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Stockholders' Equity | 12 Months Ended
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Apr. 30, 2021
Equity [Abstract] |
Stockholders' Equity | 14. Stockholders’ Equity Treasury Stock During fiscal 2021, our board of directors authorized the repurchase of up to $50.0 million of our common stock, subject to certain conditions, in the open market, or privately negotiated transactions until December 14, 2021. During fiscal 2021, we completed this stock repurchase program by purchasing 2,737,489 shares of common stock for $50.0 million utilizing cash on hand. On March 2, 2021, our board of directors authorized the repurchase of an additional $100.0 million of our common stock, subject to certain condition, in the open market, or in privately negotiated transaction until March 1, 2022. Pursuant to the second authorization, during fiscal 2021, we purchased 3,380,447 shares of our common stock for $60.0 million using cash on hand. Subsequent to fiscal 2021, we completed the second stock repurchase program by purchasing 1,967,420 of our common stock for $40.0 million utilizing cash on hand. Incentive Stock and Employee Stock Purchase Plans We have two stock incentive plans, or SPs: 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 of stockholders. All new grants covering all participants are issued under the 2013 Incentive Stock Plan. The remaining grants under the 2004 Incentive Stock Plan were exercised in the fiscal year ended, April 30, 2021. The 2013 Incentive Stock Plan authorizes the issuance of 3,000,000 shares, plus any shares that were reserved and remained available for grant and delivery under the 2004 Incentive Stock Plan as of September 23, 2013, the effective date of the 2013 Incentive Stock Plan. The plan permits the grant of options to acquire common stock, restricted stock awards, RSUs, stock appreciation rights, bonus stock and awards in lieu of obligations, performance awards, and dividend equivalents. Our board of directors, or a committee established by our board, administers the SPs, selects recipients to whom awards are granted, and determines the grants to be awarded. Options granted under the SPs are exercisable at a price determined by our board or committee at the time of grant, but in no event, less than fair market value of our common stock on the date granted. Grants of options may be made to employees and directors without regard to any performance measures. All options issued pursuant to the SPs are generally nontransferable and subject to forfeiture. Unless terminated earlier by our board of directors, the 2013 Incentive Stock Plan will terminate at the earliest of (1) the tenth anniversary of the effective date of the 2013 Stock Plan, or (2) such time as no shares of common stock remain available for issuance under the plan and we have no further rights or obligations with respect to outstanding awards under the plan. The date of grant of an award is deemed to be the date upon which our board of directors or board committee authorizes the granting of such award. Except in specific circumstances, grants vest over a period of four years and grants of stock options are exercisable for a period of 10 years. The plan also permits the grant of awards to non-employees, which our board of directors or committee has authorized in the past. The number of shares and weighted average exercise prices of options for the fiscal years ended April 30, 2021, 2020, and 2019 are as follows:
|  | For the Year Ended April 30, |
|  | 2021 |  |  | 2020 |  |  | 2019 |
|  |  |  |  |  | Weighted |  |  |  |  |  |  | Weighted |  |  |  |  |  |  | Weighted |
|  |  |  |  |  | Average |  |  |  |  |  |  | Average |  |  |  |  |  |  | Average |
|  | Shares |  |  | Exercise Price |  |  | Shares |  |  | Exercise Price |  |  | Shares |  |  | Exercise Price |
Options outstanding, beginning of year |  |  | 200,667 |  |  | $ | 7.70 |  |  |  | 267,761 |  |  | $ | 6.76 |  |  |  | 316,160 |  |  | $ | 6.69 |
Exercised during the period |  |  | (200,667 | ) |  |  | 7.67 |  |  |  | (67,094 | ) |  |  | 3.97 |  |  |  | (48,399 | ) |  |  | 6.28 |
Canceled/forfeited during period |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  |  |  |
