Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
You should read the following Management’s Discussion and Analysis of Financial Condition and Results of Operations in conjunction with our consolidated financial statements and the related notes thereto contained elsewhere in this Annual Report on Form 10-K. This discussion contains forward-looking statements that involve risks, uncertainties, and assumptions. 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 Annual Report on Form 10-K.
This section generally discusses year-to-year comparisons between fiscal 2025 and fiscal 2024. A discussion of our results of operations, liquidity, and capital resources for fiscal 2024 compared with fiscal 2023 is not included in this Annual Report on Form 10-K and can be found 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 fiscal 2024, filed with the SEC on June 20, 2024. See also the discussion below related to an immaterial correction of an error.
2025 Highlights
Our operating results for fiscal 2025 included the following:
Net sales of $474.7 million represented a decrease of $61.2 million, or 11.4%, from the prior fiscal year.
Gross profit decreased $30.9 million, or 19.6%, from the prior fiscal year, primarily as a result of lower sales volume and a shift in product mix. Gross margin decreased 270 basis points from the prior fiscal year in spite of a $3.2 million legal settlement recognized in the prior year comparable period. Excluding the impact of the prior year legal settlement, gross margin was 330 basis points lower as a result of higher material costs, higher promotional costs, and a shift in product mix to lower margin products, partially offset by lower inventory adjustments (including standard cost revaluations, shrink, and excess inventory write downs).
Net income was $13.4 million, or $0.30 per diluted share, compared with net income of $41.4 million, or $0.89 per diluted share, for the prior fiscal year.
During fiscal 2025, we paid $23.1 million in dividends compared with $22.0 million in fiscal 2024.
During fiscal 2025, we purchased 1,844,073 shares of our common stock for $25.5 million.
Immaterial Correction of an Error
During the fourth quarter of fiscal 2025, we identified an immaterial error related to our accrual for certain legal expenses, resulting in an overstatement of general and administrative expenses in the interim and annual periods for the year ended April 30, 2024 and during the interim periods for the year ended April 30, 2025. In accordance with Staff Accounting Bulletin (“SAB”) No. 99, Materiality, and SAB No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements , we evaluated the quantitative and qualitative considerations of the error and determined that the related impact was not material to results of operations, financial position, or cash flows for any historical annual or interim period. Prior year amounts have been adjusted to correct the immaterial error, which overstated accrued expenses and deferred revenue and general and administrative expenses by $2.3 million and understated income tax expense by $569,000 and overstated the related amounts of income tax receivable by $548,000 and deferred income taxes by $21,000 as of April 30, 2024 and for the year then ended. Related changes to net income, corresponding line items within cash provided by operating activities, and related disclosures within the notes accompanying these financial statements, reflect the immaterial correction.
Key Performance Indicators
We evaluate the performance of our business based upon operating profit and net income, which includes net sales, cost of sales, selling and administrative expenses, and certain components of other income and expense. We also track our return on invested capital, and we use adjusted EBITDAS (earnings before interest expense, 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 the performance of our products using measurements such 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
The firearm industry has been subject to many external factors in the past that have significantly increased the volatility of revenue generated for companies within the industry. These factors include, among others, fears surrounding crime and terrorism; significant news events; potential restrictions on the sale or makeup of firearms; actual and potential legislative, judicial, and regulatory actions; economic changes; and changes in the social and political environment, including congressional and presidential elections. See Item 1A, 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. We estimate that the annual domestic non-military firearm market is approximately $2.8 billion for handguns and $1.9 billion for long guns, excluding shotguns, based on the latest data for industry shipments as calculated by the National Shooting Sports Foundation, or NSSF, utilizing Firearms and Ammunition Excise Tax data for calendar year 2023. According to calendar 2024 reports by the ATF, the U.S. firearm manufacturing industry grew at a 1.5% compound annual growth rate in units from 2018 through 2023, although there has been wide variation among years (e.g., 2019 to 2020 grew 58.0%). We believe that this expanding base of consumers combined with our strong brand reputation and attractive price points lend support to our goal of continuing to increase our market share.
Results of Operations
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, 2025, 2024, and 2023 (dollars in thousands):
$ Change
% Change
Handguns
Long guns
Other products & services
Total net sales
Cost of sales
Gross profit
% of net sales (gross margin)
The following table sets forth certain information regarding units shipped by trade channel for the fiscal years ended April 30, 2025, 2024, and 2023 (units in thousands):
Total Units Shipped
# Change
% Change
Handguns
Long guns
Sporting Goods Channel Units Shipped
# Change
% Change
Handguns
Long guns
Professional Channel Units Shipped
# Change
% Change
Handguns
Long guns
Sales of our handguns decreased $50.0 million, or 13.1%, from fiscal 2024, primarily as a result of lower consumer demand within the industry and a shift in product mix to lower priced models, partially offset by increased shipments of newly introduced products (defined as any new SKU not shipped in the prior year), which represented 42.6% of handgun sales in the period, and a 2%-5% price increase on select products that became effective in the third fiscal quarter of fiscal 2024. Handgun unit shipments into the sporting goods channel decreased 3.5% from fiscal 2024, while overall consumer demand decreased 3.2%, (as indicated by adjusted background checks for handguns reported to the National Instant Criminal Background Check System, or NICS).
Sales of our long guns decreased $12.5 million, or 10.8%, from fiscal 2024, primarily as a result of lower consumer demand within the industry, partially offset by increased shipments of new products in the fiscal year, which represented 59.5% of sales in the period, a shift in product mix to higher priced models, and a 2%-5% price increase on select products that became effective in the third fiscal quarter of fiscal 2024. Unit shipments into the sporting goods channel decreased 24.8% from fiscal 2024, while overall consumer demand for long guns decreased 2.1%, as indicated by NICS. We believe that our unit demand declined at a significantly greater rate than NICS as a result of a combination of the industry-wide performance in some of the long gun categories in which we participate relative to those categories in which we do not participate fully, specifically hunting, as well as the impact in the current year of newly introduced products from the prior year that are at lower price points.
Other products and services sales increased $1.3 million, or 3.5%, over fiscal 2024, primarily because of increased component parts and suppressor sales, partially offset by lower business-to-business sales.
New products represented 42.8% of net sales for the 12 months ended April 30, 2025 and included six new pistols, six new long guns, and many new product line extensions.
Gross margin decreased 270 basis points from the prior fiscal year in spite of a $3.2 million legal settlement recognized in the prior year comparable period. Excluding the impact of the prior year legal settlement, gross margin was 330 basis points lower as a result of higher material costs, higher promotional costs, and a shift in product mix to lower margin models, partially offset by lower inventory adjustments (including standard cost revaluations, shrink, and excess inventory write downs).
Inventory balances increased $29.3 million between April 30, 2024 and April 30, 2025 as a result of a slowdown in demand combined with level loading of our manufacturing facilities to ensure our ability to satisfy anticipated future 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 as demand is impacted by many factors, including seasonality, new product introductions, news events, political events, and consumer tastes. We expect our inventory levels to moderately decline during fiscal 2026.
Operating Expenses
The following table sets forth certain information regarding operating expenses for the fiscal years ended April 30, 2025, 2024, and 2023 (dollars in thousands):
$ Change
% Change
Research and development
Selling, marketing, and distribution
General and administrative
Gain on sale/disposition of assets, net
Total operating expenses
% of net sales
Research and development expenses increased $2.3 million, primarily because of higher materials and testing costs associated with new product development and higher compensation-related costs. Selling, marketing, and distribution expenses increased $702,000 in spite of a $1.9 million impairment on distribution equipment related to the Relocation and one-time costs related to our grand opening event at our Maryville facility in fiscal 2024. Excluding
the impact of these one-time prior year charges, selling, marketing, and distribution expenses increased $3.5 million, primarily as a result of higher spending on promotions and higher compensation-related costs. General and administrative expenses decreased $8.2 million, primarily because of lower Relocation costs, lower profit-related compensation expense, and lower insurance costs, partially offset by higher legal costs. During fiscal 2025, we sold certain real estate located adjacent to our former Missouri distribution center for $2.3 million, net of transaction costs, and recognized a $2.3 million pre-tax gain on sale.
Operating Income
The following table sets forth certain information regarding operating income for the fiscal years ended April 30, 2025, 2024, and 2023 (dollars in thousands):
$ Change
% Change
Operating income
% of net sales (operating margin)
Operating income for fiscal 2025 decreased $23.2 million, or 49.3%, from the prior fiscal year, primarily for the reasons outlined above.
Other Income
The following table sets forth certain information regarding other income for the fiscal years ended April 30, 2025, 2024, and 2023 (dollars in thousands):
$ Change
% Change
Other (expense)/income, net
Other income for fiscal 2025 decreased $6.7 million, primarily as a result of the sale of certain intangible assets in fiscal 2024.
Interest Expense
The following table sets forth certain information regarding interest expense for the fiscal years ended April 30, 2025, 2024, and 2023 (dollars in thousands):
$ Change
% Change
Interest expense, net
Interest expense increased by $2.6 million, primarily as a result of higher average debt balances and lower average cash balances compared with fiscal 2024.
Income Tax Expense
The following table sets forth certain information regarding income tax expense for the fiscal years ended April 30, 2025, 2024, and 2023 (dollars in thousands):
$ Change
% Change
Income tax expense
% of income from operations (effective tax
rate)
We recorded income tax expense of $5.8 million for fiscal 2025, $4.5 million lower than the prior fiscal year, primarily because of decreased profitability. Our effective tax rates were 30.2% and 20.0% for fiscal 2025 and 2024, respectively. The 2024 rate was impacted favorably as a result of an amendment of prior year returns for the foreign derived income deduction that reduced 2024 income tax expense by $1.4 million, or 2.9%. Adjusting for the foreign derived income deduction for each year, the effective tax rate would have been 22.8% for fiscal 2024, which is 7.9% lower than fiscal 2025 due primarily to decreased pretax income and changes in state apportionment and other state adjustments.
Net Income
The following table sets forth certain information regarding net income and the related per share data for the fiscal years ended April 30, 2025, 2024, and 2023 (dollars in thousands, except per share data):
$ Change
% Change
Net income
Net income per share:
Basic
Diluted
Net income decreased $27.9 million, or $0.59 per diluted share, from fiscal 2024 primarily for reasons outlined above.
Liquidity and Capital Resources
Our principal cash requirements are to finance the growth of our operations, including working capital and capital expenditures, and return capital to our stockholders. Capital expenditures for new product development 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, 2025, 2024, and 2023 (dollars in thousands):
$ Change
Operating activities
Investing activities
Financing activities
Total cash flow
Operating Activities
Operating activities generally represent the principal source of our cash flow.
Cash used in operating activities was $7.2 million in fiscal 2025 compared with $106.7 million of cash provided in fiscal 2024. Cash used in operating activities in fiscal 2025 was unfavorably impacted by a $29.3 million increase in inventory compared with a $16.6 million decrease in inventory in fiscal 2024, a $14.8 million decrease in accounts payable compared with a $18.2 million increase in accounts payable in fiscal 2024, an $8.1 million decrease in accrued payroll and incentives compared with a $1.4 million decrease in accrued payroll and incentives in fiscal 2024, a $4.4 million decrease in accrued profit sharing compared with a $895,000 increase in accrued profit sharing in fiscal 2024, and lower net income. Cash used in operating activities in fiscal 2025 was favorably impacted by a $3.2 million decrease in accounts receivable compared with a $3.9 million increase in accounts receivable in fiscal 2024.
Investing Activities
Cash used in investing activities decreased $62.3 million for fiscal 2025 compared with fiscal 2024. We paid $21.6 million for capital expenditures for fiscal 2025, which was $69.2 million lower than fiscal 2024, primarily as a result of payments related to the Relocation in the prior year period.
We currently expect to spend $25.0 to $30.0 million on capital expenditures in fiscal 2026.
Financing Activities
Cash used in financing activities was $9.2 million for fiscal 2025 compared with $18.0 million in fiscal 2024. Cash used in financing activities during fiscal 2025 was primarily the result of $25.5 million of share repurchases and $23.1 million in dividend distributions, partially offset by $40 million of net borrowings under our revolving line of credit.
Credit Facilities — We entered into the Second Amended and Restated Credit Agreement on October 3, 2024. The Second Amended and Restated Credit Agreement provides for a revolving line of credit of $175.0 million at any one time, or the Revolving Line. The Revolving Line bears interest at either the Base Rate (as defined in the Second Amended and Restated Credit Agreement) or the Adjusted Term SOFR rate (as defined in the Second Amended and Restated Credit Agreement), plus an applicable margin based on our consolidated leverage ratio. The Second Amended and Restated 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 (as defined in the Amended and Restated Credit Agreement) bears interest at the Base Rate, plus an applicable margin based on our Adjusted Consolidated Leverage Ratio (as defined in the Second Amended and Restated Credit Agreement). Subject to the satisfaction of certain terms and conditions described in the Second Amended and Restated 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 October 3, 2029 or the date that is six months in advance of the earliest maturity of any Permitted Notes (as defined in the Second Amended and Restated Credit Agreement) under the Second Amended and Restated Credit Agreement.
As of April 30, 2025, we had $80.0 million of borrowings outstanding on the Revolving Line, bearing interest at an average rate of 6.69%, which was equal to the Adjusted Term SOFR rate plus an applicable margin.
The credit agreement for the Revolving Line contains financial covenants relating to maintaining a maximum leverage ratio and a minimum debt service coverage ratio. We were in compliance with all debt covenants as of April 30, 2025.
Share Repurchase Programs – On September 19, 2023, our Board of Directors authorized the repurchase of up to $50.0 million of our common stock, subject to certain conditions, in the open market or in privately negotiated transactions through September 19, 2024, or the 2023 Authorization. During fiscal 2024, we purchased 793,551 shares of our common stock for $10.2 million under the 2023 Authorization. During fiscal 2025, we purchased 1,531,763 shares of our common stock for $21.4 million under the 2023 Authorization. The 2023 Authorization expired on September 19, 2024. On September 5, 2024, our Board of Directors authorized the repurchase of up to $50.0 million of our common stock, subject to certain conditions, in the open market or in privately negotiated transactions from September 20, 2024 through September 20, 2025, or the 2024 Authorization. During fiscal 2025, we repurchased 312,310 shares of our common stock for $4.1 million under the 2024 Authorization. During fiscal 2025, we repurchased a total of 1,844,073 shares of our common stock for $25.5 million.
