UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
Commission File No.
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of incorporation or organization) |
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(I.R.S. Employer Identification No.) |
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(Address of principal executive offices) |
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(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each Class |
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Name of exchange on which registered |
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Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer |
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Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
The registrant had
AMERICAN OUTDOOR BRANDS, INC.
Quarterly Report on Form 10-Q
For the Three Months Ended July 31, 2021 and 2020
TABLE OF CONTENTS
Accumax®, BOG®, Bubba®, Caldwell®, Deadshot®, Deathgrip®, Delta Series®, E-MAX®, F.A.T. Wrench®, Fieldpod®, Frankford Arsenal®, Golden Rod®, Hooyman®, Imperial®, Intellidropper®, Lead Sled®, Lockdown®, Mag Charger®, Old Timer®, Schrade®, Sharpfinger®, Tipton®, Uncle Henry®, ust®, Wheeler®, XLA Bipod®, Crimson Trace®, Lasergrips®, Laserguard®, Laserlyte®, Lasersaddle®, Lightguard®, Rail Master®, are some of the registered U.S. trademarks of our company or one of our subsidiaries. AOB Products Company™, Dock and Unlock ™, Don’t Be Outdoorsy – Be Outdoors™, Engineered for the Unknown™, From Niche to Known™, Lockdown Puck™, MEAT!™, MEAT Your Maker!™, Secure Your Lifestyle™, The Ultimate Lifestyle™, Unmatched Accuracy at the Bench and in the Field™, Water to Plate™, Your Land. Your Legacy™, are some of the unregistered trademarks of our company or one of our subsidiaries. Trademarks licensed to us by Smith & Wesson Brands, Inc. in connection with the manufacture, distribution, marketing, advertising, promotion, merchandising, shipping, and sale of certain licensed accessory product categories include M&P®, Performance Center®, Smith & Wesson®, T/C®, and Thompson/Center Arms™, among others. This report also may contain trademarks and trade names of other companies.
Statement Regarding Forward-Looking Information
The statements contained in this Quarterly Report on Form 10-Q that are not historical are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. All statements other than statements of historical facts contained or incorporated herein by reference in this Quarterly Report on Form 10-Q, including statements regarding our future operating results, future financial position, business strategy, objectives, goals, plans, prospects, markets, and plans and objectives for future operations, are forward-looking statements. In some cases, you can identify forward-looking statements by terms such as “anticipates,” “believes,” “estimates,” “expects,” “intends,” “suggests,” “targets,” “contemplates,” “projects,” “predicts,” “may,” “might,” “plan,” “would,” “should,” “could,” “may,” “can,” “potential,” “continue,” “objective,” or the negative of those terms, or similar expressions intended to identify forward-looking statements. However, not all forward-looking statements contain these identifying words. Specific forward-looking statements in this Quarterly Report on Form 10-Q include statements regarding:
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our expectation that the unrecognized compensation expense related to unvested RSUs and PSUs will be recognized over a weighted average remaining contractual term of 1.8 years; |
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our expectation to spend approximately $7.5 million to $8.5 million for capital expenditures in fiscal 2022; |
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our future capital requirements dependency on many factors, including net sales, the timing and extent of spending to support product development efforts, the expansion of sales and marketing activities, the timing of introductions of new products and enhancements to existing products, the capital needed to operate as an independent publicly traded company, including the establishment of our independent information technology infrastructure and enterprise resource planning systems, any acquisitions or strategic investments that we may determine to make, and our ability to navigate through the many negative business impacts from the COVID-19 pandemic; |
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the possibility that further equity or debt financing may not be available to us on acceptable terms or at all; |
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the possibility that sufficient funds are not available on acceptable terms could limit or severely constrain our ability to take advantage of unexpected business opportunities or to respond to competitive pressures; |
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our expectation to continue to utilize our cash flows to invest in our business, including research and development for new product initiatives; the hiring of additional employees; growth strategies, including any potential acquisitions; to repay any indebtedness we may incur over time; and the development of our independent information technology infrastructure, including the implementation of our enterprise resource planning systems; |
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our estimation that our information technology infrastructure will cost a total of approximately $8.0 million over a period that spans fiscal 2022 and fiscal 2023; |
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our expectation for capital expenditures of approximately $3.5 million and one-time operating expenses of approximately $1.6 million in fiscal 2022; |
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our expectation to record approximately $1.2 million of duplicative expenses, in fiscal 2022, as we operate both our existing and our new information technology and enterprise resource planning platforms in parallel during the system changeover period; |
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our expectation for capital expenditures of approximately $2.0 million and one-time operating expense of approximately $1.0 million in fiscal 2023; |
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the possibility that worsening of conditions or increased fears of the COVID-19 pandemic could have a renewed and prolonged effect on manufacturing or employment in Asia, travel to and from Asia, or other restrictions on imports, all of which could have a longer-term effect on our sales and profitability in future periods; |