Options outstanding, end of period |  | — |  |  | — |  |  |  | 200,667 |  |  | $ | 7.70 |  |  |  | 267,761 |  |  | $ | 6.76 |
Weighted average remaining contractual life |  | — |  |  |  |  |  |  | 0.43 years |  |  |  |  |  |  | 2.35 years |  |  |  |  |
Options exercisable, end of period |  | — |  |  | — |  |  |  | 200,667 |  |  | $ | 7.70 |  |  |  | 267,761 |  |  | $ | 6.76 |
Weighted average remaining contractual life |  | — |  |  |  |  |  |  | 0.43 years |  |  |  |  |  |  | 2.35 years |  |  |  |  |
As of April 30, 2021, there were 3,967,603 shares available for grant under the 2013 Incentive Stock Plan. We use our unissued share pool for all shares issued for options, restricted stock awards, or RSUs, performance share units, performance-based restricted stock units, or PSUs, and shares issued under our Employee Stock Purchase Plan, or ESPP. In connection with the spin-off of AOUT, as of August 24, 2020, there was one option award outstanding that could be converted into 10,000 shares of SWBI common stock. Under the terms of the Employee Matters Agreement between us and AOUT, the holder of the outstanding SWBI options was granted a pro rata number of AOUT options with the price of the SWBI options reduced at a pro rata value to the amount of awards granted of AOUT options. Incremental compensation expense associated with this change in the award was immaterial and recognized fully in fiscal 2021. There were no outstanding and exercisable stock options as of April 30, 2021. The aggregate intrinsic value of outstanding and exercisable stock options as of April 30, 2020 and 2019 was $356,000, $826,000, respectively. The aggregate intrinsic value of the options exercised for the years ended April 30, 2021, 2020, and 2019 was $2.9 million, $260,000, and $285,000, respectively. The following table summarizes stock compensation expense by line item for the fiscal years ended April 30, 2021, 2020, and 2019 (in thousands):
|  | For the Years Ended April 30, |
|  |  | 2021 |  |  |  | 2020 |  |  |  | 2019 |
Cost of sales |  | $ | 740 |  |  | $ | 667 |  |  | $ | 694 |
Research and development |  |  | 71 |  |  |  | 79 |  |  |  | 62 |
Selling and marketing |  |  | 767 |  |  |  | 155 |  |  |  | 337 |
General and administrative |  |  | 3,128 |  |  |  | 1,456 |  |  |  | 5,854 |
Total stock-based compensation |  | $ | 4,706 |  |  | $ | 2,357 |  | (a) | $ | 6,947 |
| (a) | The decrease in general and administrative stock-based compensation expense from fiscal 2019 was because of the separation of our former President and Chief Executive Officer.
We grant service-based RSUs to employees, consultants, and directors. The awards are made at no cost to the recipient. An RSU represents the right to acquire one share of our common stock and does not carry voting or dividend rights. Except in specific circumstances, RSU grants to employees generally vest over a period of three or four years with one-third or one-fourth of the units vesting, respectively, on each anniversary date of the grant date. RSU grants to directors generally vest over a period of one year with one-twelfth of the units vesting each month. The aggregate fair value of our RSU grants is amortized to compensation expense over the applicable vesting period. In connection with the spin-off of AOUT, we adjusted outstanding RSU awards in accordance with the terms of the Employee Matters Agreement between us and AOUT. For directors and certain executives, a pro rata number of RSUs were issued of AOUT RSUs with terms that matched original SWBI RSU. For all other employees, we adjusted the underlying shares of outstanding RSUs to preserve the intrinsic value of the awards immediately before the spin-off. The adjustment of the underlying shares was determined using a ratio based on the relative values of the SWBI pre-distribution stock value and the SWBI post-distribution stock value. The outstanding awards continue to vest over their original vesting periods. We will recognize $380,000 of incremental compensation expense costs related to the adjustment of PSUs, and $740,000 of compensation expense related to the adjustment of RSUs, for a total of $1.1 million. During the fiscal year, we recognized expense of $738,000 relating to total incremental compensation cost. We grant PSUs to our executive officers. At the time of grant, we calculate the fair value of our PSUs using the Monte-Carlo simulation. We incorporate the following variables into the valuation model:
