AMERICAN OUTDOOR BRANDS CORP (AOBC) SEC Filing 10-Q Quarterly report for the period ending Wednesday, October 31, 2018

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Exhibit 99.1

 

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Contact: Liz Sharp, VP Investor Relations

American Outdoor Brands Corporation

(413) 747-6284

lsharp@aob.com

American Outdoor Brands Corporation Reports

Second Quarter Fiscal 2019 Financial Results

SPRINGFIELD, Mass., December 6, 2018 — 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 2019, ended October 31, 2018.

Second Quarter Fiscal 2019 Financial Highlights

 

   

Quarterly net sales were $161.7 million compared with $148.4 million for the second quarter last year, an increase of 8.9%.

 

   

Gross margin for the quarter was 34.9% compared with 34.2% for the second quarter last year.

 

   

Quarterly GAAP net income was $6.7 million, or $0.12 per diluted share, compared with net income of $3.2 million, or $0.06 per diluted share, for the comparable quarter last year.

 

   

Quarterly Non-GAAP net income was $11.0 million, or $0.20 per diluted share, compared with $6.3 million, or $0.11 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, one-time transaction costs, and fair value inventory step-up expense. For a detailed reconciliation, see the schedules that follow in this release.

 

   

Quarterly non-GAAP Adjusted EBITDAS was $26.7 million, or 16.5% of net sales, compared with $23.1 million, or 15.5% of net sales, for the comparable quarter last year.

James Debney, American Outdoor Brands Corporation President and Chief Executive Officer, said, “We are pleased with our second quarter operational and financial results, which reflect year-over-year increases in revenue and profitability in both our Outdoor Products & Accessories segment and our Firearms segment. Our Outdoor Products & Accessories segment, a strategically important market that we first entered just four years ago, generated approximately one-third of our revenue in the quarter. Sales growth occurred in both our Hunting & Shooting product categories, as well as our Cutlery & Tool product categories, and came from a variety of retailers, particularly our online retailers. We continued to expand our addressable market in electro-optic products with the launch of several new Crimson Trace products including rifle scopes designed for short, medium, and long-range applications, as well as five new, innovative red dot sights. In our Firearms segment, revenue growth reflected the success of our ‘bundle’ promotions booked earlier in the year and shipped in the second quarter. New firearm products, which we define as products launched within the past twelve months, represented 26.6% of our firearm revenue in the quarter and included strong sales of our M&P Shield 380 EZ pistol, which we launched in February of this year.”

“We made significant progress in the quarter on the completion of our new Logistics & Customer Services facility in Missouri – an important strategic initiative supporting our objective to be the leading provider of quality products for the shooting, hunting, and rugged outdoor enthusiast. This 632,000 square foot, state-of-the-art facility will serve as our centralized logistics, warehousing, and distribution operation, for all of our products, facilitating our growth, enhancing our efficiencies, and allowing us to better serve customers across our entire organization. We remain on track to begin ramping initial operations in the near future.”

 

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The following information was filed by AMERICAN OUTDOOR BRANDS CORP on Thursday, December 6, 2018 as an 8K 2.02 statement, which is an earnings press release pertaining to results of operations and financial condition. It may be helpful to assess the quality of management by comparing the information in the press release to the information in the accompanying 10-Q Quarterly Report statement of earnings and operation as management may choose to highlight particular information in the press release.

