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Item 7. Management’s Discussion and Analysis

2021-06-17 compared with 2020-06-19 · 117 added, 264 removed, 90 unchanged (81% of the section changed)

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Our actual results may differ materially from those anticipated in these forward-looking statements as a result of a variety of factors, including those set forth under Item 1A, “Risk Factors” and elsewhere in this report.

We report our results of operations in two segments:

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

The results of our outdoor products and accessories business, which was previously reported as a separate business segment, are being presented as discontinued operations in the consolidated statements of income/(loss) for all periods presented, See Note 3 – Discontinued Operations to our consolidated financial statements for additional information regarding these discontinued operations.

Unless otherwise indicated, any reference to income statement items in this Management’s Discussion and Analysis of Financial Condition and Results of Operations refers to results from continuing operations.

2021 Highlights

Our operating results for fiscal 2021 included the following:

Consolidated net sales were $678.4 million, an increase of $40.1 million, or 6.3%, over the prior year.

Firearms segment gross sales were $529.6 million, which included $3.6 million of inter-segment revenue, an increase of $48.3 million, or 10.0%, over the prior fiscal year, primarily because of increased consumer demand and a change in the timing of our federal excise tax obligation that resulted in an increase in revenue and a corresponding increase in cost of sales.

This change was a direct result of the opening of our distribution center in June 2019 and resulted from the Tax and Trade Bureau denying our petition and requiring us to assess federal excise tax on the first transfer of a firearm.

Starting in June 2019, we began transferring all completed firearms to our new distribution center and became required to assess federal excise tax at that point.

Previously, we assessed federal excise tax at the point of sale to our third-party customers, allowing us to reduce the invoice value of our firearms by the federal excise tax assessed.

This tax is now a cost of inventory at the distribution center and results in sales to our customers and the related cost of sales both being increased by the tax amount.

This change does not impact gross profit dollars, but it reduces gross margin percentage.

The impact during the fiscal year ended April 30, 2020 to our Firearms segment was a $37.5 million increase in sales and cost of sales and a decrease in gross margin of 240 basis points.

OP&A segment gross sales were $167.5 million, which included $15.1 million of inter-segment revenue, a decrease of $9.8 million, or 5.5%, from the prior fiscal year.

The decrease in sales was primarily because of a decline in sales of our branded camping accessory products due to one large retailer accelerating a strategy towards their own private label brand and lower OEM sales of laser products.

In addition, we experienced reduced orders as a result of recent bankruptcies and other financial instability by certain of our customers and several factors related to the COVID-19 pandemic that resulted in reduced foot traffic from “stay at home” orders and reduced customer orders from sporting goods store closures in many states.

These negative impacts were partially offset by sales growth in e-commerce resulting from a shift to online orders.

Consolidated gross margin was 34.6%, a decrease of 80 basis points from the prior fiscal year.

Excluding the impact of the change in federal excise tax in our Firearms segment, gross margin would have been 36.6%, or an increase of 120 basis points, over the prior fiscal year.

On March 23, 2020, we determined that business in our Outdoor Products & Accessories segment was expected to be negatively impacted by several factors related to the COVID-19 pandemic, including a major online retail customer’s decision to halt or delay most non-essential product orders, COVID-19-related supply chain issues, as well as COVID-19-related “stay at home” orders and sporting goods store closures, which reduced retail foot traffic in many states.

Based on these factors, we expect reduced cash flows in our Outdoor Products & Accessories segment, and we believe this constituted a triggering event under generally accepted accounting principles.

Based on the results of this evaluation, we recorded a non-cash impairment charge of $98.7 million of goodwill in our Outdoor Products & Accessories segment.

Company net loss was $61.2 million, or ($1.11) per diluted share, compared with net income of $18.4 million, or $0.33 per diluted share for the prior fiscal year.

Net income was negatively impacted in fiscal 2020 and 2019 by a $98.7 and $10.4 million impairment of goodwill, respectively.

The non-cash impairment charge described above had a $1.79 and $0.19 negative impact on fully diluted earnings per share in fiscal 2020 and 2019, respectively.

Excluding the impact of the non-cash goodwill impairment, consolidated net income would have been $8.6 million, or 29.9%, over the prior fiscal year.

On November 13, 2019, we announced that we were proceeding with a plan to spin-of f our o utdoor p roducts and a ccessories business, or the Separation, and create an independent publicly traded company to conduct that business.

We believe that separating our o utdoor p roducts and ac cessories business from our f irearm 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 Brand s , Inc., or AOUT.

In connection with the proposed spin-off, we expect to incur restructuring charges of approximately $9.0 million to $12.0 million relating to legal, regulatory, and financial services, reorganization and restructuring costs, and start-up costs for the new company.

Thus far, we have incurred $ 5.5 million of restructuring charges relating to the spin-off.

Net sales of $1.1 billion represented an increase of $529.6 million, or 100.0%, over our fiscal 2020 net sales.

The 100.0% increase in net sales was primarily driven by our ability to respond to consistently increased consumer demand over the past year with a 61.6% increase in firearm units produced combined with the cancellation of substantially all promotional activities, which resulted in an increase in average selling prices for nearly all product offerings.

Gross profit increased 171.0% over the prior fiscal year, primarily because of lower promotional spending, favorable manufacturing fixed cost absorption, favorable product mix, and price increases.

This increase was partially offset by increased volume-related spending and unfavorable inventory valuation adjustments.

Increased net sales and gross margin were driven by heightened consumer demand, which we believe was caused by continued concerns regarding the COVID-19 pandemic, events that raised fears about personal protection, and uncertainty regarding the possibility of increased firearm regulation.

Net income was $243.6 million, or $4.40 per diluted share, compared with net income of $27.7 million, or $0.50 per diluted share for the prior fiscal year, primarily as a result of increased net sales across all of our product lines.

As noted above, and in Note 3 – Discontinued Operations to our consolidated financial statements, the spin-off of our wholly owned subsidiary AOUT, from our company was completed on August 24, 2020.

Key Performance Indicators

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We also track our return on invested capital, and we use adjusted EBITDAS (earnings before interest, taxes, depreciation, amortization, and stock-based compensation expense, excluding certain non-operational items), which is a non-GAAP financial metric, as a supplemental measure of our performance in order to provide investors with an improved understanding of underlying performance trends.

We evaluate our firearm products by such measurements as gross margin per unit produced, units produced per day, revenue by trade channel, and incoming orders per day.

We evaluate our outdoor products and accessories products based upon a number of financial and operating measures, including sales, gross profit and gross margin, operating expenses, and operating margin.

We evaluate the performance of our products using such measurements as gross margin per unit produced, units produced per day, revenue by trade channel, and incoming orders per day.

External Factors that Impact the Firearm Industry

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See Item IA, Risk Factors, for further discussion of external factors that impact the firearm industry.

Although these external factors have created demand surges and volatility in the firearm market, and often make it difficult to predict demand, we believe that those external factors have also likely contributed to a long-term increase in consumer interest in firearms.

This increased consumer interest has helped the firearm industry generate a ten-year compound annual growth rate in units of approximately 5.6% according to the U.S.

Bureau of Alcohol, Tobacco, Firearms and Explosives, or ATF.

