American Outdoor Brands, Inc.AOUT
American Outdoor Brands, Inc. Income Taxes Disclosure
Income Taxes
Income tax expense/(benefit) from operations consists of the following (in thousands):
| For the Years Ended April 30, | ||||||||||||||||||||
| 2025 | 2024 | 2023 | ||||||||||||||||||
| Current: | ||||||||||||||||||||
| Federal (a) | $ | 48 | $ | 5 | $ | (126) | ||||||||||||||
| State (b) | 64 | (79) | (123) | |||||||||||||||||
| Foreign | 11 | 4 | — | |||||||||||||||||
| Total current | 123 | (70) | (249) | |||||||||||||||||
| Deferred: | ||||||||||||||||||||
| Deferred federal | — | — | — | |||||||||||||||||
| Deferred state | — | — | — | |||||||||||||||||
| Total deferred | — | — | — | |||||||||||||||||
| Total income tax expense/(benefit) | $ | 123 | $ | (70) | $ | (249) | ||||||||||||||
The following table presents a reconciliation of the provision for income taxes from operations at statutory rates to the provision (benefit) in the consolidated financial statements (in thousands):
| For the Years Ended April 30, | ||||||||||||||||||||
| 2025 | 2024 | 2023 | ||||||||||||||||||
| Federal income taxes expected at the statutory rate (c) | $ | 10 | $ | (2,587) | $ | (2,577) | ||||||||||||||
| State income taxes, less federal income tax benefit | 14 | (132) | (303) | |||||||||||||||||
| Stock compensation | 249 | 436 | 96 | |||||||||||||||||
| Research and development tax credit | (149) | (203) | (200) | |||||||||||||||||
| Change in deferred tax valuation allowance | (192) | 2,257 | 2,600 | |||||||||||||||||
| Other | 191 | 159 | 135 | |||||||||||||||||
| Total income tax expense/(benefit) | $ | 123 | $ | (70) | $ | (249) | ||||||||||||||
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(a)Federal current expense is net of $875,000 tax benefit of operating loss carryforwards.
(b)State current expense is net of $95,000 tax benefit of operating loss carryforwards.
(c)We had a federal statutory rate of 21% in fiscal 2025, 2024, and 2023.
Deferred tax assets (liabilities) related to temporary differences are the following (in thousands):
| April 30, 2025 | April 30, 2024 | ||||||||||
| Non-current tax assets (liabilities): | |||||||||||
| Inventories | $ | 1,321 | $ | 1,100 | |||||||
| Accrued expenses, including compensation | 2,261 | 1,589 | |||||||||
| Workers' compensation | 13 | 10 | |||||||||
| Warranty reserve | 322 | 286 | |||||||||
| Stock-based compensation | 991 | 1,066 | |||||||||
| State bonus depreciation | 56 | 110 | |||||||||
| Property, plant, and equipment | (1,974) | (2,619) | |||||||||
| Intangible assets | 11,059 | 11,777 | |||||||||
| Right-of Use assets | (7,401) | (7,740) | |||||||||
| Right-of Use lease liabilities | 7,724 | 7,985 | |||||||||
| Capitalized R&D | 2,649 | 2,136 | |||||||||
| Other | (182) | (83) | |||||||||
| Loss and credit carryforwards | 2,267 | 3,681 | |||||||||
| Less valuation allowance | (19,106) | (19,298) | |||||||||
| Net deferred tax asset/(liability) — total | $ | — | $ | — | |||||||
As of April 30, 2025, federal and state net operating loss, or NOL, carryforwards were $7.7 million and $5.4 million, respectively, and $382,000 of federal research & development tax credits. The tax-effected deferred tax assets recorded for federal and state NOL carryforwards were $1.6 million and $278,000, respectively. Under legislation enacted in 2017, informally titled the Tax Cuts and Jobs Act, or Tax Act, federal NOLs incurred in taxable years ending after December 31, 2017, may be carried forward indefinitely. The federal research and development credits of $382,000, which, if unused, will expire between April 30, 2043 and 2044. State NOL carryforwards of $4.5 million, which, if unused, will expire in years April 30, 2033 through April 30, 2044. The remaining $900,000 of the state NOL carryforwards may also be carried forward indefinitely.
As of April 30, 2025, we continued to maintain a full valuation allowance of $19.1 million against our net deferred income tax assets based on management's assessment that it was more likely than not that our deferred income tax assets will not be recovered. We will continue to evaluate the need for a valuation allowance on our deferred tax assets until there is sufficient positive evidence to support the reversal of all or some portion of these allowances. As of April 30, 2024, we maintained a full valuation allowance of $19.3 million against our net deferred income tax assets based on management's assessment that it was more likely than not that our deferred income tax assets will not be recovered.
The income tax provisions (benefit) represent effective tax rates of 267.4%, 0.6%, and 2.0% for the fiscal years ended April 30, 2025, 2024, and 2023, respectively.
U.S. income taxes have not been provided on $400,000 of undistributed earnings of our foreign subsidiary since it is our intention to permanently reinvest such earnings offshore. If the earnings were distributed in the form of dividends, we would not be subject to U.S. tax as a result of the Tax Act but could be subject to foreign income and withholding taxes. Determination of the amount of this unrecognized deferred income tax liability is not practical.
As of April 30, 2025 and 2024, we did not have any gross tax-effected unrecognized tax benefits.
With limited exception, we are subject to U.S. federal, state, and local, or non-U.S. income tax audits by tax authorities for fiscal years subsequent to April 30, 2021. On March 7, 2023, the Internal Revenue Service (“IRS”) initiated an examination of our Federal income tax return filed for the tax period ended April 30, 2022. On January 10, 2024, we were notified from the IRS that they had concluded their examination. As a result of their examination procedures, our tax liability was unchanged for the tax period under examination, and there was no impact to our consolidated financial statements.
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About Income Taxes Disclosures
The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.
Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.