Earnings Call Transcript - SWBI Q1 2020

Operator, Operator

Good day, everyone, and welcome to American Outdoor Brands Corporation First Quarter Fiscal 2020 Financial Results Conference Call. This call is being recorded. At this time, I would like to turn the call over to Liz Sharp, Vice President of Investor Relations, who will give us some information about today's call.

Elizabeth Sharp, Vice President of Investor Relations

Thank you, and good afternoon. Our comments today may contain predictions, estimates and other forward-looking statements. Our use of words like anticipate, project, estimate, expect, intend, believe and other similar expressions is intended to identify those forward-looking statements. Forward-looking statements also include statements regarding revenue; earnings per share; non-GAAP earnings per share; fully diluted share count and tax rate for future periods; product development, focus, objectives, strategies and vision; our strategic evolution; our market share and market demand for our product; market and inventory conditions related to our products and in our industry in general; and growth opportunities and trends. Our forward-looking statements represent our current judgment about the future, and they are subject to various risks and uncertainties. Risk factors and other considerations that could cause our actual results to be materially different are described in our securities filings, including our Forms 8-K, 10-K and 10-Q. You can find those documents as well as a replay of this call on our website at aob.com. Today's call contains time-sensitive information that is accurate only as of this time, and we assume no obligation to update any forward-looking statements. Our actual results could differ materially from our statements today. I have a few important items to note about our comments on today's call. First, we reference certain non-GAAP financial measures on this call. Our non-GAAP results and guidance exclude acquisition-related costs, including amortization, recall-related expenses, one-time transition costs, fair value inventory step-up and the tax effect related to all those adjustments. The reconciliations of GAAP financial measures to non-GAAP financial measures, whether or not they are discussed on today's call, can be found in today's Form 8-K filing as well as today's earnings press release, which are posted on our website. Also, when we reference EPS, we are always referencing fully diluted EPS. For detailed information on our results, please refer to our annual report on Form 10-K for the year ended April 30, 2019. I will now turn the call over to James Debney, President and CEO of American Outdoor Brands.

