[X] |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2012 |
[ ] |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____________ to ____________ |
Delaware |
06-0633559 |
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(State or other
jurisdiction of incorporation or organization) |
(I.R.S. employer identification no.) |
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Lacey Place, Southport, Connecticut |
06890 |
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(Address of
principal executive offices) |
(Zip code) |
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(203) 259-7843 (Registrants telephone number, including area code) |
PART I. FINANCIAL INFORMATION |
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Item
1. |
Financial Statements (Unaudited) |
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Condensed balance sheets June 30, 2012 and December 31, 2011 |
3 |
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Condensed statements of income and comprehensive income Three and six months ended June 30, 2012 and July 2, 2011 |
5 |
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Condensed statement of stockholders equity Six months ended June 30, 2012 |
6 |
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Condensed statements of cash flows Six months ended June 30, 2012 and July 2, 2011 |
7 |
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Notes to condensed financial statements June 30, 2012 |
8 |
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Item
2. |
Managements Discussion and Analysis of Financial Condition and Results of Operations |
17 |
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Item
3. |
Quantitative and Qualitative Disclosures About Market Risk |
28 |
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Item
4. |
Controls and Procedures |
28 |
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PART II. OTHER INFORMATION |
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Item
1. |
Legal Proceedings |
29 |
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Item
1A. |
Risk
Factors |
29 |
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Item
2. |
Unregistered Sales of Equity Securities and Use of Proceeds |
29 |
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Item
3. |
Defaults Upon Senior Securities |
29 |
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Item
4. |
Mining Safety Disclosures |
29 |
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Item
5. |
Other Information |
29 |
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Item
6. |
Exhibits |
30 |
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SIGNATURES |
31 |
| June 30, 2012 | | December 31, 2011 | |||||||||
(Note) | ||||||||||||
Assets |
||||||||||||
Current
Assets |
||||||||||||
Cash and cash
equivalents |
$ | 75,960 | $ | 81,056 | ||||||||
Short-term
investments |
19,994 | | ||||||||||
Trade
receivables, net |
47,332 | 42,225 | ||||||||||
Gross
inventories |
47,796 | 49,004 | ||||||||||
Less LIFO
reserve |
(37,384 | ) | (37,476 | ) | ||||||||
Less excess and obsolescence reserve |
(1,202 | ) | (1,311 | ) | ||||||||
Net inventories |
9,210 | 10,217 | ||||||||||
Deferred
income taxes |
6,753 | 5,776 | ||||||||||
Prepaid expenses and other current assets |
859 | 6,968 | ||||||||||
Total Current
Assets |
160,108 | 146,242 | ||||||||||
Property,
plant and equipment |
181,161 | 169,142 | ||||||||||
Less allowances for depreciation |
(122,629 | ) | (116,195 | ) | ||||||||
Net property, plant and equipment |
58,532 | 52,947 | ||||||||||
Deferred
income taxes |
405 | 32 | ||||||||||
Other assets |
11,364 | 7,289 | ||||||||||
Total Assets |
$ | 230,409 | $ | 206,510 |