We believe that this expanding base of consumers combined with our strong brand reputation and attractive price points are important factors in our goal to continue increasing our market share.

Although these external factors have created demand surges and volatility in the

firearm market, and often mak e it difficult to predict demand, we believe that those external factors have also likely contributed to a long-term increase in consumer interest in firearms.

From 2010 through 2019, t his increased consumer interest helped the firearm industry generate a ten-year compound annual growth rate in units of approximately 2.8% according to the ATF.

We believe that this expanding base of consumers combined with our strong brand re putation and attractive price points are important factors in our goal to continue increasing our market share.

Based on data from calendar 20 20 , we estimate that we have a 19.0 % share of the U.S.

consumer market for handguns.

consumer market for firearms .

Results of Operations

Consolidated Net Sales and Gross Profit

The following table sets forth certain information regarding consolidated net sales for the fiscal years ended April 30, 2020, 2019, and 2018 (dollars in thousands):

Cost of sales

% of net sales (gross margin)

Fiscal 2020 Consolidated Net Sales and Gross Profit Compared with Fiscal 2019

Consolidated net sales increased $40.1 million, or 6.3%, over fiscal 2019, primarily as a result of the change in the timing of our federal excise tax obligation that resulted in a $37.5 million increase in revenue and a corresponding increase in cost of sales, increased consumer demand for new products, and increased demand of our Performance Center branded products, partially offset by lower shipments of our large frame M&P branded polymer pistols and medium frame revolvers in our Firearms segment.

In our Outdoor Products & Accessories segment, net sales decreased by $7.4 million, or 4.7%, as a result of the decreased shipments in shooting, hunting, electro-optics, and camping products, partially offset by increases in demand for cutlery.

Consolidated gross margin was negatively impacted by 200 basis points as a result of the change in federal excise tax treatment described above.

Excluding that treatment, consolidated gross margin increased 120 basis points over the prior fiscal year, primarily because of a reduction in material costs due to sourcing initiatives, favorable manufacturing fixed cost absorption, shipping costs that were included in cost of sales in the prior fiscal year are now included in operating expenses because of the start-up of our new distribution center, favorable inventory valuation adjustments, and lower manufacturing spending in our Firearms segment.

Unfavorable impacts included lower margin contribution from the Outdoor Products & Accessories segment, primarily due to increased tariffs and higher promotional product discounts in our Firearms segment.

Fiscal 2019 Consolidated Net Sales and Gross Profit Compared with Fiscal 2018

Consolidated net sales for fiscal 2019 increased $31.4 million, or 5.2%, over fiscal 2018, primarily as a result of lower consumer rebates on our polymer pistols, the recognition of deferred revenue on shipments of promotional products, and higher demand for concealed carry M&P branded polymer pistols and revolvers, partially offset by lower shipments of Performance Center branded polymer pistols in our Firearms segment.

In our OP&A segment, net sales increased primarily because of market acceptance of newly introduced accessories products over the past several years and increased revenue from strategic retailers, including internet retailers, partially offset from lower electro-optics products revenue.

Consolidated gross margin for fiscal 2019 increased 320 basis points over fiscal 2018, primarily because of a combination of lower promotional product discounts, consumer rebates, and lower manufacturing spending in our Firearms segment, and changes in customer mix, and lower promotional activity, offset by unfavorable product mix in our OP&A segment.

Firearms Segment Revenue and Gross Profit

The following table sets forth certain information regarding Firearms segment revenue and gross profit for the fiscal years ended April 30, 2020, 2019, and 2018 (dollars in thousands):

Net Sales and Gross Profit

The following table sets forth certain information regarding net sales and gross profit for the fiscal years ended April 30, 2021, 2020, and 2019 (dollars in thousands):

Other Products & Services

Total Firearms Revenue

Total Revenue

Cost of sales

% of net sales (gross margin)

The following table sets forth certain information regarding firearm units shipped by trade channel for the fiscal years ended April 30, 20 20 , 20 19 , and 20 18 (units in thousands):

The following table sets forth certain information regarding units shipped by trade channel for the fiscal years ended April 30, 2021, 2020, and 2019 (units in thousands):

Total Units Shipped

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Professional Channel Units Shipped

Firearms Segment Fiscal 2020 Revenue and Gross Profit Compared with Fiscal 2019

Revenue for our handguns increased $53.8 million, or 16.0%, over fiscal 2019.

Increases in our revenue included the change in the $28.4 million federal excise tax treatment described above, increased consumer demand for new products, and increased shipments of our Performance Center branded products, partially offset by lower shipments of our large frame M&P branded polymer pistols and medium frame revolvers.

Unit shipments into the sporting goods consumer channel increased 9.7% over fiscal 2019 because of increased firearm demand, as indicated by a 26.6% increase in adjusted background checks for handguns reported to NICS, including a significant increase in the fourth quarter likely related to concerns regarding the COVID-19 pandemic.

We believe that our percentage increase in sales did not match NICS because of fulfillment of consumer demand out of our customer’s inventory, particularly by a few strategic retailers, reporting changes in a few certain states, and fulfillment of demand during the fourth quarter likely impacted by state to state sales restrictions.

Revenue for our long guns decreased $6.2 million, or 5.7%, from fiscal 2019, in spite of a $9.1 million increase in revenue related to federal excise tax, primarily due to reduced hunting rifle sales as a result of clearing discontinued products from the channel in anticipation of new products that were introduced late in our third fiscal quarter.

In addition, in spite of a late fourth quarter increase in sales, our M&P branded modern sporting rifles were down year-over-year as a result of lower demand in the first nine months of the fiscal year combined with lower promotional activity for those products and the fulfillment of demand out of customer inventory.

We believe that our percentage decrease in sales in long guns likely did not match the 13.2% increase reported by NICS because of the decline in our hunting rifle sales, the fulfillment of consumer demand from our customer’s inventory, a combination of reporting changes to NICS in certain states, and decreased promotional activity, particularly in the first half of the fiscal year.

Other products and services revenue increased $644,000, or 1.8%, over fiscal 2019, primarily because of an increased demand for handcuffs and magazines.

New products, defined as any new SKU not shipped in the prior year, represented 28.2% of firearm revenue for the 12 months ended April 30, 2020 and included a new concealed carry M&P branded polymer pistol, many new product line extensions, and promotional products bundle kits for our M&P, Performance Center, and Thompson/Center Arms branded products.

Gross margin for fiscal 2020 for our Firearms segment was negatively impacted 2 40 basis points as a result of the change in federal excise tax treatment described above.

Gross margin dollars were not impacted by that tax treatment, and e xcluding that treatment, gross margin for our firearms segment would have increased by 3 20 basis points over the prior fiscal year , due to a combination of factors, including $4.4 million of shipping costs that were included in cost of sales in the prior fiscal year that are now included in operating expenses due to the start-up of our new distribution center, which negatively impacted gross margin by 80 basis point s , a reduction in material costs due to sourcing initiatives, favorable inventory valuation adjustments related to the release of year end manufacturing variance accruals, improved manufacturing fixed cost absorption , lower manufacturing spending, and price increases , all of which favorably impacted Firearms gross margin by 520 basis points .

These favorable impacts to Firearms gross margin were partially offset by increased standards related to material and labor cost increases and by increased promotional product discounts.