Finance Lease – We are a party to a material finance lease, which is a $46.2 million lease that has an effective interest rate of approximately 5.0% and is payable in 240 monthly installments through fiscal 2039, as well as a related payment and performance guaranty, dated October 26, 2017, in favor of the Original Missouri Landlord. The building is pledged to secure the amounts outstanding. As part of the Relocation, on January 31, 2023, we entered into the Assignment and Assumption Agreement and the Amended and Restated Guaranty. Because of the Amended and Restated Guaranty, we continue to account for this lease as we have since prior to the Relocation. During fiscal 2025, AOUT made payments pursuant to this lease directly to the landlord and we neither received nor paid any cash related to this arrangement. See Note 3 — Leases for additional information.
As of April 30, 2025, we had $25.2 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 for at least the next 12 months.
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, and the costs to ensure access to adequate manufacturing capacity. Future 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.
Inflation
During fiscal 2025, 2024 and 2023 inflationary pressures resulted in increases in the cost of certain of the components, parts, raw materials, and other supplies necessary for the production of our products, as well as labor costs. We expect that inflation will continue to impact us during fiscal 2026.
Critical Accounting Estimates
Management's Discussion and Analysis of Financial Condition and Results of Operations is based upon our consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these financial statements requires that we make accounting estimates, judgments, and assumptions that can have a meaningful effect on the reporting of consolidated financial statements. See Note 2 — Significant Accounting Policies for additional information.
Critical accounting estimates are defined as those reflective of significant judgments, estimates, and uncertainties, which may result in materially different results under different assumptions and conditions. We believe the following are our critical accounting estimates:
Inventories
Description : We value inventories at the lower of cost, using the first-in, first-out, or FIFO, method, or net realizable value.
Judgments and Uncertainties : An allowance for potential non-saleable inventory as a result of excess stock or obsolescence is based upon a detailed review of inventory, past history, and expected future usage.
Sensitivity of Estimate to Change : The assumptions used to assess inventory valuation consider historical activity. Changes in these estimates can have a significant impact on the assessment of excess and obsolete inventory, which could result in material losses.
Recent Accounting Pronouncements
The nature and impact of recent accounting pronouncements is discussed in Note 2 — Significant Accounting Policies to our consolidated financial statements, which is incorporated herein by reference.
Off-Balance Sheet Arrangements
We do not have any transactions, arrangements, or other relationships with unconsolidated entities that are reasonably likely to affect our liquidity or capital resources. We have no special purpose or limited purpose entities that provide off-balance sheet financing, liquidity, or market or credit risk support or that engage in leasing, hedging, research and development services, or other relationships that expose us to liability that is not reflected in our consolidated financial statements.
I tem 7A. Quantitative and Qualitative Disclosures about Market Risk
We do not enter into any market risk sensitive instruments for trading purposes. Our principal market risk relates to the variable interest rate associated with our credit agreement, which consists of a $175.0 million revolving line of credit that bears interest at either the Base Rate or Adjusted Term SOFR rate, plus an applicable margin based on our consolidated leverage ratio. For more information regarding our financing arrangements, see Note 4 — Notes and Loans Payable . As of April 30, 2025, we had $80.0 million of borrowings outstanding on the Revolving Line, which bore an interest rate of 6.69%, which is equal to Adjusted Term SOFR rate plus an applicable margin.
I tem 8. Financial Statements and Supplementary Data
Reference is made to our consolidated financial statements, the notes thereto, and the report thereon, commencing on page F-1 of this Annual Report on Form 10-K, which financial statements, notes, and report are incorporated herein by reference.
I tem 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Not applicable.
I tem 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to provide reasonable assurance that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.
Our management, under the supervision of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act as of April 30, 2025, the end of the period covered by this Annual Report on Form 10-K. Based on that evaluation, we have concluded that, as of the end of the period covered by this Annual Report on Form 10-K, our disclosure controls and procedures were not effective. This determination is based on the material weakness in our internal control over financial reporting described below.
Management’s Annual Report on Internal Control Over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act.
A company's internal control over financial reporting includes those policies and procedures that pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies may deteriorate.
Management, with participation of the CEO and CFO, under the oversight of our Audit Committee of our Board of Directors, conducted an evaluation of the effectiveness of our internal control over financial reporting as of April 30, 2025, using the framework established in Internal Control-Integrated Framework (2013), issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO Framework). Based on that evaluation, management concluded that our internal control over financial reporting was not effective as of April 30, 2025 due to the material weakness in internal control over financial reporting, described below.
A material weakness, as defined in Exchange Act Rule 12b-2, is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis.
A deficiency was identified in our internal control over financial reporting related to the operation of the control to review the accrual for certain legal expenses. This control did not operate effectively due to insufficient knowledge and experience of our personnel related to the reconciliation of the accrual for certain legal expenses.
The material weakness resulted in immaterial misstatements to the accrual for certain legal expenses that were recorded in our consolidated financial statements during the interim and annual periods for the year ended April 30, 2024 and during the interim periods for the year ended April 30, 2025. Prior period amounts have been adjusted to correct the immaterial error, which overstated accrued expenses and deferred revenue and general and administrative expenses, understated income tax expense, and overstated income tax receivable and deferred income taxes.
The material weakness creates a reasonable possibility that a material misstatement to our annual or interim consolidated financial statements would not be prevented or detected on a timely basis by our internal controls.
Because of this material weakness, management concluded that we did not maintain effective internal control over financial reporting as of April 30, 2025.
Our independent registered public accounting firm, KPMG LLP, who audited the consolidated financial statements included in this Annual Report on Form 10-K, issued an adverse opinion on the effectiveness of the Company's internal control over financial reporting. KPMG LLP's report appears elsewhere in this Form 10-K.
Management’s Plan for Remediation of the Material Weakness
In response to the material weakness described above, with the oversight of the Audit Committee of our Board of Directors, management plans to remediate the material weakness such that the control over the accrual for certain legal expenses is operating effectively. The remediation actions include developing a training program for certain personnel to increase their knowledge of accruals for legal expenses.
Our remediation efforts are ongoing, and management expects that the remediation efforts and testing will continue in fiscal 2026. Management believes that these actions, and the improvements achieved as a result thereof, will effectively remediate the material weakness. However, the material weakness in our internal control over financial reporting will not be considered remediated until the remediated controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively.
Changes in Internal Control over Financial Reporting
No change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during our fourth fiscal quarter of 2025 has materially affected, or is reasonably likely to materially affect our internal control over financial reporting.
I tem 9B. Other Information
Rule10b5-1 Trading Arrangement; Non-Rule 10b5-1 Trading Arrangement
During the three months ended April 30, 2025, none of our directors or officers adopted or terminated a "non-Rule 10b5-1 trading arrangement" (as defined in Item 408 of Regulation S-K).
Amendment of Material Definitive Agreements
On June 18, 2025, the Compensation Committee of our Board of Directors approved an amendment and restatement of the Smith & Wesson Brands, Inc. Executive Severance Plan, the Amended and Restated Severance Plan. Among other things, the Amended and Restated Severance Plan: (i) increases the duration of the Change in Control Protection Period (as defined therein) from 12 months to 24 months; (ii) increases the period of base salary continuation in the case of a termination without Good Cause (as defined therein) or a resignation for Good Reason (as defined therein) from 26 weeks to 18 months; (iii) increases the period of base salary continuation in the case of a termination without Good Cause during a Potential Change in Control Protection Period (as defined therein) or Change in Control Protection Period (as defined therein) or a resignation upon an Adverse Change in Control Effect (as defined therein) from 52 weeks to 24 months; (iv) increases the annual cash bonus payable under the scenario described in (iii) above to two times target; (v) provides that the non-competition restriction period will apply for the period during which the individual receives cash severance; (vi) increases the duration of the application of the non-solicitation restriction from 12 months to 18 months; and (vii) includes other administrative changes.
On June 18, 2025, we entered into an Amended and Restated Employment Agreement with our President and Chief Executive Officer, Mark Smith. Among other things, the Amended and Restated Employment Agreement: (a) increases the duration of the protection period related to a Change in Control (as defined therein) from 12 months to 24 months; (b) increases the period of base salary continuation in the case of a Change in Control from 18 months to 24 months; (c) increases the annual cash bonus payable under the scenario described in (b) above to two times target; (d) increases the duration of the car allowance, medical coverage and COBRA coverage benefits under the scenario described in (b) above from 18 months to two years; and (e) includes other administrative changes.
Item 9C. D isclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not applicable.
PART III
I tem 10. Directors, Executive Officers and Corporate Governance
The information required by this Item relating to our directors and corporate governance is incorporated herein by reference to the definitive Proxy Statement to be filed pursuant to Regulation 14A of the Exchange Act for our 2025 Annual Meeting of Stockholders. The information required by this Item relating to our executive officers is included in Item 1, “Business — Executive Officers” of this Annual Report on Form 10-K.
We have adopted our Policy on Inside Information and Insider Trading governing the purchase, sale, and/or other disposition of our securities by our directors, officers, employees, and other covered persons. We believe this policy is reasonably designed to promote compliance with insider trading laws, rules and regulations, and the exchange listing standards applicable to us. A copy of this policy is filed as Exhibit 19.1 to this Annual Report on Form 10-K.
I tem 11. Executive Compensation
The information required by this Item is incorporated herein by reference to the definitive Proxy Statement to be filed pursuant to Regulation 14A of the Exchange Act for our 2025 Annual Meeting of Stockholders.
I tem 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information required by this Item is incorporated herein by reference to the definitive Proxy Statement to be filed pursuant to Regulation 14A of the Exchange Act for our 2025 Annual Meeting of Stockholders.
I tem 13. Certain Relationships and Related Transactions, and Director Independence
The information required by this Item is incorporated herein by reference to the definitive Proxy Statement to be filed pursuant to Regulation 14A of the Exchange Act for our 2025 Annual Meeting of Stockholders.
I tem 14. Principal Accountant Fees and Services
The information required by this Item is incorporated herein by reference to the definitive Proxy Statement to be filed pursuant to Regulation 14A of the Exchange Act for our 2025 Annual Meeting of Stockholders.
PART IV
I tem 15. Exhibits and Financial Statement Schedules
Financial Statements and Financial Statement Schedules
Consolidated Financial Statements are listed in the Index to Consolidated Financial Statements on page F-1 of this Annual Report on Form 10-K.
All schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission have been omitted because of the absence of the conditions under which they are required or because the information required is shown in the financial statements or notes above.
Exhibits
Exhibit
Number
Exhibit
Separation and Distribution Agreement, dated as of August 21, 2020, by and between the Registrant and American Outdoor Brands, Inc. (1)
Amended and Restated Bylaws (2)
Second Amended and Restated Articles of Incorporation (3)
Certificate of Withdrawal of Certificate of Designation (4)
Form of Common Stock Certificate (5)
Description of Securities (6)
Agreement with Respect to Defense of Smith & Wesson: Firearms Litigation, dated as of November 11, 2004 (7)
Smith & Wesson Brands, Inc. Executive Severance Pay Plan
Adoption Agreement to the Smith & Wesson Nonqualified Supplemental Deferred Compensation Plan (9)
Smith & Wesson Nonqualified Supplemental Deferred Compensation Plan Document (9)
2013 Incentive Stock Plan (10)
2022 Incentive Stock Plan (11)
Form of Restricted Stock Unit Award Grant Notice and Agreement to the 2013 Incentive Stock Plan for awards made beginning in April 2015 (12)
Form of Restricted Stock Unit Award Grant Notice and Agreement to the 2013 Incentive Stock Plan for awards made beginning in April 2020 (6)
Form of Restricted Stock Unit Award Grant Notice and Agreement to the 2022 Incentive Stock Plan for awards made beginning in April 2023 (13)
Form of Performance Stock Unit Award Grant Notice and Agreement to the 2013 Incentive Stock Plan for awards made in 2020 (6)
Form of Performance Stock Unit Award Grant Notice and Agreement to the 2013 Incentive Stock Plan for awards made beginning in 2021 (6)
Form of Performance Stock Unit Award Grant Notice and Agreement to the 2022 Incentive Stock Plan for awards made beginning in 2023 (13)
Lease Agreement, dated October 26, 2017, by and between Ryan Boone County, LLC and Smith & Wesson Corp. (14)
Assignment and Assumption of Lease Agreement, dated January 31, 2023, between Smith & Wesson Sales Company and American Outdoor Brands, Inc. (15)
Guaranty, dated October 26, 2017, entered into by the Registrant (14)
Amended and Restated Guaranty, dated January 31, 2023 (15)
Employment Agreement, executed April 4, 2020 and effective as of January 15, 2020, by and between Mark P. Smith and the Registrant (16)
Amended and Restated Employment Agreement, executed June 18, 2025 and effective as of June 18, 2025, by and between Mark P. Smith and the Registrant
Transition Services Agreement dated as of August 21, 2020, by and between the Registrant and American Outdoor Brands, Inc (1)
Tax Matters Agreement, dated as of August 21, 2020, by and between the Registrant and American Outdoor Brands, Inc. (1)
Employee Matters Agreement, dated as of August 21, 2020, by and between the Registrant and American Outdoor Brands, Inc. (1)
Trademark License Agreement, dated as of August 24, 2020, by and between Smith & Wesson Inc. and AOB Products Company (1)
Amended and Restated Trademark License Agreement, dated as of April 11, 2024, by and between Smith & Wesson Inc. and AOB Products Company
Sublease, dated as of August 24, 2020, by and between the Smith & Wesson Sales Company and American Outdoor Brands, Inc. (1)
Amended and Restated Credit Agreement, dated as of August 24, 2020, by and among the Registrant, Smith & Wesson Sales Company, Smith & Wesson, Inc., the Guarantors, the Lenders, and TD Bank, N.A. (1)
First Amendment to Amended and Restated Credit Agreement, dated as of April 28, 2023, by and among the Registrant, Smith & Wesson Sales Company, Smith & Wesson, Inc., the Guarantors, the Lenders, and TD Bank, N.A. (17)
Second Amended and Restated Credit Agreement, dated as of October 3, 2024, by and among the Registrant, Smith & Wesson Sales Company, Smith & Wesson, Inc., the Guarantors, the Lenders, and TD Bank, N.A. (19)
Project Agreement, dated September 30, 2021, by and among The Industrial Development Board of Blount County and the cities of Alcoa and Maryville, Tennessee, a public, nonprofit corporation organized and existing under the laws of the State of Tennessee and the Registrant (20)
2021 Employee Stock Purchase Plan (21)
Standard Design-Build Agreement and General Conditions, dated February 2, 2023, between Smith & Wesson Brands, Inc and The Christman Company (portions of the exhibit have been omitted) (15)
Form of Indemnity Agreement entered into with the following directors and executive officers: as of August 9, 2022 with Anita D. Britt, Fred M. Diaz, Kevin A. Maxwell, Deana L. McPherson, Barry M. Monheit, and Robert L. Scott; as of August 24, 2022 with Susan J. Cupero; as of August 25, 2022 with Denis G. Suggs and Mark P. Smith; and as of July 17, 2023 with Michelle J. Lohmeier (22)
Form of Dividend Equivalent Award Agreement (23)
Agreement and Release, dated April 28, 2025 (24)
Policy on Inside Information and Insider Trading
Subsidiaries of the Registrant
Consent of KPMG LLP, an Independent Registered Public Accounting Firm
Consent of Deloitte & Touche LLP, an Independent Registered Public Accounting Firm
Rule 13a-14(a)/15d-14(a) Certification of Principal Executive Officer
Rule 13a-14(a)/15d-14(a) Certification of Principal Financial Officer
Section 1350 Certification of Principal Executive Officer
Section 1350 Certification of Principal Financial Officer
Executive Officer Clawback Policy
101.INS
Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document.