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the possibility that increased demand for sourced products in various industries could cause delays at various U.S. ports, which could delay the timing of receipts of our products; and |
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our expectation that our inventory will increase in our second fiscal quarter because of additional planned purchases to help mitigate potential future supply chain disruptions, expected finished product price increases at our suppliers, and logistic cost fluctuations; and a planned inventory build in anticipation of new product introductions combined with our focus on introducing higher priced new products that we expect will increase inventory value. |
A number of factors could cause our actual results to differ materially from those indicated by the forward-looking statements. Such factors include, among others, the following:
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the effects of the COVID-19 pandemic and related aftermath, including potential disruptions in our suppliers’ ability to source the raw materials necessary for the production of our products, disruptions and delays in the manufacture of our products, and difficulties encountered by retailers and other components of the distribution channel for our products including delivery of product stemming from port congestion and related transportation challenges; |
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lower levels of consumer spending in general and specific to our products or product categories; |
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our ability to introduce new products that are successful in the marketplace; |
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interruptions of our arrangements with third-party contract manufacturers and freight carriers that disrupt our ability to fill our customers’ orders; |
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increases in costs or decreases in availability of finished products, product components, and raw materials; |
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our ability to maintain or strengthen our brand recognition and reputation; |
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the ability to forecast demand for our products accurately; |
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our ability to continue to expand our e-commerce business; |
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our ability to compete in a highly competitive market; |
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our dependence on large customers; |
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our ability to attract and retain talent; |
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an increase of emphasis on private label products by our customers; |
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pricing pressures by our customers; |
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our ability to collect our accounts receivable; |
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the potential for product recalls, product liability, and other claims or lawsuits against us; |
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our ability to protect our intellectual property; |
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inventory levels, both internally and in the distribution channel, in excess of demand; |
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our ability to identify acquisition candidates, to complete acquisitions of potential acquisition candidates, to integrate acquired businesses with our business, to achieve success with acquired companies, and to realize the benefits of acquisitions in a manner consistent with our expectations; |
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the performance and security of our information systems; |
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our ability to comply with any applicable foreign laws or regulations and the effect of increased protective tariffs; |
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economic, social, political, legislative, and regulatory factors; |
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the potential for increased regulation of firearms and firearms- related products; |
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the effect of political pressures on firearm laws and regulations; |
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the potential impact on our business and operations from the results of U.S. Presidential, Congressional, state, and local elections and the policies that may be implemented as a result thereof; |
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our ability to realize the anticipated benefits of being a separate, public company; |
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future investments for capital expenditures, liquidity and anticipated cash needs and availability; |
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the potential for impairment charges; |
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estimated amortization expense of intangible assets for future periods; |
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actions of social activists that could, directly or indirectly, have an adverse effect on our business; |
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disruptions caused by social unrest, including related protests or disturbances; |
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our assessment of factors relating to the valuation of assets acquired and liabilities assumed in acquisitions, the timing for such evaluations, and the potential adjustment in such evaluations; and |
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other factors detailed from time to time in our reports filed with the Securities and Exchange Commission, or the SEC, including information contained herein. |
All forward-looking statements included herein are based on information available to us as of the date hereof and speak only as of such date. Except as required by law, we undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements. The forward-looking statements contained in or incorporated by reference into this Quarterly Report on Form 10-Q reflect our views as of the date of this Quarterly Report on Form 10-Q about future events and are subject to risks, uncertainties, assumptions, and changes in circumstances that may cause our actual results, performance, or achievements to differ significantly from those expressed or implied in any forward-looking statement. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future events, results, performance, or achievements.
