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.

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 ~~55,060,972~~55,903,535 shares of common stock, par value $0.001, outstanding as of ~~December 3, 2019.~~September 1, 2020.

For the Three ~~and Six~~ Months Ended ~~October~~July 31, ~~2019~~2020 and ~~2018~~2019

Smith & Wesson®, S&W®, M&P®, M&P Shield®, Performance Center®, Bodyguard®, Governor®, SW22 Victory®, T/C ®, America’s Master Gunmaker ®, Compass®, Contender®, Dimension®, Encore®, Triumph®, Weather Shield®, Caldwell®, Delta Series®, Wheeler®, Tipton®, Frankford Arsenal®, Lockdown®, BOG-POD®, Golden Rod®, Mag Charger®, Hooyman®, Schrade®, Old Timer®, Uncle Henry®, Imperial®, Non-Typical Wildlife Solutions®, Crimson Trace®, Lasergrips®, Laserguard®, Rail Master®, Shockstop®, Laserlyte®, Key Gear®, U-Dig-It®, Bubba®, Bubba Blade®, One Cut and You’re Through®, Gemtech®, G-Core®, Halo®, Integra®, World Class Silencers®, LiNQ®, Stinky Bubba®, and Turkinator™ are some of the registered U.S. trademarks of our company or one of our subsidiaries. American Outdoor Brands ~~CorporationSM,~~Corporation^SM, M2.0™, SDVE™, Thompson/Center Arms™, Impact!™, Strike™, Venture™, Defender Series™, Instinctive Activation™, Master Series™, UST™, Blast Jacket™, One™, The Professional’s Choice for Decades™, and World Class Ammunition™ are some of the unregistered trademarks of our company or one of our subsidiaries. This report also may contain trademarks and trade names of other companies.

The statements contained in this Quarterly Report on Form 10-Q that are not purely 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. 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,” “targets,” “contemplates,” “projects,” “predicts,” “may,” “might,” “plan,” “will,” “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 the impact, if any, of recently issued accounting standards on our consolidated financial statements; assessments that we make about determining segments and reporting units; the features of our outstanding debt; estimated amortization expense of intangible assets for future periods; the outcome of the lawsuits to which we are subject and their effect on us; ~~the proposed spin-off, including the timing and purpose thereof and the expected restructuring charges,~~ our belief that ~~inventory levels, both internally and~~the claims asserted in Gemini’s complaint have no merit; our intention to aggressively defend Gemini’s complaint; our intention to vigorously oppose the proceedings related to the complaint filed against us in the ~~distribution channel, in excess~~Superior Court of ~~demand, may negatively impact future operating results;~~the State of California, County of San Diego – Central; our belief that ~~it is difficult~~the various allegations described in the Litigation section are unfounded; our belief that we have strong defenses to ~~forecast~~ the ~~potential impact~~actions filed against us by John Pidcock, as trustee of ~~distributor inventories~~the APSC Creditor Trust; our 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; our belief that we have provided adequate accruals for defense costs; the possibility that worsening of conditions or increased fears relating to the pandemic could have a renewed and prolonged effect on ~~future revenue~~manufacturing or employment in China, travel to and ~~income as demand is impacted by many factors, including seasonality, new product introductions, news events, political events, and consumer tastes; our assessment~~from China, or other restrictions on imports – all of ~~consumer demand and factors that stimulate demand for our products; the~~which could have a longer-term effect on our ~~business~~sales and profitability in future periods, with regard to concerns surrounding COVID-19, and based on our understanding of ~~various factors, including terrorism and~~ the ~~level of political pressures~~current situation; our expectation on ~~firearm laws and regulations; expected inventory levels for future periods; future investments~~spending for capital ~~expenditures;~~expenditures in fiscal 2021; factors affecting our future ~~products~~capital requirements; availability of equity or debt financing on acceptable terms, if at all; our belief that our existing capital resources and ~~product developments;~~credit facilities will be adequate to fund our operations, including our outstanding debt and other commitments, for the ~~features, quality,~~next 12 months; our belief that our improved processes and ~~performance~~procedures will assist in the remediation of our ~~products;~~material weakness, though management is still evaluating the ~~success~~design of ~~particular product or marketing programs; our market share~~these new controls and ~~factors that affect our market share; and liquidity and anticipated cash needs and availability.~~procedures. 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. A number of factors could cause actual results to differ materially from those indicated by the forward-looking statements. Such factors include, among other, economic, social, political, legislative, and regulatory factors; the potential for increased regulation of firearms and ~~firearms-related~~firearm-related products; actions of social activists that could have an adverse effect on our business; the impact of lawsuits; the demand for our products; the state of the U.S. economy in general and the firearm industry in particular; general economic conditions and consumer spending patterns; our competitive environment; the supply, availability, and costs of raw materials and components; speculation surrounding fears of terrorism and crime; our anticipated growth and growth opportunities; our ability to increase demand for our products in various markets, including consumer, law enforcement, and military channels, domestically and internationally; our penetration rates in new and existing markets; our strategies; the ~~completion of our proposed spin-off and the~~ operations and performance of the two separate companies ~~thereafter;~~after the completed spin-off; our ability to maintain and enhance brand recognition and reputation; risks associated with the establishment of our new 632,000 square foot national logistics facility including the expected benefits; our ability to introduce new products; the success of new products; our ability to expand our markets; our ability to integrate acquired businesses in a successful manner; the ~~general growth of our outdoor products and accessories business; the~~ potential for cancellation of orders from our backlog; and other factors detailed from time to time in our reports filed with the Securities and Exchange Commission, or the SEC, including our Annual Report on Form 10-K for the fiscal year ended April 30, ~~2019,~~2020, filed with the SEC on June 19, ~~2019.~~2020.

		As of:							As of:
		October 31, 2019			April 30, 2019				July 31, 2020			April 30, 2020
		(In thousands, except par value and share data)							(In thousands, except par value and share data)
ASSETS	ASSETS							ASSETS
Current assets:
Cash and cash equivalents		$	43,846		$	41,015			$	65,271		$	125,398
Accounts receivable, net of allowance for doubtful accounts of $2,036 on October 31, 2019 and $1,899 on April 30, 2019			93,629			84,907
Accounts receivable, net of allowances for credit losses of $1,411 on July 31, 2020 and $1,438 on April 30, 2020										101,358			93,433
Inventories			201,213			163,770				149,567			164,191
Prepaid expenses and other current assets			8,904			6,528				11,015			8,838
Income tax receivable			5,468			2,464				656			1,595
Total current assets			353,060			298,684				327,867			393,455
Property, plant, and equipment, net			170,348			183,268				156,785			157,417
Intangibles, net			82,562			91,840				69,842			73,754
Goodwill			182,267			182,269				83,605			83,605
Deferred income taxes										2,396			2,396
Other assets			20,559			10,728				17,674			18,334
		$	808,796		$	766,789			$	658,169		$	728,961
LIABILITIES AND STOCKHOLDERS’ EQUITY	LIABILITIES AND STOCKHOLDERS’ EQUITY							LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable		$	36,102		$	35,584			$	53,829		$	39,196
Accrued expenses and deferred revenue			42,545			39,322				49,987			64,602
Accrued payroll and incentives			10,640			21,473				13,241			14,623
Accrued income taxes			265			175				18,905			5,503
Accrued profit sharing			1,198			2,830				5,877			2,414
Accrued warranty			4,475			5,599				3,462			3,633
Current portion of notes and loans payable			75,000			6,300
Total current liabilities			170,225			111,283				145,301			129,971
Deferred income taxes			9,640			9,776
Notes and loans payable, net of current portion			127,800			149,434				24,311			159,171
Finance lease payable, net of current portion			40,389			45,400				39,610			39,873
Other non-current liabilities			14,192			6,452				11,882			12,828
Total liabilities			362,246			322,345				221,104			341,843
Commitments and contingencies (Note 11)
Commitments and contingencies (Note 10)
Stockholders’ equity:
Preferred stock, $.001 par value, 20,000,000 shares authorized, 0 shares issued or outstanding			—			—				—			—
Common stock, $.001 par value, 100,000,000 shares authorized, 73,226,141 issued and 55,059,279 shares outstanding on October 31, 2019 and 72,863,624 shares issued and 54,696,762 shares outstanding on April 30, 2019			73			73
Common stock, $.001 par value, 100,000,000 shares authorized, 73,864,745 issued and 55,697,883 shares outstanding on July 31, 2020 and 73,526,790 shares issued and 55,359,928 shares outstanding on April 30, 2020										74			74
Additional paid-in capital			266,582			263,180				269,192			267,630
Retained earnings			402,131			402,946				390,101			341,716
Accumulated other comprehensive income			139			620				73			73
Treasury stock, at cost (18,166,862 shares on October 31, 2019 and April 30, 2019)			(222,375	)		(222,375	)
Treasury stock, at cost (18,166,862 shares on July 31, 2020 and April 30, 2020)										(222,375	)		(222,375	)
Total stockholders’ equity			446,550			444,444				437,065			387,118
		$	808,796		$	766,789			$	658,169		$	728,961

The accompanying notes are an integral part of these condensed consolidated financial statements.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME/(LOSS) AND COMPREHENSIVE INCOME/(LOSS)

	For the Three Months Ended October 31,						For the Six Months Ended October 31,							For the Three Months Ended July 31,
	2019			2018			2019			2018				2020			2019
	(In thousands, except per share data)												(In thousands, except per share data)
Net sales	$	154,388		$	161,703		$	278,057		$	300,536			$	277,965		$	123,665
Cost of sales		104,082			105,317			179,898			191,728				161,199			75,811
Gross profit		50,306			56,386			98,159			108,808				116,766			47,854
Operating expenses:
Research and development		2,988			3,251			6,217			6,062				2,965			3,229
Selling, marketing, and distribution		19,352			15,291			36,125			26,906				19,269			16,773
General and administrative		23,082			26,518			49,791			51,039				29,080			26,709
Total operating expenses		45,422			45,060			92,133			84,007				51,314			46,711
Operating income		4,884			11,326			6,026			24,801				65,452			1,143
Other (expense)/income, net:
Other income/(expense), net		86			8			91			(9	)			151			5
Interest expense, net		(3,039	)		(2,274	)		(5,666	)		(4,274	)			(1,316	)		(2,627	)
Total other (expense)/income, net		(2,953	)		(2,266	)		(5,575	)		(4,283	)			(1,165	)		(2,622	)
Income from operations before income taxes		1,931			9,060			451			20,518
Income/(loss) from operations before income taxes															64,287			(1,479	)
Income tax expense		638			2,395			1,266			6,208				15,902			629
Net income/(loss)		1,293			6,665			(815	)		14,310				48,385			(2,108	)
Comprehensive (loss)/income:
Comprehensive income/(loss)
Change in unrealized loss on interest rate swap		(198	)		(54	)		(618	)		(158	)		—				(420	)
Other comprehensive loss, before income taxes		(198	)		(54	)		(618	)		(158	)		—				(420	)
Income tax benefit on other comprehensive loss		45			14			137			41			—				92
Other comprehensive loss, net of tax		(153	)		(40	)		(481	)		(117	)		—				(328	)
Comprehensive income/(loss):	$	1,140		$	6,625		$	(1,296	)	$	14,193			$	48,385		$	(2,436	)
Net income/(loss) per share:
Basic	$	0.02		$	0.12		$	(0.01	)	$	0.26			$	0.87		$	(0.04	)
Diluted	$	0.02		$	0.12		$	(0.01	)	$	0.26			$	0.86		$	(0.04	)
Weighted average number of common shares outstanding:
Basic		54,912			54,444			54,847			54,395				55,494			54,783
Diluted		55,424			55,107			54,847			55,047				56,277			54,783

The accompanying notes are an integral part of these condensed consolidated financial statements.

CONDENSED CONSOLIDATED ~~STATEMENT~~STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

Accumulated

Common

Additional

Other

Total

Stock

Paid-In

Retained

Comprehensive

Treasury Stock

Stockholders’

(In thousands)

Shares

Amount

Capital

Earnings

Income/(Loss)

Shares

Amount

Equity

Balance at July 31, 2018

72,551

$
73

$
255,189

$
392,181

$
1,612

18,167

$
(222,375
)

$
426,680

Proceeds from exercise of employee stock options

16

—

76

—

—

—

—

76

Stock-based compensation

—

1,962

—

—

—

—

1,962

Shares issued under employee stock purchase plan

108

—

943

—

—

—

—

943

Change in unrealized loss on interest rate swap, net of
tax effect

—

—

—

(40
)

—

—

(40
)
Issuance of common stock under restricted stock unit awards, net of shares surrendered

31

—

(44
)

—

—

—

—

(44
)
Net income

—

—

—

6,665

—

—

—

6,665

Balance at October 31, 2018

72,706

73

258,126

398,846

1,572

18,167

(222,375
)

436,242

Balance at April 30, 2018

72,434

72

253,616

389,146

1,689

18,167

(222,375
)

422,148

Proceeds from exercise of employee stock options

33

—

215

—

—

—

—

215

Stock-based compensation

—

—

3,952

—

—

—

—

3,952

Shares issued under employee stock purchase plan

108

—

943

—

—

—

—

943

Change in unrealized loss on interest rate swap, net of
tax effect

—

—

—

—

(117
)

—

—

(117
)
Impact of adoption of accounting standard updates

—

—

—

(4,610
)

—

—

—

(4,610
)
Issuance of common stock under restricted stock unit awards, net of shares surrendered

131

1

(600
)

—

—

—

—

(599
)
Net income

—

—

—

14,310

—

—

—

14,310

Balance at October 31, 2018

72,706

73

258,126

398,846

1,572

18,167

(222,375
)

436,242

Balance at July 31, 2019

72,988

73

264,230

400,838

292

18,167

(222,375
)

443,058

Proceeds from exercise of employee stock options

15

—

74

—

—

—

—

74

Stock-based compensation

—

—

1,428

—

—

—

—

1,428

Shares issued under employee stock purchase plan

173

—

862

—

—

—

—

862

Change in unrealized loss on interest rate swap, net of tax effect

—

—

—

—

(153
)

