Spinoff of American Outdoor Brands (AOUT) from Smith & Wesson (SWBI)

Smith & Wesson spun off American Outdoor Brands effective August 25, 2020 in a transaction meant to be tax-free to its shareholders. American Outdoor Brands began normal trading on August 25, 2020.

Resolution:

This action is a simple spinoff transaction in the accounting software. The tax consequences are stated in a Form 8937 posted on the Smith & Wesson website at this URL: https://ir.smith-wesson.com/static-files/ff11cbc7-b898-4445-be51-6920c59f2e87 . The cost basis allocation information for these instructions is taken from form 8937.

NOTES:

Earlier this year, American Outdoor Brands (AOBC) changed their name and ticker Symbol to Smith & Wesson Brands, Inc.(SWBI). If your club did not already record this change, do this first, otherwise the spinoff in August will not make sense. This change can be handled with a merger by going to Transactions > Merger  or Accounting > Securities > Record merger of securities depending on the version of the software being used.

Here is the information you need to complete the merger.

  • Date: 06/01/2020
  • Select Parent Security (or Parent Company) : American Outdoor Brands (AOBC)
  • Parent Price Per Share: 13.61
  • Merged Security (or Symbol of New Company) : Smith & Wesson (SWBI)
    • Shares received : 1.0 x (# of AOBC  shares owned)
  • New Comapny Price Per Share : 13.61

Save the transaction and the merger has been entered.

The cost basis allocation is dependent on the prices used for both Smith & Wesson and American Outdoor Brands in the cost basis calculations. In our experience brokers tend to use the prices found in the guidance companies post on their websites including IRS form 8937. If your broker does not use that guidance, the cost basis of the companies involved as recorded in your accounting records and in your broker’s records will not match. This is not cause for concern. This is just due to the inexact nature of the tax code in this regard. Partnership tax returns have specific areas to reconcile these usually small differences. ICLUBcentral tax printer software automatically fills in these adjustments in the normal operation of the software using the data imported from your accounting records and that you enter from your 1099.

The Spinoff Entry

Go to Transactions > Spinoff  or Accounting > Securities > Record spinoff of securities depending on the version of the software being used. If you are unfamiliar with spinoff transactions you can get help at this URL: https://www.iclub.com/support/kb/default.asp?page=normal_spinoff

Here is the information you need to complete the spinoff.

  • Date: 8/25/2020
  • Select Parent Security (or Parent Company) : Smith & Wesson (SWBI)
  • Remaining Basis Percentage: 79.521 (rounded from 79.5208 in form 8937)
  • Cash received: See your broker statement for cash-in-lieu received
  • Spinoff Security (or Symbol of New Company) : American Outdoor Brands (AOUT)
    • Shares received : 0.25 x (# of SWBI  shares owned) (Remember to include fractional shares.)
  • For example, if you owned 100 SWBI shares, you should receive 0.25 x 100 = 25 AOUT shares.
  • Price Per Share : 17.78 (Closing price on 8/25/2020)

Save the transaction and the spinoff has been entered.