Vista Outdoor(VSTO) - 2021 Q1 - Quarterly Report

PART I - Financial Information This part presents the company's unaudited interim financial statements and management's discussion and analysis for the period Item 1. Unaudited Financial Statements This section presents the unaudited condensed consolidated financial statements and accompanying notes for the three months ended June 28, 2020 Condensed Consolidated Balance Sheets This statement details the company's assets, liabilities, and stockholders' equity at the end of the reporting period Condensed Consolidated Balance Sheet Highlights (Amounts in thousands) | Metric | June 28, 2020 | March 31, 2020 | | :-------------------------------- | :------------ | :------------- | | Total assets | $1,388,446 | $1,391,289 | | Total liabilities | $898,941 | $948,784 | | Total stockholders' equity | $489,505 | $442,505 | | Cash and cash equivalents | $36,059 | $31,375 | | Long-term debt | $443,927 | $511,806 | Condensed Consolidated Statements of Comprehensive Income (Loss) This statement outlines the company's revenues, expenses, and net income or loss over the reporting period Condensed Consolidated Statements of Comprehensive Income (Loss) Highlights (Amounts in thousands except per share data) | Metric | Three months ended June 28, 2020 | Three months ended June 30, 2019 | | :--------------------------------- | :------------------------------- | :------------------------------- | | Sales, net | $479,140 | $459,774 | | Gross profit | $125,368 | $95,078 | | Net income (loss) | $40,476 | $(16,615) | | Basic EPS | $0.70 | $(0.29) | | Diluted EPS | $0.69 | $(0.29) | | Comprehensive income (loss) | $42,696 | $(16,268) | Condensed Consolidated Statements of Cash Flows This statement summarizes the cash inflows and outflows from operating, investing, and financing activities Condensed Consolidated Statements of Cash Flows Highlights (Amounts in thousands) | Metric | Three months ended June 28, 2020 | Three months ended June 30, 2019 | | :-------------------------------------- | :------------------------------- | :------------------------------- | | Cash provided by (used for) operating activities | $77,363 | $(36,168) | | Cash used for investing activities | $(4,452) | $(9,127) | | Cash (used for) provided by financing activities | $(68,356) | $54,765 | | Increase in cash and cash equivalents | $4,684 | $9,660 | | Cash and cash equivalents at end of period | $36,059 | $31,595 | Condensed Consolidated Statements of Stockholders' Equity This statement details the changes in the company's equity accounts over the reporting period Condensed Consolidated Statements of Stockholders' Equity Highlights (Amounts in thousands except share data) | Metric | June 28, 2020 | March 31, 2020 | | :--------------------------------- | :------------ | :------------- | | Total Stockholders' Equity | $489,505 | $442,505 | | Accumulated Deficit | $(919,572) | $(960,048) | | Accumulated Other Comprehensive Loss | $(98,774) | $(100,994) | | Comprehensive income (loss) for the period | $42,696 | $(16,268) (for 3 months ended June 30, 2019) | Notes to the Condensed Consolidated Financial Statements These notes provide additional detail and context for the line items in the primary financial statements 1. Significant Accounting Policies The company operates through two segments and adopted new accounting standards which did not have a material impact on its financial statements - Vista Outdoor operates through two reportable segments: Shooting Sports and Outdoor Products, focusing on outdoor and shooting sports products[18] - The company adopted ASU No 2016-13 (Topic 326) and ASU No 2018-13 on April 1, 2020, neither of which had a material impact on the condensed consolidated financial statements[22][23] - The company is currently evaluating the impacts of ASU No 2019-12, Simplifying the Accounting for Income Taxes, which is effective for fiscal years beginning after December 15, 2021[24] 2. Fair Value of Financial Instruments Financial instruments are measured at fair value using a three-tier hierarchy, with debt fair value based on market rates - Interest rate swaps and commodity forward contracts are considered Level 2 instruments for fair value measurement, utilizing observable inputs[27][28] - A $12,000 thousand interest-free, five-year promissory note receivable from the Firearms business sale is classified as a Level 3 instrument, discounted at 10% to an estimated fair value of $8,196 thousand as of June 28, 2020[29][53] Fair Value of Financial Instruments (Amounts in thousands) | Instrument | June 28, 