Welcome to Smith & Wesson Brands Inc's fourth quarter and full fiscal 2021 financial results conference call. This call is being recorded. At this time, I would like to turn the call over to Rob Cicero, General Counsel, who will give us some information about today's call.
Thank you, and good afternoon. Our comments today may contain predictions, estimates, and other forward-looking statements. Our use of the words anticipate, project, estimate, expect, intend, believe, and other similar expressions are intended to identify those forward-looking statements. Forward-looking statements also include statements regarding our product development, focus, objectives, strategies, strategic evolution, market share, and demand for our products, as well as inventory conditions related to our products, growth opportunities and trends, and conditions in our industry in general. Our forward-looking statements represent our current judgment about the future, and they are subject to various risks and uncertainties that could cause our actual results, levels of activity, performance, or achievements to be materially different from those expressed or implied by our statements today.
These risks and uncertainties are described in detail in our securities filings, including our periodic reports on Forms 8-K, 10-K and 10-Q, which you can find on our website at smith-wesson.com, along with a replay of today's call. Our actual results, level of activity, performance, and achievements could differ materially from those expressed or implied by our statements today, and we expressly disclaim any obligation to update any forward-looking statements. I have a few important items to note about our comments on the call today. First, we reference certain non-GAAP financial results on this call. Our non-GAAP financial results exclude acquisition-related amortization, one-time transition costs, COVID-19 expenses, and the tax effect related to each of these exclusions. Reconciliations of GAAP financial measures to non-GAAP financial measures, whether or not they are discussed on today's call, can be found in our securities filings and also in today's earnings press release.
Our securities filings and today's earnings press release can be found on our website. Also, when we reference EPS, we are always referencing fully diluted EPS. Finally, when we discuss NICS results, we are referring to adjusted NICS, a metric published by the National Shooting Sports Foundation based on the FBI NICS data. Adjusted NICS removes those background checks conducted for purposes other than the purchase of a firearm. Please remember that adjusted NICS background checks are generally considered to be the best available proxy for consumer firearm demand at the retail counter. Since we transfer firearms only to law enforcement agencies and federally licensed distributors and retailers and not to end consumers, NICS generally does not directly correlate to our shipments or market share in any given time period. We believe mostly due to inventory levels in the channel.
Before I hand the call over to our speakers today, I want to remind everyone that we completed the spinoff of our outdoor products and accessories business on August 24th, 2020. As such, we are now reporting all historical financial information for that business as discontinued operations. Unless otherwise indicated, any reference to income statement items during this call refers to results from continuing operations. Joining us on today's call are Mark Smith, President and Chief Executive Officer, and Deana McPherson, Chief Financial Officer. With that, I will turn the call over to Mark.
Thank you, Rob. Thanks, everyone, for joining us. As we bring our fiscal year to a close, first and foremost, I'd like to take a moment to reflect on the unbelievable accomplishments of the Smith & Wesson employees in these last 12 months. As with the rest of the nation, each and every member of our team has faced adversity in their personal and professional lives this year that we could not have ever imagined just 18 short months ago.
As they have always done, the Smith & Wesson team rose to the challenge without hesitation, immediately jumping into action to redesign workstations, develop rigorous disinfectant programs, expand PPE requirements, secure cleaning and disinfecting supplies, repurpose manufacturing assets to make PPE for frontline workers in our communities, set up home offices, alter work procedures to minimize exposure risk, implement temperature scanners, and the list just goes on and on. The most impressive and humbling thing to see was how our unbelievable family of employees came together to support each other throughout the most challenging times we've seen in our lifetime and made sure the company they love never missed a beat.
Whether as our order entry team, working tirelessly to manage the influx of new orders, our operations team ramping production by over 60% in a few short months, our AP and AR teams keeping up with the immense volume of transactions that came along with this, our human resources team thinking outside the box to recruit almost 300 new employees in the midst of a pandemic, our sales team continuing to safely visit customers and make sure that their needs were met, our customer service team handling heavy call volume to ensure our reputation for world-class service never faltered, and every other employee and function in the organization, the impressive results that Smith & Wesson delivered this year and the long-term success of the business simply would not be possible without them.