—

—

(153
)
Issuance of common stock under restricted stock unit awards, net of shares surrendered

50

—

(12
)

—

—

—

—

(12
)
Net income

—

—

—

1,293

—

—

—

1,293

Balance at October 31, 2019

73,226

73

266,582

402,131

139

18,167

(222,375
)

446,550

Balance at April 30, 2019

72,864

73

263,180

402,946

620

18,167

(222,375
)

444,444

Proceeds from exercise of employee stock options

15

—

74

—

—

—

—

74

Stock-based compensation

—

—

3,016

—

—

—

—

3,016

Shares issued under employee stock purchase plan

173

—

862

—

—

—

—

862

Change in unrealized loss on interest rate swap, net of tax effect

—

—

—

—

(481
)

—

—

(481
)
Issuance of common stock under restricted stock unit awards, net of shares surrendered

174

—

(550
)

—

—

—

—

(550
)
Net loss

—

—

—

(815
)

—

—

—

(815
)
Balance at October 31, 2019

73,226

$
73

$
266,582

$
402,131

$
139

18,167

$
(222,375
)

$
446,550

											Accumulated
	Common				Additional						Other								Total
	Stock				Paid-In			Retained			Comprehensive			Treasury Stock					Stockholders’
(In thousands)	Shares		Amount		Capital			Earnings			Income/(Loss)			Shares		Amount			Equity
Balance at April 30, 2019		72,864	$	73	$	263,180		$	402,946		$	620			18,167	$	(222,375	)	$	444,444
Stock-based compensation		—		—		1,588			—			—			—		—			1,588
Change in unrealized loss on interest rate swap, net of tax effect	—		—		—				—			(328	)		—		—			(328	)
Issuance of common stock under restricted stock unit awards, net of shares surrendered		124		—		(538	)		—			—			—		—			(538	)
Net loss		—		—	—				(2,108	)		—			—		—			(2,108	)
Balance at July 31, 2019		72,988		73		264,230			400,838			292			18,167		(222,375	)		443,058

Balance at April 30, 2020		73,527		74		267,630			341,716			73			18,167		(222,375	)		387,118
Proceeds from exercise of employee stock options		191		—		1,518			—			—			—		—			1,518
Stock-based compensation		—		—		1,041			—			—			—		—			1,041
Issuance of common stock under restricted stock unit awards, net of shares surrendered		147		—		(997	)		—			—			—		—			(997	)
Net income		—		—	—				48,385			—			—		—			48,385
Balance at July 31, 2020		73,865	$	74	$	269,192		$	390,101		$	73			18,167	$	(222,375	)	$	437,065

The accompanying notes are an integral part of these condensed consolidated financial statements.

	For the Six Months Ended October 31,						For the Three Months Ended July 31,
	2019			2018			2020			2019
	(In thousands)						(In thousands)
Cash flows from operating activities:
Net (loss)/income	$	(815	)	$	14,310
Adjustments to reconcile net income to net cash (used in)/provided by operating activities:
Net income/(loss)							$	48,385		$	(2,108	)
Adjustments to reconcile net income/(loss) to net cash provided by/(used in) operating activities:
Depreciation and amortization		27,993			25,994			12,888			14,346
Loss/(gain) on sale/disposition of assets		15			(1,038	)		3			—
Provision for losses on notes and accounts receivable		392			146			136			634
Deferred income taxes		—			(1,519	)
Change in fair value of contingent consideration		100			—
Stock-based compensation expense		3,016			3,952			1,041			1,588
Changes in operating assets and liabilities:
Accounts receivable		(9,114	)		(7,278	)		(6,811	)		14,031
Inventories		(37,443	)		(22,482	)		14,624			(31,678	)
Prepaid expenses and other current assets		(2,376	)		(1,352	)		(2,177	)		(2,822	)
Income taxes		(2,914	)		3,786			14,341			397
Accounts payable		1,019			5,488			14,061			(6,015	)
Accrued payroll and incentives		(10,833	)		2,322			(1,382	)		(10,875	)
Accrued profit sharing		(1,632	)		(369	)		3,463			686
Accrued expenses and deferred revenue		(92	)		(12,052	)		(14,640	)		(6,675	)
Accrued warranty		(1,124	)		(992	)		(171	)		(612	)
Other assets		1,372			40			660			428
Other non-current liabilities		(2,170	)		95			(946	)		(463	)
Net cash (used in)/provided by operating activities		(34,606	)		9,051
Net cash provided by/(used in) operating activities								83,475			(29,138	)
Cash flows from investing activities:
Payments to acquire patents and software		(389	)		(207	)		(292	)		(123	)
Proceeds from sale of property and equipment		—			1,223
Payments to acquire property and equipment		(8,979	)		(19,605	)		(7,343	)		(3,695	)
Net cash used in investing activities		(9,368	)		(18,589	)		(7,635	)		(3,818	)
Cash flows from financing activities:
Proceeds from loans and notes payable		75,000			50,000			—			25,000
Payments on finance lease obligation		(431	)		(323	)		(238	)		(214	)
Payments on notes and loans payable		(28,150	)		(53,150	)		(135,000	)		(1,575	)
Proceeds from exercise of options to acquire common stock, including employee stock purchase plan		936			1,158
Proceeds from exercise of options to acquire common stock								268			—
Payment of employee withholding tax related to restricted stock units		(550	)		(600	)		(997	)		(538	)
Net cash provided by/(used in) financing activities		46,805			(2,915	)
Net increase/(decrease) in cash and cash equivalents		2,831			(12,453	)
Net cash (used in)/provided by financing activities								(135,967	)		22,673
Net decrease in cash and cash equivalents								(60,127	)		(10,283	)
Cash and cash equivalents, beginning of period		41,015			48,860			125,398			41,015
Cash and cash equivalents, end of period	$	43,846		$	36,407		$	65,271		$	30,732
Supplemental disclosure of cash flow information
Cash paid for:
Interest	$	5,767		$	4,339		$	1,556		$	1,690
Income taxes	$	4,184		$	3,065		$	1,689		$	235

The accompanying notes are an integral part of these condensed consolidated financial statements.

~~AMERICAN OUTDOORS~~SMITH & WESSON BRANDS, ~~CORPORATION~~INC. AND SUBSIDIARIES

For the Three ~~and Six~~ Months Ended ~~October~~July 31, ~~2019~~2020 and ~~2018~~2019

We are a leading manufacturer, designer, and provider of consumer products for the shooting, hunting, and rugged outdoor enthusiast. We are one of the largest manufacturers of handguns, modern sporting rifles, and handcuffs in the United States and an active participant in the hunting rifle and suppressor markets. We are also a leading provider of shooting, hunting, and rugged outdoor products and accessories, including knives and cutting tools, sighting lasers, shooting supplies, tree saws, and survival gear. We have 2 reporting segments: (1) Firearm and (2) Outdoor Products & Accessories.

In our ~~Firearms~~Firearm segment, we manufacture a wide array of handguns (including revolvers and pistols), long guns (including modern sporting rifles, bolt action rifles, and muzzleloaders), handcuffs, suppressors, and other firearm-related products for sale to a wide variety of customers, including gun enthusiasts, collectors, hunters, sportsmen, competitive shooters, individuals desiring home and personal protection, law enforcement and security agencies and officers, and military agencies in the United States and throughout the world. We sell our firearm products under the Smith & Wesson, M&P, Performance Center, Thompson/Center Arms, and Gemtech brands. We manufacture our firearm products at our facilities in Springfield, Massachusetts; Houlton, Maine; and Deep River, Connecticut. We also sell our manufacturing services to other businesses to level-load our factories. We sell those services under our Smith & Wesson and Smith & Wesson Precision Components brands.

In our Outdoor Products & Accessories segment, 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, ~~distribute,~~ and ~~manufacture reloading, gunsmithing,~~sell products and ~~gun cleaning supplies; high-quality stainless steel cutting tools and accessories; flashlights; tree saws and related trimming accessories;~~accessories, including shooting supplies, rests, vaults, and other related accessories; premium sportsman knives and tools for fishing ~~accessories; apparel; vault accessories; laser grips~~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 ~~sights;~~grips; reloading, gunsmithing, and ~~a full range of products for~~firearm cleaning supplies; and survival, camping, and emergency preparedness. We sell our products under the Caldwell, Crimson Trace, Wheeler, Tipton, Frankford Arsenal, Schrade, Imperial, Uncle Henry, BUBBA, UST, Lockdown, Hooyman, BOG, Old Timer, LaserLyte, and KeyGear brands. We also offer firearms and non-firearms accessories, such as flashlights and knives, under our brands in our firearms business, including Smith & Wesson, M&P, Performance Center, and Thompson/Center Arms.preparedness products. We develop and market our products at our facility in Columbia, Missouri and contract for the manufacture and assembly of most of our products with third parties located in Asia. We also manufacture some of our electro-optics products at our facility in Wilsonville, Oregon.

On November 13, 2019, we announced that we were proceeding with a plan to spin-off our outdoor products and accessories ~~at our facilities in Columbia, Missouri~~business, or the Separation, and ~~Wilsonville, Oregon.~~create an independent publicly traded company to conduct that business. On August 24, 2020, we completed the previously announced Separation. See also Note 12 — Subsequent Events, for more information.

Interim Financial Information – The condensed consolidated balance ~~sheet~~sheets as of ~~October~~July 31, ~~2019,~~2020, the condensed consolidated statements of income/(loss) and comprehensive ~~income(loss)~~income/(loss) for the three ~~and six~~ months ended ~~October~~July 31, ~~2019~~2020 and ~~2018,~~2019, the condensed consolidated ~~statement~~statements of changes in stockholders’ equity for the ~~six~~three months ended ~~October~~July 31, ~~2019~~2020 and ~~2018,~~2019, and the condensed consolidated statements of cash flows for the ~~six~~three months ended ~~October~~July 31, ~~2019~~2020 and ~~2018~~2019 have been prepared by us without audit. 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 ~~October~~July 31, ~~2019~~2020 and for the periods presented, have been included. All intercompany transactions have been eliminated in consolidation. The consolidated balance sheet as of April 30, ~~2019~~2020 has been derived from our audited consolidated financial statements.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States, or GAAP, have been condensed or omitted. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended April 30, ~~2019.~~2020. The results of operations for the ~~six~~three months ended ~~October~~July 31, ~~2019~~2020 may not be indicative of the results that may be expected for the year ending April 30, ~~2020,~~2021, or any other period.

~~Revenue Recognition -~~ Reclassification –We ~~recognize revenue in accordance with~~have corrected the ~~provisions~~accompanying consolidated balance sheet as of ~~Accounting Standards Update, or ASU,~~ ~~Revenue from Contracts withCustomers~~ ~~(Topic 606), which became effective for us on May 1, 2018. Generally, all performance obligations are satisfied and revenue is recognized when the risks and rewards of ownership have transferred~~April 30, 2020 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 that entitle customers to receive free goods based upon their purchase of our products. The fulfillment of these free goods are our responsibility. In such instances, we allocate the revenue of the promotional sales based on the estimated level of participationappropriately present deferred income taxes in the ~~sales promotional program and the timing~~amount of ~~the shipment of all of the products~~$2.4 million as non-current assets that were previously included in the promotional program, including the free goods. We recognize revenue proportionally as each performance obligation is satisfied, based on the relative transaction price of each product. The net change in contract liabilities for a given period is reported as an increase or decrease to sales.current assets.

~~AMERICAN OUTDOORS~~SMITH & WESSON BRANDS, ~~CORPORATION~~INC. AND SUBSIDIARIES

For the Three ~~and Six~~ Months Ended ~~October~~July 31, ~~2019~~2020 and ~~2018~~2019

Our product sales are generally sold free on board, or FOB, shipping point and provide payment terms to most commercial customers ranging from 20 to 90 days of product shipment with a discount available in certain cases for early payment. For contracts with discounted terms, we determine the transaction price upon establishment of the contract that contains the final terms of the sale, including the 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. In some instances, we provide longer payment terms, particularly as it relates to our hunting dating programs, which represent payment terms due in the fall for certain orders of hunting products received in the spring and summer. 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.

Recently Issued Accounting Standards – ~~In February 2016, the Financial Accounting Standards Board, or FASB issued ASU 2016-02,~~ ~~Leases~~ (Topic 842), or ASU 2016-02, which amends the existing guidance to require lessees to recognize right-of-use assets and lease liabilities in a classified balance sheet. The most prominent among the changes in the standard is the requirement for lessees to recognize right-of-use assets and lease liabilities for those leases classified as operating leases under current U.S. GAAP. The requirements of this ASU are effective for financial statements for annual periods beginning after December 15, 2018, and early adoption is permitted. We utilized leasing software to assist us in the accounting and tracking of leases and used the optional transitional method allowed by ASU 2018-11, ~~Leases~~ (Topic 842) Targeted Improvements. Under this method, we applied the standard using the modified retrospective method with an adoption date of May 1, 2019. We elected to use the package of practical expedients, which permits us to not reassess certain lease contract provisions. We adopted ASU 2016-02 effective May 1, 2019 and recognized right-of-use assets of $11.5 million, and lease liabilities of $12.8 million. The difference between the right-of-use assets and the lease liabilities of $1.3 million is a result of the reclassification of deferred rent and lease incentive liabilities primarily relating to our real estate operating leases into the right-of use assets, which had no impact to retained earnings. See also Note 3 – ~~Leases, for more information.~~

In June 2016, the FASB issued ASU 2016-13, Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The new standard changes the impairment model for most financial assets that are measured at amortized cost and certain other instruments, including trade receivables, from an incurred loss model to an expected loss model and adds certain new required disclosures. Under the expected loss model, entities will recognize credit losses to be incurred over the entire contractual term of the instrument rather than delaying recognition of credit losses until it is probable the loss has been incurred. The requirements of this ASU are effective for financial statements for annual periods beginning after December 15, 2019, and early adoption is permitted. ~~While we are currently evaluating~~We adopted the ~~impact~~new standard on May 1, 2020 and the adoption of this ~~standard will~~ASU did not have a material impact on our condensed consolidated financial ~~statements, we do not expect that impact to be material.~~statements.

