SWHC

[setravis]

• SMITH & WESSON HLDG CORP Earnings Call scheduled for Thu, Sep 7
CCBN (Tue 9:10am) 



Motley Fool
Foolish Forecast: Triggering Smith & Wesson
Tuesday September 5, 2:07 pm ET
By Rich Smith


Smith & Wesson Holding (Nasdaq: SWHC - News) reports Q1 2007 earnings results tomorrow afternoon. Want to know what Wall Street expects to see? Read on. Want to know what really matters? Read on a bit more.
What analysts say:


Buy, sell, or waffle? Five analysts follow the stock; all five rate it a buy.
Revenues. On average, they expect sales to surge 30% in tomorrow's news.
Earnings. They also expect reported profits to more than double to $0.07 per share.
What management says:
Smith & Wesson (S&W) capped a fine fiscal 2006 -- in which sales rose 27% and profits per diluted share soared 175%, even after expensing stock options -- with a move of the stock from the American Stock Exchange to the Nasdaq. A whole slew of initiatives have supported the company's revival, including a focus on sales to the U.S. government to help arm federal law enforcement and the Afghanistan National Police, and the introduction of new lines of "military & Police" firearms targeted (sorry, bad pun) at penetrating (ditto) domestic and federal law enforcement markets. The company has also switched from an independent sales force, in which salesmen sold both S&W products and those of other manufacturers, to one directly employed by the company and focused on selling only S&W products. Finally, Smith & Wesson is leveraging its strong name recognition and high-quality reputation through licensing deals (just take a look at their price list), and manufacturing firearms that one wouldn't ordinarily associate with the famed handgun maker, including tactical rifles, hunting rifles, and shotguns.

Put it all together, and management now projects that fiscal 2007 will see 14% to 18% sales growth and roughly a 50% increase in profits per diluted share, to about $0.31 per share.

What management does:
S&W's margin trends have been a mixed bag over the last 18 months. But last quarter's surge in gross margins brought the rolling gross tally to its highest level in a year. Combined with operational improvements, this started pushing operating and net profits up, too.


Margins % 1/05 4/05 7/05 10/05 1/06 4/06
Gross 34.4 30.2 29.3 29.6 26.1 31.0
Op. 8.8 7.5 7.9 7.8 3.9 12.0
Net 3.8 4.2 5.0 3.7 4.4 5.4


All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:
On a firmwide level, S&W predicts about $14 million in operating cash flow this year, and $8 million in capital expenditures -- yielding about $6 million in free cash flow. However, note management's clarification that the capex figure is for maintenance capex only. If the firm decides to fund any expansion outside of its core business, free cash flow will be lower.

So as good as the GAAP numbers looked last year, and as good as they appear this year, there's a significant difference building between those accounting profits (projected at $13 million this year) and S&W's actual cash profits. That has me feeling a bit leery of the attractive GAAP numbers. From a cash-profits basis, the firm isn't looking as profitable as its accounting profits suggest.

Competitors:


Law Enforcement Associates (AMEX: AID - News)
Mace Security (Nasdaq: MACE - News)
Sturm, Ruger (NYSE: RGR - News)
TASER International (Nasdaq: TASR - News)
Suppliers:


Carpenter Technology (NYSE: CRS - News)
Fool contributor Rich Smith does not own shares of any company named above. TASER is a Motley Fool Rule Breakers pick. The Fool has a disclosure policy.

[setravis]

52wk Range: 3.50 - 9.99

Volume: 958,396
Avg Vol (3m): 425,544

Technicals
Record Volume
Record Price High

Last Price Quote is:
inf%above 13-day EMA
inf%above 50-day EMA
RS Rating: N/A 

Fundamentals
Earnings Expected on Sep 13

Key Data:
Market Cap (M): $387.37 
P/E Ratio: 45.04 
PEG Ratio: N/A 
Next Earnings: 09/13/2006
Last Analyst Rating: N/A

[joet]

   Fantastic Pick Travis, been watching your posts on this one from $7, never did enter... do you have an upside target?

A bit nostalgic for me, I grew up in Springfield Mass.  Talked some with my dad about the gun maker, his take is that the current great growth is due to an agressive CEO who is doing all he can to make S+W more of a name brand and sell all kind of associated Stuff, ie. like "harley davidson" has done so well. 

Thoughts on an entry at this point.  does 10 seem like a threshold for another ramp up?

Thank you and Applaud for all of your efforts!

Cheers Joe

[setravis]

  Fantastic Pick Travis, been watching your posts on this one from $7, never did enter... do you have an upside target?

A bit nostalgic for me, I grew up in Springfield Mass.  Talked some with my dad about the gun maker, his take is that the current great growth is due to an agressive CEO who is doing all he can to make S+W more of a name brand and sell all kind of associated Stuff, ie. like "harley davidson" has done so well. 

Thoughts on an entry at this point.  does 10 seem like a threshold for another ramp up?

Thank you and Applaud for all of your efforts!

Cheers Joe

Breakout.....to a record price high.
Took another nice bounce to the upside off the 50-day MA.
See you in the teens !

Thanks  joet !