Because of this firmly held belief, our company has maintained a longstanding profit-sharing program. Earlier today, we announced to our employees that this year we will be distributing over $14 million to eligible employees, which will be 15% of each employee's annual wages. In addition, the company achieved a very significant milestone in fiscal 2021, surpassing $1 billion in sales for the first time in our 169-year history. As I said, this would not have been possible without all of our employees. In recognition of this milestone, we will also be awarding every employee who is not eligible for our management bonus program a special bonus of $1,200 per full-time employee and $600 for temporary workers, prorated for the months of service during the fiscal year, and to be paid next Thursday, June 24th.
Congratulations to each of you, and thank you to our entire Smith & Wesson family. Turning now to the business results. Our fourth quarter revenue of nearly $323 million was the highest quarter ever on record and marks the fourth consecutive record-breaking quarter for the company, capping off a year in which the company achieved just under $1.1 billion in revenue, as I mentioned just now, surpassing the $1 billion mark for the first time in our history. As far as profitability, our goal is always to keep costs low and leverage overhead during periods of heightened demand, and the team did an outstanding job this year. Even though we doubled our top-line revenue year-on-year, they held fixed costs largely flat and therefore drove net income of over $89 million for the fourth quarter and nearly $244 million for the year. Again, both new high water marks for the company.
All of this led to nearly $318 million in cash from operations for the year. In keeping with our stated capital allocation strategies at the spinoff, we used this cash to completely pay off our $160 million debt, return over $8 million to shareholders through dividends, and reduce our outstanding shares by over 14% just in the short 10 months since the spinoff. Demonstrating our continued commitment to returning value to shareholders, our board this week approved a 60% increase in our fixed dividend and also authorized an additional $50 million share repurchase program. Undoubtedly, our fourth quarter and the year have been remarkable, but the most exciting aspect has been how these achievements have positioned Smith & Wesson for long-term success. Our manufacturing logistics teams produced and shipped nearly 2.5 million units last fiscal year, representing a 70% increase year-on-year.
During the same time frame, the U.S. firearms market, as measured by NICS, grew by 42%. Even though it was a record year of growth for the industry, we were still able to realize astounding market share gains. We did this by leveraging our flexible manufacturing model, which as we've discussed on previous calls, enables us to react much more quickly to changes in market demand, ensuring that our product is more readily available at retail, even during periods when the overall industry is capacity constrained.
Our sales and marketing team has also been hard at work ensuring that the millions of new firearms owners who have entered the market over the past 15 months are welcomed and encouraging them to learn how to responsibly enjoy the shooting sports, while also continuing to connect with the tens of millions of longtime loyal Smith & Wesson consumers who trust in our products every day. Just in the past year, we have conducted a thorough A&U study to understand the new firearm owner population and how we can best connect with them. We have recorded over 45 instructional videos for our GUNSMARTS program, along with our professional shooting team, on topics ranging from the basics of responsible firearm ownership, how to find a local firearm social community, or increase your skills and become a proficient target shooter. These videos have been viewed over 2 million times.
We have completely redesigned and relaunched our website to improve ease of use and brand messaging, which has been very well received by the 16 million people who have visited our site for the first time this year. We held the first-ever virtual show in the firearms industry, highlighting our brand and launching our extremely popular new pistol, the Shield Plus, which has sold over 148,000 units just in the first three months since we launched it. We produced the first-ever brand anthem for the company, a powerful video highlighting the values and beliefs that Smith & Wesson shares with firearms owners across the nation. We completed a full strategic product line review, priming the next generation of Smith & Wesson products with 12 unique brand-new products scheduled for launch in this upcoming year.
Next month, we will be debuting a state-of-the-art touchscreen interactive display at over 50 major retail locations around the country, designed to highlight Smith & Wesson products, features, brand messaging, and connect with firearms consumers directly at the retail level as they make their purchase decisions. As you can see, our renewed focus on being a pure-play firearms company has allowed us to move the needle very quickly across every function of the business in a very short amount of time, and we are just getting started. When we combine our results of the past year, the well-publicized influx of first-time firearms owners. Our laser focus on driving market share growth within the firearm space, our iconic brand, and our millions of loyal followers even before the pandemic, we are extremely well-positioned to parlay the success of the past year into lasting long-term results.