101.SCH
Inline XBRL Taxonomy Extension Schema Document
Cover Page Interactive Data File (embedded within the Inline XBRL document)
* Management contract or compensatory arrangement.
** An application has been submitted to the SEC for confidential treatment, pursuant to Rule 24b-2 of the Exchange Act, of portions of this exhibit. These portions have been omitted from this exhibit.
*** Certain schedules and exhibits have been omitted from this filing pursuant to Item 601(a) (5) of the Regulation S-K. We agree to furnish supplementally a copy of any omitted schedule or exhibit to the SEC upon request.
Incorporated by reference to the Registrant’s Form 8-K filed with the SEC on August 26, 2020.
Incorporated by reference to the Registrant’s Form 8-K filed with the SEC on March 22, 2024.
Incorporated by reference to the Registrant’s Form 8-K filed with the SEC on April 12, 2019.
Incorporated by reference to the Registrant’s Form 8-K filed with the SEC on October 1, 2013.
Incorporated by reference to the Registrant’s Form 10-K filed with the SEC on June 19, 2020.
Incorporated by reference to the Registrant’s Form 10-K filed with the SEC on June 17, 2021.
Incorporated by reference to the Registrant’s Form 10-Q filed with the SEC on March 10, 2005.
Incorporated by reference to the Registrant’s Form 8-K filed with the SEC on June 9, 2020.
Incorporated by reference to the Registrant’s Form 8-K filed with the SEC on December 20, 2013.
Incorporated by reference to the Registrant’s Form S-8 filed with the SEC on December 20, 2013.
Incorporated by reference to Appendix A of the Registrant's Proxy Statement filed with the SEC on August 3, 2022.
Incorporated by reference to the Registrant’s Form 10-K filed with the SEC on June 22, 2015.
Incorporated by reference to the Registrant’s Form 10-K filed with the SEC on June 22, 2023.
Incorporated by reference to the Registrant’s Form 8-K filed with the SEC on October 31, 2017.
Incorporated by reference to the Registrant’s Form 8-K filed with the SEC on February 3, 2023.
Incorporated by reference to the Registrant’s Form 8-K filed with the SEC on April 9, 2020.
Incorporated by reference to the Registrant’s Form 10-K filed with the SEC on June 20, 2024.
Incorporated by reference to the Registrant’s Form 8-K filed with the SEC on May 2, 2023.
Incorporated by reference to the Registrant’s Form 8-K filed with the SEC on October 4, 2024.
Incorporated by reference to the Registrant’s Form 8-K filed with the SEC on September 30, 2021.
Incorporated by reference to the Registrant’s Form S-8 filed with the SEC on March 30, 2022.
Incorporated by reference to the Registrant’s Form 10-Q filed with the SEC on September 8, 2022.
Incorporated by reference to the Registrant’s Form 10-Q filed with the SEC on December 7, 2023.
Incorporated by reference to the Registrant’s Form 8-K filed with the SEC on May 2, 2025.
Item 16. Form 10-K Summary
Not applicable.
S IGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
SMITH & WESSON BRANDS, INC.
/s/ Mark P. Smith
Mark P. Smith
President and Chief Executive Officer
Date: June 20, 2025
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated.
Signature
Capacity
Date
/s/ Mark P. Smith
President, Chief Executive Officer, and Director
(Principal Executive Officer)
June 20, 2025
Mark P. Smith
/s/ Deana L. McPherson
Executive Vice President, Chief Financial Officer, Treasurer, and Assistant Secretary
(Principal Financial and Accounting Officer)
June 20, 2025
Deana L. McPherson
/s/ Robert L. Scott
Chairman of the Board
June 20, 2025
Robert L. Scott
/s/ Anita D. Britt
Director
June 20, 2025
Anita D. Britt
/s/ Fred M. Diaz
Director
June 20, 2025
Fred M. Diaz
/s/ Michelle J. Lohmeier
Director
June 20, 2025
Michelle J. Lohmeier
/s/ Barry M. Monheit
Director
June 20, 2025
Barry M. Monheit
/s/ Denis G. Suggs
Director
June 20, 2025
Denis G. Suggs
I NDEX TO CONSOLIDATED FINANCIAL STATEMENTS
SMITH & WESSON BRANDS, INC. AND SUBSIDIARIES
Page
Reports of Independent Registered Public Accounting Firm (PCAOB ID No. 185)
Report of Independent Registered Public Accounting Firm (PCAOB ID No. 34)
Consolidated Balance Sheets as of April 30, 2025 and 2024
Consolidated Statements of Income for the years ended April 30, 2025, 2024, and 2023
Consolidated Statements of Changes in Stockholders’ Equity for the years ended April 30, 2025, 2024, and 2023
Consolidated Statements of Cash Flows for the years ended April 30, 2025, 2024, and 2023
Notes to Consolidated Financial Statements
Report of Independent R e gistered Public Accounting Firm
To the Stockholders and the Board of Directors
Smith & Wesson Brands, Inc.:
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheet of Smith & Wesson Brands, Inc. and subsidiaries (the Company) as of April 30, 2025, the related consolidated statements of income, changes in stockholders’ equity, and cash flows for the year then ended, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of April 30, 2025, and the results of its operations and its cash flows for the year then ended, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of April 30, 2025, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated June 20, 2025 expressed an adverse opinion on the effectiveness of the Company’s internal control over financial reporting.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audit provides a reasonable basis for our opinion.
Critical Audit Matters
Critical audit matters are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that there are no critical audit matters.
/s/ KPMG LLP
We have served as the Company's auditor since 2024.
Nashville, Tennessee
June 20, 2025
Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors
Smith & Wesson Brands, Inc.:
Opinion on Internal Control Over Financial Reporting
We have audited Smith & Wesson Brands, Inc. and subsidiaries' (the Company) internal control over financial reporting as of April 30, 2025, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, because of the effect of the material weakness, described below, on the achievement of the objectives of the control criteria, the Company has not maintained effective internal control over financial reporting as of April 30, 2025, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheet of the Company as of April 30, 2025, the related consolidated statements of income, changes in stockholders’ equity, and cash flows for the year then ended, and the related notes (collectively, the consolidated financial statements), and our report dated June 20, 2025 expressed an unqualified opinion on those consolidated financial statements.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis. A material weakness related to the ineffective operation of a control over the accrual for certain legal expenses has been identified and included in management’s assessment. The material weakness was considered in determining the nature, timing, and extent of audit tests applied in our audit of the 2025 consolidated financial statements, and this report does not affect our report on those consolidated financial statements.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made
only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ KPMG LLP
Nashville, Tennessee
June 20, 2025
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the stockholders and the Board of Directors of Smith & Wesson Brands, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheet of Smith & Wesson Brands, Inc. and subsidiaries (the "Company") as of April 30, 2024, the related consolidated statements of income, changes in stockholders' equity, and cash flows, for each of the two years in the period ended April 30, 2024, and the related notes (collectively referred to as the "financial statements").
In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of April 30, 2024, and the results of its operations and its cash flows for each of the two years in the period ended April 30, 2024, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ Deloitte & Touche LLP
Hartford, Connecticut
June 20, 2024 (June 20, 2025, as to the immaterial correction of an error described in Note 2 and the retrospective application of the adoption of ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, as described in Notes 2 and 16)
We began serving as the Company's auditor in 2014. In 2024 we became the predecessor auditor.
SMITH & WESSON BRANDS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
April 30, 2025
April 30, 2024
(In thousands, except par value and share data)
ASSETS
Current assets:
Cash and cash equivalents
Accounts receivable, net of allowances for credit losses of $ 5 on
April 30, 2025 and $ 0 on April 30, 2024
Inventories
Prepaid expenses and other current assets
Income tax receivable
Total current assets
Property, plant, and equipment, net of accumulated depreciation and
amortization of $ 368,811 on April 30, 2025 and $ 352,615 on April 30, 2024
Intangibles, net
Goodwill
Deferred income taxes
Other assets
Total assets
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable
Accrued expenses and deferred revenue
Accrued payroll and incentives
Accrued profit sharing
Accrued warranty
Total current liabilities
Notes and loans payable (Note 4)
Finance lease payable, net of current portion
Other non-current liabilities
Total liabilities
Commitments and contingencies (Note 14)
Stockholders’ equity:
Preferred stock, $ 0.001 par value, 20,000,000 shares authorized, no shares
issued or outstanding
Common stock, $ 0.001 par value, 100,000,000 shares authorized,
75,789,455 issued and 44,111,461 shares outstanding on April 30,
2025 and 75,395,490 shares issued and 45,561,569 shares
outstanding on April 30, 2024
Additional paid-in capital
Retained earnings
Accumulated other comprehensive income
Treasury stock, at cost ( 31,677,994 shares on April 30, 2025 and
29,833,921 shares on April 30, 2024)
Total stockholders’ equity
Total liabilities and stockholders’ equity
The accompanying notes are an integral part of these consolidated financial statements.
SMITH & WESSON BRANDS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEM ENTS OF INCOME
For the Year Ended April 30,
(In thousands, except per share data)
Net sales
Cost of sales
Gross profit
Operating expenses:
Research and development
Selling, marketing, and distribution
General and administrative
Gain on sale/disposition of assets, net
Total operating expenses
Operating income
Other (expense)/income, net:
Other (expense)/income, net
Interest expense, net
Total other (expense)/income, net
Income before income taxes
Income tax expense
Net income
Net income per share:
Basic - net income
Diluted - net income
Weighted average number of common shares outstanding:
Basic
Diluted
The accompanying notes are an integral part of these consolidated financial statements.
SMITH & WESSON BRANDS, INC. AND SUBSIDIARIES
C ONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
Accumulated
Common
Additional
Other
Total
Stock
Paid-In
Retained
Comprehensive
Treasury Stock
Stockholders’
(In thousands, except per share data)
Shares
Amount
Capital
Earnings
Income
Shares
Amount
Equity
Balance at April 30, 2022
Stock-based compensation
Shares issued under employee stock purchase plan
Issuance of common stock under restricted
stock unit awards, net of shares surrendered
Dividends issued ($ 0.40 per common share)
Net income
Balance at April 30, 2023
Stock-based compensation
Shares issued under employee stock purchase plan
Issuance of common stock under restricted
stock unit awards, net of shares surrendered
Repurchase of treasury stock, including excise tax
Unpaid dividend accrued
Dividends issued ($ 0.48 per common share)
Net income
Balance at April 30, 2024
Stock-based compensation
Shares issued under employee stock purchase plan
Issuance of common stock under restricted
stock unit awards, net of shares surrendered
Repurchase of treasury stock, including excise tax
Unpaid dividend accrued
Dividends issued ($ 0.52 per common share)
Net income
Other
Balance at April 30, 2025
The accompanying notes are an integral part of these consolidated financial statements.
SMITH & WESSON BRANDS, INC. AND SUBSIDIARIES
C ONSOLIDATED STATEMENTS OF CASH FLOWS
For the Year Ended April 30,
(In thousands)
Cash flows from operating activities:
Net income
Adjustments to reconcile net income to net cash (used in)/provided by
operating activities:
Depreciation and amortization
Gain on sale/disposition of assets
Recoveries on notes and accounts receivable
Deferred income taxes
Stock-based compensation expense
Non-cash sublease income
Other, net
Changes in operating assets and liabilities:
Accounts receivable
Inventories
Prepaid expenses and other current assets
Income taxes
Accounts payable
Accrued payroll and incentives
Accrued profit sharing
Accrued expenses and deferred revenue
Accrued warranty
Other assets
Other non-current liabilities
Net cash (used in)/provided by operating activities
Cash flows from investing activities:
Payments to acquire patents and software
Proceeds from sale of property and equipment
Proceeds from sale of intangible assets
Payments to acquire property and equipment
Net cash used in investing activities
Cash flows from financing activities:
Proceeds from loans and notes payable
Cash paid for debt issuance costs
Payments on finance lease obligation
Payments on notes and loans payable
Payments to acquire treasury stock
Dividend distribution
Proceeds to acquire common stock from employee stock purchase plan
Payment of employee withholding tax related to restricted stock units
Net cash (used in)/provided by financing activities
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents, beginning of period
Cash and cash equivalents, end of period
Supplemental disclosure of cash flow information
Cash paid for:
Interest, net of amounts capitalized
Income taxes
The accompanying notes are an integral part of these consolidated financial statements.
