Smith & Wesson Brands, Inc. · NASDAQ:SWBI
Smith & Wesson Brands — Investor Presentation (March 2006)
33 slides from Smith & Wesson Brands's investor presentation, Mar 9, 2006
Slide 1: Smith & Wesson
Smith & Wesson Mike Golden, President, CEO John Kelly, CFO March 2006
Slide 2: Investment Highlights
Investment Highlights • Leadership Team in Place • A New Market Approach...Safety, Security, Protection, Sport • A Strong, Untapped Legacy Brand • Innovative New Products • Growth Opportunities in Core Business • Diversification into New Markets • Significant Productivity Enhancement Opportunities •
Slide 3: Experienced Leadership Team
Experienced Leadership Team... Mike Golden, President, CEO John Kelly, CFO Tom Taylor, VP Marketing Ken Chandler, VP Operations Leland Nichols, VP Sales Barbara Hunnicutt, VP Licensing Ann Makkiya, Corporate Counsel Bill Lachenmeyer, VP Human Resources 4
Slide 4: Company Background
Company Background • 154 Year Old American Company • Headquarters: Springfield, Massachusetts • 736 Employees • Two Manufacturing Facilities (Union-Free): — Springfield, Massachusetts • Revolvers, Pistols — Houlton, Maine • Handcuffs, Pistols 5
Slide 5: Company Background
Company Background • Largest U.S. Manufacturer of Handguns • Largest U.S. Exporter of Handguns • Largest U.S. Manufacturer of Handcuffs • # 1 in U.S. Revolver Market Share • # 3 in U.S. Pistol Market Share • A Legacy Brand With 87% Brand Awareness With the General Public (Not Just Firearm Enthusiast
Slide 6: S&W: 87% Brand Awareness
S&W: 87% Brand Awareness Extremely high in our served markets, and in markets we do not serve today: A company-sponsored, 2004 survey asked consumers about their purchase intent for the following products & services. S&W ranked as follows: Revolvers #1 (served) Pistols #1 (served) Shotguns #3 (not s
Slide 7: A New Market Approach
A New Market Approach Smith & Wesson Yesterday: Selling Handguns in the U.S. Sporting Goods Channel GOAL Smith & Wesson Today: A Global Leader in Safety...Security...Protection...Sport 8
Slide 8: Growth Strategy
Growth Strategy Use “Safety-Security-Protection-Sport” platform to enter new markets while driving CAGR of 19-20% in core business in fiscal 2006. Existing Brand Handgun New Market Development Business Possibilities • Re-invent the legacy • Innovative New • Long Guns • Key to new market entry Produc
Slide 9: Revolver / Pistol Market: $605MM
Revolver / Pistol Market: $605MM 2004 (CALENDAR) U.S. DOMESTIC NON-MILITARY MARKET —2005 (FISCAL) S&W SALES REVOLVERS PISTOLS $138MM $467MM $52MM 38% $47MM 10% S&W 2005 (Includes Walther Products) Market 2004 SOURCE: BATF 2004 Excise Tax Study & Smith & Wesson Management Estimates 10
Slide 10: Innovative New Products
Innovative New Products 500 Revolvers 460 XVR Scandium Pistols S&W 1911 Family Military & Police Pistol Series 11
Slide 11: Introducing the Smith & Wesson Military & Police Pistol
Introducing the Smith & Wesson Military & Police Pistol • First units shipped December 5, 2005 • Engineered with input from over a dozen LE and military organizations • Unique features incorporate versatility, enhanced durability and safety. • World class product introduction, regarded as the most p
Slide 12: Channel Management Strategy
Channel Management Strategy Federal Law Local Law Enforcement Enforcement & Military International Sporting Goods 13
Slide 13: Handgun Growth Strategy: Sporting Goods Channel
Handgun Growth Strategy Sporting Goods Channel • Sales Leadership in Place — Eoin B. Stafford, Director of Sporting Goods Sales — Formerly H&K • Expanded Smith & Wesson Employee Sales Force (+16) — Elimination of manufacturer’s reps — Demand creation: Product “pull” vs. “push” • Increased focus on h
Slide 14: Handgun Growth Strategy: Military/Federal Government Channel
Handgun Growth Strategy Military/Federal Government Channel • Leadership in Place — Ernest Langdon, Director of Federal Law Enforcement/Military Sales — Formerly Operations Manager, Law Enforcement Sales with Beretta — Tactical training provider to law enforcement and military — Multiple national an
Slide 15: Handgun Growth Strategy: Law Enforcement Channel
Handgun Growth Strategy Law Enforcement Channel • Leadership in Place Bryan James, Dir. Law Enforcement Sales — formerly Glock • Expanded Sales Organization — Two additional top sales executives hired from Glock — Increased from 5 to 8 Regional Sales Managers • Launched M&P Pistol — Designed specifi
Slide 16: Handgun Growth Strategy: International Channel
Handgun Growth Strategy International Channel • Leadership in Place: — Amaro Goncalves, Dir. International Sales — formerly Colt • Launched M&P Pistol — Designed specifically to penetrate police/military markets • Lobbying underway — Shorten Federal export approval timeline — Raise $1,000,000 Congre
Slide 17: New Market Opportunities & Options