Our Firearm inventory levels increased slightly during fiscal 2020 due primarily to the change in timing related to federal excise tax that is now in inventory, which increased inventory by $5.4 million, combined with an increase in raw materials and work in process resulting from an increase in production to meet demand near the end of our fiscal year related to the COVID-19 pandemic.

These increases were almost entirely offset by a 19% decrease in finished goods units as shipments in our fourth fiscal quarter increased to meet that demand.

While inventory levels, both internally and in the distribution channel, in excess of demand may negatively impact future operating results, it is difficult to forecast the potential impact of distributor inventories on future revenue and income since demand is impacted by many factors, including seasonality, new product introductions, news events, political events, and consumer tastes.

Our Firearms segment order backlog as of April 30, 2020 and 2019 was $95.7 million and $39.2 million, respectively.

We allow orders received that have not yet shipped to be cancelled, and therefore, our backlog may not be indicative of future sales.

Firearms Segment Fiscal 2019 Revenue and Gross Profit Compared with Fiscal 2018

Revenue for our handguns increased $10.6 million, or 3.3%, over fiscal 2018, primarily as a result of lower consumer rebates on our polymer pistols, the recognition of deferred revenue on shipments of promotional products, and higher demand for concealed carry M&P branded polymer pistols and revolvers, partially offset by lower shipments of Performance Center branded polymer pistols.

Actual unit shipments into the sporting goods channel for our handgun products increased 1.3% over fiscal 2018, primarily as a result of increased demand for certain of our handgun products because of successful seasonal promotional programs, including a promotion that bundled one of our handgun products with a shooting accessories product.

Although overall consumer demand for handguns decreased 8.9% from fiscal 2018 (as indicated by adjusted background checks reported in NICS), we believe consistent demand for the broad array of quality products that we offer, combined with a normalized level of distributor inventory (rather than a sharp decline in such inventory in the prior year), had a positive impact on our fiscal 2019 results.

Revenue for our long guns increased $17.5 million, or 19.4%, over fiscal 2018, partially because of replenishment of inventory, specifically for our sport model modern sporting rifle, in the sporting goods channel and several successful promotional programs, including a promotion that bundled a firearm with shooting accessory products.

As a result, we believe we increased our market share for long guns.

Other products and services revenue increased $1.4 million, or 4.3%, over the prior year, primarily because of higher sales of parts and handcuffs.

New products, defined as any new SKU not shipped in the prior year, represented 20.1% of firearm revenue for fiscal 2019 and included our new concealed carry Performance Center M&P branded polymer pistol and many other new product line extensions for our M&P and Thompson/Center Arms branded products.

The increase in the number of units sold favorably impacted firearm revenue by 1.0%.

Our Firearm s segment order backlog as of April 30, 2019 and 2018 was $39.2 million and $96.1 million, respectively.

The decrease in order backlog from the prior fiscal year was primarily because of the normalization of channel inventories and the timing of order fulfillment.

Outdoor Products & Accessories Segment Revenue and Gross Profit

The following table sets forth certain information regarding Outdoor Products & Accessories segment revenue and gross profit for the fiscal years ended April 30, 2020, 2019, and 2018 (dollars in thousands):

Cost of sales

% of net sales (gross margin)

Outdoor Products & Accessories Segment Fiscal 2020 Revenue and Gross Profit Compared with Fiscal 2019

Revenue for our Outdoor Products & Accessories segment decreased $9.8 million, or 5.5%, from fiscal 2019, primarily because of $4.0 million of reduced sales to OEM customers for our laser products, a $4.3 million decline in sales of our branded camping accessory products as a result of one large retailer accelerating a strategy towards its own private label brand, and $2.4 million of lower intercompany sales.

In addition, we experienced reduced orders as a result of recent bankruptcies and other financial instability by certain of our customers and several factors r elated to the COVID-19 pandemic, including a major online retail customer’s decision to halt or delay most non-essential product orders, COVID-19-related supply chain issues, COVID-19-related “stay at home” orders, and sporting goods store closures, which have significantly reduced retail foot traffic in many states.

The reduced orders as a result of the COVID-19 pandemic were partially offset by $6.8 million of increased sales growth in e-commerce from a shift to online orders.

New products represented 14.0% of Outdoor Products & Accessories segment revenue for fiscal 2020.

Net sales for our Outdoor Products & Accessories segment was 22.5% of total company net sales compared with 25.0% in fiscal 2019.

Gross margin for fiscal 2020 for our Outdoor Products & Accessories segment declined 380 basis points compared to the prior year, primarily because of unfavorable variance capitalization for costs that were capitalized in fiscal 2019 and expensed in fiscal 2020, which was caused by the reduction of laser manufacturing in fiscal 2019, and higher tariff costs on imported goods.

Our Outdoor Products & Accessories segment inventory was relatively flat as compared to fiscal 2019.

We believe our inventory levels have enabled us to maintain minimal disruption from COVID-19 pandemic responses with our suppliers.

It is possible, however, that worsening of conditions or increased fears of a pandemic could have a renewed and prolonged effect on manufacturing or employment in China, travel to and from China, or other restrictions on imports, all of which could have a longer-term effect on our sales and profitability in future periods.

Our Outdoor Products & Accessories segment order backlog as of April 30, 2020 was $1.8 million, or $10.9 million lower than at the end of fiscal 2019.

We allow orders received that have not yet shipped to be cancelled, and therefore, our backlog may not be indicative of future sales.

Outdoor Products & Accessories Segment Fiscal 2019 Net Sales and Gross Profit Compared with Fiscal 2018

Net sales for our Outdoor Products & Accessories segment for fiscal 2019 increased $1.9 million, or 1.2%, over fiscal 2018.

Net sales increased primarily because of market acceptance of newly introduced accessories products over the past several years and increased revenue from strategic retailers, including internet retailers, partially offset from lower electro-optics products revenue as a result of a general decline in firearm market conditions mentioned above.

New products in our Outdoor Products & Accessories segment represented 6.2% of this segment’s revenue for fiscal 2019 and included more than 300 new products.

Net sales for our Outdoor Products & Accessories segment was 25.0% of total company net sales compared with 26.0% in fiscal 2018.

Gross margin for fiscal 2019 for our Outdoor Products & Accessories segment remained flat compared with fiscal 2018.

Favorable impacts to gross margin included changes in customer mix, which yielded higher gross margins, and lower promotional activity offset by unfavorable product mix.

Our Outdoor Products & Accessories segment order backlog as of April 30, 2019 was $12.7 million, or $1.6 million lower than at the end of fiscal 2018.

Consolidated Operating Expenses

Fiscal 2021 Net Sales and Gross Profit Compared with Fiscal 2020

Net sales for our handguns increased $365.0 million, or 93.4%, over fiscal 2020 as a result of increased demand for all major product lines, likely as a result of pandemic-related restrictions, fear for personal safety, and concerns over increased firearm regulation resulting from a change in the Presidential administration.

Unit shipments of our handguns into the sporting goods consumer channel increased 66.9% over fiscal 2020 as a result of increased demand, which correlates to the 48.9% increase in adjusted background checks for handguns reported to NICS.

We believe our outperformance of adjusted NICS was a result of our ability to increase capacity to meet consumer demand, and a consumer preference for our products at the retail level.