SMITH & WESSON BRANDS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS - (Continued)
Supplemental Disclosure of Non-cash Investing and Financing Activities:
For the Year Ended April 30,
(In thousands)
Purchases of property and equipment included in accounts
payable
Capital lease included in accrued expenses and finance lease
payable
The accompanying notes are an integral part of these consolidated financial statements.
SMITH & WESSON BRANDS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Organization
We are one of the world’s leading manufacturers and designers of firearms. We manufacture a wide array of handguns (including revolvers and pistols), long guns (including modern sporting rifles, pistol caliber carbines, and lever-action rifles), handcuffs, firearm 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 and Gemtech brands. We manufacture our products at our facilities in Maryville, Tennessee; Springfield, Massachusetts; and Houlton, Maine. We also sell our manufacturing services to other businesses to attempt to level-load our factories. We sell those services under our Smith & Wesson and Smith & Wesson Precision Components brands. On September 30, 2021, we announced our plan to move our headquarters and significant elements of our operations to Maryville, Tennessee in 2023, or the Relocation. During fiscal 2024, we began manufacturing and distribution activities from the new Maryville, Tennessee facility. During fiscal 2025, we ceased operations at our Deep River facility and vacated the premises. See Note 14 — Commitments and Contingencies , and Note 15 — Restructuring for more information.
2. Significant Accounting Policies
Immaterial Correction of an Error — During the fourth quarter of fiscal 2025, we identified an immaterial error related to our accrual for certain legal expenses, resulting in an overstatement of general and administrative expenses in the interim and annual periods for the year ended April 30, 2024 and during the interim periods for the year ended April 30, 2025. In accordance with Staff Accounting Bulletin (“SAB”) No. 99, Materiality, and SAB No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements , we evaluated the quantitative and qualitative considerations of the error and determined that the related impact was not material to results of operations, financial position, or cash flows for any historical annual or interim period. Prior year amounts have been adjusted to correct the immaterial error, which overstated accrued expenses and deferred revenue and general and administrative expenses by $ 2.3 million and understated income tax expense by $ 569,000 and overstated the related amounts of income tax receivable by $ 548,000 and deferred income taxes by $ 21,000 as of April 30, 2024 and for the year then ended. Related changes to net income, corresponding line items within cash provided by operating activities, and related disclosures within the notes accompanying these financial statements, reflect the immaterial correction.
Use of Estimates — The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the financial statement dates and the reported amounts of revenue and expenses during the reporting periods. Our significant estimates include the accrual for warranty, reserves for excess and obsolete inventory, rebates and other promotions, valuation of intangible assets, and costs associated with the Relocation. Actual results could differ from those estimates.
Principles of Consolidation — The accompanying consolidated financial statements include the accounts of Smith & Wesson Brands, Inc. and its wholly owned subsidiaries, including Smith & Wesson Inc., Smith & Wesson Sales Company, and SWPC Plastics, LLC. In our opinion, all adjustments, which include only normal recurring adjustments necessary to fairly present the financial position, results of operations, changes in stockholders’ equity, and cash flows at April 30, 2025 and 2024 and for the periods presented, have been included. All intercompany accounts and transactions have been eliminated in consolidation.
Reclassifications — We have reclassified certain amounts relating to prior period results to conform to current period presentation. These reclassifications have not changed the results of operations of prior periods.
Fair Value of Financial Instruments — Unless otherwise indicated, the fair values of all reported assets and liabilities, which represent financial instruments not held for trading purposes, approximate the carrying values of such amounts because of their short-term nature or market rates of interest.
SMITH & WESSON BRANDS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Cash and Cash Equivalents — We consider all highly liquid investments purchased with original maturities of three months or less at the date of acquisition to be cash equivalents. We maintain our cash in bank deposit accounts that, at times, may exceed federally insured limits. We have not experienced any losses in such accounts. As of April 30, 2025, all of our accounts exceeded federally insured limits.
Trade Receivables — We extend credit to our domestic customers and some foreign distributors based on their financial condition. We sometimes offer discounts for early payment on invoices. When we believe the extension of credit is not advisable, we rely on either a prepayment or a letter of credit. We write off balances deemed uncollectible by us against our allowance for credit losses. We estimate our allowance for credit losses through current past due balances, knowledge of our customers’ financial situations, and past payment history.
Concentrations of Credit Risk — Financial instruments that potentially subject us to concentration of credit risk consist principally of cash, cash equivalents, and trade receivables. We place our cash and cash equivalents in overnight U.S. government securities. Concentrations of credit risk with respect to trade receivables are limited by the large number of customers comprising our customer base and their geographic and business dispersion. We perform ongoing credit evaluations of our customers’ financial condition and generally do not require collateral.
For fiscal 2025, sales to one of our customers represented 14.6 % of our total net sales, and as of April 30, 2025, this customer accounted for 36.1 % of our total accounts receivable. No other customer represented more than 10 % of our fiscal 2025 net sales or accounted for more than 10 % of our accounts receivable as of April 30, 2025. For fiscal 2024, sales to three of our customers exceeded 10 % of our net sales, totaling 34.8 %. As of April 30, 2024, two of our customers each accounted for more than 10 % of our accounts receivable, for a total of 47.9 %.
Inventories — We value inventories at the lower of cost, using the first-in, first-out, or FIFO, method or net realizable value. An allowance for potential non-saleable inventory due to excess stock or obsolescence is based upon a detailed review of inventory, past history, and expected future usage.
Property, Plant, and Equipment — We record property, plant, and equipment, consisting of land, building, improvements, machinery, equipment, software, hardware, furniture, and fixtures, at cost and depreciate them using the straight-line method over their estimated useful lives. We charge expenditures for maintenance and repairs to earnings as incurred, and we capitalize additions, renewals, and betterments. Upon the retirement or other disposition of property and equipment, we remove the related cost and accumulated depreciation from the respective accounts and include any gain or loss in operations. We lease certain of our real estate, machinery, and photocopiers under non-cancelable operating and finance lease agreements, and we recognize expenses under our operating lease assets and liabilities at the commencement date based on the present value of lease payments over the lease term. The depreciable life of assets and leasehold improvements are based on the expected life of the lease. A summary of the estimated useful lives is as follows:
Description
Useful Life
Building and improvements
10 to 40 years
Software and hardware
2 to 7 years
Machinery and equipment
2 to 10 years
Office equipment and furniture
5 years
We include tooling, dies, and fixtures as part of machinery and equipment and depreciate them over a period generally not exceeding ten years .
Intangible Assets — We record intangible assets at cost or based on the fair value of the assets acquired. Intangible assets consist of developed technology, customer relationships, tr ademarks, trade names, and patents. We amortize intangible assets over their estimated useful lives or in proportion to expected yearly revenue generated from the intangibles that were acquired.
Revenue Recognition — We recognize revenue in accordance with the provisions of Accounting Standards Codification, or ASC, 606, Revenue from Contracts with Customers . Generally, all performance obligations are
SMITH & WESSON BRANDS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
satisfied and revenue is recognized when the risks and rewards of ownership have transferred to the customer, which is generally upon shipment but could be delayed until the receipt of customer acceptance.
In some instances, sales include multiple performance obligations. The most common of these instances relates to sales promotion programs under which customers are entitled to receive free goods based upon their purchase of our products, which we have identified as a material right. The fulfillment of these free goods is our responsibility. In such instances, we allocate the revenue of the promotional sales based on the estimated level of participation in the sales promotional program and the timing of the shipment of all of the products included in the promotional program, including the free goods. We recognize revenue related to the material right proportionally as each performance obligation is satisfied. The net change in contract liabilities for a given period is reported as an increase or decrease to sales.
We generally sell our products free on board, or FOB, shipping point and provide payment terms to most commercial customers ranging from 20 to 60 days of product shipment with a discount available to some customers for early payment. Generally, framework contracts define the general terms of sales, including payment terms, freight terms, insurance requirements, and cancelation provisions. Purchase orders define the terms for specific sales, including description, quantity, and price of each product purchased. We estimate variable consideration relative to the amount of cash discounts to which customers are likely to be entitled. As a result of utilizing practical expedients in accordance with ASC 606, we do not consider these extended terms to be a significant financing component of the contract because the payment terms are less than one year. In all cases, we consider our costs related to shipping and handling to be a cost of fulfilling the contract with the customer.
Research and Development — We engage in both internal and external research and development, or R&D, in order to remain competitive and to exploit possible untapped market opportunities. We approve prospective R&D projects after analysis of the cost and benefits associated with the potential product. Costs in R&D expense include, among other items, salaries, materials, utilities, and administrative costs.
Earnings per Share — We calculate basic and diluted earnings per common share in accordance with the provisions of ASC 260-10, Earnings Per Share . Basic earnings per common share equals net income divided by the weighted average number of common shares outstanding during the period. Diluted earnings per common share equals net income divided by the weighted average number of common shares outstanding during the period, including the effect of outstanding stock options and other stock-based instruments if their effect is dilutive.
The following table provides a reconciliation of the net income amounts and weighted average number of common and common equivalent shares used to determine basic and diluted earnings per common share (in thousands, except per share data):
For the Year Ended April 30,
Net income
Weighted average shares outstanding — Basic
Effect of dilutive stock awards
Weighted average shares outstanding — Diluted
Earnings per share — Basic
Earnings per share — Diluted
For fiscal 2025, 2024, and 2023, the number of shares excluded from the computation of diluted earnings per share was 29,935 , 18,009 , and 30,307 , respectively, because the effect would be antidilutive.
Valuation of Long-lived Tangible and Intangible Assets — We evaluate the recoverability of long-lived assets, or asset groups, whenever events or changes in circumstances indicate that carrying amounts may not be recoverable. When such evaluations indicate that the related future undiscounted cash flows are not sufficient to recover the carrying values of the assets, such carrying values are reduced to fair value and this adjusted carrying value becomes the asset’s new cost basis. We determine fair value primarily using future anticipated cash flows that are directly
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
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, right of use assets, 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; and
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 Othe r, we evaluate goodwill for potential impairment on an annual basis, as of February 1, and whenever events or changes in circumstances indicate that the fair value of a reporting unit may be below its carrying value. Under the guidance, we may assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If this assessment indicates it is more likely than not that the fair value of a reporting unit is less than its carrying amount, a quantitative test for goodwill impairment would be performed. If the fair value of our single reporting unit exceeds the carrying value of our net assets, including goodwill, goodwill is not impaired. If the carrying value of our net assets, including goodwill, exceeds the fair value of the reporting unit, then we would determine the implied fair value of the reporting unit’s goodwill. If the carrying value of our goodwill exceeds its implied fair value, then we would record an impairment loss equal to the difference. We did no t record any goodwill impairments during the fiscal years ended April 30, 2025 or 2024.
The re-measurement of goodwill is classified as a Level 3 fair value assessment as described in Note 9 - Fair Value Measurement, due to the significance of unobservable inputs developed using company-specific information.
Income Taxes – We use the asset and liability approach for financial accounting and reporting income taxes. The provision for income taxes is based upon income reported in the accompanying consolidated financial statements as required by ASC 740, Income Taxes. We determine our deferred tax assets and liabilities based on temporary differences between financial reporting and tax bases in assets and liabilities, which are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. We recognize the effect on deferred taxes of a change in tax rates in the period that includes the enactment date. In assessing the realization of our deferred tax assets, we consider whether it is more likely than not that the deferred tax assets will be realized. The ultimate realization of our deferred tax assets depends upon generating future taxable income during the periods in which our temporary differences become deductible and before our net operating loss carryforwards expire. We evaluate the recoverability of our deferred tax assets by assessing the need for a valuation allowance on a quarterly basis. If we determine that it is more likely than not that our deferred tax assets will not be recovered, we establish a valuation allowance against some or all of our deferred tax assets. Recording or reversing a valuation allowance could have a significant effect on our future results of operations and financial position.
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Warranty — We generally provide a limited one-year warranty and a lifetime service policy to the original purchaser of our new firearm 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. In addition, we sometimes experience certain manufacturing and design issues with respect to our firearms and initiate product recalls and safety alerts.
We quantify and record an estimate for warranty-related costs based on our actual historical claims experience and current repair costs. 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 would be adversely impacted. Warranty expense for the fiscal years ended April 30, 2025, 2024, and 2023 amounted to $ 2.4 million, $ 2.6 million, and $ 1.5 million, respectively.
The following table sets forth the change in accrued warranties, a portion of which is recorded as a non-current liability, in the fiscal years ended April 30, 2025, 2024, and 2023 (in thousands):
Balance as of April 30, 2023
Warranties issued and adjustments to provisions
Warranty claims
Balance as of April 30, 2024
Warranties issued and adjustments to provisions
Warranty claims
Balance as of April 30, 2025
Advertising Costs — We expense advertising costs, primarily consisting of magazine advertisements, printed materials, television advertisements, digital advertisements, radio advertisements, and billboards, either as incurred or upon the first occurrence of the advertising. Advertising expense, included in selling, marketing, and distribution expenses, for the fiscal years ended April 30, 2025, 2024, and 2023, amounted to $ 15.2 million, $ 14.7 million, and $ 14.7 million, respectively.
Shipping and Handlin g — In the accompanying consolidated financial statements, we included amounts billed to customers for shipping and handling in net sales. Inbound freight charges and internal transfer costs are included in cost of goods sold; however, costs incurred to distribute products to customers is included in selling, marketing, and distribution expenses.
Insurance Reserves — In January 2020, we formed a wholly owned captive insurance company, which provides product liability insurance to us and our subsidiaries. We are self-insured through retentions or deductibles for the majority of our workers’ compensation, automobile, general liability, product liability, and group health insurance programs. Self-insurance amounts vary up to $ 10.0 million per occurrence; however, we believe the likelihood of reaching the maximum per occurrence limit is remote. We record our liability for estimated premiums and incurred losses in the accompanying consolidated financial statements on an undiscounted basis.
Recently Issued Accounting Standards — The Financial Accounting Standards Board, or FASB, issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which is intended to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The disclosure requirements included in ASU 2023-07 are required for all public entities, including entities with a single reportable segment. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, and early adoption is permitted. The guidance is required to be applied on a retrospective basis. We adopted ASU 2023-07 in the fourth quarter of fiscal 2025. The adoption of this guidance resulted in additional financial statement disclosures and had no impact to our consolidated financial condition, results of operations, or cash flows. See Note 16 - Segment Reporting which includes the disclosures resulting from our adoption of this guidance.