2020 Carrying Amount | June 28, 2020 Fair Value | March 31, 2020 Carrying Amount | March 31, 2020 Fair Value | | :---------------- | :---------------------------- | :----------------------- | :----------------------------- | :---------------------- | | Fixed-rate debt | $350,000 | $344,750 | $350,000 | $284,375 | | Variable-rate debt | $99,000 | $99,000 | $167,256 | $167,256 | - No impairments were recorded for assets measured at fair value on a nonrecurring basis for the three months ended June 28, 2020[33] 3. Leases The company's operating leases for properties and equipment resulted in net lease costs of $5,253 thousand for the quarter Operating Lease Assets and Liabilities (Amounts in thousands) | Metric | June 28, 2020 | March 31, 2020 | | :-------------------------- | :------------ | :------------- | | Operating lease assets | $67,237 | $69,024 | | Current operating lease liabilities | $10,758 | $10,780 | | Long-term operating lease liabilities | $71,686 | $73,738 | | Total lease liabilities | $82,444 | $84,518 | Net Lease Costs (Amounts in thousands) | Metric | Three months ended June 28, 2020 | Three months ended June 30, 2019 | | :------------------------ | :------------------------------- | :------------------------------- | | Fixed operating lease costs | $5,059 | $5,017 | | Variable operating lease costs | $582 | $535 | | Sublease income | $(388) | $(281) | | Net Lease costs | $5,253 | $5,271 | - Weighted Average Remaining Lease Term for operating leases was 9.44 years as of June 28, 2020, with a Weighted Average Discount Rate of 8.66%[35] Approximate Minimum Lease Payments (Amounts in thousands) | Fiscal Year | Amount | | :---------------- | :----- | | Remainder of 2021 | $13,151 | | 2022 | $15,105 | | 2023 | $13,379 | | 2024 | $11,748 | | 2025 | $10,718 | | Thereafter | $60,714 | | Total lease payments | $124,815 | | Present value of lease liabilities | $82,444 | 4. Derivative Financial Instruments The company utilizes commodity forward contracts for lead as effective cash flow hedges to manage price fluctuation exposure - The company uses commodity forward contracts to hedge exposure to lead price fluctuations for ammunition manufacturing, designated as effective cash flow hedges[39] - As of June 28, 2020, outstanding lead forward contracts covered 25.25 million pounds of lead[40] - There were no cash flow hedge interest rate swaps in place as of June 28, 2020[38] 5. Revenue Recognition Revenue is recognized upon transfer of control to the customer, with Shooting Sports contributing 70% of total sales Net Sales by Major Category (Amounts in thousands) | Category | Three months ended June 28, 2020 | Three months ended June 30, 2019 | | :---------------------- | :------------------------------- | :------------------------------- | | Ammunition | $261,762 | $213,810 | | Firearms | $0 | $24,017 | | Hunting and Shooting | $72,396 | $70,970 | | Action Sports | $72,859 | $67,909 | | Outdoor Recreation | $72,123 | $83,068 | | Total | $479,140 | $459,774 | Net Sales by Geographic Region (Amounts in thousands) | Region | Three months ended June 28, 2020 | Three months ended June 30, 2019 | | :--------------- | :------------------------------- | :------------------------------- | | United States | $422,405 | $381,156 | | Rest of the World | $56,735 | $78,618 | | Total | $479,140 | $459,774 | - Revenue for products is recognized at a point in time upon the transfer of control to the customer, typically upon shipment[43] 6. Earnings Per Share The company reported a significant improvement in earnings per share, with diluted EPS of $0.69 compared to a prior-year loss Earnings Per Common Share (Amounts in thousands except per share data) | Metric | Three months ended June 28, 2020 | Three months ended June 30, 2019 | | :----------------------------------- | :------------------------------- | :------------------------------- | | Net income (loss) | $40,476 | $(16,615) | | Weighted-average common shares outstanding (basic) | 58,057 | 57,722 | | Diluted shares | 58,957 | 57,722 | | Basic EPS | $0.70 | $(0.29) | | Diluted EPS | $0.69 | $(0.29) | - Potentially dilutive securities of 528 were not included in diluted EPS for the three months ended June 28, 2020, as their effect would have been anti-dilutive[49] 7. Receivables Net receivables totaled $324,619 thousand, with Walmart representing 15% of total trade receivables Net Receivables (Amounts in thousands) | Metric | June 28, 2020 | March 31, 2020 | | :----------------------------------- | :------------ | :------------- | | Trade receivables | $335,484 | $323,436 | | Other receivables | $4,286 | $4,841 | | Less: allowance for estimated credit losses and discounts | $(15,151) | $(14,760) | | Net receivables | $324,619 | $313,517 | - Walmart accounted for 15% of total trade receivables as of June 28, 2020[52] Allowance for Estimated Credit Losses and Discounts Activity (Amounts in thousands) | Activity | Amount | | :-------------------------------------- | :----- | | Balance, March 31, 2020 | $14,760 | | Provision for credit losses | $707 | | Write-off of uncollectible amounts, net of recoveries | $(261) | | Discounts and other adjustments | $(55) | | Balance, June 28, 2020 | $15,151 | Note Receivable (Amounts in thousands) | Metric | June 28, 2020 | March 31, 2020 | | :-------------------------------------------------- | :------------ | :------------- | | Principal | $12,000 | $12,000 | | Less: unamortized discount | $(3,804) | $(3,990) | | Note receivable, net | $8,196 | $8,010 | 8. Inventories Net inventories increased slightly to $332,210 thousand, primarily driven by an increase in raw materials Current Net Inventories (Amounts in thousands) | Component | June 28, 2020 | March 31, 2020 | | :---------------- | :------------ | :------------- | | Raw materials | $92,636 | $85,609 | | Work in process | $35,514 | $33,622 | | Finished goods | $204,060 | $212,062 | | Net inventories | $332,210 | $331,293 | - Long-term inventories, presented net of reserves within deferred charges and other non-current assets, totaled $27,925 thousand as of June 28, 2020[54] 9. Accumulated Other Comprehensive Loss (AOCL) Total AOCL decreased to $(98,774) thousand due to positive changes in derivatives and currency translation adjustments Components of AOCL (Amounts in thousands) | Component | June 28, 2020 | March 31, 2020 | | :------------------------------------ | :------------ | :------------- | | Derivatives | $(445) | $(1,426) | | Pension and other postretirement benefits liabilities | $(92,463) | $(93,353) | | Cumulative translation adjustment | $(5,866) | $(6,215) | | Total AOCL | $(98,774) | $(100,994) | Changes in AOCL (Three months ended June 28, 2020, Amounts in thousands) | Item | Derivatives | Pension and other postretirement benefits liabilities | Cumulative translation adjustment | Total | | :------------------------------------ | :---------- | :------------------------------------ | :-------------------------------- | :------ | | Beginning balance in AOCL | $(1,426) | $(93,353) | $(6,215) | $(100,994) | | Change in fair value of derivatives | $(5) | — | — | $(5) | | Net losses reclassified from AOCL | $986 | — | — | $986 | | Net actuarial losses reclassified from AOCL | — | $968 | — | $968 | | Prior service costs reclassified from AOCL | — | $(78) | — | $(78) | | Net change in cumulative translation adjustment | — | — | $349 | $349 | | Ending balance in AOCL | $(445) | $(92,463) | $(5,866) | $(98,774) | 10. Goodwill and Intangible Assets Goodwill remained unchanged at $83,167 thousand, while net intangible assets decreased slightly due to amortization - Goodwill balance remained at $83,167 thousand as of June 28, 2020, entirely allocated to the Shooting Sports segment[58] Net Intangible Assets by Major Class (Amounts in thousands) | Asset Class | June 28, 2020 Total | March 31, 2020 Total | | :-------------------------- | :------------------ | :------------------- | | Trade names | $32,999 | $33,932 | | Patented technology | $5,976 | $6,194 | | Customer relationships and other | $151,222 | $154,871 | | Non-amortizing trade names | $111,103 | $111,103 | | Net intangible assets | $301,300 | $306,100 | - Amortization expense for the three months ended June 28, 2020, was $4,953 thousand, compared to $5,097 thousand in the prior year[59] Expected Future Amortization Expense (Amounts in thousands) | Fiscal Year | Amount | | :---------------- | :----- | | Remainder of 2021 | $14,912 | | 2022 | $19,831 | | 2023 | $19,715 | | 2024 | $19,663 | | 2025 | $19,645 | | Thereafter | $96,431 | | Total | $190,197 | 11. Other Current and Non-Current Liabilities Other current and non-current liabilities increased, driven by accruals for in-transit inventory and other items Other Current and Non-Current Liabilities (Amounts in thousands) | Category | June 28, 2020 | March 31, 2020 | | :-------------------------------- | :------------ | :------------- | | Other current liabilities: | | | | Rebates | $11,927 | $16,225 | | Accrual for in-transit inventory | $18,557 | $11,064 | | Other | $75,718 | $70,908 | | Total other current liabilities | $106,202 | $98,197 | | Other non-current liabilities: | | | | Non-current