52wk Range: 3.50 - 10.76

Volume: 1,443,282
Avg Vol (3m): 447,243

Technicals
Record Volume
Record Price High

Fundamentals
Earnings Expected on Sep 7

Key Data:
Market Cap (M): $387.37 
P/E Ratio: 45.04 
PEG Ratio: N/A 
Next Earnings: 09/13/2006
Last Analyst Rating: N/A


[audio] SMITH & WESSON HLDG CORP Earnings Conference Call (live tomorrow at 5:00 pm ET)

Link:
http://biz.yahoo.com/cc/6/72506.html

[setravis]

Press Release Source: Smith & Wesson Holding Corporation


Smith & Wesson Secures Contracts for M&P Pistols
Wednesday September 6, 12:00 pm ET 
Columbus, Ohio Police and Dallas/Fort Worth International Airport Police Convert to M&P40


SPRINGFIELD, Mass., Sept. 6 /PRNewswire-FirstCall/ -- Smith & Wesson Holding Corporation (Nasdaq: SWHC - News), parent company of Smith & Wesson Corp., the legendary 154-year old firearms maker, announced today that it has secured contracts to supply the Columbus, Ohio Police Department and the Dallas/Fort Worth International Airport Police (DFW) with the company's advanced-design polymer pistol, the M&P40. The agreements call for 1,875 M&P40 pistols to be shipped to the Columbus Police Department and 305 M&P40 pistols to be shipped for use by DFW Airport police officers.


After an extensive evaluation process, both departments indicated that the M&P40 incorporates key features that provide accuracy, durability and flexibility for use in duty. During performance testing completed by the Columbus Police Department, over 60,000 rounds were fired through six M&P40 pistols, with no malfunctions recorded. In conjunction with the testing, an additional rapid-fire test was conducted and 2,500 rounds were fired through one pistol in 40 minutes. Officials at both the Columbus Police Department and the DFW Airport Police indicated that the M&P40 performed flawlessly through each test.

Sergeant Dana Winship, Columbus Division of Police, said, "Trying to find a pistol to match the range of hand sizes of the 1,800 officers at the Columbus Police Department, along with insuring accuracy, durability, and the stopping power needed for police work, was a daunting effort. After an extensive evaluation of the various makes of pistols available, the M&P40 proved to be superior in all aspects. Smith and Wesson developed the M&P pistol with the police officer in mind. The M&P40 is an ergonomic, lightweight yet controllable pistol with ambidextrous capabilities, excellent accuracy and a crisp, smooth trigger pull. The officers on the street deserve the best equipment available. Smith & Wesson stepped up and delivered that with the M&P."

Tom Taylor, Smith & Wesson's Vice President of Marketing, said, "Since the M&P Pistol Series was first introduced in November 2005, it has quickly changed performance expectations in the duty firearm test and evaluation process. We are proud to support the men and women of the Columbus Police Department and the Dallas Fort Worth Airport Police, and are pleased to add them to the growing number of law enforcement agencies that have selected M&P pistols."

About Smith & Wesson

Smith & Wesson is a global provider of products and services for the safety, security, protection and sport markets. The Company manufactures firearms and handcuffs and is home to America's longest-running firearms training facilities for America's public servants. The Company also markets a variety of products for sport shooters including firearm safety/security devices, shooter protective gear, knives, apparel, and other accessory lines. The Company is based in Springfield, Mass., with manufacturing facilities in Springfield and Houlton, Maine. Contact (800) 331-0852 or log on to www.smith-wesson.com.


    Liz Sharp, VP Investor Relations
    Smith & Wesson Holding Corporation
    (480) 949-9700 x. 115
    [email protected]

    Industry Contact: Gary Giudice
    Blue Heron Communications
    (800) 654-3766
    [email protected]




--------------------------------------------------------------------------------
Source: Smith & Wesson Holding Corporation

[nullzero]

Nice pick Setravis! Its one of those great stocks I always seem to miss I want to add badly! If they pullback to 9s im in for sure!

[setravis]

Yesterday......

Smith & Wesson shares rise on quarterly earnings

SAN FRANCISCO (MarketWatch) - Smith & Wesson Holding Corp. (SWHC : smith & wesson hld
10.85, +0.89, +8.9%) shares rose 5% to $10.47 in after-hours trading Thursday. After the closing bell, the Springfield, Mass.-based maker of firearms reported first-quarter net earnings of $3.37 million, or 8 cents a share, compared with $2.69 million, or 7 cents a share, in the same period last year. Analysts polled by Thomson First Call had expected per-share earnings of 7 cents. Product and service revenue rose 41% to $47.6 million from $31.9 million. Analysts had forecast revenue of $43 million. The company said it sees 2007 per-share earnings of 36 cents, on revenue of $200 million.
   

[setravis]

Form 10-Q for SMITH & WESSON HOLDING CORP


--------------------------------------------------------------------------------

8-Sep-2006

Quarterly Report



Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Overview
Please refer to the Overview found in the Management's Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended April 30, 2006. This Overview sets forth key management objectives and key performance indicators used by management as well as key industry data tracked by management. First Quarter Fiscal 2007 Highlights
Net product sales for the quarter ended July 31, 2006 were $47.6 million, a $15.8 million, or 49.5%, increase over net product sales of $31.8 million for the quarter ended July 31, 2005. Firearms sales, our core business, increased for the quarter by $15.8 million, or 54.0%, compared with the quarter ended July 31, 2005.
Net income for the quarter ended July 31, 2006 was $3.4 million compared with $2.7 million for the quarter ended July 31, 2005. Net income for the quarter ended July 31, 2005 included a $3.1 million environmental reserve reduction. This environmental adjustment had an after-tax impact of approximately $1.9 million.
Gross profit as a percentage of net revenue was 34.7% for the quarter. This was consistent with gross profit in the fourth quarter of fiscal 2006 and a significant improvement over the 29.4% gross profit percentage for the quarter ended July 31, 2005.
We completed shipment of the largest M&P pistol order to date with 5,700 M&P 40 pistols going to the North Carolina Department of Corrections.
Restatement/ SEC Inquiry