We lease certain of our real estate, machinery, photocopiers, and vehicles under non-cancelable operating lease agreements.

~~Operating~~We recognize expenses under our operating lease assets and liabilities ~~are recognized~~ 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, residual value guarantees, or restrictive covenants. For operating leases, we recognize expense ~~is recognized~~ 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. The execution of those renewal options is 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.

The amounts of assets and liabilities related to our operating and financing leases as of ~~October~~July 31, ~~2019 are~~2020 were as follows (in thousands):

During the three months ended July 31, 2020, wWee recorded ~~$928,000~~$809,000 of operating lease costs, of which ~~$279,000 were~~$215,000 related to short-term ~~$526,000~~leases and not recorded as right-of-use assets. We recorded $510,000 of financing lease amortization and ~~$518,000~~$524,000 of financing lease interest expense during the three months ended ~~October~~July 31, ~~2019. We~~2020. During the three months ended July 31, 2019, we recorded ~~$1.9~~$1.0 million of operating lease costs, of which ~~$479,000 were~~$200,000 related to short-term ~~$1.1 million~~leases, and not recorded as right-of-use assets. We recorded $535,000 of financing lease amortization and ~~$1.0 million~~$520,000 of financing lease interest expense during the ~~six~~three months ended ~~October~~July 31, 2019. As of ~~October~~July 31, ~~2019,~~2020, our weighted average lease term and weighted average discount rate for our operating leases was ~~4.6~~4.0 years and ~~4.5%~~4.6%, respectively. As of ~~October~~July 31, ~~2019,~~2020, our weighted average lease term and weighted average discount rate for our financing leases was ~~19.0~~18.2 years and 5.0%, respectively, and ~~consists~~consisted primarily of our national logistics facility located in Columbia, Missouri. 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.

Future lease payments for all our operating and finance leases for succeeding fiscal years is as follows (in thousands):

During the three ~~and six~~ months ended ~~October~~July 31, 2020 and 2019, the cash paid for amounts included in the measurement of the liabilities and the operating cash flows was $1.4 million ~~and $2.8 million, respectively.~~in both periods.

~~On May 1, 2018, we adopted ASU 2014-09~~ ~~Revenue from Contracts with Customers~~ (Topic 606), or ASU 2014-09, using the modified retrospective approach, and recorded a contract liability, included in accrued expenses in the condensed consolidated balance sheet, for outstanding performance obligations related to sales promotions. When evaluating our performance obligations, we disaggregate revenue based on major product lines, which correlate with our reportable segments disclosed in Note 12 — ~~Segment Reporting.~~ Also, domestic sales account for approximately 95% of our total net sales. There are no significant judgments or estimates used in the determination of performance obligations, and the transaction price for the performance obligations are allocated on a pro-rata basis. There are no other contract costs that need to be considered based on the nature of our performance obligations.

~~The following table outlines the impact of the adoption of ASU 2014-09 on revenue recognized during the six-month periods ended October 31, 2019 and 2018 (in thousands):~~

During the six months ended October 31, 2019, we recognized $22.3 million of deferred revenue, of which $10.5 million was previously deferred as of April 30, 2019, as the performance obligations relating to sales promotions were satisfied. This recognition of revenue was partially offset by $15.6 million of additional deferred revenue for outstanding performance obligations relating to sales promotions that have not been satisfied, which was recorded to accrued expenses in the condensed consolidation balance sheet. This resulted in a $6.7 million net increase in revenue during the six months ended October 31, 2019. We estimate that revenue from the outstanding performance obligations as of October 31, 2019 will be recognized during fiscal 2020.

During the six months ended October 31, 2018, we recognized $26.3 million of revenue previously deferred, most of which was deferred as of May 1, 2018, the date we adopted ASU 2014-09, as the performance obligations relating to sales promotions were satisfied. This recognition of revenue was partially offset by $12.0 million of additional deferred revenue for outstanding performance obligations relating to sales promotions that have not been satisfied, which was recorded to accrued expenses in the condensed consolidated balance sheet. This resulted in a $14.3 million net increase in revenue during the six months ended October 31, 2018.

The changes in the carrying amount of goodwill for the three ~~and six~~ months ended ~~October~~July 31, ~~2019~~2020 by reporting segment were as ~~follows:~~follows (in thousands):

See Note 1211 — Segment Reporting for more detail on segment financial information.

~~AMERICAN OUTDOORS~~SMITH & WESSON BRANDS, ~~CORPORATION~~INC. AND SUBSIDIARIES

For the Three ~~and Six~~ Months Ended ~~October~~July 31, ~~2019~~2020 and ~~2018~~2019

The following table presents a summary of intangible assets as of ~~October~~July 31, ~~2019~~2020 and April 30, ~~2019~~2020 (in thousands):

	October 31, 2019							April 30, 2019							July 31, 2020							April 30, 2020
	Gross							Gross							Gross							Gross
	Carrying		Accumulated			Net Carrying		Carrying		Accumulated			Net Carrying		Carrying		Accumulated			Net Carrying		Carrying		Accumulated			Net Carrying
	Amount		Amortization			Amount		Amount		Amortization			Amount		Amount		Amortization			Amount		Amount		Amortization			Amount
Customer relationships	$	92,560	$	(47,312	)	$	45,248	$	92,560	$	(41,643	)	$	50,917	$	92,560	$	(55,341	)	$	37,219	$	92,560	$	(52,981	)	$	39,579
Developed technology		21,230		(11,454	)		9,776		21,230		(10,428	)		10,802		21,788		(13,186	)		8,602		21,788		(12,705	)		9,083
Patents, trademarks, and trade names		57,747		(31,399	)		26,348		57,477		(28,479	)		28,998		57,880		(35,682	)		22,198		57,837		(34,320	)		23,517
Backlog		1,150		(1,150	)		—		1,150		(1,150	)		—		1,150		(1,150	)		—		1,150		(1,150	)		—
		172,687		(91,315	)		81,372		172,417		(81,700	)		90,717		173,378		(105,359	)		68,019		173,335		(101,156	)		72,179
Patents in progress		964		—			964		897		—			897		1,393		—			1,393		1,145		—			1,145
Total definite-lived intangible assets		173,651		(91,315	)		82,336		173,314		(81,700	)		91,614		174,771		(105,359	)		69,412		174,480		(101,156	)		73,324
Indefinite-lived intangible assets		226		—			226		226		—			226		430		—			430		430		—			430
Total intangible assets	$	173,877	$	(91,315	)	$	82,562	$	173,540	$	(81,700	)	$	91,840	$	175,201	$	(105,359	)	$	69,842	$	174,910	$	(101,156	)	$	73,754

We amortize intangible assets with determinable lives over a weighted-average period of approximately five years. The weighted-average periods of amortization by intangible asset class is approximately five years for customer ~~relationships,~~relationships; six years for developed ~~technology,~~technology; and five years for patents, trademarks, and trade names. Amortization expense, excluding amortization of deferred financing costs, amounted to ~~$4.8~~$4.2 million and ~~$5.5~~$4.8 million for the three months ended ~~October~~July 31, ~~2019~~2020 and ~~2018, respectively. Amortization expense, excluding amortization of deferred financing costs, amounted to $9.7 million and $11.0 million for the six months ended October 31,~~ 2019, ~~and 2018,~~ respectively.

Estimated amortization expense of intangible assets for the remainder of fiscal ~~2020~~2021 and succeeding fiscal years is as follows (in thousands):

~~Credit Facilities~~ – On June 15, 2015, we and certain of our domestic subsidiaries entered into an unsecured credit facility, or the Credit Agreement, with TD Bank, N.A. and other lenders, or the Lenders, which included a $175.0 million revolving line of credit, or the Revolving Line, and a $105.0 million term loan, or the Term Loan, of which $78.2 million remained outstanding as of October 31, 2019. The Revolving Line provides for availability for general corporate purposes, with borrowings to bear interest at a variable rate equal to LIBOR or prime plus an applicable margin based on our consolidated leverage ratio, at our election. On October 27, 2016, we entered into a second amendment to our Credit Agreement, or the Second Amendment, which, among other things, increased the Revolving Line to $350.0 million, increased the option to expand the credit commitment to an additional $150.0 million, and extended the maturity of the Revolving Line from June 15, 2020 to October 27, 2021. On November 22, 2019, we entered into a fifth amendment to our Credit Agreement, or the Fifth Amendment, which, among other things, provides the Lenders’ consent to the spin-off of the Outdoor ProductsSMITH & Accessories business, provided that certain financial conditions are satisfied, including (x) granting the Lenders security interest in the assets of the remaining business, (y) reducing the Revolving Line to $250.0 million at the time of the spin-off, and (z) reducing the option to expand the credit agreement to $50.0 million at the time of the spin-off. Other than the changes described in the Second and Fifth Amendments, we otherwise remain subject to the terms of the Credit Agreement, as described below.

For the Three ~~and Six~~ Months Ended ~~October~~July 31, ~~2019~~2020 and ~~2018~~2019

Credit Facilities — On August 24, 2020, we and certain of our direct and indirect Domestic Subsidiaries entered into an amended and restated credit agreement, or the Amended and Restated Credit Agreement, with certain lenders; 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 amended and restated that certain Credit Agreement, dated as of June 15, 2015, by and among us, certain of our direct and indirect Domestic Subsidiaries, the lenders party thereto, and TD Bank, N.A., as administrative agent and swingline lender, as previously amended. The Amended and Restated Credit Agreement is currently unsecured; however, should any Springing Lien Trigger Event occur, we and certain of our direct and indirect Domestic Subsidiaries would be required to enter into certain documents that create in favor of TD Bank, N.A., as administrative agent, and the lenders party to such documents a legal, valid, and enforceable ‎first priority Lien on the Collateral described therein.

The Amended and Restated Credit Agreement provides for a revolving line of credit of $100.0 million at any one time, or the Revolving Line. The Revolving Line bears interest at either the Base Rate or LIBOR rate, plus an applicable margin based on our consolidated leverage ratio. The 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 bears interest at the Base Rate, plus an applicable margin based on our consolidated leverage ratio. Subject to the satisfaction of certain terms and conditions described in the 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 August 24, 2025, or the date that is six months in advance of the earliest maturity of any Permitted Notes under the Amended and Restated Credit Agreement.

As of ~~October~~July 31, ~~2019,~~2020, we had ~~$50.0~~$25.0 million of borrowings outstanding on the Revolving Line, which bore interest at ~~4.13%~~1.67%, which is equal to the LIBOR rate plus an applicable margin.

The ~~Term Loan, which bears interest at~~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 ~~variable rate, requires principal payments of $6.3 million per annum plus interest, payable quarterly. The Term Loan was paid in full on November 19, 2019 with proceeds from the Revolving Line.~~

We were required to obtain interest rate protection on the Term Loan covering not less than 75% of the aggregate outstanding principal balance of the Term Loan. Accordingly, on June 18, 2015, we entered into an interest rate swap agreement, which expires on June 15, 2020, that covered 100% of the $105.0 million of floating rate debt. On July 6, 2015, we executed an interest rate swap pursuant to such agreement, which requires us to pay interest atminimum consolidated fixed charge coverage ratio and a ~~defined rate of 1.56% while receiving interest at a defined variable rate equal to the one-month LIBOR rate. This swap, when combined with the applicable margin based on our~~maximum consolidated leverage ~~ratio, effectively fixed our interest rate on the Term Loan, which is subject to change based on changes in our consolidated leverage~~ ratio. ~~As of October 31, 2019, our interest rate on the Term Loan was 4.29%.~~

As of October 31, 2019, the interest rate swap was considered effective and had no effect on earnings. The fair value of the interest rate swap on October 31, 2019 was an asset of $92,000, which was recorded in other assets on our condensed consolidated balance sheet. In accordance with the repayment of the Term Loan on November 19, 2019, the interest rate swap was terminated causing a small gain in the amount of approximately $40,000.

~~2020 Senior Notes~~ ~~– On February 28, 2018, we issued an aggregate of $75.0 million of~~the 2020 Senior Notes to various institutional investors pursuant to the terms and conditions of an indenture, or the 2020 Senior Notes Indenture, and purchase agreements. The 2020 Senior Notes bear interest at a rate of 5.000% per annum payable on February 28 and August 28 of each year, beginning on August 28, 2018. We incurred $158,000 of debt issuance costs related to the issuance of the 2020 Senior Notes.

As of February 28, 2019, we may, at our option, upon not less than 30 nor more than 60 days’ prior notice, redeem all or a portion of the 2020 Senior Notes at a redemption price of 100.000% of the principal amount of the 2020 Senior Notes to be redeemed plus accrued and unpaid interest as of the applicable redemption date. On December 5, 2019, we issued a notice of redemption to holders of our outstanding 5.000% Senior Notes that we intend to redeem all of our outstanding 5.000% Senior Notes on January 6, 2020, or the Redemption Date. The redemption price for the 5.000% Senior Notes will be 100% of the principal amount of the 5.000% Senior Notes, plus accrued and unpaid interest to, but not including, the Redemption Date.

The Credit Agreement for our credit facility contains financial covenants relating to maintaining maximum leverage and minimum debt service coverage. The 2020 Senior Notes Indenture contains a financial covenant relating to times interest earned.

Letters of Credit – At ~~October~~July 31, ~~2019,~~2020, we had outstanding letters of credit aggregating ~~$1.0 million.~~$2.7 million, which included a $1.5 million letter of credit to collateralize our captive insurance company.

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 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 condensed 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 ~~$43.8~~$65.3 million and ~~$41.0~~$125.4 million as of ~~October~~July 31, ~~2019~~2020 and April 30, ~~2019,~~2020, respectively. We utilized Level 1 of the value hierarchy to determine the fair values of these assets.