Net sales for our long guns increased $151.8 million, or 149.5%, over fiscal 2020 as a result of increased consumer demand for our M&P modern sporting rifles, we believe driven by fear for public safety, concerns over increased firearms regulation resulting from a change in the Presidential administration, and an increased participation in outdoor activities because of COVID-19, partially offset by a bulk sale to clear discontinued products from the channel in the prior year.

Unit shipments into the sporting goods channel increased 80.8% over fiscal 2020 compared with a 40.6% increase in reported NICS checks over the prior comparable period.

that our percentage increase in long gun sales significantly exceeded the increase in NICS because our flexible manufacturing capabilities allowed us to increase production capacity significantly during this period , combined with a consumer preference for our products at the retail level.

Other products and services net sales increased $12.8 million, or 34.1%, over fiscal 2020, primarily because of increased sales of component parts, handcuffs, and business-to-business services.

New products, defined as any new SKU not shipped in the prior year, represented 17.3% of net sales for the 12 months ended April 30, 2021 and included several new M&P branded polymer pistols, many new product line extensions, and promotional products bundle kits for our M&P and Thompson/Center Arms branded products.

Gross margin for fiscal 2021 increased by 171.0% over the prior fiscal year, primarily because of lower promotional spending, favorable manufacturing fixed cost absorption, favorable product mix, and price increases.

This increase was partially offset by increased manufacturing spending, unfavorable inventory valuation adjustments.

Our inventory levels decreased $25.3 million during fiscal 2021, as a result of the increase in consumer demand.

The past year has seen unprecedented demand, which has resulted in internal, distributor, and retail inventories being at historically low levels.

A discussion of our results of net sales and gross profit for the year ended April 30, 2020 compared to the year ended April 30, 2019 is included in Part II, Item 7.

“Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the year ended April 30, 2020, filed with the SEC on June 19, 2020.

Operating Expenses

The following table sets forth certain information regarding operating expenses for the fiscal years ended April 30, 2021, 2020, and 2019 (dollars in thousands):

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General and administrative

Goodwill impairment

Total operating expenses

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Fiscal 2021 Operating Expenses Compared with Fiscal 2020

Excluding the impact of the goodwill impairment for fiscal 2020 and 2019 described above, operating expenses increased $7.1 million over the prior fiscal year.

Selling, marketing, and distribution expenses increased $17.3 million, partially as a result of the start-up of our new distribution center during the first quarter of fiscal 2020, which included approximately $4.4 million of costs that would have been included in cost of sales in the prior year as well as additional costs related to compensation and benefits, depreciation, property taxes, and security.

In addition, increased co-op advertising expenses in the Firearms segment related to strategic customers, additional targeted customer promotions in our Outdoor Products & Accessories segment, and increases related to the development of our e-commerce initiative resulted in increased spending over the prior fiscal year.

General and administrative expenses decreased $9.7 million, primarily as a result of decreased compensation related expenses in connection with the separation of our former President and Chief Executive Officer, decreased other compensation related expenses, decreased costs due to the closure of our Jacksonville, Florida facility, and a reduction in our allowance for doubtful accounts, which combined amounted to a $17.1 million decrease in general and administrative expenses.

These decreases were partially offset by increased depreciation and compensation-related expenses related to our new distribution center, increased expenses related to the planned spin-off of our outdoor products and accessories business, which amounted to $5.5 million, as described above, increased spending relating to maintaining a safe and operational work environment throughout the COVID-19 pandemic, which amounted to $2.5 million, and increased professional fees.

Operating expenses increased $14.0 million over the prior fiscal year.

Selling, marketing, and distribution expenses increased $616,000, primarily because of increased freight-related expenses and expenses related to temporary labor, as a result of increased shipments, additional expenses for a consumer firearm safety program, increased co-op advertising expenses for strategic customers, and compensation-related expenses.

These increased expenses were partially offset by lower travel and entertainment expenses as a result of COVID-19 and decreased spending on targeted customer promotions.

General and administrative expenses increased $13.2 million, primarily because of $3.2 million of increased expenses related to the spin-off, $12.6 million of increased profit-sharing expense, and $1.0 million in donations to the National Shooting Sports Foundation.

These increased expenses were partially offset by lower travel and entertainment expensed due to COVID-19, and decreased compensation-related expenses.

Fiscal 2020 Operating Expenses Compared with Fiscal 2019

Excluding the impact of the goodwill impairment described above, operating expenses increased $9.1 million over fiscal 2018.

Research & development expenses increased $1.5 million as a result of increased compensation-related expenses and professional fees.

Selling and marketing expenses increased primarily as a result of $1.9 million of increased compensation-related expenses and increased travel and entertainment expenses, partially offset by decreased advertising expenses, commission costs, and professional fees.

General and administrative expenses increased $6.1 million because of $8.9 million of increased compensation-related expenses as well as increased depreciation expenses related to our national logistics facility.

These increases were partially offset by $2.3 million of decreased professional fees, lower donations to the National Rifle Association of $950,000, decreased travel and entertainment related expenses, and decreased acquisition-related costs.

Consolidated Operating (Loss)/ Income

Operating expenses increased by $12.6 million over fiscal 2019.

Research and development expenses decreased $644,000 as a result of decreased compensation-related expenses.

Selling and marketing expenses increased primarily as a result of $5.3 million of increased compensation-related expenses, $4.4 million of increased freight and shipping expense, and $2.5 million in depreciation expense related to our distribution center.

These increased expenses were partially offset by a decrease in spending on promotional events because of COVID-19.

General and administrative expenses increased $ 1.0 million because of increased depreciation expenses and other expenses related to the spin-off of our outdoor products and accessories business.

These increases were partially offset by decreased compensation-related expenses in connection with the separation of our former President and Chief Executive Officer.

Operating Income from Continuing Operations

The following table sets forth certain information regarding operating income for the fiscal years ended April 30, 2021, 2020, and 2019 (dollars in thousands):

Operating (loss)/income

Operating income from continuing operations

% of net sales (operating margin)

Fiscal 2020 Operating (Loss)/Income Compared with Fiscal 2019

Excluding the impact of the goodwill impairment for fiscal 2020 and 2019 described above, operating income for fiscal 2020 would have been $49.8 million, an increase of $1.4 million, or 2.9%, over the prior fiscal year, primarily because of favorable manufacturing fixed cost absorption, favorable inventory valuation adjustments, lower manufacturing spending in our Firearms segment, decreased compensation related expenses in connection with the separation of our former President and Chief Executive Officer, and decreased costs as a result of the closure of our Jacksonville, Florida facility.

These increases to operating income were partially offset by increased promotional product discounts and targeted customer promotions in our Firearms segment, increased co-op advertising expenses related to strategic customers, increased expenses related to the development of our e-commerce initiative, increased depreciation and compensation-related expenses related to our new distribution center, increased expenses related to the planned spin-off of our outdoor products and accessories business, and increased expenses related to the COVID-19 pandemic.

Fiscal 2019 Operating Income Compared with Fiscal 2018

Excluding the impact of the goodwill impairment described above, operating income for fiscal 2019 was $48.5 million, an increase of $21.4 million, or 79.1% over fiscal 2018, primarily because of a combination of lower promotional product discounts, lower consumer rebates, lower manufacturing spending, decreased professional fees, lower donations to the National Rifle Association, decreased travel and entertainment related expenses, and decreased acquisition-related costs.