New Market Opportunities & Options Safety...Security...Protection...Sport Shotguns • Long Guns Hunting Rifles • Criminal Investigation Tactical Rifles • Homeland Defense • Training/Ranges Products/Services • Ammunition • Less Lethal • Security Systems Options: Decline Opportunity Outsource Manufactu
Slide 18: Smith & Wesson Enters the Long Gun Market
Smith & Wesson Enters the Long Gun Market • Consumers say S&W should be in long guns...particularly tactical rifles • Tactical rifles are the fastest growing segment in the long gun market • Sporting Goods channel is underserved by premium tactical rifles • Expansion of Military & Police family of p
Slide 19: Introducing the Smith & Wesson M&P15 Rifle Series
Introducing the Smith & Wesson M&P15 Rifle Series “Smith & Wesson’s new AR-type rifle is a credit to the firm’s long history of duty guns.” - Dick Metcalf, Guns & Ammo Magazine, March/SHOT Show Edition “If you’re a fan of the M4A1 Carbine, I can assure you that the new M&P Carbine is as good as it g
Slide 20: The Military & Police Family Begins
The Military & Police Family Begins... • Concept to first shipment — 6 months • Test & evaluation unit requests from 80 Law Enforcement Agencies • First order received 3 weeks from launch — Las Vegas Metro P.D. • Targeting 10%-15% market share in year one 21
Slide 21: The Brand: Licensing Opportunities
The Brand: Licensing Opportunities • FY 2005 Licensing Revenue: $1.8M — Hearing & Eye Protection, Knives, Safes, Soft Air Guns, etc. • Target: Grow Licensing Revenue 3-5X by 2009 — Recent Licensees: Sentry Safe, Radiator Specialty (gun cleaning products) Hats and Tees — New Possibilities: Monitored
Slide 22: The Brand: Re-Inventing a Legacy
The Brand: Re-Inventing a Legacy Inconsistent Message to a Limited Audience GOAL “Loud” and Visible Brand With a Consistent Message to a Diverse Audience 23
Slide 23: Media Blitz
Media Blitz Wall Street Journal Front Page — Marketplace Section July 28, 2005 • 36 magazine covers in 11 months • Visibility in core magazines, TV and — Unprecedented in industry radio as well as non-industry publications. — Outpacing all major competitors — Over 102 million total — M&P — 22 Editor
Slide 24: Marketing Initiatives
Marketing Initiatives NASCAR Customer Affinity Programs: 25
Slide 25: Operations / Manufacturing
Operations / Manufacturing • Strong Team Supporting: — Pistol Process Line — New Product Development • Initial Focus: Stabilize Operations — Repeatable & predictable machinery — Consistent Output • Current Focus: — Implementing Smith & Wesson Operating System • Based on Toyota Production System • Pr
Slide 26: Driving Gross Margin Improvement
Driving Gross Margin Improvement • Production Rates up Significantly Jan-Dec Revolvers Guns Per Day 44% Pistols Guns Per Day 300% 27
Slide 27: Legislative & Litigation Trends
Legislative & Litigation Trends 40 30 32 20 Cases 26 20 10 13 10 8 5 4 0 4 2 2001 2002 2003 2004 2005 Industry Municipal Cases Pending or on Appeal Product Liability Cases Pending Against S&W Protection of Lawful Commerce in Arms Act Signed into law October, 2005 28
Slide 28: Income Statement Summary: Year Ended April 30, 2005
Income Statement Summary Year Ended April 30, 2005 2004 2005 Revenue $117.9 $124.0 Gross Profit $39.1 $40.9 Operating Income $4.8 $11.2 Net Income $0.8 $5.2 EPS $0.02 $0.14 *In millions except for per share data 29
Slide 29: Income Statement Summary: Quarter Ended January 31, 2006
Income Statement Summary Quarter Ended January 31, 2006 2005 2006 Revenue $31.1 $38.6 Gross Profit $7.7 $11.3 Operating Income $0.6 $1.9 Net Income ($0.2) $1.1 EPS -— $0.03 *In millions except for per share data 30
Slide 30: Income Statement Summary: Nine Months Ended January 31, 2006
Income Statement Summary Nine Months Ended January 31, 2006 2005 2006 Revenue $88.0 $106.0 Gross Profit $29.5 $31.4 Operating Income $7.7 $7.9 Net Income $3.4 $4.5 EPS $0.90 $0.11 *In millions except for per share data 31
Slide 31: Balance Sheet Summary
Balance Sheet Summary January 31, 2006 Cash & Cash Equivalents $0.95 Accounts Receivable $19.2 Working Capital $20.7 Accounts Payable $9.1 Notes Payable $18.9 Equity $34.2 Total Shares Outstanding 39.2 *In Millions 32
Slide 32: Annual Guidance
Annual Guidance FY2007 FY2006 FY2005 Guidance Actual New Product $172-$180m +19-20% $124.0m Sales Income $12.5 $7.5-$8.0m $5.2m* Earnings per Fully Diluted Share: $0.30 $0.19-$0.20* $.14* *Guidance takes into account expected adjustments to reflect the early adoption of Statement of Financial Accoun
Slide 33: Investment Highlights
Investment Highlights • Leadership Team in Place • A New Market Approach...Safety, Security, Protection, Sport • A Strong, Untapped Legacy Brand • Innovative New Products • Growth Opportunities in Core Business • Diversification into New Markets • Significant Productivity Enhancement Opportunities •
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