In December 2023, the FASB, issued ASU 2023-09, Improvements to Income Tax Disclosures, which requires entities to disclose in their rate reconciliation table additional categories of information about federal, state, and foreign
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
income taxes and provide more details about the reconciling items in some categories if items meet a quantitative threshold. Entities will have to provide qualitative disclosures about the new categories. The guidance will require all entities to disclose income taxes paid, net of refunds, disaggregated by federal (national), state, and foreign taxes for annual periods, and to disaggregate the information by jurisdiction based on a quantitative threshold. The guidance makes several other changes to the disclosure requirements. Entities are required to apply the guidance prospectively, with the option to apply it retrospectively. The guidance is effective for annual periods beginning after December 15, 2024, or the fiscal year ending April 30, 2026 for us. We are currently evaluating the impact, if any, that the adoption of this standard will have on financial disclosures.
In November 2024, the FASB issued ASU 2024-03, Disaggregation of Income Statement Expenses, which requires entities to disclose, in the notes to financial statements, specified information about certain costs and expenses included in each relevant expense caption presented on the face of the income statement. Entities will also be required to disclose qualitative descriptions of the amounts remaining in relevant expense captions that are not separately disaggregated quantitatively. Entities will need to disclose the total amount of selling expenses and, in annual reporting periods, an entity’s definition of selling expenses. Entities are required to apply the guidance prospectively, with the option to apply it retrospectively. The guidance is effective for annual periods beginning after December 15, 2026, or
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
the fiscal year ending April 30, 2028 for us. We are currently evaluating the impact that the adoption of this standard will have on financial disclosures.
3. Leases
We lease certain of our real estate, machinery, equipment, and photocopiers under non-cancelable operating and finance lease agreements.
We recognize expenses for our operating lease assets and liabilities at the commencement date based on the present value of lease payments over the lease term. Our leases do not provide an implicit interest rate. We use our incremental borrowing rate based on the information available at the lease commencement date in determining the present value of lease payments. Our lease agreements do not require material variable lease payments or residual value guarantees, nor do they include restrictive covenants. For operating leases, we recognize expense on a straight-line basis over the lease term. Tenant improvement allowances are recorded as an offsetting adjustment included in our calculation of the respective right-of-use asset.
Many of our leases include renewal options that enable us to extend the lease term. The execution of those renewal options is at our sole discretion and renewals are reflected in the lease term when they are reasonably certain to be exercised. The depreciable life of assets and leasehold improvements are limited by the expected lease term.
The amounts of assets and liabilities related to our operating and financing leases as of April 30, 2025 and 2024 were as follows (in thousands):
Balance Sheet Caption
April 30, 2025
April 30, 2024
Operating Leases
Right-of-use assets
Accumulated amortization
Right-of-use assets, net
Other assets
Current liabilities
Accrued expenses and deferred revenue
Non-current liabilities
Other non-current liabilities
Total operating lease liabilities
Finance Leases
Right-of-use assets
Accumulated depreciation
Right-of-use assets, net
Property, plant, and equipment, net
Current liabilities
Accrued expenses and deferred revenue
Non-current liabilities
Finance lease payable, net of current portion
Total finance lease liabilities
During fiscal 2025, we recorded $ 1.0 million of operating lease costs. We recorded $ 2.3 million of finance lease amortization and $ 1.8 million of financing lease interest expense during fiscal 2025. As of April 30, 2025, our weighted average lease term and weighted average discount rate for our operating leases was 2.4 years and 4.4 %, respectively. As of April 30, 2025, our weighted average lease term and weighted average discount rate for our financing leases were 13.4 years and 5.0 %, respectively, and consisted primarily of our former Missouri distribution center. The building is pledged to secure the amounts outstanding. The depreciable lives of right-of-use assets are limited by the lease term and are amortized on a straight-line basis over the life of the lease.
O n October 26, 2017, we entered into a lease agreement with Ryan Boone County, LLC, or the Original Missouri Landlord, concerning certain real property located in Boone County, Missouri on which we had been operating our distribution center, or the Missouri Lease, as well as a related payment and performance guaranty, dated
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October 26, 2017, in favor of the Original Missouri Landlord. As part of the Relocation, on January 31, 2023, we entered into (i) an assignment and assumption agreement with American Outdoor Brands, Inc., our former wholly owned subsidiary, or AOUT (which became effective on January 1, 2024), pursuant to which AOUT assumed all of our rights, entitlement, and obligations in, to, and under the Missouri Lease, or the Assignment and Assumption Agreement, and (ii) an amended and restated guaranty in favor of RCS-S&W Facility, LLC, as successor in interest to the Original Missouri Landlord, pursuant to which Smith & Wesson Sales Company was added as a guarantor, or the Amended and Restated Guaranty. Because of the Amended and Restated Guaranty, we continue to account for this lease as we have since prior to the Relocation. During fiscal 2025, AOUT made payments pursuant to this lease directly to the landlord and we neither received nor paid any cash payments related to this arrangement. For the fiscal year ended April 30, 2025, noncash sublease income was $ 1.7 million and was recorded in general and administrative expense in our consolidated statements of income. During the fiscal year ended April 30, 2025 we recognized $ 2.1 million of depreciation expense associated with the related right-of-use asset. In addition, on January 5, 2024, we entered into an amendment to extend the lease term on our Deep River facility through January 4, 2025, at which time we ceased the related operations and vacated the premises.
The following table represents future expected undiscounted cashflows, based on the Assignment and Assumption Agreement with AOUT, to be received by the landlord directly from AOUT on an annual basis for the next five years and thereafter, as of April 30, 2025 (in thousands):
Fiscal
Amount
Thereafter
Total future receipts
Less amounts representing interest
Present value of receipts
Future lease payments for all our operating and finance leases for succeeding fiscal years are as follows (in thousands):
Operating
Financing
Total
Thereafter
Total future lease payments
Less amounts representing interest
Present value of lease payments
Less current maturities of lease liabilities
Long-term maturities of lease liabilities
During fiscal 2025, the cash paid for amounts included in the measurement of liabilities and operating cash flows was $ 1.2 million.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
4. Notes and Loans Payable
Credit Facilities — On August 24, 2020, we and certain of our subsidiaries entered into an amended and restated credit agreement, or the Amended and Restated Credit Agreement, with certain lenders, including TD Bank, N.A., as administrative agent; TD Securities (USA) LLC and Regions Bank, as joint lead arrangers and joint bookrunners; and Regions Bank, as syndication agent. The Amended and Restated Credit Agreement provided for a revolving line of credit of $ 100.0 million at any one time. On April 28, 2023, we entered into an amendment to the Amended and Restated Credit Agreement to, among other things, replace LIBOR with SOFR as the interest rate benchmark and amend the definition of “Consolidated Fixed Charge Coverage Ratio” to exclude unfinanced capital expenditures in connection with our plan to move our headquarters and significant elements of our operations to Maryville, Tennessee in 2023, or the Relocation. The revolving line bore interest at either the Base Rate (as defined in the Amended and Restated Credit Agreement) or the Adjusted Term SOFR rate, plus an applicable margin based on our consolidated leverage ratio.
On October 3, 2024, we and certain of our subsidiaries entered into an amended and restated credit agreement, or the Second Amended and Restated Credit Agreement, with certain lenders, including TD Bank, N.A., as administrative agent; TD Securities (USA) LLC and Regions Bank, as joint lead arrangers and joint bookrunners; and Regions Bank, as syndication agent. The Second Amended and Restated Credit Agreement amended and restated the Amended and Restated Credit Agreement. The Second Amended and Restated Credit Agreement is currently unsecured; however, should any Springing Lien Trigger Event (as defined in the Second Amended and Restated Credit Agreement) occur, we and certain of our subsidiaries would be required to execute certain documents in favor of TD Bank, N.A., as administrative agent, and the lenders party to such documents would have a legal, valid, and enforceable first priority lien on the collateral described therein.
The Second Amended and Restated Credit Agreement provides for a revolving line of credit of $ 175.0 million at any one time, or the Revolving Line. The Revolving Line bears interest at either the Base Rate (as defined in the Second Amended and Restated Credit Agreement) or the Adjusted Term SOFR rate, plus an applicable margin based on our consolidated leverage ratio . The Second Amended and Restated 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 (as defined in the Second Amended and Restated Credit Agreement) bears interest at the Base Rate, plus an applicable margin based on our Adjusted Consolidated Leverage Ratio (as defined in the Second Amended and Restated Credit Agreement) . Subject to the satisfaction of certain terms and conditions described in the Second Amended and Restated 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 October 3, 2029 or the date that is six months in advance of the earliest maturity of any Permitted Notes (as defined in the Second Amended and Restated Credit Agreement) under the Second Amended and Restated Credit Agreement.
As of April 30, 2025, we had $ 80.0 million of borrowings outstanding on the Revolving Line, bearing interest at a weighted average rate of 6.69 %, which is equal to the Adjusted Term SOFR rate plus an applicable margin.
The Second Amended and Restated Credit Agreement contains customary limitations, including limitations on indebtedness, liens, fundamental changes to business or organizational structure, investments, loans, advances, guarantees, and acquisitions, asset sales, dividends, stock repurchases, stock redemptions, and the redemption or prepayment of other debt, and transactions with affiliates. We are also subject to financial covenants, including a minimum consolidated fixed charge coverage ratio and a maximum consolidated leverage ratio. As of April 30, 2025, we were compliant with all required financial covenants.
Letters of Credit – At April 30, 2025, we had outstanding letters of credit aggregating $ 2.7 million, which included a $ 1.5 million letter of credit to collateralize our captive insurance company.
Debt Issuance Costs — During fiscal 2025, we incurred $ 941,000 of debt issuance costs. We did not incur any debt issuance costs during fiscal 2024 or 2023. Debt issuance costs are amortized to expense over the life of the credit
SMITH & WESSON BRANDS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
facility. In total, we amortized $ 157,000 , $ 89,805 , and $ 89,805 to interest expense for all debt issuance costs in fiscal 2025, 2024, and 2023, respectively.
5. Net Sales
The following table sets forth the breakdown of net sales for the fiscal years ended April 30, 2025, 2024, and 2023 (in thousands):
For the Years Ended April 30,
Handguns
Long Guns
Other Products & Services
Total Net Sales
We sell our products and services under our Smith & Wesson and Gemtech brands. Depending upon the product or service, our customers primarily include distributors; federal, state, and municipal law enforcement agencies and officers; government and military agencies; businesses; retailers; and retail consumers for non-serialized firearms-related products.
We sell our products worldwide. The following table sets forth the breakdown of export net sales included in the above table. Our export net sales shown below accounted for approximately 5 %, 5 %, and 4 % of total net sales for the fiscal years ended April 30, 2025, 2024, and 2023, respectively (in thousands):
For the Years Ended April 30,
Region
Asia
Europe
Latin America
All others international
Total international net sales
6 . Property, Plant, and Equipment
The following table summarizes property, plant, and equipment as of April 30, 2025 and 2024 (in thousands):
April 30, 2025
April 30, 2024
Machinery and equipment
Building and improvements
Software and hardware
Land and improvements
Right of use assets
Construction in progress
Total property, plant, and equipment
Less: Accumulated depreciation and amortization
Total property, plant, and equipment, net
Total depreciation of tangible assets and amortization of software expense amounted to $ 31.3 million, $ 32.0 million, and $ 31.0 million for the fiscal years ended April 30, 2025, 2024, and 2023, respectively.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The following table summarizes depreciation and amortization expense, which includes amortization of intangibles and debt financing costs, by line item for the fiscal years ended April 30, 2025, 2024, and 2023 (in thousands):
For the Years Ended April 30,
Cost of sales
Research and development
Selling, marketing, and distribution
General and administrative
Interest expense, net
Total depreciation and amortization
7. Inventories
The following table sets forth a summary of inventories, net of reserves, stated at lower of cost or net realizable value, as of April 30, 2025 and 2024 (in thousands):
April 30, 2025
April 30, 2024
Finished goods
Finished parts
Work in process
Raw material
Total inventories
8. Accrued Expenses and Deferred Revenue
The following table sets forth other accrued expenses as of April 30, 2025 and 2024 (in thousands):
April 30, 2025
April 30, 2024
Accrued taxes other than income
Accrued customer incentives and promotions
Accrued employee benefits
Accrued professional fees
Current portion of finance lease obligation
Current portion of operating lease obligation
Accrued settlement
Accrued other
Total accrued expenses and deferred revenue
9. Fair Value Measurement
We follow the provisions of ASC 820-10, Fair Value Measurements and Disclosures Topic , or ASC 820-10, for our financial assets and liabilities. ASC 820-10 provides a framework for measuring fair value under GAAP and requires expanded disclosures regarding fair value measurements. ASC 820-10 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the
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measurement date. ASC 820-10 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs, where available, and minimize the use of unobservable inputs when measuring fair value.
Financial assets and liabilities recorded on the accompanying consolidated balance sheets are categorized based on the inputs to the valuation techniques as follows:
Level 1 — Financial assets and liabilities whose values are based on unadjusted quoted prices for identical assets or liabilities in an active market that we have the ability to access at the measurement date (examples include active exchange-traded equity securities, listed derivatives, and most U.S. Government and agency securities).
Our cash and cash equivalents, which are measured at fair value on a recurring basis, totaled $ 25.2 million and $ 60.8 million as of April 30, 2025 and 2024, respectively. The carrying value of our revolving line of credit approximated the fair value as of April 30, 2025. We utilized Level 1 of the value hierarchy to determine the fair values of these assets.
Level 2 — Financial assets and liabilities whose values are based on quoted prices in markets in which trading occurs infrequently or whose values are based on quoted prices of instruments with similar attributes in active markets. Level 2 inputs include the following:
quoted prices for identical or similar assets or liabilities in non-active markets (such as corporate and municipal bonds which trade infrequently);
inputs other than quoted prices that are observable for substantially the full term of the asset or liability (such as interest rate and currency swaps); and
inputs that are derived principally from or corroborated by observable market data for substantially the full term of the asset or liability (such as certain securities and derivatives).