In August 2003, we decided to amend various reports previously filed with the SEC to modify certain accounting matters related to our acquisition of Smith & Wesson Corp. We decided to restate our Annual Report on Form 10-KSB for the fiscal year ended April 30, 2002 as well as our Quarterly Reports on Form 10-QSB for the quarters ended July 31, 2001 and 2002, October 31, 2001 and 2002, and July 31, 2002 and 2003. The Annual Report on Form 10-KSB for the fiscal year ended April 30, 2003 was filed in December 2003 and included restated financial statements for fiscal 2002. The amended Quarterly Reports on Form 10-QSB for the July and October quarters were filed in July 2004, and the amended Quarterly Reports on Form 10-QSB for the July quarters were filed in March 2004. The SEC is conducting an informal inquiry regarding the circumstances surrounding the restatement. We are cooperating fully with the SEC in this inquiry. The inquiry is still ongoing. There has been no change in the status of this investigation during the quarter ended July 31, 2006.



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Table of Contents

Results of Operations
Net Product and Services Sales
    The following table sets forth certain information relating to net product
and services sales for the quarters ended July 31, 2006 and 2005:

                                                                                  %
                                2006             2005           $ Change       Change

       Revolvers            $ 14,098,090     $ 13,263,389     $    834,701         6.3 %
       Pistols                17,345,254        9,450,149        7,895,105        83.5 %
       Walther                 5,844,382        3,379,177        2,465,205        73.0 %
       Performance Center      2,054,619        1,647,489          407,130        24.7 %
       Engraving               2,387,223        1,024,898        1,362,325       132.9 %
       Rifles                  2,137,183                -        2,137,183           -
       Other                   1,315,161          572,992          742,169       129.5 %

       Total Firearms         45,181,912       29,338,094       15,843,818        54.0 %
       Handcuffs               1,329,011        1,118,387          210,624        18.8 %
       Specialty Services        559,864          848,412         (288,548 )     (34.0 )%
       Other                     533,662          544,830          (11,168 )      (2.0 )%

       Non-Firearms            2,422,537        2,511,629          (89,092 )      (3.5 )%
       Total                $ 47,604,449     $ 31,849,723     $ 15,754,726        49.5 %




We recorded net product and services sales of $47,604,449 for the quarter ended July 31, 2006, an increase of $15,754,726, or 49.5%, over the quarter ended July 31, 2005. Firearms sales increased by $15,843,818, or 54.0%, over the comparable quarter last year. Non-firearm sales for the quarter ended July 31, 2006 decreased by $89,092, or 3.5%, compared with the quarter ended July 31, 2005 due to lower specialty services sales, partially offset by higher handcuff sales.
Revolver sales increased by $834,701, or 6.3%, for the quarter ended July 31, 2006 to $14,098,090, compared with the quarter ended July 31, 2005. The increase resulted from a 11.8% increase in units sold, primarily in the sporting trade channel. The increase in the number of states adopting concealed carry laws has increased demand for our small frame revolvers. This has resulted in a lower average unit price, as the first quarter of last year included the introduction of the Model 460 revolver, whose selling price is approximately double that of the small frame revolvers. The revolver order backlog was $4,152,807 at July 31, 2006 compared with $8,973,700 at July 31, 2005.
Pistol sales of $17,345,254 were $7,895,105, or 83.5% higher, for the quarter ended July 31, 2006 than for the quarter ended July 31, 2005. The increase in pistol sales was attributable to the introduction of the M&P pistol as well as the government contract for Sigma pistols for the Afghanistan National Police. The M&P accounted for 63.9% of the increase in pistol sales. The pistol order backlog was at $15,359,409 at July 31, 2006 compared with $2,447,084 at July 31, 2005.
We are the exclusive U.S. distributor of Walther firearms. Walther firearms sales increased by $2,465,205, or 73.0%, for the quarter ended July 31, 2006 compared with the quarter ended July 31, 2005. The increase in Walther sales was attributable to higher demand across all product lines, particularly the P22 and PPK pistols. We believe that the restructuring of our commercial sales force in fiscal 2006 is responsible for the increase in the Walther line. Walther order backlog was $1,494,334 at July 31, 2006 compared with $1,324,527 at July 31, 2005.
Performance Center sales increased by $407,130, or 24.7%, for the quarter ended July 31, 2006 to $2,054,619 compared with the quarter ended July 31, 2005. Custom variations of the Model 460 were responsible for the increase in sales. The Performance Center had an order backlog of $1,562,428 at July 31, 2006 compared with $1,868,548 at July 31, 2005.