These increases to operating income were partially offset by unfavorable inventory valuation adjustments and manufacturing fixed-cost absorption, increased compensation-related expenses, and increased depreciation expenses related to our national logistics facility.

Other Income/(Expense)

The following table sets forth certain information regarding operating income/(expense) for the fiscal years ended April 30, 2020, 2019, and 2018 (dollars in thousands):

Other income/(expense)

In fiscal 2018, we recorded a reduction of $1.6 million in the contingent consideration liability in connection with the acquisition of Ultimate Survival Technologies, Inc.

Consolidated Interest (Expense)/Income

Fiscal 2021 Operating Income from Continuing Operations Compared with Fiscal 2020

Operating income from continuing operations for fiscal 2021 increased $269.3 million, or 535.4%, over the prior fiscal year, primarily because of increased sales and the resulting improvements in gross margins.

Operating income from continuing operations was also favorably impacted by lower promotional product spending, favorable manufacturing fixed-cost absorption, lower travel and entertainment expenses because of COVID-19, and decreased advertising costs.

These favorable impacts were partially offset by increased volume-related spending, increased freight-related expenses, and increased profit-sharing expense.

Fiscal 2020 Operating Income from Continuing Operations Compared with Fiscal 2019

Operating income from continuing operations for fiscal 2020 was $50.3 million, an increase of $6.8 million, or 15.6% over fiscal 2019, primarily because of favorable manufacturing fixed cost absorption, favorable inventory valuation adjustments, and lower manufacturing spending, as well as decreased compensation-related expenses in connection with the separation of our former President and Chief Executive Officer.

These increases in operating income from continuing operations were partially offset by increased promotional product discounts and targeted customer promotions, increased depreciation and compensation-related expenses related to the new distribution center, increased expenses related to the spin-off of our outdoor products and accessories business, and increased expenses related to the COVID-19 pandemic.

The following table sets forth certain information regarding operating income for the fiscal years ended April 30, 2021, 2020, and 2019 (dollars in thousands):

Other income for fiscal 2021increased $1.8 million, or 354.9%, over the prior fiscal year, primarily as a result of the sublease of the distribution center to AOUT, whereby AOUT subleases from us 59.0% of our distribution center under the same terms as the master lease.

Interest (Expense)

The following table sets forth certain information regarding interest expense for the fiscal years ended April 30, 2021, 2020, and 2019 (dollars in thousands):

Interest expense

Interest expense increased by $1.9 million over the prior fiscal year as a result of interest recorded related to our capital lease for our new distribution center and additional borrowings outstanding during the fiscal year.

Interest expense decreased by $1.8 million between fiscal 2018 and fiscal 2019 because of lower overall outstanding debt during fiscal 2019.

Consolidated Income Tax Expense

Interest expense decreased by $7.7 million from the prior fiscal year as a result of lower overall outstanding debt during fiscal 2021 resulting from increased cash generation that enabled us to repay all amounts outstanding on our revolving line of credit.

Interest expense increased by $1.8 million over fiscal 20 19 as a result of interest recorded related to our capital lease for our new distribution center and additional borrowings outstanding on our revolving line of credit during the fiscal year.

Income Tax Expense

The following table sets forth certain information regarding income tax expense for the fiscal years ended April 30, 2021, 2020, and 2019 (dollars in thousands):

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% of income from operations (effective tax rate)

We recorded income tax expense of $1.3 million for fiscal 2020, $9.1 million lower than the prior fiscal year, primarily because of decreased profitability.

We recorded income tax expense of $74.4 million for fiscal 2021, $62.9 million higher than the prior fiscal year, primarily because of increased profitability.

The effective tax rates were 23.4% and 29.4% for fiscal 2021 and 2020, respectively.

The effective tax rate for fiscal 2020 and 2019 excludes a non-cash goodwill impairment charge as a discrete item.

We recorded income tax expense of $10.3 million for fiscal 2019, versus an income tax benefit of $2.5 million for fiscal 2018, primarily because of the impact of Tax Reform in the prior year.

The effective tax rate decreased by 6.0% as a result of non-deductible expenses impacting taxable income to a lesser extent as taxable income rises.

In addition, prior year income tax expense included higher non-deductible spin-related transaction costs.

We recorded income tax expense of $11.5 million for fiscal 2020, $2.2 million higher than 2019, primarily because of increased profitability.

The effective tax rates were 29.4% and 27.1% for fiscal 2020 and 2019, respectively.

The effective tax rate for fiscal 2019 excludes a non-cash goodwill impairment charge as a discrete item.

Consolidated Net (Loss)/Income

The increase in rate was due to higher non-deductible spin-related costs in fiscal 2020.

Income from Continuing Operations

The following table sets forth certain information regarding net income and the related per share data for the fiscal years ended April 30, 2021, 2020, and 2019 (dollars in thousands, except per share data):

Net (loss)/income

Net (loss)/income per share

Fiscal 2020 Net (Loss)/Income Compared with Fiscal 2019

Excluding the impact of goodwill impairment for fiscal 2020 and 2019, net income increased $8.6 million or $0.16 per diluted share, from the prior fiscal year, primarily as a result of the reasons discussed above, as well as increased interest expense because of increased interest on our capital lease for our new distribution center and additional borrowings outstanding.

Fiscal 2019 Net Income Compared with Fiscal 2018

Excluding the impact of Tax Reform in fiscal 2018 and goodwill impairment in fiscal 2019, net income was $28.8 million for fiscal 2019 compared with $11.4 million for fiscal 2018, an increase of $17.4 million, or 152.6%.

The increase in net income was primarily due to increased revenue, a combination of lower promotional product discounts, consumer rebates, lower manufacturing spending, decreased professional fees, and lower donations to the National Rifle Association.

The favorable impacts to net income were partially offset by unfavorable inventory valuation adjustments and manufacturing fixed-cost absorption, increased compensation-related expenses, and increased depreciation expenses related to our national logistics facility.

Income from continuing operations

Net income per share

Basic - continuing

Diluted - continuing

Fiscal 2021 Income from Continuing Operations Compared with Fiscal 2020

Net income increased $215.9 million, or $3.90 per diluted share, over the prior fiscal year for reasons outlined above.

Fiscal 2020 Income from Continuing Operations Compared with Fiscal 2019

Net income increased $2.7 million, or $0.05 per diluted share, over the prior fiscal year for reasons outlined above.

Liquidity and Capital Resources

Our principal cash requirements are to (1) finance the growth of our operations, including working capital and capital expenditures;

(2) service our existing debt;

and (3) fund the spin-off of our outdoor products and accessories business.

Capital expenditures for material handling equipment and other capital projects to support our national logistics facility, various information technology projects, and tooling for new product offerings represent important cash needs.

Our principal cash requirements are to (1) finance the growth of our operations, including working capital and capital expenditures, and (2) return capital to our stockholders.

Capital expenditures for new product development, additional manufacturing capacity, and repair and replacement of equipment represent important cash needs.

The following table sets forth certain cash flow information for the fiscal years ended April 30, 2021, 2020, and 2019 (dollars in thousands):

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Operating Activities

Operating activities represent the principal source of our cash flow.

