Overview

Please refer to the Management's Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the fiscal year ended April 30, 2019 and our unaudited condensed consolidated financial statements included in Item 1 of this Quarterly Report on Form 10-Q. This section sets forth key objectives and performance indicators used by us as well as key industry data tracked by us.

We report our results of operations in two segments: (1) Firearms and (2) Outdoor Products & Accessories.

Third Quarter Fiscal 2020 Highlights

Our operating results for the three months ended January 31, 2020 included the following:



    •  On January 14, 2020, our Board of Directors named Mark P. Smith and Brian
       D. Murphy as co-Presidents and co-Chief Executive Officers of our company.
       Mr. Smith and Mr. Murphy succeeded P. James Debney, who separated as
       President and Chief Executive Officer and as a director of our company. The
       separation of Mr. Debney resulted in a $3.8 million decrease in general and
       administrative expenses as compared to the comparable quarter last year
       because of the reversal of compensation related costs.


    •  Consolidated net sales were $166.7 million, an increase of $4.7 million, or
       2.9%, from the comparable quarter last year.


    •  Firearms segment gross sales were $127.4 million, which included $907,000
       of inter-segment revenue, an increase of $3.8 million, or 3.1%, over the
       comparable quarter last year, primarily because of increased handgun sales
       due to the shipment of a new handgun and a change in the timing of our
       federal excise tax obligation that resulted in an increase in revenue and a
       corresponding increase in cost of sales.  This change was a direct result
       of the opening of our distribution center in June 2019 and resulted from
       the Tax and Trade Bureau denying our petition and requiring us to assess
       federal excise tax on the first transfer of a firearm.  Starting in June
       2019, we began transferring all completed firearms to our new distribution
       center and became required to assess federal excise tax at that point.
       Previously, we assessed federal excise tax at the point of sale to our
       third-party customers, allowing us to reduce the invoice value of our
       firearms by the federal excise tax assessed. This tax is now a cost of
       inventory at the distribution center and results in sales to our customers
       and the related cost of sales both being increased by the tax amount. This
       change does not impact gross profit dollars, but it reduces gross margin
       percentage.  The impact during the three months ended January 31, 2020 was
       a $10.1 million increase in sales and cost of sales and a decrease in gross
       margin of 240 basis points.


    •  Outdoor Products & Accessories segment gross sales were $43.3 million,
       which included $3.1 million of inter-segment revenue, an increase of $1.4
       million, or 3.2%, over the comparable quarter last year.


    •  Consolidated gross margin was 33.1%, a decrease of 30 basis points from the
       comparable quarter last year. Excluding the impact of the change in federal
       excise tax treatment, gross margin would have been 35.3%, or an increase of
       190 basis points over the comparable quarter last year.


    •  Consolidated net income was $5.7 million, or $0.10 per diluted share,
       compared with a net loss of $5.7 million, or ($0.10) per diluted share for
       the comparable quarter last year. Results for the comparable quarter last
       year included a $10.4 million non-cash impairment of goodwill in our
       Outdoor Products & Accessories segment. This non-cash impairment charge had
       a $0.19 negative impact on basic and fully diluted earnings per share for
       the three months ended January 31, 2019.

Our operating results for the nine months ended January 31, 2020 included the following:



    •  Consolidated net sales were $444.8 million, a decrease of $17.8 million, or
       3.8%, from the prior year comparable period.


    •  Firearms segment gross sales were $336.6 million, which included $2.6
       million of inter-segment revenue, a decrease of $4.1 million, or 1.2%, from
       the prior year comparable period, primarily because of the fulfillment of
       consumer demand from channel inventory for our modern sporting rifles and
       lower promotional activity in the current year for bolt action rifles,
       partially offset by a change in the timing of our federal excise tax
       obligation as described above and increased handgun sales because of the
       shipment of a new handgun. The change in federal excise tax treatment had a
       $20.8 million favorable impact on Firearms segment revenue and a decrease
       in gross margin of 200 basis points for the nine months ended January 31,
       2020 compared with the prior year comparable period.


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    •  Outdoor Products & Accessories segment gross sales were $124.3 million,
       which included $13.5 million of inter-segment revenue, a decrease of $10.8
       million, or 8.0%, from the prior year comparable period. The decrease in
       sales was primarily because of a reduction in shipments to one large
       retailer in our shooting and camping accessory product categories combined
       with a change in the timing of bulk orders for another retailer. This was
       partially offset by sales growth in our cutlery product category.