With that, I'll turn the call over to Deana to cover financial results before we take questions.
Thanks, Mark. As Mark noted, for the fourth consecutive quarter, we are reporting record revenues due to a combination of increases in capacity that were implemented in response to ongoing heightened demand, an increase in average selling prices due to the lack of promotions being offered, combined with a 3% price increase that was implemented in November, and an increase in operating days during the quarter. Revenue for the quarter reached $322.9 million, a $129.9 million or 67.3% increase over the prior year comparable quarter. The fourth quarter is typically our strongest quarter of the year with 65 operating days. Finally, the introduction of our very popular Shield Plus, which began shipping during the middle of the quarter, contributed to the strong fourth quarter performance.
Turning to a review of full-year sales, as Mark noted, for the first time in company history, we achieved over $1 billion in sales, hitting $1,059,000, actually doubling our fiscal 2020 sales of $529 million. As Mark also noted, this achievement is a result of the hard work and dedication of all of the Smith & Wesson employees who worked throughout the pandemic, increasing volume by over 60% in the middle of the year and navigating numerous challenges in the supply chain due to the pandemic, weather, and other issues. Gross margin in the fourth quarter of 45.1% was nearly 1,300 basis points above the 32.2% realized in the prior year comparable quarter. This increase in margin was due to increased unit shipments combined with the elimination of substantially all promotional activity and 3% price increase and a mix shift toward higher margin products.
Margins were slightly negatively impacted by increased volume-related spending, some inflation impacts, increased depreciation on machinery purchases, and compensation-related costs associated with increased headcount and profitability. We have fully accrued for the special bonus that we are paying to our team members, most of which work in operations. For the full year, gross margin of 42.4% was over 1,100 basis points higher than the 31.3% recognized in fiscal 2020. A full year of record production levels led to very favorable absorption, which, when combined with increased average selling prices and strong cost control, drove margins to record highs.
Operating expenses of $29.7 million for our fourth quarter were $1.5 million lower than the prior year comparable quarter in spite of the increased shipping costs and customer allowances associated with increased volume, $2.9 million of increased profit-sharing expense, increased legal fees, and an increase in costs associated with market research, new product launches, and the launch of a new marketing initiative. The net decrease in operating expenses was driven by reduced salaries, $4.3 million in reduced spin-related costs, lower stock compensation, lower trade shows and travel costs due to the pandemic, and lower consulting. For the full year, operating expenses of $129.4 million are approximately $14 million higher than fiscal 2020, driven primarily by a $12.6 million increase in profit sharing that will be distributed to our hardworking Smith & Wesson employees later this year.
In addition, increased volume-related costs combined with $3.2 million of spin-related costs more than offset cost savings initiatives, lower pandemic-related costs, and lower free goods and samples that are generally used as needed to spur sales. We are thrilled that our team demonstrated the ability to leverage operating costs while doubling revenue, resulting in operating expenses being 12.2% of revenue for the full year as compared to 21.8% for the prior year. The increase in revenue and gross margin, combined with strong expense containment, led to record quarterly profitability, including net income of $89.2 million, GAAP earnings per share of $1.70, non-GAAP earnings per share of $1.71, and adjusted EBITDA of $125.6 million, or almost 39% of revenue.
For the full year, our profitability exceeded expectations, including net income of $243.6 million, GAAP earnings per share of $4.40, non-GAAP earnings per share of $4.54, and adjusted EBITDA of $366.6 million, or 34.6% of revenue. During the fourth quarter, we generated $118.8 million in cash from operations and spent $3.7 million on capital equipment, resulting in $115.1 million in free cash. We also spent $60 million to repurchase approximately 3.4 million shares of our common stock and paid $2.6 million in dividends, resulting in the company ending the quarter with $113 million of cash and no bank debt. Looking at our full year, we generated $317.3 million in cash from operations and spent $22.3 million on capital equipment, which resulted in a record $295 million in free cash.
