow us to lower our costs, better serve our customers, and achieve our objective to be the leading provider of quality products for the shooting, hunting, and rugged outdoor enthusiast; and our expectations for net sales, GAAP income per diluted share, acquisition-related costs, amortization of acquired intangible assets, fair value inventory step-up and backlog expense, tax effect of non-GAAP adjustments, and non-GAAP income per diluted share for the second quarter of fiscal 2020 and for fiscal 2020.  We caution that these statements are qualified by important risks, uncertainties and other factors that could cause actual results to differ materially from those reflected by such forward-looking statements.  Such factors include, among others, economic, social, political, legislative, and regulatory factors; the potential for increased regulation of firearms and firearm-related products; actions of social activists that could have an adverse effect on our business; the impact of lawsuits; the demand for our products; the state of the U.S. economy in general and the firearm industry in particular; general economic conditions and consumer spending patterns; our competitive environment; the supply, availability and costs of raw materials and components; the impact of protectionist tariffs and trade wars; speculation surrounding fears of terrorism and crime; our anticipated growth and growth opportunities; our ability to increase demand for our products in various markets, including consumer, law enforcement, and military channels, domestically and internationally; our penetration rates in new and existing markets; our strategies; our ability to maintain and enhance brand recognition and reputation; risks associated with the establishment of our new 630,000 square foot Logistics & Customer Services facility in Missouri; our ability to introduce new products; the success of new products; our ability to expand our markets; our ability to integrate acquired businesses in a successful manner; the general growth of our outdoor products and accessories business; the potential for cancellation of orders from our backlog; and other risks detailed from time to time in our reports filed with the SEC, including our Annual Report on Form 10-K for the fiscal year ended April 30, 2019.

Contact: Liz Sharp, VP Investor Relations
American Outdoor Brands Corporation
(413) 747-6284
lsharp@aob.com    

 

AMERICAN OUTDOOR BRANDS CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)



As of:


July 31, 2019


April 30, 2019


(In thousands, except par value and share data)

 ASSETS

 Current assets:




Cash and cash equivalents

$    30,732


$     41,015

Accounts receivable, net of allowance for doubtful accounts of $2,294 on July 31, 2019 and $1,899 on April 30, 2019

70,242


84,907

Inventories

195,448


163,770

Prepaid expenses and other current assets

9,350


6,528

Income tax receivable 

2,140


2,464

Total current assets

307,912


298,684

 Property, plant, and equipment, net

174,355


183,268

 Intangibles, net

87,113


91,840

 Goodwill

182,267


182,269

 Other assets

20,808


10,728


$ 772,455


$   766,789

 LIABILITIES AND STOCKHOLDERS' EQUITY

 Current liabilities:




Accounts payable

$    29,549


$     35,584

Accrued expenses and deferred revenue

35,750


39,322

Accrued payroll and incentives

10,598


21,473

Accrued income taxes

248


175

Accrued profit sharing

3,516


2,830

Accrued warranty

4,987


5,599

Current portion of notes and loans payable

79,800


6,300

Total current liabilities

164,448


111,283

 Deferred income taxes 

9,683


9,776

 Notes and loans payable, net of current portion

99,467


149,434

 Finance lease payable, net of current portion

40,708


45,400

Other non-current liabilities

15,091


6,452

Total liabilities

329,397


322,345

 Commitments and contingencies 




 Stockholders' equity:




Preferred stock, $.001 par value, 20,000,000 shares authorized, no shares issued or outstanding


Common stock, $.001 par value, 100,000,000 shares authorized, 72,987,388 shares issued and 54,820,526 shares outstanding on July 31, 2019 and 72,863,624 shares issued and54,696,762 shares outstanding on April 30, 2019

73


73

Additional paid-in capital 

264,230


263,180

Retained earnings

400,838


402,946

Accumulated other comprehensive income

292


620

Treasury stock, at cost (18,166,862 shares on July 31, 2019 and April 30, 2019)

(222,375)


(222,375)

Total stockholders' equity

443,058


444,444


$ 772,455


$   766,789

 

AMERICAN OUTDOOR BRANDS CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME








For the Three Months Ended



July 31, 2019


July 31, 2018



(Unaudited)



(In thousands, except per share data)

Net sales


$ 123,665


$ 138,833

Cost of sales


75,811


86,411

Gross profit


47,854


52,422

Operating expenses:





Research and development


3,229


2,810

Selling, marketing, and distribution


16,773


11,615

General and administrative


26,709


24,521

Total operating expenses


46,711


38,946

Operating income


1,143


13,476

Other (expense)/income, net:





Other income/(expense), net 


5


(18)

Interest expense, net


(2,627)


(2,001)

Total other (expense)/income, net


(2,622)


(2,019)

(Loss)/income from operations before income taxes


(1,479)


11,457

Income tax expense


629


3,812

Net (loss)/income


(2,108)


7,645

Net (loss)/income per share:





Basic


$       (0.04)


$        0.14

Diluted


$       (0.04)


$        0.14

Weighted average number of common shares outstanding:





Basic


54,783


54,345

Diluted


54,783


54,931

 

AMERICAN OUTDOOR BRANDS CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)






For the Three Months Ended


July 31, 2019


July 31, 2018


(In thousands)