Level 3 — Financial assets and liabilities whose values are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. These inputs reflect our assumptions about the assumptions a market participant would use in pricing the asset or liability.
As of April 30, 2025, we did no t have any Level 2 or Level 3 financial assets or liabilities.
10. Self-Insurance Reserves
As of April 30, 2025 and 2024, we had reserves for workers’ compensation, product liability, and medical/dental costs totaling $ 8.7 million, (of which $ 3.6 million and $ 3.3 million, respectively, was classified as other non-current liabilities). As of April 30, 2025 and 2024, $ 5.1 million and $ 5.4 million, respectively, were included in current liabilities on the accompanying consolidated balance sheets. In addition, as of April 30, 2025 and 2024, $ 1.1 million and $ 984,000 , respectively, of workers’ compensation receivable was classified as other assets. While we believe these reserves to be adequate, it is possible that the ultimate liabilities will exceed such estimates.
The following table summarizes the activity in the workers’ compensation, product liability, and medical/dental reserves in the fiscal years ended April 30, 2025 and 2024 (in thousands):
For the Year Ended April 30,
Beginning balance
Additional provision charged to expense
Payments
Ending balance
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
It is our policy to provide an estimate for loss as a result of expected adverse findings or legal settlements on product liability, workers’ compensation, and other matters when such losses are probable and are reasonably estimable. It is also our policy to accrue for reasonably estimable legal costs associated with defending such litigation. While such estimates involve a range of possible costs, we determine, in consultation with counsel, the most likely cost within such range on a case-by-case basis. We also record receivables from insurance carriers relating to these matters when their collection is probable and reasonably estimable. As of April 30, 2025 and 2024, we had accrued reserves for product litigation liabilities of $ 3.1 million (of which $ 566,000 and $ 497,000 , respectively, was non-current), consisting entirely of expected legal defense costs. As of April 30, 2025 and 2024, we had no receivables from insurance carriers related to these liabilities.
11. Stockholders’ Equity
Treasury Stock
On September 19, 2023, our Board of Directors authorized the repurchase of $ 50.0 million of our common stock, subject to certain conditions, in the open market or in privately negotiated transactions through September 19, 2024, or the 2023 Authorization. During fiscal 2024, we purchased 793,551 shares of our common stock for $ 10.2 million under the 2023 Authorization. During fiscal 2025, we purchased 1,531,763 shares of our common stock for $ 21.4 million under the 2023 Authorization. The 2023 Authorization expired on September 19, 2024. On September 5, 2024, our Board of Directors authorized the repurchase of up to $ 50.0 million of our common stock, subject to certain conditions, in the open market or in privately negotiated transactions from September 20, 2024 through September 20, 2025, or the 2024 Authorization. As of April 30, 2025, we had repurchased 312,310 shares of our common stock for $ 4.1 million under the 2024 Authorization. We did not purchase any shares of our common stock during fiscal 2023.
During the year ended April 30, 2025, we repurchased a total of 1,844,073 shares of our common stock for $ 25.5 million. During the year ended April 30, 2024, we repurchased a total of 793,551 shares of our common stock for $ 10.2 million.
Incentive Stock and Employee Stock Purchase Plans
We have two stock incentive plans: the 2013 Incentive Stock Plan and the 2022 Incentive Stock Plan, or, together, the Incentive Stock Plans, under which employees and non-employees may be granted stock options, restricted stock awards, restricted stock units, or RSUs, stock appreciation rights, bonus stock, and awards in lieu of obligations, performance awards, and dividend equivalents. No grants have been made under the 2013 Incentive Stock Plan since our stockholders approved the 2022 Incentive Stock Plan at our annual meeting of stockholders held in September 2022. All new grants are issued under the 2022 Incentive Stock Plan.
The 2022 Incentive Stock Plan authorizes the issuance of 1,000,000 shares, plus 4,312,247 shares that were reserved and remained available for grant and delivery under the 2013 Incentive Stock Plan as of September 12, 2022, the effective date of the 2022 Incentive Stock Plan. The 2022 Incentive Stock Plan permits the grant of options to acquire common stock, restricted stock awards, RSUs, stock appreciation rights, bonus stock and awards in lieu of obligations, performance awards, and dividend equivalents. Our Board of Directors, or a committee of our Board of Directors, administers the stock plans, selects recipients to whom awards are granted, and determines the grants to be awarded. Options granted under the stock plans are exercisable at a price determined by our Board of Directors or a committee of our Board of Directors at the time of grant, but in no event, less than fair market value of our common stock on the effective date of the grant. Grants of options may be made to employees and directors without regard to any performance measures. All options issued pursuant to the stock plans are generally nontransferable and subject to forfeiture.
Unless terminated earlier by our Board of Directors, the 2022 Incentive Stock Plan will terminate at the earliest of (1) the tenth anniversary of the effective date of the 2022 Incentive Stock Plan, or (2) such time as no shares of common stock remain available for issuance under the plan and we have no further rights or obligations with respect to outstanding awards under the plan. The date of grant of an award is deemed to be the effective date upon which our Board of Directors or a committee authorizes the granting of such award.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Except in specific circumstances, grants of stock options vest over a period of four years and are exercisable for a period of 10 years after vesting. The 2022 Incentive Stock Plan also permits the grant of stock options to non-employees, which our Board of Directors or a committee has authorized in the past. There were no outstanding and exercisable stock options in fiscal 2025, 2024, and 2023.
The following table summarizes stock compensation expense by line item for the fiscal years ended April 30, 2025, 2024, and 2023 (in thousands):
For the Year Ended April 30,
Cost of sales
Research and development
Selling, marketing, and distribution
General and administrative
Total stock-based compensation
As of April 30, 2025, there were 4,997,827 shares available for grant under the 2022 Incentive Stock Plan. We use our unissued share pool for all shares issued for options, restricted stock awards, RSUs, performance share units, performance-based restricted stock units, or PSUs, and shares issued under our Employee Stock Purchase Plan, or ESPP.
We grant service-based RSUs to employees, consultants, and directors. The awards are made at no cost to the recipient. An RSU represents the right to acquire one share of our common stock and does not carry voting or dividend rights. Except in specific circumstances, RSU grants to employees and consultants generally vest over a period of three or four years with one-third or one-fourth of the units vesting, respectively, on each anniversary date of the grant date. RSU grants to directors generally vest over a period of one year with one-twelfth of the units vesting each month. The aggregate fair value of our RSU grants is amortized to compensation expense over the applicable vesting period.
We grant PSUs to our executive officers. At the time of grant, we calculate the fair value of our PSUs using the Monte-Carlo simulation. We incorporate the following variables into the valuation model:
For the Year Ended April 30,
Grant date fair market value
Smith & Wesson Brands, Inc
Russell 2000 Index
Volatility (a)
Smith & Wesson Brands, Inc
Russell 2000 Index
Correlation coefficient (b)
Risk-free interest rate (c)
Dividend yield
Expected volatility is calculated over the most recent period that represents the remaining term of the performance period as of the valuation date, or three years .
The correlation coefficient utilizes the same historical price data used to develop the volatility assumptions.
The risk-free interest rate is based on the yield of a zero-coupon U.S. Treasury bill, commensurate with the three-year performance period.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The PSUs vest, and the fair value of such PSUs are recognized, over the corresponding three-year performance period. Our PSUs have a maximum aggregate award equal to 200 % of the target amount granted. Generally, the number of PSUs that may be earned depends upon the total stockholder return, or TSR, of our common stock compared with the TSR of the Russell 2000 Index, or RUT, over the three-year performance period. The relative performance of our common stock must equal or exceed the relative performance of the RUT for any of the PSUs subject to the awards to be earned and vest. The relative performance of our common stock must outperform the RUT by 5 % in order for the target award to vest. The relative performance of our common stock must outperform the RUT by at least 10 % in order for 200 % of the PSUs subject to the awards (the maximum number of PSUs) being earned and vesting. In addition, there is a cap on the number of shares that can be earned under our PSUs, which is equal to six times the grant-date value of each award.
In certain circumstances, the vested awards will be delivered on the first anniversary of the applicable vesting date. We have applied a discount to the grant date fair value when determining the amount of compensation expense to be recorded for these RSUs and PSUs.
During fiscal 2025, we granted 142,878 PSUs to certain of our executive officers. We also granted 486,895 service-based RSUs during fiscal 2025, including 142,882 RSUs to certain of our executive officers, 54,666 RSUs to our directors, and 289,347 RSUs to non-executive officer employees.
During fiscal 2025, we canceled 63,469 market-condition PSUs as a result of the failure to satisfy the performance metric and 38,521 as a result of the service period condition not being met. We canceled 36,068 service-based RSUs as a result of the service period condition not being met. We delivered 218,831 shares of common stock to current employees and directors under vested RSUs with a total market value of $ 4.5 million.
During fiscal 2024, we granted 176,583 PSUs to certain of our executive officers. We also granted 357,357 service-based RSUs during fiscal 2024, including 117,724 RSUs to certain of our executive officers, 58,819 RSUs to our directors, and 180,814 RSUs to non-executive officer employees.
During fiscal 2024, we canceled 158,100 market-condition PSUs as a result of the failure to satisfy the performance metric. We canceled 24,385 service-based RSUs as a result of the service period condition not being met. We delivered 228,087 shares of common stock to current employees and directors under vested RSUs with a total market value of $ 2.7 million. In addition, in connection with a 2019 grant, which vested in fiscal 2023, we delivered 55,726 market-condition PSUs to certain of our executive officers and a former executive officer with a total market value of $ 664,000 .
During fiscal 2023, we granted 108,736 PSUs to certain of our executive officers. We also granted 287,854 service-based RSUs during fiscal 2023, including 72,494 RSUs to certain of our executive officers, 56,497 RSUs to our directors, and 158,863 RSUs to non-executive officer employees.
During fiscal 2023, we canceled 35,179 service-based RSUs as a result of the service period condition not being met. We delivered 202,859 shares of common stock to current employees under vested RSUs with a total market value of $ 2.7 million. In addition, in connection with a 2018 grant, which vested in fiscal 2022, we delivered 83,586 market-condition PSUs to certain of our executive officers and a former executive officer with a total market value of $ 1.2 million. In addition, in connection with a 2019 grant, 57,600 PSUs vested to certain of our executive officers and a former executive officer, which resulted from achieving the maximum performance of 200.0 % of target for the original 28,800 PSUs granted. Relating to this same grant, 1,874 shares were released to cover tax obligations on the vesting.
The grant date fair value of RSUs and PSUs that vested in fiscal 2025, 2024, and 2023 was $ 3.8 million, $ 3.3 million, and $ 4.0 million, respectively.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
A summary of activity for unvested RSUs and PSUs for fiscal years 2025, 2024, and 2023 is as follows:
For the Year Ended April 30,
Weighted
Weighted
Weighted
Total # of
Average
Total # of
Average
Total # of
Average
Restricted
Grant Date
Restricted
Grant Date
Restricted
Grant Date
Stock Units
Fair Value
Stock Units
Fair Value
Stock Units
Fair Value
RSUs and PSUs outstanding,
beginning of period
Awarded
Released
Forfeited
RSUs and PSUs outstanding,
end of period
Includes 28,800 PSUs that vested during the fiscal year in connection with achieving maximum performance targets for the 2019 grants.
Includes 55,726 PSUs that vested during fiscal 2023.
As of April 30, 2025, there was $ 5.0 million of unrecognized compensation cost related to unvested RSUs and PSUs. This cost is expected to be recognized over a weighted average remaining contractual term of 1.2 years.
On September 27, 2021, our stockholders approved our 2021 ESPP, which authorizes the sale of up to 3,000,000 shares of our common stock to employees. All options and rights to participate in our ESPP are nontransferable and subject to forfeiture in accordance with our ESPP guidelines. Our current ESPP will be implemented in a series of successive offering periods, each with a maximum duration of 12 months. If the fair market value, or FMV, per share of our common stock on any purchase date is less than the FMV per share on the start date of a 12-month offering period, then that offering period will automatically terminate, and a new 12-month offering period will begin on the next business day. Each offering period will begin on April 1 or October 1, as applicable, immediately following the end of the previous offering period. Payroll deductions will be on an after-tax basis, in an amount of not less than 1 % and not more than 20 % (or such greater percentage as the committee appointed to administer our ESPP may establish from time to time before the first day of an offering period) of a participant’s compensation on each payroll date. The option exercise price per share will equal 85 % of the lower of the FMV on the first day of the offering period or the FMV on the exercise date. The maximum number of shares that a participant may purchase during any purchase period is 12,500 shares, or a total of $ 25,000 in shares, based on the FMV on the first day of the offering period. Our ESPP will remain in effect until the earliest of (a) the exercise date that participants become entitled to purchase a number of shares greater than the number of reserved shares available for purchase under our ESPP, (b) such date as is determined by our Board of Directors in its discretion, or (c) March 31, 2032. In the event of certain corporate transactions, each option outstanding under our ESPP will be assumed or an equivalent option will be substituted by the successor corporation or a parent or subsidiary of such successor corporation. During fiscal 2025 and 2024, 175,134 and 151,225 shares were purchased under the 2021 ESPP, respectively.
We measure the cost of employee services received in exchange for an award of an equity instrument based on the grant-date fair value of the award. We calculate the fair value of our stock options issued to employees using the Black-Scholes model at the time the options were granted. That amount is then amortized over the vesting period of the option. With our ESPP, fair value is determined at the beginning of the purchase period and amortized over the term of each exercise period.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The following assumptions were used in valuing our ESPP purchases during the years ended April 30, 2025, 2024, and 2023:
For the Year Ended April 30,
Risk-free interest rate
Expected term
6 months
6 months
6 months
Expected volatility
Dividend yield
We estimate expected volatility using historical volatility for the expected term. The fair value of each stock option or ESPP purchase was estimated on the date of the grant using the Black-Scholes option pricing model (using the risk-free interest rate, expected term, expected volatility, and dividend yield variables, as noted in the above table). The total stock-based compensation expense, including stock options, purchases under our ESPP, and RSU and PSU awards, was $ 7.6 million, $ 5.7 million, and $ 5.1 million, for fiscal years 2025, 2024, and 2023, respectively.
