The following discussion and analysis should be read in conjunction with our
Consolidated Financial Statements and related notes appearing elsewhere in this
Annual Report. This section and other sections of this Annual Report contains
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. See “Forward-Looking Statements” and Part I, Item
1A. “Risk Factors” included in this Annual Report.
(Dollar amounts in thousands except share and per share data or unless otherwise
indicated)
Critical Accounting Estimates
Our discussion and analysis of our financial condition and results of operations
are based on our consolidated financial statements, which have been prepared in
accordance with accounting principles generally accepted in the U.S. In
preparing the consolidated financial statements, we make estimates and judgments
that affect the reported amounts of assets, liabilities, sales, expenses, and
related disclosure of contingent assets and liabilities. We re-evaluate our
estimates on an on-going basis. Our estimates are based on historical experience
and on various other assumptions that we believe to be reasonable under the
circumstances. Actual results may differ from these estimates under different
assumptions or conditions. We review our estimates on an ongoing basis to ensure
the estimates appropriately reflect changes in our business and the most recent
information available.
We believe the critical accounting policies discussed below affect our most
significant estimates and judgments used in the preparation of our consolidated
financial statements. For a complete discussion of all our significant
accounting policies, see Note 1, Significant Accounting Policies, to the
consolidated financial statements in Part II, Item 8 of this Annual Report.
Revenue Recognition
The total amount of revenue we recognize for the sale of our products reflects
various sales adjustments for discounts, returns, refunds, allowances, rebates,
and other customer incentives. These sales adjustments can vary based on market
conditions, customer preferences, timing of customer payments, volume of
products sold, and timing of new product launches. These adjustments require
management to make reasonable estimates of the amount we expect to receive from
the customer. We estimate sales adjustments by customer or by product category
on the basis of our historical experience with similar contracts with customers,
adjusted as necessary to reflect current facts and circumstances and our
expectations for the future. Sales taxes, firearms and ammunition excise tax,
and other similar taxes are excluded from revenue.
Allowance for Estimated Credit Losses
We maintain an allowance for credit losses related to accounts receivable for
future expected credit losses resulting from the inability or unwillingness of
our customers to make required payments. We estimate the allowance based upon
historical bad debts, current customer receivable balances, age of customer
receivable balances, and the customers’ financial condition and in relation to a
representative pool of assets consisting of a large number of customers with
similar risk characteristics. The allowance is adjusted as appropriate to
reflect differences in current conditions as well as changes in forecasted
macroeconomic conditions.
Inventories
Our inventories are valued at the lower of cost or net realizable value. We
evaluate the quantities of inventory held against past and future demand and
market conditions to determine excess or slow-moving inventory. For each product
category, we estimate the market value of the inventory comprising that category
based on current and projected selling prices. If the projected market value is
less than cost, we provide an allowance to reflect the lower value of the
inventory. This methodology recognizes projected inventory losses at the time
such losses are evident rather than at the time goods are actually sold. The
projected market value of the inventory may decrease due to consumer
preferences, legislative changes, or loss of key contracts among other events.
Income Taxes
Provisions for federal, state, and foreign income taxes are calculated based on
reported pre-tax earnings and current tax law. Such provisions differ from the
amounts currently receivable or payable because certain items of income and
expense are recognized in different time periods for financial reporting
purposes than for income tax purposes. Significant judgment is required in
determining income tax provisions and evaluating tax positions. We periodically
assess our liabilities and contingencies for all periods that are currently open
to examination or have not been effectively settled based on the most current
available information. Where it is not more likely than not that our tax
position will be sustained, we record the entire resulting tax liability and
when it is more likely than not of being sustained, we record our best estimate
of the resulting tax
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liability. As per our policy, any applicable interest and penalties related to
these positions are also recorded in the consolidated financial statements. To
the extent our assessment of the tax outcome of these matters changes, such
change in estimate will impact the income tax provision in the period of the
change.
Deferred tax assets are assessed to determine whether it is more likely than not
that some portion or all of the deferred tax assets will be realized.
Significant estimates are required for this analysis. If we determine it is not
more likely than not that all of the deferred tax assets will be realized, a
valuation allowance will be recorded. Changes in the amounts of valuation
allowance are recorded in the tax provision in the period when the change
occurs.
Accounting for goodwill and indefinite-lived intangibles
We test goodwill and indefinite lived intangible assets annually or upon the
occurrence of events or changes in circumstances that indicate that the asset
might be impaired.
We estimate fair value to assess the recoverability of our goodwill and
indefinite lived intangible assets using a discounted cash flow model. Our
assumptions used to develop the discounted cash flow analysis require us to make
significant estimates regarding future revenues and expenses, projected capital
expenditures, changes in working capital, and appropriate discount rates. The
projections also take into account several factors including current and
estimated economic trends and outlook, costs of raw materials and other factors
that are beyond our control. If the current economic conditions were to
deteriorate, or if we were to lose significant business, causing a reduction in
estimated discounted cash flows, it is possible that the estimated fair value of
certain reporting units or indefinite lived intangible assets could fall below
their carrying value resulting in the necessity to conduct additional impairment
tests in future periods. We continually monitor the reporting units and
indefinite lived intangible assets for impairment indicators.