    •  Consolidated gross margin was 34.5%, a decrease of 70 basis points from the
       prior year comparable period. Excluding the impact of the change in federal
       excise tax, gross margin would have been 36.2%, or an increase of 100 basis
       points over the prior year comparable period.


    •  Consolidated net income was $4.9 million, or $0.09 per diluted share,
       compared with net income of $8.6 million, or $0.16 per diluted share, for
       the prior year comparable period. The non-cash impairment charge described
       above had an $0.18 negative impact on diluted earnings per share for the
       nine months ended January 31, 2019.


    •  On November 14, 2019, we announced a plan to spin-off our outdoor products
       and accessories business, pending final approval, as a tax-free dividend to
       our stockholders.  We expect the spin-off to be completed in the second
       half of calendar 2020. The spin-off will create two independent publicly
       traded companies: Smith & Wesson Brands, Inc. (which would encompass our
       firearm business) and American Outdoor Brands, Inc. (which would encompass
       our outdoor products and accessories business). The primary purpose of the
       spin-off is to enable the management team of each company to focus on its
       specific strategies, including (1) structuring its business to take
       advantage of growth opportunities in its specific markets; (2) tailoring
       its business operation and financial model to its specific long-term
       strategies; and (3) aligning its external financial resources, such as
       stock, access to markets, credit, and insurance factors, with its
       particular type of business. In connection with the proposed spin-off, we
       expect to incur restructuring charges of approximately $9.0 million to
       $12.0 million relating to legal, regulatory, and financial services,
       reorganization and restructuring costs, and start-up costs for the new
       company. Thus far, we have incurred $1.2 million of restructuring charges
       relating to the spin-off.




Results of Operations

Consolidated Net Sales and Gross Profit - For the Three Months Ended January 31, 2020



The following table sets forth certain information regarding consolidated net
sales and gross profit for the three months ended January 31, 2020 and 2019
(dollars in thousands):



                                2020          2019         $ Change      % Change
Net sales                     $ 166,695     $ 162,008     $    4,687           2.9 %
Cost of sales                   111,492       107,949          3,543           3.3 %
Gross profit                  $  55,203     $  54,059     $    1,144           2.1 %

% of net sales (gross margin) 33.1 % 33.4 %

Consolidated net sales increased $4.7 million, or 2.9%, primarily because of a change in federal excise tax treatment that resulted in a $10.1 million increase in firearm sales. In our Firearms segment, revenue for handguns increased as a result of the introduction of a new concealed carry handgun and, in our Outdoor Products & Accessories segment, an increase in shooting and hunting accessory product sales was the result of increased orders from several large national retailers. These increases were partially offset by lower sales of modern sporting rifles, hunting rifles, and camping accessory product sales.



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Consolidated gross margin declined 30 basis points from the comparable quarter last year. Although gross margin dollars were not impacted as a result of the change in federal excise tax treatment described above, the gross margin percentage was negatively impacted by 220 basis points. Excluding that impact, consolidated gross margins increased by 190 basis points over the comparable quarter last year, primarily because of shipping costs that were included in cost of sales in the comparable quarter last year are now included in operating expenses because of the start-up of our new distribution center, favorable manufacturing fixed cost absorption, lower manufacturing spending, and favorable inventory valuation adjustments in our Firearms segment. The favorable impacts to gross margin were partially offset by increased promotional product discounts in Firearms, lower production of laser sights that resulted in the corresponding unfavorable manufacturing fixed-cost absorption, an increase in inventory reserves for slow moving product in our Outdoor Products & Accessories segment, and higher tariff costs on imported goods in the Outdoor Products & Accessories segment.

Firearms Segment Revenue and Gross Profit - For the Three Months Ended January 31, 2020



The following tables set forth certain information regarding Firearms revenue
and gross profit for the three months ended January 31, 2020 and 2019 (dollars
in thousands):



                                2020          2019        $ Change       % Change
Handguns                      $  94,251     $  84,151     $  10,100           12.0 %
Long Guns                        24,656        30,216        (5,560 )        -18.4 %
Other Products & Services         8,509         9,256          (747 )         -8.1 %
Total Firearms Revenue        $ 127,416     $ 123,623     $   3,793            3.1 %
Cost of sales                    91,867        89,262         2,605            2.9 %
Gross profit                  $  35,549     $  34,361     $   1,188            3.5 %