Cash provided by operating activities was $95.0 million in fiscal 2020, or $37.5 million higher than the prior fiscal year.

Cash generated by operating activities for fiscal 2020 was favorably impacted by the postponement of $15.1 million in federal excise tax payments as a result of COVID-19, an incremental $20.4 million decrease in accounts receivable due to timing of shipments and customer payments, and an incremental $10.1 million decrease in inventory from the prior year due to increased firearms shipments.

These favorable impacts were partially offset by an incremental $17.8 million of decreased payroll and incentive accruals due to the payment of higher management incentive bonuses during the year and the separation of our former President and Chief Executive Officer.

We anticipate that inventory levels in our Firearms segment will remain relatively flat to slightly up in the first quarter of fiscal 2021 as we ramp production to meet current consumer demand.

We expect that inventory levels in Outdoor Products & Accessories will increase in the first quarter of fiscal 2021 due to seasonal demand requirements.

Cash provided by operating activities was $57.5 million in fiscal 2019, or $4.2 million lower than fiscal 2018.

Cash generated by operating activities for fiscal 2019 was favorably impacted by net income of $72.3 million before depreciation and amortization, $11.0 million of increased payroll and incentives due to increased management incentive accruals, and a $10.4 million non-cash goodwill impairment charge in our Outdoor Products & Accessories segment.

Cash provided by operating activities was negatively impacted by $29.0 million of increased accounts receivable due to the timing of customer shipments, $10.5 million of increased inventory primarily due to increased inventory purchases to mitigate tariff costs related to our outdoor products and accessories products , and an $7.2 million reduction in accrued expenses because of decreased promotional product discounts and consumer rebate accruals.

Operating activities from continuing operations represent the principal source of our cash flow.

Cash provided by operating activities from continuing operations was $317.3 million in fiscal 2021, or $236.4 million higher than the prior fiscal year.

Cash generated by operating activities from continuing operations for fiscal 2021 was favorably impacted by net income of $274.3 million before depreciation and amortization, an incremental $26.2 million decrease in inventory from the prior year due to increased shipments to meet consumer demand, an incremental $21.5 million increase in accounts payable due to increased manufacturing purchases and timing of payments, an incremental $12.6 million increase in profit sharing, and a $10.8 million increase in management incentive bonus accruals due to higher income from continuing operations.

These favorable impacts were partially offset by an incremental $46.7 million of decreased accrued expenses, primarily due to lower promotional product discount accruals and the payment of deferred federal excise tax liabilities allowed by the Tax and Trade Bureau as a result of the COVID-19 pandemic, and a $5.6 million incremental increase in accounts receivable due to timing of shipments.

We anticipate that inventory levels will remain relatively flat in the first quarter of fiscal 2022 as we continue to meet current consumer demand.

Cash provided by operating activities from continuing operations was $80.8 million in fiscal 2020, or $29.7 million higher than fiscal 2019.

Cash generated by operating activities from continuing operations for fiscal 2020 was favorably impacted by net income of $59.6 million before depreciation and amortization, a $28.9 million incremental decrease in accounts receivable due to the timing of shipments and customer payments, and a $28.3 million incremental increase in accrued expenses, primarily due to an increase in promotional product discount accruals and the postponement of federal excise tax payments as a result of the COVID-19 pandemic.

These favorable impacts were partially offset by an incremental $15.9 million of decreased payroll and incentive accruals due to the payment of higher management incentive bonuses during the year and the separation of our former President and Chief Executive Officer and a $8.6 million incremental increase in inventory.

Investing Activities

Cash used in investing activities in fiscal 2020 was $14.0 million, or $20.9 million lower than fiscal 2019.

We recorded capital expenditures of $13.9 million for fiscal 2020, $20.0 million lower than fiscal 2019 due to increased spending in the prior year related to our national distribution center.

Cash used in investing activities in fiscal 201 9 was $ 34.8 million, or $ 7.3 million lower than in fiscal 2018 , primarily due to $ 21.3 million of spending on business acquisition s in the prior fiscal year , partially offset by higher spending on capital expenditures in fiscal 2019 compared with fiscal 2018.

We recorded capital expenditures of $33.9 million, or $15.5 million over fiscal 2018, primarily because of spending related to our national logistics facility that was completed during fiscal 2019.

Excluding spending related to our national logistics facility, we recorded capital expenditures of $16.5 million, a decrease of $2.0 million from fiscal 2018.

During fiscal 2019, we acquired substantially all of the LaserLyte branded products and other assets from P&L Industries Inc., for a purchase price of $2.0 million, subject to certain adjustments , utilizing cash on hand.

Cash used in investing activities in fiscal 2021 was $22.3 million, or $10.2 million higher than fiscal 2020.

We recorded capital expenditures of $22.1 million for fiscal 2021, $9.6 million higher than fiscal 2020 due to expenditures required to increase manufacturing capacity.

Cash used in investing activities in fiscal 2020 was $12.1 million, or $17.6 million lower than in fiscal 2019.

We recorded capital expenditures of $12.4 million for fiscal 2020, $18.5 million lower than fiscal 2019 due to increased spending in the prior year related to our distribution center.

Financing Activities

Cash used in financing activities was $303.8 million in fiscal 2021 compared with cash provided by financing activities of $3.4 million in fiscal 2020.

Cash used in financing activities during the fiscal year was primarily a result of a net repayment of $160.0 million of borrowings on our credit facility, funding a distribution of $25.0 million to our subsidiary housing our discontinued operations, and $110.0 million of share repurchases.

Cash provided by financing activities was $3.4 million in fiscal 2020, compared with a cash usage of $30.5 million in fiscal 2019.

Cash generated from operations and not earmarked for investments in our business would typically have been used to reduce the balance of our revolving credit facility but was not solely as a precaution related to the COVID-19 pandemic.

See below regarding the repayment of our Term Loan and Senior Notes with proceeds from our Revolving Line during fiscal 2020.

Cash used in financing activities was $30.5 million in fiscal 2019, which was relatively flat from the prior fiscal year.

Cash used in financing activities during fiscal 2019 and 2018 was primarily the result of reducing our outstanding borrowings under our Revolving Line by $25.0 million and principal payments on our Term Loan.

Capital Lease – In fiscal 2017, we announced a plan to establish a national logistics facility in Boone County, Missouri.

We rely on this logistics facility for substantially all of our product distribution.

In fiscal 2018, we broke ground on this new 633,000 square foot facility, which was completed in November 2018 and became fully operational during fiscal 2020.

As part of the completion of the building, we entered into a lease agreement with the developer of the building for $46.2 million.

The lease has an effective interest rate of approximately 5.0% and is payable in 240 monthly installments through fiscal 2039.

Upon the commencement of this lease, we accounted for the lease as a finance lease under the provisions of ASC 842, Leases.

Cash generated from operations and not earmarked for investments in our business would historically been used to reduce the balance of our revolving credit facility but was not in fiscal 2020 solely as a precaution related to the COVID-19 pandemic.

Finance Lease – We are party to a $46.2 million lease for our distribution center in Columbia, Missouri, which has an effective rate of approximately 5.0% and is payable in 240 monthly installments through fiscal 2039.

