Smith & Wesson Brands(US:SWBI)2022-06-23 20:41Financial Performance - Net sales for fiscal 2022 were $864.1 million, a decrease of $195.1 million, or 18.4%, compared to fiscal 2021, primarily due to decreased consumer demand [236]. - Gross profit decreased by 16.6% from the prior fiscal year, while gross margin increased by 0.9% to 43.3% due to price increases and a favorable product mix [236][245]. - Net income for fiscal 2022 was $194.5 million, or $4.08 per diluted share, down from $243.6 million, or $4.40 per diluted share in fiscal 2021 [236]. - Operating income from operations decreased by $68.0 million, or 21.3%, to $251.7 million, primarily due to reduced sales volumes and expenses related to the relocation [254]. - Income from operations for fiscal 2022 was $194.494 million, down $49.077 million, or 20.1%, from fiscal 2021 [261]. - Cash provided by operating activities was $137.814 million in fiscal 2022, a decrease of $179.446 million, or 56.6%, from the prior fiscal year [266]. Stock and Shareholder Activities - The company purchased 4,755,572 shares of common stock for $90.0 million during the fiscal year [236]. Inventory and Sales - Inventory levels increased by $58.2 million during fiscal 2022 as the company replenished stock to prepare for potential future increases in consumer demand [246]. - Handgun sales decreased by $131.5 million, or 17.4%, while long gun sales decreased by $63.9 million, or 25.2%, compared to fiscal 2021 [240][242]. - New products accounted for 19.8% of net sales for the 12 months ended April 30, 2022, including two new pistols and one new modern sporting rifle [244]. Expenses and Taxation - Total operating expenses decreased by $6.4 million, with general and administrative expenses down by $6.8 million compared to fiscal 2021 [250]. - Income tax expense for fiscal 2022 was $57.892 million, a decrease of $16.502 million, or 22.2%, from the prior fiscal year, with an effective tax rate of 22.9% [259]. - Interest expense decreased by $1.8 million, or 45.5%, to $(2.135) million in fiscal 2022, as the company maintained a zero balance on its revolving line following debt repayment [258]. Cash Flow and Capital Expenditures - Cash used in investing activities was $24.116 million in fiscal 2022, an increase of $1.855 million, or 8.3%, compared to fiscal 2021 [270]. - Cash used in financing activities was $105.987 million in fiscal 2022, a decrease of $197.771 million, or 65.1%, from fiscal 2021 [274]. - The company expects to spend between $20.0 million and $25.0 million on capital expenditures in fiscal 2023, excluding spending related to the Relocation [271]. - The company had $120.7 million in cash and cash equivalents on hand as of April 30, 2022, which is expected to be adequate to fund operations for the next 12 months [281]. Market and Economic Conditions - The company estimates a 16.0% share of the U.S. consumer market for firearms based on data from calendar 2021 [238]. - Inflationary increases in hourly wages and raw materials began to impact the company in the fourth fiscal quarter, with expectations of increased impact in fiscal 2023 [283]. Asset Management and Risk - The company evaluates the recoverability of long-lived assets whenever events indicate that carrying amounts may not be recoverable, adjusting carrying values to fair value based on future anticipated cash flows [287]. - Inventories are valued at the lower of cost or net realizable value, with allowances for non-saleable inventory based on detailed reviews and historical data [288]. - The company provides a limited one-year warranty and a lifetime service policy for new firearm products, estimating warranty obligations based on historical claims experience [289]. - There are no off-balance sheet arrangements that could affect liquidity or capital resources, and no special purpose entities are used for financing or risk support [291]. - The principal market risk relates to a $100.0 million revolving line of credit with a variable interest rate, which would have been 2.1% if borrowings were outstanding as of April 30, 2022 [292].