EX-99.2 5 p73439exv99w2.htm EXHIBIT 99.2 exv99w2
 

EXHIBIT 99.2
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
     On January 3, 2007, Smith & Wesson Holding Corporation (the Company) completed its previously announced acquisition of Bear Lake Acquisition Corp. and its subsidiaries, including Thompson/Center Arms Company, Inc., for $102,000,000 in cash.
     The following tables show summary unaudited pro forma condensed combined statements of operations as if the Company and Bear Lake Acquisition Corp. had been combined as of May 1, 2005 and for the unaudited pro forma condensed combined balance sheet as if the Company and Bear Lake Acquisition Corp. had been combined as of October 31, 2006. The unaudited pro forma condensed combined financial information of the Company and Bear Lake Acquisition Corp. is based on estimates and assumptions, which have been made solely for purposes of developing such pro forma information. The estimated pro forma adjustments arising from these acquisitions are derived from their respective preliminary purchase price allocations.
     The pro forma data are presented for illustrative purposes only and are not necessarily indicative of the operating results or financial position that would have occurred if each transaction had been consummated as of May 1, 2005 or October 31, 2006, nor are the data necessarily indicative of future operating results or financial position.
     FOOTNOTE REFERENCE TO THE COLUMNS ON THE PRO FORMA CONDENSED COMBINED STATEMENTS:
     (A) As reported in the Company’s audited consolidated financial statements included in its Annual Report on Form 10-K for the fiscal year ended April 30, 2006, as filed with the SEC, or the Company’s quarterly report on Form 10-Q for the six months ended October 31, 2006, as filed with the SEC.
     (B) Derived from Bear Lake Acquisition Corp.’s unaudited financial statements for the period from April 1, 2005 through March 31, 2006. In the opinion of management, all adjustments, consisting of normal and recurring adjustments, considered necessary for a fair presentation of the results of operations for the period presented have been included.
     (C) Derived from Bear Lake Acquisition Corp.’s unaudited financial statements for the period from April 1, 2006 through September 30, 2006. In the opinion of management, all adjustments, consisting of normal and recurring adjustments, considered necessary for a fair presentation of the results of operations for the period presented have been included.

 

 

SMITH & WESSON HOLDING CORPORATION and Subsidiaries
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEETS
As of:
                                     
    Historical     Historical                  
    Smith & Wesson     Bear Lake     Pro forma         Pro Forma  
    October 31, 2006 (A)     September 30, 2006 (C)     Adjusments         Combined  
ASSETS
                                    
Current assets:
                                    
Cash and cash equivalents
   $ 654,434     $ 934,786                 $ 1,589,220  
Accounts receivable, net of allowance for doubtful accounts
     31,586,550       14,315,870                   45,902,420  
Inventories
     21,619,744       12,418,817       3,000,000     (13)     37,038,561  
Other current assets
     2,316,452       1,383,778                   3,700,230  
Deferred income taxes
     3,346,684       846,146       (941,600 )   (17)     3,251,230  
Income tax receivable
     1,233,749       974,214                   2,207,963  
Assets held for sale
     —       175,436       (175,436 )   (7)     —  
 
                            
Total current assets
     60,757,613       31,049,047       2,824,564           94,631,224  
 
                            
Property, plant and equipment, net
     31,611,333       7,101,939       (1,261,939 )   (12)     37,451,133  
Intangibles, net
     424,505       6,758,634       93,501,938     (8)     100,685,077  
Deferred income taxes
     7,358,194       —                   7,358,194  
Other assets
     4,662,161       1,242,268       (55,595 )   (1)     5,848,834  
 
                            
 
   $ 104,813,806     $ 46,151,888     $ 94,067,368         $ 245,033,062  
 
                            
 
                                    
LIABILITIES AND STOCKHOLDERS’ EQUITY
                                    
Current liabilities:
                                    
Accounts payable
   $ 11,428,999     $ 3,737,148                   15,166,147  
Accrued other expenses
     3,922,840       2,061,001       1,250,000      (11, 14)     7,233,841  
Accrued payroll
     4,988,750       —       175,000     (15)     5,163,750  
Accrued taxes other than income
     1,177,493       158,095                   1,335,588  
Accrued profit sharing
     2,059,805       600,000                   2,659,805  
Accrued workers’ compensation
     404,264       —                   404,264  
Accrued product liability
     2,293,616       1,238,832       221,000     (16)     3,753,448  
Accrued warranty
     1,416,780       231,199                   1,647,979  
Deferred revenue
     4,836       —                   4,836  
Current portion of notes payable
     6,245,335       9,600,690       (9,162,708 )   (2)     6,683,317  
 