Executing the capital allocation priorities that we have described over the past year, we used this free cash to entirely pay off our $160 million revolving line of credit, repurchase $6.1 million shares of our common stock for $110 million, and pay $8.2 million in dividends to our shareholders. In addition, after the close of the year, we repurchased the remaining $40 million authorized on our share repurchase program, buying back another nearly 2 million shares, bringing the total outstanding share count down by over 14% in just the 10 months since we became a pure-play firearm company. Consistent with our capital allocation strategy, I am pleased to announce that our board has authorized a 60% increase in our quarterly dividend to $0.08 per share. This quarter's dividend will be paid to shareholders of record on July 1st, with payment to be made on July 6th.
The board has also authorized a new share repurchase program for up to $50 million of the company's common stock. Looking forward into our first quarter of fiscal 2022, I'd like to remind you that in periods of high demand, our ability to recognize revenue is primarily a function of our production capacity. That production capacity is somewhat governed by the number of days we have available due to weekends, holidays, and other non-operating days such as shutdowns. Our fourth quarter had 65 operating days, whereas our first quarter 2022 will have only 58 operating days due to the first week of our two-week shutdown occurring in July. Our distributor inventory as of today still remains very low at one week of supply. On June 14th, we implemented a 3% price increase on our products.
In addition, as we always do, we monitor our supply chain for indications of stress related to our significant increase in demand or issues related to the pandemic. During the start of our first quarter, we did have one of our key suppliers shut down for over a week due to COVID issues. We believe we have recovered from this situation, but it did impact our capacity for about one week. As always, supply chain risks are subject to change and our team continues to develop contingencies to offset and avoid any additional interruptions. We are not currently planning to add any capacity that will have an impact on our first quarter results. Finally, our effective tax rate is approximately 24%. With that, operator, can we please open the call to questions from our analysts?
If you'd like to ask a question at this time, please press the star and the number one key on your touch-tone telephone. To withdraw your question press the pound key. Again that is start then one if you'd like to ask a question at this time. Our first question comes from Mark Smith with Lake Street Capital.
Hi, guys.
Mark.
Great quarter. Just wanted to hit a little bit, if you can give us any additional detail on new products, specifically Shield Plus, and you gave us some great detail there. If new products are skewing heavier in your sales mix now than maybe they historically have, and then any insight into your outlook on new products and how that can help going forward?
Sure. Yeah. I think as we talked about maybe on the last call, our approach to new products right now in this environment where we're capacity constrained is to be a little bit more strategic or judicious, if you will, on launching them into the market, just given the fact that we're capacity constrained. We really want to make sure that the products that we're launching, the goal right now is to obviously just keep our loyal consumers excited about our brand, keep us fresh, et cetera, make sure that we're closing any of those big white spaces that we see out there, and the Shield Plus was a great example of that and obviously been very successful and very well received by the market.
As we go forward into the next fiscal year, we're going to continue that approach, but I will say that that new product pipeline is extremely healthy. The NPD team has done a tremendous job. We've got a lot of new products teed up and kind of waiting in the wings, and we've got plans, as I mentioned on the prepared remarks, for 12 of those to be launched into the marketplace over the next year. It will be a bit of a heavier year this year than it was last.
Okay, great. As we look at average selling price, it moved higher, has continued to move a little higher. You took the 3%. It looks like especially in long guns, have you maybe had more success in price increases in long guns rather than handguns? Anything you can talk about on ASP as far as any pushback that you're getting or just the ease to take pricing.
Sure. First of all, on pushback, no pushback whatsoever on pricing. I think our customers understand that, A, we're capacity constrained, and B, there's been some inflation impacts that I think are very well publicized out there and just in general. No pushback on price increases. As far as the ASP, though, and the increase scenario, I think the majority of the driver there, Mark, is going to be promotional, is lack of promotional activity overall, is that we just don't need to participate and we see that going forward here. We don't foresee any need in the near future to be
Participating in promotional activity. On the long gun side, what you're seeing there is a little bit that, as we announced at the beginning of May, we de-emphasized the T/C brand as we're coming back into hunting under the Smith & Wesson brand, and you'll see that coming up here in the next, or beginning into that in the next few months. A lot of that ASP on the long gun side is going to be that.
Okay. The last one for me is really just looking at the cost side. Deana talked a little bit about some inflation. Where are you seeing that? Where are you seeing any pressure on the cost side?