| For the Years Ended April 30, |
|  | 2021 |  |  | 2020 |  |  |  | 2019 |
Grant date fair market value |  |  |  |  |  |  |  |  |  |  |  |
Smith & Wesson Brands, Inc | $ 16.99 - 17.27 |  |  | $ | 7.80 |  |  |  | $ | 9.85 |
Russell 2000 Index | $ 1,526.46 - 1,571.21 |  |  | $ | 1,138.78 |  |  |  | $ | 1,591.21 |
Volatility (a) |  |  |  |  |  |  |  |  |  |  |  |
Smith & Wesson Brands, Inc | 59.09% - 61.34% |  |  |  | 54.02 | % |  |  |  | 45.19 | %
Russell 2000 Index | 27.62% - 29.27% |  |  |  | 24.66 | % |  |  |  | 15.65 | %
Correlation coefficient (b) | 0.1242 - 0.1302 |  |  |  | 0.11 |  |  |  | 0.14 |
Risk-free interest rate (c) | 0.16% - 0.22% |  |  |  | 0.35 | % |  |  |  | 2.23 | %
Dividend yield (d) |  | 0.95 | % |  |  | 0 | % |  |  |  | 0 | %
(a) | Expected volatility is calculated over the most recent period that represents the remaining term of the performance period as of the valuation date, or three years.
(b) | The correlation coefficient utilizes the same historical price data used to develop the volatility assumptions.
(c) | The risk-free interest rate is based on the yield of a zero-coupon U.S. Treasury bill, commensurate with the three-year performance period.
(d) | We did not pay dividends in fiscal 2020 and 2019.
The PSUs vest, and the fair value of such PSUs are recognized, over the corresponding three-year performance period. Our PSUs have a maximum aggregate award equal to 200% of the target amount granted. Generally, the number of PSUs that may be earned depends upon the total stockholder return, or TSR, of our common stock compared with the TSR of the Russell 2000 Index, or RUT, over the three-year performance period. For PSUs, our stock must outperform the RUT by 5% in order for the target award to vest. In addition, there is a cap on the number of shares that can be earned under our PSUs, which is equal to six times the grant-date value of each award. In connection with the spin-off of AOUT and in accordance with the terms of the Employee Matters Agreement between us and AOUT, all outstanding PSU awards were adjusted such that the performance criteria relative to SWBI share price was modified to compare the market cap of SWBI for the 90 days subsequent to the original grant date to the combined market cap of SWBI and AOUT for the 90 days preceding the original vest date. The change in the market cap will be compared to the change in the value of the Russell 2000 index for the same period. In addition, a pro rata number of AOUT PSUs were granted at the time of the spin to each SWBI PSU recipient with the same terms as the underlying original SWBI PSU. In connection with the retirement of our former chief financial officer, 50,200 PSUs were converted to RSUs for immediate delivery during the fiscal year. In certain circumstances, the vested awards will be delivered on the first anniversary of the applicable vesting date. We have applied a discount to the grant date fair value when determining the amount of compensation expense to be recorded for these RSUs and PSUs. During the fiscal year ended April 30, 2021, we granted 36,308 PSUs to certain of our executive officers. We also granted 234,007 service-based RSUs during the year ended April 30, 2021, including 68,461 RSUs to certain of our executive officers, 25,570 RSUs to our directors, and 139,976 RSUs to non-executive officer employees. Compensation expense recognized related to grants of RSUs and PSUs was $3.4 million for the fiscal year ended April 30, 2021. During the fiscal year ended April 30, 2021, we canceled 88,365 service-based RSUs, of which 57,547 RSUs was a result of the spin-off, and 30,818 RSUs was as a result of the service period condition not being met. We canceled 92,500 PSUs of which 28,800 PSUs was a result of the spin-off and 63,700 was a result of the three-year stock performance targets were not being achieved. We delivered 50,200 shares of common stock to our former chief financial officer