                            
Total current liabilities
     33,942,718       17,626,965       (7,516,708 )         44,052,975  
 
                            
Notes payable, net of current portion
     13,452,502       1,746,064       25,971,990     (3, 9)     41,170,556  
 
                            
Convertible Debt, inclusive of issuance costs
     —       —       75,756,422     (10)     75,756,422  
 
                            
Deferred tax liability
     —       5,525,450       20,269,619           25,795,069  
 
                            
Notes payable to former stockholders, net of discounts and current amounts
     —       11,334,277       (11,334,277 )   (4)     —  
 
                            
Other non-current liabilities
     7,625,513       839,454                   8,464,967  
 
                            
 
                                    
Mandatorily redeemable series A preferred stock
     —       5,445,000       (5,445,000 )         —  
Accumulated unpaid dividens series A preferred stock
     —       991,697       (991,697 )         —  
Less: stockholder note receivable for purchase of stock
     —       (345,000 )     345,000           —  
 
                            
 
     —       6,091,697       (6,091,697 )   (5)     —  
 
                            
 
                                    
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, 40,835,422 shares on October 31, 2006 and 39,310,543 shares on April 30, 2006 issued
     40,835       —                   40,835  
Additional paid-in capital
     41,907,995       48,670       (48,670 )   (6)     41,907,995  
Retained earnings
     14,240,243       2,939,311       (2,939,311 )   (6)     14,240,243  
Treasury stock, at cost (1,200,000 shares on October 31, 2006)
     (6,396,000 )     —                   (6,396,000 )
 
                            
Total stockholders’ equity
     49,793,073       2,987,981       (2,987,981 )         49,793,073  
 
                            
 
   $ 104,813,806     $ 46,151,888     $ 94,067,368         $ 245,033,062  
 
                            

 

 

SMITH & WESSON HOLDING CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF INCOME
AND COMPREHENSIVE INCOME
for the year ended APRIL 30, 2006
                                 
    Historical     Historical     Pro forma     Pro Forma  
    Smith & Wesson (A)     Bear Lake (B)     Adjusments     Combined  
Net product and services sales
   $ 157,874,717     $ 64,830,661     $ —     $ 222,705,378  
License revenue
     2,173,907       —       —       2,173,907  
Cost of products and services sold
     110,354,558       36,478,047       —       146,832,605  
Cost of license revenue
     87,067       —       —       87,067  
 
                        
Gross profit
     49,606,999       28,352,614       —       77,959,613  
 
                        
 
                                
Operating expenses:
                                
Research and development, net
     348,788       269,311       —       618,099  
Selling and marketing
     16,546,671       10,364,293       —       26,910,964  
General and administrative
     21,255,031       10,109,095       —       31,364,126  
Environmental expense (credit)
     (3,087,810 )     —       —       (3,087,810 )
 
                        
Total operating expenses
     35,062,680       20,742,699       —       55,805,379  
 
                        
 
                                
Income from operations
     14,544,319       7,609,915       —       22,154,234  
 
                        
 
                                
Other income/(expense):
                                
Other income/(expense)
     745,577       (10,492 )     —       735,085  
Interest income
     112,322       115,716       —       228,038  
Interest expense
     (1,638,022 )     (3,828,036 )     (1,842,364 )(18)     (7,308,422 )
 
                        
Total other expense
     (780,123 )     (3,722,812 )     (1,842,364 )     (6,345,299 )
 
                        
 
                                
Income before income taxes
     13,764,196       3,887,103       (1,842,364 )     15,808,935  
Income tax expense (benefit)
     5,062,617       1,273,625       —       6,336,242  
 
                          
Net income
   $ 8,701,579     $ 2,613,478     $ (1,842,364 )   $ 9,472,693  
 
                        
 
                                
Weighted average number of common and common equivalent shares outstanding, basic
     36,586,794                       36,586,794  
 
                            
 
                                
Net income per share, basic
   $ 0.24                     $ 0.26  
 
                            
 
                                
Weighted average number of common and common equivalent shares outstanding, diluted
     39,787,045                       39,787,045  
 