James Debney, President and CEO

Thank you, Liz. Good afternoon, and thanks, everyone for joining us. With me on today's call is Jeff Buchanan, our Chief Financial Officer. Later in the call, Jeff will provide a recap of our financial performance as well as our updated guidance. Our results for the first quarter reflected our ability to remain focused on executing our strategic plan while addressing the challenges of ongoing softness in the firearms market. Today, I'll share with you some details of our first quarter. Then Jeff will provide information on our financial results and our outlook for the coming fiscal year. As you know, we transfer firearms only to law enforcement agencies and federally licensed distributors and retailers, not directly to end consumers. That said, adjusted NICS background checks are generally considered to be the best available proxy for consumer demand for firearms at retail. In our fiscal Q1, background checks for handguns increased 2.1% year-over-year, while our units shipped to distributors and retailers decreased by 7%. For the same period, background checks for long guns declined by 2.2% year-over-year, while our units shipped to distributors and retailers declined 8.1%. This result was expected. Recall last quarter when we cautioned that a Q1 correction relative to adjusted NICS was extremely likely, given the success of our year-end promotions and our strong outperformance of the market in Q4. In a more recent update, July adjusted NICS were up only slightly year-over-year. And while adjusted NICS appear to be following its typical slow summer seasonality, this was the second-largest sequential monthly decline in the past four years, indicating to us that the consumer market for firearms remains very soft. Distributor inventory of our firearms increased sequentially from 127,000 units at the end of Q4 to 178,000 units at the end of Q1. Distributor increases in inventory are very typical this time of year due to the seasonal slowdown in sales velocity in the channel as well as planned inventory buildup leading into the full hunting and holiday shopping seasons. This year, those inventories also reflect the success of our Q1 buy-in programs that positioned participating distributors to take full advantage of our fall promotions in Q2. In addition, distributor inventory grew in the long gun category as we proactively worked to reduce our inventory of a certain product line with enough time for that inventory to clear out of the channel in advance of an upcoming new product launch. Since the end of Q1, distributor inventories have increased and remain above our eight-week threshold. Turning to new products. Innovation to support our organic growth strategy remains the highest priority across our entire business. Within each of our divisions, creative new product development teams focus on innovating for the consumer to meet their needs, wants and desires. In firearms, we continue to prepare for several major new product launches scheduled for the current fiscal year. While I won't share details at this point, I can tell you that we look forward to providing consumers with some exciting new products from brands that they know and trust. So please stay tuned. Also note that this is one of the reasons our internal inventory increased in Q1 as we build up inventories of our existing product portfolio in preparation for shifting capacity over to new products when they launch. In Outdoor Products & Accessories, our decision to organize into brand lanes is yielding exciting results. Each lane consists of a highly agile team that provides dedicated brand management, creative design, content production, product management, new product development and engineering. These entrepreneurial teams have been very productive over the last few quarters. During Q1, we attended ICAST, one of the largest fishing trade shows in the world, to showcase our new BUBBA lifestyle brand and demonstrate our ever-growing portfolio of fishing tools, including the new BUBBA electric fillet knife, which we launched in February. To say the show was a success is truly an understatement. Not only was the booth packed nonstop with attendees, we came home with the Best of Category award in cutlery, hand pliers, and tools for the BUBBA electric fillet knife. I want to commend the team for their success in energizing the new BUBBA brand. While it's still a small product line today, our BUBBA sales delivered year-over-year growth of 65% in Q1. Well, that is a great example of the value that can be quickly created from small tuck-in acquisitions. We also made some exciting developments in our newly rebranded BOG line of shooting rests. During the quarter, we reengineered the BOG product line with innovation that delivers a variety of solutions for hunters. Our global e-commerce and technology division is at the forefront of our digital innovation, providing best-in-class sales and marketing technologies that power our online business. We utilize our newly expanded digital capabilities to harvest the growth potential of our existing brands. We do that by building brand-immersive and content-rich websites, delivering intelligent, targeted and personalized campaigns and providing exceptional customer experiences. During Q1, we demonstrated these capabilities with the launch of our new brand website for Caldwell, Frankford Arsenal, Wheeler, and BOG. These new websites will allow our customers to connect with us and form deeper emotional relationships with our brands. We've also made important organizational changes in support of these initiatives, combining the customer service functions from our firearms and OP&A businesses. Under the focused leadership of the e-commerce and technology division, the customer experience group will have the agility and focus we need to drive seamless and efficient customer interactions with all of our brands. Now I want to touch briefly on the topic of tariffs. Since much of our Outdoor Products & Accessories business involves China manufacturing, tariffs are obviously presenting us with an ever-changing landscape. Our team in China has done their best to address this challenging environment. That said, as the tariff situation continues to escalate, opportunities to offset that impact have begun to rapidly diminish. As we continue to navigate this volatile and dynamic environment, we are continually exploring mitigation opportunities such as securing sources in other low-cost countries. However, our supply chain in China is relatively sophisticated compared to those available in other low-cost countries, so a rapid change is difficult. In addition, bringing an entirely new manufacturer online takes time, and the duration of the tariff is still very unclear. Later in the call, Jeff will share a bit more detail regarding the timing and financial impact of the tariffs as they stand today. During the quarter, we achieved significant milestones at our new Missouri Campus, which serves primarily as the centralized logistics, warehousing and distribution operation for our entire business. First, we completed the transfer of our firearms logistics and warehousing operations to the new facility. This is important since firearms are highly regulated products, and the establishment of the strict control processes at the new facility was a key milestone. In fact, we just completed yet another full serial number count at the facility on Saturday, and as we expected, we achieved 100% accuracy in that count. Second, we consolidated and shuttered our Jacksonville, Florida business during Q1, eliminating 100,000 square feet of office and warehouse space. These significant achievements coincided with the strong quarter-end order flow driven by the success of our late summer firearm promotion. As a result, we are forced to prioritize firearms shipments over OP&A shipments, which, in turn, negatively impacted our OP&A revenues for the quarter. The vast majority of those delayed OP&A shipments were completed at the beginning of Q2. We don't anticipate a recurrence of this type of conflict since the transfer of the firearms logistics and warehousing operations and the shuttering of the Jacksonville business are now complete. In addition, the heightened quarter-end activity provided us with meaningful insights that will be valuable as we grow our Missouri Campus in the future. The next consolidation will be our original 145,000-square-foot BTI office and warehouse space. Our Missouri Campus is an important strategic initiative, which will ultimately allow us to lower our costs, better serve our customers and support the achievement of our objective to be the leading provider of quality products for the shooting, hunting and rugged outdoor enthusiast.