~~AMERICAN OUTDOORS~~SMITH & WESSON BRANDS, ~~CORPORATION~~INC. AND SUBSIDIARIES

For the Three ~~and Six~~ Months Ended ~~October~~July 31, ~~2019~~2020 and ~~2018~~2019

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:

The carrying value of our Term Loan approximated the fair value as of October 31, 2019 in considering Level 2 inputs within the hierarchy. The carrying value of our 2020 Senior Notes as of October 31, 2019 approximated the fair value in considering Level 2 inputs within the hierarchy as our 2020 Senior Notes are not frequently traded. The fair value of our interest rate swap was estimated by a third-party using inputs that are observable or that can be corroborated by observable market data, such as interest rate yield curves, and, therefore, is classified within Level 2 of the valuation hierarchy. For more information regarding the interest rate swap, refer to Note 6 — ~~Notes, Loans Payable, and Financing Arrangements~~.

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.

The acquisition-related contingent consideration liability represents the estimated fair value of additional future earn-outs payable for acquisitions of businesses that included earn-out clauses. The valuation of the contingent consideration will be evaluated on an ongoing basis and is based on management estimates and entity-specific assumptions, which are consideredWe currently do 0t have any Level 2 or Level 3 ~~inputs.~~financial assets or liabilities as of July 31, 2020.

~~In connection with the Gemtech acquisition, up to a maximum of $17.1 million may be paid contingent upon the cumulative~~ ~~three-year~~ ~~sales volume of Gemtech products. The valuation of this contingent consideration liability was established in accordance with ASC 805 —~~ ~~Business Combinations~~. During the six months ended October 31, 2019, we reduced the remaining fair value of this contingent liability by $100,000 to 0 because we confirmed the performance metrics were not achieved. This reduction was recorded in other income on the condensed consolidated statements of income/(loss).

The following table sets forth a summary of inventories, net of reserves, stated at lower of cost or net realizable value, as of ~~October~~July 31, ~~2019~~2020 and April 30, ~~2018~~2020 (in thousands):

The following table sets forth other accrued expenses as of ~~October~~July 31, ~~2019~~2020 and April 30, ~~2019~~2020 (in thousands):

(a) Decrease in accrued taxes other than income is due to the deferral of federal excise tax payments allowed by the Tax and Trade Bureau as a result of the COVID-19 pandemic as of April 30, 2020.

The following table provides a reconciliation of the net income/(loss) amounts and weighted average number of common and common equivalent shares used to determine basic and diluted ~~earnings~~earnings/(loss) per share for the three ~~and six~~ months ended ~~October~~July 31, ~~2019~~2020 and ~~2018~~2019 (in thousands, except per share data):

For the three months ended October 31, 2019, options to purchase 45,441 shares of common stock were excluded from the computation of diluted earnings per share because the effect would be antidilutive. All of our outstanding stock options and restricted stock units, or RSUs, were included in the computation of diluted earnings per share for the three months ended ~~October~~July 31, ~~2018. All~~2020. For the three months ended July 31, 2019, we excluded 3,340 shares of ~~our outstanding~~common stock ~~options and RSUs were included in~~from the computation of diluted earnings per share, ~~for~~because the ~~three and six months ended October 31, 2019 and 2018.~~effect would be antidilutive.

We have 2 incentive stock plans: the 2004 Incentive Stock Plan and the 2013 Incentive Stock Plan. New grants under the 2004 Incentive Stock Plan have not been made since the approval of the 2013 Incentive Stock Plan at our ~~September 23,~~ 2013 ~~annual meeting~~Annual Meeting of ~~stockholders.~~Stockholders. All new grants covering all participants are issued under the 2013 Incentive Stock Plan. Except in specific circumstances, grants vest over a period of ~~three or~~ four years, and stock options are exercisable for a period of 10 years from the date of grant. The ~~plan~~2013 Incentive Stock Plan also permits the grant of awards to non-employees, which our board of directors has authorized in the past.

The number of shares and weighted average exercise prices of stock options for the three ~~and six~~ months ended ~~October~~July 31, ~~2019~~2020 and ~~2018~~2019 were as follows:

The aggregate intrinsic value of outstanding and exercisable stock options as of ~~October~~July 31, ~~2019~~2020 and ~~2018 was $335,000 and $2.0 million, respectively. The aggregate intrinsic value of stock options exercised in the three and six months ended October 31,~~ 2019 was ~~$100,000.~~$212,400 and $770,000, respectively. The aggregate intrinsic value of the stock options exercised in the three ~~and six~~ months ended ~~October~~July 31, ~~2018~~2020 was ~~$154,000~~$2.8 million. There were 0 stock options exercised during the three months ended July 31, 2019. At July 31, 2020 and ~~$230,000, respectively. At October 31,~~ 2019, there was 0 unrecognized compensation expense relating to outstanding stock options.

We have an Employee Stock Purchase Plan, or ESPP, in which each participant is granted an option to purchase our common stock on each subsequent exercise date during the offering period (as such terms are defined in the ESPP) in accordance with the terms of the ESPP.

The total stock-based compensation expense, including stock options, purchases under our ESPP, RSUs, and performance-based RSUs, or PSUs, was ~~$3.0~~$1.0 million and ~~$4.0~~$1.6 million for the ~~six~~three months ended ~~October~~July 31, ~~2019~~2020 and ~~2018,~~2019, respectively. Stock-based compensation expense is included in cost of sales, sales and marketing, research and development, and general and administrative expenses.

We grant service-based RSUs to employees and directors. The awards are made at no cost to the recipient. An RSU represents the right to receive one share of our common stock and does not carry voting or dividend rights. Except in specific circumstances, RSU grants to employees vest over a period of four years with one-fourth of the units vesting on each anniversary of the grant date. We amortize the aggregate fair value of our RSU grants to compensation expense over the vesting period.

We grant PSUs to our executive officers and certain management employees who are not executive officers. The PSUs vest, and the fair value of such PSUs will be recognized, over the corresponding three-year performance period.

During the ~~six~~three months ended ~~October~~July 31, ~~2019,~~2020, we granted an aggregate of ~~252,911~~27,130 service-based ~~RSUs, including 137,271~~ RSUs to non-executive officer ~~employees and 115,640 RSUs to our directors.~~employees. Compensation expense related to grants of RSUs and PSUs was ~~$2.7 million~~$766,000 for the ~~six~~three months ended ~~October~~July 31, ~~2019.~~2020. During the ~~six~~three months ended ~~October~~July 31, ~~2019,~~2020, we cancelled ~~156,725~~63,700 PSUs as a result of the failure to satisfy the performance metric and ~~67,454~~8,062 service-based RSUs as a result of the service condition not being met. In connection with the vesting of RSUs, during the ~~six~~three months ended ~~October~~July 31, ~~2019,~~2020, we delivered common stock to our employees and directors, including our executive officers, with a total market value of ~~$1.9~~$2.9 million.

During the ~~six~~three months ended ~~October~~July 31, ~~2018,~~2019, we granted an aggregate of ~~191,085~~131,771 service-based ~~RSUs, including 141,576~~ RSUs to non-executive officer ~~employees and 49,509 RSUs to our directors.~~employees. Compensation expense related to grants of RSUs and PSUs was ~~$3.6~~$1.4 million for the ~~six~~three months ended ~~October~~July 31, ~~2018.~~2019. During the ~~six~~three months ended ~~October~~July 31, ~~2018,~~2019, we cancelled ~~112,000~~123,025 PSUs as a result of the failure to satisfy the performance metric and ~~16,363~~15,805 service-based RSUs as a result of the failure to satisfy the service condition. In connection with the vesting of RSUs, during the ~~six~~three months ended ~~October~~July 31, ~~2018,~~2019, we delivered common stock to our employees and directors, including our executive officers, with a total market value of ~~$2.2~~$1.7 million.

A summary of activity for unvested RSUs and PSUs for the ~~six~~three months ended ~~October~~July 31, ~~2019~~2020 and ~~2018~~2019 is as follows:

As of ~~October~~July 31, ~~2019,~~2020, there was ~~$6.2~~$3.6 million of unrecognized compensation expense related to unvested RSUs and PSUs. This expense is expected to be recognized over a weighted average remaining contractual term of ~~1.5~~1.7 years.

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 the defendants 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 May 2018, the District Court dismissed the complaint on the grounds of forum non conveniens. In June 2018, Gemini appealed the decision dismissing its complaint to the U.S. Court of Appeals for the Ninth Circuit, or the Ninth Circuit. On July 24, 2019, the Ninth Circuit reversed the dismissal, and remanded the case to the District Court to perform a traditional forum non conveniens analysis. On September 6, 2019, the parties stipulated that they do not contest that the venue is proper in the District of Idaho. On November 4, 2019, we filed an answer to ~~plaintiff’s~~Gemini’s complaint and a counterclaim against

Gemini and its stockholders at the time of the signing of the Asset Purchase Agreement. We believe the claims asserted in the complaint have no merit, and we intend to aggressively defend this action.

We are a defendant in 76 product liability cases and are aware of 5 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 on August 27, 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 trial court 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. On May 23, 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. On July 8, 2019, defendants filed a Petition to Transfer jurisdiction to the Indiana Supreme Court. Briefing was completed in the Indiana Supreme Court on August 5, 2019. On November 26, 2019, the Indiana Supreme Court denied our petition to transfer. The case ~~will now return~~was returned to the trial court.

In May 2018, we were named in an action related to the Parkland, Florida shooting, filed in the Circuit Court, Broward County, Florida, seeking a declaratory judgment that a Florida statute that provides firearm manufacturers and dealers immunity from liability when their legally manufactured and lawfully sold firearms are later used in criminal acts only applies to civil actions commenced by governmental agencies not private litigants. In August 2018, we moved to dismiss the complaint on the grounds that it seeks an impermissible advisory opinion. On December 6, 2018, the court granted defendants’ motion to dismiss without prejudice and granted plaintiffs leave to amend their complaint. On December 10, 2018, plaintiffs filed a Second Amended Complaint for Declaratory Relief. On December 13, 2018, defendants filed a Motion to Dismiss Plaintiffs’ Second Amended Complaint. On November 21, 2019, the court granted defendants’ motion to dismiss plaintiffs’ second amended complaint, with prejudice.

On July 31, 2019, our competitor, Sturm, Ruger & Co., Inc., filed a complaint and motion for preliminary injunction against us in the U.S. District Court, District of New Hampshire, seeking injunctive relief and damages. Plaintiff alleges trade dress infringement, involving our Thompson/Center brand T/CR22 rifle, as well as violation of the New Hampshire Consumer Protection Act. A hearing on plaintiff’s motion for preliminary injunction was held in November 2019. On December 2, 2019, plaintiff withdrew its motion for preliminary injunction.

In August 2019, Primus Group, LLC filed an action in the U.S. District Court for the Southern District of Ohio Eastern Division against us and other ~~firearms~~firearm manufacturers, alleging Racketeer Influenced Corrupt Organizations Act (RICO) violations, racketeering enterprise, and intentional misrepresentation. Plaintiff, which operates as an “entertainment venue” in Columbus, Ohio, purports to bring this action on behalf of “all persons entitled to freely attend schools, shopping locations, churches, entertainment venues, and workplaces in the United States without the intrusion of individuals armed with assault weapons.” In addition to compensatory and punitive damages, plaintiff seeks preliminary and permanent injunctive relief enjoining the distribution and sale of “assault weapons.” On August 20, 2019, the court denied without prejudice plaintiff’s Motion for Temporary Restraining Order. On September 3, 2019, defendants moved to dismiss plaintiff’s complaint. On September 16, 2019, plaintiff filed an amended complaint, adding claims of public nuisance, negligent design, and failure to warn. On October 9, 2019, the U.S. District Court granted defendants’ motion, dismissing the case in its entirety. On October 11, 2019, plaintiff filed a notice of appeal with the U.S. Court of Appeals for the Sixth Circuit, or the Sixth Circuit. On November 1, 2019, the Sixth Circuit dismissed plaintiff’s appeal for failure to pay the required fee. On November 4, 2019, plaintiff-appellant filed, and the Sixth Circuit granted, a motion to reinstate the case. ~~Appellant’s brief is due~~However, on March 13, 2020, at the request of the Appellant and based on the death of co-counsel, the Sixth Circuit held the case in abeyance and ordered that the Appellant file a status report every 30 days. On April 14, 2020, the Appellant filed a Status Report stating that it intended to reactivate the case or dismiss the appeal within 60 days. The Appellant has filed no further Status Reports.

We are a defendant in a putative class proceeding before the Ontario Superior Court of Justice in Toronto, Canada. The action was filed on December 16, 2019. ~~Our response is due by January~~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 2 victims of a shooting that took place in Toronto on July 22, 2018, and their family members. One victim was shot and injured during the shooting. The other suffered unspecified injuries while fleeing the shooting. The plaintiffs are seeking 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. On July 13, ~~2020.~~2020, we filed a Notice of Motion for an order striking the claim and dismissing the action in its entirety.

In May 2020, we were named in an action related to the Chabad of Poway synagogue shooting that took place on April 27, 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. We intend to vigorously oppose the proceedings.

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.

John Pidcock, as trustee of the ASPC Creditor Trust (appointed under the plan of reorganization of AcuSport Corp., or AcuSport, as debtor in possession under chapter 11 of the U.S. Bankruptcy Code), is the plaintiff in 2 separate actions against us in the U.S. Bankruptcy Court for the Southern District of Ohio. The first seeks recovery of alleged preferential transfers received by us from AcuSport in the aggregate amount of $4.2 million. The second seeks turnover of goods allegedly owed to AcuSport by us under one or more of our promotional programs in the amount of $1.5 million. We have filed answers to both complaints denying all material allegations and asserting affirmative defenses. We believe we have strong defenses to these actions and intend to continue to vigorously defend them.

In addition, from time to time, we are involved in lawsuits, claims, investigations, and proceedings, including commercial, environmental, 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 ~~$18.6~~$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 ~~as described below,~~ are a reasonable quantitative measure of the cost to us of product liability cases and claims.

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.

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.

At this time, an estimated range of reasonably possible additional losses relating to unfavorable outcomes cannot be made.

