American Outdoor Brands Corporation have announced a plan to spin off Smith & Wesson from their non-firearm brands. In a press release timed with the release of the company’s financial report for the first quarter of 2020, American Outdoors announced that “its Board of Directors has unanimously approved proceeding with a plan to spin-off its outdoor products and accessories business as a tax-free stock dividend to its stockholders.”
The splitting of the company into Smith & Wesson Brands, Inc. (which will encompass the firearm business) and American Outdoor Brands, Inc. (which will include all the outdoor products and accessories businesses) will take place during the second half of 2020.
In their press release Barry M. Monheit, Chairman of the Board, said:
There have been significant changes in the political climate as well as the economic, investing, and insurance markets since we embarked upon what we believe have been our very successful diversification efforts. We believe that separating into two independent public companies will allow each company to better align its strategic objectives with its capital allocation priorities. We also believe that this action will give the investment community clearer insight into the value creation potential in each of these independent companies, ultimately driving enhanced stockholder value. From the standpoint of our stockholders, at the time of the spin-off, the AOBC stockholders will own 100% of each company, thereby maintaining their pre-spin interest in both companies, and will thereafter have the ability to make distinct investment decisions tailored to their particular investment profile.
The press release outlines the American Outdoors belief that the companies will benefit from ‘distinct focus’ and “compelling investment opportunities based on its particular operating and financial model.” James Debney, the company’s current President and CEO, continued “I believe the Board’s decision to spin-off our outdoor products and accessories business will allow each company and its leadership to focus on its unique business characteristics and opportunities and to better drive long-term value for its stakeholders.” Debney has chosen to lead American Outdoor Brands, Inc. half of the company.
American Outdoors also announced that following the spin off Mark Smith to serve as CEO of Smith & Wesson Brands, Inc. Smith is currently President of American Outdoor Brands Corporation’s Manufacturing Services Division. The spin off of Smith & Wesson is expected to take 8 to 10 months and when completed the company is estimated “to generate revenue between $450 million and $500 million and adjusted EBITDAS between $90 million and $105 million in its first 12 months as an independent company.”
American Outdoors originally formed in 2002, and was known as the Smith & Wesson Holding Corporation until 2016.
American Outdoors also released their Q1 2020 financial report:
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.
by Matthew Moss