Jeffrey Buchanan, Chief Financial Officer

Thanks, James. Revenue for the quarter was $123.7 million, a decrease of 10.9% from the prior year. Revenue from our firearms segment was $95.4 million, a decrease of 9.3%. And revenue from our OP&A segment was $33.2 million, a decrease of 10.8%. Intercompany eliminations were $5 million. It should be noted that the decline in our OP&A revenue was the result of the timing of shipments to a major customer as well as the impact of the shipping conflicts that James outlined. For the full year, we expect OP&A revenue to be up versus the prior year. Now turning to gross margin. In Q1, the total company gross margin was 38.7% compared to 37.8% in the prior year. In the firearms segment, gross margin increased to 37.1%. Although unfavorable product mix increased promotional costs and higher manufacturing spending negatively impacted gross margin, that impact was more than offset by favorable manufacturing absorption and inventory variance adjustments. In the outdoor products segment, gross margin declined to 42.4%, primarily as a result of tariffs and increased shipments to larger customers receiving discounted pricing. In the quarter, GAAP operating expenses were $46.7 million compared to $38.9 million in Q1 of last year. On a non-GAAP basis, operating expenses were $41.5 million as compared to $33.5 million in the prior year. Expenses were higher because of increased compensation, advertising, and marketing costs. In addition, with the startup of our new Missouri Campus, operating expenses increased $3.8 million, which includes $1.6 million of depreciation; $1.6 million of shipping costs for firearms, which were previously reported in cost of goods sold; and $600,000 of other costs, including compensation and facility-related costs. Eventually, the impact of these additional costs will lessen as we consolidate other facilities. For the first quarter, GAAP EPS came in at a $0.04 loss as compared with EPS of $0.14 last year. Our non-GAAP EPS was $0.03 as compared with $0.21 in the year ago quarter. Note that the non-GAAP tax rate this quarter was nearly 54% because nondeductible items represent a much higher percentage of the low pretax income number. Adjusted EBITDAS in the first quarter was $17.5 million for a 14.1% EBITDAS margin as compared with a 20.4% margin in Q1 of last year. So now, turning to the balance sheet. In Q1, cash used in operating activities was $29.1 million. Cash flow was primarily impacted by our $31.7 million build in inventories. As we have noted in the past, cash flow in the first half of the year is typically neutral to negative. During the summer months when the retail sales cycle is at a low point in firearms and we have our seasonal shutdown, we typically build our inventory levels. We also had additional inventory this quarter as a result of our planning for two items: first, safety stock for the ongoing consolidations into the Missouri Campus; and second, inventory built in connection with planned new product launches for the second half of the year. CapEx for the quarter was $3.7 million, and we expect to spend a little over $25 million in CapEx for the full fiscal year, mostly on IT, new products and maintenance. At the end of Q1, we had $30.7 million of cash, with $25 million drawn on our line of credit, a term loan of $79.8 million and bonds of $75 million. As a result, total net borrowings at the end of Q1 were $149.1 million. Our one-year trailing EBITDAS is about $100 million, so our net leverage ratio was only about 1.5:1. Now I will discuss guidance. We expect Q2 revenue to be in the range of $140 million to $150 million. At that revenue range, we expect GAAP EPS of between a negative $0.04 and breakeven and non-GAAP EPS of between $0.03 and $0.07. The higher sequential revenue in the second quarter is not fully benefiting the bottom line estimate for several reasons, including the absence of favorable inventory variance adjustments, the impact of increased tariffs and increased promotional activities. Although we expect the slowness in the firearms that we saw over the summer to continue for the next few months, we are planning some exciting new product introductions for the second half of the fiscal year. Thus, for the full year, we are maintaining our expectations that revenue will be in the range of $630 million to $650 million. Our profitability, however, will be impacted by the tariffs. Without that impact, we believe our EPS would have been within our most recent guidance, but tariffs now make that result unlikely. As a result, we now expect full year GAAP EPS to be between $0.41 and $0.49 and non-GAAP EPS to be between $0.70 and $0.78. All these estimates are based on our current fully diluted share count of 55 million shares and a tax rate for the full fiscal year of approximately 30%.

James Debney, President and CEO

All right, Jeff. With that, operator, please open up the call for questions from our analysts.

Operator, Operator

And our first question is from Cai von Rumohr from Cowen.