We report our results of operations in 2 segments: (1) ~~Firearms~~Firearm (which includes ~~Firearms~~Firearm and Manufacturing Services divisions) and (2) Outdoor Products & Accessories. Our two segments are defined based on the reporting and review process used by the chief operating decision maker, our Chief Executive Officer. The ~~Firearms~~Firearm segment has been determined to be a single operating segment and reporting segment based on our reliance on production metrics, such as gross margin per unit produced, units produced per day, incoming orders per day, and revenue produced by trade channel, all of which are particular to the ~~Firearms~~Firearm segment. The Outdoor Products & Accessories segment is evaluated by a measurement of incoming orders per day and sales and gross margin by customer and brand.

~~AMERICAN OUTDOORS~~SMITH & WESSON BRANDS, ~~CORPORATION~~INC. AND SUBSIDIARIES

For the Three ~~and Six~~ Months Ended ~~October~~July 31, ~~2019~~2020 and ~~2018~~2019

The ~~Firearms~~Firearm segment includes our firearms, services, and other components, which we manufacture or provide at our facilities in Springfield, Massachusetts; Houlton, Maine; and Deep River, Connecticut, and our firearm products, which we develop, assemble, and market in our Springfield, Massachusetts facility. The Outdoor Products & Accessories segment includes our accessories products, which we develop, source, market, and distribute at our facilities in Columbia, Missouri, and our electro-optics products, which we develop, market, and assemble in our Wilsonville, Oregon facility. We report operating costs based on the activities performed within each segment.

Segment assets are those directly used in or clearly allocable to a reportable segment’s operations. Assets by business segment are presented in the following table as of ~~October~~July 31, ~~2019~~2020 and April 30, ~~2019~~2020 (in thousands):

Results by business segment are presented in the following tables for the three months ended ~~October~~July 31, ~~2019~~2020 and ~~2018~~2019 (in thousands):

~~Results by business segment are presented in the following tables for the six months ended October 31, 2019 and 2018 (in thousands):~~

On November ~~12,~~13, 2019, ~~our Board of Directors approved~~we announced that we were proceeding with a plan to spin-off our outdoor products and accessories business ~~as a tax-free stock dividend to our stockholders. Pending final approval of our Board of Directors, customary regulatory approvals,~~ and ~~tax and legal considerations, this spin-off is expected to be completed in the second half of calendar 2020 and would~~ create ~~two~~an independent publicly traded ~~companies: Smith & Wesson Brands, Inc. (which would encompass~~company to conduct that business. On August 24, 2020, or the Distribution Date, at 12:01 a.m. Eastern Time, the previously announced separation, or the Separation, of our ~~firearm business) and~~wholly owned subsidiary, American Outdoor Brands, Inc. ~~(which would encompass~~, a Delaware corporation, or AOUT, from our company was completed. The Separation was achieved through the transfer

of all the assets and legal entities, subject to any related liabilities, associated with our outdoor products and accessories ~~business).~~

~~The purpose~~business to AOUT, which we refer to as the Transfer, and the distribution of 100% of the ~~spin-off is~~AOUT outstanding capital stock to ~~enable~~holders of our common stock as of the ~~management team~~close of ~~each company~~business on August 10, 2020, or the Record Date, which we refer to focus on its specific strategies, including (1) structuring its business to take advantage of growth opportunities in its specific markets; (2) tailoring its business operation and financial model to its specific long-term strategies; and, (3) aligning its external financial resources, such as ~~stock, access to markets, credit, and insurance factors, with its particular type of business.~~the Distribution. In connection with the ~~proposed spin-off,~~Distribution, our stockholders received one share of AOUT common stock for every 4 shares of our common stock held as of the close of business on the Record Date. Following the Distribution, AOUT became an independent, publicly traded company, and we ~~expect~~retain 0 ownership interest in AOUT. During the three months ended July 31, 2020, we spent $3.6 million related to ~~incur restructuring charges of approximately $9.0 million~~the Separation.

Our common stock continues to ~~$12.0 million relating to legal, regulatory, and financial services, reorganization and restructuring costs, and start-up costs for~~trade on the Nasdaq Global Select Market under the new ~~company beginning~~ticker symbol “SWBI,” and AOUT is now trading shares of common stock listed on the Nasdaq Global Market under the ticker symbol “AOUT.” Beginning in our second quarter of fiscal 2020, the outdoor products and ~~concluding in~~accessories business historical financial data will be recorded as discontinued operations. Please refer to our form 8-K filed on August 26, 2020 for more information regarding the ~~second half~~Separation.

On August 26, 2020, our Board of ~~calendar~~Directors authorized a regular quarterly dividend for shareholders of $0.05 per share. The dividend for the three months ended July 31, 2020 will be for shareholders of record as of market close on September 17, 2020 and is payable on October 1, 2020.

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

Please refer to the Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the fiscal year ended April 30, ~~2019~~2020 and our unaudited condensed consolidated financial statements included in Item 1 of this Quarterly Report on Form 10-Q. This section sets forth key objectives and performance indicators used by us as well as key industry data tracked by us.

We report our results of operations in 2 segments: (1) ~~Firearms~~Firearm and (2) Outdoor Products & Accessories. Subsequent to the spin-off of our outdoor products and accessories business on August 24, 2020, or the Separation, we will no longer report our operations in two segments.

Our operating results for the three months ended ~~October~~July 31, ~~2019~~2020 included the following:

~~Our operating results for the six months ended October 31, 2019 included the following:~~

Consolidated Net Sales and Gross Profit – For the Three Months Ended ~~October~~July 31, ~~2019~~2020

The following table sets forth certain information regarding consolidated net sales and gross profit for the three months ended ~~October~~July 31, ~~2019~~2020 and ~~2018~~2019 (dollars in thousands):

Consolidated net sales ~~decreased $7.3~~increased $154.3 million, or ~~4.5%~~124.8%, ~~from the comparable quarter last year~~primarily because of ~~lower shooting~~increased consumer demand for the majority of our products in our Firearm segment and ~~hunting accessory product sales to two significant customers~~increased revenue from our e-commerce channel in our Outdoor Products & Accessories ~~segment as well as lower sales of modern sporting rifles and bolt action rifles in our Firearms~~ segment. ~~As described above, our sales were favorably impacted by a change in federal excise tax treatment resulting in an $8.1 million increase in revenue as compared to the comparable quarter last year.~~

Consolidated gross margin ~~was negatively impacted by 180~~increased 330 basis points ~~as a result of the change in federal excise tax treatment mentioned above. Excluding that impact, consolidated gross margins decreased by 50 basis points from~~over the comparable quarter last year primarily because of lower promotional product spending in our Firearm segment because of the ~~impact of lower sales volumes~~increased demand in the consumer market that eliminated the need for promotional programs in the quarter, and favorable manufacturing fixed cost absorption. Consolidated gross margin was also favorably impacted by customer mix, product mix, and favorable manufacturing fixed-cost absorption in our Outdoor Products & Accessories ~~segment to two significant customers for products that typically have higher gross margins, higher promotional product discounts, and unfavorable manufacturing fixed-cost absorption in our Firearms~~ segment. Favorable impacts to gross margin include reduced manufacturing spending and inventory valuation adjustments in our Firearms segment. Despite the lower gross margin in our Outdoor Products & Accessories segment, this segment favorably impacted total consolidated gross margin by 440 basis points for the three months ended October 31, 2019.

~~Firearms~~Firearm Segment Revenue and Gross Profit – For the Three Months Ended ~~October~~July 31, ~~2019~~2020

The following tables set forth certain information regarding ~~Firearms~~Firearm revenue and gross profit for the three months ended ~~October~~July 31, ~~2019~~2020 and ~~2018~~2019 (dollars in thousands):

The following table sets forth certain information regarding firearm units shipped by trade channel for the three months ended ~~October~~July 31, ~~2019~~2020 and ~~2018~~2019 (units in thousands):

Revenue for our handguns increased ~~$9.6~~$95.5 million, or ~~13.4%~~136.9%, over the comparable quarter last year. ~~Increases~~The increase in revenue was due to ~~our revenue included~~increased demand for all major product lines driven by an increased consumer interest in firearms, likely resulting from continued concerns regarding the ~~change~~COVID-19 pandemic, recent events that have raised fears about personal protection, and uncertainty regarding the possibility of increased firearm regulation in ~~federal excise tax treatment, which had a $5.9 million favorable impact on handgun revenue,~~relation to the pre-planned shipment of a new handgun into our sales channel, and increased shipments of our Performance Center branded products, partially offset by lower shipments of our large frame M&P branded polymer pistols.upcoming political election. Unit shipments into the sporting goods consumer channel increased ~~14.2%~~121.6% over the comparable quarter last year primarily because of increased promotional activity for our concealed carry M&P branded polymer pistols, increased shipments of new products in anticipation of new product launches scheduled for our third fiscal quarter, anddue to increased consumer firearm demand, as indicated by a ~~14.8%~~141.3% increase over the comparable quarter last year in total adjusted handgun background checks as reported to the National Instant Criminal Background Check Systems, or NICS, which we believe is a proxy for overall consumer demand. We believe that our percentage increase in sales in handguns likely did not match the increase in NICS because of a significant decline of channel inventory during the quarter and capacity constraints related to the significant increase in consumer demand.

Revenue for our long guns ~~decreased $5.9~~increased $37.2 million, or ~~19.7%~~224.4%, ~~from~~over the comparable quarter last ~~year, in spite of a $2.2 million~~year. The increase in revenue ~~due to the change in federal excise tax treatment,~~was primarily because of ~~lower bolt action~~increased consumer demand for our M&P modern sporting rifles. This was partially offset by a decrease in hunting rifle sales as a result of ~~clearing~~a bulk sale to clear discontinued products from the channel in ~~anticipation of new product introductions, as well as lower demand for our M&P branded modern sporting rifles due to pricing pressure in~~ the ~~market.~~prior year.

Other products and services revenue ~~decreased $1.8~~increased $1.7 million, or ~~17.5%~~19.1%, ~~from~~over the comparable quarter last year, primarily because of ~~lower~~increased sales of component parts and handcuffs, ~~and~~partially offset by lower sales in specialty services.

New products in our ~~Firearms~~Firearm segment, defined as any new SKU not shipped in the comparable quarter last year, represented ~~34.7%~~11.8% of firearm revenue for the three months ended ~~October~~July 31, ~~2019~~2020 and included a new concealed carry M&P branded polymer pistol, many new product line extensions, and promotional product bundle kits for our M&P, Performance Center, and Thompson/Center Arms branded products.

Gross margin for the three months ended ~~October~~July 31, ~~2019~~2020 for our ~~Firearms segment was negatively impacted by 220 basis points as a result of the change in federal excise tax treatment. Excluding that impact, gross margin for our firearms~~Firearm segment increased ~~by 190~~310 basis points over the comparable quarter last year, primarily because of ~~shipping costs that were included in~~lower promotional product spending, favorable manufacturing fixed cost ~~of sales in the comparable quarter last year that are now included in operating expenses due to the start-up of our new distribution center, lower manufacturing spending,~~absorption, and favorable inventory valuation adjustments related to the release of year end manufacturing variance accruals. Year-end manufacturing variances are amortized over the first inventory turn in the year following capitalization and can be favorable or unfavorable based upon a number of factors, including production levels, spending, raw material costs, and labor. The favorable impacts to Firearms gross marginprice increases. These increases were partially offset by unfavorable inventory valuation adjustments and increased ~~promotional product discounts.~~manufacturing spending.

Firearm inventory balances ~~increased $2.1~~decreased $23.8 million during the three months ended ~~October~~July 31, ~~2019 primarily because~~2020 as a result of ~~the change in federal excise tax treatment. While inventory levels, both internally and in the distribution channel, in excess of demand may negatively impact future operating results, it is difficult~~our ability to forecast the potential impact of distributor inventories on future revenue and income since demand is impacted by many factors, including seasonality, new product introductions, news events, political events, andmeet increased consumer ~~preferences.~~demand.

Outdoor Products & Accessories Segment Revenue and Gross Profit – For the Three Months Ended ~~October~~July 31, ~~2019~~2020

The following table sets forth certain information regarding Outdoor Products & Accessories segment revenue for the three months ended ~~October~~July 31, ~~2019~~2020 and ~~2018~~2019 (dollars in thousands):

~~Revenue~~For the three months ended July 31, 2020, revenue for our Outdoor Products & Accessories segment increased $17.4 million, or 52.3%, over the comparable quarter last year, primarily because of higher demand for the majority of our products, which we believe was driven by increased consumer interest in self-protection and outdoor activities. In addition, there were several factors we believe are related to the COVID-19 pandemic, such as increased participation in outdoor recreation activities that we believe was heightened due to state-mandated travel restrictions, increased foot traffic after the reopening of retail locations that were previously ordered to be closed, and our ability to replenish retailer inventory after non-essential product orders were halted in our fourth fiscal quarter that had a positive impact on our revenue for the three months ended ~~October~~July 31, ~~2019 decreased $8.1 million, or 14.6%, from~~2020. Revenue in our e-commerce channel increased over the comparable quarter last ~~year. Revenue declined~~year, that we believe resulted from a shift in consumer preference during the current period to online retailers and increases in our own direct-to-consumer business. Sales in our traditional channels, which include retailers with physical brick and mortar stores, increased over the comparable quarter last year primarily because of the reasons described above. In addition, feedback from certain of our large customers seems to indicate significant growth over the comparable quarter last year, reflecting strong consumer demand for our products in the channel. The increase in revenue was partially offset by $2.6 million lower inter-segment revenue and a previously communicated decline in sales of our branded camping accessory products due to one large retailer accelerating a strategy towards its own private label brand.