We are subject to the informational requirements of the Exchange Act, and we file or furnish reports, proxy statements, and other information with the SEC. Such reports and other information we file with the SEC are available free of charge at https://ir.aob.com/financial-information/sec-filings as soon as practicable after such reports are available on the SEC’s website at www.sec.gov. The SEC’s website contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC.
PART I — FINANCIAL INFORMATION
Item 1. Financial Statements
AMERICAN OUTDOOR BRANDS, INC. AND SUBSIDIARIES
CONSOLIDATED AND COMBINED BALANCE SHEETS
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As of: |
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July 31, 2021 (Unaudited) |
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April 30, 2021 |
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(In thousands, except per share data) |
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ASSETS |
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Current assets: |
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Cash and cash equivalents |
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$ |
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$ |
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Accounts receivable, net of allowance for credit losses of $ and $ |
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Inventories |
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Prepaid expenses and other current assets |
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Income tax receivable |
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— |
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Total current assets |
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Property, plant, and equipment, net |
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Intangible assets, net |
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Goodwill |
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Right-of-use assets |
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Deferred income taxes |
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Other assets |
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Total assets |
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$ |
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$ |
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LIABILITIES AND EQUITY |
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Current liabilities: |
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Accounts payable |
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$ |
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$ |
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Accrued expenses |
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Accrued payroll and incentives |
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Accrued income taxes |
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— |
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Lease liabilities, current |
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Accrued profit sharing |
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Total current liabilities |
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Lease liabilities, net of current portion |
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Other non-current liabilities |
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Total liabilities |
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Commitments and contingencies (Note 11) |
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Equity: |
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Preferred stock, $ issued or outstanding |
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Common stock, $ issued and outstanding on July 31, 2021 and outstanding on April 30, 2021 |
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Additional paid in capital |
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Retained earnings |
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Total equity |
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Total liabilities and equity |
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$ |
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$ |
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See accompanying notes to unaudited consolidated and combined financial statements.
5
AMERICAN OUTDOOR BRANDS, INC. AND SUBSIDIARIES
CONSOLIDATED AND COMBINED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(Unaudited)
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For the Three Months Ended July 31, |
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2021 |
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2020 |
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(In thousands, except per share data) |
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Net sales (including $ party sales for the three months ended July 31, 2020 prior to the Separation) |
$ |
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$ |
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Cost of sales |
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Gross profit |
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Operating expenses: |
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Research and development |
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Selling, marketing, and distribution |
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General and administrative |
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Total operating expenses |
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Operating income |
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Other income/(expense), net: |
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Other income, net |
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Interest (expense)/income, net |
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Total other income, net |
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Income from operations before income taxes |
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Income tax expense |
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Net income/comprehensive income |
$ |
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$ |
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Net income per share: |
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Basic |
$ |
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$ |
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Diluted |
$ |
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$ |
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Weighted average number of common shares outstanding: |
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Basic |
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Diluted |
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See accompanying notes to unaudited consolidated and combined financial statements.