Cai Von Rumohr, Analyst

So could you give us a little more color on the Chinese tariff issue both in terms of the incremental impact you're assuming and what that assumes regarding how long the tariff is in place? You also mentioned, I think, last quarter that you would try to secure price concessions from your suppliers and implement price hikes of your own. Maybe discuss those issues.

Jeffrey Buchanan, Chief Financial Officer

Right. Cai, it's Jeff. We indicated that the adjusted EPS guidance for the year was reduced by just over $5 million, primarily due to tariffs. The main impact will be felt in the second half of the year as we still have inventory. Essentially, the tariff lists 1 through 3 increased from 25% to 30%, which is 5% higher than our initial expectations. Additionally, the new list 4 started at 10%, and while there was talk of its deferral, list 4 actually includes parts 4a and 4b, with most of our products under 4a, which is set to begin on September 1 and has been raised from 10% to 15%. These are the tariff impacts. The amount we estimate in our guidance does not capture the full extent of the tariff impact as we are assuming we've successfully implemented some mitigation efforts, such as price increases. We are reaching the end of vendor concessions after entering negotiations some time ago, but we will keep pursuing that. We're also looking to source vendors outside of China; however, as James mentioned in his remarks, other Asian companies lack a sophisticated supply chain and cannot source all the materials and components we require, and it will take time. We do not know how long this situation will last.

James Debney, President and CEO

We need to be cautious about raising prices because if we're not careful, we could lose our competitive edge. We'll monitor the retail situation closely.

Cai Von Rumohr, Analyst

Got it. So if I just sort of simplify this, the tariff impact predominantly hits in the second half because you entered the year with some buffer inventory. Therefore, if those tariffs persist at that level, the amount probably would be larger next year. Is that a fair assumption? Or I mean...

Jeffrey Buchanan, Chief Financial Officer

Larger in '21, yes. So our expected impact for the second half of '20 on the tariffs as they stand right now is in our guidance.

James Debney, President and CEO

Yes. And what you described there, Cai, is the tariffs are here to stay, and there's a lot of uncertainty about the timing of tariffs, whether they're here to stay or not. So if they did stay, then obviously, I think you could go back to taking some price increases because the market will be able to stand it.

Cai Von Rumohr, Analyst

Got it. Last one, could you provide us with an idea of what to expect for cash flow for the year or a general range?

Jeffrey Buchanan, Chief Financial Officer

We are expecting cash flow to be neutral to positive in the second quarter. Usually, the first half of the year shows neutral to negative cash flow. In the second half, we anticipate a very strong cash flow that aligns with last year's performance, as the first quarter experienced cash outflow due to increased inventory.

James Debney, President and CEO

Yes, we have made a substantial investment in inventory, as reflected on the balance sheet, for several reasons. One reason, which we have discussed previously, is the transfer of the firearms business logistics and warehouse to the new distribution center in Missouri. Additionally, as I mentioned in the prepared remarks, we are currently in the summer period, which is typically very slow, and we always build inventory during this time. We also have significant new product launches on the horizon, for which we have built up inventory, as well as for our existing product lineup. This is because we will need to allocate a large portion of our capacity to produce the new products before their launch and then continue to meet demand after the launch.

Jeffrey Buchanan, Chief Financial Officer

Yes. The guidance numbers we are providing are similar to last year. Last year, we invested significantly in our logistics operations center and our Missouri Campus, which we do not have this year. Therefore, we believe that cash flow will be quite strong for the year.

Operator, Operator

And our next question is from James Hardiman from Wedbush Securities.

James Hardiman, Analyst

So I guess the first question is about the quarter. I believe people are more interested in the outlook than in the quarter itself, but you reported earnings at the low end of the expected range. For some time now, you've typically been at the high end or above. Can you discuss what aspects of the quarter did not meet your expectations? It seems like the tariff issue may not have significantly impacted you, as that appears to be more of a concern for later in the year. Please elaborate on how this quarter compared to your expectations.

Jeffrey Buchanan, Chief Financial Officer

As for the top line, our guidance midpoint miss was mainly due to the shipping constraints that James mentioned. At the end of the quarter, while limited by manpower, we focused on prioritizing shipments of firearms due to their higher average selling price. This decision accounted for most of the miss. If we had managed our shipping differently, we would likely have met our earnings number. Additionally, our tax rate was over 50%, largely because of some nondeductible items that impact you more when taxable income is lower. These two factors essentially explain the entirety of the situation.

