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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 10-Q

 

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended January 31, 2022

Commission File No. 001-39366

 

American Outdoor Brands, Inc.

(Exact name of registrant as specified in its charter)

 

 

Delaware

 

84-4630928

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

1800 North Route Z, Suite A

Columbia, Missouri

 

65202

(Address of principal executive offices)

 

(Zip Code)

(800338-9585

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each Class

Trading Symbol

Name of exchange on which registered

Common Stock, par value $0.001 per share

AOUT

Nasdaq Global Select Market

 

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      No  

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).    Yes      No  

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

 

☐  

  

Accelerated filer

 

 

 

 

 

Non-accelerated filer

 

☒  

  

Smaller reporting company

 

 

 

 

 

 

Emerging growth company

 

 

  

 

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      No  

The registrant had 13,352,149 shares of common stock, par value $0.001, outstanding as of March 6, 2022.  

 


 

AMERICAN OUTDOOR BRANDS, INC.

Quarterly Report on Form 10-Q

For the Three and Nine Months Ended January 31, 2022 and 2021

 

TABLE OF CONTENTS

 

PART I - FINANCIAL INFORMATION

  

 

 

Item 1. Financial Statements (Unaudited)

  

5

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

  

22

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

  

30

 

Item 4. Controls and Procedures

  

30

 

 

 

 

PART II - OTHER INFORMATION

  

 

 

Item 1. Legal Proceedings

  

31

 

Item 1A. Risk Factors

  

31

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

 

31

 

Item 6. Exhibits

  

31

Signatures

  

33

 

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®, and 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™, and 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:

 

future lease payments for all our operating leases for the remainder of fiscal 2022 and for succeeding fiscal years;

 

future expected amortization expense for the remainder of fiscal 2022 and for succeeding fiscal years;

 

our expectation that the unrecognized compensation expense related to unvested RSUs and PSUs will be recognized over a weighted average remaining contractual term of 1.5 years;

 

our expectation of spending approximately $7.5 million to $8.5 million for capital expenditures in fiscal 2022;

 

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;

 

the possibility that further equity or debt financing may not be available to us on acceptable terms or at all;

 

the possibility that our ability to take advantage of unexpected business opportunities or to respond to competitive pressures could be limited or severely constrained if sufficient funds are not available or are not available on acceptable terms;

 

our expectation to continue to utilize our cash flows to invest in our business, including research and development for new product initiatives; hire additional employees; fund growth strategies, including any potential acquisitions; repay of any indebtedness we may incur over time; and develop our independent information technology infrastructure, including the implementation of our enterprise resource planning systems;

 

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;

 

our expectation for capital expenditures of approximately $3.5 million and one-time operating expenses of approximately $1.6 million in fiscal 2022;

 

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;

 

our expectation for capital expenditures of approximately $2.0 million and one-time operating expense of approximately $1.0 million in fiscal 2023;

 

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;

 

the possibility that increased demand for sourced products in various industries could cause further delays at various U.S. ports, which could delay the timing of receipts of our products;

 

our intention to utilize a combination of cash on hand and availability from our revolving line to complete the Grilla Grills acquisition; and

 

our expectation for our inventory balance to be relatively flat in our fourth quarter of fiscal 2022.

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:

 

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;

 

lower levels of consumer spending in general and specific to our products or product categories;

 

our ability to introduce new products that are successful in the marketplace;

 

interruptions of our arrangements with third-party contract manufacturers and freight carriers that disrupt our ability to fill our customers’ orders;

 

increases in costs or decreases in availability of finished products, product components, and raw materials;


 

 

our ability to maintain or strengthen our brand recognition and reputation;

 

the ability to forecast demand for our products accurately;

 

our ability to continue to expand our e-commerce business;

 

our ability to compete in a highly competitive market;

 

our dependence on large customers;

 

our ability to attract and retain talent;

 

an increase of emphasis on private label products by our customers;

 

pricing pressures by our customers;

 

our ability to collect our accounts receivable;

 

the potential for product recalls, product liability, and other claims or lawsuits against us;

 

our ability to protect our intellectual property;

 

inventory levels, both internally and in the distribution channel, in excess of demand;

 

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;

 

the performance and security of our information systems;

 

our ability to comply with any applicable foreign laws or regulations and the effect of increased protective tariffs;

 

economic, social, political, legislative, and regulatory factors;

 

the potential for increased regulation of firearms and firearms- related products;

 

the effect of political pressures on firearm laws and regulations;

 

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;

 

our ability to realize the anticipated benefits of being a separate, public company;

 

future investments for capital expenditures, liquidity and anticipated cash needs and availability;

 

the potential for impairment charges;

 

estimated amortization expense of intangible assets for future periods;

 

actions of social activists that could, directly or indirectly, have an adverse effect on our business;