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Table of Contents
Engraving sales increased by $1,362,325, or 132.9% to $2,387,223 for the quarter ended July 31, 2006 compared with the quarter ended July 31, 2005. This increase resulted from the sale of commemorative revolvers featuring our Model 460.
We began shipments of our M&P 15 tactical rifle in February 2006. Sales of our M&P 15 rifles were $2,137,183 for the quarter ended July 31, 2006. Twenty police agencies have selected the M&P 15, and another six departments have approved the M&P 15, for on-duty carry. In addition, we have received requests from approximately 55 law enforcement agencies for test and evaluation. The backlog for tactical rifles was $8,592,346 at July 31, 2006.
Sales through our sporting goods distribution channel were approximately $32.2 million for the quarter ended July 31, 2006, an increase of 36.7% over the comparable period last year. Law enforcement sales and federal government sales were approximately $10.9 million, a $7.4 million increase over the quarter ended July 31, 2005. International sales for the quarter ended July 31, 2006 of $3.6 million were up slightly over the comparable quarter last year. The focus of many law enforcement agencies is on the M&P pistol. To date, 59 law enforcement agencies have selected the M&P pistol and another 23 have selected the M&P and are awaiting funding. Another 24 agencies have approved the M&P pistol for on-duty carry. In addition, over 140 agencies have requested samples for test and evaluation. Most of these evaluations were still in process as of July 31, 2006.
Licensing Revenue
The following table sets forth certain information relating to licensing revenue for the quarters ended July 31, 2006 and 2005:


                                                                     %
                       2006          2005         $ Change        Change

                     $398,385     $ 799,977     $ (401,592)       (50.2)%




Licensing revenue for the quarter ended July 31, 2006 decreased by $401,592, or 50.2%, compared with the quarter ended July 31, 2005. Licensing income for the quarter ended July 31, 2005 included a benefit of $350,000 as a result of an audit we conducted on one of our licensees. During the quarter ended July 31, 2006 we added two new licensees (Law Enforcement Associates and Mill Street), and terminated our agreements with two existing licensees. Cost of Revenue and Gross Profit
The following table sets forth certain information regarding cost of revenue and gross profit for the quarters ended July 31, 2006 and 2005:


                                                                                 %
                                2006             2005          $ Change       Change

         Cost of revenue    $ 31,324,719     $ 23,050,811     $ 8,273,908        35.9 %
            % net revenue           65.3 %           70.6 %
         Gross profit       $ 16,678,115     $  9,598,889     $ 7,079,226        73.8 %
            % net revenue           34.7 %           29.4 %




Gross profit for the quarter ended July 31, 2006 increased by $7,079,226, or 73.8%, compared with the quarter ended July 31, 2005. The higher sales volume was responsible for the increase in gross profit. In addition, we realized substantial benefits because we leveraged our fixed costs. While sales increased by 49.5% for the quarter ended July 31, 2006, fixed costs (manufacturing salaries, depreciation, insurance, and utilities) only increased by 18.6%. Utility costs for the quarter increased by $440,883, or 64.7%, over the comparable quarter last year, reflecting rising energy costs. Depreciation expense for the quarter increased by $354,797 compared with the quarter ended July 31, 2005 as a result of the increased capital spending in fiscal 2006.
Gross profit, as a percentage of net product and services sales and license revenue, increased from 29.4% for the quarter ended July 31, 2005 to 34.7% for the quarter ended July 31, 2006.



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Table of Contents

Operating Expenses
    The following table sets forth certain information regarding operating
expenses for the quarters ended July 31, 2006 and 2005:

                                                                                         %
                                        2006             2005          $ Change       Change

  Research and development, net     $    168,094     $     39,840     $   128,254       321.9 %
  Sales and marketing                  4,711,932        3,950,277         761,655        19.3 %
  General and administrative           5,915,185        3,879,841       2,035,344        52.5 %
  Environmental credit                         -       (3,087,810 )     3,087,810
  Operating expenses                $ 10,795,211     $  4,782,148     $ 6,013,063       125.7 %
      % net revenue                         22.5 %           14.6 %




Operating expenses for the quarter ended July 31, 2006 increased by $6,013,063, or 125.7%, over the quarter ended July 31, 2005. Operating expenses for the quarter ended July 31, 2005 included a $3,087,810 reduction in our environmental reserves as a result of the completion of remediation on a parcel of land that we sold to the City of Springfield. Under the terms of the purchase and sale agreement, the city agreed to remediate the property, but we still had a potential liability until that remediation was completed and we maintained a reserve for that potential liability. The remediation was completed in May 2005 and as a result we released reserves that had been previously established to remediate that property. Sales and marketing expenses increased by $761,655 because of our investment in additional resources to increase our market penetration in the law enforcement and federal government channels. General and administrative expense increased by $2,035,344 for the quarter ended July 31, 2006. The increase in general and administrative expense was attributable to $793,962 in increased spending on cash compensation and fringes and $727,242 in additional profit sharing expense. We also incurred $691,050 in stock option expense relative to SFAS 123(R), an increase of $415,550 over the amount incurred in the quarter ended July 31, 2005.
Operating expenses, as a percentage of net product and services sales and license revenue, increased by 7.9% to 22.5% for the quarter ended July 31, 2006 compared with the quarter ended July 31, 2005. Income from Operations
The following table sets forth certain information regarding income from operations for the quarters ended July 31, 2006 and 2005:


                                                                                    %
                                    2006            2005          $ Change       Change

      Income from operations     $ 5,882,904     $ 4,816,741     $ 1,066,163        22.1 %
         % net revenue                  12.3 %          14.8 %




Income from operations was $5,882,904 for the quarter ended July 31, 2006, a $1,066,163, or 22.1%, increase compared with operating income of $4,816,741 for the quarter ended July 31, 2005. The increase was due primarily to the higher sales volume. As indicated above, operating expenses for the quarter ended July 31, 2005 included a $3,087,810 reduction in environmental reserves. Other Income/ Expense
Other expense totaled $123,737 for the quarter ended July 31, 2006 compared with other income of $42,891 for the quarter ended July 31, 2005. Foreign exchange losses for the quarter ended July 31, 2006 totaled $132,063 compared with an exchange gain of $25,810 for the quarter ended July 31, 2005. The exchange activity resulted from inventory purchases from Walther, which are billed in Euros. We purchase forward contracts to hedge against exchange fluctuation and record mark-to-market adjustments on the contracts accordingly.
Interest income of $30,711 for the quarter ended July 31, 2006 represented an increase of $12,207 compared with the quarter ended July 31, 2005.