under vested PSUs with a total market value of $1.3 million, under the terms of his retirement. We delivered 357,345 shares of common stock to current employees under vested RSUs with a total market value of $5.8 million. During the fiscal year ended April 30, 2020, we granted 105,767 PSUs to certain of our executive officers and 32,050 PSUs to non-executive officer employees. We also granted 400,483 service-based RSUs during the year ended April 30, 2020, including 113,770 RSUs to certain of our executive officers, 115,600 RSUs to our directors, and 211,073 RSUs to non-executive officer employees. Compensation expense recognized related to grants of RSUs and PSUs was $2.3 million for the fiscal year ended April 30, 2020. During the fiscal year ended April 30, 2020, we canceled 232,793 service-based RSUs as a result of the service period condition not being met and 367,025 PSUs as the three-year stock performance targets were not achieved. We delivered 296,139 shares of common stock to current employees under vested RSUs with a total market value of $2.6 million. During the year ended April 30, 2019, we granted 181,600 PSUs to certain of our executive officers. We also granted 360,185 service-based RSUs during the year ended April 30, 2019, including 167,818 RSUs to certain of our executive officers, 49,509 RSUs to our directors, and 142,858 RSUs to non-executive officer employees. Compensation expense recognized related to grants of RSUs and PSUs was $7.3 million for the fiscal year ended April 30, 2019. During the fiscal year ended April 30, 2019, we canceled 33,899 service-based RSUs as a result of the service period condition not being met and 112,000 PSUs as the three-year stock performance targets were not achieved. We delivered 206,572 shares of common stock to current employees under vested RSUs with a total market value of $2.5 million. The grant date fair value of RSUs and PSUs that vested in fiscal 2021, 2020, and 2019 was $5.9 million, $5.0 million, and $3.9 million, respectively. A summary of activity for unvested RSUs and PSUs for fiscal years 2021, 2020, and 2019 is as follows:
|  | For the Year Ended April 30, |
|  | 2021 |  |  | 2020 |  |  | 2019 |
|  |  |  |  |  | Weighted |  |  |  |  |  |  | Weighted |  |  |  |  |  |  | Weighted |
|  | Total # of |  |  | Average |  |  | Total # of |  |  | Average |  |  | Total # of |  |  | Average |
|  | RSUs and |  |  | Grant Date |  |  | RSUs and |  |  | Grant Date |  |  | RSUs and |  |  | Grant Date |
|  | PSUs |  |  | Fair Value |  |  | PSUs |  |  | Fair Value |  |  | PSUs |  |  | Fair Value |
RSUs and PSUs outstanding, beginning of period |  |  | 1,313,974 |  |  | $ | 10.86 |  |  |  | 1,631,631 |  |  | $ | 15.44 |  |  |  | 1,442,317 |  |  | $ | 17.80 |
Awarded |  |  | 270,315 |  |  |  | 16.54 |  |  |  | 578,300 |  |  |  | 5.75 |  |  |  | 541,785 |  |  |  | 10.65 |
Vested |  |  | (407,545 | ) |  |  | 14.57 |  |  |  | (296,139 | ) |  |  | 17.05 |  |  |  | (206,572 | ) |  |  | 19.11 |
Forfeited |  |  | (180,865 | ) |  |  | 15.18 |  |  |  | (599,818 | ) |  |  | 15.34 |  |  |  | (145,899 | ) |  |  | 16.11 |
RSUs and PSUs outstanding, end of period |  |  | 995,879 |  |  | $ | 11.14 |  |  |  | 1,313,974 |  |  | $ | 10.86 |  |  |  | 1,631,631 |  |  | $ | 15.44 |
As of April 30, 2021, there was $2.7 million of unrecognized compensation cost related to unvested RSUs and PSUs. This cost is expected to be recognized over a weighted average remaining contractual term of 1.4 years. On September 26, 2011, our stockholders approved our 2011 ESPP, which authorizes the sale of up to 6,000,000 shares of our common stock to employees. All options and rights to participate in our ESPP are nontransferable and subject to forfeiture in accordance with our ESPP guidelines. Our current ESPP will be implemented in a series of successive offering periods, each with a maximum duration of 12 months. If the fair market value, or FMV, per share of our common stock on any purchase date is less than the FMV per share on the start date of a 12-month offering period, then that offering period will automatically terminate, and a new 12-month offering period will begin on the next business day. Each offering period will begin on April 