portion of accrued income tax liability | $31,158 | $30,159 | | Other | $17,859 | $13,345 | | Total other non-current liabilities | $49,017 | $43,504 | Product Warranty Liability Reconciliation (Amounts in thousands) | Activity | Amount | | :------------------------------------------ | :----- | | Balance, March 31, 2020 | $9,149 | | Payments made | $(858) | | Warranties issued | $771 | | Changes related to pre-existing warranties and other adjustments | $(82) | | Balance, June 28, 2020 | $8,980 | 12. Long-term Debt Long-term debt decreased to $443,927 thousand due to a reduction in the ABL Revolving Credit Facility Long-term Debt Composition (Amounts in thousands) | Component | June 28, 2020 | March 31, 2020 | | :-------------------------- | :------------ | :------------- | | ABL Revolving Credit Facility | $99,000 | $167,256 | | 5.875% Senior Notes | $350,000 | $350,000 | | Principal amount of long-term debt | $449,000 | $517,256 | | Less: unamortized deferred financing costs | $(5,073) | $(5,450) | | Carrying amount of long-term debt | $443,927 | $511,806 | - As of June 28, 2020, the amount available under the ABL Revolving Credit Facility was $289,705 thousand[63] - The weighted average interest rate for borrowings under the New Credit Facilities as of June 28, 2020, was 1.99%[67] - The company was in compliance with all debt covenants as of June 28, 2020, including maintaining Excess Availability above the $42,500 thousand threshold[71][75] - Cash paid for interest on debt decreased to $7,302 thousand for the quarter from $15,654 thousand in the prior year, due to reduced principal and lower interest rates[76] 13. Employee Benefit Plans The company recognized a net benefit of $21 thousand for defined benefit plans and made its full fiscal 2021 required pension contribution - Net benefit for employee defined benefit plans was $21 thousand for the three months ended June 28, 2020, down from $101 thousand in the prior year[77] - The company made the entire fiscal 2021 required contributions of $7,100 thousand to the pension trust during the quarter[78] 14. Income Taxes The effective tax rate was 2.8%, a significant increase from the prior year, primarily due to prior-year impairments and current operating income Income Tax Provision and Effective Rates (Amounts in thousands) | Metric | Three months ended June 28, 2020 | Effective Rate | Three months ended June 30, 2019 | Effective Rate | | :-------------------- | :------------------------------- | :------------- | :------------------------------- | :------------- | | Income tax provision | $1,149 | 2.8% | $737 | (4.6)% | - The increase in the effective tax rate is primarily due to the impairment of held-for-sale assets in the prior year quarter and a decrease in the valuation allowance[81] - The CARES Act is anticipated to impact the tax provision for the tax year ended March 31, 2021, due to increased allowable interest expense deduction[83] - It is reasonably possible that a $14,072 thousand reduction of uncertain tax benefits could occur in the next 12 months[89] 15. Contingencies Various legal and environmental matters are not expected to have a material adverse effect on the company's financial condition - The company does not consider any currently pending legal proceedings, individually or in aggregate, to be material to its business[90] - A liability for environmental remediation of $708 thousand was recorded as of June 28, 2020, which is not expected to have a material adverse effect[93] 16. Condensed Consolidating Financial Statements The company's 5.875% Notes are fully and unconditionally guaranteed by substantially all of its domestic subsidiaries - The 5.875% Notes are guaranteed on an unsecured basis, jointly and severally and fully and unconditionally, by substantially all of Vista Outdoor's domestic subsidiaries[95] - Vista Outdoor (the parent company) has no independent assets or operations[95] 17. Operating Segment Information The company operates through two segments, Shooting Sports (70% of sales) and Outdoor Products (30% of sales) - The company's operations are aggregated into two reportable segments: Shooting Sports and Outdoor Products, based on a realignment in fiscal 2020[96] - Shooting Sports generated approximately 70% of external sales for the three months ended June 28, 2020[99] - Outdoor Products generated approximately 30% of external sales for the three months ended June 28, 2020[99] - Walmart represented 10% of total sales for the three months ended June 28, 2020, and 14% in the prior year period[99] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on