% of net sales (gross margin) 27.9 % 27.8 %






The following table sets forth certain information regarding firearm units
shipped by trade channel for the three months ended January 31, 2020 and 2019
(units in thousands):



Total Units Shipped                  2020      2019       # Change      % Change
Handguns                               310       294          16          5.4%
Long Guns                              61        88          (27)        -30.7%

Sporting Goods Channel Units Shipped 2020 2019 # Change % Change Handguns

                               289       276          13          4.7%
Long Guns                              58        85          (27)        -31.8%

Professional Channel Units Shipped   2020      2019       # Change      % Change
Handguns                               21        18            3          16.7%
Long Guns                               3         3            0          0.0%

Revenue for our handguns increased $10.1 million, or 12.0%, over the comparable quarter last year. Increases in our revenue included the above described change in federal excise tax treatment, which had a $7.8 million favorable impact on handgun revenue, and increased revenue due to the shipment of a new concealed carry handgun into our sales channel. Unit shipments into the sporting goods consumer channel increased 4.7% over the comparable quarter last year primarily because of increased shipment of new products and increased consumer firearm demand, as indicated by a 13.9% increase over the comparable quarter last year in total adjusted handgun background checks as reported to the National Instant Criminal Background Check Systems, or NICS, which we believe is a proxy for overall consumer demand. We believe that our percentage increase in sales in handguns likely did not match NICS as a result of a combination of reporting changes in certain states, timing related to new product introductions, and fulfillment of consumer demand out of channel inventory, particularly by several key strategic retailers.

Revenue for our long guns decreased $5.6 million, or 18.4%, from the comparable quarter last year, in spite of a $2.3 million increase in revenue as a result of the change in federal excise tax treatment. The decrease in revenue was due to decreased sales for our M&P modern sporting rifles as a result of decreased promotional product discounts related to bundle promotions compared to the prior year as a result of a reduction in inventory by certain strategic retailers. The decrease in revenue was also due to lower bolt action rifle sales during the current quarter as a result of offering discounts on discontinued products in the prior fiscal year as well as the timing of new product introductions later in the current fiscal year that led to lower orders early in the quarter.



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Other products and services revenue decreased $747,000, or 8.1%, from the comparable quarter last year, primarily because of lower sales of component parts, handcuffs, and specialty services.

New products in our Firearms segment, defined as any new SKU not shipped in the comparable quarter last year, represented 37.0% of firearm revenue for the three months ended January 31, 2020 and included a new concealed carry M&P branded polymer pistol, many new product line extensions, and promotional product bundle kits for our M&P, Performance Center, and Thompson/Center Arms branded products.

Gross margin for the three months ended January 31, 2020 for our Firearms segment increased 10 basis points over the comparable quarter last year in spite of the negative impact of the change in federal excise tax treatment. Gross margin was negatively impacted by 240 basis points as a result of the change in federal excise tax treatment, although gross margin dollars were not impacted by that change. Excluding that tax impact, gross margin for our firearms segment increased by 250 basis points over the comparable quarter last year, primarily because of a reduction in material costs due to sourcing initiatives, shipping costs that were included in cost of sales in the comparable quarter last year that are now included in operating expenses due to the start-up of our new distribution center, favorable manufacturing fixed cost absorption, and lower manufacturing spending. The favorable impacts to Firearms gross margin were partially offset by increased promotional product discounts.

Firearm inventory balances remained relatively flat during the three months ended January 31, 2020. While inventory levels, both internally and in the distribution channel, in excess of demand may negatively impact future operating results, it is difficult to forecast the potential impact of distributor inventories on future revenue and income since demand is impacted by many factors, including seasonality, new product introductions, news events, political events, and consumer preferences.

Outdoor Products & Accessories Segment Revenue and Gross Profit - For the Three Months Ended January 31, 2020



The following table sets forth certain information regarding Outdoor Products &
Accessories segment revenue for the three months ended January 31, 2020 and 2019
(dollars in thousands):



                                2020         2019        $ Change       % Change
Revenue                       $ 43,270     $ 41,911     $    1,359            3.2 %
Cost of sales                   24,750       22,564          2,186            9.7 %
Gross profit                  $ 18,520     $ 19,347     $     (827 )         -4.3 %