James Hardiman, Analyst

Okay. That's helpful. And then as I think about the full year guidance and the second quarter guidance, I mean if we hit the midpoint of the second quarter, you're basically going to do $0.08 in the first half of the year, which would mean you have to do $0.64 in the back half. I know there's some things with Missouri, but walk us through why it's going to be such a dramatic uptick in earnings. It seems like it's probably more margin than it is sales. But again, given the fact that tariffs are the big issue in the back half, how are you going to accomplish that big ramp?

Jeffrey Buchanan, Chief Financial Officer

The earnings per share are largely a result of strong top-line performance in the second half of the year. When firearms are producing at such a high volume, we achieve significant efficiencies. We have several new product launches in firearms for the second half of the year that we are optimistic about. These new products contribute significantly to sales in that period, and they are also why we currently have a lot of inventory; we are adjusting our production lines and have developed certain products that we won't be making later in the year. This has had a dual effect on this quarter. For outdoor products, much of the quarter's performance is influenced by one or two large customers. We are also optimistic for the second half of the year for outdoor products. Although outdoor products experienced a decline this quarter, we anticipate that for the entire year, sales will increase by low to mid-single digits. Therefore, we expect robust growth in outdoor products.

James Hardiman, Analyst

That's helpful. I have one last question along the same lines. There's an expectation that new products will significantly drive shipments in the second half of the year. Given that, why shouldn't I be concerned about the distributor inventory numbers at 178,000? That figure was around 145,000 a year ago. At what point should we worry that distributors may be less inclined to purchase the new product you plan to ship in the second half?

James Debney, President and CEO

I want to reassure you, James, that I'm not worried about the inventory levels with our two-step distribution partners. We're approaching the busier season, entering full hunting season soon, and then quickly moving into the holiday season, which are peak times for retail. The adjusted NICS checks for those months confirm this. Even looking into the new year, while we can exclude January, February, March, and somewhat April are typically strong months. Historically, our firearms business tends to end the second half of the year much stronger than the first half. We have our usual promotions planned, including bundled promotions and typical show specials like the buy six, get one free offer. While that specific number can vary, it's a common example. These promotions will be robust enough to align with market conditions. If the market is strong, we will scale back; if it weakens, we will ramp them up and be aggressive. We have sufficient inventory and capacity to support this approach. To navigate this softer market, which I think we can all acknowledge, it’s essential to be proactive in both new product development and promotional activities, and we are excelling in both areas, as we've demonstrated over the past few years.

Jeffrey Buchanan, Chief Financial Officer

Yes. And I just wanted to add a bit, and I've mentioned this each year, but the promotional activity that we do, we measure the cost of the promotional activity against the benefit of the absorption in the factory. And we've generally found that we are ahead even when we strongly promote.

James Debney, President and CEO

Yes. And you can draw a direct comparison with one of our primary competitors in terms of margin as well. But also going back to the subject of inventory, we still have less inventory in terms of units with our two-step distribution partners.

Operator, Operator

And our next question is from Scott Stember from CL King.

Scott Stember, Analyst

A question on the second quarter guidance. Assuming, I guess, a modestly up NICS environment and you talked about how there was a little bit of payback in the first quarter because of the fourth-quarter promotions, assuming that's gone and assuming that some of these constraints on the outdoor products side are gone, am I thinking of this wrong? And shouldn't you be predicting to maybe be up a little bit or flat in the second quarter? Or is there something else where I'm off with my timing for some of those things to go away?

Jeffrey Buchanan, Chief Financial Officer

It's a soft market currently, and our guidance reflects our perspective on it. In the outdoor products segment, we expect the increase I previously mentioned to occur mostly in the second half of the year, primarily due to the timing of orders from a key customer. Therefore, the combination of a weak firearms market and the order timing for outdoor products has influenced our guidance.

Scott Stember, Analyst

Got it. And just flushing out the operating expenses a little bit. You talked about, I guess, the priority of, I guess, impact to compensation expense and marketing and advertising. Is it fair to assume that's the order? And then also just trying to get a sense of what you would expect for the entire year for operating expenses.