Yeah, we've managed to hold off a lot of the cost increase, but we are seeing some. Obviously, that's just across the entire manufacturing supply chain, just in the U.S. in general, not just in firearms. I think it's pretty well-publicized. We're seeing inflation. We've passed on a lot of that. You saw the price increase that we just went into effect earlier this week. We've been able to pass on so far. We've either been able to mitigate it or pass it through.
Okay. Excellent. This is helpful. Thank you, guys.
Thanks, Mark.
Thanks, Mark .
Our next question comes from Cai von Rumohr with Cowen and Company.
Yes. Thanks so much, pretty extraordinary quarter.
Thanks.
Could you comment, Mark, a little bit on availability of labor. I think at one point you mentioned that with the payouts from the government, that basically it was tough to get workers. How is your ability to get workers?
It's still a challenge. What I will say, and I'll give kudos to our HR team, they've been able to think outside the box and come up with some creative ideas to get some labor in. It hasn't impacted our ability, obviously, as you can see from the results, materially to ramp production. We're having to work twice, three times as hard to get the labor in. It's definitely still continuing to have an impact on labor availability. However, due to the hard work of the team, we've been able to stave it off.
Got it. I think everybody recognizes you're in a cyclical industry, but not many companies I follow have net cash positions. As you look forward from what you see, assuming we're going to see some deceleration, how do you think about what kind of balance sheet? You want to stay net cash positive, or would you take on debt because interest rates are so low? Give us some color how you think about all of that, if you could.
Yeah, that's a great question. We'll talk in much more detail tomorrow on the Analyst Day presentation about this, Cai. The short answer to your question is we do intend to remain zero debt, net cash positive. We'll talk some more tomorrow on this as well. I think you can expect that, as you mentioned, we're in a cyclical industry, and you saw over $300 million in cash generated from operations this year, that we don't expect that to ever drop below $75 million range.
We intend to always remain net cash positive.
Yeah. It's our stated strategy, Cai, to keep the zero debt and use cash to reinvest in the business, to pay the dividend, to buy back stock as we can. As you know, you probably remember, we're limited on how much stock we can buy back for the rest of the year until we get to the second anniversary of the spin. Our intention is to build a little bit of a war chest, be prepared for the next time we can do stock buybacks and return cash back to our investors.
Refresh my memory. What is the limit? You just passed the new authorization of $50 million.
Right.
How much of that can you buy?
We think based on the stock price that we could do the rest of that through August of next year, but probably not a lot more than that. There's a safe harbor limit when you do a spin- that generally speaking, you don't want to purchase more than 20% of your outstanding shares.
Yeah.
We're at 14% in the first 10 months. That's what's behind the $50 million, which is okay because where we are on cash and our ability to keep generating, we raised the dividend and we have lots of ideas. We're reinvesting in marketing and doing some other things there. We're pretty comfortable with where we are.
Excellent. You mentioned the days, 65 in the fourth, 58 in the first. Just so we can, for modeling purposes, can you walk us through how many days you had in each of the first three quarters and how those days look like this year?
Yeah, I sure can. I have that right here. Let's see. Last year, fiscal 2020 was 59, 56, 65.
Fiscal 2022 will be 58, 59, 56, 65. Pretty close.
Okay. Was that fiscal 2020 that was 65? I thought you said 68 in the fourth quarter of 2021?
No, 65. 59, 69, 56.
Got it. Okay. It's essentially relatively level.
Yes, very close. There's one less operating day in 2022 than in 2021, just based on the way that the weekends and holidays fall.
Got it. I don't know if you can give us, obviously you have not been giving guidance, but can you give us any color about how you think about the opportunities for the year in terms of results qualitatively even?
Yeah. Obviously we can't give any quantitative notes or color, as you noted, we're not giving guidance. I think what we can tell you is that the firearms market still continues to be very active. I think it's widely known the ammunition shortages continue. There's still a lot of interest in firearms. May was the second highest adjusted NICS checks ever on record. While it was a deceleration versus last year, last year was a pretty tough comp and still remains, if you look at the stack chart, is just in a different stratosphere from where it was in 2019. We expect that the market will continue to remain elevated. Obviously we're going to be comping to a pretty tough year, though, as we go forward. We're pretty optimistic.