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Table of Contents

Interest Expense
    The following table sets forth certain information regarding interest
expense for the quarters ended July 31, 2006 and 2005:

                                                                     %
                       2006          2005         $ Change        Change

                     $344,961     $ 549,337     $ (204,376)       (37.2)%




Interest expense declined for the quarter ended July 31, 2006 by $204,376. Interest expense for the quarter ended July 31, 2005 included a $210,968 write-off of debt issuance costs. Total debt outstanding as of July 31, 2006 was $18,615,007 compared with $16,028,401 on April 30, 2006. Income Taxes
Income tax expense of $2,075,601 for the quarter ended July 31, 2006 increased $434,065 compared with income tax expense of $1,641,536 for the quarter ended July 31, 2005. The effective rates for the quarters ended July 31, 2006 and 2005 were 38.1% and 37.9%, respectively. Net Income
The following table sets forth certain information regarding net income and the related per share data for the quarters ended July 31, 2006 and 2005:


                                                                                  %
                                    2006            2005         $ Change      Change

        Net income               $ 3,369,316     $ 2,687,263     $ 682,053        25.4 %
        Net income per share
             Basic               $      0.09     $      0.08     $    0.01        12.5 %
             Diluted             $      0.08     $      0.07     $    0.01        14.3 %




The increase in net income and net income per share for the quarter ended July 31, 2006 compared with the quarter ended July 31, 2005 resulted from the higher sales volume, partially offset by higher operating expenses. Pre-tax income for the quarter ended July 31, 2005 included the $3,087,810 environmental reserve reduction, which accounted for approximately $1.9 million of net income. Liquidity and Capital Resources
Our principal cash requirements are to finance the growth of our firearms and licensing operations and to service our existing debt. Capital expenditures for new products, capacity expansion, and process improvements represent important cash needs.
The following table sets forth certain information relative to cash flow for the quarters ended July 31, 2006 and 2005:


                                                                                    %
                                  2006             2005           $ Change       Change

     Operating activities     $    620,979     $ (3,349,129 )   $  3,694,608       110.3 %
     Investing activities       (3,417,620 )     (2,266,270 )     (1,151,350 )     (50.8 )%
     Financing activities        3,324,811        2,765,910          834,401        13.4 %

          Total               $    528,170     $ (2,849,489 )   $  3,377,659       118.5 %




Operating activities represent the principal source of our cash flow. The $620,979 increase in cash from operating activities for the quarter ended July 31, 2006 was primarily a result of the higher net income. In the quarter ended July 31, 2005, $3,087,810 of the pre-tax income came from a reduction in our environmental reserve, a non-cash transaction. The accounts receivable balance at July 31, 2006 was $27,000,226 compared with $17,980,621 at July 31, 2005. This reflects an increase in sales for the month of July, which were



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Table of Contents
approximately $8.7 million higher year-over-year. Inventory during the quarter ended July 31, 2006 increased by approximately $4.0 million. As a result of factory capacity constraints, we traditionally build inventory in the first quarter in anticipation of increased demand later in the fiscal year.
Cash used for investing activities increased by $1,151,350 for the quarter ended July 31, 2006 compared with the quarter ended July 31, 2005. Capital spending for the quarter ended July 31, 2006 was $3,410,079 compared with $2,299,620 for the quarter ended July 31, 2005, an increase of $1,110,459. We expect to spend approximately $13.0 million on capital expenditures in fiscal 2007. The major capital expenditures will focus on increasing pistol production capacity to meet increased demand, primarily our pistol product line, tooling for new product offerings, and various projects designed to increase capacity and upgrade manufacturing technology.
The $834,401 increase in cash provided by financing activities for the quarter ended July 31, 2006 resulted from higher stock compensation expense as well as an increase in short-term borrowings. Short-term bank borrowings totaled $3.0 million at July 31, 2006 compared with $2.5 million at July 31, 2005. The increase was attributable to higher capital spending. We paid $413,394 against the long-term notes payable to BankNorth, our primary bank during the quarter ended July 31, 2006.
As of July 31, 2006, we had $1,259,476 in cash and cash equivalents on hand. We have a $17.0 million credit facility with TD BankNorth to support letters of credit, working capital needs, and capital expenditures. We have been approved for and are in the process of finalizing an agreement with TD BankNorth for an additional line of $30.0 million to fund acquisitions. Other Matters
Critical Accounting Policies

The preparation of financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant accounting policies are disclosed in Note 3 of the Notes to the Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended April 30, 2006. The most significant areas involving our judgments and estimates are described in the Management's Discussion and Analysis of Financial Conditions and Results of Operations in our Annual Report on Form 10-K for the year ended April 30, 2006, to which there have been no material changes. Actual results could differ from those estimates.
Recent Accounting Pronouncements