6
AMERICAN OUTDOOR BRANDS, INC. AND SUBSIDIARIES
CONSOLIDATED AND COMBINED STATEMENTS OF EQUITY
(Unaudited)
(In thousands)
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Common Stock |
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Former Net Parent |
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Additional |
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Shares |
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Amount |
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Company Investment |
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Paid-In Capital |
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Retained Earnings |
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Total Equity |
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Balance at April 30, 2020 |
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— |
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$ |
— |
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$ |
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$ |
— |
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$ |
— |
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$ |
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Net income |
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— |
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— |
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— |
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— |
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Net transfers from former Parent |
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— |
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— |
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— |
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— |
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Balance at July 31, 2020 |
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— |
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$ |
— |
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$ |
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$ |
— |
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$ |
— |
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$ |
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Common Stock |
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Former Net Parent |
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Additional |
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Shares |
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Amount |
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Company Investment |
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Paid-In Capital |
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Retained Earnings |
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Total Equity |
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Balance at April 30, 2021 |
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$ |
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$ |
— |
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$ |
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$ |
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$ |
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Net Income |
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— |
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— |
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— |
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— |
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Stock-based compensation |
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— |
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— |
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— |
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— |
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Proceeds from exercise of stock options |
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— |
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— |
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— |
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Issuance of common stock under restricted stock unit awards, net of tax |
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— |
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— |
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( |
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— |
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( |
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Balance at July 31, 2021 |
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$ |
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$ |
— |
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$ |
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$ |
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$ |
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See accompanying notes to unaudited consolidated and combined financial statements.
7
AMERICAN OUTDOOR BRANDS, INC. AND SUBSIDIARIES
CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS
(Unaudited)
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For the Three Months Ended July 31, |
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2021 |
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2020 |
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(In thousands) |
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Cash flows from operating activities: |
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Net income |
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$ |
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$ |
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Adjustments to reconcile net income to net cash provided by/(used in) operating activities: |
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Depreciation and amortization |
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Loss on sale/disposition of assets |
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— |
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Provision for credit losses on accounts receivable |
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Deferred income taxes |
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( |
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— |
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Stock-based compensation expense |
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Changes in operating assets and liabilities: |
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Accounts receivable |
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( |
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Inventories |
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( |
) |
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( |
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Prepaid expenses and other current assets |
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( |
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( |
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Income taxes |
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( |
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Accounts payable |
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Accrued payroll and incentives |
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( |
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Right of use assets |
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Accrued profit sharing |
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Accrued expenses |
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Other assets |
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Lease liabilities |
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( |
) |
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( |
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Other non-current liabilities |
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( |
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Net cash (used in)/provided by operating activities |
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( |
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Cash flows from investing activities: |
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Payments to acquire patents and software |
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( |
) |
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( |
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Payments to acquire property and equipment |
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( |
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( |
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Net cash used in investing activities |
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( |
) |
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( |
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Cash flows from financing activities: |
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Net transfers from former Parent |
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— |
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Proceeds from exercise of options to acquire common stock |
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— |
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Payment of employee withholding tax related to restricted stock units |
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( |
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— |
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Net cash (used in)/provided by financing activities |
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( |
) |
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Net decrease in cash and cash equivalents |
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( |
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( |
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Cash and cash equivalents, beginning of period |
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Cash and cash equivalents, end of period |
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$ |
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$ |
— |
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Supplemental disclosure of cash flow information |
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Cash paid for: |
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|
|
|
|
|
|
Interest |
|
$ |
|
|
|
$ |
— |
|
Income taxes |
|
$ |
|
|
|
$ |
— |
|
See accompanying notes to unaudited consolidated and combined financial statements.
8
AMERICAN OUTDOOR BRANDS, INC. AND SUBSIDIARIES
CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS - (Continued)
(Unaudited)
Supplemental Disclosure of Non-cash Investing and Financing Activities:
|
|
For the Three Months Ended July 31, |
|
|||||
|
|
2021 |
|
|
2020 |
|
||
|
|
(In thousands) |
|
|||||
Purchases of property and equipment and intangibles included in accounts payable |
|
$ |
|
|
|
$ |
|
|
Changes in right of use assets for operating lease obligations |
|
|
|
|
|
|
— |
|
Changes in lease liabilities for operating lease obligations |
|
|
|
|
|
|
— |
|
See accompanying notes to unaudited consolidated and combined financial statements.
9
AMERICAN OUTDOORS BRANDS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (UNAUDITED)
For the Three Months Ended July 31, 2021 and 2020
(1) Background, Description of Business, and Basis of Presentation:
Background
On August 24, 2020, Smith & Wesson Brands, Inc., or our former parent, completed the spin-off of its outdoor products and accessories business, or the Separation, to our company (our “company,” “we,” “us,” or “our”).