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  • 18487867_32
    Revenue - Product
    While inventory levels, both internally and in the distribution channel, in excess of demand may negatively impact future operating results, it is difficult to forecast the potential impact of distributor inventories on future revenue and income since demand is impacted by many factors, including seasonality, new product introductions, news events, political events, and consumer tastes.
  • 18487867_30
    Revenue - Product
    The increase in the number of units sold favorably impacted firearm revenue by 5.2%.
  • 18487867_26
    Revenue - Product
    Revenue for our long guns increased $5.0 million, or 20.2%, over the comparable quarter last year, which we believe was partially a result of replenishment of inventory in the sporting goods channel, and partially a result of a successful promotion that bundled a firearm with a shooting accessories product.
  • 18487867_55
    Financial - Earnings
    Gross margin for the three months ended October 31, 2018 for our Outdoor Products & Accessories segment increased 1.1% over the comparable quarter last year, primarily because of a change in product mix and customer mix.
  • 18487867_72
    Financial - Income
    The following table sets forth certain information regarding income tax expense for the three months ended October 31, 2018 and 2017 (dollars in thousands): 29 The decrease in the effective tax rate from the comparable quarter last year was primarily because of the effects of the Tax Cuts and Job Act of 2017, which reduced the U.S. federal statutory income tax rate from 35% to 21% effective January 1, 2018.
  • 18487867_40
    Revenue - Product
    Absent the change in accounting standards, net sales for our Firearms segment was relatively flat compared with the prior year comparable period despite lower unit shipments into the sporting goods channel because of a $10.6 million reduction in promotional consumer rebates, which increased our average selling price in the current fiscal year.
  • 18487867_11
    Financial - Earnings
    Company gross margin was 34.9%, an increase of 70 basis points over the comparable quarter last year.
  • 18487867_90
    Financial - Expense
    As of October 31, 2018, we recorded $38.5 million in construction in progress, which is included in property, plant, and equipment in our condensed consolidated balance sheet, for costs incurred by the builder relating to the purchase of land and costs related to the design and construction of the building, offset by a $38.5 million capital lease payable, which is included in capital lease payable, net of current portion, in our condensed consolidated balance sheet.
  • 18487867_78
    Financial - Debt
    Our principal cash requirements are to (1) finance the growth of our operations, including working capital and capital expenditures, (2) service our existing debt, and (3) fund any potential acquisitions.
  • 18487867_16
    Financial - Earnings
    Company gross margin was 36.2%, an increase of 3.2% over the prior year comparable period.
  • 18487867_44
    Revenue - Product
    Revenue for our long guns increased $10.7 million, or 26.2%, over the prior year comparable period, partially because of replenishment of inventory in the sporting goods channel, and partially a result of a successful promotion that bundled a firearm with a shooting accessories product.
  • 18487867_69
    Financial - Income
    The following table sets forth certain information regarding operating income/(expense) for the three months ended October 31, 2018 and 2017 (dollars in thousands): The following table sets forth certain information regarding operating income/(expense) for the six months ended October 31, 2018 and 2017 (dollars in thousands): Other income/(expense) decreased from the prior year comparable period as a result of a $1.3 million adjustment in the contingent consideration liability in connection with the acquisition of Ultimate Survival Technologies, Inc. in fiscal 2017.
  • 18487867_70
    Financial - Expense
    The following table sets forth certain information regarding interest expense for the three months ended October 31, 2018 and 2017 (dollars in thousands): Interest expense decreased by $689,000 from the comparable quarter last year as a result of lower overall outstanding debt during the three months ended October 31, 2018.
  • 18487867_43
    Other - Other
    Most of the decline in handgun unit shipments for fiscal 2019 compared with the prior year comparable period was primarily because of lower promotions and consumer rebates that resulted in reduced orders during our first quarter, partially offset by increased unit shipments during our second quarter primarily because of increased promotional activity and increased demand for our products.
  • 18487867_48
    Revenue - Product
    The reduction in the number of units sold negatively impacted firearm revenue by 4.0%.
  • 18487867_61
    Financial - Expense