New products in our Outdoor Products & Accessories segment, defined as ~~a result of lower shooting and hunting accessory product sales as a result of large discount orders that occurred~~any new SKU not shipped in the comparable quarter last year, ~~from two significant customers that did not repeat in the current year quarter. Despite this uneven order cadence, point~~represented 10.2% of ~~sale data continues to indicate strong demand for our products at retail.~~

~~New products represented 17.6% of Outdoor Products & Accessories segment~~ revenue for the three months ended ~~October~~July 31, ~~2019 and included over 300~~2020. Our Outdoor Products & Accessories segment has a history of introducing approximately 250 to 350 new ~~products.~~SKUs each year, the majority of which are introduced late in our third fiscal quarter.

Gross margin for the three months ended ~~October~~July 31, ~~2019~~2020 for our Outdoor Products & Accessories segment ~~decreased 6.5% from~~increased 320 basis points over the comparable quarter last year, primarily because of ~~unfavorable customer, product, and~~ channel mix, ~~with~~product mix, and lower sales to two significant customers that typically result in higher gross margins, as well as lower production of electro-optics units that resulted in the corresponding unfavorable manufacturing fixed-cost absorption. Gross margin was also negatively impactedpromotion expenses from increased demand, partially offset by higher tariff ~~costs on imported goods.~~costs.

~~Outdoor Products & Accessories inventory balances remained relatively flat during the three months ended October 31, 2019.~~

~~Consolidated Net Sales and Gross Profit – For the Six Months Ended October 31, 2019~~

~~The following table sets forth certain information regarding consolidated net sales and gross profit for the six months ended October 31, 2019 and 2018 (dollars in thousands):~~

Consolidated net sales decreased $22.5 million, or 7.5%, from the prior year comparable period because of lower demand for revolvers and modern sporting rifles and a shift in product mix in our Firearms segment as well as lower shooting, hunting, and survival equipment sales in our Outdoor Products & Accessories segment. As described above, our sales were favorably impacted by the change in our federal excise tax treatment, resulting in a $10.6 million increase in revenue over the prior year comparable period.

Consolidated gross margin was negatively impacted by 140 basis points as a result of the change in federal excise tax treatment mentioned above. Excluding that treatment, consolidated gross margin increased 50 basis points from the prior year comparable period, primarily because of favorable inventory valuation adjustments and lower manufacturing spending in our Firearms segment. Unfavorable impacts included lower margin contribution from the Outdoor Products & Accessories segment and higher promotional product discounts and unfavorable manufacturing fixed-cost absorption in our Firearms segment. Outdoor Products & Accessories gross margin was also negatively impacted by lower sales volumes to two significant customers, that typically has higher gross margins, and unfavorable product mix. Despite the lower gross marginInventory in our Outdoor Products & Accessories segment ~~this segment favorably impacted total consolidated gross margin by 300 basis points for~~increased $9.1 million during the ~~six~~three months ended ~~October~~July 31, ~~2019.~~

~~Firearms Segment Revenue and Gross Profit – For the Six Months Ended October 31, 2019~~

~~The following tables set forth certain information regarding Firearms revenue and gross profit for the six months ended October 31, 2019 and 2018 (dollars in thousands):~~

~~The following table sets forth certain information regarding firearm units shipped by trade channel for the six months ended October 31, 2019 and 2018 (units in thousands):~~

~~Revenue for~~2020. Items impacting our handguns increased $3.6 million, or 2.5%, as a result of the change in the federal excise tax treatment mentioned above. Excluding this change, revenue for our handguns decreased $4.4 million, or 3.0%, from the prior year comparable period primarily because of increased promotional activity and a shift in mix to lower priced products. Favorable impacts to our handgun revenueinventory included a ~~pre-planned shipment of a new handgun into our sales channel that we plan~~planned inventory build to ~~launch in our third fiscal quarter combined with higher Performance Center branded product sales. Although adjusted background checks for handguns reported~~support increased demand leading up to the ~~National Instant Criminal Background Check Systems, or NICS, which is a proxy for overall consumer demand,~~fall hunting and holiday shopping seasons, the resolution of COVID-19 related supply chain issues that resulted in increased ~~8.4% compared with the prior year comparable period, we believe~~order fulfillment of our ~~outperformance of adjusted NICS in prior fiscal quarters~~inventory, additional planned purchases to help mitigate potential future supply chain disruptions, and ~~a continued increase in channel inventories during the current quarter likely negatively impacted orders and our results for the current fiscal year.~~

~~Revenue for our long guns decreased $10.8~~million, or 21.0%, from the prior year comparable period, in spite of a $2.5 million increase in revenue due to a change in when we are assessed federal excise tax, primarily because of lower bolt action rifle sales as a result of clearing discontinued products from the channelan inventory build in anticipation of new product introductions ~~as well as lower demand for our M&P branded modern sporting rifles due to pricing pressure~~later in the ~~market.~~

~~Other products and services revenue decreased $705,000, or 3.8%, from the prior year comparable period, primarily because of lower sales of component parts and handcuffs.~~

New products in our Firearms segment represented 19.3% of firearm revenue for the six months ended October 31, 2019 and included many new product line extensions and promotional products bundle kits for our M&P, Performance Center, and Thompson/Center Arms branded products.

Gross margin for the six months ended October 31, 2019 for our Firearms segment was negatively impacted 170 basis points as a result of the change in federal excise tax treatment mentioned above. Excluding that treatment, gross margin for our firearms segment increased by 330 basis points over the prior year comparable period,primarily because of shipping costs that were included in cost of sales in the comparable quarter last year that are now included in operating expenses due to the start-up of our new distribution center, favorable inventory valuation adjustments related to the release of year end manufacturing variance accruals, whichfiscal year. These increases were partially offset by increased ~~standards related~~sales and improved order cadence, which improved inventory turns. With regard to ~~material~~concerns surrounding COVID-19, and ~~labor cost increases, combined with improved~~based on our understanding of the current situation, it is possible that worsening of conditions or increased fears relating to the pandemic could have a renewed and prolonged effect on manufacturing ~~fixed cost absorption, lower manufacturing spending,~~or employment in China, travel to and ~~price increases~~from China, or other restrictions on imports – all of which ~~favorably impacted Firearms gross margin by 5.2%. These favorable impacts to Firearms gross margin were partially offset by increased promotional product discounts.~~

~~Outdoor Products & Accessories Segment Revenue~~could have a longer-term effect on our sales and ~~Gross Profit – For the Six Months Ended October 31, 2019~~

~~The following table sets forth certain information regarding Outdoor Products & Accessories segment revenue for the six months ended October 31, 2019 and 2018 (dollars~~profitability in ~~thousands):~~

Revenue for our Outdoor Products & Accessories segment for the six months ended October 31, 2019 decreased $12.2 million, or 13.1%, from the prior year comparable period. Revenue decreased primarily as a result of lower shooting and hunting accessory and survival equipment sales to two significant customers. The decline in revenue was partially offset by higher cutlery revenue that we believe was due to market acceptance for newly introduced products over the past several years and inorganic revenue in electro-optics.

~~New products represented 18.8% of Outdoor Products & Accessories segment revenue for the six months ended October 31, 2019.~~

Gross margin for the six months ended October 31, 2019 for our Outdoor Products & Accessories segment decreased 9.5% from the prior year comparable period primarily because of lower sales to two significant customers that typically result in higher gross margins and changes in customer and channel mix. Gross margin was also negatively impacted by higher tariff costs on imported goods.

The following table sets forth certain information regarding operating expenses for the three months ended ~~October~~July 31, ~~2019~~2020 and ~~2018~~2019 (dollars in thousands):

~~Research and development expenses decreased $263,000 primarily as a result of decreased compensation related expenses.~~ Selling, marketing, and distribution expenses increased ~~$4.1~~$2.5 million ~~partially as a result of~~over the ~~start-up of our new distribution center during the first quarter of fiscal 2020, which included approximately $1.1 million of shipping costs that would have been included in cost of sales in the~~prior year comparable quarter, ~~last year as well as additional costs related to compensation and benefits, depreciation, property taxes, and security. In addition,~~primarily because of increased co-op advertising expenses tofor strategic customers, ~~in the Firearms segment~~increased compensation-related expenses, and ~~additional~~

~~targeted customer promotions resulted in~~ increased ~~spending over the comparable quarter last year.~~freight-related expenses. This increased spending was partially offset by lower ~~management incentive compensation costs.~~travel and entertainment expenses due to COVID-19 and decreased advertising expenses. General and administrative expenses ~~decreased $3.4~~increased $2.4 million because of $3.6 million of expenses related to the spin-off of our outdoor products and accessories business, $2.8 million of increased profit sharing expense, and increased other compensation-related expenses, partially offset by a ~~combination of decreased compensation related~~reduction in our allowance for doubtful accounts and lower travel and entertainment expenses ~~decreased~~due to COVID-19. The increases in total operating expenses were also partially offset by lower employee medical costs, likely due to the ~~closure~~deferral of our Jacksonville, Florida facility during our first fiscal quarter, and decreased bad debt expense. These increases were partially offset by increased depreciation related to our 633,000 square foot Missouri distribution center.

~~The following table sets forth certain information regarding operating expenses for~~elective procedures resulting from the ~~six months ended October 31, 2019 and 2018 (dollars in thousands):~~

Research and development expenses increased $155,000 as a result of increased professional fees and new product development costs. Selling, marketing, and distribution expenses increased $9.2 million partially as a result of the start-up of our new distribution center during the first quarter of fiscal 2020, which included approximately $2.2 million of costs that would have been included in cost of sales in the prior year comparable period as well as additional costs related to compensation and benefits, depreciation, property taxes, and security. In addition, increased co-op advertising expenses in the Firearms segment related to strategic customers, additional targeted customer promotions, and increases related to the development of our eCommerce initiative resulted in increased spending over the prior year comparable period. General and administrative expenses decreased $1.2 million primarily due to decreased compensation related expenses and decreased costs due to the closure of our Jacksonville, Florida facility, partially offset by increased professional fees and increased depreciation and compensation-related expenses related to our 633,000 square foot Missouri distribution center.COVID-19 pandemic.

The following table sets forth certain information regarding operating income for the three months ended ~~October~~January 31, ~~2019~~2020 and ~~2018~~2019 (dollars in thousands):

Operating income for the three months ended ~~October~~July 31, ~~2019 was $4.9~~2020 increased $64.3 million ~~a decrease of $6.4 million from~~over the comparable quarter last year, primarily because increased revenue in both of our segments and the resulting improvements in gross margins. Consolidated operating income was also favorably impacted by lower ~~sales~~travel and ~~profitability~~entertainment expenses due to COVID-19, decreased advertising costs, and a reduction of our allowance for doubtful accounts. These increases were partially offset by expenses related to the spin-off of our outdoor products and accessories business, unfavorable inventory valuation adjustments in our ~~Outdoor Products & Accessories segment and increased promotional product discounts and targeted customer promotions in our Firearms~~Firearm segment, increased ~~costs related to our 633,000 square foot Missouri distribution center, and~~manufacturing spending, increased co-op advertising expenses, ~~to strategic customers. These increased expenses were partially offset by favorable manufacturing spending, favorable inventory valuation adjustments,~~ and ~~decreased cost from the prior year comparable quarter as a result of the closure of our Jacksonville, Florida facility.~~higher compensation-related costs.

~~The following table sets forth certain information regarding operating income for the six months ended October 31, 2019 and 2018 (dollars in thousands):~~

Operating income for the six months ended October 31, 2019 was $6.0 million, a decrease of $18.8 million from the prior year comparable period, primarily because of lower sales volumes, unfavorable manufacturing fixed-cost absorption, increased promotional product discounts and targeted customer promotions in our Firearms segment, increased co-op advertising expenses related to strategic customers, and increases related to the development of our eCommerce initiative. These increased expenses were partially offset by a combination of lower manufacturing spending, decreased compensation related expenses, and decreased costs as a result of the closure of our Jacksonville, Florida facility.

The following table sets forth certain information regarding interest expense for the three months ended ~~October~~July 31, ~~2019~~2020 and ~~2018~~2019 (dollars in thousands):

During the three months ended ~~October~~July 31, ~~2019,~~2020, interest expense ~~increased~~decreased by ~~$765,000 over~~$1.3 million from the comparable quarter last year as a result of ~~increased interest~~lower borrowings outstanding on our ~~capital lease for our Missouri Campus and additional borrowings on our Credit Facility.~~revolving line of credit.

~~The following table sets forth certain information regarding interest expense for the six months ended October 31, 2019 and 2018 (dollars in thousands):~~

During the six months ended October 31, 2019, interest expense increased by $1.4 million over the prior year comparable period as a result of increased interest on our capital lease for our Missouri Campus and additional borrowings on our Credit Facility.

The following table sets forth certain information regarding interest expense for the three months ended ~~October~~July 31, ~~2019~~2020 and ~~2018~~2019 (dollars in thousands):

Income tax expense ~~decreased $1.8~~increased $15.3 million ~~from~~over the comparable quarter last year as a result of ~~lower~~higher operating income for the reasons mentioned above.

~~The following table sets forth certain information regarding income tax expense for the six months ended October 31, 2019 and 2018 (dollars in thousands):~~

~~Income tax expense decreased $4.9 million from the prior year comparable period, as a result of lower operating income and the tax effect of stock compensation.~~

The following table sets forth certain information regarding consolidated net income and the related per share data for the three months ended ~~October~~July 31, ~~2019~~2020 and ~~2018~~2019 (dollars in thousands, except per share data):

Net income ~~of $1.3 million~~ for ~~the~~ three months ended ~~October~~July 31, ~~2019~~2020 was ~~$5.4~~$48.4 million ~~lower than~~compared to a net ~~income~~loss of ~~$6.7~~$2.1 million ~~for~~in the comparable quarter last year primarily because of a combination of lower sales volumes and profitability in our Outdoor Products & Accessories segment, increased promotional product discounts and targeted customer promotions, higher manufacturing spending, increased costs related to our 633,000 square foot Missouri distribution center, and increased co-op advertising expenses to strategic customers, and increased interest expense. These increased expenses were partially offset by favorable manufacturing spending, favorable inventory valuation adjustments, and savings as a result of ~~the closure~~increased revenue in both of our ~~Jacksonville, Florida facility.~~

The following table sets forth certain information regarding consolidated net (loss)/income and the related per share data for the six months ended October 31, 2019 and 2018 (dollars in thousands, except per share data):segments.