% of net sales (gross margin) 42.8 % 46.2 %

For the three months ended January 31, 2020, revenue for our Outdoor Products & Accessories segment increased $1.4 million, or 3.2%, over the comparable quarter last year. Revenue increased as a result of increased shooting, hunting, and cutlery product sales that were driven by certain large national retailers, reflecting increased demand from these customers on a more consistent basis over the comparable quarter last year in the form of higher weekly replenishment orders. This normalized order cadence also increased overall sales dollars to these customers because of the reduction of bulk orders, which are typically accompanied with discounted prices. In addition, point of sale data from our large customers in these categories indicates significant growth over the comparable quarter last year, demonstrating strong consumer demand for our products in the channel. In spite of the increases in shooting, hunting, and cutlery, reduced sales to OEM customers for our laser products, recent bankruptcies and other financial instability by certain of our customers, and a decline in sales of our branded camping accessory products due to one large retailer accelerating a strategy towards its own private label brand, resulted in a lower than anticipated increase in revenue over the prior fiscal quarter.

New products represented 12.2% of Outdoor Products & Accessories segment revenue for the three months ended January 31, 2020. Our Outdoor Products & Accessories segment has a history of introducing approximately 250 to 350 new SKUs each year, the majority of which are introduced late in our third fiscal quarter.



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Gross margin for the three months ended January 31, 2020 for our Outdoor Products & Accessories segment decreased 340 basis points from the comparable quarter last year, primarily because of lower production of laser sights that resulted in corresponding unfavorable manufacturing fixed-cost absorption, an increase in inventory reserves for slow moving laser products, and higher tariff costs on imported goods, partially offset by price increases and the absence of large bulk buy orders that typically have discounted prices.

Inventory in our Outdoor Products & Accessories segment increased $800,000 during the three months ended January 31, 2020. Items impacting our inventory included an increase in import tariffs, the introduction of over 250 new products during the quarter, increased sales and improved order cadence, and better management of inventory turns. With regard to concerns surrounding the coronavirus, and based on the situation as it currently stands, we believe our inventory levels will allow us to mitigate some of the impact to our business in the short term. We also believe that we will be able to obtain additional inventory to support the majority of our future business needs as nearly all of our suppliers in China have returned to work and are producing products with only occasional temporary disruptions to new orders. It is possible, however, that worsening of conditions or increased fears of a pandemic could have a renewed and prolonged effect on manufacturing or employment in China, travel to and from China, or other restrictions on imports - all of which could have a longer term effect on our sales and profitability in future periods.

Consolidated Net Sales and Gross Profit - For the Nine Months Ended January 31, 2020



The following table sets forth certain information regarding consolidated net
sales and gross profit for the nine months ended January 31, 2020 and 2019
(dollars in thousands):



                                2020          2019        $ Change       % Change
Net sales                       444,753     $ 462,544     $ (17,791 )         -3.8 %
Cost of sales                   291,390       299,677        (8,287 )         -2.8 %
Gross profit                  $ 153,363     $ 162,867     $  (9,504 )         -5.8 %

% of net sales (gross margin) 34.5 % 35.2 %

Consolidated net sales decreased $17.8 million, or 3.8%, from the prior year comparable period because of lower modern sporting and hunting rifle sales in our Firearms segment and lower shooting and hunting and camping accessory sales in our Outdoor Products & Accessories segment. The decreases were partially offset by increased handgun sales in our Firearms segment and cutlery product sales in our Outdoor Products & Accessories segment. As described above, our sales were favorably impacted by the change in our federal excise tax treatment, resulting in a $20.8 million increase in revenue over the prior year comparable period.

Consolidated gross margin was negatively impacted by 170 basis points as a result of the change in federal excise tax treatment described above. Excluding that treatment, consolidated gross margin increased 100 basis points over the prior year comparable period, primarily because of the change in accounting for shipping costs as described above, a reduction in material costs due to sourcing initiatives, favorable inventory valuation adjustments, and lower manufacturing spending in our Firearms segment. Unfavorable impacts included lower margin contribution from the Outdoor Products & Accessories segment and higher promotional product discounts and unfavorable manufacturing fixed-cost absorption in our Firearms segment.