I think we've done a great job of taking market share and not just sitting back on our laurels and enjoying the fact that the operations team is cranking out product. We've also done a whole lot of work on the marketing side to be ready for any eventuality in terms of that. We're pretty, as I mentioned in my prepared comments, we're pretty excited about the long term.
Terrific. Thanks so much.
Thanks, Cai.
Our next question comes from Scott Stember with C.L. King.
Good afternoon, guys. Congrats on the very strong results. Thanks for taking my questions.
Of course.
You were just talking about the market and obviously May, despite the fact it decelerated, was still one of the best months on record. In general, what are you hearing from your guys about the attitudes with regards to usage? Do you have any additional stats beyond what you gave last quarter about people hitting the ranges and just out there and actually using their guns versus prior surges where it was more stockpiling?
I think as we've talked about, and I think it's been very well publicized, the influx of new firearms owners over the last year, 8 million in 2020 and probably another two or three on top of that since the end of 2020. You're probably talking more than 10 million new firearm owners coming into the marketplace. A lot of those are new entrants into the market, excited about it, excited about using their product, learning, becoming proficient. As you know, and we talked about quite a few times, we're doing a lot on that to try and reach out to those folks. How do we talk to them? What are the best channels? What messaging should we be sending? GUNSMARTS videos, beyond that, social media, et cetera, reaching out on non-endemic advertising, how do we engage with those new consumers?
I think a lot of those new consumers are going to, and again, as we've talked about expanding the demographics of the traditional firearms owner and making it less of a partisan, if you will, gun ownership less of a partisan issue and more just an American issue or American right and passion. I think that's good for us, for Smith & Wesson, and good for us as an industry. In terms of the here and now, right now, I think we're seeing a little bit of the summer seasonality like we normally always do this time of year. The anecdotal feedback we're getting from our retailers is good summer seasonality, but it's not back to 2019 by any way, shape, or form.
It's maybe down off of November, December, where we usually have our peaks, but it's at a different level than it was two years ago.
Got it. Much has been made with a lot of people, with the economy opening back up and people going back to some of their previous outdoor or just activities in general. You're not hearing anything to suggest that some of these newer owners that have guns are just walking away? Just trying to get a sense what you're hearing there?
No. We're not hearing anything to that effect.
All right. Lastly, just following up on the last question before that. You talked about ammunition shortages and the impact that's having on new gun sales. Can you just maybe expand upon that? Is that getting any worse, any better, or is it just going to probably be the same headwind for this year coming up?
We are hearing a little bit of pockets of folks being able to get a little bit of ammunition on the shelf. I will say, the general answer is no, it's not getting any worse either. I think that just kind of remains to be an issue. I think the yin and the yang of that for us, frankly, is that, yeah, it can have a damping effect on the firearm sales, but it also shows a pretty strong continued interest in shooting sports in general. I think that's a bit of a headwind for us in the firearm sales, but it's also a bellwether for the industry in general.
Got it. All right. That's all I have. Talk to you tomorrow. Thanks.
All right. Thanks, Scott.
As a reminder, if you'd like to ask a question at this time, please press the star, then the one key. Our next question comes from James Hardiman with Wedbush Securities.
Hey, good afternoon. Wanted to circle back, Deana, to this manufacturing capacity. We talked about the difference in operating days, 4Q versus 3Q. By my math, I guess to about a 6% sequential benefit, if you want to call it that, 4Q versus 3Q. You actually grew shipments more like 24%, and handgun shipments were up 30%. Obviously, I understand that production capacity and shipments aren't quite the same thing, but maybe fill us in on how you're able to accomplish that, especially given, I think what you noted was a key supplier shutting down, where you lost a little bit of time.
We lost a little time. That lost a little time is for Q1. That did not impact Q4.
Oh, got it.
That comment referenced kind of the first quarter look forward. There's a definite mix issue or a positive benefit of mix, what it takes to make certain products versus other products. You can make certain products faster. The other thing is that you might notice a little bit of inventory change. We were gearing up for a Shield Plus launch at the end of January. We had already made the product in January, and had put it into inventory so that we could stock our distributors and dealers ahead of time. You would see more sales in the beginning part of March. Mark noted that we sold an awful lot of those Shield Pluses during the quarter. We would've been starting to stock those up in Q1, sorry, in Q3. Q4 ended up taking advantage of that.