 

disruptions caused by social unrest, including related protests or disturbances;

 

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

 

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 BALANCE SHEETS

 

 

As of:

 

 

 

January 31, 2022

(Unaudited)

 

 

April 30, 2021

 

 

 

(In thousands, except par value and share data)

 

ASSETS

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

22,778

 

 

$

60,801

 

Accounts receivable, net of allowance for credit losses of $104 on January 31, 2022

   and $119 on April 30, 2021

 

 

45,346

 

 

 

37,487

 

Inventories

 

 

119,571

 

 

 

74,296

 

Prepaid expenses and other current assets

 

 

9,672

 

 

 

7,098

 

Income tax receivable

 

 

729

 

 

 

149

 

Total current assets

 

 

198,096

 

 

 

179,831

 

Property, plant, and equipment, net

 

 

13,623

 

 

 

10,992

 

Intangible assets, net

 

 

43,754

 

 

 

53,643

 

Goodwill

 

 

64,315

 

 

 

64,315

 

Right-of-use assets

 

 

24,310

 

 

 

25,375

 

Deferred income taxes

 

 

6,620

 

 

 

6,683

 

Other assets

 

 

668

 

 

 

424

 

Total assets

 

$

351,386

 

 

$

341,263

 

LIABILITIES AND EQUITY

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

20,454

 

 

$

16,021

 

Accrued expenses

 

 

13,867

 

 

 

9,843

 

Accrued payroll and incentives

 

 

3,818

 

 

 

6,774

 

Lease liabilities, current

 

 

1,846

 

 

 

1,771

 

Accrued profit sharing

 

 

928

 

 

 

1,933

 

Total current liabilities

 

 

40,913

 

 

 

36,342

 

Lease liabilities, net of current portion

 

 

23,513

 

 

 

24,780

 

Other non-current liabilities

 

 

39

 

 

 

236

 

Total liabilities

 

 

64,465

 

 

 

61,358

 

Commitments and contingencies (Note 11)

 

 

 

 

 

 

 

 

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, 14,188,033 shares

   issued and 13,823,635 shares outstanding on January 31, 2022 and 14,059,440

   shares issued and outstanding on April 30, 2021

 

 

14

 

 

 

14

 

Additional paid in capital

 

 

267,583

 

 

 

265,362

 

Retained earnings

 

 

26,335

 

 

 

14,529

 

Treasury stock, at cost (364,398 shares on January 31, 2022)

 

 

(7,011

)

 

 

 

Total equity

 

 

286,921

 

 

 

279,905

 

Total liabilities and equity

 

$

351,386

 

 

$

341,263

 

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)

 

 

 

For the Three Months ended January 31,

 

 

For the Nine Months ended January 31,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

 

 

(In thousands, except per share data)

 

Net sales (including $2.4 million of

   related party sales for the four months

   of our fiscal year 2021 prior to

   the Separation)

 

$

70,105

 

 

$

82,649

 

 

$

201,633

 

 

$

212,214

 

Cost of sales

 

 

38,010

 

 

 

45,276

 

 

 

107,518

 

 

 

114,038

 

Gross profit

 

 

32,095

 

 

 

37,373

 

 

 

94,115

 

 

 

98,176

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

1,377

 

 

 

1,478

 

 

 

4,354

 

 

 

4,641

 

Selling, marketing, and distribution

 

 

15,627

 

 

 

15,121

 

 

 

44,490

 

 

 

41,426

 

General and administrative

 

 

10,366

 

 

 

10,591

 

 

 

31,020

 

 

 

29,899

 

Total operating expenses

 

 

27,370

 

 

 

27,190

 

 

 

79,864

 

 

 

75,966

 

Operating income

 

 

4,725

 

 

 

10,183

 

 

 

14,251

 

 

 

22,210

 

Other income/(expense), net:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income, net

 

 

258

 

 

 

141

 

 

 

1,004

 

 

 

352

 

Interest (expense)/income, net

 

 

(68

)

 

 

(51

)

 

 

(167

)

 

 

341

 

Total other income, net

 

 

190

 

 

 

90

 

 

 

837

 

 

 

693

 

Income from operations before income taxes

 

 

4,915

 

 

 

10,273

 

 

 

15,088

 

 

 

22,903

 

Income tax expense

 

 

1,149

 

 

 

2,244

 

 

 

3,282

 

 

 

5,746

 

Net income/comprehensive income

 

$

3,766

 

 

$

8,029

 

 

$

11,806

 

 

$

17,157

 

Net income per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.27

 

 

$

0.57

 

 

$

0.84

 

 

$

1.23

 

Diluted

 

$

0.27

 

 

$

0.56

 

 

$

0.82

 

 

$

1.20

 