Jeffrey Buchanan, Chief Financial Officer

Our first quarter is typically our lowest. I anticipate operating expenses will increase by about $2 million to $3 million and then level off for the remainder of the year. It's important to keep a few things in mind regarding operating expenses. First, we have shifted some shipping costs from cost of goods sold to operating expenses. Additionally, we're still in the process of building out the distribution center, which means we are managing duplicate facilities. For instance, we currently have two operational sites in Missouri: the new Missouri Campus and the old campus that came with the acquisition of Battenfeld, which is about 150,000 square feet. Most of these duplicate costs should be eliminated by the third and fourth quarters. We actually expect to see further savings in 2021 as we transition other areas and finalize the move to the distribution center.

Scott Stember, Analyst

I understand. I'm trying to determine how much will eventually be affected by the new distribution center, as you haven't provided guidance for 2021 yet and we are still some time away. I'm interested in understanding what kind of leverage may be achieved beyond this year, considering this year's challenges and the fact that some of the operating expenses will significantly exceed last year's figures.

Jeffrey Buchanan, Chief Financial Officer

Well, like last time, we mentioned that around $0.07 represents the expenses we have this year that won't be repeated next year, and those will mainly be in OpEx. So I would suggest using that figure to compare OpEx between this year and next year.

Scott Stember, Analyst

And just one last follow-up on that. The marketing and advertising, I guess, just it'd be safe to assume in this tough environment that it probably will stay at these elevated levels for the foreseeable future?

Jeffrey Buchanan, Chief Financial Officer

Yes. Actually, yes. And then, of course, if you're launching new products in the back half of the year, there's more advertising associated with these new product launch costs.

Operator, Operator

And our next question is from Steven Dyer from Craig Hallum.

Steven Dyer, Analyst

Just want to drill down a little bit more on second quarter guidance. So we've had three straight months of positive mix. August should be up pretty significantly according to our checks. And again, the down 10% revenue at the midrange, which would imply, I think, a little bit better than that in outdoor products, a little bit worse than that in firearms, it seems like a large delta vis-à-vis how you guys have been running with the NICS sort of over time, this will be the second consecutive quarter of a fairly big kind of deviation to the downside. Is there any sort of additional color you can give, timing-wise, or why that would be? I'm assuming you don't feel like you're losing share.

Jeffrey Buchanan, Chief Financial Officer

No, you mentioned it's a significant deviation. It's a downside based on your assumption regarding NICS. We really cannot predict what's going to occur with NICS, but our distributor inventory is somewhat elevated. As James stated, we're comfortable with it, although it's higher than last quarter. I don't think there's anything more to add beyond what I previously mentioned. That midpoint is what we've aimed for.

Steven Dyer, Analyst

And presumably, since I don't think you have in the past, you're not including any point-of-sale data that you're seeing up to this point until August is released and finalized. Our checks are indicating an increase of about 20% year-over-year in August.

Jeffrey Buchanan, Chief Financial Officer

Yes, this is the one quarter when we released earnings without the NICS data for the first month of the next quarter. So we'll just have to wait and see what happens.

Steven Dyer, Analyst

So presumably, anything more than, call it, flattish for August and September would be, I guess, upside to your sort of base assumptions going in?

Jeffrey Buchanan, Chief Financial Officer

I don't think we provide comments on the level of certainty regarding our guidance or any potential changes. I can say that while your checks are great, we will just have to wait and see what happens.

James Debney, President and CEO

Yes. Steve, I love your NICS number. I hope that comes true. 20% will take us to one of the highest in the last five years.

Steven Dyer, Analyst

Well, it's through three weeks and it's through one state. So anyway, I'll move on. So obviously, a supplier went bankrupt or a distributor went bankrupt in the quarter. Did that have any material impact on you guys or the channel period, I guess?

Jeffrey Buchanan, Chief Financial Officer

No, it hasn't had an impact because that was a long time in the making and probably hadn't shipped for quite a while. What we reserved in relation to that distributor occurred last quarter. I think there's likely some dumping of inventory as a result of it. But...

James Debney, President and CEO

Yes. I think we covered that last time as well, and we said they had ceased to become really relevant for the last 18 months, let's say, prior to that bankruptcy.

Steven Dyer, Analyst

All right. Got it. Last one for me. So you guys have a couple of $75 million notes due, 1 in June of 2021 and 1 in August. Any commentary on plans for that, your ability to refi, et cetera?