The consolidated and combined financial statements prior to the Separation, including the three months ended July 31, 2020, do not necessarily reflect what the financial position, results of operations, and cash flows would have been had we operated as an independent, publicly traded company during the historical periods presented. For the three months ended July 31, 2020, the unaudited combined financial statements were prepared on a “carve-out” basis.
Basis of Presentation – Unaudited Consolidated and Combined Financial Statements
Our unaudited consolidated and combined financial statements for the three months ended July 31, 2021 are consolidated financial statements based on the reported results of our company as a standalone company. These financial statements have been prepared in accordance with accounting principles generally accepted in the United States, or GAAP, for interim financial information and Article 10 of Regulation S-X. The consolidated and combined balance sheet at April 30, 2021 was derived from audited financial statements.
The consolidated and combined financial statements at July 31, 2021 and for the three months ended July 31, 2021 and 2020 are unaudited, but in our opinion include all normal recurring adjustments necessary for a fair statement of the results for the interim periods. The results reported in these consolidated and combined financial statements should not necessarily be taken as indicative of results that may be expected for the entire year. These consolidated and combined financial statements should be read in conjunction with the consolidated and combined financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended April 30, 2021.
Basis of Presentation – Prior to the Separation
Prior to the Separation and for the three months ended July 31, 2020, the unaudited combined financial statements reflected the financial position, results of operations, and cash flows for the periods presented as historically managed by our former parent and were derived from the consolidated financial statements and accounting records of our former parent in accordance with GAAP.
In addition, for purposes of preparing the combined financial statements, prior to the Separation, on a “carve-out” basis, a portion of our former parent’s total corporate expenses were allocated to us based on direct usage when identifiable or, when not directly identifiable, on the basis of proportional net revenue, employee headcount, delivery units, or square footage, as applicable. These expense allocations included the cost of corporate functions and resources provided by our former parent, including executive management, finance, accounting, legal, human resources, internal audit, and the related benefit costs associated with such functions, such as stock-based compensation and the cost of our former parent’s Springfield, Massachusetts corporate headquarters. We were allocated $
For the three months ended July 31, 2020, our net sales to our former parent totaled $
Description of Business
We are a leading provider of outdoor products and accessories encompassing hunting, fishing, camping, shooting, and personal security and defense products for rugged outdoor enthusiasts. We conceive, design, produce or source, and sell our products and accessories, including shooting supplies, rests, vaults, and other related accessories; lifestyle products, such as premium sportsman knives and tools for fishing and hunting; land management tools for hunting preparedness; harvesting products for post-hunt or post-fishing activities; electro-optical devices, including hunting optics, firearm aiming devices, flashlights, and laser grips; reloading, gunsmithing, and firearm cleaning supplies; and survival, camping, and emergency preparedness products. We develop and market
10
AMERICAN OUTDOORS BRANDS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (UNAUDITED)
For the Three Months Ended July 31, 2021 and 2020
our products at our facility in Columbia, Missouri and contract for the manufacture and assembly of most of our products with third-parties located in Asia. We also manufacture some of our electro-optics products at our facility in Wilsonville, Oregon.
We focus on our brands and the establishment of product categories in which we believe our brands will resonate strongly with the activities and passions of consumers and enable us to capture an increasing share of our overall addressable markets. Our owned brands include Caldwell, Wheeler, Tipton, Frankford Arsenal, Hooyman, BOG, MEAT!, Uncle Henry, Old Timer, Imperial, Crimson Trace, LaserLyte, Lockdown, Ust, BUBBA, and Schrade, and we license for use in association with certain products we sell additional brands, including M&P, Smith & Wesson, Performance Center by Smith & Wesson, and Thompson/Center Arms. In focusing on the growth of our brands, we organize our creative, product development, sourcing, and e-commerce teams into four brand lanes, each of which focuses on one of four distinct consumer verticals – Marksman, Defender, Harvester, and Adventurer – with each of our brands included in one of the brand lanes.