12. Employer Sponsored Benefit Plans
Contributory Defined Investment Plan — We offer two contributory defined investment plans covering substantially all employees, subject to service requirements. Employees may contribute up to 100 % of their annual pay, depending on the plan. We generally make discretionary matching contributions of up to 50 % of the first 6 % of employee contributions to the plan. We contributed $ 2.4 million, $ 2.7 million, and $ 2.6 million for the fiscal years ended April 30, 2025, 2024, and 2023, respectively.
Nonelective Contribution Sharing Plan — We have a non-contributory profit sharing plan covering substantially all of our employees. Employees become eligible on May 1 following the completion of a full fiscal year of continuous service. Our contributions to the plan are discretionary. For fiscal 2025, we plan to contribute approximately $ 3.8 million, which has been recorded in general and administrative costs. We contributed $ 9.1 million and $ 8.2 million for the fiscal years ended April 30, 2024 and 2023, respectively. Contributions are funded after the fiscal year-end.
13. Income Taxes
Income tax expense from continuing operations consisted of the following (in thousands):
For the Year Ended April 30,
Current:
Federal
State
Total current
Deferred:
Federal
State
Total deferred
Total income tax expense
SMITH & WESSON BRANDS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The following table presents a reconciliation of income tax expense from continuing operations at the statutory rate of 21 % to the expense in the consolidated financial statements (in thousands):
For the Year Ended April 30,
Federal income taxes expected at the statutory rate
State income taxes, net of federal tax effects
Stock compensation
Business meals and entertainment
Research and development tax credit
Amendments to prior year returns
Other
Total income tax expense
SMITH & WESSON BRANDS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Deferred tax assets and liabilities related to temporary differences consisted of the following (in thousands):
For the Years Ended April 30,
Deferred Tax Assets
Inventory reserves
Accrued expenses, including compensation
Net operating loss carryforwards and tax credits
Operating lease liability
Product liability
Workers' compensation
State bonus depreciation
Warranty reserve
Stock-based compensation
Section 174 capitalized R&D expense
Other
Total deferred tax assets before valuation allowance
Valuation allowance
Net deferred tax assets
Deferred Tax Liabilities
Operating lease right-of-use assets
Property, plant & equipment
Intangible assets
Other
Total deferred tax liabilities
Net Deferred Tax Asset
We h ad no federal net operating losses as of April 30, 2025.
We had $ 77.3 million and $ 27.1 million in state net operating loss carryforwards as of April 30, 2025 and 2024, respectively. The state net operating loss carryforwards will expire between April 30, 2026 and April 30, 2040 . We had $ 5.3 million and $ 3.3 million of state tax credit carryforwards as of April 30, 2025 and 2024, respectively. Of the $ 5.3 million, $ 2.4 million can be carried forward indefinitely and $ 2.9 million will expire between April 30, 2026 and April 30, 2050 .
As of April 30, 2025 and 2024, valuation allowances related to our deferred tax assets for state net operating loss carryforwards were $ 4.0 million and $ 1.4 million, respectively, and $ 2.2 million and $ 1.9 million were provided on our deferred tax assets for state tax credits, respectively, that we do not anticipate using prior to expiration.
The income tax provisions represent effective tax rates of 30.2 % and 20.0 % for fiscal 2025 and 2024, respectively.
With limited exception, we are subject to U.S. federal, state, and local income tax audits by tax authorities for fiscal years subsequent to April 30, 2019.
As of April 30, 2025 and 2024, we have no t recorded any unrecognized tax benefits. We maintain an accounting policy of recording interest and penalties, if applicable, related to uncertain tax positions as a component of income taxes. As of April 30, 2025 and 2024, there were no interest and penalties accrued.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
14. Commitments and Contingencies
Litigation
In January 2018, Gemini Technologies, Incorporated, or Gemini, commenced an action against us in the U.S. District Court for the District of Idaho, or the District Court. The complaint alleges, among other things, that we breached the earn-out and other provisions of the asset purchase agreement and ancillary agreements between the parties in connection with our acquisition of the Gemtech business from Gemini. The complaint seeks a declaratory judgment interpreting various terms of the asset purchase agreement and damages in the sum of $ 18.6 million. In November 2019, we filed an answer to Gemini’s complaint and a counterclaim against Gemini and its stockholders at the time the asset purchase agreement was signed. Plaintiffs amended their complaint to add a claim of fraud in the inducement. In September 2021, Gemini filed a motion for summary judgment seeking to dismiss our counterclaim. In June 2022, the District Court denied Gemini's motion for summary judgment. Gemini filed a second motion for summary judgment, and in August 2023, the District Court again denied Gemini’s motion. In November 2023, we entered into a settlement agreement with plaintiffs on the indemnity and counterclaims. On the same day, plaintiffs filed a motion for leave, seeking to file a second amended complaint. In January 2024, the District Court allowed plaintiffs’ amended allegations of fraud, and denied without prejudice their motion to add punitive damages. In February 2024, the District Court set a trial date of January 6, 2025, which was later postponed. In April 2025, the District Court issued an amended scheduling order. The expert discovery cutoff and dispositive motion deadline are August 15, 2025. The court also scheduled a status conference in June 2025. We believe the claims asserted in the complaint have no merit, and we intend to aggressively defend this action.
We are a defendant in one product liability case and are aware of six other product liability claims, primarily alleging defective product design, defective manufacturing, or failure to provide adequate warnings. In addition, we are a co-defendant in a case filed in August 1999 by the city of Gary, Indiana, or the City, against numerous firearm manufacturers, distributors, and dealers seeking to recover monetary damages, as well as injunctive relief, allegedly arising out of the misuse of firearms by third parties. In January 2018, the Lake Superior Court, County of Lake, Indiana granted defendants’ Motion for Judgment on the Pleadings, dismissing the case in its entirety. In February 2018, plaintiffs appealed the dismissal to the Indiana Court of Appeals. In May 2019, the Indiana Court of Appeals issued a decision, which affirmed in part and reversed in part, and remanded for further proceedings, the trial court’s dismissal of the City’s complaint. In July 2019, defendants filed a Petition to Transfer jurisdiction to the Indiana Supreme Court. In November 2019, the Indiana Supreme Court denied defendants' petition to transfer, and the case was returned to the trial court. In March 2024, a bill was signed into law that purports to prohibit political subdivisions in Indiana from bringing certain legal actions against certain firearm industry members and to apply to actions or suits filed before, after, or on August 27, 1999. Defendants subsequently filed a joint motion for judgment on the pleadings based on the new law. In August 2024, the trial court denied defendants’ joint motion for judgment on the pleadings and, in October 2024, stayed its proceedings pending an interlocutory appeal with the Indiana Court of Appeals. In November 2024, the Indiana Court of Appeals granted defendants’ motion to accept jurisdiction of the interlocutory appeal. In December 2024, the state of Indiana filed a notice of intervention in the appeal, which was accepted in January 2025. In February 2025, defendants and the state of Indiana filed opening briefs with the Indiana Court of Appeals. In March 2025, the court granted the City’s request to file its opposition brief in May 2025. We believe the claims asserted in the complaint have no merit, and we intend to aggressively defend this action.
We are a defendant in a putative class proceeding before the Ontario Superior Court of Justice in Toronto, Canada that was filed in December 2019 . The action claims CAD$ 50 million in aggregate general damages, CAD$ 100 million in aggregate punitive damages, special damages in an unspecified amount, together with interest and legal costs. The named plaintiffs are two victims of a shooting that took place in Toronto in July 2018 and their family members. One victim was shot and injured during the shooting. The other victim suffered unspecified injuries while fleeing the shooting. The plaintiffs sought to certify a claim on behalf of classes that include all persons who were killed or injured in the shooting and their immediate family members. The plaintiffs allege negligent design and public nuisance. The case has not been certified as a class action. In July 2020, we filed a Notice of Motion for an order striking the claim and dismissing the action in its entirety. In February 2021, the court granted our motion in part and dismissed the plaintiffs’ claims in public nuisance and strict liability. The court declined to strike the negligent design claim and ordered that the claim proceed to a certification motion. In March 2021, we filed a motion for leave to appeal the court’s refusal to strike the negligent design claim with the Divisional Court, Ontario Superior Court of Justice. In July 2021, plaintiffs filed a motion to stay our motion for leave to appeal with the Divisional Court, on
SMITH & WESSON BRANDS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
grounds that appeal is premature. In November 2021, the Divisional Court granted plaintiffs’ motion, staying our motion for leave to appeal until 30 days after the decision on the balance of plaintiffs’ certification motion. A hearing on plaintiffs’ certification motion was held in January 2024. In March 2024, the court denied the plaintiffs’ motion for class certification. Three appeals have been filed: (1) our appeal from the dismissal of our motion to strike the negligent design claim; (2) the plaintiffs’ appeal from the order striking out their public nuisance and strict liability claims; and, (3) the plaintiffs’ appeal from the order dismissing their certification motion. In August 2024, the parties filed their motions regarding the appeals. In October 2024, the parties filed their response briefs and, in December 2024, the Court of Appeals for Ontario heard the appeals together.
In May 2020, we were named in an action related to the Chabad of Poway synagogue shooting that took place in April 2019. The complaint was filed in the Superior Court of the State of California for the County of San Diego – Central and asserts claims against us for product liability, unfair competition, negligence, and public nuisance. The plaintiffs allege they were present at the synagogue on the day of the incident and suffered physical and/or emotional injury. The plaintiffs seek compensatory and punitive damages, attorneys’ fees, and injunctive relief. In September 2020, we filed a demurrer and motion to strike, seeking to dismiss plaintiffs’ complaint. In July 2021, the court granted our motion in part and reversed it in part, ruling that (1) the Protection of Lawful Commerce in Arms Act barred plaintiffs’ product liability action; (2) plaintiffs did not have standing to maintain an action under the Unfair Competition Law for personal injury related damages, but gave plaintiffs leave to amend to plead an economic injury; and (3) the Protection of Lawful Commerce in Arms Act did not bar plaintiffs’ ordinary negligence and public nuisance actions because plaintiffs had alleged that we violated 18 U.S.C. Section 922(b)(4), which generally prohibits the sale of fully automatic “machineguns.” In August 2021, we filed a Petition for Writ of Mandate in the Court of Appeal of the State of California, Fourth Appellate District, Division One. In September 2021, the Court of Appeal denied our appeal. In February 2022, the court consolidated the case with three related cases, in which we are not a party. In March 2022, the court granted our motion, dismissing plaintiffs’ Unfair Competition Law claim, without further leave to amend. In February 2023, we filed a motion for summary judgment. In May 2023, the court denied our motion for summary judgment without prejudice and allowed plaintiffs time for additional discovery. A hearing on our renewed motion for summary judgment was held in October 2024. In December 2024, the court granted our renewed motion for summary judgment and we later filed a proposed notice of final judgment with the court, requesting the court to enter a final judgment in our favor and to dismiss all claims against us. In February 2025, the court entered the final judgment. On April 7, 2025, we filed a memorandum of costs, requesting the court award us taxable costs. On April 8, 2025, plaintiffs filed a notice of appeal with the California Court of Appeal. On April 22, 2025, plaintiffs filed a motion to tax costs with the court. On April 18, 2025, plaintiffs filed a notice designating record on appeal, requesting the court to prepare the record for the California Court of Appeal. On April 29, 2025, we filed a notice designating record on appeal with the court.
We are a defendant in an action filed in the U.S. District Court for the District of Massachusetts. In August 2021, the Mexican Government filed an action against several U.S.-based firearms manufacturers and a firearms distributor, claiming defendants design, market, distribute, and sell firearms in ways they know routinely arm the drug cartels in Mexico. Plaintiff alleges, among other claims, negligence, public nuisance, design defect, unjust enrichment, and restitution against all defendants and violation of the Massachusetts Consumer Protection Act against us alone, and is seeking monetary damages and injunctive relief. In November 2021, defendants filed motions to dismiss plaintiff’s complaint. In September 2022, the district court granted defendants’ motions to dismiss. In October 2022, plaintiff filed a notice of appeal with the U.S. Court of Appeals for the First Circuit. In January 2024, the First Circuit reversed the trial court’s dismissal of the case. In April 2024, defendants filed a Petition for a Writ of Certiorari with the U.S. Supreme Court. In August 2024, the district court dismissed the case against six of the eight defendants in the lawsuit (excluding us) based on personal jurisdiction grounds. In October 2024, the U.S. Supreme Court granted defendants’ Petition for Writ of Certiorari, and the district court issued an order staying the case in its entirety pending the U.S. Supreme Court’s review of the case. On June 5, 2025, the Supreme Court ruled in our favor, holding that because Mexico's complaint does not plausibly allege that the defendant firearm manufacturers aided and abetted firearm dealers' unlawful sales of firearms to Mexican traffickers, the PLCAA bars the suit.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
In September 2022, we were named as defendants in 12 nearly identical, separate actions related to a shooting in Highland Park, Illinois on July 4, 2022. The complaints were filed in the Circuit Court of the Nineteenth Judicial Circuit in Lake County, Illinois and assert claims against us for negligence and deceptive and unfair practices under the Illinois Consumer Fraud and Deceptive Business Practices Act. The plaintiffs allege they were present at a parade at the time of the incident and suffered physical and/or emotional injury. The plaintiffs seek compensatory damages, attorneys’ fees, and injunctive relief. We filed motions for removal of each case to the U.S. District Court for the Northern District of Illinois. In November 2022, we filed a motion to consolidate the cases for preliminary motion purposes. In December 2022, plaintiffs filed motions to remand the cases back to the state court. In September 2023, the court granted plaintiffs’ motion to remand. In October 2023, we filed a notice of appeal to the U.S. Court of Appeals for the Seventh Circuit. In March 2024, three new lawsuits were filed in the Circuit Court of Lake County, Illinois. In April 2024, the Seventh Circuit affirmed the remand decision. In May 2024, plaintiffs filed a motion for attorneys’ fees incurred as a result of removal, and we filed an opposition to plaintiffs’ motion. In March 2025, the district court granted plaintiffs’ motion, ordering us to pay certain of plaintiffs’ attorneys’ fees. In June and July 2024, the district court remanded the 12 separate actions to state court, with some plaintiffs amending their complaints to remove references to violations of federal law and asserting additional claims against us, including claims alleging violation of the Illinois Uniform Deceptive Trade Practices Act, negligent and intentional infliction of emotional distress, and negligent entrustment. We were also named in 13 additional separate cases against us in the same state court during the same time period, largely raising similar allegations against us as in the initial and amended complaints. In July 2024, the trial court consolidated all cases for purposes of motions to dismiss and discovery. In September 2024, we filed our motions to dismiss plaintiffs’ 25 separate complaints. On January 23 and 28, 2025, the trial court heard oral argument on our motions to dismiss plaintiffs’ complaints. On April 1, 2025, the court granted our motion to dismiss without prejudice with respect to plaintiffs’ counts for violation of the Illinois Consumer Fraud and Deceptive Business Practices Act – Deceptive and Unlawful Acts for lack of standing (Consumer Fraud Act—Deception Claims only) and negligent entrustment and denied all remaining counts. Later in April, plaintiffs served their first set of written discovery and we filed a motion to certify issues for interlocutory appeal with the trial court. On May 1, 2025, the trial court ordered an expedited briefing schedule for the motion and stayed discovery. On June 5, 2025, the court certified several issues for interlocutory appeal, lifted the discovery stay, and set an initial trial date for March 8, 2027. We also filed our answers to plaintiffs' complaints.