| June 30, 2012 | | December 31, 2011 | |||||||||
(Note) | ||||||||||||
Liabilities and Stockholders Equity |
||||||||||||
Current
Liabilities |
||||||||||||
Trade
accounts payable and accrued expenses |
$ | 26,946 | $ | 28,592 | ||||||||
Product
liability |
1,010 | 1,305 | ||||||||||
Employee
compensation and benefits |
14,212 | 14,882 | ||||||||||
Workers
compensation |
4,846 | 4,600 | ||||||||||
Income taxes payable |
1,194 | 217 | ||||||||||
Total Current
Liabilities |
48,208 | 49,596 | ||||||||||
Accrued
pension liability |
19,122 | 19,082 | ||||||||||
Product
liability accrual |
370 | 441 | ||||||||||
Contingent
liabilities Note 11 |
| | ||||||||||
Stockholders Equity |
||||||||||||
Common Stock,
non-voting, par value $1: |
||||||||||||
Authorized
shares 50,000; none issued |
| | ||||||||||
Common Stock,
par value $1: |
||||||||||||
Authorized
shares 40,000,000 2012 23,459,506 issued, 19,160,072 outstanding 2011 23,382,566 issued, 19,083,132 outstanding |
23,460 | 23,383 | ||||||||||
Additional
paid-in capital |
12,473 | 10,454 | ||||||||||
Retained
earnings |
192,203 | 168,981 | ||||||||||
Less:
Treasury stock at cost 2012 4,299,434 shares 2011 4,299,434 shares |
(37,884 | ) | (37,884 | ) | ||||||||
Accumulated other comprehensive loss |
(27,543 | ) | (27,543 | ) | ||||||||
Total Stockholders Equity |
162,709 | 137,391 | ||||||||||
Total Liabilities and Stockholders Equity |
$ | 230,409 | $ | 206,510 |
| Three Months Ended | | Six Months Ended | | ||||||||||||||||
June 30, 2012 | July 2, 2011 | June 30, 2012 | July 2, 2011 | |||||||||||||||||
Net firearms
sales |
$ | 118,147 | $ | 78,471 | $ | 228,934 | $ | 152,912 | ||||||||||||
Net castings sales |
1,422 | 1,151 | 2,972 | 2,151 | ||||||||||||||||
Total net
sales |
119,569 | 79,622 | 231,906 | 155,063 | ||||||||||||||||
Cost of
products sold |
74,435 | 51,157 | 144,979 | 102,604 | ||||||||||||||||
Gross profit |
45,134 | 28,465 | 86,927 | 52,459 | ||||||||||||||||
Operating
expenses: |
||||||||||||||||||||
Selling |
9,107 | 6,468 | 20,107 | 13,380 | ||||||||||||||||
General and administrative |
7,728 | 4,935 | 14,106 | 9,560 | ||||||||||||||||
Total operating expenses |
16,835 | 11,403 | 34,213 | 22,940 | ||||||||||||||||
Operating income |
28,299 | 17,062 | 52,714 | 29,519 | ||||||||||||||||
Other
income: |
||||||||||||||||||||
Interest
expense, net |
(21 | ) | (13 | ) | (44 | ) | (33 | ) | ||||||||||||
Other income, net |
316 | 114 | 495 | 290 | ||||||||||||||||
Total other income, net |
295 | 101 | 451 | 257 | ||||||||||||||||
Income before
income taxes |
28,594 | 17,163 | 53,165 | 29,776 | ||||||||||||||||
Income taxes |
10,580 | 6,350 | 19,671 | 11,017 | ||||||||||||||||
Net income and comprehensive income |
$ | 18,014 | $ | 10,813 | $ | 33,494 | $ | 18,759 | ||||||||||||
Basic earnings per share |
$ | 0.94 | $ | 0.57 | $ | 1.75 | $ | 1.00 | ||||||||||||
Fully diluted earnings per share |
$ | 0.91 | $ | 0.56 | $ | 1.71 | $ | 0.99 | ||||||||||||
Cash dividends per share |
$ | 0.324 | $ | 0.097 | $ | 0.536 | $ | 0.147 |
Common Stock | Additional Paid-in Capital | Retained Earnings | Treasury Stock | Accumulated Other Comprehensive Loss | Total | |||||||||||||||||||||||
Balance at
December 31, 2011 |
$ | 23,383 | $ | 10,454 | $ | 168,981 | $ | (37,884 | ) | $ | (27,543 | ) | $ | 137,391 | ||||||||||||||
Net income
and comprehensive income |
33,494 | 33,494 | ||||||||||||||||||||||||||
Dividends
paid |
(10,272 | ) | (10,272 | ) | ||||||||||||||||||||||||
Recognition
of stock-based compensation expense |
2,104 | 2,104 | ||||||||||||||||||||||||||
Employee
withholding tax related to share-based compensation |
(1,045 | ) | (1,045 | ) | ||||||||||||||||||||||||
Tax benefit
realized from exercise of stock options and vesting of RSUs |
