SMITH & WESSON BRANDS, INC. Income Taxes Disclosure
13. Income Taxes
Income tax expense from continuing operations consisted of the following (in thousands):
|
|
For the Year Ended April 30, |
|
||||||||||||
|
|
2025 |
|
|
2024 |
|
|
2023 |
|
||||||
Current: |
|
|
|
|
|
|
|
|
|
|
|
|
|||
Federal |
|
$ |
|
6,875 |
|
|
$ |
|
6,786 |
|
|
$ |
|
16,259 |
|
State |
|
|
|
1,977 |
|
|
|
|
2,713 |
|
|
|
|
1,955 |
|
Total current |
|
|
|
8,852 |
|
|
|
|
9,499 |
|
|
|
|
18,214 |
|
Deferred: |
|
|
|
|
|
|
|
|
|
|
|
|
|||
Federal |
|
|
|
(2,638 |
) |
|
|
|
2,558 |
|
|
|
|
(6,217 |
) |
State |
|
|
|
(394 |
) |
|
|
|
(1,701 |
) |
|
|
|
(647 |
) |
Total deferred |
|
|
|
(3,032 |
) |
|
|
|
857 |
|
|
|
|
(6,864 |
) |
Total income tax expense |
|
$ |
|
5,820 |
|
|
$ |
|
10,356 |
|
|
$ |
|
11,350 |
|
The following table presents a reconciliation of income tax expense from continuing operations at the statutory rate of 21% to the expense in the consolidated financial statements (in thousands):
|
|
For the Year Ended April 30, |
|
||||||||||||
|
|
2025 |
|
|
2024 |
|
|
2023 |
|
||||||
Federal income taxes expected at the statutory rate |
|
$ |
|
4,041 |
|
|
$ |
|
10,861 |
|
|
$ |
|
10,127 |
|
State income taxes, net of federal tax effects |
|
|
|
1,406 |
|
|
|
|
(144 |
) |
|
|
|
1,023 |
|
Stock compensation |
|
|
|
386 |
|
|
|
|
467 |
|
|
|
|
136 |
|
Business meals and entertainment |
|
|
|
113 |
|
|
|
|
100 |
|
|
|
|
89 |
|
Research and development tax credit |
|
|
|
(335 |
) |
|
|
|
(281 |
) |
|
|
|
(265 |
) |
Amendments to prior year returns |
|
|
|
— |
|
|
|
|
(1,176 |
) |
|
|
|
— |
|
Other |
|
|
|
209 |
|
|
|
|
529 |
|
|
|
|
240 |
|
Total income tax expense |
|
$ |
|
5,820 |
|
|
$ |
|
10,356 |
|
|
$ |
|
11,350 |
|
Deferred tax assets and liabilities related to temporary differences consisted of the following (in thousands):
|
|
For the Years Ended April 30, |
|
|||||
|
|
2025 |
|
|
2024 |
|
||
Deferred Tax Assets |
|
|
|
|
|
|
||
Inventory reserves |
|
$ |
11,637 |
|
|
$ |
8,489 |
|
Accrued expenses, including compensation |
|
|
2,930 |
|
|
|
4,678 |
|
Net operating loss carryforwards and tax credits |
|
|
8,200 |
|
|
|
3,964 |
|
Operating lease liability |
|
|
128 |
|
|
|
240 |
|
Product liability |
|
|
151 |
|
|
|
191 |
|
Workers' compensation |
|
|
684 |
|
|
|
704 |
|
State bonus depreciation |
|
|
980 |
|
|
|
1,812 |
|
Warranty reserve |
|
|
760 |
|
|
|
1,017 |
|
Stock-based compensation |
|
|
1,573 |
|
|
|
1,319 |
|
Section 174 capitalized R&D expense |
|
|
2,983 |
|
|
|
2,502 |
|
Other |
|
|
942 |
|
|
|
820 |
|
Total deferred tax assets before valuation allowance |
|
|
30,968 |
|
|
|
25,736 |
|
Valuation allowance |
|
|
(6,169 |
) |
|
|
(3,347 |
) |
Net deferred tax assets |
|
|
24,799 |
|
|
|
22,389 |
|
Deferred Tax Liabilities |
|
|
|
|
|
|
||
Operating lease right-of-use assets |
|
|
(96 |
) |
|
|
(197 |
) |
Property, plant & equipment |
|
|
(11,679 |
) |
|
|
(12,426 |
) |
Intangible assets |
|
|
(2,418 |
) |
|
|
(2,270 |
) |
Other |
|
|
(346 |
) |
|
|
(268 |
) |
Total deferred tax liabilities |
|
|
(14,539 |
) |
|
|
(15,161 |
) |
Net Deferred Tax Asset |
|
$ |
10,260 |
|
|
$ |
7,228 |
|
We had no federal net operating losses as of April 30, 2025.
We had $77.3 million and $27.1 million in state net operating loss carryforwards as of April 30, 2025 and 2024, respectively. The state net operating loss carryforwards will expire between April 30, 2026 and April 30, 2040. We had $5.3 million and $3.3 million of state tax credit carryforwards as of April 30, 2025 and 2024, respectively. Of the $5.3 million, $2.4 million can be carried forward indefinitely and $2.9 million will expire between April 30, 2026 and April 30, 2050.
As of April 30, 2025 and 2024, valuation allowances related to our deferred tax assets for state net operating loss carryforwards were $4.0 million and $1.4 million, respectively, and $2.2 million and $1.9 million were provided on our deferred tax assets for state tax credits, respectively, that we do not anticipate using prior to expiration.
The income tax provisions represent effective tax rates of 30.2% and 20.0% for fiscal 2025 and 2024, respectively.
With limited exception, we are subject to U.S. federal, state, and local income tax audits by tax authorities for fiscal years subsequent to April 30, 2019.
As of April 30, 2025 and 2024, we have not recorded any unrecognized tax benefits. We maintain an accounting policy of recording interest and penalties, if applicable, related to uncertain tax positions as a component of income taxes. As of April 30, 2025 and 2024, there were no interest and penalties accrued.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Jun 20, 2025 | Showing above |
| 2024 | Jun 20, 2024 | |
| 2023 | Jun 22, 2023 | |
| 2022 | Jun 23, 2022 | |
| 2021 | Jun 17, 2021 | |
| 2020 | Jun 19, 2020 | |
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.