SMITH & WESSON BRANDS, INC. Goodwill & Intangibles Disclosure
6. Goodwill and Intangible Assets
The changes in the carrying amount of goodwill by reporting segment are as follows (in thousands):
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Outdoor Products & |
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Firearm Segment |
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Accessories Segment |
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Total Goodwill |
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Balance as of April 30, 2018 |
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$ |
18,490 |
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$ |
172,797 |
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$ |
191,287 |
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Adjustments |
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534 |
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— |
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534 |
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Acquisitions |
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— |
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844 |
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|
844 |
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Goodwill impairment |
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— |
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(10,396 |
) |
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(10,396 |
) |
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Balance as of April 30, 2019 |
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19,024 |
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163,245 |
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182,269 |
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Adjustments |
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— |
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(2 |
) |
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(2 |
) |
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Goodwill impairment |
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— |
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(98,662 |
) |
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(98,662 |
) |
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Balance as of April 30, 2020 |
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$ |
19,024 |
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$ |
64,581 |
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$ |
83,605 |
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For more information regarding goodwill impairment testing, see Note 3 — Significant Accounting Policies — Valuation of Long-lived Tangible and Intangible Assets to our consolidated financial statements.
As of April 30, 2020, the goodwill recorded within our Outdoor Products & Accessories segment is presented net of $109.1 million of accumulated impairment losses, all of which was recorded during fiscal 2020 and 2019. The goodwill within our Firearms segment has no accumulated impairment losses.
The following table presents a summary of intangible assets as of April 30, 2020 and 2019 (in thousands):
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April 30, 2020 |
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April 30, 2019 |
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Gross |
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Gross |
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Carrying |
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Accumulated |
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Net Carrying |
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Carrying |
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Accumulated |
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Net Carrying |
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Amount |
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Amortization |
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Amount |
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Amount |
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Amortization |
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Amount |
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Customer relationships |
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$ |
92,560 |
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$ |
(52,981 |
) |
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$ |
39,579 |
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$ |
92,560 |
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$ |
(41,643 |
) |
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$ |
50,917 |
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Developed technology |
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21,788 |
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(12,705 |
) |
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9,083 |
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21,230 |
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(10,428 |
) |
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10,802 |
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Patents, trademarks, and trade names |
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57,837 |
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(34,320 |
) |
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23,517 |
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57,477 |
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(28,479 |
) |
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28,998 |
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Backlog |
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1,150 |
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(1,150 |
) |
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— |
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1,150 |
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(1,150 |
) |
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— |
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173,335 |
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(101,156 |
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72,179 |
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172,417 |
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(81,700 |
) |
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90,717 |
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Patents in progress |
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1,145 |
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— |
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1,145 |
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|
897 |
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— |
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|
897 |
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Total definite-lived intangible assets |
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174,480 |
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(101,156 |
) |
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73,324 |
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173,314 |
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(81,700 |
) |
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91,614 |
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Indefinite-lived intangible assets |
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430 |
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— |
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430 |
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|
226 |
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— |
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226 |
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Total intangible assets |
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$ |
174,910 |
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$ |
(101,156 |
) |
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$ |
73,754 |
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$ |
173,540 |
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$ |
(81,700 |
) |
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$ |
91,840 |
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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, six years for developed technology, and five years for patents, trademarks, and trade names. Amortization expense, excluding amortization of deferred financing costs, amounted to $19.5 million, $22.0 million, and $21.0 million for the fiscal years ended April 30, 2020, 2019, and 2018, respectively.
The following table represents future expected amortization expense as of April 30, 2020, which will primarily be recorded in our Outdoor Products & Accessories segment (in thousands):
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Fiscal |
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Amount |
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2021 |
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$ |
16,798 |
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2022 |
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14,412 |
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2023 |
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11,857 |
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2024 |
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10,109 |
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2025 |
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6,456 |
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Thereafter |
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12,547 |
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Total |
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$ |
72,179 |
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About Goodwill & Intangibles Disclosures
Goodwill and intangible asset disclosures reveal the premium paid in acquisitions and how management assesses whether that premium retains its value. Since goodwill is no longer amortized under US GAAP, the annual impairment test is the only mechanism that adjusts carrying values downward — making the assumptions behind that test critically important for investors.
Key signals: a history of goodwill impairments suggests management consistently overpays for acquisitions. Watch the gap between reporting unit fair value and carrying amount — when fair value exceeds carrying amount by less than 10-20%, a small decline in business performance could trigger a write-down. For finite-lived intangibles, examine useful life assumptions across customer relationships, technology, and trade names; aggressive estimates inflate near-term earnings. Compare total intangibles-to-total-assets ratios against peers to assess acquisition dependency. Rising goodwill as a percentage of equity can signal balance sheet fragility.