                            
 
                                
Net income per share, diluted
   $ 0.22                     $ 0.24  
 
                            

 

 

SMITH & WESSON HOLDING CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF INCOME
AND COMPREHENSIVE INCOME
for the six months ended October 31, 2006
                                 
    Historical     Historical     Pro forma     Pro Forma  
    Smith & Wesson (A)     Bear Lake (C)     Adjustments     Combined  
Net product and services sales
   $ 98,388,910     $ 34,612,768     $ —     $ 133,001,678  
License revenue
     996,420       —       —       996,420  
Cost of products and services sold
     66,637,045       19,219,668       —       85,856,713  
Cost of license revenue
     15,492       —       —       15,492  
 
                        
Gross profit
     32,732,793       15,393,100       —       48,125,893  
 
                        
 
                                
Operating expenses:
                                
Research and development, net
     530,268       151,462       —       681,730  
Selling and marketing
     9,285,133       5,487,340       —       14,772,473  
General and administrative
     11,690,020       5,488,887       —       17,178,907  
Environmental expense (credit)
     —       —       —       —  
 
                        
Total operating expenses
     21,505,421       11,127,689       —       32,633,110  
 
                        
 
                                
Income from operations
     11,227,372       4,265,411       —       15,492,783  
 
                        
 
                                
Other income/(expense):
                                
Other income/(expense)
     (329,311 )     50,157       —       (279,154 )
Interest income
     69,306       31,837       —       101,143  
Interest expense
     (718,220 )     (1,953,781 )     (881,419 )(18)     (3,553,420 )
 
                        
Total other expense
     (978,225 )     (1,871,787 )     (881,419 )     (3,731,431 )
 
                        
 
                                
Income before income taxes
     10,249,147       2,393,624       (881,419 )     11,761,352  
Income tax expense (benefit)
     4,024,867       1,318,203       —       5,343,070  
 
                        
Net income
   $ 6,224,280     $ 1,075,421     $ (881,419 )   $ 6,418,282  
 
                        
 
                                
Weighted average number of common and common equivalent shares outstanding, basic
     39,626,269                       39,626,269  
 
                            
 
                                
Net income per share, basic
   $ 0.16                     $ 0.16  
 
                            
 
                                
Weighted average number of common and common equivalent shares outstanding, diluted
     41,408,240                       41,408,240  
 
                            
 
                                
Net income per share, diluted
   $ 0.15                     $ 0.16  
 
                            

 

 

     NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
Pro forma adjustments reflect only those adjustments which are factually determinable and do not include the impact of contingencies which will not be known until the resolution of the contingency. The allocation of the purchase price relating to these acquisitions is preliminary, pending the finalization of the Company’s review of certain of the accounts and the finalization of the appraisal of identifiable intangible assets.
  (1)   Adjustment to loan origination fees not assumed as part of the acquisition.
 
  (2)   Adjustment to the current portion of long-term debt and the credit line not assumed as part of the acquisition.
 
  (3)   Adjustment to long-term debt not assumed as part of the acquisition $1,746,064.
 
  (4)   Adjustment to notes payable to former stockholders, net of discounts not assumed as part of the acquisition.
 
  (5)   Adjustment to record the redemption of mandatorily redeemable series A preferred stock retired as part of the acquisition.
 
  (6)   Adjustment to eliminate the equity of acquired company.
 
  (7)   Adjustment to record property not purchased.
 
  (8)   Adjustment to record the valuation of acquired intangible assets.
 
  (9)   Adjustment to record line of credit borrowings to fund the acquisition $28,000,000 net of $281,946 issuance costs.
 
  (10)   Adjustment to record the issuance of convertible debt sold to fund the acquisition $80,000,000 convertible debt net of $4,243,578 debt issuance costs.
 
  (11)   Adjustment to record estimated assumed liabilities at fair value.
 
  (12)   Adjustment to P, P, & E to its appraised value.
 
  (13)   To adjust inventory to its fair value.
 
  (14)   Record estimated professional fees as part of the acquisition $1,000,000.
 
  (15)   Adjustment to record estimated liabilities at fair value.
 
  (16)   Adjustment to record estimated liabilities at fair value.
 
  (17)   Adjustment for deferred taxes related to the acquisition.
 
  (18)   Adjustment to eliminate interest expense on debt not acquired and reflect interest on borrowings to fund the acquisition.