financial performance, strategic initiatives, industry outlook, and liquidity Forward-Looking Information is Subject to Risk and Uncertainty The report contains forward-looking statements subject to numerous risks including the COVID-19 pandemic and economic conditions - The report contains forward-looking statements subject to numerous risks and uncertainties, including impacts from the COVID-19 pandemic, general economic conditions, and supply chain issues[105][106] - Other risks include changes in demand, competitive environment, international market diversification, regulatory changes, and cybersecurity threats[106] Business Overview The company serves outdoor sports and recreation markets with nearly 40 brands sold through various retail channels - Vista Outdoor serves outdoor sports and recreation markets with nearly 40 brands, offering sporting ammunition, golf rangefinders, and outdoor accessories[108] - Products are sold through mass, specialty, and independent retailers as well as directly to consumers via brand websites[108] Organizational Structure The company operates through two reportable segments: Shooting Sports and Outdoor Products - The company operates through two reportable segments: Shooting Sports (approximately 70% of external sales) and Outdoor Products (approximately 30% of external sales)[109][111] - Shooting Sports includes ammunition and hunting/shooting accessories, while Outdoor Products includes sports protection, outdoor cooking, golf, and hydration[111] Business Strategy The company is executing a multi-year strategic transformation plan focused on profitable growth and operational excellence - Vista Outdoor is executing a multi-year strategic transformation plan to drive profitable growth by re-investing cost savings[109] - The strategy is built on five pillars, including Operational Excellence, Reducing Financial Leverage, and returning to Organic Growth[110][112][116] - The first phase focused on stabilizing the business, improving profitability, and reducing financial leverage through cash flow generation and divestitures[114] - For the remainder of fiscal year 2021, the focus is on driving long-term, profitable organic sales growth[115] Financial Highlights and Notable Events Quarterly sales increased 4.2%, gross profit rose 31.9%, and diluted EPS improved significantly to $0.69 - Quarterly sales increased by $19,366 thousand (4.2%), driven by strong Shooting Sports demand[117] - Gross profit increased by $30,290 thousand (31.9%), with both segments showing improvement due to operating efficiencies[117] - EBIT increased by $52,797 thousand, primarily due to gross profit increases and reduced operating expenses[117] - Diluted EPS improved significantly to $0.69 for the quarter, from $(0.29) in the prior year[117] - The principal balance on the ABL Revolving Credit Facility was reduced by $68,256 thousand using cash generated from operations[117] Outlook The company anticipates continued strong demand in Shooting Sports and growth in Outdoor Recreation driven by online channels Shooting Sports Industry The Shooting Sports industry is experiencing increased demand influenced by the political environment, COVID-19, and civil unrest - Sales of hunting and shooting-sports related products are heavily influenced by participation rates and the political environment[118] - Demand is expected to be influenced by the 2020 U.S. presidential election cycle, the COVID-19 pandemic, and nationwide civil unrest[118] - The company expects continued increases in participation and is well-positioned due to its scale and global operating platform in ammunition manufacturing[119] Outdoor Recreation Industry The Outdoor Recreation industry is capitalizing on the shift to online platforms and increasing demand for local outdoor activities - The Outdoor Products brands experienced a challenging retail environment in fiscal 2020, driven by the shift in consumer preferences to online platforms[121] - The company expects increasing demand for outdoor recreation products as consumers look to local outdoor activities[122] - Outdoor Products brands are well-positioned to benefit from the shift to online channels due to significant investments in e-commerce capabilities[122] Results of Operations The company's operational results show increased sales and significantly improved profitability driven by the Shooting Sports segment Fiscal 2021 Compared to Fiscal 2020 Net sales increased 4.2% and EBIT rose 1,110.6%, driven by strong Shooting Sports demand and operating efficiencies Net