1 or October 1, as applicable, immediately following the end of the previous offering period. Payroll deductions will be on an after-tax basis, in an amount of not less than 1% and not more than 20% (or such greater percentage as the committee appointed to administer our ESPP may establish from time to time before the first day of an offering period) of a participant’s compensation on each payroll date. The option exercise price per share will equal 85% of the lower of the FMV on the first day of the offering period or the FMV on the exercise date. The maximum number of shares that a participant may purchase during any purchase period is 12,500 shares, or a total of $25,000 in shares, based on the FMV on the first day of the offering period. Our ESPP will remain in effect until the earliest of (a) the exercise date that participants become entitled to purchase a number of shares greater than the number of reserved shares available for purchase under our ESPP, (b) such date as is determined by our board of directors in its discretion, or (c) March 31, 2022. In the event of certain corporate transactions, each option outstanding under our ESPP will be assumed or an equivalent option will be substituted by the successor corporation or a parent or subsidiary of such successor corporation. During fiscal 2021, 2020, and 2019, 204,482, 380,209, and 230,282 shares, respectively, were purchased by our employees under our ESPP. We measure the cost of employee services received in exchange for an award of an equity instrument based on the grant-date fair value of the award. We calculate the fair value of our stock options issued to employees using the Black-Scholes model at the time the options were granted. That amount is then amortized over the vesting period of the option. With our ESPP, fair value is determined at the beginning of the purchase period and amortized over the term of each exercise period. The following assumptions were used in valuing our ESPP purchases during the years ended April 30, 2021, 2020, and 2019:
| For the Years Ended April 30, |
| 2021 |  |  | 2020 |  |  | 2019 |
Risk-free interest rate |  | 0.08 | % |  |  | 1.24 | % |  |  | 2.21 | %
Expected term (a) | 6 months |  |  | 4 & 6 months |  |  | 6 months |
Expected volatility (b) |  | 70.93 | % |  |  | 63.6 | % |  |  | 45.3 | %
Dividend yield (c) |  | 1.17 | % |  |  | 0 | % |  |  | 0 | %
| (a) | The 2nd purchase period of 2020 was abbreviated because of the timing of the spin-off of our outdoor products and accessories business.
| (b) | We believe our expected volatility increased in fiscal 2020 primarily due to market and stock price fluctuations as a result of the COVID-19 pandemic.
| (c) | We did not pay dividends in fiscal 2020 and 2019.
We estimate expected volatility using historical volatility for the expected term. The fair value of each stock option or ESPP purchase was estimated on the date of the grant using the Black-Scholes option pricing model (using the risk-free interest rate, expected term, expected volatility, and dividend yield variables, as noted in the above table). The total stock-based compensation expense, including stock options, purchases under our ESPP, and RSU and PSU awards, was $4.7 million, $2.4 million, and $6.9 million, for fiscal years 2021, 2020, and 2019, respectively.

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- Definition The entire disclosure for shareholders' equity comprised of portions attributable to the parent entity and noncontrolling interest, including other comprehensive income. Includes, but is not limited to, balances of common stock, preferred stock, additional paid-in capital, other capital and retained earnings, accumulated balance for each classification of other comprehensive income and amount of comprehensive income. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08(e)(1)) -URI http://asc.fasb.org/extlink&oid=120395691&loc=d3e23780-122690 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.3-04) -URI http://asc.fasb.org/extlink&oid=120397183&loc=d3e187085-122770 Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -URI http://asc.fasb.org/topic&trid=2208762 + Details
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