What changed in this filing

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Item 1. Business

2021-06-17 compared with 2020-06-19 · 187 added, 386 removed, 236 unchanged (71% of the section changed)

We are a leading manufacturer, designer, and provider of consumer products for the shooting, hunting, and rugged outdoor enthusiast.

We are one of the largest manufacturers of handguns, modern sporting rifles, and handcuffs in the United States and an active participant in the hunting rifle and suppressor markets.

We are also a leading provider of outdoor products and accessories encompassing hunting, fishing, camping, shooting, and personal security defense products for rugged outdoor enthusiasts.

We have two reporting segments:

(1) Firearms and (2) Outdoor Products & Accessories.

We are one of the world’s leading manufacturers and designers of firearms.

W e manufacture a wide array of handguns (including revolvers and pistols), long guns (including modern sporting rifles, bolt action rifles, and muzzleloaders), handcuffs, suppressors, and other firearm-related products for sale to a wide variety of customers, including firearm enthusiasts, collectors, hunters, sportsmen, competitive shooters, individuals desiring home and personal protection, law enforcement and security agencies and officers, and military agencies in the United States and throughout the world.

We sell our products under the Smith & Wesson, M&P, Thompson/Center Arms, and Gemtech brands.

We manufacture our products at our facilities in Springfield, Massachusetts, Houlton, Maine, and Deep River, Connecticut.

We store finished good inventory and fulfill customer orders from our distribution center in Columbia, Missouri.

We also sell our manufacturing services to other businesses to level-load our factories.

We sell those services under our Smith & Wesson and Smith & Wesson Precision Components brands.

Smith & Wesson was founded in 1852 by Horace Smith and Daniel B.

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from Tomkins in May 2001 and renamed our company Smith & Wesson Holding Corporation.

In January 2017, we changed the name of our company from Smith & Wesson Holding Corporation to American Outdoor Brands Corporation to better reflect our then expanding strategic focus on the growing markets for shooting, hunting, and rugged outdoor enthusiasts.

At the time, we believed that the name “American Outdoor Brands Corporation” better reflected our family of brands, our broad range of product offerings, and our plans to continue building upon our portfolio of strong American brands with two reporting segments.

On November 13, 2019, we announced that we were proceeding with a plan to spin-off our outdoor products and accessories business, or the Separation, and create an independent publicly traded company to conduct that business.

We believe that separating our outdoor products and accessories business from our firearm business and forming a new company to conduct the outdoor products and accessories business will enable the management team of each company to focus on its specific strategies, including, among others, (1) structuring its business to take advantage of growth opportunities in its specific markets, (2) tailoring its business operation and financial model to its specific long-term strategies, and (3) aligning its external financial resources, such as stock, access to markets, credit, and insurance factors, with its particular type of business.

In our view, the Separation is in the best interests of our company and our stockholders and would create two industry-leading companies with attributes that best position each company for long-term success.

In preparation for the Separation, on May 29, 2020, we changed our name to Smith & Wesson Brands, Inc., and on June 1, 2020, we changed the name of the company that will operate our outdoor products and accessories business through its subsidiaries to American Outdoor Brands, Inc., or AOUT.

Subject to the satisfaction or waiver of certain conditions, the Separation will be completed by way of the transfer of all of the assets and legal entities, subject to any related liabilities, associated with our outdoor products and accessories business to AOUT or its subsidiaries, or the Transfer, and the pro rata distribution, or the Distribution, of all of the outstanding shares of AOUT common stock to our stockholders of record as of the close of business on the record date of the Distribution.

Each of our stockholders will receive shares of AOUT common stock for the shares of our common stock held by such stockholders as of the close of business on the record date, so that our stockholders would own stock of our company as well as 100% of the stock of AOUT and we will retain no ownership interest in that company.

We expect to receive an opinion from counsel to the effect that, among other things, the Transfer will qualify as a transaction that is tax-free for U.S.

federal income tax purposes, except to the extent of any cash received in lieu of fractional shares.

The Distribution does not require the approval of our stockholders.

Our common stock will continue to trade on the Nasdaq Global Select Market under the ticker symbol “SWBI,” and AOUT has applied to have its shares of common stock listed on the Nasdaq Global Market under the ticker symbol “AOUT.” The Separation is subject to the satisfaction or waiver of certain conditions, and we cannot provide any assurance that we will complete the Separation.

In January 2017, we changed the name of our company from Smith & Wesson Holding Corporation to American Outdoor Brands Corporation.

In May 2020, in preparation for the spin-off of our outdoor products and accessories business, or the Separation, which was completed on August 24, 2020, we changed our name to Smith & Wesson Brands, Inc.

Unless otherwise noted, all discussion below, including amounts and percentages for all periods, reflect the results of operations and financial condition from continuing operations.

As such, our former outdoor products and accessories business is reported as discontinued operations and has been excluded.

We maintain our principal executive offices at 2100 Roosevelt Avenue, Springfield, Massachusetts 01104.

Our telephone number is (800) 331-0852.

Our website is located at www.aob.com .

Our website is located at www.smith-wesson.com .

Through our website, we make available free of charge our annual reports on Form 10-K, our proxy statements, our quarterly reports on Form 10-Q, our current reports on Form 8-K, and amendments to any of these documents filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, or the Exchange Act.

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Our fiscal year ended on April 30, 2021.

Firearms Division

Firearms - Introduction

In our Firearms division, we manufacture a wide array of handguns (including revolvers and pistols), long guns (including modern sporting rifles, bolt action rifles, and muzzleloaders), handcuffs, suppressors, and other firearm-related products for sale to a wide variety of customers, including gun enthusiasts, collectors, hunters, sportsmen, competitive shooters, individuals desiring home and personal protection, law enforcement and security agencies and officers, and military agencies in the United States and throughout the world.

We sell our firearm products under the Smith & Wesson, M&P, Performance Center, Thompson/Center Arms, and Gemtech brands.

We manufacture our firearm products at our facilities in Springfield, Massachusetts, Houlton, Maine, and Deep River, Connecticut.

We also sell our manufacturing services to other businesses to level-load our factories.

We sell those services under our Smith & Wesson and Smith & Wesson Precision Components brands.

Our objective in our Firearms division is to continue to strengthen our position as one of the world’s leading firearm manufacturers.

Key elements of our strategy to achieve this objective and deliver long-term stockholder value are as follows:

Our objective is to be the undisputed market leader in the firearm industry.

K ey elements of our strategy to achieve this objective and deliver long-term stockholder value are as follows:

drive organic growth by leveraging our brands and maintaining a robust product pipeline to increase market share in markets in which we participate and expand into adjacent and complementary markets;

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create a leverageable infrastructure by streamlining and standardizing our business operations, including optimizing product distribution;

reduce our leverage and deploy our cash flow in such a manner so as to maximize return on invested capital.

We estimate that the annual domestic non-military firearm market based on industry shipments is approximately $2.1 billion for handguns and $1.8 billion for long guns, excluding shotguns, with our market share in calendar 2019, based on the latest data, being approximately 15.1% and 5.2%, respectively.

deploy our cash flow in such a manner so as to maximize return on invested capital.

We estimate that the annual domestic non-military firearm market based on industry shipments is approximately $2.9 billion for handguns and $1.5 billion for long guns, excluding shotguns, with our market share, based on the latest data provided by the National Shooting Sports Foundation, or NSSF, utilizing Firearms and Ammunition Excise Tax data for calendar year 2020, being approximately 21.2% and 15.0%, respectively.

According to 2019 reports by the U.S.

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firearm manufacturing industry has shown a minimal annual decline in firearms manufactured between 2014 and 2019 in spite of individual years in which units manufactured have grown as much as 23.0% in one year.

Our net sales were $ 678.

4 million for the fiscal year ended April 30, 2020;

$638.3 million for the fiscal year ended April 30, 2019;

and $ 606.9 million, for the fiscal year ended April 30, 2018.

Our gross profit for the fiscal years ended April 30, 2020, 2019, and 2018 totaled $ 2 34.

7 million, $ 226.2 million, and $ 195.8 million, respectively.

Total assets were $ 7 2 9.0 million as of April 30, 2020;

$ 766.8 million as of April 30, 2019;

and $ 745.1 million as of April 30, 2018.

Firearms - Strategy

Our objective is to continue to strengthen our position as one of the world’s leading firearm manufacturers.

The data from the ATF lags by one year from the NSSF data, and we expect a significant increase to be reported by the ATF once calendar year 2020 data is published in late 2021.

Our objective is to be the undisputed market leader in the firearm industry.

Key elements of our strategy to achieve this objective are as follows:

Drive Organic Growth by Leveraging Brands and Designing Innovative New Products

We are focused on driving organic growth by ensuring a robust new product pipeline and leveraging our brands to help us to increase market share in markets in which we participate and to expand into adjacent and complementary markets by (1) capitalizing on the goodwill developed through our historic 168 year old “Smith & Wesson” brand as well as our extensive portfolio of other well-known brands, such as M&P, Performance Center, Thompson/Center Arms, and Gemtech;

We are focused on driving organic growth by ensuring a robust new product pipeline and leveraging our brands to help us to increase market share in markets in which we participate and to expand into adjacent and complementary markets by (1) capitalizing on the goodwill developed through our historic 169 year old “Smith & Wesson” brand as well as our extensive portfolio of other well-known brands, such as M&P and Gemtech;

(2) enhancing our relationships with key retailers, distributors, and buying groups and using our standard margin advantage to engage in competitive promotional activities;

and (3) introducing new products, especially in the polymer handgun market as represented by our M&P brand.

During the last two fiscal years, we have introduced numerous new products, including variations and product lines around the Smith & Wesson, M&P, Thompson/Center, Gemtech, and Performance Center brands.

We plan to continue to introduce new firearm products in fiscal 2021.

During the last two fiscal years, we have introduced numerous new products, including variations and product lines around the Smith & Wesson, M&P, and Gemtech, brands.

We plan to continue to introduce new products in fiscal 2022.

Design, Produce, and Market High-Quality Products that Drive Customer Satisfaction and Loyalty

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Create a Leverageable Infrastructure by Streamlining and Standardizing our Business Operations, including Optimizing Product Distribution

We intend to continue to streamline and standardize certain administrative functions of our business.

In addition, we are leveraging our manufacturing expertise by creating a manufacturing services platform in our Springfield, Massachusetts facility.

A streamlined and standardized approach requires investing in an integrated and configurable technology infrastructure in areas such as enterprise resource planning, or ERP, and compliance.

We intend to continue to streamline and standardize certain administrative functions of our business with a goal toward driving profitability and improving the ease with which our customers are able to do business with us.

streamlined and standardized approach requires investing in an integrated and configurable technology infrastructure in areas such as enterprise resource planning, or ERP, and compliance.

We intend to continue investing in such systems to further enhance our efficiency, improve information reporting, and strengthen internal controls.

Reduce our L everage and D eploy our C ash F low in S uch a M anner so as to M aximize R eturn on I nvested C apital.

From fiscal 2015 through fiscal 2019, we generated $526.0 million in cash from operations.

During that same period, we invested $396.7 million in cash on acquisitions and $145.0 million in cash to acquire property, equipment, and patents;

increased our borrowings by $56.4 million;

and repurchased $80.0 million of our outstanding stock.

Following the Separation, we plan to focus on developing, growing, and protecting our iconic firearm brands and using our cash flow from operations on actions that will maximize our return on invested capital, including (1) continuing to invest as needed for organic growth, especially in machinery, equipment, and new product development;

(2) reducing our leverage;

and (3) returning excess capital to our stockholders.

We intend to deemphasize all inorganic investment activities.

Firearm - Products

Our firearm products combine our legacy of 168 years of American manufacturing and engineering expertise with modern technological advances.

We strive to leverage our tradition of innovation in materials, performance, and engineering, along with our proven history of reliability, to produce feature-rich, safe, durable, accurate, and high-performing firearms that satisfy the needs of our broad range of customers.

Our introduction of new firearm products is intended to enhance our competitive position and broaden our participation in the overall firearm market.

We have substantially enhanced the breadth and quality of our portfolio of firearm products over the years.

Deploy our Cash Flow in Such a Manner so as to Maximize Return on Invested Capital

During fiscal 2021, we generated $317.3 million in cash from continuing operations.

We utilized this cash to repay all of our existing debt, invest in equipment to increase our capacity and improve our efficiency, declare and pay the first ever dividend in our history, and repurchase $110 million of our outstanding stock.

We intend to continue our focus on developing, growing, and protecting our iconic firearm brands and using our cash flow from operations on actions that will maximize our return on invested capital, including continuing to invest as needed in organic growth, especially in machinery, equipment, and new product development and returning excess capital to our stockholders.

Our products combine our legacy of 169 years of American manufacturing and engineering expertise with modern technological advances.

Driven by the needs of the individual firearm owner, we continually strive to improve the experience of buying, owning, and shooting a firearm.

We also strive to leverage our tradition of innovation in materials, performance, and engineering, along with our proven history of reliability, to produce feature-rich, safe, durable, accurate, and high-performing firearms that satisfy the needs of our broad range of customers.

Our introduction of new products is intended to enhance our competitive position and broaden our participation in the overall market.

We have substantially enhanced the breadth and quality of our portfolio of products over the years.

We have always been a leader in the revolver market.

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The addition of our Thompson/Center Arms brand of hunting firearms and interchangeable firearm systems into our product portfolio in January 2007 enhanced our long gun barrel manufacturing capabilities for our modern sporting rifles.

Although we recently announced our plan to divest our Thompson/Center Arms brand, we intend to focus on the hunting and long-range shooting market under our iconic Smith & Wesson brand.

The addition of our Gemtech branded suppressor products in August 2017 expanded our firearm-related product offerings.

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semi-automatic pistols and revolvers.

All of our firearms and firearm related products are currently sold under our Smith & Wesson, M&P, Performance Center, Thompson/Center Arms, and Gemtech brands.

All of our firearms and firearm related products are currently sold under our Smith & Wesson, M&P, Thompson/Center Arms, and Gemtech brands.

Our customers include distributors;

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While this development process is ongoing, our launch timing for new products depends on market conditions to maximize sales across the entire product portfolio.

In fiscal 2019, we launched several new products and product line extensions under our Smith & Wesson, M&P, Performance Center, Thompson/Center Arms, and Gemtech brands.

In fiscal 2020, we further expanded our Smith & Wesson branded products by introducing the Model 648 revolver, chambered in 22 Winchester Magnum, a stainless-steel revolver available in 6” barrel and eight shot capacity.

The Patridge front sight and adjustable rear sight make it a perfect choice for any competition or recreational shooter.

In fiscal 20 20 , we introduced several additions and enhancements to our popular line of M&P branded pistols , most notably the M&P9 Shield EZ.

This high - demand firearm stays true to what made the EZ platform so popular and is now offered in the powerful 9mm caliber.

In the M&P M2.0 product platform, we introduced the subcompact series chambered in 9mm, 40 S&W , and 45 AUTO calibers.

The subcompact embodies all of the M2.0 features, including a lighter, more crisp trigger with tactile and audible reset, as well as an aggressive grip texture for increased control and four interchangeable palmswell grip sizes.

The M&P M2.0 subcompact is the perfect fit for someone looking for an easy to conceal and carry firearm, but wants more capacity.

In fiscal 20 21 , we introduced several additions and enhancements to our popular line of M&P branded pistols , most notably the high capacity, micro-compact M&P Shield Plus.

Designed for concealed carry, the M&P Shield Plus is the most advanced M&P Shield pistol to date, featuring a magazine of up to 13 rounds in a slim, micro-compact frame.

The M&P Shield Plus is available in 9mm and in a variety of configurations, including Performance Center® models with optics cuts, upgraded sights, and other features .

We also expanded the line of M&P M2.0 Compact pistols to include an optics-ready variant.

Building on the award-winning M&P M2.0 Compact pistol series, the new models are chambered in 9mm and feature a slide cut for optics, co-witness white-dot front and rear sights, and enlarged forward slide serrations.

Our customers continue to demand premium firearms that provide a competitive edge in sport shooting and hunting.

Our Performance Center products are engineered and manufactured to meet this need and they incorporate many custom features not found in our standard products, such as enhanced triggers for smoother trigger pull, ported barrels for better muzzle control, and specialty sights for quicker target acquisition.

During fiscal 2020, we introduced the Performance Center M&P M2.0 C.O.R.E.

series pistols.

Among several enhancements, these pistols feature cuts in the slide allowing consumers to mount their favorite red dot optic for target and competition shooting.

Within our Thompson/Center Arms branded products, we continued to focus on expanding our bolt-action rifle business while maintaining our leadership in muzzleloaders and interchangeable systems.

During fiscal 2020, we launched the new Compass II platform – Compass Utility, Compass II, and Compass II Compact.

The Compass II boasts a new, improved trigger and comes with Thompson/Center’s M.O.A.

accuracy guarantee.

Each of these categories are available with or without scopes.

In addition, we expanded our Venture line of bolt-action rifles with the introduction of the Venture II, which offers a threaded barrel, an improved trigger, and is chambered in 350 Legend.

Within our Gemtech line of suppressors we introduced the Lunar 9 suppressor, our quietest and most versatile 9mm suppressor to date.

The Lunar 9 suppressor includes our latest baffle design and offers users two configurations, the ultra-quiet full-length 7” configuration, and the ultra-compact 4.7” configuration.

The Lunar 9 suppressor can be used on the vast majority of popular 9mm handguns, pistol caliber carbines, and 300BLK host firearms.

Firearms net sales for the years ended April 30, 2020, 2019, and 2018 were $526.0 million, $478.5 million, and $449.0 million, respectively.

Firearm gross profit for the years ended April 30, 2020, 2019, and 2018 totaled $164.2 million, $152.8 million, and $123.2 million, respectively.

Total assets for our firearms business totaled $469.1 million and $389.7 million as of April 30, 2020 and 2019, respectively.

Refer to our consolidated financial statements, commencing on page F-1 of this report, for more information regarding our firearm business.

Sales of our handguns accounted for $390.7 million, or 57.6%, of total net sales for the fiscal year ended April 30, 2020;

$336.9 million, or 52.8%, of total net sales for the fiscal year ended April 30, 2019;

and $326.3 million, or 53.8%, of total net sales for the fiscal year ended April 30, 2018.

Sales of long guns accounted for $101.5 million, or 15.0%, of total net sales for the fiscal year ended April 30, 2020;

$107.7 million, or 16.9%, of total net sales for the fiscal year ended April 30, 2019;

and $90.2 million, or 14.9%, of total net sales for the fiscal year ended April 30, 2018.

Sales of other products and services accounted for $33.8 million, or 5.0%, of total net sales for the fiscal year ended April 30, 2020;

$33.9 million, or 5.3%, of total net sales for the fiscal year ended April 30, 2019;

and $32.5 million, or 5.4%, of total net sales for the fiscal year ended April 30, 2018.

We currently manufacture an extensive variety of handgun models that include revolvers and pistols.

During fiscal 2021, we introduced the Performance Center M&P Shield EZ pistols.

Building on the popular M&P Shield EZ pistol, the new Performance Center models share the same easy-to-use features found across the entire M&P Shield EZ series and are further enhanced with premium Performance Center features.

The Performance Center M&P Shield EZ pistols are available with black, silver, and gold accents and include a ported barrel, flat face trigger, a tuned action, as well as other features.

Within our Gemtech line of suppressors, we introduced the Integra 15-22 suppressor, an integrally-suppressed upper receiver designed for .22 LR.

Built for use exclusively with Smith & Wesson’s M&P15-22 rifle, the Gemtech Integra 15-22 ships as a complete upper receiver group that offers an exceptionally quiet shooting experience in a compact package.

Our net sales from continuing operations were $1.1 billion for the fiscal year ended April 30, 2021;

$529.6 million for the fiscal year ended April 30, 2020;

and $481.3 million for the fiscal year ended April 30, 2019.

Our gross profit from continuing operations for the fiscal years ended April 30, 2021, 2020, and 2019 totaled $449.0 million, $165.7 million, and $146.3 million, respectively.

Total assets from continuing operations as of April 30, 2021 and 2020 were $446.4 million and $486.4 million, respectively.

We currently manufacture an extensive variety of handgun models that includes revolvers and pistols.

A revolver is a handgun with a cylinder that holds the ammunition in a series of rotating chambers that are successively aligned with the barrel of the firearm during each firing cycle.

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Our revolvers are available in a variety of models and calibers, with applications in virtually all professional and consumer markets.

We offer pistols under our Smith & Wesson, M&P, and Performance Center brands.

We offer pistols under our Smith & Wesson and M&P brands.

Our full size and compact M&P pistol products have been engineered with input from professional users and are designed to offer performance, safety, and durability that meet the standards of global law enforcement and military personnel, as well as features attractive to consumers.

We believe that our M&P branded pistol products are the most ergonomic, feature-rich, and innovative products on the market today.

Our range of full size and compact M&P pistol products are made with a polymer frame, a rigid stainless-steel chassis, and a black, through-hardened corrosion resistant finished stainless-steel barrel and slide for durability.

Our M&P pistol products feature patented and easily changed palmswell grips in three or four sizes, allowing the user to customize grips in a matter of seconds;

Our range of full size and compact M&P pistol products are made with a polymer

frame, a rigid stainless - steel chassis, and a black, through-hardened corrosion resistant finished stainless - steel barrel and slide for durability.

Our M&P pistol products feature patented and easily changed palmswell grips in four sizes, allowing the user to customize grips in a matter of seconds;

a passive trigger safety to prevent the pistol from firing if dropped;

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We introduced additional M&P Shield models during fiscal 2020.

We believe the M&P Shield pistol is one of the most popular firearms in the market, having surpassed the three millionth unit shipped in fiscal 2019.

We believe the M&P Shield pistol is one of the most popular firearms in the market, having shipped nearly five million units as of April 30, 2021.

Our Performance Center has been providing specialized products and services for the most demanding shooting sports enthusiasts since 1990.

To meet the requirements of law enforcement professionals, competitive shooters, collectors, and discriminating sport enthusiasts who demand superior firearm products, our Performance Center personnel conceptualize, engineer, and craft firearm products to create enhanced versions of our standard products.

To meet the requirements of law enforcement professionals, competitive shooters, collectors, and discriminating sport enthusiasts who demand superior products, our Performance Center personnel conceptualize, engineer, and craft products to create enhanced versions of our standard products.

Our craftsmen, many of whom are actively involved in competitive shooting, are highly skilled and experienced gunsmiths.

Performance Center products are offered under the Smith & Wesson, M&P, and Thompson/Center brands and are typically made in limited production quantities, although we offer a number of catalog variations in order to increase product availability.

Performance Center products are offered under the Smith & Wesson and M&P brands and are typically made in limited production quantities, although we offer a number of catalog variations in order to increase product availability.

Our “Classics” department makes it possible to own historic firearms that are manufactured today but modeled after original favorites, such as the Model 29, the firearm made famous by the movie character Dirty Harry.

These firearms are newly crafted with designs that take advantage of some of the most famous and collectible guns that we have ever made.

These firearms are newly crafted with designs that take advantage of some of the most famous and collectible firearms that we have ever made.

Our Classics department also makes commemorative firearms and employs master engravers to craft one-of-a-kind custom firearms.

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Our M&P branded modern sporting rifles are designed to satisfy the functionality and reliability needs of global military, law enforcement, and security personnel.

These long guns are popular with consumers as hunting and sporting target rifles and are sold through our sporting good distributors, retailers, and dealers.

We offer M&P modern sporting rifles in five different calibers (22LR, 5.56mm NATO (223), 300 Whisper, 308 Winchester (7.62x51mm), and 6.5 Creedmoor) for multiple recreational and professional uses.

We also offer upper assemblies so gun owners can easily modify their M&P to suit the needs and tasks of the various forms of sport shooting and hunting.

These long guns are popular with consumers as hunting, personal protection, and sporting target rifles and are sold through our sporting good distributors, retailers, and dealers.

We offer M&P modern sporting rifles in four different calibers (22LR, 5.56mm NATO (223), 308 Winchester (7.62x51mm), and 6.5 Creedmoor) for multiple recreational and professional uses.

We also offer upper assemblies so firearm owners can easily modify their M&P to suit the needs and tasks of the various forms of sport shooting and hunting.

Our broad product portfolio of modern sporting rifles includes a 22 caliber model, an opening price-point sport model, a hunting caliber model for longer range effectiveness, and several models designed for the exclusive use of military and law enforcement agencies throughout the world.

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Our black powder firearms are highly accurate, dependable rifles configured with muzzle loading barrels for hunting.

Black powder firearms are purchased by hunting enthusiasts, primarily for use during exclusive black powder hunting seasons for hunting big game, such as deer and elk.

We offer two models of interchangeable, single-shot firearm systems that deliver numerous gun, barrel, and caliber configurations and finishes.

Black powder firearms are

purchased by hunting enthusiasts, primarily for use during exclusive black powder hunting seasons for hunting big game, such as deer and elk.

We offer two models of interchangeable, single-shot firearm systems that deliver numerous firearm, barrel, and caliber configurations and finishes.

These firearm systems can be purchased fully assembled or as frame assemblies that can be configured by the owner as a center-fire rifle, rim-fire rifle, shotgun, black powder firearm, or single-shot handgun for use across the entire range of big- and small-game hunting.

As a result, a firearm owner can easily change barrels, stocks, and forends, resulting in “one gun for all seasons” that can be continuously modified to suit the needs and tasks of the owner for various forms of sport shooting and hunting.

As a result, a firearm owner can easily change barrels, stocks, and fore-ends, resulting in “one firearm for all seasons” that can be continuously modified to suit the needs and tasks of the owner for various forms of sport shooting and hunting.

With the recently announced plan to divest the Thompson/Center Arms brand, we will continue to direct focus on the hunting and long-range shooting products under the Smith & Wesson brand.

Other Products and Manufacturing Services

Our other products and manufacturing services in the firearms division include the following:

Our other products and manufacturing services include the following:

We sell parts to support our firearm business, including barrels and magazines that are manufactured at our facilities or purchased through third parties.

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We have the ability to customize handcuffs to fit customer specifications.

Smith & Wesson Academy:

The Smith & Wesson Academy offers state-of-the-art-instruction designed to meet the training needs of law enforcement and security customers worldwide.

This service-only offering sends instructors to provide courses and training to law enforcement and military personnel at their locations in the field.

We are the nation’s oldest firearm suppressor manufacturer and an active participant in the firearm suppressor market around the world.

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We also believe that business-to-business sales provide profitable revenue stream diversification and enable us to maximize capacity utilization of our manufacturing assets.

We market our manufacturing services division under the Smith & Wesson Precision Components brand name.

Outdoor Products & Accessories (OP&A) Division

OP&A - Introduction

We are a leading provider of outdoor products and accessories encompassing hunting, fishing, camping, shooting, and personal security and defense products for rugged outdoor enthusiasts.

We conceive, design, produce or source, and sell products and accessories, including shooting supplies, rests, vaults, and other related accessories;

premium sportsman knives and tools for fishing and hunting;

land management tools for hunting preparedness;

harvesting products for post-hunt or post-fishing activities;

electro-optical devices, including hunting optics, firearm aiming devices, flashlights, and laser grips;

reloading, gunsmithing, and firearm cleaning supplies;

and survival, camping, and emergency preparedness products.

We develop and market our products at our facility in Columbia, Missouri and contract for the manufacture and assembly of most of our products with third parties located in Asia.

We also manufacture some of our electro-optics products at our facility in Wilsonville, Oregon.

We focus on our brands and the establishment of product categories in which we believe our brands will resonate strongly with the activities and passions of consumers and enable us to capture an increasing share of our overall addressable markets.

Our owned brands include Caldwell, Wheeler, Tipton, Frankford Arsenal, Hooyman, BOG, MEAT!, Uncle Henry, Old Timer, Imperial, Crimson Trace, LaserLyte, Lockdown, UST, BUBBA, and Schrade, and we license from our Firearms division for use in association with certain products that we sell, including M&P, Smith & Wesson, Performance Center by Smith & Wesson, and Thompson/Center Arms.

In focusing on the growth of our brands, we organize our creative, product development, sourcing, and e-commerce teams into four brand lanes, each of which focuses on one of four distinct consumer verticals – Marksman, Defender, Harvester, and Adventurer – with each of our brands included in one of the brand lanes.

Our sales activities focus on our various distribution channels, which we refer to as classes of trade, such as online retailers, specialty retailers, dealers, distributors, and direct to consumer.

Our Marksman brands address product needs arising from consumer activities that take place primarily at the shooting range and where firearms are cleaned, maintained, and worked on.

Our Defender brands include products that help consumers aim their firearms more accurately, including situations that require self-defense, and products that help secure, store, and maintain connectivity to those possessions that some consumers would consider to be high value or high consequence.

Our Harvester brands focus on the activities hunters typically engage in, including hunting preparation, the hunt itself, and the activities that follow a hunt, such as meat processing.

Our Adventurer brands include products that help enhance consumers’ fishing and camping experiences.

Our objective in our OP&A division is to enhance our position as a leading provider of high-quality and innovative outdoor products and accessories for the hunting, fishing, camping, shooting, personal security and defense, and other rugged outdoor markets and to expand our addressable market into carefully selected new product arenas.

Key elements of our strategy to achieve this objective and deliver long-term stockholder value are as follows:

introduce a continuing stream of innovative new and differentiated rugged outdoor products and product extensions that appeal to consumers and achieve market acceptance and drive customer satisfaction and loyalty;

expand the size of our addressable market by appealing to new and larger consumer audiences in new product categories outside the rugged outdoor market;

cultivate and enhance direct-to-consumer relationships through our digital platforms;

expand and enhance our supply chain;

pursue acquisitions that financially and strategically complement our current business.

Throughout our history, we believe that we have been able to utilize our understanding of consumer needs to develop and introduce innovative new disruptive products with strong intellectual property protection that have continually increased our market share in their product categories, such as our Lead Sled, which we believe represents a substantial portion of the market share in the shooting rest category.

Since the acquisition of Battenfeld Technologies, Inc.

in 2014 as a stock transaction in which we acquired key brands like Caldwell, Wheeler, Tipton, Frankford Arsenal, and Lockdown , we have enhanced our product development capabilities, developed a multi-faceted marketing approach, improved our multi-channel distribution platform, and expanded and diversified our business through organic growth and strategic acquisitions.

The following table sets forth information regarding the brands and products added to our operations through acquisitions in the fiscal years indicated:

Name, Original

Location, and Developments

Type of Acquisition

Product Brands

Produced Products

Hooyman, LLC, Appleton, Wisconsin (operated out of our Columbia, Missouri facility)

Extendable tree saws for the hunting and outdoor industry

PowerTech, Inc., Collierville, Tennessee (operated out of our Columbia, Missouri facility)

Smith & Wesson, M&P

Tactical flashlights, universal LED lights, and pocket lights

Taylor Brands, LLC, operated as BTI Tools, LLC, or BTI Tools, Kingsport, Tennessee (subsequently relocated operations to our Columbia, Missouri facility in fiscal 2018)

Smith & Wesson, M&P, Schrade, Uncle Henry, Old Timer

High-quality knives, specialty tools, and accessories

Crimson Trace Corporation, or Crimson Trace, Wilsonville, Oregon

Crimson Trace

Laser sighting and tactical lighting systems

Ultimate Survival Technologies, Inc., currently operating as Ultimate Survival Technologies, LLC, or UST, Jacksonville, Florida (subsequently relocated operations to our Columbia, Missouri facility in fiscal 2019)

High-quality survival and camping equipment, including LED lights, all-weather fire-starting kits, unbreakable signal mirrors, premium outdoor cutting tools, first aid kits, survival kits, and camping products

Fish Tales, LLC, Tucson, Arizona (operated out of our Columbia, Missouri facility)

Premium sporting knives and tools for fishing and hunting, including Bubba Blade branded products (subsequently rebranded as BUBBA)

P&L Industries, Inc., Cottonwood, Arizona (subsequently relocated operations to our Wilsonville, Oregon facility in fiscal 2019)

Laser training and sighting products for the consumer market, including LaserLyte branded products

Outdoor Products & Accessories net sales were $ 152.4 million, or 2 2.

5 %, of total net sales, for the fiscal year ended April 30, 20 20 ;

$ 159.8 million, or 2 5 .0 %, of total net sales, for the fiscal year ended April 30, 201 9 ;

and $ 157.9 million, or 26.0 %, of total net sales, for the fiscal year ended April 30, 201 8 .

Results reported include net sales related to acquisitions for the period subsequent to their respective acquisition dates .

Our Outdoor Products & Accessories gross profit for the fiscal years ended April 30, 20 20 , 20 19 , and 20 18 totaled $7 0.5 million, $ 73.4 million, and $ 72.5 million, respectively.

Total assets for our O utdoor P roducts & A ccessories business totaled $ 2 61.0 million and $ 377.

1 million as of April 30, 2020 and 2019 , respectively.

OP&A - Strategy

Introduce a Continuing Stream of New and Differentiated High-Quality Rugged Outdoor Products that Drive Customer Satisfaction and Loyalty

We plan to continue conceiving, designing, producing or sourcing, and marketing in a timely manner a continuing stream of innovative new and differentiated high-quality rugged outdoor products and product extensions that appeal to consumers, achieve market acceptance, and drive customer satisfaction and loyalty to our product groups.

Our tradition of innovation and our ongoing research and development, product engineering, product and component sourcing, marketing, and distribution activities are critical components of our ability to continue to offer successful products and bolster our market share in the product categories in which we participate.

We believe our track record of understanding consumer desires, introducing flagship products in our core product categories, and then strategically expanding within those categories will enable us to continue to expand our existing product offerings.

For example, we expanded the BUBBA brand’s red handled non-slip grip knives to a line of electronic fillet knives that utilized lithium-ion and drive-train technology that we previously developed for our line of rechargeable flashlight and tree saws under our M&P and Hooyman brands, respectively.

The American Sportfishing Association awarded this new product as “Best in Category for Cutlery, Hand Pliers or Tools.”

We also plan to devote significant time and energy to expand the reach of our brands into targeted new rugged outdoor markets that are aligned with the positioning of our brands.

For example, we rebranded our BOG-POD brand to simply BOG in order to expand into new extensive product categories beyond shooting rests only, including hunting blinds, chairs, and game cameras;

expanded our BUBBA brand into nets, gaffs, pliers, and gloves;

expanded our Frankford Arsenal brand into larger reloading product categories;

and expanded our Crimson Trace brand into other large and growing firearm aiming selective categories, including mounted flashlights, sights, and scopes.

We also plan to utilize or “cross pollinate” technologies across brands, such as transporting the non-slip grip from our BUBBA fishing products onto the handles of Hooyman’s new line of hand-held land management tools to provide further product differentiation.

Expand Our Addressable Market by Appealing to New and Larger Audiences in New Product Categories Outside the Rugged Outdoor Market

We plan to expand the size of our addressable market beyond the shooting, hunting, and rugged outdoor markets and thereby enlarge our customer base and customer relationships through entry into new large product categories outside the rugged outdoor market.

For example, we recently expanded our Lockdown branded products from vault accessories used when storing firearms to introducing the Lockdown Puck, which is a compact hockey-puck sized product designed to protect high value or otherwise important items that sends a message to a smart phone or other device when the item or its location is moved or otherwise disturbed from its storage in a closet, cabinet, or drawer.

We believe the expansion of our Lockdown brand from its original firearm safety application to applications such as monitoring jewelry compartments and liquor cabinets and controlling the humidity of humidors and wine cellars will enable us to gain an organic entry into the very large home security market.

Expanding our addressable market will reduce our dependence on a small group of customers and increase our revenue.

Cultivate and Enhance Direct-to-Consumer Relationships through Our Digital Platforms

We plan to cultivate and enhance our direct relationships with consumers by addressing the growing desire of consumers to deal directly with the product and brand source and by recognizing the changing retail landscape and the trend to two-day or next-day delivery.

In this regard, we have made significant investments in building both our creative teams and new e-commerce platforms, positioning us to create and distribute our products directly to consumers.

Each of our brands will have a dedicated website, and each of our brand lanes has a dedicated creative and e-commerce team that works to support online marketing and delivery methods that foster direct-to-consumer efforts.

Because of this targeted approach, our fiscal 2019 direct-to-consumer revenue increased 50% over fiscal 2018.

We also expect that our direct-to-consumer efforts will generate pull-through for our products at retail locations for those who prefer a traditional retail approach rather than purchasing directly from our online platform.

Our new e-commerce platform and digital systems also provide opportunities to support the launch of entirely new brands and products to meet the needs of our consumers.

For example, we leveraged our new e-commerce platform and digital ecosystem to organically enter the new market of meat processing with our MEAT!

brand that includes grinders, mixers, vacuum sealers, sausage stuffers, dehydrators, and slicers.

Expand and Enhance Our Supply Chain

We plan to expand and enhance our supply chain by identifying, qualifying, attracting, and maintaining qualified contract manufacturers and other suppliers of finished products and product components made to our specifications and the raw materials needed for products and product components that meet our efficiency, quality, cost, delivery, and other requirements.

Qualifying additional suppliers will reduce our dependence on any one or small group of suppliers and protect us against supplier financial, operational, performance, or capacity issues.

Pursue Acquisitions that Financially and Strategically Complement our Current Business

We intend to continue to complement our organic growth initiatives by pursuing strategic acquisitions that will enable us to expand our product offerings, add new brands, penetrate adjacent and complementary markets, increase our customer base, expand our supply chain, increase our marketing and distribution capabilities, and enhance our operating results through improved acquired company performance, especially when we believe we can improve the performance and profitability of an acquired company through the implementation of our operating methods, strategies, and services.

We believe the architecture of our brand lanes and sales organization provide us with a leverageable platform from which to integrate acquisitions quickly, achieve cost savings, provide immediate brand support, and add sales expertise to drive brand penetration within our existing customer base.

During the last five fiscal years, we have spent nearly $232.9 million (exclusive of the $133.6 million purchase price for Battenfeld Technologies, Inc., our first acquisition of an outdoor products and accessories business) on acquiring companies and brands to support our growth in the outdoor products and accessories market.

In fiscal 2017, we acquired the stock of Crimson Trace Corporation, and the assets of Taylor Brands, LLC, and Ultimate Survival Technologies, Inc., which allowed us to capitalize on established brands to expand into the electro-optics, knife, and survival and camping equipment markets, respectively.

We further expanded our knife offerings and entered the large fishing accessories market in fiscal 2018 when we purchased Bubba Blade branded knives, a provider of premium branded sports knives and tools for fishing and hunting.

We have now expanded that business into other types of fishing gear and accessories, as well as rebranded it as BUBBA to reflect this expansion beyond knives only.

We believe we have succeeded in integrating our acquired companies into our brand lanes and sales structure.

Consolidation of these brands into our platform has yielded approximately $12.0 million in annualized cost savings while giving us entry into new, larger rugged outdoor market segments.

OP&A - Product Design and Development

We are a leading provider of outdoor products and accessories used in hunting, fishing, camping, shooting, personal security and defense, and other rugged outdoor activities.

To be successful, we must continue to conceive, design, produce or source, and market a continuing stream of innovative new products and product extensions that appeal to consumers and achieve market acceptance and drive customer satisfaction and loyalty to our brands and product groups.

We believe that we will drive customer satisfaction and loyalty by offering high-quality, innovative products on a timely and cost-effective basis, as well as providing world-class customer service, training, and support.

We regard our high-quality, innovative products as the most important aspect of our customer satisfaction and loyalty, but we also offer customer service and support with various programs, such as toll-free customer support numbers, e-mail customer question and answer communications, broad service policies, and product warranties.

We have developed unique brand-specific content on our websites to help maximize the consumers’ experience with our products.

As noted previously, our products include shooting supplies, rests, vaults, and other related accessories;

premium sportsmen knives and tools for fishing and hunting;

land management tools for hunting preparedness;

harvesting products for post-hunt or post-fishing activities;

electro-optical devices, including hunting optics, firearm aiming devices, flashlights, and laser grips;

reloading, gunsmithing, and firearm cleaning supplies;

and survival, camping, and emergency preparedness products.

We typically launch well over 150 new outdoor products and accessories SKUs each year.

We generally strive to bring a new product from concept to market within 6 to 12 months, depending on product complexity and other matters.

Since 2011, we have introduced over 1,500 variations of outdoor products and accessories products, including the products introduced by the companies we acquired.

Our extensive product portfolio includes highly regarded brands, such as the Caldwell line of shooting supplies, which has marketed and sold shooting accessories for more than 20 years, and Crimson Trace, which has provided laser lighting systems for nearly 25 years.

OP&A - Brands

We organize our OP&A brands in “Brand Lanes,” which are the foundation for our distinctive operations.

Our brand-first approach is combined with passionate personnel to deliver authentic experiences to our consumers.

Our knowledgeable employees develop a deep understanding of our brands and understand precisely what our customers and consumers desire most in new products.

Dedicated management, marketing, creative, e-commerce, and engineering teams assigned to each brand lane allow us to strategically and efficiently approach our development roadmap and marketing efforts.

We currently sell our products under 20 distinct brands, organized into four brand lanes aligned with our specific consumer verticals:

Marksman Brands

Caldwell – shooting range and marksman products

Frankford Arsenal – ammunition reloading products

Tipton – firearm cleaning and maintenance products

Wheeler – gunsmithing tools

Defender Brands

Crimson Trace – firearm aiming solutions

Imperial – cutlery and tools

LaserLyte – firearm training systems

Lockdown – security and storage solutions

M&P Accessories – cutlery, flashlights, and various firearm accessories

Performance Center by Smith & Wesson – cutlery, cleaning kits, and various firearm accessories

Smith & Wesson Accessories – knives, flashlights, shooting glasses and cases, cleaning kits, and hearing protection products

Harvester Brands

BOG – hunting accessories

Hooyman – land management tools

– meat processing equipment

Old Timer – cutlery and tools

Thompson/Center Accessories – firearm scopes, black powder barrels, speed loaders, magazines, and cleaning and maintenance products

Uncle Henry – hunting knives and tools

Adventurer Brands

BUBBA – fishing tools and knives

Schrade – rugged outdoor cutlery and tools

UST – camping and survival products

We own all of the above brands and we have established a licensing arrangement between our Firearms and OP&A divisions for those brands and trademarks that are specifically owned by our Firearms division, which include the Smith & Wesson logo, the script “Smith & Wesson,” the “M&P” logo, the script “Thompson/Center Arms,” and the script “Performance Center,” which are well-known and have a reputation for quality, value, and trustworthiness in the accessories industry.

We market our manufacturing services division under the Smith & Wesson and Smith & Wesson Precision Components brand names.

Marketing, Sales, and Distribution

Our Firearm business goes to market in a variety of ways, including two-step distribution, strategic retailers, and buying groups consisting of certain large, regional retailers, utilizing direct sales employees to service these customers.

We go to market in a variety of ways, including two-step distribution, strategic retailers, and buying groups consisting of certain large, regional retailers, utilizing direct sales employees to service these customers.

We also sell firearms directly to law enforcement agencies and manufacturing services directly to other businesses.

We sell internationally primarily through distributors, which in turn sell to retail stores and government agencies.

Our top five commercial distributors in the United States accounted for a total of 43.4% and 40.8% of our net sales from continuing operations for the fiscal years ended April 30, 2021 and 2020, respectively.

Those commercial distributors are not regionally exclusive and have many of the same dealer customers.

Therefore, we believe that the loss of one or more of these distributors would not materially impact sales as the remaining distributors would be allocated additional sales.

We market our firearms products to consumers through independent dealers, large retailers, in-store retail channels, direct to consumer, and range operations using focused marketing and promotional campaigns, which include print, broadcast, and digital advertising campaigns;

We sell our products worldwide.

International sales accounted for 2 %, 4 %, and 5% of our net sales from continuing operations for the fiscal years ended April 30, 202 1 , 20 20 , and 201 9 , respectively.

Our businesses own tooling that is located at various suppliers in Asia and North America.

For the fiscal years ended April 30, 2021, 2020, and 2019, marketing, advertising, and promotion expenses for continuing operations were $12.5 million, $13.6 million, and $13.4 million, respectively, excluding the cost of rebates and promotions reflected in gross profit.

We market our products using a multi-faceted approach to consumers through independent dealers, large retailers, in-store retail channels, direct to consumer, and range operations using focused marketing and promotional campaigns, which include print, broadcast, and digital advertising campaigns;

social and electronic media;

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We also attend various trade shows, such as the Shooting, Hunting, Outdoor Trade (SHOT) Show, the NRA Annual Meeting & Exhibits, the National Association of Sporting Goods Wholesalers Show, the International Association of Chiefs of Police Show, the Association of the United States Army Show, or AUSA Show, the International Weapons Exhibition Show, or IWA Show, in Europe, and various distributor, buying group, and consumer shows.

In our OP&A business, w e deploy a multi-faceted strategy to engage with consumers and to deliver positive consumer experiences.

Our marketing approach begins with our team utilizing television, print, and other advertising media to assure that our customers and consumers connect with our brands and to the products we offer.

In order to help convert at the point of purchase, increase the likelihood of loyal consumer relationships, and build advocacy with our consumer base, we market our products to consumers using focused campaigns that align with each brand’s core characteristics.

In this regard, we utilize what we believe are the most impactful mediums, such as in-store retail merchandising, online merchandising, grassroots events, digital advertising campaigns, influencer marketing, and robust distribution of content across most social media channels, to encourage enthusiasts to continue exploring our brand offerings and ultimately lead to purchases.

To further our message, we frequently participate in various earned media across a full spectrum of digital and print publications, which drives authenticity back to our consumer base as they read about the latest information regarding our suite of new products.

This multifaceted approach is intertwined with the brand lane structure that we believe differentiates us from our competition and offer s a significant advantage in efficiency.

The SMITH & WESSON GUNSMARTS program is designed to welcome new firearm owners into the firearm community and highlight key resources available to those who have just purchased their first pistol, rifle, or revolver.

As a cornerstone of the campaign, we released a new video series devoted to helping inform, educate, and excite those who have recently joined the firearm community.

Hosted on YouTube, the SMITH & WESSON GUNSMARTS video series covers a comprehensive set of topics that takes the viewer from the basics of firearm safety through their first trips to the range – all in a simple, inviting manner.

Digital Marketing

In our Firearms division, we utilize our websites, including www.smith-wesson.com , www.tcarms.com, and www.

We utilize our websites, including www.smith-wesson.com and www.

g emtech.com to market our products and services and to provide a wide range of information regarding our company to customers, consumers, dealers, distributors, investors, and government and law enforcement agencies worldwide.

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Our direct to consumer e-mail marketing helps us to further engage our consumers and communicate the value of our brands.

We continue to invest in new digital marketing capabilities designed by our e-commerce team to provide best-in-class customer experiences.

Utilizing our digital platform, we operate branded e-commerce websites designed to inform, inspire, and prepare our customers for the rugged outdoors.

We continue to invest in new digital marketing capabilities to provide best-in-class customer experiences.

Our websites are designed to inform, inspire, and prepare our customers for the next step in their firearms journey.

We believe our digital platform supports future sales growth and profitability.

In our OP&A division, we believe social media platforms, such as Facebook, Instagram, YouTube, LinkedIn, and Twitter, are effective in enabling us to showcase content, educate our customer base about our products, and generate enthusiasm for our brands.

Our direct-to-consumer e-mail marketing helps us to further engage our consumers and communicate the value of our brands.

We continue to invest in new digital marketing capabilities designed by our e-commerce and marketing teams to provide favorable customer experiences.

Utilizing our digital platform, we operate branded e-commerce websites designed to inform, inspire, and prepare our customers for the rugged outdoors.

We believe our digital platform supports our core business and facilitates future sales growth and profitability.

We utilize our websites, including www.aob.com , www.btibrands.com , www.crimsontrace.com , www.store.smith-wesson.com , www.lockdown.com , www.caldwellshooting.com , www.frankfordarsenal.com , www.wheelertools.com , www.ustgear.com , www.bubbablade.com , www.boghunt.com , www.hooyman.com , www.accessories.tcarms.com , and www.madewithmeat.com , to market our products and to provide a wide range of information regarding our company to customers, consumers, dealers, distributors, investors, and government agencies.

Service and Support

In our Firearms division, we utilize a variety of methods for supporting our consumers and dealers.

We have a toll-free customer service number, e-mail, and social media messaging to answer questions and resolve issues regarding our firearm products.

In addition, we offer a limited one-year warranty program and a lifetime service policy under which we repair defects in material or workmanship in our firearm products without charge for as long as the original purchaser owns the firearm.

We utilize a variety of methods for supporting our consumers and dealers.

We have a toll-free customer service number, e-mail, and social media messaging to answer questions and resolve issues regarding our products.

In addition, we offer a limited one-year warranty program and a lifetime service policy under which we repair defects in material or workmanship in our products without charge for as long as the original purchaser owns the firearm.

We also maintain a number of authorized warranty centers throughout the world and provide both warranty and charge repair services at our facilities.

In our OP&A division, in order to provide consumers with positive experiences involving our products, we maintain a dedicated team of trained customer support representatives who seek to successfully address customer questions or issues that may arise across our product offerings.

We utilize a toll-free customer service number to answer questions and resolve issues.

We stand behind the quality of our products by offering a variety of warranties, ranging from limited one-year, three-year, limited-lifetime, or full-lifetime warranties, depending on the product.

We also will repair or replace with an item of equivalent value, at our option, certain products or parts that are found to be defective under normal use and service, without charge during the warranty period.

Total Company Marketing Metrics

Our top five commercial distributors in the United States accounted for a total of 32.6% and 30.3%, of our consolidated net sales for the fiscal years ended April 30, 2020 and 2019, respectively.

We sell our products worldwide.

International sales accounted for 4%, 5%, and 5% of our net sales for the fiscal years ended April 30, 2020, 2019, and 2018, respectively.

Our businesses own tooling that is located at various suppliers in Asia and North America.

For the fiscal years ended April 30, 2020, 2019, and 2018, marketing, advertising, and promotion expenses were $28.1 million, $24.3 million, and $25.8 million, respectively, excluding the cost of rebates and promotions reflected in gross profit.

In our Firearms division, we manufacture most of the components for our firearms, but purchase certain components and parts, including bolt carriers, rifle receivers, magazines, small parts, and rifle stocks, from third parties.

We manufacture most of the components for our firearms, but purchase certain components and parts, including bolt carriers, rifle receivers, magazines, small parts, and rifle stocks, from third parties.

We also purchase ammunition for product testing.

Most of our major suppliers for our firearm products are U.S.-based and provide materials, components, and parts, such as steel, polymer components, and metal-injected-molded components.

Most of our major suppliers for our products are U.S.-based and provide materials, components, and parts, such as steel, polymer components, and metal-injected-molded components.

The costs of these materials, components, and parts are at competitive rates.

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We have alternative sources for these raw materials.

In our OP&A division, we generally utilize third-party contract manufacturers and suppliers for our finished products and product components, except for laser aiming and tactical lighting systems that we assemble at our Wilsonville, Oregon facility.

Third-party contract manufacturers and suppliers provide finished products and product components to us in accordance with our product and component specifications.

Third parties also supply us and our contract manufacturers with the raw materials used in our products and product components, including steel, plastic, aluminum, copper, lead, and packaging materials.

Most of our third-party contract manufacturers and suppliers are in Asia, primarily China, and, to a lesser extent, Taiwan and Japan.

We perform some very minor assembly of products at our Columbia, Missouri facility.

For certain products and components, we utilize a dual sourcing supply chain to mitigate risks associated with sourcing key components from only one supplier.

We do not have long-term contractual arrangements with any of our suppliers that guarantee us production capacity, prices, lead times, or delivery schedules.

Our reliance on these independent parties exposes us to vulnerability because of our dependence on a few sources of supply.

We believe, however, that other sources of supply are available.

In addition, we continually strive to develop relationships with other sources of supply in order to reduce our dependence on any one source of supply.

As a result, we believe that our current and other available suppliers will ensure that we obtain a sufficient supply of goods built to our specifications in a timely manner and on satisfactory economic terms.

We have three manufacturing facilities at which we produce our firearm products:

We have three manufacturing facilities at which we produce our products:

a 575,000 square-foot facility located in Springfield, Massachusetts;

a 38,000 square-foot facility located in Houlton, Maine;

two facilities totaling 44,000 square-feet located in Houlton, Maine;

and a 150,000 square-foot facility located in Deep River, Connecticut.

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We produce our major firearm components utilizing computer-assisted machines.

Our skilled employees u se sophisticated automated testing equipment to ensure the proper functioning of our firearms.

Our skilled employees use sophisticated automated testing equipment to ensure the proper functioning of our firearms.

Every firearm is test fired before shipment.

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a four shift, 168 hour per week schedule and a three shift, 120 hour per week schedule.

In Columbia, Missouri, we lease a 633,000 square foot facility, which was constructed for us, completed in November 2018, and then sold and leased back by us.

This facility serves as our distribution center and operates two shifts of four 10-hour days.

We sublease 59% of this facility to our former outdoor products and accessories subsidiary under the same terms as the master lease.

We seek to minimize inventory costs through an integrated planning and production system.

All facilities in our Firearms division operate under SAP, a fully integrated ERP system.

All facilities operate under SAP, a fully integrated ERP system.

We intend to continue investing in improving our facilities and our systems in order to increase efficiency, improve information reporting, and strengthen internal controls.

In Columbia, Missouri we lease a 633,000 square foot facility, which was constructed for us, completed in November 2018, and then sold and leased back by us.

This facility serves as the warehouse and distribution facility for our Firearms division and as principal executive, administrative, financial, sales, marketing, R&D, assembly, and distribution operations for our OP&A division.

We also lease a 50,000 square foot facility in Wilsonville, Oregon, which houses production, assembly, and warehousing operations for our laser sighting and tactical lighting systems operations in our OP&A division.

Research and Development

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Accordingly, we own numerous patents related to our products.

We apply for patents whenever we develop innovative new products, unique designs, or processes of commercial importance.

We apply for patents whenever we develop innovative new products,

unique designs, or processes of commercial importance.

We do not believe that our business is materially dependent on any single patent.

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We have an active global program of trademark registration, monitoring, and enforcement.

We believe that our Smith & Wesson, M&P, Performance Center, Thompson/Center Arms, and Gemtech brands and our S&W monogram trademarks are known and recognized by the public worldwide and are important to our firearm business.

In addition, we market our outdoor products and accessories under the 20 brand names listed above.

We also sell outdoor products and accessories utilizing our firearm brands.

We believe that our Smith & Wesson, M&P, Thompson/Center Arms, and Gemtech brands and our S&W monogram trademarks are known and recognized by the public worldwide and are important to our firearm business.

We intend to vigorously pursue and challenge infringements of our patents, trademarks, service marks, trade dress, and copyrights, as we believe the goodwill associated with them is a cornerstone of our branding strategy.

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We believe we can effectively compete with all our present competitors.

Our primary competitors in our Firearm division are Ruger and Taurus in the revolver market and Glock, Ruger, Sig Sauer, Springfield Armory, and Taurus in the pistol market.

Our primary competitors are Ruger and Taurus in the revolver market, and Glock, Ruger, Sig Sauer, Springfield Armory, and Taurus in the pistol market.

We compete primarily with Sig Sauer, Ruger, Remington, Savage, and Daniel Defense in the modern sporting rifle market and Browning, Remington, Ruger, Savage, CVA, and Traditions in the hunting rifle market.

Our OP&A division operates in a highly competitive market and encounters competition from both domestic and foreign participants.

We compete primarily based upon innovation, performance, price, quality, reliability, durability, consumer brand awareness, and customer service and support.

Our competitors include Vista Outdoor and a large number of small private companies that directly compete with a limited number of our brands.

Certain of our competitors may have more established brand names and stronger distribution channels than we do, and have, or have through their owners, access to financial and marketing resources that are substantially greater than we possess, that may allow them to invest more heavily in product development, intellectual property, and marketing.

In addition, our products compete with many other sporting and recreational products and activities for the discretionary spending of consumers.

We sell our firearm products through a variety of federally licensed distribution channels.

Depending upon the product or service, our firearm customers include distributors;

We sell our products through a variety of federally licensed distribution channels.

Depending upon the product or service, our customers include distributors;

federal, state, and municipal law enforcement agencies and officers;

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and consumers.

Our outdoor products and accessories customers consist primarily of online retailers, sports specialty stores, sporting goods stores, dealers and distributors, mass market, home and auto retailers, and consumers through our own e-commerce platform, including our websites.

The ultimate users of our products consist of outdoor enthusiasts, fisherman, campers, hikers, and other sportsmen.

We grant payment terms to most commercial customers ranging from 20 to 90 days.

However, in some instances, we provide longer payment terms, particularly as it relates to our hunting dating programs, which provides payment terms due in the fall for certain orders of hunting products received in the spring and summer.

During fiscal 2020, firearm sales into our professional channel accounted for approximately 8.0% of our firearm revenue, which included state and local law enforcement agencies, the federal government, and international customers.

The remaining 92.0% of our firearm revenue was through federal firearm licensees to domestic consumers.

Revenue for our OP&A division during fiscal 2020 was approximately 4.3% to international customers and 95.7% to domestic customers.

Our domestic net sales are made to e-commerce retailers, strategic retailers, dealers, and distributors that sell to licensed dealers that in turn sell to the end users.

In some cases, we sell directly to large retailers and dealers.

Our firearm business is seasonal with revenue generally peaking in our fourth fiscal quarter, which ends April 30, as a result of most industry events and distributor shows normally scheduled during the early spring months.

In addition, because of our operating schedule, which includes a summer and a winter shutdown of our firearm manufacturing facilities, we have an increased number of operating days in our fourth fiscal quarter, which allows our shipping and production volumes to exceed other quarters.

However, in some instances, we provide longer payment terms, particularly as it relates to our fall dating programs for hunting sales, which provides payment terms due in the fall for certain orders of hunting products received in the spring and summer.

During fiscal 2021, sales into our professional channel accounted for approximately 6.0% of our net sales, which included state and local law enforcement agencies, the federal government, and international customers.

The remaining 94.0% of our net sales was through federal firearm licensees to domestic consumers.

Our business is seasonal with sales generally peaking in our fourth fiscal quarter, which ends April 30, as a result of most industry events and distributor shows normally scheduled during the early spring months.

In addition, because of our operating schedule, which includes a summer and a winter shutdown of our manufacturing facilities, we have an increased number of operating days in our fourth fiscal quarter, which allows our shipping and production volumes to exceed other quarters.

Seasonality, however, can be disrupted by external events that may drive sales or impact channel inventories, which may slow or accelerate our sales.

Our outdoor products and accessories business is also seasonal, especially because many of its products are used in outdoor-based activities.

Our sales of outdoor products and accessories are typically the highest between August and October because of demand relating to prime hunting season, seasonal cutlery promotions, the timing of industry trade shows, and holiday season demand.

The sales of outdoor products and accessories may also be affected by unseasonal weather conditions.

Governmental Regulations

Our firearm and suppressor business is primarily regulated by the ATF, which licenses the manufacture, sale, and import of firearms and suppressors in the United States.

Governmental Regulations of Firearms

Our business is primarily regulated by the ATF, which licenses the manufacture, sale, and import of firearms and suppressors in the United States.

The ATF conducts periodic audits of our facilities that hold Federal Firearms Licenses.

Department of State currently oversees the export of articles, services, and related technical data that are designated as defense articles or defense services on the U.S.

Munitions List, as set forth in the International Traffic in Arms Regulations, or ITAR, under the Arms Export Control Act, or AECA.

We are required to obtain an export license for all international shipments of items controlled under ITAR and AECA.

There are also various state laws, regulations, and local ordinances relating to firearm characteristics, features, and sales, as well as firearm magazine capacities.

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Warnings and instructions concerning the safe operation of our firearms and suppressors are contained in Safety & Instruction Manuals included in all boxes in which firearms and suppressors are shipped and are also available for download from our Smith & Wesson, Thompson/Center Arms, and Gemtech websites.

Like other manufacturers and distributors of consumer products, the products we sell in our OP&A division are required to comply with a wide variety of federal, state, and international laws, rules, and regulations, including those related to consumer products and consumer protection, advertising and marketing, labor and employment, data protection and privacy, intellectual property, workplace health and safety, the environment, the import and export of products, and tax matters.

Our failure to comply with applicable federal, state, and international laws, rules, and regulations may result in our being subject to claims, lawsuits, fines, and adverse publicity that could have a material adverse effect on our business, operating results, and financial condition.

These laws, rules, and regulations currently impose significant compliance requirements on our business, and more restrictive laws, rules, and regulations may be adopted in the future.

In addition to the foregoing, the U.S.

Food and Drug Administration, or FDA, regulates certain of our electro-optics products and meat processing equipment.

Environmental Health and Safety

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We regularly incur substantial capital and operating costs to comply with environmental laws, including remediation of known environmental conditions which we fund through cash flows from operations.

We spent $1.2 million in fiscal 2020 on environmental compliance, consisting of $918,000 for disposal fees and containers, $237,000 for remediation, and $60,000 for DEP analysis and fees.

We spent $1.3 million in fiscal 2021 on environmental compliance, consisting of $846,000 on disposal fees and containers, $346,000 for remediation, $65,000 for DEP analysis and air filtration fees, and $63,000 on reporting and compliance.

We spent $1.2 million in fiscal 2020 on environmental compliance, consisting of $918,000 for disposal fees and containers, $237,000 for remediation, and $60,000 for DEP analysis and air filtration fees.

In the normal course of our business, we may become involved in various proceedings relating to environmental health and safety matters, and we are currently engaged in an environmental investigation and remediation.

Our manufacturing facilities are located on properties with a long history of industrial use, including the use of hazardous substances.

We have identified soil and groundwater contamination at our Springfield, Massachusetts plant that we are investigating, monitoring, or remediating, as appropriate.

We have identified soil and groundwater contamination at our Springfield, Massachusetts plant that we continue to monitor and remediate , as appropriate.

Based on the situation, an environmental reserve may be recorded based upon currently enacted laws and regulations, currently available facts, experience in remediation efforts, existing technology, and the ability of other potentially responsible parties or contractually liable parties to pay the allocated portions of any environmental obligations.

As of April 30, 2020, we do not have an open environmental reverse recorded in our consolidated balance sheet.

As of April 30, 202 1 , we do not have an open environmental re serve recorded in our consolidated balance sheet .

Based on information known to us, we do not expect current environmental regulations or environmental proceedings and claims to have a material adverse effect on our consolidated financial position, results of operations, or cash flows.

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There can be no assurance that additional or changing environmental regulation will not become more burdensome in the future and that any such development would not have a material adverse effect on our company.

Human Capital

Creating a positive work environment for our employees is critical to our ability to successfully execute our strategy.

We are committed to a strong, healthy culture focused on respect for all employees, creating and sustaining a family atmosphere, united under a clear vision, with the understanding of each function and individual’s responsibility for team results, collective pride in our company and our industry, and shared rewards for results.

In order to ensure that we embody our values and that our culture remains healthy and strong, we place significant focus on our human resources.

Training & Development

Attraction, retention, and development of employees is critical to our success.

We offer training and development programs to encourage advancement from within, including the following:

tuition reimbursement for up to 100% of an employee’s advanced degree;

computer numerical control (CNC) machine apprentice training at a local community college in conjunction with a state-funded program;

toolmaker apprentice training in conjunction with a state-funded program;

waste water treatment operator training leading to licensure;

leadership effectiveness training for manufacturing managers in conjunction with a state-funded program;

reimbursement for continuing professional education for our professionally licensed employees;

other in-house and cross-functional training to aid with career advancement.

We believe that this training and development leads to more valuable contributions and satisfaction for our employees within their existing roles and also positions employees for roles they aspire to attain.

In addition, we offer a “high potential” development program for top performers with the intention that they can be developed, mentored, and ultimately promoted into higher level roles.

Finally, we conduct quarterly training for all employees on various topics, such as sexual harassment, bribery, anti-corruption, cybersecurity, phishing, and insider trading, among others.

Equal Opportunity

We are committed to hiring qualified candidates without regard to race, religion, color, sex, sexual orientation, pregnancy, gender identity, age, national origin, ancestry, physical or mental disability, genetic information, or any other status.

This commitment extends to all levels of our organization, including within senior management and our Board of Directors.

Our Talent Acquisition team focuses on ensuring that our workforce represents society as a whole and that our business is open and welcoming to everyone.

As of April 30, 2021, our workforce consisted of:

76% male and 24% female;

50% female named executive officers;

9% under 25 years old, 27% between 25-35 years old, 24% between 35-45 years old, 18% between 45-55 years old, 18% between 55-65 years old, and 4% over 65 years old;

59% Caucasian, 27% Hispanic/Latino/Latina, 10% Black, 2% undisclosed, and 2% that identify as two or more races.

Our Talent Acquisition team emphasizes recruiting and retaining a talented and diverse workforce with special focus on hiring veterans, whenever possible.

Voluntary turnover is less than 2%, and our average tenure is 7.6 years.

We contract a third party to review compensation practices on an annual basis to ensure we pay all employees equitably.

Health and Safety

Our Employee Assistance Program is supplemented by Cigna behavioral health tools in order to support employees’ mental as well as physical health needs.

As an essential business, we pride ourselves on having safely and effectively continued running our operations throughout the COVID-19 pandemic.

At the start of the pandemic, we increased pay for those employees who continued to report to work on-site to keep our business running.

These employees turned out record quarters during fiscal 2021, despite the challenges we all faced both at work and at home.

We have a documented education and training plan to ensure employees are well trained on safety measures throughout the organization.

We offer more than 55 different types of training, including lecture, classroom setting, and hands-on training to ensure our employees have the knowledge needed to ensure their safety, as well as the safety of others.

The success of our training program has allowed us to maintain a low level of safety claims and reduce lost work hours.

Our calendar year 2020 and 2019 total recordable incident rate (TRIR) of 1.1 and 1.3, respectively, and lost time incident rate (LTIR) of 0.4 for both years compares favorably to the latest OSHA industry data.

According to OSHA, for our NAICS industry code, the calendar year 2019 TRIR was 2.1 and the LTIR was 0.8.

Total Rewards

Competitive pay and benefits have always been a highlight of our employee experience.

We offer comprehensive benefit programs to our employees that allow them flexibility of choice through our Total Rewards framework of pay and service recognition, health and wellness, financial well-being, work/life balance, culture and community, and learning and development.

We are committed to ensuring that all of our employees are paid a fair wage.

To that end, we offer generous wages and benefits to our employees , including the following:

a comprehensive medical, dental, and vision plan for our employees and their families, for which we pay between 87% and 93% of the total cost;

a 401(k) plan with a company match of up to 3% of the first 6% contributed by the employee;

a profit-sharing plan, where the employee can earn up to 15% of their eligible earnings based on company profits;

twelve annual holidays and a paid time off program, including paid sick and vacation time;

paid and unpaid leaves of absence, including paid family and medical leave;

flexible spending and health savings accounts;

life and disability insurance coverage;

employee stock purchase plan;

a dedicated health and wellness clinic for employees and their dependents;

on-site cafeteria and fitness center;

Employee Assistance Programs;

product discounts;

license-to-carry subsidies.

Annual increases and incentive compensation are based on merit, which is communicated to employees upon hire and documented through our talent management program as part of the annual performance review process.

As of May 31, 2021, we had 2,240 employees, including 4 part-time employees.

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We believe that our employee relations are good and that the high quality of our employee base is instrumental to our success.

As of April 30, 2020 and 2019, we had a backlog of orders in our Firearms segment totaling $95.7 million and $39.2 million, respectively.

The increase in firearms order backlog from the prior fiscal year was primarily because of the increased demand for firearms as a result of the COVID-19 pandemic.

In our OP&A segment, we had a backlog of orders totaling $1.8 million and $12.7 million as of April 30, 2020 and 2019, respectively.

Our backlog consists of orders for which purchase orders have been received and which are generally scheduled for shipment within six months and subject to capacity constraints, including lack of available product.

We allow orders received that have not yet shipped to be cancelled;

therefore, our backlog may not be indicative of future sales.

Executive Officers

Information About our Executive Officers

The following table sets forth certain information regarding our executive officers:

Co-President and Co-Chief Executive Officer

Executive Vice President, Chief Financial Officer, Chief Administrative Officer, and Treasurer

President and Chief Executive Officer

Executive Vice President, Chief Financial Officer, Treasurer, and Assistant Secretary

Senior Vice President, General Counsel, Chief Compliance Officer, and Secretary

President, Firearms

Smith has served as Co-President and Co-Chief Executive Officer since January 2020.

Smith served as President, Manufacturing Services of our company and as President of Manufacturing Services for Smith & Wesson Corp., a subsidiary of our company, since March 2016.

Vice President, Sales

Smith has served as President and Chief Executive Officer since August 2020.

Smith served as Co-President and Co-Chief Executive Officer from January 2020 to August 2020.

Smith served as President, Manufacturing Services of our company and as President of Manufacturing Services for Smith & Wesson Sales Company (formerly known as American Outdoor Brands Sales Company and Smith & Wesson Corp.), a subsidiary of our company, from March 2016 until January 2020 .

Smith served as Vice President of Manufacturing and Supply Chain Management from May 2011 until March 2016 and served as Vice President of Supply Chain Management from May 2010 until May 2011.

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Smith was a Production Supervisor for Bell Aromatics, a manufacturer of flavors and fragrances, from August 1999 until March 2001 .

Murphy has served as Co-President and Co-Chief Executive Officer since January 2020.

Murphy served as President of the Outdoor Products & Accessories Division from May 2017 to January 2020.

From December 2016 until May 2017, he was President of the Outdoor Recreation Division, the activities of which were collapsed into Outdoor Product & Accessories.

From February 2015 until December 2016, he was Vice President, Corporate Development of Vista Outdoor, Inc., a publicly held designer, manufacturer, and marketer of outdoor sports and recreation products.

From April 2013 until February 2015, Mr.

Murphy was Director of Mergers & Acquisitions and Director of Financial Planning & Analysis for Alliant Techsystems, an aerospace, defense, and outdoor sporting goods company.

Murphy held various management roles at McMaster-Carr Supply Company, a supplier of maintenance, repair, and operations materials to industrial and commercial facilities worldwide, from April 2011 until March 2013.

From May 2006 until October 2010 he served as an investment banker with the publicly held firm Houlihan Lokey, where he advised companies in the areas of strategy, acquisitions, divestitures, recapitalizations, and restructuring.

Buchanan has served as Executive Vice President, Chief Financial Officer, and Treasurer of our company since January 2011 and has served as Chief Administrative Officer since September 2015.

Buchanan served as Secretary from January 2011 until April 2012.

Buchanan served as a director of our company from November 2004 until December 2010.

He was of counsel to the law firm of Ballard Spahr LLP from May 2010 until December 2010.

Buchanan served as a Senior Managing Director of CKS Securities, LLC, a registered broker-dealer, from August 2009 until May 2010 and as a Senior Managing Director of Alare Capital Securities, L.L.C., a registered broker-dealer, from November 2006 until July 2009.

From 2005 to 2006, Mr.

Buchanan was principal of Echo Advisors, Inc., a corporate consulting and advisory firm focusing on mergers, acquisitions, and strategic planning.

Buchanan served in various positions for Three-Five Systems, Inc., a publicly traded electronic manufacturing services company, including Executive Vice President, Chief Financial Officer, and Treasurer, from May 1996 until February 2005.

Buchanan was a business attorney from 1986 until 1996 for the law firm of O’Connor, Cavanagh, Anderson, Killingsworth & Beshears and for the law firm of Davis Wright Tremaine LLP from 1984 until 1986.

He was a senior staff person at Deloitte & Touche LLP from 1982 to 1984.

Buchanan is a director and Audit Committee Chairman of Synaptics Incorporated, a publicly traded company that develops custom user interface solutions.

McPherson has served as Executive Vice President , Chief Financial Officer, Treasurer, and Assistant Secretary since August 2020.

McPherson served as Vice President, Chief Accounting Officer, Corporate Controller, and Assistant Treasurer from September 2017 to August 2020.

McPherson served as Vice President, Corporate Controller, and Assistant Treasurer from November 2009 to September 2017.

McPherson served as Corporate Controller from June 2007 to November 2009.

From November 2001 to June 2007, Ms.

McPherson held a number of increasingly responsible positions for Wood Group PLC, a $5.0 billion international energy services company, including, at her departure, Vice President of Finance for the Heavy Industrial Turbines division.

From November 1995 to November 2001, she served as Accounting Manager of FiberMark DSI, Inc.

(formerly Rexam DSI, Inc.), a producer of specialty fiber-based materials in the paper and packaging industry.

From June 1992 to November 1995 she was employed as an auditor at Deloitte & Touche LLP.

McPherson is a Certified Public Accountant registered with the Commonwealth of Massachusetts and a Chartered Global Management Accountant.

Cicero has served as Senior Vice President and General Counsel of our company since June 2017, Vice President and General Counsel of our company since October 2011 and Chief Compliance Officer and Secretary since April 2012.

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Cicero was an Assistant Corporation Counsel in the New York City Office of the Corporation Counsel from September 1993 until June 1996.

Tobiassen has served as President of the Firearms Division of our company since March 2019.

From August 2016 until March 2019, he was President of the Electro-Optics Division of our company, which was established in August 2016 when our company acquired Crimson Trace Corporation, the industry leader in laser sighting systems and tactical lighting for firearms.

Tobiassen served as President of Crimson Trace Corporation from September 2009 until August 2016, and as Marketing Director from April 2005 until September 2009.

Previously, he was Vice President of Marketing at LaCrosse Footwear, Inc., a leading producer of outdoor footwear and protective apparel.

From August 2000 until September 2001, he served as Vice President of Marketing for Danner, Inc., a division of LaCrosse Footwear, Inc.

Cupero has served as Vice President of Sales of our company since March 2021.

Cupero has held increasingly higher positions with our company during her 42 years of service, including Director of Independent Distributors from June 20, 2017 until assuming her current position, and Director of Sales Administration from March 2015 until June 2017.

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What changed 10-K

Item 1. Business