Firearms Segment Revenue and Gross Profit - For the Nine Months Ended January 31, 2020



The following tables set forth certain information regarding Firearms revenue
and gross profit for the nine months ended January 31, 2020 and 2019 (dollars in
thousands):



                                2020          2019        $ Change       % Change
Handguns                      $ 247,373     $ 230,968     $  16,405            7.1 %
Long Guns                        63,180        81,969       (18,789 )        -22.9 %
Other Products & Services        26,022        27,701        (1,679 )         -6.1 %
Total Firearms Revenue        $ 336,575     $ 340,638     $  (4,063 )         -1.2 %
Cost of sales                   233,507       239,639        (6,132 )         -2.6 %
Gross profit                  $ 103,068     $ 100,999     $   2,069            2.0 %

% of net sales (gross margin) 30.6 % 29.6 %






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The following table sets forth certain information regarding firearm units
shipped by trade channel for the nine months ended January 31, 2020 and 2019
(units in thousands):



Total Units Shipped                  2020   2019   # Change   % Change
Handguns                             800    772       28        3.6%
Long Guns                            189    249      (60)      -24.1%

Sporting Goods Channel Units Shipped 2020 2019 # Change % Change Handguns

                             729    701       28        4.0%
Long Guns                            177    236      (59)      -25.0%

Professional Channel Units Shipped   2020   2019   # Change   % Change
Handguns                              71     71       0         0.0%
Long Guns                             12     13      (1)       -7.7%

Revenue for our handguns increased $16.4 million, or 7.1%, primarily as a result of the change in the federal excise tax treatment described above. Excluding this change, revenue for our handguns remained relatively flat from the prior year comparable period as a result of increased promotional activity and a shift in mix to lower priced products. Favorable impacts to our handgun revenue included shipments of a new concealed carry handgun and increased shipments of Performance Center branded products, which also improved our average selling price. Although adjusted background checks for handguns reported to NICS increased 10.6% compared with the prior year comparable period, our sporting goods channel unit sales increased only 4.0% during the same period. We believe that our percentage increase in sales in handguns likely did not match NICS because of a combination of reporting changes in certain states, timing related to new product introductions, and fulfillment of consumer demand our of inventory, particularly by a few key strategic retailers. Inventory levels within the channel decreased substantially as compared to the end of our prior fiscal year as well as compared to the prior consecutive period, which demonstrates positive response in the marketplace regarding our products, and we believe we are maintaining handgun market share.

Revenue for our long guns decreased $18.8 million, or 22.9%, from the prior year comparable period, in spite of a $4.9 million increase in revenue because of a change in when we are assessed federal excise tax, primarily because of lower shipments of our M&P branded modern sporting rifles as a result of lower promotional activity in the current year as compared with the prior year comparable period and the fulfillment of consumer demand with channel inventory. In addition, bolt action rifle sales were lower than the prior year comparable period as a result of clearing discontinued products from the channel in anticipation of new products that were introduced late in our third fiscal quarter. We believe that our percentage decrease in sales likely did not match NICS because of the same reasons described above.

Other products and services revenue decreased $1.7 million, or 6.1%, from the prior year comparable period, primarily because of lower sales of component parts and handcuffs.

New products in our Firearms segment represented 29.6% of firearm revenue for the nine months ended January 31, 2020 and included a new concealed carry M&P branded polymer pistol, many new product line extensions, and promotional products bundle kits for our M&P, Performance Center, and Thompson/Center Arms branded products.

Gross margin for the nine months ended January 31, 2020 for our Firearms segment was negatively impacted 200 basis points as a result of the change in federal excise tax treatment described above. Gross margin dollars were not impacted by that tax treatment, and excluding that treatment, gross margin for our firearms segment increased by 300 basis points over the prior year comparable period, primarily because of shipping costs that were included in cost of sales in the prior year comparable period that are now included in operating expenses due to the start-up of our new distribution center, a reduction in material costs due to sourcing initiatives, favorable inventory valuation adjustments related to the release of year end manufacturing variance accruals, which were partially offset by increased standards related to material and labor cost increases, combined with improved manufacturing fixed cost absorption, lower manufacturing spending, and price increases, all of which favorably impacted Firearms gross margin by 5.0%. These favorable impacts to Firearms gross margin were partially offset by increased promotional product discounts.