1,037 | 1,037 | ||||||||||||||||||||||||||
Common stock
issued compensation plans |
77 | (77 | ) | | ||||||||||||||||||||||||
Balance at June 30, 2012 |
$ | 23,460 | $ | 12,473 | $ | 192,203 | $ | (37,884 | ) | $ | (27,543 | ) | $ | 162,709 |
Six Months Ended | ||||||||||||
June 30, 2012 | July 2, 2011 | |||||||||||
Operating
Activities |
||||||||||||
Net
income |
$ | 33,494 | $ | 18,759 | ||||||||
Adjustments
to reconcile net income to cash provided by operating activities: |
||||||||||||
Depreciation |
6,774 | 5,860 | ||||||||||
Slow moving
inventory valuation adjustment |
(64 | ) | (176 | ) | ||||||||
Stock-based
compensation |
2,104 | 1,247 | ||||||||||
Gain on sale
of assets |
(13 | ) | (7 | ) | ||||||||
Deferred
income taxes |
(1,350 | ) | 1,111 | |||||||||
Changes in
operating assets and liabilities: |
||||||||||||
Trade
receivables |
(5,107 | ) | (292 | ) | ||||||||
Inventories |
1,071 | 5,954 | ||||||||||
Trade
accounts payable and accrued expenses |
(1,400 | ) | 2,298 | |||||||||
Employee
compensation and benefits |
(670 | ) | (580 | ) | ||||||||
Product
liability |
(366 | ) | 135 | |||||||||
Prepaid
expenses, other assets and other liabilities |
2,054 | (3,434 | ) | |||||||||
Income taxes payable |
977 | 1,499 | ||||||||||
Cash provided by operating activities |
37,504 | 32,374 | ||||||||||
Investing
Activities |
||||||||||||
Property,
plant and equipment additions |
(12,339 | ) | (7,719 | ) | ||||||||
Proceeds from
sale of assets |
13 | 16 | ||||||||||
Purchases of
short-term investments |
(29,993 | ) | (47,496 | ) | ||||||||
Proceeds from maturities of short-term investments |
9,999 | 35,496 | ||||||||||
Cash used for investing activities |
(32,320 | ) | (19,703 | ) | ||||||||
Financing
Activities |
||||||||||||
Tax benefit
from exercise of stock options |
1,037 | 1,441 | ||||||||||
Repurchase of
common stock |
| (1,999 | ) | |||||||||
Payment of
employee withholding tax related to share-based compensation |
(1,045 | ) | (2,432 | ) | ||||||||
Dividends paid |
(10,272 | ) | (2,775 | ) | ||||||||
Cash used for financing activities |
(10,280 | ) | (5,765 | ) | ||||||||
(Decrease)
Increase in cash and cash equivalents |
(5,096 | ) | 6,906 | |||||||||
Cash and cash
equivalents at beginning of period |
81,056 | 5,132 | ||||||||||
Cash and cash equivalents at end of period |
$ | 75,960 | $ | 12,038 |
| June 30, 2012 | | December 31, 2011 | |||||||||
Inventory at
FIFO |
||||||||||||
Finished
products |
$ | 2,458 | $ | 3,318 | ||||||||
Materials and work in process |
45,338 | 45,686 | ||||||||||
Gross
inventories |
47,796 | 49,004 | ||||||||||
Less: LIFO
reserve |
(37,384 | ) | (37,476 | ) | ||||||||
Less: excess and obsolescence reserve |
(1,202 | ) | (1,311 | ) | ||||||||
Net inventories |
$ | 9,210 | $ | 10,217 |
Three Months Ended | Six Months Ended | |||||||||||||||||||
| June 30, 2012 | | July 2, 2011 | | June 30, 2012 | | July 2, 2011 | |||||||||||||
Numerator: |
||||||||||||||||||||
Net
income |
$ | 18,014 | $ | 10,813 | $ | 33,494 | $ | 18,759 | ||||||||||||
Denominator: |
||||||||||||||||||||
Weighted
average number of common shares outstanding Basic |
19,155,127 | 18,897,879 | 19,135,946 | 18,824,585 | ||||||||||||||||
Dilutive effect of options and restricted stock units outstanding under the Companys employee compensation
plans |
528,152 | 362,614 | 490,875 | 175,266 | ||||||||||||||||
Weighted average number of common shares outstanding Diluted |
19,683,279 | 19,260,493 | 19,626,821 | 18,999,851 |
Period | Total Number of Shares Purchased | Average Price Paid Per Share | Total Number of Shares Purchased as Part of Publicly Announced Program | Maximum Dollar Value of Shares that May Yet Be Purchased Under the Program | ||||||||||||||||