In July 2006, the Financial Accounting Standards Board ("FASB") issued FASB Interpretation No. 48, "Accounting for Uncertainty in Income Taxes" ("FIN 48"), an interpretation of Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes." FIN 48 clarifies the accounting for uncertainty in income taxes recognized in a company's financial statements and prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition and will become effective for us for fiscal years beginning after December 15, 2006. We are in the process of evaluating the impact of adoption of FIN 48. Item 3. Quantitative and Qualitative Disclosures About Market Risk

We have purchased Euro participating forward option contracts to minimize the fluctuations in exchange rates when purchasing finished goods and components from a European supplier. Participating forward options provide full protection against the depreciation of the U.S. dollar and partial benefit from the appreciation of the U.S. dollar. If the Euro strengthens above the average rate, we will not pay more than the average rate. If the Euro weakens below the average rate, 50% of the Euros are at the average rate and the remaining 50% of the Euros are paid for at the spot rate. As of July 31, 2006, we had three 600,000 Euros option contracts



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Table of Contents
remaining, with the last expiring in October 2006. During the three months ended July 31, 2006, we experienced a net gain of $38,000 on hedging transactions that were executed during the period. As of July 31, 2006, the fair market value of outstanding derivatives was an asset of approximately $27,000 versus a liability of $136,000 as of July 31, 2005.
Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures We have carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. As defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act, disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports we file or submit under the Securities Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC's rules and forms. Disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed by us in the reports we file or submit under the Securities Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. We formed a disclosure committee in the fall of 2002 that includes senior financial, operational, and legal personnel charged with assisting the Chief Executive Officer and Chief Financial Officer in overseeing the accuracy and timeliness of the periodic reports filed under the Security Exchange Act and in evaluating regularly our disclosure controls and procedures.
Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of July 31, 2006, our disclosure controls and procedures are effective at a reasonable assurance level in that they were reasonably designed to ensure that information required to be disclosed by us in the reports we file or submit under the Security Exchange Act (i) is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC, and (ii) is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. There have been no changes in our internal control over financial reporting that occurred during the most recent fiscal quarter that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

[setravis]

Great numbers sales and profit.....
Another sporting goods supplier delivered higher-caliber results.
Smith & Wesson, chalked up a 49% sales increase and a 25% profit rise fired up by higher sales of its new guns to law enforcement and to the U.S. Army, which is using them to equip Afghan government forces.

Technicals
Record Price High
Percentage Gainer

Fundamentals
Key Data:
Market Cap (M): $387.37 
P/E Ratio: 45.04 
PEG Ratio: N/A 
Next Earnings: 12/06/2006
Last Analyst Rating: N/A

[setravis]

Motley Fool
Smith & Wesson Pops
Monday September 11, 1:24 pm ET
By Rich Smith


Smith & Wesson Holding (Nasdaq: SWHC - News) wowed Wall Street last week, delivering fiscal first-quarter 2007 sales growth far exceeding expectations, better profits than predicted, and upping guidance for the rest of the new fiscal year (2007). Result: a one-day 8% pop in the share price.


Year over year, the company posted revenue growth of 50% on the strength of amazing pistol sales growth. Firearms revenue in general grew 54%, while Walther pistol sales rocketed 73% and S&W's own-brand sales grew 84%. Management executed brilliantly on its promise to grow sales of its new Military & Police (M&P) line of products, reporting that sales to law enforcement had doubled since this time last year, and that combined sales to law enforcement and the federal government (including U.S. Army purchases used to arm the Afghan military and police) more than tripled.

Although the company was not specific on this point, I suspect that the large increase in volume of sales also benefited S&W by delivering certain economies of scale. In a world of continued high energy and raw materials prices, it would otherwise be hard to explain the 530-basis point improvement in gross margins to 34.7%.

Mind you, the lower parts of the income statement didn't look nearly so good. Operating margins declined 270 basis points to 12.4%, and net margins fell 140 basis points to 7.1%. However, both of these numbers are deceiving; one year ago, earnings benefited from a one-time "environmental reserve reduction" that temporarily inflated operating and net margins, and that did not recur this quarter.

And speaking of recurring events, management seems pretty confident that last week's numbers were no flash in the pan. Looking farther out, it expects to repeat success and maintain gross margins in the 34% range. It also upped sales and earnings guidance by roughly 10%, and now predicts $200 million in revenue and $0.36 per share for the year.

Where's the cash?
So much for the world according to GAAP. But as pretty as the accounting profits picture appears, it seems my concerns about free cash flow, expressed in last week's Foolish Forecast, have proven correct. In predicting its cash flow for the rest of the year, S&W scaled back its operating cash flow estimate for the year to about $13 million, while adding $5 million in expansion capital expenditures (to fund its move into producing "long guns") to its already-stated objective of $8 million in maintenance capex. Result: Even as management upped its GAAP profits prediction to $15 million, its free cash flow now looks likely to approach zero.

Call me a cynic, but when I see non-existent free cash flow, contrasted with apparently superb GAAP results, and promises of more of the same in the near future -- and combined with a planned offering of 15 million shares -- I get the uneasy feeling that the business isn't as strong as the GAAP numbers imply.

