Smith & Wesson Brands(US:SWBI)2024-09-05 20:15Financial Performance - Net sales for the three months ended July 31, 2024, were $88.3 million, a decrease of $25.9 million, or 22.7%, compared to the same quarter last year[62] - The company reported a net loss of $2.1 million, or $0.05 per share, compared to net income of $3.1 million, or $0.07 per diluted share, in the prior year[62] - Operating loss for the quarter was $1.9 million, a decrease of $6.2 million from the prior year, resulting in an operating margin of -2.1%[69] Sales Performance - Handgun sales decreased by $32.8 million, or 38.1%, primarily due to lower consumer demand, despite new product shipments representing 36.1% of handgun sales[64] - Long gun sales increased by $5.9 million, or 31.6%, driven by new product shipments that accounted for 70.0% of long gun sales[65] Gross Margin and Expenses - Gross margin improved to 27.4% from 26.6% in the comparable quarter last year, attributed to favorable fixed-cost absorption and a price increase[66] - Research and development expenses rose by $716,000, or 39.8%, due to higher materials and testing costs associated with new product development[68] Cash Flow and Capital Expenditures - Cash used in operating activities was $30.8 million, significantly impacted by a $29.3 million increase in inventory[75] - The company expects to spend between $25 million and $30 million on capital expenditures in fiscal 2025[76] - Cash provided by financing activities was $10.2 million, primarily from $30 million in borrowings under the revolving line of credit[77] Debt and Financing - As of July 31, 2024, the company had $70.0 million of borrowings outstanding on the Revolving Line, bearing interest at an average rate of 7.19%[80] - The Missouri Lease amounts to $46.2 million with an effective interest rate of approximately 5.0%, payable in 240 monthly installments through fiscal 2039[78] - The company has an option to increase the Revolving Line by an aggregate amount not exceeding $50.0 million, subject to certain terms and conditions[79] - The credit agreement includes financial covenants related to maintaining maximum leverage and minimum debt service coverage, with compliance as of July 31, 2024[80] Shareholder Returns - The company repurchased 870,669 shares of common stock for $12.9 million during the three months ended July 31, 2024[81] - A regular quarterly dividend of $0.13 per share was authorized for stockholders, payable on October 3, 2024[81] Liquidity and Capital Resources - As of July 31, 2024, the company had $35.5 million in cash and cash equivalents on hand, indicating adequate capital resources for at least the next 12 months[83] - The company may face limitations on capital requirements due to factors such as net sales and product development spending[82] Lease Agreements - The company recognized $878,000 of related income from the Missouri Lease during the three months ended July 31, 2024[78] - The Missouri Sublease was terminated as of January 1, 2024, following an amendment in July 2022 that increased the subleased space to 64.7% of the facility[78]