1/4/11-1/29/11 |
133,400 | $ | 14.94 | 133,400 | ||||||||||||||||
Total |
133,400 | $ | 14.94 | 133,400 | $ | 8,000,000 |
| Shares | | Weighted Average Exercise Price | | Grant Date Fair Value | |||||||||||
Outstanding
at December 31, 2011 |
328,700 | $ | 8.58 | $ | 4.42 | |||||||||||
Granted |
| | | |||||||||||||
Exercised |
(46,956 | ) | $ | 7.81 | $ | 3.80 | ||||||||||
Expired |
| | | |||||||||||||
Outstanding at June 30, 2012 |
281,744 | $ | 8.71 | $ | 4.52 |
(in thousands) | Three Months Ended | Six Months Ended | ||||||||||||||||||
June 30, 2012 | July 2, 2011 | June 30, 2012 | July 2, 2011 | |||||||||||||||||
Net Sales |
||||||||||||||||||||
Firearms |
$ | 118,147 | $ | 78,471 | $ | 228,934 | $ | 152,912 | ||||||||||||
Castings |
||||||||||||||||||||
Unaffiliated |
1,422 | 1,151 | 2,972 | 2,151 | ||||||||||||||||
Intersegment |
6,547 | 4,718 | 12,929 | 9,104 | ||||||||||||||||
7,969 | 5,869 | 15,901 | 11,255 | |||||||||||||||||
Eliminations |
(6,547 | ) | (4,718 | ) | (12,929 | ) | (9,104 | ) | ||||||||||||
$ | 119,569 | $ | 79,622 | $ | 231,906 | $ | 155,063 | |||||||||||||
Income (Loss)
Before Income Taxes |
||||||||||||||||||||
Firearms |
$ | 28,722 | $ | 17,998 | $ | 53,616 | $ | 30,750 | ||||||||||||
Castings |
(720 | ) | (150 | ) | (1,163 | ) | (447 | ) | ||||||||||||
Corporate |
592 | (685 | ) | 712 | (527 | ) | ||||||||||||||
$ | 28,594 | $ | 17,163 | $ | 53,165 | $ | 29,776 |
June 30, 2012 | December 31, 2011 | |||||||||||
Identifiable
Assets |
||||||||||||
Firearms |
$ | 112,685 | $ | 103,545 | ||||||||
Castings |
5,692 | 5,290 | ||||||||||
Corporate |
112,032 | 97,675 | ||||||||||
$ | 230,409 | $ | 206,510 |
ITEM 2. |
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
2012 | 2011 | ||||||||||||||||||||||||||
Q2 | | Q1 | Q4 | | Q3 | | Q2 | | Q1 | ||||||||||||||||||
Estimated
Units Sold from Distributors to Retailers (1) |
410,300 | 460,800 | 291,800 | 244,700 | 264,400 | 284,300 | |||||||||||||||||||||
Total
adjusted NICS Background Checks (thousands) (2) |
2,619 | 3,376 | 3,467 | 2,374 | 2,220 | 2,739 |
(1) |
The estimates for each period were calculated by taking the beginning inventory at the distributors, plus shipments from the Company to distributors during the period, less the ending inventory at distributors. These estimates are only a proxy for actual market demand as they: |
|
Rely on data provided by independent distributors that are not verified by the Company, |
|
Do not consider potential timing issues within the distribution channel, including goods-in-transit, and |
|
Do not consider fluctuations in inventory at retail. |
(2) |
While NICS background checks are not a precise measure of retail activity, they are commonly used as a proxy for retail demand. NICS background checks are performed when the ownership of most firearms, either new or used, is transferred by a Federal Firearms Licensee. NICS background checks are also performed for permit applications, permit renewals, and other administrative reasons. |
2012 | 2011 | ||||||||||||||||||||||||||
Q2 | | Q1 | Q4 | | Q3 | | Q2 | | Q1 | ||||||||||||||||||
Units
Ordered |
291,500 | 1,200,100 | 452,300 | 168,700 | 263,500 | 503,500 | |||||||||||||||||||||
Orders
Received |
$ | 84.6 | $ | 308.7 | $ | 120.3 | $ | 49.6 | $ | 81.4 | $ | 134.7 | |||||||||||||||
Average Sales
Price of Orders Received |
$ | 290 | $ | 257 | $ | 266 | $ | 294 | $ | 309 | $ | 268 | |||||||||||||||
Ending
Backlog |
$ | 273.2 | $ | 304.4 | $ | 98.2 | $ | 69.8 | $ | 97.4 | $ | 92.9 | |||||||||||||||
Average Sales
Price of Ending Backlog |
$ | 269 | $ | 264 | $ | 291 | $ | 341 | $ | 309 | $ | 279 |
2012 | 2011 | ||||||||||||||||||||||||||
Q2 | | Q1 | Q4 | | Q3 | | Q2 | | Q1 | ||||||||||||||||||