[setravis]

 
52wk Range: 3.50 - 10.98

Volume: 1,040,328
Avg Vol (3m): 470,089

Technicals
Record Price High

Fundamentals
Key Data:
Market Cap (M): $425.71 
P/E Ratio: 49.50 
PEG Ratio: N/A 
Next Earnings: 12/06/2006
Last Analyst Rating: N/A

[setravis]

Indie Research
Smith & Wesson Director Buys Into Strength
Wednesday September 13, 3:01 pm ET
By the InsiderScore.com Research Staff


A director at Smith & Wesson Holding Corporation (Nasdaq: SWHC - News) bought stock with shares of the gunmaker at an all-time high.


Vice Chairman Robert Scott, a director at Smith & Wesson since December 1999, purchased 30,000 shares at $11.31 on September 12th, boosting his holdings to 370,000 shares. Previously, Scott bought 10,000 shares at $5.61 in March, and 30,000 shares at $5.58 in September 2005. Scott also exercised options on 300,000 shares at $0.89 in September 2005, and he currently holds options for 10,000 shares.

Scott's was scored 1.5 out of 4.0 by InsiderScore.com's proprietary scoring algorithm.

Scott was previously the vice president of business development and, later, president of Saf-T-Hammer Corp., which bought Smith & Wesson in 2001. He served as chairman of Smith & Wesson's wholly owned subsidiary, Smith & Wesson Corp., in 2003, and was a consultant for Smith & Wesson from May 2004 to February 2006. From November 2004 to May 2005, Scott was selling shares of Smith & Wesson, disposing of 488,000 shares at an average price of $1.91.

In May 2001, Scott was issued warrants with a cashless exercise clause for 5 million shares at $0.89. The company amended the warrants in May 2005, removing the cashless exercise clause, and in September 2005, Scott tendered his unexercised options to the company in exchange for $2.67 per share in cash. Scott and two other directors, both former Saf-T-Hammer Corp. executives, also agreed to sell Smith & Wesson back an aggregate of 1.2 million shares at $5.33 if the company so requests.

Directors at Smith & Wesson receive an annual retainer of $60,000, plus options for 10K shares each year. Scott receives an additional $18,000 in cash compensation plus a per diem expense allowance of $1,000 while traveling on behalf of our company at various industry functions.

Since hitting a 52-week low of $3.50 in December 2005, shares of Smith & Wesson have marched steadily higher. The stock has closed higher each month except in July, when it closed at the same price as it did in June. Smith & Wesson has also hit a new all-time high each month since May, and the stock has hit all-time highs on 11 of the past 12 trading days, including today when it hit $12.73.

Smith & Wesson's strength can be attributed to a number of factors, not the least being a string of impressive quarterly results backed up by contract wins. The stock has also benefited from an early July inclusion in the Russell 2000 and Russell 3000 indices, and a move from the American Stock Exchange, where it traded under the "SWB" symbol, to the NASDAQ. The recent strength comes on the heels of an impressive fiscal first quarter 2007 earnings report.

For Q1 (ended July 31, 2006), Smith & Wesson reported net income of $3.4 million, or 8 cents per share, up from $2.69 million, or 7 cents per share, a year earlier, and a penny better than analysts expected. Revenue, meanwhile, rose 49.5% to $48 million, or $5 million better than analysts had forecast. Sales of the company's Smith & Wesson pistols rose 83.5% and sales of Walther pistols shot up 73%, pacing an overall 54% increase in firearms sales. Smith & Wesson's license revenue fell from $800,000 to $400,000.

Looking forward, Smith & Wesson forecast revenue of $200 million for fiscal 2007, an increase of 26.6% year-over-year, and net income of $15 million, or 36 cents per share, a 72% increase from the prior year. The company's $13 million in CapEx is expected to be fully-funded by cash flow from operations, with most of the expenditures coming in the first half.

"Our strategy also calls for diversification into new markets with new products. Market research indicated that our strong Smith & Wesson brand could be successfully transferred into new markets, including the long gun market for tactical rifles, hunting rifles and shotguns. In fiscal 2006, we introduced our new M&P tactical rifle series, which is being well received in the market place. We intend to continue our expansion into other segments of the long gun market, with the introduction of new product offerings during the first half of calendar 2007," President & CEO Michael Golden said.

Following earnings, analysts at Merriman, Rodman and Renshaw, and Cowen were bullish on the name. Merriman said Smith & Wesson's entry into the military and law enforcement sectors combined with new product extensions should increase sales and profitability. Based on their P/E multiple of 28X to 32X, Merriman believes the stock could trade into the $12.60 to $14.40 range. Cowen, meanwhile, said Smith & Wesson could outperform the market by 15% in the next six to twelve months.

Worth Noting: To fund potential acquisitions, Smith & Wesson has filed a shelf registration for the sale of up tp 15 million shares of common stock. The company also recently received an additional $30 million line of credit from lenders to use for acquisitions.

"While no acquisitions are currently planned, establishing these funding vehicles will allow the Company to move quickly in the event desirable acquisitions are identified," Smith & Wesson said in its earnings release.

Smith & Wesson currently has a little more than 39.5 million shares outstanding.

InsiderScore.com issued six previous Research Notes on Smith & Wesson, the first coming in March 2005 when the stock was trading around $2.15. Our most recent note was in March, when Scott and Golden bought shares in a range of $5.61 to $5.85. Other than a small buy a week after our last note, Scott's buy yesterday was the first by any Smith & Wesson insider since March.

No member of the InsiderScore.com editorial staff contributing to this article has any long or short positions in any company mentioned. Indie Research has a disclosure policy.

