American Outdoor Brands Corporation Reports Second Quarter Fiscal 2018 Financial Results

SPRINGFIELD, Mass., Dec. 7, 2017 /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 second quarter fiscal 2018, ended October 31, 2017.

Second Quarter Fiscal 2018 Financial Highlights

• Quarterly net sales were $148.4 million, in-line with the company's guidance range, compared with $233.5 million for the second quarter last year, a decrease of 36.4%.
• Gross margin for the quarter was 34.2% compared with 41.8% for the second quarter last year.
• Quarterly GAAP net income was $3.2 million, or $0.06 per diluted share, compared with net income of $32.5 million, or $0.57 per diluted share, for the comparable quarter last year. Second quarter 2018 and 2017 GAAP net income per diluted share include expenses of $2.8 million and $3.0 million, respectively, for amortization, net of tax, related to acquisitions.
• Quarterly Non-GAAP net income was $6.3 million, or $0.11 per diluted share, compared with $39.1 million, or $0.68 per diluted share, for the comparable quarter last year. GAAP to non-GAAP adjustments to net income exclude a number of acquisition-related costs, including amortization, fair value inventory step-up and backlog expense, one-time transition costs, and discontinued operations, as well as the associated tax effect on non-GAAP adjustments. For a detailed reconciliation, see the schedules that follow in this release.
• Quarterly non-GAAP Adjusted EBITDAS was $23.1 million, or 15.5% of net sales, compared with $72.4 million, or 31.0% of net sales, for the comparable quarter last year.
• During the second quarter, the company completed the purchase of substantially all of the assets of Gemini Technologies, Incorporated ("Gemtech"), a provider of high quality suppressors and accessories for the consumer, law enforcement, and military markets, for $10.9 million. The company also completed the purchase of substantially all of the assets of Fish Tales, LLC, a provider of premium sportsman knives and tools for fishing and hunting, including the knife brand, Bubba Blade™, for approximately $12.1 million.

James Debney, American Outdoor Brands Corporation President and Chief Executive Officer, commented, "Our results for the second quarter were within our guidance range despite challenging market conditions.  Lower shipments in our Firearms business reflected a significant reduction in wholesaler and retailer orders versus the prior year, and were partially offset by higher revenue in our Outdoor Products & Accessories business.  Total revenue for the quarter faced a challenging comparison to last year, when we believe strong consumer demand was driven by personal safety concerns and pre-election fears of increased firearm legislation."

"In Firearms, shipments of our new M&P branded polymer products in full-size, compact, and concealed carry models helped to offset lower orders in other product categories.  While we were pleased that our firearm inventory at distributors declined slightly during the quarter, we believe that orders were negatively impacted by heightened channel inventory from multiple manufacturers at retail. As expected, our internal inventories peaked during the quarter, as we prepared for a number of new firearm product launches.  Since then, we have reduced our internal production output levels and our outsourced capacity to help lower inventories and better balance production to demand. For the second half of fiscal 2018, our focus remains on ensuring that our internal manufacturing resources are aligned with demand.  In addition, we intend to introduce several exciting new products, and execute on long-term organic growth initiatives that support our vision of being the leading provider of quality products for the shooting, hunting, and rugged outdoor enthusiast," concluded Debney.

Jeffrey D. Buchanan, Executive Vice President, Chief Financial Officer, and Chief Administrative Officer, commented, "We ended the quarter with cash of $68.2 million and net debt of approximately $223 million. While cash flow for our second quarter was flat, as expected, we are forecasting positive cash flow for the balance of our fiscal year, as we lower our internal inventory levels in conjunction with the upcoming holiday buying season, new product launches, and winter distributor buying shows which take place during our fourth fiscal quarter." 

Financial Outlook

Conference Call and Webcast

The company will host a conference call and webcast today, December 7, 2017, to discuss its second quarter fiscal 2018 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 code 2598827.  No RSVP is necessary.  The conference call audio webcast can also be accessed live and for replay on the company's website at www.aob.com, under the Investor Relations section. The company will maintain an audio replay of this conference call on its website for a period of time after the call. No other audio replay will be available.

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, we consider and use these supplemental measures of operating performance in order to provide the reader with an improved understanding of underlying performance trends.  We believe it is useful for our company and the reader to review, as applicable, both (1) GAAP measures that include (i) amortization of acquired intangible assets, (ii) transition costs, (iii) discontinued operations, (iv) changes in contingent consideration liabilities, (v) acquisition-related costs, (vi) inventory step-up and backlog expense, (vii) tax effect of non-GAAP adjustments, (viii) net cash (used in)/provided by operating activities, (ix) net cash used in investing activities, (x) receipts from note receivable, (xi) interest expense (xii) income tax (benefit)/expense, (xiii) depreciation and amortization, and (xiv) stock-based compensation expense; and (2) the non-GAAP measures that exclude such information. We present these non-GAAP measures because we consider them an important supplemental measure of our performance. Our definition of these adjusted financial measures may differ from similarly named measures used by others. We believe 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 our GAAP measures.  The principal limitations of these measures are that they do not reflect our actual expenses and may thus have the effect of inflating our 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 and long gun products sold under the Smith & Wesson®, M&P®, Thompson/Center Arms™, and Gemtech® brands as well as provides forging, machining, and precision plastic injection molding services. Outdoor Products & Accessories provides shooting, hunting, and outdoor accessories, including reloading, gunsmithing, and gun cleaning supplies, tree saws, vault accessories, knives, laser sighting systems, tactical lighting products, and survival and camping equipment. Brands in Outdoor Products & Accessories include Smith & Wesson®, M&P®, Thompson/Center Arms™, Crimson Trace®, Caldwell® Shooting Supplies, Wheeler® Engineering, Tipton® Gun Cleaning Supplies, Frankford Arsenal® Reloading Tools, Lockdown® Vault Accessories, Hooyman® Premium Tree Saws, BOG POD®, Golden Rod® Moisture Control, Schrade®, Old Timer®, Uncle Henry®, Imperial®, Bubba Blade®, and UST™.  For more information on American Outdoor Brands Corporation, call (844) 363-5386 or log on to www.aob.com.  

Safe Harbor StatementCertain 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 strategy to continue growing and balancing our business across the shooting, hunting, and rugged outdoor enthusiast market; our belief that total revenue for the quarter faced a challenging comparison to last year's heightened levels of firearms demand which we believe was driven by concerns for personal safety and the potential for increased firearm legislation; our belief that lower shipments in our Firearms business were due to a softening in wholesaler and retailer orders compared to last year; our belief that heightened channel inventory from multiple manufacturers at retail locations contributed to lower orders in the quarter; our belief that we are focused on executing our long-term strategic initiatives, which support our vision of being the leading provider of quality products for the shooting, hunting and rugged outdoor enthusiast; our belief that we will generate positive cash flow for the balance of our fiscal year; and our expectations for net sales, GAAP income per diluted share, amortization of acquired intangible assets, acquisition-related costs, transition costs, change in contingent consideration, tax effect of non-GAAP adjustments, and non-GAAP income per diluted share for the third quarter of fiscal 2018 and for fiscal 2018.  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, 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 potential for increased regulation of firearms and firearm-related products; 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 national distribution center; our ability to introduce new products including our new M&P branded polymer products in full-size, compact and concealed carry models; 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, 2017.

Contact: Liz Sharp, VP Investor RelationsAmerican Outdoor Brands Corporation(413) 747-6284[email protected] 

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SOURCE American Outdoor Brands Corporation