    The following table sets forth certain information regarding operating expenses for the three months ended October 31, 2018 and 2017 (dollars in thousands): Operating expenses increased $2.3 million over the comparable quarter last year.
  • 18487867_71
    Financial - Expense
    The following table sets forth certain information regarding interest expense for the six months ended October 31, 2018 and 2017 (dollars in thousands): Interest expense decreased by $1.1 million from the prior year comparable period as a result of lower overall outstanding debt during the six months ended October 31, 2018.
  • 18487867_57
    Financial - Earnings
    The following table sets forth certain information regarding firearm units shipped by trade channel for the six months ended October 31, 2018 and 2017 (units in thousands): 27 Gross margin for the six months ended October 31, 2018 for our Firearms segment increased by 4.1% over the prior year comparable period, primarily because of a combination of lower promotional product discounts, consumer rebates, and favorable manufacturing spending, which favorably impacted Firearms gross margin by 12.2%.
  • 18487867_10
    Revenue - Product
    Outdoor Products & Accessories segment gross sales were $56.0 million, which included $5.2 million of inter-segment revenue, an increase of $5.2 million, or 10.2%, over the comparable quarter last year.
  • 18487867_8
    Revenue - Product
    Our operating results for the three months ended October 31, 2018 included the following: Company net sales were $161.7 million, an increase of $13.3 million, or 8.9%, over the comparable quarter last year.
  • 18487867_28
    Revenue - Product
    Other products and services revenue increased $2.1 million, or 29.4%, over the comparable quarter last year primarily because of higher sales of parts and handcuffs.
  • 18487867_66
    Financial - Expense
    General and administrative expenses decreased as a result of a $2.1 million decrease in professional fees, a $950,000 lower donation to the National Rifle Association, and decreased travel and entertainment related expenses, partially offset by $1.0 million of increased compensation-related expenses.
  • 18487867_15
    Revenue - Product
    Outdoor Products & Accessories segment gross sales were $93.2 million, which included $8.1 million of inter-segment revenue, an increase of $9.9 million, or 11.9%, over the prior year comparable period.
  • 18487867_99
    Financial - Debt
    We incurred $525,000 of debt 31 issuance costs related to this amendment and have recorded these costs in notes and loans payable in the condensed consolidated balance sheet.
  • 18487867_13
    Revenue - Product
    Our operating results for the six months ended October 31, 2018 included the following: Company net sales were $300.5 million, an increase of $23.1 million, or 8.3%, over the prior year comparable period.
  • 18487867_130
    Revenue - Product
    32 Our future capital requirements will depend on many factors, including net sales, the timing and extent of spending to support product development efforts, the expansion of sales and marketing activities, the timing of introductions of new products and enhancements to existing products, the costs to ensure access to adequate manufacturing capacity, the construction of our national logistics facility, and any acquisitions or strategic investments that we may make.
  • 18487867_46
    Revenue - Product
    Other products and services revenue increased $1.4 million, or 8.9%, over the prior year comparable period primarily because of higher sales of parts and handcuffs.
  • 18487867_63
    Financial - Expense
    General and administrative expenses increased as a result of a $2.0 million of increased compensation-related expenses, partially offset by reduced professional fees.
  • 18487867_88
    Other - Other
    Including spending related to our national logistics facility, we currently expect to spend between $45.0 million to $50.0 million on capital expenditures, an increase of $26.5 million to $31.5 million, respectively, over the $18.5 million spent in fiscal 2018.
  • 18487867_56
    Financial - Earnings
    Our Outdoor Products & Accessories segment favorably impacted total company gross margin by 5.1% for the three months ended October 31, 2018.
  • 18487867_60
    Financial - Earnings
    Our Outdoor Products & Accessories segment favorably impacted total company gross margin by 3.9% for the six months ended October 31, 2018.
  • 18487867_65
    Financial - Expense
    Research and development expenses increased $530,000 as a result of increased compensation-related expenses and professional fees.
  • 18487867_33
    Revenue - Product
    Outdoor Products & Accessories Net sales for our Outdoor Products & Accessories segment for the three months ended October 31, 2018 increased $2.6 million, or 5.4%, over the comparable quarter last year.
  • 18487867_49
    Revenue - Product