In December 2022, the City of Buffalo, New York filed a complaint in the Supreme Court of the State of New York, County of Erie, against numerous manufacturers, distributors, and retailers of firearms. Later in December 2022, the City of Rochester, New York filed an almost identical complaint in the Supreme Court of the State of New York, County of Monroe against the same defendants. The complaints allege violation of the New York General Business Law, public nuisance, and deceptive business practices in violation of the New York General Business Law. In January 2023, we filed notices of removal of the cases to the U.S. District Court for the Western District of New York. In March 2023, defendants filed a motion to stay both cases pending a ruling by the U.S. Court of Appeals for the Second Circuit in the NSSF v. James case. In June 2023, the court granted defendants’ motions to consolidate and to stay pending resolution of the NSSF v. James appeal.
We believe that the various allegations as described above are unfounded, and, in addition, that any incident and any results from them or any injuries were due to negligence or misuse of the firearm by the claimant or a third party.
In addition, from time to time, we are involved in lawsuits, claims, investigations, and proceedings, including commercial, environmental, premises, and employment matters, which arise in the ordinary course of business.
The relief sought in individual cases primarily includes compensatory and, sometimes, punitive damages. Certain of the cases and claims seek unspecified compensatory or punitive damages. In others, compensatory damages sought may range from less than $ 75,000 to approximately $ 50.0 million. In our experience, initial demands do not generally bear a reasonable relationship to the facts and circumstances of a particular matter. We believe that our accruals for product liability cases and claims are a reasonable quantitative measure of the cost to us of product liability cases and claims.
SMITH & WESSON BRANDS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
We are also involved in a putative stockholder derivative lawsuit filed on February 4, 2025 in the U.S. District Court for the District of Nevada. The action was brought by plaintiffs seeking to act on our behalf against our directors and certain of our executive officers. The complaint alleges breach of fiduciary duty (for allegedly allowing us to become exposed to significant liability for intentionally violating federal, state, and local laws through our manufacturing, marketing, and sales of “AR-15 style rifles” and similar semiautomatic firearms) and violations of Section 14(a) of the Securities Exchange Act of 1934. The derivative plaintiffs seek, among other things, damages, as well as reforms and improvements to our compliance procedures and governance policies. In May 2025, we filed a motion to dismiss plaintiffs’ complaint.
We were named in a putative class action lawsuit filed on April 4, 2025 in the U.S. District for the Northern District of California. The complaint alleges violation of the California Invasion of Privacy Act, the California Privacy Act, invasion of privacy, intrusion upon seclusion, fraud/deceit/misrepresentation, breach of contract, breach of implied contract and fair dealing, trespass to chattels, and unjust enrichment. Plaintiffs allege that after they clicked on the “reject all” cookies button, our website enabled third parties to place cookies and similar tracking technologies on their browsers and devices and/or to transmit their user data to third parties for their financial gain and other purposes. Plaintiffs seek compensatory damages (including statutory damages), punitive damages, nominal damages, restitution, disgorgement of revenues and profits, injunctive relief, and attorneys’ fees and costs.
We are vigorously defending ourselves in the lawsuits to which we are subject. An unfavorable outcome or prolonged litigation could harm our business. Litigation of this nature also is expensive, time consuming, and diverts the time and attention of our management.
We monitor the status of known claims and the related product liability accrual, which includes amounts for defense costs for asserted and unasserted claims. After consultation with litigation counsel and a review of the merit of each claim, we have concluded that we are unable to reasonably estimate the probability or the estimated range of reasonably possible losses related to material adverse judgments related to such claims and, therefore, we have not accrued for any such judgments. In the future, should we determine that a loss (or an additional loss in excess of our accrual) is at least reasonably possible and material, we would then disclose an estimate of the possible loss or range of loss, if such estimate could be made, or disclose that an estimate could not be made. We believe that we have provided adequate accruals for defense costs.
For the fiscal years ended April 30, 2025, 2024, and 2023, we paid $ 155,000 , $ 320,000 , and $ 988,000 , respectively, in defense and administrative costs relative to product liability and municipal litigation. In addition, during fiscal 2025, 2024, and 2023, we paid an aggregate of $ 30,000 , $ 1.6 million, and $ 1.5 million, respectively, in settlements related to product liability cases. As of April 30, 2025, we had $ 20,000 accrued for settlements, that were subsequently paid in the following fiscal year. As of April 30, 2024, we had no amounts accrued for settlements.
We have recorded our liability for defense costs before consideration for reimbursement from insurance carriers. We have also recorded the amount due as reimbursement under existing policies from the insurance carriers as a receivable shown in other current assets and other assets.
When changes to our prior estimates of product liability provisions and municipal litigation liabilities are warranted, we recognize additional expense or reductions in expense. In fiscal 2025, 2024, and 2023, we recorded additional expense of $ 62,000 , $ 35,000 , and $ 176,000 , respectively.
Commitments
In connection with the Relocation, we entered into a project agreement, or the Project Agreement, with The Industrial Development Board of Blount County and the cities of Alcoa and Maryville, Tennessee, a public, nonprofit corporation organized and existing under the laws of the state of Tennessee, or the IDB. Pursuant to the Project Agreement, we represented to the IDB that we intend to incur, or cause to be incurred, no less than $120.0 million in aggregate capital expenditures on or before December 31, 2025, create no less than 620 new jobs, and sustain an average hourly wage of at least $ 25.97 at the facility. Further, pursuant to the Project Agreement, we are required to, among other things, (A) execute a facility lease and an equipment lease with the IDB; (B) cause the construction of the new facility at our sole cost and expense to commence on or before May 31, 2022; (C) incur, or cause to be incurred, aggregate capital expenditures in connection with the construction and equipping of the new facility in an aggregate amount of not less than $ 120.0 million on or before December 31, 2025; (D) cause the construction of the
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
new facility to be substantially completed and for a certificate of occupancy to be issued therefore on or before December 31, 2023; (E) provide the IDB with a written report certified by one of our authorized officers, not later than January 31 of each year during the period between January 31, 2024 and January 31, 2031; and (F) make certain payments to the IDB in the event that our actual capital expenditures, number of employees, or average hourly wage of such employees are less than our projections.
On February 2, 2023, we entered into a design-build agreement with The Christman Company, or Christman, related to the construction of our Maryville facility, or the Construction Contract. The Construction Contract has an effective date of September 13, 2021 and incorporates the arrangements under which we and Christman have been proceeding. Pursuant to the Construction Contract, Christman is obligated to deliver certain services, including, among others, design phase services and construction phase services, and we are obligated to pay Christman for services performed. The parties to the Construction Contract agreed that Christman will perform and complete the Work (as defined therein) on a cost-plus basis for a guaranteed minimum price of $ 114.0 million, including contingencies. When adding the cost of machinery and equipment, we spent $ 158.0 million, net of $ 10 million in grants received, as of April 30, 2025 on capital expenditures related to the Relocation. The Construction Contract includes terms that are customary for contracts of this type, including with respect to indemnification and insurance. The Construction Contract lists certain contract milestones and guaranteed completion dates, and we will be entitled to liquidated damages under certain circumstances. Each party to the Construction Contract is entitled to terminate the Construction Contract under certain circumstances.
During fiscal 2024, we determined that we would have no use for certain distribution equipment in the Missouri distribution center and could not fully recover the net book value of such equipment. Therefore, we recorded an impairment of $ 1.9 million in selling, marketing, and distribution on the consolidated statements of income during that period. We vacated the Missouri distribution center effective January 1, 2024 and sold assets we could no longer utilize to AOUT at their remaining net book value of $ 2.9 million, relocating all remaining assets to our Maryville facility. During fiscal 2025, we sold certain real estate located adjacent to the Missouri distribution center for $ 2.3 million, net of transaction costs, and recognized a $ 2.3 million pre-tax gain on sale.
During fiscal 2025 and 2024, we relocated a portion of our plastic injection molding operations to the Maryville facility. As of April 30, 2025, the plastic injection molding machinery and equipment previously utilized in our Deep River facility had been relocated to the Maryville facility or disposed of. We recognized no material amounts of impairment related to the assets previously utilized at the Deep River facility.
Environmental Remediation
We are subject to numerous federal, state, and local laws and regulations that regulate the health and safety of our workforce, including those regulations monitored by the Occupational Health and Safety Administration, or OSHA, the National Fire Protection Association, and the Department of Public Health. Though not exhaustive, examples of applicable regulations include confined space safety, walking and working surfaces, machine guarding, and life safety.
We are also subject to numerous federal, state, and local environmental laws and regulations concerning, among other things, emissions in the air; discharges to land, surface, subsurface strata and water; and the generation, handling, storage, transportation, treatment, and disposal of hazardous wastes and other materials. These laws have required us to make significant expenditures of both a capital and expense nature. Several of the more significant federal laws applicable to our operations include the Clean Air Act, the Clean Water Act, the Comprehensive Environmental Response, Compensation and Liability Act, or CERCLA, and the Solid Waste Disposal Act, as amended by the Resource Conservation and Recovery Act.
We have in place programs and personnel to monitor compliance with various federal, state, and local environmental regulations. In the normal course of our manufacturing operations, we are subject to governmental proceedings and orders pertaining to waste disposal, air emissions, and water discharges into the environment. We fund our environmental costs through cash flows from operations. We believe that we are in compliance with applicable environmental regulations in all material respects.
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We are required to remediate hazardous waste at our facilities. Currently, we own a designated site in Springfield, Massachusetts that contains two release areas, which are the focus of remediation projects as part of the Massachusetts Contingency Plan, or MCP. The MCP provides a structured environment for the voluntary remediation of regulated releases. We may be required to remove hazardous waste or remediate the alleged effects of hazardous substances on the environment associated with past disposal practices at sites not owned by us. We have received notice that we are a potentially responsible party from the Environmental Protection Agency and/or individual states under CERCLA or a state equivalent at two sites.
As of April 30, 2025, and 2024, we did no t have an open environmental reserve recorded in our consolidated balance sheet.
When the available information is sufficient to estimate the amount of liability, that estimate has been used. When the information is only sufficient to establish a range of probable liability and no point within the range is more likely than any other, the lower end of the range has been used. We may not have insurance coverage for our environmental remediation costs. We have not recognized any gains from probable recoveries or other gain contingencies.
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. However, it is not possible to predict with certainty the impact on us of future environmental compliance requirements or the cost of resolving of future environmental health and safety proceedings and claims, in part because the scope of the remedies that may be required is not certain, liability under federal environmental laws is joint and several in nature, and environmental laws and regulations are subject to modification and changes in interpretation. 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.
Contracts
Employment Agreements — We have employment, severance, and change of control agreements with certain employees.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
15. Restructuring
As a result of the Relocation, $ 1.2 million, $ 7.1 million, and $ 8.3 million of restructuring charges were recorded in fiscal 2025, 2024, and 2023, respectively.
The following table summarizes restructuring charges by line item for fiscal 2025, 2024 and 2023 (in thousands):
For the Year Ended April 30,
Cost of sales
Research and development
Selling, marketing, and distribution
General and administrative
Total restructuring charges, net
The components of the restructuring charges recorded in our consolidated statements of income are as follows (in thousands):
For the Year Ended April 30,
Consulting and outside services
Employee relocation (a)
Employee relations
Office rent and equipment
Public relations
Freight
Severance and employee-related benefits (a)
Total restructuring charges, net
Recorded in accrued payroll and incentives
The following table summarizes the activity in the severance and employee-related benefits and relocation accruals for fiscal 2025 and fiscal 2024 (in thousands):
Severance and
employee-related
benefits
Relocation
Total (a)
Accrual at April 30, 2023
Charges
Cash payments and settlements
Accrual at April 30, 2024
Charges
Cash payments and settlements
Accrual at April 30, 2025
Recorded in accrued payroll and incentives
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
16. Segment Reporting
We operate our business as one operating segment, which also represents one reportable segment: firearms. Therefore, results of our operations are reported on a consolidated basis for purposes of segment reporting, consistent with internal management reporting.
The firearms segment is engaged in the design, manufacture, and sale of a variety of firearms and firearm-related products. Our Chief Executive Officer has been identified as the chief operating decision maker (CODM). The CODM manages and allocates resources on a consolidated basis. The determination of a single segment is consistent with the financial information regularly reviewed by the CODM for purposes of evaluating performance and allocating resources, which is reviewed on a consolidated basis.
As our CODM evaluates the financial performance of our firearms segment on a consolidated basis, the measure of segment performance is net income, as reflected in the consolidated statements of income. The CODM uses net income to allocate resources on a consolidated basis, which enables the CODM to assess both the overall level of resources available and optimize distribution of resources in line with our long-term strategic goals. Our segment net sales, segment significant expenses, and segment profit, as provided to the CODM, align to the captions presented on our consolidated statements of income. As we manage our assets on a consolidated basis, the measure of segment assets is total assets, as reflected in the consolidated balance sheets.
The following table summarizes additional segment information, not already disclosed elsewhere (in thousands):
For the Years Ended April 30,
Interest income
Interest expense
Interest expense, net