The building is pledged to secure the amounts outstanding.

During the fiscal 2020, we paid $900,000 in principal payments relating to this capital lease.

In November 2019, we announced a plan to spin off the outdoor products and accessories business of the company resulting in two independent companies:

Smith & Wesson Brands, Inc.

(which would encompass our firearm business) and American Outdoor Brands, Inc.

(which would encompass our outdoor products and accessories business).

The lease is currently held by the corporation that will be named Smith & Wesson Brands, Inc.

and is expected to remain that way after the spin-off.

It is expected, however, that American Outdoor Brands, Inc.

will become a sub-lessor of the facility, although negotiations on those matters have not yet been completed.

Credit Facilities - On June 15, 2015, we and certain of our domestic subsidiaries entered into an unsecured credit facility, or the Credit Agreement, with TD Bank, N.A.

and other lenders, or the Lenders, which included a $175.0 million revolving line of credit, or the Revolving Line, and a $105.0 million term loan, or the Term Loan.

The Term Loan was paid in full on November 19, 2019 with proceeds from the Revolving Line.

The Revolving Line provides for availability for general corporate purposes, with borrowings to bear interest at a variable rate equal to LIBOR or prime plus an applicable margin based on our consolidated leverage ratio, at our election.

On October 27, 2016, we entered into a second amendment to our Credit Agreement, or the Second Amendment, which, among other things, increased the Revolving Line to $350.0 million, increased the option to expand the credit commitment to an additional $150.0 million, and extended the maturity of the Revolving Line from June 15, 2020 to October 27, 2021.

On November 22, 2019, we entered into a fifth amendment to our Credit Agreement, or the Fifth Amendment, which, among other things, provides the Lenders’ consent to the spin-off of the outdoor products and accessories business, provided that certain financial conditions are satisfied, including (x) granting the Lenders security interest in the assets of the remaining business, (y) reducing the Revolving Line to $250.0 million at the time of the spin-off, and (z) reducing the option to expand the credit agreement to $50.0 million at the time of the spin-off.

Other than the changes described in the Second and Fifth Amendments, we otherwise remain subject to the terms of the Credit Agreement, as described below.

As of April 30, 2020, we had $160.0 million of borrowings outstanding on the Revolving Line, which bore interest at 2.95%, which was equal to the LIBOR rate plus an applicable margin.

We were required to obtain interest rate protection on the Term Loan covering not less than 75% of the aggregate outstanding principal balance of the Term Loan.

Accordingly, on June 18, 2015, we entered into an interest rate swap agreement that covered 100% of the $105.0 million of floating rate debt.

On July 6, 2015, we executed an interest rate swap pursuant to such agreement, which required us to pay interest at a defined rate of 1.56% while receiving interest at a defined variable rate equal to the one-month LIBOR rate.

This swap, when combined with the applicable margin based on our consolidated leverage ratio, effectively fixed our interest rate on the Term Loan, which was subject to change based on changes in our consolidated leverage ratio.

In accordance with the repayment of the Term Loan on November 19, 2019, the interest rate swap was terminated resulting in a realized gain of approximately $40,000.

2018 Senior Notes - During fiscal 2015, we issued an aggregate of $75.0 million of 5.000% Senior Notes due 2018, or the 2018 Senior Notes, to various institutional investors pursuant to the terms and conditions of an indenture and purchase agreements.

The 2018 Senior Notes bear interest at a rate of 5.000% per annum payable on January 15 and July 15 of each year, beginning on January 15, 2015.

We incurred $2.3 million of debt issuance costs related to the issuance of the 2018 Senior Notes.

As discussed below, the 2018 Senior Notes were redeemed on March 8, 2018 with proceeds from the issuance of 5.000% Senior Notes due 2020.

As part of the redemption, in fiscal 2018, we wrote off $226,000 of debt issuance costs related to the 2018 Senior Notes.

2020 Senior Notes - On February 28, 2018, we issued an aggregate of $75.0 million of the 5.000% Senior Notes due 2020, or the 2020 Senior Notes, to various institutional investors pursuant to the terms and conditions of an indenture, or the 2020 Senior Notes Indenture, and purchase agreements.

The 2020 Senior Notes bore interest at a rate of 5.000% per annum payable on February 28 and August 28 of each year, beginning on August 28, 2018.

We incurred $158,000 of debt issuance costs related to the issuance of the 2020 Senior Notes.

On January 6, 2020, or the Redemption Date, we redeemed 100% of the principal amount of the 2020 Senior Notes, plus accrued and unpaid interest to, but not including, the Redemption Date, with proceeds from the Revolving Line.

As part of the redemption, we wrote off $42,000 of debt issuance costs related to the 2020 Senior Notes.

During the fiscal year, we paid $949,000 in principal payments relating to this finance lease.

In connection with the completion of the Separation on August 24, 2020, we entered into an agreement with AOUT to sublease them 59.0% of this facility under the same terms as the master lease.

We have recorded $1.7 million of income related to this sublease agreement, which is recorded in other income/(expense) in our condensed consolidated statement of income/(loss) and comprehensive income/(loss).

Credit Facilities - As of April 30, 2021, we had no outstanding indebtedness.

However, we maintain an unsecured revolving line of credit with TD Bank, N.A.

and other lenders, or the Lenders, which includes availability up to $100.0 million at any one time.

T he revolving line provides for availability for general corporate purposes, with borrowings to bear interest at either the Base Rate or LIBOR rate, plus an applicable margin based on our consolidated leverage ratio, as of April 30, 2021.

The credit agreement also provides a swingline facility in the maximum amount of $5.0 million at any one time (subject to availability under the revolving line).

Each swingline loan bears interest at the Base Rate, plus an applicable margin based on our consolidated leverage ratio.

In response to a Springing Lien Triggering Event (as defined in the credit agreement), we would be required to enter into certain documents that create in favor of TD Bank, N.A., as administrative agent, and the lenders party to such documents as legal, valid, and enforceable first priority lien on the collateral described therein.

Subject to the satisfaction of certain terms and conditions described in the credit agreement, we have an option to increase the revolving line by an aggregate amount not exceeding $50.0 million.

The revolving line matures on the earlier of August 24, 2025, or the date that is six months in advance of the earliest maturity of any permitted notes under the credit agreement.

The credit agreement for our credit facility contains financial covenants relating to maintaining maximum leverage and minimum debt service coverage.

We were in compliance with all debt covenants as of April 30, 2021.

Share Repurchase Programs - We did not repurchase any shares of our common stock during fiscal 2020, 2019, or 2018.

Share Repurchase Programs - On December 15, 2020, our board of directors authorized the repurchase of $50.0 million of our common stock, subject to certain conditions, in the open market or privately negotiated transactions until December 14, 2021.

During fiscal 2021, we repurchased 2,737,489 shares of our common stock under this authorization.

On March 2, 2021, our board of directors authorized the repurchase of an additional $100.0 million of our common stock, subject to certain conditions, in the open market or privately negotiated transactions.

During fiscal 2021, we repurchased 3,380,447 shares of our common stock for $60.0 million.

Subsequent to fiscal 2021, we completed the second stock repurchase program by purchasing 1,967,420 shares of our common stock for $40.0 million.

We did not repurchase any shares of our common stock during fiscal 2020 or 2019.