Cash flows from operating activities:




Net (loss)/income

$       (2,108)


$       7,645

Adjustments to reconcile net income to net cash (used in)/provided by operating activities:




Depreciation and amortization 

14,346


12,852

Loss on sale/disposition of assets


7

Provision for losses on notes and accounts receivable

634


55

Deferred income taxes


(1,520)

Stock-based compensation expense

1,588


1,990

Changes in operating assets and liabilities:




Accounts receivable

14,031


15,208

Inventories

(31,678)


(13,538)

Prepaid expenses and other current assets

(2,822)


(2,363)

Income taxes

397


3,892

Accounts payable

(6,015)


(3,921)

Accrued payroll and incentives

(10,875)


(653)

Accrued profit sharing

686


254

Accrued expenses and deferred revenue

(6,675)


(8,568)

Accrued warranty

(612)


(656)

Other assets

428


(62)

Other non-current liabilities

(463)


17

Net cash (used in)/provided by operating activities

(29,138)


10,639

Cash flows from investing activities:




Payments to acquire patents and software

(123)


(190)

Proceeds from sale of property and equipment


1

Payments to acquire property and equipment

(3,695)


(6,919)

Net cash used in investing activities

(3,818)


(7,108)

Cash flows from financing activities:




Proceeds from loans and notes payable

25,000


Payments on finance lease obligation

(214)


(161)

Payments on notes and loans payable

(1,575)


(26,575)

Proceeds from exercise of options to acquire common stock


139

Payment of employee withholding tax related to restricted stock units

(538)


(556)

Net cash provided by/(used in) financing activities

22,673


(27,153)

Net decrease in cash and cash equivalents

(10,283)


(23,622)

Cash and cash equivalents, beginning of period

41,015


48,860

Cash and cash equivalents, end of period

$       30,732


$       25,238

Supplemental disclosure of cash flow information




Cash paid for:




Interest

$         1,690


$         1,220

Income taxes

$            235


$            484

 

RECONCILIATION OF GAAP FINANCIAL MEASURES TO NON-GAAP FINANCIAL MEASURES
(Dollars in thousands, except per share data)
(Unaudited)










For the Three Months Ended 


July 31, 2019


July 31, 2018


$


% of Sales


$


% of Sales

GAAP gross profit

$ 47,854


38.7%


$ 52,422


37.8%

Diode recall

(589)


-0.5%



Fair value inventory step-up



150


0.1%

Transition costs

620


0.5%



Non-GAAP gross profit

$ 47,885


38.7%


$ 52,572


37.9%









GAAP operating expenses

$ 46,711


37.8%


$ 38,946


28.1%

Amortization of acquired intangible assets

(4,770)


-3.9%


(5,446)


-3.9%

Transition costs

(466)


-0.4%



0.0%

Non-GAAP operating expenses

$ 41,475


33.5%


$ 33,500


24.1%









GAAP operating income

$   1,143


0.9%


$ 13,476


9.7%

Fair value inventory step-up


0.0%


150


0.1%

Diode recall

(589)


-0.5%



Amortization of acquired intangible assets

4,770


3.9%


5,446


3.9%

Transition costs

1,086


0.9%



Non-GAAP operating income

$   6,410


5.2%


$ 19,072


13.7%









GAAP net (loss)/income

$  (2,108)


-1.7%


$   7,645


5.5%

Fair value inventory step-up



150


0.1%

Amortization of acquired intangible assets

4,770


3.9%


5,446


3.9%

Diode recall

(589)


-0.5%



Transition costs

1,086


0.9%



Tax effect of non-GAAP adjustments

(1,422)


-1.1%


(1,550)


-1.1%

Non-GAAP net income

$   1,737


1.4%


$ 11,691


8.4%









GAAP net income per share - diluted

$    (0.04)




$      0.14



Fair value inventory step-up






Amortization of acquired intangible assets

0.09




0.10



Diode recall

(0.01)






Transition costs

0.02






Tax effect of non-GAAP adjustments

(0.03)




(0.03)



Non-GAAP net income per share - diluted

$      0.03




$      0.21



 

AMERICAN OUTDOOR BRANDS CORPORATION AND SUBSIDIARIES

RECONCILIATION OF NET OPERATING CASH FLOW TO FREE CASH FLOW
(In thousands)
(Unaudited)






For the Three Months Ended


July 31, 2019


July 31, 2018

Net cash (used in)/provided by operating activities

$   (29,138)


$    10,639

Net cash used in investing activities

(3,818)


(7,108)

Free cash flow

$   (32,956)


$      3,531

 

AMERICAN OUTDOOR BRANDS CORPORATION AND SUBSIDIARIES

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

(in thousands)

(Unaudited)







For the Three Months Ended



July 31, 2019


July 31, 2018






GAAP net (loss)/income


$           (2,108)


$             7,645

Interest expense


2,763


2,031

Income tax (benefit)/expense


629


3,812

Depreciation and amortization


14,092


12,744

Stock-based compensation expense


1,588


1,989

Diode Recall


(589)


Fair value inventory step-up



150

Transition costs


1,086


Non-GAAP Adjusted EBITDAS


$          17,461


$          28,371

 

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SOURCE American Outdoor Brands Corporation