About InsiderScore.com: InsiderScore is an insider trading data monitoring and intelligence service. Its proprietary algorithms rank transactions in real time, allowing investors to focus on the most important transactions each day. Barron's said InsiderScore was "one of the five best debuts in the investment-research sector of 2005." Professional investors can click here to take advantage of this valuable information with a free trial.

[setravis]

    
Business Overview

BRIEF: For the fiscal year ended 30 April 2006, Smith & Wesson Holding's revenues increased 27% to $160M. Net income increased 66% to $8.7M. Revenues reflect an increase in sales of pistols and increased revolver sales. Net income also reflects higher operating margins, the presence of reduction for estimated environmental remediation costs, decreased interest expense and the presence of net other income vs. an expense. http://smith-wesson.com


Price Performance Actual (%)
4 Week 31.99 
13 Week 43.79
26 Week 95.46
52 Week  118.46 
Year To Date 174.05

Technicals
Record Price High
Percentage Gainer 

MACD is Bullish
Stochastic is Bullish

Fundamentals
Key Data:
Market Cap (M): $425.71 
P/E Ratio: 49.50 
PEG Ratio: N/A 
Next Earnings: 12/06/2006
Last Analyst Rating: N/A

52wk Range: 3.50 - 11.47

Volume: 3,819,759
Avg Vol (3m): 485,511

Support @ $11.50...10.48...8.43

Here is a 6 month and a 3 year chart

[setravis]

Breakout.....to a record price high.
Took another nice bounce to the upside off the 50-day MA.
See you in the teens !

Teens, and here we are!! 

This gun maker has been killing it's 52 week high for a weeks now.
With law enforcement and the military as primary customers,there could be a lot more upside in this stock.
I really like the fact that institutional ownership is quite minimal and that a roaring economy isn't needed to fuel growth here! Volume is up as well as the revenue up 49.5% over the comparable quarter last year.

52wk Range: 3.50 - 13.88

Volume: 888,985
Avg Vol (3m): 630,826

Technicals
Last Price Quote is:
52.70%above 50-day EMA
 
Fundamentals
Key Data:
Market Cap (M): $530.06 
P/E Ratio: 58.35   
Next Earnings: 12/06/2006

[setravis]

Press Release Source: WallStreet Direct, Inc.


CYDF, SWHC and EGLS Update the Investment Community in All-New Interviews With WallSt.net
Wednesday September 20, 7:00 am ET


NEW YORK, Sept. 20 /PRNewswire/ -- On August 10, Billy Robinson, CEO of Cyber Defense Systems, Inc. (OTC Bulletin Board: CYDF - News) updated the investment community in an all-new interview with www.wallst.net . Interview highlights include detailed discussions on the following topics:

    -  the company's two product lines
    -  new product development
    -  government agencies that have utilized the Company's unmanned aerial
       systems
    -  current capitalization, the company's ability to generate working
       capital
    -  industry trends bolstering the company's near-term growth prospects
    -  long-term growth strategy
    -  upcoming milestones for investors to watch for

To hear the interview in its entirety, and to read an in-depth report on the company, visit http://wallst.net/superstocks/superstocks_profile.asp?ticker=cydf .

On September 14, Michael Golden, CEO of Smith & Wesson Holding Corp. (Nasdaq: SWHC - News) updated the investment community in an all-new interview with www.wallst.net . Interview highlights include detailed discussions on the following topics:


    -  transferring the company's focus from the handgun and sporting goods
       channel in the U.S. to a company in the global business of "safety,
       security, protection and sport"
    -  "significantly" expanding the company's business with the U.S. Federal
       government, law enforcement in the U.S. and international markets
    -  key drivers behind the company's record quarter
    -  recent product introductions, and their impact on the company's sales
    -  government contracts
    -  upcoming milestones for investors to watch for

On September 7, Tom Rohrs, CEO of Electroglas, Inc. (Nasdaq: EGLS - News) updated the investment community in an all-new interview with www.wallst.net . Interview highlights include detailed discussions on the following topics:


    -  the company's target markets
    -  annual growth rate and competition in the company's niche market
    -  recent product introductions, and the value-added contributions they
       offer customers
    -  current capitalization and balance sheet strength
    -  reasons the company's products have a competitive edge
    -  why the company's relationship with Amkor Technology is significant
    -  upcoming milestones for investors to watch for

To hear the interviews in their entirety, visit http://www.wallst.net , and click on "Interviews." Interviews require free registration, and can be accessed either by locating the respective company's ticker symbol under the appropriate exchange on the left-hand column of the "Interviews" page or by entering the respective company's ticker symbol in the Search Archive window at the bottom of the "Interviews" page.

About WallSt.net

www.wallst.net is owned and operated by WallStreet Direct, Inc., a wholly owned subsidiary of Financial Media Group, Inc. The website is a leading provider of financial news, media, tools and community-driven applications for investors. www.wallst.net offers visitors free membership to its in-depth executive interviews, exclusive editorial content, breaking news, and several proprietary applications. In addition to its website, WallStreet Direct organizes investor conferences, publishes a newspaper, and provides multimedia advertising solutions to small and mid-sized publicly traded companies. We are expecting to receive two thousand two hundred fifty dollars from Cyber Defense Systems, Inc. for media and advertising services. For a complete list of our advertisers, and advertising relationships, visit http://www.wallst.net/disclaimer/disclaimer.asp .

(Logo: http://www.newscom.com/cgi-bin/prnh/20050927/LATU121LOGO )




--------------------------------------------------------------------------------
Source: WallStreet Direct, Inc.