At April 30, 2021, we had $113.0 million in cash and cash equivalents on hand.

Based upon our current working capital position, current operating plans, and expected business conditions, we believe that our existing capital resources and credit facilities will be adequate to fund our operations, including our outstanding debt and other commitments, for the next 12 months, apart from any major acquisitions.

Our future capital requirements will depend on many factors, including net sales, the timing and extent of spending to support product development efforts, the expansion of sales and marketing activities, the timing of introductions of new products and enhancements to existing products, the costs to ensure access to adequate manufacturing capacity, costs to enhance the equipment and software at our logistics facility, and any acquisitions or strategic investments that we may determine to make.

Further equity or debt financing may not be available to us on acceptable terms or at all.

If sufficient funds are not available or are not available on acceptable terms, our ability to take advantage of unexpected business opportunities or to respond to competitive pressures could be limited or severely constrained.

In addition to the operational needs described above, at the time of the Separation, we intend to contribute $25.0 million in cash to the outdoor products and accessories business.

Our future capital requirements will depend on many factors, including net sales, the timing and extent of spending to support product development efforts, the expansion of sales and marketing activities, the timing of introductions of new products and enhancements to existing products, the costs to ensure access to adequate manufacturing capacity, and costs to enhance the equipment and software at our distribution center.

We do not believe that inflation had a material impact on us during fiscal 2021, 2020, or 2019.

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We determine fair value primarily using future anticipated cash flows that are directly associated with and are expected to arise as a direct result of the use and eventual disposition of the asset, or asset group, discounted using an interest rate commensurate with the risk involved.

We have significant long-lived tangible and intangible assets, which are susceptible to valuation adjustments as a result of changes in various factors or conditions.

The most significant long-lived tangible and intangible assets, other than goodwill, are property, plant, and equipment, developed technology, customer relationships, patents, trademarks, and trade names.

We amortize all finite-lived intangible assets either on a straight-line basis or based upon patterns in which we expect to utilize the economic benefits of such assets.

We initially determine the values of intangible assets by a risk-adjusted, discounted cash flow approach.

We assess the potential impairment of identifiable intangible assets and fixed assets whenever events or changes in circumstances indicate that the carrying values may not be recoverable and at least annually.

Factors we consider important, which could trigger an impairment of such assets, include the following:

significant underperformance relative to historical or projected future operating results;

significant changes in the manner or use of the assets or the strategy for our overall business;

significant negative industry or economic trends;

a significant decline in our stock price for a sustained period;

a decline in our market capitalization below net book value.

Future adverse changes in these or other unforeseeable factors could result in an impairment charge that could materially impact future results of operations and financial position in the reporting period identified.

In accordance with ASC 350, Intangibles-Goodwill and Other, we test goodwill for impairment on an annual basis on February 1 and between annual tests if indicators of potential impairment exist.

The impairment test compares the fair value of the operating units to their carrying amounts to assess whether impairment is present.

We have reviewed the provisions of ASC 350-20, with respect to the criteria necessary to evaluate the number of reporting units that exist.

Based on this review, we had concluded that we have two operating units when reviewing ASC 350-20:

Firearms and Outdoor Products & Accessories.

We estimate the fair value of our Firearms and Outdoor Products & Accessories operating units using an equal weighting of the fair values derived from the income approach and the market approach because we believe a market participant would equally weight both approaches when valuing the operating units.

The income approach is based on the projected cash flows that are discounted to their present value using discount rates that consider the timing and risk of the forecasted cash flows.

Fair value is estimated using internally developed forecasts and assumptions.

The discount rate used is the average estimated value of a market participant’s cost of capital and debt, derived using customary market metrics.

Other significant assumptions include revenue growth rates, profitability projections, and terminal value growth rates.

The market approach estimates fair values based on the determination of appropriate publicly traded market comparison companies and market multiples of revenue and earnings derived from those companies with similar operating and investment characteristics as the operating unit being valued.

Finally, we compare and reconcile our overall fair value to our market capitalization in order to assess the reasonableness of the calculated fair values of our operating units.

We recognize an impairment loss for goodwill if the implied fair value of goodwill is less than the carrying value.

As of our valuation date, February 1, 2020, our Firearms operating unit had $19.0 million of goodwill and its fair value significantly exceeded its carrying value.

Our Outdoor Products & Accessories operating unit had $163.2 million of goodwill and its fair value exceeded its carrying value by approximately 1.5%.

Given the extreme market volatility, we relied solely on the income approach to derive the current value of the Outdoor Products & Accessories segment.

Based on these factors, we expect reduced cash flows in our Outdoor Products & Accessories segment, and we believe this constituted a triggering event under generally accepted accounting principles.

Based on the results of this evaluation, we recorded a non-cash impairment charge $98.7 million of goodwill in our Outdoor Products & Accessories segment.

As of April 30, 2020, our Outdoor Products & Accessories operating unit had $64.6 million of goodwill.

Although we concluded that there was no additional impairment of the goodwill associated with our operating units as of April 30, 2020, we will continue to closely monitor their performance and related market conditions for future indicators of potential impairment and reassess accordingly.

Our assumptions related to the development of fair value could deviate materially from actual results and forecasts used to support asset carrying values may change in the future, which could result in non-cash charges that would adversely affect our financial results of operations.

The re-measurement of goodwill is classified as a Level 3 fair value assessment as described in Note 13 - Fair Value Measurement, due to the significance of unobservable inputs developed using company-specific information.

We value inventories at the lower of cost, using the first-in, first-out, or FIFO, method, or net realizable value.

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We generally provide a limited one-year warranty and a lifetime service policy to the original purchaser of our new firearm products.

We either provide a limited one-year, three-year, lifetime, or full lifetime warranty program to the original purchaser of most of our accessories products.

We either provide a limited one-year, or a limited-lifetime warranty to the original purchaser of most of our other products.

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

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We quantify and record an estimate for warranty-related costs based on our actual historical claims experience and current repair costs.

We make adjustments to accruals as warranty claims data and historical experience warrant.

Should we experience actual claims and repair costs that are higher than the estimated claims and repair costs used to calculate the provision, our operating results for the period or periods in which such returns or additional costs materialize could be adversely impacted.

We adjust accruals as warranty claims data and historical experience warrant.

Should we experience actual claims and repair costs that are higher than the estimated claims and repair costs used to calculate the provision, our

operating results for the period or periods in which such returns or additional costs materialize could be adversely impacted.

Recent Accounting Pronouncements

The nature and impact of recent accounting pronouncements is discussed in Note 3 — Significant Accounting Policies to our consolidated financial statements, which is incorporated herein by reference.

Contractual Obligations and Commercial Commitments

The following table sets forth a summary of our material contractual obligations and commercial commitments as of April 30, 2020 (in thousands):

Long-term debt obligations

Finance lease obligation

Operating lease obligations

Purchase obligations

Total obligations

We had $160.0 million of borrowings under our Revolving Line as of April 30, 2020 .

In fiscal 2019, we entered into a $45.4 million capital lease obligation related to the purchase of land and costs related to the design and construction of our national logistics facility.

We have $30.1 million of contractually obligated interest payments pertaining to our outstanding capital lease obligation.

Off-Balance Sheet Arrangements

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis