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Leases | 6 Months Ended
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Oct. 31, 2023
Leases [Abstract] |
Leases | (3) Leases: We lease certain of our real estate, machinery, equipment, and photocopiers under non-cancelable operating and finance lease agreements. We recognize expenses for our operating lease assets and liabilities 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 or residual value guarantees, nor do they include restrictive covenants. For operating leases, we recognize expense on a straight-line basis over the lease term. Tenant improvement allowances are recorded as an offsetting adjustment included in our calculation of the respective right-of-use asset. Many of our leases include renewal options that enable us to extend the lease term. The execution of those renewal options is at our sole discretion and renewals 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 31, 2023 were as follows (in thousands):
|  | Balance Sheet Caption |  | October 31, 2023 |
Operating Leases |  |  |  |  |
Right-of-use assets |  |  |  | $ | 5,994 |
Accumulated amortization |  |  |  |  | (4,787 | )
Right-of-use assets, net |  | Other assets |  | $ | 1,207 |
Current liabilities |  | Accrued expenses and deferred revenue |  | $ | 727 |
Non-current liabilities |  | Other non-current liabilities |  |  | 678 |
Total operating lease liabilities |  |  |  | $ | 1,405 |
Finance Leases |  |  |  |  |
Right-of-use assets |  |  |  | $ | 41,631 |
Accumulated depreciation |  |  |  |  | (10,580 | )
Right-of-use assets, net |  | Property, plant, and equipment, net |  | $ | 31,051 |
Current liabilities |  | Accrued expenses and deferred revenue |  | $ | 1,498 |
Non-current liabilities |  | Finance lease payable, net of current portion |  |  | 36,209 |
Total finance lease liabilities |  |  |  | $ | 37,707 |
During the three months ended October 31, 2023, we recorded $411,000 of operating lease costs, of which $41,000 related to short-term leases that were not recorded as right-of-use assets. We recorded $566,000 of finance lease amortization and $475,000 of financing lease interest expense for the three months ended October 31, 2023. As of October 31, 2023, the weighted average lease term and weighted average discount rate for our operating leases was 2.8 years and 4.4%, respectively. As of October 31, 2023, the weighted average lease term and weighted average discount rate for our financing leases were 14.8 years and 5.0%, respectively, and consisted primarily of our Missouri facility. The building is pledged to secure the amounts outstanding. 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. On October 26, 2017, we entered into (a) a lease agreement with Ryan Boone County, LLC, or the Original Missouri Landlord, concerning certain real property located in Boone County, Missouri on which we had, until recently, been operating a distribution center, or the Missouri Lease, and (b) a guaranty in favor of the Original Missouri Landlord, or the Guaranty. With the completion of the spin-off of our outdoor products and accessories business on August 24, 2020, or the Separation, we entered into a sublease whereby American Outdoor Brands, Inc., our former wholly owned subsidiary, or AOUT, subleases from us 59.0% of our Missouri distribution center under the same terms as the Missouri Lease, or the Missouri Sublease. On July 16, 2022, we entered into an amendment to the Missouri Sublease, increasing the leased space to 64.7% of the facility under the same terms as the Missouri Lease. On January 31, 2023, we entered into (i) an assignment and assumption agreement with AOUT, pursuant to which AOUT will assume all of our rights, entitlement, and obligations in, to, and under the Missouri Lease, in each case effective on January 1, 2024, subject to a number of conditions precedent, or the Assignment and Assumption Agreement, and (ii) an amended and restated guaranty in favor of RCS-S&W Facility, LLC, as successor in interest to the Original Missouri Landlord, pursuant to which Smith & Wesson Sales Company was added as a guarantor, or the Amended and Restated Guaranty. We intend to terminate the Missouri Sublease on or around the effective date of the Assignment and Assumption Agreement. As of October 31, 2023, income related to the Missouri Sublease was $1.3 million, of which $722,000 was recorded in general and administrative expenses and $581,000 was recorded in interest expense, net, in our condensed consolidated statements of income. In addition, we intend to occupy our Connecticut facility at least through May 4, 2024, the end of the current lease term and may seek to extend the lease through the end of calendar 2024. We do not currently believe there are any indications of impairment relating to these right-of-use assets. The following table represents future expected undiscounted cashflows, based on the sublease agreement with AOUT, to be received on an annual basis for the next five years and thereafter, as of October 31, 2023 (in thousands):
Fiscal |  | Amount |
2024 |  | $ | 1,399 |
2025 |  |  | 3,180 |
2026 |  |  | 3,235 |
2027 |  |  | 3,292 |
2028 |  |  | 3,350 |
Thereafter |  |  | 38,906 |
Total future sublease receipts |  |  | 53,362 |
Less amounts representing interest |  |  | (16,408 | )
Present value of sublease receipts |  | $ | 36,954 |
Future lease payments for all our operating and finance leases for succeeding fiscal years is as follows (in thousands):
|  |  |  | Operating |  |  | Financing |  |  | Total |
2024 |  |  |  | $ | 650 |  |  | $ | 1,675 |  |  | $ | 2,325 |
2025 |  |  |  |  | 324 |  |  |  | 3,378 |  |  |  | 3,702 |
2026 |  |  |  |  | 301 |  |  |  | 3,433 |  |  |  | 3,734 |
2027 |  |  |  |  | 272 |  |  |  | 3,490 |  |  |  | 3,762 |
2028 |  |  |  |  | 125 |  |  |  | 3,424 |  |  |  | 3,549 |
Thereafter |  |  |  |  | — |  |  |  | 38,906 |  |  |  | 38,906 |
Total future lease payments |  |  |  |  | 1,672 |  |  |  | 54,306 |  |  |  | 55,978 |
Less amounts representing interest |  |  |  |  | (267 | ) |  |  | (16,599 | ) |  |  | (16,866 | )
Present value of lease payments |  |  |  |  | 1,405 |  |  |  | 37,707 |  |  |  | 39,112 |
Less current maturities of lease liabilities |  |  |  |  | (727 | ) |  |  | (1,498 | ) |  |  | (2,225 | )
Long-term maturities of lease liabilities |  |  |  | $ | 678 |  |  | $ | 36,209 |  |  | $ | 36,887 |
During the three and six months ended October 31, 2023, the cash paid for amounts included in the measurement of liabilities and operating cash flows was $1.2 million and $2.3 million, respectively.

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