Sales by Segment (Amounts in thousands) | Segment | June 28, 2020 | June 30, 2019 | $ Change | % Change | | :-------------- | :------------ | :------------ | :------- | :------- | | Shooting Sports | $334,158 | $308,797 | $25,361 | 8.2% | | Outdoor Products | $144,982 | $150,977 | $(5,995) | (4.0)% | | Total net sales | $479,140 | $459,774 | $19,366 | 4.2% | - Shooting Sports sales increased due to strong demand for ammunition, favorable sales mix, and pricing actions[128] - Outdoor Products sales decreased primarily due to retail store closures and supply chain interruptions[129] Gross Profit by Segment (Amounts in thousands) | Segment | June 28, 2020 | June 30, 2019 | $ Change | % Change | | :-------------- | :------------ | :------------ | :------- | :------- | | Shooting Sports | $84,502 | $55,393 | $29,109 | 52.5% | | Outdoor Products | $40,866 | $39,685 | $1,181 | 3.0% | | Total gross profit | $125,368 | $95,078 | $30,290 | 31.9% | - Shooting Sports gross profit increased due to operating efficiencies, sales volume, and pricing actions in Ammunition[130] - Outdoor Products gross profit increased due to operating efficiencies and strong direct-to-consumer sales[131] EBIT by Segment (Amounts in thousands) | Segment | June 28, 2020 | June 30, 2019 | $ Change | % Change | | :-------------- | :------------ | :------------ | :------- | :-------- | | Shooting Sports | $54,565 | $16,819 | $37,746 | 224.4% | | Outdoor Products | $11,506 | $6,852 | $4,654 | 67.9% | | Corporate and other | $(18,028) | $(28,425) | $10,397 | 36.6% | | Total EBIT | $48,043 | $(4,754) | $52,797 | 1,110.6% | - Shooting Sports EBIT increased due to gross profit growth and an $8,638 thousand reduction in operating expenses[132] - Outdoor Products EBIT increased due to gross profit growth and a $3,473 thousand reduction in operating expenses[133] - Corporate and Other operating expense reduction was primarily due to a prior year held-for-sale asset impairment of $9,429 thousand[134] Interest Expense, Net (Amounts in thousands) | Item | June 28, 2020 | June 30, 2019 | $ Change | % Change | | :-------------------- | :------------ | :------------ | :------- | :-------- | | Corporate and other | $6,418 | $11,124 | $(4,706) | (42.3)% | - Interest expense, net, decreased by 42.3% due to a reduction in the average principal debt balance and lower interest rates[135] Income Tax Provision (Amounts in thousands) | Item | June 28, 2020 | Effective Rate | June 30, 2019 | Effective Rate | $ Change | | :-------------------- | :------------ | :------------- | :------------ | :------------- | :------- | | Corporate and other | $1,149 | 2.8% | $737 | (4.6)% | $412 | - The increase in the effective tax rate from (4.6)% to 2.8% was primarily caused by the impairment of held-for-sale assets in the prior year[137] Liquidity and Capital Resources The company's liquidity is strong, with increased operating cash flow used to reduce debt on its revolving credit facility Liquidity Operating cash flows are the primary source of liquidity, supplemented by committed credit facilities - Operating cash flows are the primary source of liquidity, supplemented by committed credit facilities and access to public debt and equity markets[138] Cash Flows Summary (Amounts in thousands) | Cash Flows | Three months ended June 28, 2020 | Three months ended June 30, 2019 | | :-------------------------------------- | :------------------------------- | :------------------------------- | | Cash provided by (used for) operating activities | $77,363 | $(36,168) | | Cash used for investing activities | $(4,452) | $(9,127) | | Cash (used for) provided by financing activities | $(68,356) | $54,765 | | Net cash flows | $4,684 | $9,660 | - Cash provided by operating activities increased by $113,531 thousand, driven by increased net income and favorable changes in net working capital[139] - Cash used for investing activities decreased by $4,675 thousand due to lower capital expenditures[140] - Cash used for financing activities increased by $123,121 thousand, primarily due to the reduction in the ABL Revolving Credit Facility[140] Capital Resources Management believes current cash and available credit are adequate to meet future needs, with total debt at 47.8% of capitalization - Principal future cash requirements include capital expenditures, debt repayments, employee benefit obligations, and strategic acquisitions[142] - Management believes current cash, anticipated cash flows, and $289,705 thousand available under the ABL Revolving Credit Facility are adequate to fund future growth[144] - Total debt