Weighted average number of common shares

   outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

14,054

 

 

 

13,999

 

 

 

14,091

 

 

 

13,987

 

Diluted

 

 

14,205

 

 

 

14,254

 

 

 

14,332

 

 

 

14,321

 

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)

 

 

Common Stock

 

 

Former Net Parent

 

 

Additional

 

 

 

 

 

 

Treasury Stock

 

 

 

 

 

For the three months ended

January 31, 2022 and 2021

 

Shares

 

 

Amount

 

 

Company

Investment

 

 

Paid-In

Capital

 

 

Retained

Earnings

 

 

Shares

 

 

Amount

 

 

Total

Equity

 

Balance at October 31, 2020

 

 

13,992

 

 

$

14

 

 

$

 

 

$

263,519

 

 

$

5,252

 

 

 

 

 

$

 

 

$

268,785

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

8,029

 

 

 

 

 

 

 

 

 

8,029

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

904

 

 

 

 

 

 

 

 

 

 

 

 

904

 

Issuance of common stock under

   restricted stock unit awards

 

 

18

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock and

   reclassification of former

   net parent company investment

 

 

 

 

 

 

 

 

 

 

 

(14

)

 

 

 

 

 

 

 

 

 

 

 

(14

)

Balance at January 31, 2021

 

 

14,010

 

 

$

14

 

 

$

 

 

$

264,409

 

 

$

13,281

 

 

 

 

 

$

 

 

$

277,704

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at October 31, 2021

 

 

14,183

 

 

$

14

 

 

$

 

 

$

266,686

 

 

$

22,569

 

 

 

 

 

$

 

 

$

289,269

 

Net Income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,766

 

 

 

 

 

 

 

 

 

3,766

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

920

 

 

 

 

 

 

 

 

 

 

 

 

920

 

Issuance of common stock under

   restricted stock unit awards, net of

   tax

 

 

5

 

 

 

 

 

 

 

 

 

(23

)

 

 

 

 

 

 

 

 

 

 

 

(23

)

Repurchase of treasury stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

364

 

 

 

(7,011

)

 

 

(7,011

)

Balance at January 31, 2022

 

 

14,188

 

 

$

14

 

 

$

 

 

$

267,583

 

 

$

26,335

 

 

 

364

 

 

$

(7,011

)

 

$

286,921

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common Stock

 

 

Former Net Parent

 

 

Additional

 

 

 

 

 

 

Treasury Stock

 

 

 

 

 

For the nine months ended

January 31, 2022 and 2021

 

Shares

 

 

Amount

 

 

Company

Investment

 

 

Paid-In

Capital

 

 

Retained

Earnings

 

 

Shares

 

 

Amount

 

 

Total

Equity

 

Balance at April 30, 2020

 

 

 

 

$

 

 

$

224,098

 

 

$

 

 

$

 

 

 

 

 

$

 

 

$

224,098

 

Net income

 

 

 

 

 

 

 

 

3,876

 

 

 

 

 

 

13,281

 

 

 

 

 

 

 

 

 

17,157

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

1,680

 

 

 

 

 

 

 

 

 

 

 

 

1,680

 

Issuance of common stock under

   restricted stock unit awards

 

 

35

 

 

 

 

 

 

 

 

 

(14

)

 

 

 

 

 

 

 

 

 

 

 

(14

)

Net transfers from former Parent

 

 

 

 

 

 

 

 

34,783

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

34,783

 

Issuance of common stock and

   reclassification of former

   net parent company investment

 

 

13,975

 

 

 

14

 

 

 

(262,757

)

 

 

262,743

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at January 31, 2021

 

 

14,010

 

 

$

14

 

 

$

 

 

$

264,409

 

 

$

13,281

 

 

 

 

 

$

 

 

$

277,704

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at April 30, 2021

 

 

14,059

 

 

$

14

 

 

$

 

 

$

265,362

 

 

$

14,529

 

 

 

 

 

$

 

 

$

279,905

 

Net Income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

11,806

 

 

 

 

 

 

 

 

 

11,806

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

2,336

 

 

 

 

 

 

 

 

 

 

 

 

2,336

 

Shares issued under employee stock

   purchase plan

 

 

35

 

 

 

 

 

 

 

 

 

408

 

 

 

 

 

 

 

 

 

 

 

 

408

 

Proceeds from exercise of stock options

 

 

3

 

 

 

 

 

 

 

 

 

5

 

 

 

 

 

 

 

 

 

 

 

 

5

 

Issuance of common stock under

   restricted stock unit awards, net of

   tax

 

 

91

 

 

 

 

 

 

 

 

 

(528

)

 

 

 

 

 

 

 

 

 

 

 

(528

)

Repurchase of treasury stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

364

 

 

 

(7,011

)