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Outdoor Products & Accessories Segment Revenue and Gross Profit - For the Nine Months Ended January 31, 2020



The following table sets forth certain information regarding Outdoor Products &
Accessories segment revenue for the nine months ended January 31, 2020 and 2019
(dollars in thousands):



                                2020          2019        $ Change       % Change
Revenue                       $ 124,296     $ 135,118     $ (10,822 )         -8.0 %
Cost of sales                    73,119        73,474          (355 )         -0.5 %
Gross profit                  $  51,177     $  61,644     $ (10,467 )        -17.0 %

% of net sales (gross margin) 41.2 % 45.6 %

Revenue for our Outdoor Products & Accessories segment for the nine months ended January 31, 2020 decreased $10.8 million, or 8.0%, from the prior year comparable period. Revenue decreased primarily as a result of reduced sales to OEM customers for our laser products, recent bankruptcies and other financial instability by certain of our customers, and a decline in sales of our branded camping accessory products due to one large retailer accelerating a strategy towards their own private label brand. The negative impacts on revenue were partially offset by increased cutlery product sales to most major customers.

New products represented 10.3% of Outdoor Products & Accessories segment revenue for the nine months ended January 31, 2020.

Gross margin for the nine months ended January 31, 2020 for our Outdoor Products & Accessories segment was negatively impacted by 4.4% from the prior year comparable period primarily because of lower production of laser sights that resulted in the corresponding unfavorable manufacturing fixed-cost absorption and higher tariff costs on imported goods.

Consolidated Operating Expenses

The following table sets forth certain information regarding operating expenses for the three months ended January 31, 2020 and 2019 (dollars in thousands):





                                       2020         2019       $ Change       % Change
Research and development             $  3,192     $  3,297     $    (105 )         -3.2 %
Selling, marketing, and distribution   19,294       15,373         3,921           25.5 %
General and administrative             21,810       27,026        (5,216 )        -19.3 %
Impairment of long-lived assets             -       10,396             -            N/A
Total operating expenses             $ 44,296     $ 56,092     $ (11,796 )        -21.0 %
% of net sales                           26.6 %       34.6 %


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Research and development expenses remained relatively flat from the prior year comparable quarter. Selling, marketing, and distribution expenses increased $3.9, million partially as a result of the start-up of our new distribution center during the first quarter of fiscal 2020, which included approximately $1.1 million of shipping costs that would have been included in cost of sales in the comparable quarter last year as well as additional costs related to compensation and benefits, depreciation, property taxes, and security. In addition, increased co-op advertising expenses to strategic customers in the Firearms segment resulted in increased spending over the comparable quarter last year. This increased spending was partially offset by lower management incentive compensation costs. General and administrative expenses decreased $5.2 million because of a combination of decreased compensation related expenses in connection with the separation of our President and Chief Executive Officer, decreased costs due to the closure of our Jacksonville, Florida facility during our first fiscal quarter, and decreased bad debt expense. These increases were partially offset by increased depreciation related to our 633,000 square foot Missouri distribution center and increased expenses related to the planned spin-off of our outdoor products and accessories business, as described above. On February 26, 2020, we signed a separation agreement with our former President and Chief Executive Officer that will result in an increase to our fourth quarter general and administrative expenses by approximately $1.6 million.

The following table sets forth certain information regarding operating expenses for the nine months ended January 31, 2020 and 2019 (dollars in thousands):





                                       2020          2019        $ Change       % Change
Research and development             $   9,410     $   9,358     $      52            0.6 %
Selling, marketing, and distribution    55,419        42,279        13,140           31.1 %
General and administrative              71,601        78,065        (6,464 )         -8.3 %
Impairment of long-lived assets              -        10,396             -            N/A
Total operating expenses             $ 136,430     $ 140,098     $  (3,668 )         -2.6 %
% of net sales                            30.7 %        30.3 %

Research and development remained flat from the prior year comparable period. Selling, marketing, and distribution expenses increased $13.1 million partially as a result of the start-up of our new distribution center during the first quarter of fiscal 2020, which included approximately $3.3 million of costs that would have been included in cost of sales in the prior year comparable period as well as additional costs related to compensation and benefits, depreciation, property taxes, and security. In addition, increased co-op advertising expenses in the Firearms segment related to strategic customers, additional targeted customer promotions in our Outdoor Products & Accessories segment, and increases related to the development of our eCommerce initiative resulted in increased spending over the prior year comparable period. General and administrative expenses decreased $6.5 million primarily as a result of decreased compensation related expenses in connection with the separation of our President and Chief Executive Officer, and decreased costs due to the closure of our Jacksonville, Florida facility, partially offset by increased professional fees, increased depreciation and compensation-related expenses related to our 633,000 square foot Missouri distribution center, and increased expenses related to the planned spin-off of our outdoor products and accessories business, as described above.

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