Net loss of $815,000 for the six months ended October 31, 2019 was $15.1 million lower than net income of $14.3 million for the prior year comparable period, primarily for the same reasons as described in the second quarter comparison as well as increases related to the development of our eCommerce initiative.

Our principal cash requirements are to (1) finance the growth of our operations, including working capital and capital expenditures, (2) service our existing debt, and (3) fund ~~any potential acquisitions and~~ the spin-off of our ~~Outdoor Products & Accessories segment.~~outdoor products and accessories business. Capital expenditures for ~~material handling equipment and other capital projects to support our national logistics facility, various information technology projects, and tooling for~~ new product ~~offerings~~development and repair and replacement of equipment represent important cash needs.

The following table sets forth certain cash flow information for the ~~six~~three months ended ~~October~~July 31, ~~2019~~2020 and ~~2018~~2019 (dollars in thousands):

On an annual basis, operating activities generally represent the principal source of our cash flow.

Cash ~~used in~~provided by operating activities was ~~$34.6~~$83.5 million for the ~~six~~three months ended ~~October~~July 31, ~~2019~~2020 compared with ~~$9.1 million of~~a cash ~~generated for~~usage in the ~~six months ended October 31, 2018. Cash used in operating activities for the six months ended October 31, 2019 was negatively impacted by a $37.4~~prior year comparable quarter due to an incremental $50.5 million increase in ~~inventory related to~~ ~~the preparation for the fall hunting and holiday seasons~~ ~~and a build-up~~net income, an incremental $46.3 million decrease in inventory because of ~~our existing products~~increased shipments to meet consumer demand, and an incremental $20.1 million increase in ~~preparation for shifting manufacturing capacity to new products when they launch. In addition, a $10.8 million reduction in payroll and incentive accruals~~accounts payable due to ~~the payment~~increased manufacturing purchases and timing of ~~management incentive bonuses during the period, a $9.1~~payments. These favorable impacts were partially offset by an incremental $20.8 million increase in accounts receivable due to timing of shipments and aan incremental $8.0 million decrease in accrued expenses ~~and deferred revenue combined~~primarily due to ~~increase cash used in operating activities. These cash usages were partially offset by income before depreciation and amortization of $27.2 million. Consistent with our historical seasonal~~lower promotional product discount accruals. We expect firearm inventory ~~trends, we expect inventory in both of our segments~~balances to ~~decline~~remain relatively flat throughout our ~~third~~next fiscal quarter.

Cash used in investing activities ~~decreased $9.4~~increased $3.8 million for the ~~six~~three months ended ~~October~~July 31, ~~2019 from~~2020 over the prior year comparable period. We recorded capital expenditures of ~~$9.0~~$7.3 million for the ~~six~~three months ended ~~October~~July 31, ~~2019, $10.6~~2020, $3.6 million ~~lower~~higher than the prior year comparable ~~period due to increased spending in the prior year related to our national distribution center.~~period. We currently expect to spend between ~~$20.0~~$30.0 million and ~~$25.0~~$35.0 million on capital expenditures in fiscal ~~2020, a decrease~~2021, an increase of ~~$8.9~~$16.1 million to ~~$13.9~~$21.1 million, as compared with ~~$33.9~~$13.9 million in capital expenditures in fiscal ~~2019.~~2020.

Cash used in financing activities was $136.0 million for the three months ended July 31, 2020 compared with cash provided by financing activities ~~was $46.8~~of $22.7 million for the ~~six~~three months ended ~~October~~July 31, ~~2019 compared with cash~~2019. Cash used in financing activities ~~of $2.9 million for~~during the ~~six~~three months ended ~~October~~July 31, ~~2018. Cash provided by financing activities during the six months ended October 31, 2019~~2020 was primarily a result of ~~$50.0~~$135.0 million ~~borrowings~~of payments on our credit ~~facility to support cash needed for operations, partially offset by principal payments on our Term Loan.~~facility.

~~Capital~~Finance Lease – ~~In fiscal 2017, we announced~~We are a ~~plan~~party to ~~establish~~ a $46.2 million lease for our national logistics facility in Boone County, ~~Missouri. We ultimately plan to rely on this logistics facility for substantially all of our product distribution. In fiscal 2018, we broke ground on this new 633,000 square foot facility,~~Missouri, which was completed in November 2018 and will become fully operational over the course of the remainder of fiscal 2020. As part of the completion of the building, we entered into a lease agreement with the developer of the building for $46.2 million. The lease has an effective interest rate of approximately 5.0% and is payable in 240 monthly installments through fiscal 2039. Upon the commencement of this lease, leases were accounted for under the provisions of ASC 840-10, Leases, which requires that leases be evaluated and classified as operating or capital leases for financial reporting purposes. Based on our evaluation under ASC 840-10, we determined that the lease qualified as a capital lease because the net present value of future lease payments exceeded 90% of the fair market value of the leased building. The building is pledged to secure the amounts outstanding. During the ~~six~~three months ~~ended October~~ending July 31, ~~2019,~~2020, we paid ~~$408,000~~$238,000 in principal payments relating to this ~~capital~~finance lease. ~~In November 2019, we announced a plan to spin off~~With the ~~outdoor products and accessories business~~completion of the company resulting in two independent companies: Smith & Wesson Brands, Inc. (which would encompass our firearm business) and American Outdoor Brands, Inc. (which would encompass our outdoor products and accessories business). The lease is currently held bySeparation on August 24, 2020, we entered into a sublease for 59.0% of this facility under the ~~corporation that would be named Smith & Wesson Brands, Inc. and is expected to remain that way after~~same terms as the ~~spin-off. It is expected, however, that American Outdoor Brands, Inc. will become a sub-lessor of the facility, although negotiations on those matters have not yet been completed.~~master lease.

Credit Facilities — – On ~~June 15, 2015,~~August 24, 2020, we and certain of our ~~domestic subsidiaries~~direct and indirect Domestic Subsidiaries entered into an ~~unsecured~~amended and restated credit ~~facility,~~agreement, or the Amended and Restated Credit Agreement, with certain lenders; TD Bank, N.A., as administrative agent; TD Securities (USA) LLC and ~~other~~Regions Bank, as joint lead arrangers and joint bookrunners; and Regions Bank, as syndication agent. The Amended and Restated Credit Agreement amended and restated that certain Credit Agreement, dated as of June 15, 2015, by and among us, certain of our direct and indirect Domestic Subsidiaries, the lenders orparty thereto, and TD Bank, N.A., as administrative agent and swingline lender, as previously amended. The Amended and Restated Credit Agreement is currently unsecured; however, should any Springing Lien Trigger Event occur, we and certain of our direct and indirect Domestic Subsidiaries would be required to enter into certain documents that create in favor of TD Bank, N.A., as administrative agent, and the ~~Lenders, which included~~lenders party to such documents a ~~$175.0 million~~legal, valid, and enforceable ‎first priority Lien on the Collateral described therein.

The Amended and Restated Credit Agreement provides for a revolving line of credit of $100.0 million at any one time, or the Revolving ~~Line, and a $105.0 million term loan, or the Term Loan, of which $78.2 million remained outstanding as of October 31, 2019.~~Line. The Revolving Line ~~provides for availability for general corporate purposes, with borrowings to bear~~bears interest at ~~a variable~~either the Base Rate or LIBOR rate, ~~equal to LIBOR or prime~~ plus an applicable margin based on our consolidated leverage ~~ratio, at our election. On October 27, 2016, we entered into a second amendment to our~~ratio. The Amended and Restated Credit Agreement oralso provides a swingline facility in the ~~Second Amendment, that, among other things, increased~~maximum amount of $5.0 million at any one time (subject to availability under the Revolving Line). Each Swingline Loan bears interest at the Base Rate, plus an applicable margin based on our consolidated leverage ratio. Subject to the satisfaction of certain terms and conditions described in the Amended and Restated Credit Agreement, we have an option to increase the Revolving Line ~~to $350.0 million, increased~~by an aggregate amount not exceeding $50.0 million. The Revolving Line matures on the ~~option to expand~~earlier of August 24, 2025, or the ~~credit commitment to an additional $150.0 million, and extended~~date that is six months in advance of the earliest maturity of any Permitted Notes under the ~~Revolving Line from June 15, 2020 to October 27, 2021. On November 22, 2019, we entered into a fifth amendment to our~~Amended and Restated Credit Agreement, or the Fifth Amendment, which, among other things, provides the Lenders’ consent to the spin-off of the Outdoor Products & Accessories business, provided that certain financial conditions are satisfied, including (x) granting the Lenders a security interest in the assets of the remaining business, (y) reducing the Revolving Line to $250.0 million at the time of the spin-off, and (z) reducing the option to expand the credit agreement to $50.0 million at the time of the spin-off. Other than the changes described in the Second and Fifth Amendments, we otherwise remain subject to the terms of the Credit Agreement, as described below. We incurred $525,000 of debt issuance costs related to this amendment and have recorded these costs in notes and loans payable in the condensed consolidated balance sheet.Agreement.

As of October 31, 2019, the interest rate swap was considered effective and had no effect on earnings. The fair value of the interest rate swap on October 31, 2019 was an asset of $92,000 and was recorded in other assets on our condensed consolidated balance sheet. ~~In accordance with the repayment of the Term Loan on November 19, 2019, the interest rate swap was terminated causing a small gain in the amount of $40,000.~~

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

agreements. The 2020 Senior Notes bear interest at a rate of 5.000% per annum payable on February 28 and August 28 of each year, beginning on August 28, 2018. We incurred $158,000 of debt issuance costs related to the issuance of the 2020 Senior Notes.

Dividends — On August 26, 2020, our Board of Directors authorized a regular quarterly dividend for shareholders of $0.05 per share. The dividend for the three months ended July 31, 2020 will be for shareholders of record as of market close on September 17, 2020 and is payable on October ~~31, 2019.~~1, 2020.

Our future capital requirements will depend on many factors, including net sales, the timing and extent of spending to support product development efforts, the expansion of sales and marketing activities, the timing of introductions of new products and enhancements to existing products, the costs to ensure access to adequate manufacturing capacity, costs to enhance the ~~construction of~~equipment and software at our ~~national~~ logistics ~~facility, the spin-off of our Outdoor Products & Accessories segment, and any acquisitions or other strategic investments that we may make.~~facility. Further equity or debt financing may not be available to us on acceptable terms or at all. If sufficient funds are not available or are not available on acceptable terms, our ability to take advantage of unexpected business opportunities or to respond to competitive pressures could be limited or severely constrained. In addition to the operational needs described above, at the time of the Separation, we contributed $25.0 million in cash to the outdoor products and accessories business.

As of ~~October~~July 31, ~~2019,~~2020, we had ~~$43.8~~$65.3 million in cash and cash equivalents on hand. Based upon our current working capital position, current operating plans, and expected business conditions, we believe that our existing capital resources and credit facilities will be adequate to fund our operations, including our outstanding debt and other commitments, for the next 12 months.

The preparation of condensed consolidated financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods. Significant accounting policies are disclosed in Note 3 of the Notes to the Consolidated Financial Statements in our Annual Report on Form 10-K for the fiscal year ended April 30, ~~2019.~~2020. The most significant areas involving our judgments and estimates are described in Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the fiscal year ended April 30, ~~2019,~~2020, to which there have been no material changes. Actual results could differ from our estimates.

The nature and impact of recent accounting pronouncements, if any, is discussed in Note 2—Basis of Presentation to our condensed consolidated financial statements included elsewhere in this report, which is incorporated herein by reference.

During the period ended ~~October~~July 31, ~~2019,~~2020, we did not enter into or transact any forward option contracts nor did we have any forward contracts outstanding. We enter into derivative financial instruments, such as interest rate swaps, in order to mitigate our interest rate risk associated with our variable rate debt. We may be exposed to credit and market risks, including, but not limited to, the failure of any counterparty to perform under the terms of the derivative contract or the adverse effect on the value of the financial instrument resulting from a change in interest rates. As of October 31, 2019, we had an interest rate swap agreement outstanding, which matures on June 15, 2020 and hedged the variable interest on our Term Loan. This interest rate swap agreement was terminated on November 19, 2019 in conjunction with the restructuring of our Credit Facility. The outstanding balance of the Term Loan was $78.2 million, and the aggregate net fair value of the interest rate swap was $92,000 as of October 31, 2019. The fair value of this interest rate swap agreement was dependent upon existing market interest rates and swap spreads. As of October 31, 2019, the effective interest rate of our Term Loan was 4.29%.

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of 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 Securities Exchange Act of 1934, as amended, or the Exchange Act). Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of ~~October~~July 31, ~~2019,~~2020, our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) were effective to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act was recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of ~~October~~July 31, ~~2019,~~2020, our disclosure controls and procedures were effective at a reasonable assurance level in that they were reasonably designed to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act (i) is recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the SEC, and (ii) is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

There was no change in our internal control over financial reporting during the period covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Our management assessed the effectiveness of our internal control over financial reporting as of April 30, 2020. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control – Integrated Framework (2013).

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 our annual or interim financial statements will not be prevented or detected on a timely basis.

In the course of preparing the financial statements that are included in our Form 10-K dated April 30, 2020, management identified a material weakness in the internal control environment as we did not appropriately design and maintain controls related to the accounting for goodwill impairment. Control activities were not designed or maintained over the preparation and review of the goodwill impairment analysis, including our accounting for the related income tax treatment and review of third-party experts’ work product.

The material weakness resulted in audit adjustments to goodwill pertaining to our Outdoor Products & Accessories reporting unit that were recorded in our consolidated financial statements as of and for the year ended April 30, 2020 prior to our issuance of those financial statements and could result in a reasonable possibility that a material misstatement to our annual or interim consolidated financial statements may 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, 2020.