Units
Ordered |
291,500 | 1,200,100 | 452,300 | 168,700 | 263,500 | 503,500 | |||||||||||||||||||||
Units
Produced |
418,500 | 379,000 | 302,000 | 289,700 | 281,200 | 241,800 | |||||||||||||||||||||
Units
Shipped |
421,100 | 382,500 | 315,100 | 276,500 | 279,600 | 251,800 | |||||||||||||||||||||
Average Sales
Price (3) |
$ | 280 | $ | 290 | $ | 289 | $ | 286 | $ | 281 | $ | 296 | |||||||||||||||
Units on
Backlog |
1,016,700 | 1,153,500 | 337,400 | 204,500 | 315,500 | 332,700 |
(3) |
Net of Federal Excise Tax of 10% for handguns and 11% for long guns. |
2012 | 2011 | | |||||||||||||||||||||||||
Q2 | | Q1 | Q4 | | Q3 | | Q2 | | Q1 | ||||||||||||||||||
Units
Company Inventory |
10,400 | 12,800 | 16,200 | 28,800 | 15,500 | 13,700 | |||||||||||||||||||||
Units
Distributor Inventory (4) |
68,000 | 57,200 | 135,600 | 112,300 | 80,500 | 65,300 | |||||||||||||||||||||
Total
inventory (5) |
78,400 | 70,000 | 151,800 | 141,100 | 96,000 | 79,000 |
(4) |
Distributor ending inventory as provided by the Companys independent distributors. These numbers do not include goods-in-transit inventory that has been shipped from the Company but not yet received by the distributors. |
(5) |
This total does not include inventory at retailers. The Company does not have access to data on retailer inventories of the Companys products. |
| Three Months Ended | | |||||||||||||||||
| June 30, 2012 | | July 2, 2011 | | |||||||||||||||
Net
sales |
$ | 119,569 | 100.0 | % | $ | 79,622 | 100.0 | % | |||||||||||
Cost of
products sold, before LIFO, overhead and labor rate adjustments to inventory and product liability |
74,201 | 62.1 | % | 50,235 | 63.1 | % | |||||||||||||
LIFO
expense(income) |
(21 | ) | | 338 | 0.4 | % | |||||||||||||
Overhead rate
adjustments to inventory |
321 | 0.3 | % | 314 | 0.4 | % | |||||||||||||
Labor rate
adjustments to inventory |
5 | | 96 | 0.1 | % | ||||||||||||||
Product
liability |
(71 | ) | (0.1 | )% | 174 | 0.2 | % | ||||||||||||
Total cost of products sold |
74,435 | 62.3 | % | 51,157 | 64.2 | % | |||||||||||||
Gross profit |
$ | 45,134 | 37.7 | % | $ | 28,465 | 35.8 | % |
| Six Months Ended | | |||||||||||||||||
| June 30, 2012 | | July 2, 2011 | | |||||||||||||||
Net
sales |
$ | 231,906 | 100.0 | % | $ | 155,063 | 100.0 | % | |||||||||||
Cost of
products sold, before LIFO, overhead and labor rate adjustments to inventory and product liability |
144,136 | 62.2 | % | 101,552 | 65.5 | % | |||||||||||||
LIFO
income |
(92 | ) | | (252 | ) | (0.2 | )% | ||||||||||||
Overhead rate
adjustments to inventory |
726 | 0.3 | % | 472 | 0.3 | % | |||||||||||||
Labor rate
adjustments to inventory |
108 | | 252 | 0.2 | % | ||||||||||||||
Product
liability |
101 | | 580 | 0.4 | % | ||||||||||||||
Total cost of products sold |
144,979 | 62.5 | % | 102,604 | 66.2 | % | |||||||||||||
Gross profit |
$ | 86,927 | 37.5 | % | $ | 52,459 | 33.8 | % |
|
increased promotional expenses, |
|
increased equity and performance-based compensation expense, |
|
increased expenses related to the ongoing implementation of a new information technology infrastructure, and |
|
increased freight expense due to increased sales volume. |
(a) |
Exhibits: |
31.1 |
Certification Pursuant to Rule 13a-14(a) as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
31.2 |
Certification Pursuant to Rule 13a-14(a) as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
32.1 |
Certification Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
32.2 |
Certification Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
Date: August 1, 2012 |
S/THOMAS A. DINEEN Thomas A. Dineen Principal Financial Officer, Principal Accounting Officer, Vice President, Treasurer and Chief Financial Officer |