    26 Outdoor Products & Accessories Net sales for our Outdoor Products & Accessories segment for the six months ended October 31, 2018 increased $6.3 million, or 8.0%, over the prior year comparable period.
  • 18487867_105
    Financial - Earnings
    As of October 31, 2018, the interest rate swap was considered effective and had no effect on earnings.
  • 18487867_121
    Financial - Shares / Equity
    The 2020 Senior Notes Indenture contains certain affirmative and negative covenants, including limitations on restricted payments (such as share repurchases, dividends, and early payment of indebtedness), limitations on indebtedness, limitations on the sale of assets, and limitations on liens.
  • 18487867_53
    Financial - Expense
    The following tables set forth certain information regarding cost of sales and gross profit for the three months ended October 31, 2018 and 2017 (dollars in thousands): Gross margin for the three months ended October 31, 2018 for our Firearms segment increased by 70 basis points over the comparable quarter last year, primarily because of a combination of lower promotional product discounts and favorable manufacturing spending, which favorably impacted Firearms gross margin by 6.4%.
  • 18487867_124
    Financial - Shares / Equity
    Among such exceptions are (i) the ability to make share repurchases each fiscal year in an amount not to exceed the lesser of (A) $50.0 million in any fiscal year or (B) 75.0% of our consolidated net income for the previous four consecutive published fiscal quarters prior to the date of the determination of such consolidated net income, and (ii) share repurchases over the life of the 2020 Senior Notes in an aggregate amount not to exceed $75.0 million.
  • 18487867_21
    Revenue - Product
    Firearms Net sales for our Firearms segment for the three months ended October 31, 2018 increased 10.7% over the comparable quarter last year, of which 8.6% was a result of a change in accounting standards that impacted the timing of revenue recognition when shipping promotional products and 2.1% was a result of increased demand for our revolvers and modern sporting rifles combined with lower promotional activity resulting in a higher average selling price.
  • 18487867_85
    Other - Other
    Cash used in investing activities decreased $14.5 million for the six months ended October 31, 2018 compared with the prior year comparable period.
  • 18487867_89
    Financial - Cash Flow
    The building for our national logistics facility will be treated as a capital lease and will be recorded in construction in progress, offset by a capital lease payable throughout building construction and will have no impact on cash flow.
  • 18487867_18
    Revenue - Product
    23 The following table sets forth certain information regarding net sales for the three months ended October 31, 2018 and 2017 (dollars in thousands): Company net sales for the three months ended October 31, 2018 were $161.7 million, an increase of $13.3 million, or 8.9%, over net sales of $148.4 million for the three months ended October 31, 2017.
  • 18487867_38
    Revenue - Product
    The following table sets forth certain information regarding net sales for the six months ended October 31, 2018 and 2017 (dollars in thousands): Company net sales for the six months ended October 31, 2018 were $300.5 million, an increase of $23.1 million, or 8.3%, over net sales of $277.4 million for the six months ended October 31, 2017.
  • 18487867_134
    Financial - Debt
    Based upon our current working capital position, current operating plans, and expected business conditions, we believe that our existing capital resources and credit facilities will be adequate to fund our operations, including our outstanding debt and other commitments, for the next 12 months.
  • 18487867_73
    Financial - Expense
    The increase in tax expense is a result of increased operating profit over the comparable quarter last year.
  • 18487867_82
    Financial - Earnings
    Cash provided by operating activities for the six months ended October 31, 2018 was impacted by net income before depreciation and amortization of $40.3 million, $5.5 million of increased accounts payable because of timing of payments, and $2.3 million of increased payroll and incentives due to increased management incentive accruals.
  • 18487867_79
    Other - Other
    Capital expenditures for material handling equipment and other capital projects to support our national logistics facility, various information technology projects, and tooling for new product offerings represent important cash needs for the remainder of fiscal 2019.

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  • Form Type: Quarterly
  • Number of times amended: 0
  • Accession Number: 0001564590-18-030605
  • Submitted to the SEC: Thursday, December 6, 2018 4:16:46 PM EST
  • Accepted by the SEC: Thursday, December 6, 2018
  • Period ending: October 2018
  • Industry: Ordnance And Accessories No Vehicles Guided Missiles