|
• |
Our Marksman brands address product needs arising from consumer activities that take place primarily at the shooting range and where firearms are cleaned, maintained, and worked on. |
|
• |
Our Defender brands include products that help consumers aim their firearms more accurately, including situations that require self-defense, and products that help safely secure and store, as well as maintain connectivity to those possessions that many consumers consider to be high value or high consequence. |
|
• |
Our Harvester brands focus on the activities hunters typically engage in, including the activities to prepare for the hunt, the hunt itself, and the activities that follow a hunt, such as meat processing. |
|
• |
Our Adventurer brands include products that help enhance consumers’ fishing and camping experiences. |
Reclassification
We have adjusted the accompanying consolidated balance sheet as of April 30, 2021 to reclassify $
Revenue Recognition
We recognize revenue for the sale of our products at the point in time when the control of ownership has transferred to the customer. The transfer of control typically occurs at a point in time based on consideration of when the customer has i) a payment obligation, ii) physical possession of goods has been received, iii) legal title to goods has passed, iv) risks and rewards of ownership of goods has passed to customers, and v) the customer has accepted the goods. The timing of revenue recognition occurs either on shipment or delivery of goods based on contractual terms with the customer.
The duration of contractual arrangements with customers in our wholesale channels is typically less than one year. Payment terms with customers are typically between
We have elected to treat all shipping and handling activities as fulfillment costs and recognize the costs as distribution expenses at the time we recognize the related revenue. Shipping and handling costs billed to customers are included in net sales.
11
AMERICAN OUTDOORS BRANDS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (UNAUDITED)
For the Three Months Ended July 31, 2021 and 2020
The amount of revenue recognized reflects the expected consideration to be received for providing the goods or services to the customer, which includes estimates for variable consideration. Variable consideration includes allowances for trade term discounts, chargebacks, and product returns. Estimates of variable consideration are determined at contract inception and reassessed at each reporting date, at a minimum, to reflect any changes in facts and circumstances. We apply the portfolio approach as a practical expedient and utilize the expected value method in determining estimates of variable consideration, based on evaluations of specific product and customer circumstances, historical and anticipated trends, and current economic conditions. We have co-op advertising program expense, which we record within advertising expense, in recognition of a distinct service that we receive from our customers at the retail level.
Disaggregation of Revenue
The following table sets forth certain information regarding trade channel net sales for the three months ended July 31, 2021 and 2020 (dollars in thousands):
|
2021 |
|
|
2020 |
|
|
$ Change |
|
|
% Change |
|
||||
e-commerce channels |
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
|
- |
% |
Traditional channels |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
Total net sales |
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
% |
Our e-commerce channels include net sales from customers that do not traditionally operate a physical brick-and-mortar store, but generate the majority of their revenue from consumer purchases at their retail websites. Our e-commerce channels also include our direct-to-consumer sales. Our traditional channels include customers that primarily operate out of physical brick-and-mortar stores and generate the large majority of their revenue from consumer purchases at their brick-and-mortar locations.
We sell our products worldwide.
|
2021 |
|
|
2020 |
|
|
$ Change |
|
|
% Change |
|
||||
Domestic net sales |
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
% |
International net sales |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
Total net sales |
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
% |
Accounts Receivable and Allowance for Estimated Credit Losses
We record trade accounts receivable at net realizable value that include estimated allowances for trade terms, sales incentive programs, discounts, markdowns, chargebacks, and returns as discussed under Revenue Recognition above. We extend credit to our domestic customers and some foreign distributors based on their credit worthiness. 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 loss accounts.
We maintain an allowance for credit losses related to accounts receivable for future expected credit losses resulting from the inability or unwillingness of our customers to make required payments. We estimate our allowance for credit losses based on relevant information such as historical experience, current conditions, and future expectation and in relation to a representative pool of assets consisting of a large number of customers with similar risk characteristics and similar financial assets. The allowance is adjusted as appropriate to reflect differences in current conditions as well as changes in forecasted macroeconomic conditions.