as a percentage of total capitalization was 47.8% as of June 28, 2020[146] Contractual Obligations and Commitments There have been no material changes to contractual obligations since the fiscal 2020 Annual Report - Current and long-term operating lease liabilities were $10,758 thousand and $71,686 thousand, respectively, as of June 28, 2020[147] - There have been no material changes to contractual obligations and commitments since the fiscal 2020 Annual Report on Form 10-K[148] Contingencies Various legal and environmental matters are not expected to have a material adverse effect on the company's financial condition - The company is subject to various legal proceedings and environmental liabilities, including being identified as a potentially responsible party (PRP) for hazardous waste sites[149][150][151] - Based on currently available information, these matters are not expected to have a material adverse effect on the company's operating results, financial condition, or cash flows[151] Critical Accounting Policies and Estimates There have been no material changes to critical accounting policies and estimates from the prior fiscal year-end - There have been no material changes to critical accounting policies and estimates from the fiscal 2020 Annual Report on Form 10-K[153] Dependence on Key Customers; Concentration of Credit Walmart represented 10% of the company's sales for the quarter, posing a concentration of credit risk - Walmart represented 10% of the company's sales for the three months ended June 28, 2020, and 14% for the three months ended June 30, 2019[154] - The loss of any key customer could materially adversely affect the business and financial condition[154][155] Inflation and Commodity Price Risk The company employs a strategic sourcing and hedging strategy to mitigate risks from raw material price fluctuations - Inflation has not had a significant impact on operations, but changes in raw material prices have impacted the Shooting Sports Segment[156] - The company employs a strategic sourcing, pricing, and hedging strategy to mitigate commodity price fluctuation risks[157] Item 3. Quantitative and Qualitative Disclosures about Market Risk The company's market risks remain consistent with those disclosed in its Annual Report for fiscal 2020 - Market risks, including those from interest rates, commodity prices, and foreign currency exchange rates, are similar to those disclosed in the Annual Report on Form 10-K for fiscal 2020[158] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective, with no material changes in internal controls - The CEO and CFO concluded that disclosure controls and procedures were effective as of June 28, 2020[159] - No material changes in internal control over financial reporting occurred during the three months ended June 28, 2020[160] PART II - Other Information This part covers legal proceedings, risk factors, and other required disclosures for the reporting period Item 1. Legal Proceedings The company does not anticipate any legal or environmental matters to have a material adverse effect on its business - The company is subject to various legal proceedings and environmental liabilities, including actions associated with hazardous waste sites[162][163] - These proceedings are not considered material to the business and are not expected to result in a material adverse effect[162][163] Item 1A. Risk Factors There have been no material changes to the risk factors previously disclosed in the company's Annual Report - No material changes to the risk factors disclosed in the Annual Report on Form 10-K for the fiscal year ended March 31, 2020[164] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This item is not applicable for the reporting period - Not applicable[165] Item 3. Defaults Upon Senior Securities This item is not applicable for the reporting period - Not applicable[166] Item 4. Mine Safety Disclosures This item is not applicable for the reporting period - Not applicable[167] Item 5. Other Information There is no other information to report under this item - None[168] Item 6. Exhibits This section lists all exhibits filed as part of the Quarterly Report on Form 10-Q - The report includes exhibits such as the Transaction Agreement, Tax Matters Agreement, Stock Purchase Agreement, and Certifications of Principal Executive and Financial Officers[170] SIGNATURES This section contains the official signatures authorizing the filing of the report - The report was signed on August 6, 2020, by Sudhanshu Priyadarshi, Senior Vice President and Chief Financial Officer[175]