Stockholders' Equity

3 Months Ended

Jul. 31, 2022

Equity [Abstract]

Stockholders' Equity

(8) Stockholders’ Equity:

Treasury Stock

On March 2, 2021, our Board of Directors authorized the repurchase of up to $100.0 million of our common stock, subject to certain conditions, in the open market or in privately negotiated transactions. During fiscal 2021, we repurchased 3,380,447 shares of our common stock for $60.0 million under this authorization. During the three months ended July 31, 2021, we completed this stock repurchase program by repurchasing 1,967,420 shares of our common stock for $40.0 million, utilizing cash on hand. On June 15, 2021, our Board of Directors authorized the repurchase of an additional $50.0 million of our common stock, subject to certain conditions, in the open market or in privately negotiated transactions. As of July 31, 2021, there were no purchases under this authorization; however, this authorization was completed during fiscal 2022. There were no common stock purchases through the three months ended July 31, 2022, nor were there any unfulfilled authorizations.

Earnings per Share

The following table provides a reconciliation of the net income amounts and weighted average number of common and common equivalent shares used to determine basic and diluted earnings per share for the three months ended July 31, 2022 and 2021 (in thousands, except per share data):

	For the Three Months Ended July 31,
	2022								2021
	Net					Per Share			Net					Per Share
	Income			Shares		Amount			Income			Shares		Amount
Basic earnings	$		3,312		45,739	$		0.07	$		76,882		48,394	$		1.59
Effect of dilutive stock awards		—			363		—			—		656			—
Diluted earnings	$		3,312		46,102	$		0.07	$		76,882		49,050	$		1.57

For the three months ended July 31, 2022, the amount of restricted stock units, or RSU's, excluded from the computation of diluted earnings per share was 18,641 because the effect would be antidilutive. All of our outstanding shares were included in the computation of diluted earnings per share for the three months ended July 31, 2021.

Incentive Stock and Employee Stock Purchase Plans

In September 2013, our Board of Directors approved the 2013 Incentive Stock Plan under which employees and non-employees may be granted stock options, restricted stock awards, restricted stock units, stock appreciation rights, and bonus stock awards.

In July 2022, our Board of Directors approved the Smith & Wesson Brands, Inc. 2022 Incentive Stock Plan under which employees and non-employees may be granted stock options, restricted stock awards, restricted stock units, stock appreciation rights, and bonus stock awards. Our stockholders will be asked to approve this plan at our annual meeting of stockholders on September 12, 2022.

We have an Employee Stock Purchase Plan, or the ESPP, under which each participant is granted an option to purchase our common stock at a discount 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 $1.2 million and $1.5 million for the three months ended July 31, 2022 and 2021, respectively. We include stock-based compensation expense in cost of sales, sales and marketing, research and development, and general and administrative expenses.

We grant RSUs to employees and non-employee members of our Board of 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, from time to time, 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 three months ended July 31, 2022, we granted an aggregate of 229,721 RSUs, including 157,227 RSUs to non-executive officer employees and 72,494 RSUs to our executive officers. During the three months ended July 31, 2022, we granted 108,736 PSUs to certain of our executive officers. During the three months ended July 31, 2022, we cancelled 2,472 RSUs as a result of the service conditions not being met. In connection with the vesting of RSUs, during the three months ended July 31, 2022, we delivered common stock to our employees and directors, including our executive officers, with a total market value of $2.2 million. In connection with a 2018 grant, which vested in fiscal 2022, we delivered market-condition PSUs to certain of our executive officers and a former executive officer with a total market value of $1.2 million. In addition, in connection with a 2019 grant, 57,600 PSUs vested to certain of our executive officers and a former executive officer, which resulted from achieving the maximum performance of 200.0% of target for the original 28,800 PSUs granted.

During the three months ended July 31, 2021, we granted an aggregate of 126,430 RSUs, including 66,441 RSUs to non-executive officer employees and 49,277 RSUs to our executive officers. During the three months ended July 31, 2021, we granted 73,913 PSUs to certain of our executive officers. During the three months ended July 31, 2021, we cancelled 1,502 RSUs as a result of the service conditions not being met. In connection with the vesting of RSUs, during the three months ended July 31, 2021, we delivered common stock to our employees and directors, including our executive officers, with a total market value of $2.2 million. In addition, in connection with a 2018 grant, we vested 86,400 market-condition PSUs to certain of our executive officers and a former executive officer, which resulted from achieving the maximum performance of 200.0% of target for the original 43,200 PSUs granted.

A summary of activity for unvested RSUs and PSUs for the three months ended July 31, 2022 and 2021 is as follows:

	For the Three Months Ended July 31,
	2022					2021
				Weighted					Weighted
	Total # of			Average		Total # of			Average
	Restricted			Grant Date		Restricted			Grant Date
	Stock Units			Fair Value		Stock Units			Fair Value
RSUs and PSUs outstanding, beginning of period		830,813		$	13.30		995,879		$	10.65
Awarded (a)		367,257			13.70		243,543			16.45
Vested		(238,444	)		12.72		(115,763	)		13.42
Forfeited		(2,472	)		15.47		(1,502	)		12.07
RSUs and PSUs outstanding, end of period		957,154		$	13.60		1,122,157		$	11.62

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(a)Includes 28,800 and 43,200 PSUs vested during the three months ended July 31, 2022 and 2021, respectively, in connection with achieving maximum performance targets for the 2019 and 2018 grants, respectively.

As of July 31, 2022, there was $5.4 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 1.7 years.