EX-99.1 2 d737338dex991.htm EX-99.1 EX-99.1

Exhibit 99.1

LOGO `

Contact: Liz Sharp, VP Investor Relations

American Outdoor Brands Corporation

(413) 747-6284

lsharp@aob.com

American Outdoor Brands Corporation Reports

First Quarter Fiscal 2020 Financial Results

SPRINGFIELD, Mass., August 29, 2019 -- 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.

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.”

 

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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.

 

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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.

 

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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 and 54,696,762 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  
    

 

 

     

 

 

  

 

Page 4 of 8

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  

 

Page 5 of 8

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  

 

Page 6 of 8

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    
  

 

 

      

 

 

    

 

Page 7 of 8

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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