12
AMERICAN OUTDOORS BRANDS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (UNAUDITED)
For the Three Months Ended July 31, 2021 and 2020
In November 2020, we entered into a factoring arrangement with a designated financial institution specifically designed to factor trade receivables with a certain customer that has extended terms, which are traditional to the customer’s industry. Under this factoring arrangement, from time to time, we sell this certain customer’s trade receivables at a discount on a non-recourse basis. These transactions are accounted for as sales and cash proceeds are included in cash provided by operating activities in the statement of cash flows. During the three months ended July 31, 2021, we recorded an immaterial amount of factoring fees related to factoring transactions, which are included in other income/(expense), net on our consolidated and combined statement of operations.
Concentration 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 the three months ended July 31, 2021,
For the three months ended July 31, 2020,
(2)
Recently Issued Accounting Standards – In March 2020, the Financial Accounting Standards Board, or FASB, issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, or ASU 2020-04, to provide temporary optional expedients and exceptions to the contract modifications, hedge relationships, and other transactions affected by reference rate reform if certain criteria are met. ASU 2020-04, which was effective upon issuance and may be applied through December 31, 2022, is applicable to all contracts and hedging relationships that reference the London Interbank Offered Rate or any other reference rate expected to be discontinued. We are currently evaluating the new guidance and the expected effect on our consolidated and combined financial statements and related disclosures.
Recently Adopted Accounting Standards – In December 2019, FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, or ASU 2019-12, an amendment of the FASB Accounting Standards Codification. ASU 2019-12 simplifies the accounting for income taxes by removing certain exceptions for intraperiod tax allocations and deferred tax liabilities for equity method investments and adds guidance regarding whether a step-up in tax basis of goodwill relates to a business combination or a separate transaction. ASU 2019-12 is effective for fiscal years beginning after December 15, 2020, with early adoption permitted. We adopted
(3) Leases:
We lease certain of our real estate, as well as other equipment, under non-cancelable operating lease agreements. 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 terms. 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, residual value guarantees, or 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 can extend the lease term. These renewal options are at our sole discretion and 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.
13
AMERICAN OUTDOORS BRANDS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (UNAUDITED)
For the Three Months Ended July 31, 2021 and 2020
The amounts of assets and liabilities related to our operating leases as of July 31, 2021 are as follows (in thousands):
|
|
|
July 31, 2021 |
|
|
Operating Leases |
|
|
|
|
|
Right-of-use assets |
|
|
$ |
|
|
Accumulated amortization |
|
|
|
( |
) |
Right-of-use assets, net |
|
|
$ |
|
|
|
|
|
|
|
|
Lease liabilities, current portion |
|
|
$ |
|
|
Lease liabilities, net of current portion |
|
|
|
|
|
Total operating lease liabilities |
|
|
$ |
|
|
|
|
|
|
|
|
We recorded $
Future lease payments for all our operating leases for the remainder of fiscal 2022 and for succeeding fiscal years are as follows (in thousands):
|
|
|
Operating |
|
|
2022 |
|
|
$ |
|
|
2023 |
|
|
|
|
|
2024 |
|
|
|
|
|
2025 |
|
|
|
|
|
2026 |
|
|
|
|
|
2027 |
|
|
|
|
|
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 |
|
|
$ |
|
|
The cash paid for amounts included in the measurement of the liabilities and the operating cash flows was $
14
AMERICAN OUTDOORS BRANDS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (UNAUDITED)
For the Three Months Ended July 31, 2021 and 2020
(4) Goodwill and Intangible Assets, net:
The following table summarizes intangible assets as of July 31, 2021 and April 30, 2021 (in thousands):
|
|
July 31, 2021 |
|
|
April 30, 2021 |
|
||||||||||||||||||
|
|
Gross |
|
|
|
|
|
|
|
|
|
|
Gross |
|
|
|
|
|
|
|
|
|
||
|
|
Carrying |
|
|
Accumulated |
|
|
Net Carrying |
|
|
Carrying |
|
|
Accumulated |
|
|
Net Carrying |
|
||||||
|
|
Amount |
|
|
Amortization |
|
|
Amount |
|
|
Amount |
|
|
Amortization |
|
|
Amount |
|
||||||
Customer relationships |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
Developed technology |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
Patents, trademarks, and trade names |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
Patents in progress |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
Total definite-lived intangible assets |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
( |