Jeffrey Buchanan, Chief Financial Officer

Yes. We've already spoken with our banks. I don't think there's going to be any problem on refinancing those. We'll probably undertake that effort early autumn. And interest rates are actually down from the last time that we engaged in these kinds of negotiations. And the outlook obviously is fairly on a flat yield curve. So I think that the negotiations should be good with respect to like what we want to do.

Operator, Operator

And our next question is from Mark Smith from Lake Street.

Mark Smith, Analyst

First off, can you just walk through how much new products typically mix in sales?

Jeffrey Buchanan, Chief Financial Officer

Well, it usually isn't typical. But I would say that it ranges around 15% this quarter. It's been as high as 25% to 28%. So I think it ranges from about 12% to 30%, depending on what has occurred in the last several quarters. OP&A is 20% this quarter. That tends to be more consistent because OP&A has a structured process for introducing new products every year, while in firearms, it's less regular.

James Debney, President and CEO

Yes. It's a steady stream of new products come out of OP&A. Development times tend to be a little shorter. Development times for firearms tend to be extremely long, pretty intensive in terms of consuming resources, can be capital-intensive as well, depending on tooling requirements and so on. So that's why we talk about major product launches rather than line extensions and so on. And we're very excited about the major product launch that we have coming up this fiscal year.

Mark Smith, Analyst

Okay. And can you talk a little bit about the cadence of sales primarily in firearms throughout the quarter?

Jeffrey Buchanan, Chief Financial Officer

The first quarter, you mean?

Mark Smith, Analyst

Yes.

Jeffrey Buchanan, Chief Financial Officer

Yes. It was back-loaded, so heavily back-loaded, not unusual in the summer months. Maybe this quarter was a bit more back-loaded because of bringing up the DC. So we had a situation which you had to move a lot of inventory to the DC. In the past, with the Springfield facility being shut down for a couple of months towards the end of the quarter, we probably shipped a little earlier than we did this quarter, but like the Missouri Campus has not shut down. And so the combination of everything made it probably more back-ended than it typically is.

James Debney, President and CEO

Yes. I think another big influence on firearms in terms of their order patterns for the quarter was our success in Q4, and we described that in a lot of detail. And as you know, we overperformed versus adjusted NICS by quite a large amount. We said in Q&A, there will be a correction in Q1. So there's no doubt in my mind in the first two months of the quarter, distributors and retailers alike took a bit of a break because they've taken in some inventory at the end of Q4 before starting ordering again late in Q1. And that's one of the reasons that we got so compressed at the end of quarter and had that capacity constraint at the DC.

Mark Smith, Analyst

What is the current demand for firearms? Looking ahead, what indications do you see from customers today that inform your guidance for Q2 in a year that is heavily back-end loaded, excluding new products?

James Debney, President and CEO

The firearms segment of our business is currently experiencing typical seasonal patterns. We are experiencing a slowdown now, which is expected, but we anticipate an uptick toward the end of this month, and even more so as we move into September, October, and the gift-giving season. We believe that normal seasonality is influencing this. We maintain regular communication with our retail and distribution partners, and while everyone is cautiously optimistic, I must emphasize that we don't have a clear outlook at the moment. Various macroeconomic factors could significantly influence demand. Overall, we expect this year to remain relatively flat, a sentiment I have expressed previously.

Mark Smith, Analyst

Okay. And then anything happening for end users here in the used firearm market that is maybe skewing NICS data away from what we're seeing from you guys?

James Debney, President and CEO

Nothing that we picked up on. We monitor that. We do a monthly market share analysis, and components of that is used firearm sales. They seem to be fairly consistent. Some retailers are better at it than other retailers, but nothing that we've seen.

Mark Smith, Analyst

Okay. And then last one from me, just a housekeeping item. The kind of guidance that you gave on tax, I believe it was 30% for the full year. I assume that's on a GAAP basis?

Jeffrey Buchanan, Chief Financial Officer

Yes, that's correct. That figure is for the full year. However, we experienced over a 50% rate in Q1. For the remaining quarters, we will likely be around 27% or 28%.

Operator, Operator

At this time, I'm showing no further questions. I would like to turn the call back over to Mr. James Debney, President and CEO, for closing remarks.

James Debney, President and CEO

Thank you, operator. I want to thank the American Outdoor Brands team for their commitment and dedication to excellence. Great job, everybody. Thanks, everyone, for joining us today, and we look forward to speaking with you next quarter.

Operator, Operator

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the program. You may now disconnect.