That is really helpful. As I think about modeling this going forward, should I not then think about the fourth quarter shipment numbers as the sort of max capacity? It seems like what you're saying is that may be more than what your actual production capacity is. Assuming that you're going to be making as much as you can, at least for the next couple of quarters, which is what it sounds like you're saying. Should we assume that it's maybe closer to the third quarter level, obviously adjusted for the difference in production days?
Right. Yeah, I think that's a great way to look at it. Then sort of layer in the fact that Q3 had a lot more holidays. It was a little bit lighter, I think it was 56 days. Then consider that we did have a bit of a supply chain disruption in May that we've recovered from, but that you're not operating on 100% as you might always do. I think about looking at Q3, we didn't add capacity in Q4. We just were able to change around some mix and then take advantage of the Shield Plus launch.
Got it. That is extremely helpful. Lastly, the most difficult one to actually know. Obviously, you have to make some assumption about retail here, but given where inventories are, how long do you think it takes to replenish end market inventories from here?
Obviously, there's a lot of factors that go into that, James. Obviously, the biggest one being the demand levels, right? Where do they go from here? Do they stay elevated? Which we believe they will versus 2019, what will the seasonality look like, et cetera. I think the one thing on inventories to just note is that, while we are hearing some anecdotal feedback from some of the retailers that they're definitely able to get some pockets of inventory back on the shelf again in certain categories. There are other categories that remain sold out. For example, for us, revolvers, is in pretty short supply out there and just in general. Our distributor inventories remain at one week. The number that Deana gave there is actually as of today, not as of the end of our quarter.
There's still a significant restocking that's going to have to take place. When that happens, I guess it's going to be a factor of the demand.
Got it. Mark, Deana, thank you.
Thank you.
Thanks.
Our next question comes from Rommel Dionisio with Aegis Capital.
Good afternoon, thanks. First question on the professional channel unit ship. Obviously, a smaller portion of your business than sporting goods, but there was a big jump on the handgun side, and I wonder if you could just talk about that a little. It just doesn't seem, I mean, it was a 52% increase year-over-year, and that doesn't seem to be a sector of the industry that is all that cyclical. I wonder, was it a big contract, a new product? What really kind of drove that handgun increase?
I'll have to drive you back, Rommel. It's a great question, and because it is a smaller part of our business, we didn't actually focus on it in our prepared remarks. Last year in the fourth quarter, we were moving from State to Commerce. A lot of the ability to ship internationally, were really held up by the government. The other thing is that the European governments were hit really hard earlier than the United States with COVID-19, and they actually shut down a lot of the shipments in and out. The freight carriers couldn't get product in and out. That was more of the State to Commerce stuff between January and February. In March and April, the impact of COVID on all of the European and other countries that would normally receive shipments for the professional sale.
Wouldn't that have impacted the fiscal 2021 as well, or was that pretty much wrapped up by what April is of a year ago?
Yeah. It's been wrapped up. Europe has been accepting shipments, and Commerce has been running for over a year now. If you looked at February, March, April of this year compared to February, March, April of fiscal 2020, it's sort of night and day as to the way that Europe has been receiving product and the way that Commerce has been running. There's not any holdups in licensing when you want to ship internationally anymore.
Okay, great. Thanks very much.
You're welcome.
Thanks, Rommel.
As a reminder, if you'd like to ask a question at this time, that is star then one. I'm showing no further questions in queue at this time. I'd like to turn the call back to Mark Smith for closing remarks.
Thanks, operator. Just want to say thanks to everybody for joining us today. Once again, congratulations to my fellow Smith & Wesson team members for a record-breaking year. Just as a reminder, please note that, as we mentioned earlier, we will be conducting an Analyst Day presentation tomorrow at 9:00 A.M. Eastern Standard Time. Deana and I will be presenting our long-term strategy for Smith & Wesson. We'll be taking a few questions from our analysts. Presentation will be open to the public and it's available to call in using the information provided in our press release, and we will share the presentation materials on the investor relations page of our website. With that, please stay safe, and look forward to speaking with you all next quarter.
This concludes today's conference call. Thank you for participating. You may now disconnect.