In response to the material weaknesses described above, during the three months ended July 31, 2020, we began implementing, evaluating, and designing new internal controls and procedures related to the accounting for goodwill impairment. Though management is still evaluating the design of these new controls and procedures, we believe that our improved processes and procedures will assist in the remediation of our material weakness. Once placed in operation for a sufficient period of time, we will subject these controls and procedures to appropriate tests in order to determine whether they are operating effectively. Management, with oversight from the Audit Committee, is committed to the remediation of our known material weakness as expeditiously as possible.

In designing and evaluating our disclosure controls and procedures, our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable, not absolute, assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and our management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs. The design of any disclosure controls and procedures also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

The nature of legal proceedings against us is discussed in Note 1110—Commitments and Contingencies to our condensed consolidated financial statements included elsewhere in this report, which is incorporated herein by reference.

As of ~~October~~July 31, ~~2019,~~2020, we had no authorized share repurchase programs.

The exhibits listed on the Index to Exhibits (immediately preceding the signatures section of this Quarterly Report on Form 10-Q) are included herewith or incorporated herein by reference.

Pursuant to the requirements 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.

Title of each Class	Trading Symbol	Name of exchange on which registered
Common Stock, par value ~~$.001~~$0.001 per share	~~AOBC~~SWBI	Nasdaq Global Select Market

PART I - FINANCIAL INFORMATION
	Item 1. Financial Statements (Unaudited)	4
	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	2221
	Item 3. Quantitative and Qualitative Disclosures About Market Risk	3227
	Item 4. Controls and Procedures	3327

PART II - OTHER INFORMATION		29
	Item 1. Legal Proceedings	3429
	Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	3429
	Item 6. Exhibits	3429
Signatures		3631
EX-31.1
EX-31.2
EX-32.1
EX-32.2

	For the Six Months Ended October 31,
	2019			2018
	(In thousands)
Purchases of property and equipment included in accounts payable	$	66		$	4,332
Purchases of property and equipment funded by capital lease	—				16,547
Capital lease obligation	—				16,547
Changes in other assets for operating lease obligations		11,821		—
Change in property and equipment for adoption of ASU 2016-02		3,201		—
Changes in finance lease liabilities for the adoption of ASU 2016-02		(4,245	)	—
Changes in lease liabilities for operating lease obligations		12,790		—

	For the Three Months Ended July 31,
	2020		2019
	(In thousands)
Purchases of property and equipment included in accounts payable	$	1,051	$	547
Receivable for exercise of options to acquire common stock		1,250	—
Adoption of ASU 2016-02:
Changes in other assets for operating lease obligations	—			10,928
Change in property and equipment	—			3,201
Changes in finance lease liabilities	—			(4,245	)
Changes in lease liabilities for operating lease obligations	—			11,970

	Balance Sheet Caption	October 31, 2019			Balance Sheet Caption	July 31, 2020
Operating Leases
Right-of-use assets		$	11,805			$	10,391
Accumulated amortization			(1,309	)			(2,666	)
Right-of-use assets, net	Other assets	$	10,496		Other assets	$	7,725

Current liabilities	Accrued expenses and deferred revenue	$	2,833		Accrued expenses and deferred revenue	$	2,566
Non-current liabilities	Other non-current liabilities		8,824		Other non-current liabilities		6,644
Total operating lease liabilities		$	11,657			$	9,210
Finance Leases
Right-of-use assets		$	41,070			$	40,986
Accumulated depreciation			(1,078	)			(2,622	)
Right-of-use assets, net	Property, plant, and equipment, net	$	39,992		Property, plant, and equipment, net	$	38,364

Current liabilities	Accrued expenses and deferred revenue		946		Accrued expenses and deferred revenue		1,021
Non-current liabilities	Finance lease payable, net of current portion		40,389		Finance lease payable, net of current portion		39,610
Total finance lease liabilities		$	41,335			$	40,631

Large accelerated filer	☒	Accelerated filer	☐

Non-accelerated filer	☐	Smaller reporting company	☐

Emerging growth company	☐

	Operating			Financing			Total			Operating			Financing			Total
2020	$	1,774		$	1,495		$	3,269
2021		3,122			3,016			6,138		$	2,290		$	2,269		$	4,559
2022		2,921			3,056			5,977			2,855			3,056			5,911
2023		2,769			3,071			5,840			2,665			3,071			5,736
2024		1,722			3,125			4,847			1,622			3,125			4,747
2025		330			3,180			3,510			353			3,180			3,533
Thereafter		679			48,783			49,462			686			48,783			49,469
Total future lease payments		13,317			65,726			79,043			10,471			63,484			73,955
Less amounts representing interest		(1,660	)		(24,391	)		(26,051	)		(1,261	)		(22,853	)		(24,114	)
Present value of lease payments		11,657			41,335			52,992			9,210			40,631			49,841
Less current maturities of lease liabilities		(2,833	)		(946	)		(3,779	)		(2,566	)		(1,021	)		(3,587	)
Long-term maturities of lease liabilities	$	8,824		$	40,389		$	49,213		$	6,644		$	39,610		$	46,254

	2019			2018
Outstanding performance obligations at beginning of period	$	12,213		$	23,305
Revenue recognized		(14,571	)		(13,998	)
Revenue deferred		5,472			4,314
Outstanding performance obligations at July 31		3,114			13,621
Revenue recognized		(7,716	)		(12,337	)
Revenue deferred		10,104			7,667
Outstanding performance obligations as of October 31	$	5,502		$	8,951

			Outdoor Products &
	Firearms Segment		Accessories Segment			Total Goodwill
Balance as of April 30, 2019	$	19,024	$	163,245		$	182,269
Adjustments		—		(2	)		(2	)
Balance as of July 31, 2019		19,024		163,243			182,267
Adjustments		—		—			—
Balance as of October 31, 2019	$	19,024	$	163,243		$	182,267

			Outdoor Products &
	Firearm Segment		Accessories Segment		Total Goodwill
Balance as of April 30, 2020	$	19,024	$	64,581	$	83,605
Adjustments		—		—		—
Balance as of July 31, 2020	$	19,024	$	64,581	$	83,605

Fiscal	Amount		Amount
2020	$	9,613
2021		16,608	$	12,581
2022		14,222		14,416
2023		11,856		11,861
2024		10,105		10,113
2025				6,460
Thereafter		18,968		12,588
Total	$	81,372	$	68,019

	As of October 31, 2019						As of April 30, 2019						As of July 31, 2020						As of April 30, 2020
	Firearms		Outdoor Products & Accessories		Total		Firearms		Outdoor Products & Accessories		Total		Firearm		Outdoor Products & Accessories		Total		Firearm		Outdoor Products & Accessories		Total
Total assets	$	452,099	$	356,697	$	808,796	$	389,719	$	377,070	$	766,789	$	403,329	$	254,840	$	658,169	$	467,978	$	260,983	$	728,961
Property, plant, and equipment, net		159,347		11,001		170,348		170,549		12,719		183,268		146,627		10,158		156,785		147,642		9,775		157,417
Intangibles, net		4,619		77,943		82,562		4,661		87,179		91,840		4,429		65,413		69,842		4,982		68,772		73,754
Goodwill		19,024		163,243		182,267		19,024		163,245		182,269		19,024		64,581		83,605		19,024		64,581		83,605

	For the Three Months Ended October 31, 2019 (a)													For the Three Months Ended July 31, 2020 (a)
	Firearms		Outdoor Products & Accessories			Corporate			Intersegment Eliminations			Total		Firearm		Outdoor Products & Accessories			Corporate			Intersegment Eliminations			Total
Revenue from external customers	$	112,884	$	41,504		$	—		$	—		$	154,388	$	228,857	$	49,108		$	—		$	—		$	277,965
Intersegment revenue		833		6,305			—			(7,138	)		—		1,028		1,472			—			(2,500	)		—
Total gross revenue		113,717		47,809			—			(7,138	)		154,388		229,885		50,580			—			(2,500	)		277,965
Cost of sales		81,596		29,226			—			(6,740	)		104,082		137,461		27,498			—			(3,760	)		161,199
Gross margin		32,121		18,583			—			(398	)		50,306		92,424		23,082			—			1,260			116,766
Operating income/(loss)		5,413		(1,312	)		(10,924	)		11,707			4,884		60,301		3,241			(12,336	)		14,246			65,452
Income tax expense/(benefit)		3,744		883			(3,989	)		—			638		10,957		(1,081	)		6,026			—			15,902

	For the Six Months Ended October 31, 2019 (a)
	Firearms		Outdoor Products & Accessories			Corporate			Intersegment Eliminations			Total
Revenue from external customers	$	207,443	$	70,614		$	—		$	—		$	278,057
Intersegment revenue		1,715		10,410			—			(12,125	)		—
Total gross revenue		209,158		81,024			—			(12,125	)		278,057
Cost of sales		141,639		48,369			—			(10,110	)		179,898
Gross margin		67,519		32,655			—			(2,015	)		98,159
Operating income/(loss)		14,409		(8,424	)		(21,943	)		21,984			6,026
Income tax expense/(benefit)		8,163		131			(7,028	)		—			1,266

	For the Six Months Ended October 31, 2018 (a)													For the Three Months Ended July 31, 2019 (a)
	Firearms		Outdoor Products & Accessories			Corporate			Intersegment Eliminations			Total		Firearm		Outdoor Products & Accessories			Corporate			Intersegment Eliminations			Total
Revenue from external customers	$	215,468	$	85,068		$	—		$	—		$	300,536	$	94,555	$	29,110		$	—		$	—		$	123,665
Intersegment revenue		1,546		8,139			—			(9,685	)		—		882		4,106			—			(4,988	)		—
Total gross revenue		217,014		93,207			—			(9,685	)		300,536		95,437		33,216			—			(4,988	)		123,665
Cost of sales		150,377		50,910			—			(9,559	)		191,728		60,039		19,143			—			(3,371	)		75,811
Gross margin		66,637		42,297			—			(126	)		108,808		35,398		14,073			—			(1,617	)		47,854
Operating income/(loss)		24,461		(2,021	)		(21,740	)		24,101			24,801		8,998		(7,112	)		(11,020	)		10,277			1,143
Income tax expense/(benefit)		6,834		(7	)		(619	)		—			6,208		4,420		(752	)		(3,039	)		—			629

	October 31, 2019		April 30, 2019		July 31, 2020			April 30, 2020
Finished goods(a)	$	138,085	$	108,247	$	82,621		$	111,169
Finished parts		42,823		36,181		48,316			32,721
Work in process		5,601		7,576		5,798			7,037
Raw material		14,704		11,766		12,832	��		13,264
Total inventories	$	201,213	$	163,770	$	149,567		$	164,191

	For the Six Months Ended October 31,										For the Three Months Ended July 31,
	2019					2018					2020					2019
				Weighted					Weighted					Weighted					Weighted
	Total # of			Average		Total # of			Average		Total # of			Average		Total # of			Average
	Restricted			Grant Date		Restricted			Grant Date		Restricted			Grant Date		Restricted			Grant Date
	Stock Units			Fair Value		Stock Units			Fair Value		Stock Units			Fair Value		Stock Units			Fair Value
RSUs and PSUs outstanding, beginning of period		1,631,631		$	15.44		1,442,316		$	17.80		1,313,974		$	11.54		1,631,631		$	17.80
Awarded		252,911			7.54		191,085			12.61		27,130			21.02		131,771			10.65
Vested		(236,489	)		17.62		(182,536	)		19.83		(212,232	)		15.76		(182,900	)		19.11
Forfeited		(224,179	)		18.04		(128,363	)		15.91		(71,762	)		21.64		(138,830	)		16.11
RSUs and PSUs outstanding, end of period		1,423,874		$	13.26		1,322,502		$	16.99		1,057,110		$	10.25		1,441,672		$	15.44

	2019			2018			$ Change			% Change			2020			2019			$ Change		% Change
Net Sales	$	154,388		$	161,703		$	(7,315	)		-4.5	%
Net sales													$	277,965		$	123,665		$	154,300		124.8	%
Cost of sales		104,082			105,317			(1,235	)		-1.2	%		161,199			75,811			85,388		112.6	%
Gross profit	$	50,306		$	56,386		$	(6,080	)		-10.8	%	$	116,766		$	47,854		$	68,912		144.0	%
% of net sales (gross margin)		32.6	%		34.9	%								42.0	%		38.7	%

Total Units Shipped	2019		2018		# Change		% Change	2020		2019		# Change		% Change
Handguns		265		241		24	10.0%		472		225		247	109.8%
Long Guns		68		95		(27)	-28.4%		112		60		52	86.7%

Sporting Goods Channel Units Shipped	2019		2018		# Change		% Change	2020		2019		# Change		% Change
Handguns		241		211		30	14.2%		441		199		242	121.6%
Long Guns		62		89		(27)	-30.3%		108		57		51	89.5%

Professional Channel Units Shipped	2019		2018		# Change		% Change	2020		2019		# Change		% Change
Handguns		24		30		(6)	-20.0%		31		26		5	19.2%
Long Guns		6		6		0	0.0%		4		3		1	33.3%

2.12		Plan of Merger, dated May 29, 2020, by and between American Outdoor Brands and the Registrant (1)

3.10		Articles of Merger (1)

10.107(a)		Executive Severance Pay Plan, amended as of June 4, 2020 (2)

31.1		Rule 13a-14(a)/15d-14(a) Certification of Principal Executive Officer

31.2		Rule 13a-14(a)/15d-14(a) Certification of Principal Financial Officer

32.1		Section 1350 Certification of Principal Executive Officer

32.2		Section 1350 Certification of Principal Financial Officer

101.INS		Inline XBRL Instance Document – The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

101.SCH		Inline XBRL Taxonomy Extension Schema Document

101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document

104		Cover Page Interactive Data File (formatted as Inline XBRL with applicable taxonomy extension information contained in Exhibits 101).

	~~AMERICAN OUTDOOR~~SMITH & WESSON BRANDS, ~~CORPORATION,~~INC. a Nevada corporation

Date: ~~December 5, 2019~~September 3, 2020	By:	/s/ Mark P. ~~James Debney~~Smith
		Mark P. ~~James Debney~~Smith
		President and Chief Executive Officer