Business Combinations
We allocate the purchase price, including contingent consideration, of our
acquisitions to the assets and liabilities acquired, including identifiable
intangible assets, based on their fair values at the date of acquisition. The
fair values are primarily based on third-party valuations using our management
assumptions that require significant judgments and estimates. The purchase price
allocated to intangibles is based on unobservable factors, including but not
limited to, projected revenues, expenses, customer attrition rates, royalty
rates, a weighted average cost of capital, among others. The weighted average
cost of capital uses a market participant’s cost of equity and after-tax cost of
debt and reflects the risks inherent in the cash flows. The unobservable factors
we use are based upon assumptions believed to be reasonable, but are also
uncertain and unpredictable, as a result these estimates, and assumptions may
require adjustment in the future if actual results differ from our estimates.
Contingent Consideration
Our approach to valuing the initial contingent consideration associated with the
purchase price uses unobservable factors such as projected revenues and expenses
over the term of the contingent earn-out period, discounted for the period over
which the contingent consideration is measured, and volatility rates. Based upon
these assumptions, the initial contingent consideration is then valued using a
Monte Carlo simulation analysis in a risk-neutral framework. As of March 31,
2022, the contingent consideration liability consists of the estimated amounts
due for earn-out payments from fiscal year 2023 through 2026. On a recurring
basis, we adjust the contingent consideration liability to fair value based on
the estimated probability of achieving the earn out targets and changes in any
of the other Level 3 inputs above. To the extent our estimates change in the
future regarding the likelihood of achieving these targets, we may need to
record material adjustments to our contingent consideration liabilities.
See Note 1, Significant Accounting Policies, to the consolidated financial
statements in Part II, Item 8 of this Annual Report, for discussion of new
accounting pronouncements.
Executive Summary
Fiscal year 2022 record results and significant growth were supported by strong
demand in the market for our portfolio of iconic brands, including the seven new
brands acquired during the last two fiscal years.
Financial Highlights and Notable Events of fiscal year 2022
•Net sales increased $819,099 or 36.8%, over the prior fiscal year.
•Sporting Products net sales increased $618,137, or 55.2%.
•Outdoor Products net sales increased $200,962, or 18.2%.
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•Gross profit increased $476,272, or 75.2%, as compared to the prior fiscal
year. Gross profit as a percentage of sales, increased to 36.4%, an increase of
799 basis points over the prior fiscal year.
•Sporting Products gross profit increased $399,930, or 128.1%.
•Outdoor Products gross profit increased $78,024, or 24.3%
•EBIT increased $361,264, or 126.8%, as compared to the prior fiscal year. EBIT
as a percentage of sales increased to 21.2%, an increase of 842 basis points
over the prior fiscal year.
•Fiscal year 2022 income was $473,226, or $8.00 per diluted share, an increase
of $207,214, or $3.56 per diluted share over the prior fiscal year.
•We acquired QuietKat Inc. (QuietKat) during the first fiscal quarter of 2022,
Foresight Sports (Foresight) and Fiber Energy Products (Fiber) during the third
fiscal quarter of 2022, and Stone Glacier during the fourth fiscal quarter of
2022. See Note 7, Acquisitions and Divestitures, of the consolidated financial
statements in Part II, Item 8 of this Annual Report, for a discussion of our
acquisitions during fiscal year 2022.
•We repurchased 2,981 shares for a total of $113,165 during fiscal year 2022
under our 2021 Share Repurchase Program and our 2022 Share Repurchase Program.
See Part II, Item 5 of this Annual Report, for details on our share repurchase
programs.
•On May 5, 2022, we announced that our Board of Directors has unanimously
approved preparations for the separation of our Outdoor Products and Sporting
Products reportable segments into two independent, publicly-traded companies
(the “Planned Separation”). We anticipate that the transaction will be in the
form of a distribution to our shareholders of 100% of the stock of Outdoor
Products, which will become a new, independent publicly traded company. The
distribution is intended to be tax-free to U.S. shareholders for U.S. federal
income tax purposes. We currently expect the transaction will be completed in
calendar year 2023, subject to final approval by our Board of Directors, a Form
10 registration statement being declared effective by the U.S. Securities and
Exchange Commission, regulatory approvals and satisfaction of other conditions.
There can be no assurance regarding the ultimate timing of the proposed
transaction or that the transaction will be completed.
Outlook
Sporting Products Industry
Sales of hunting and shooting-sports related products, including ammunition, are
heavily influenced by hunting and recreational shooting participation rates,
civil unrest and the political environment. We believe that long-term
participation trends support our expectation of continued increased demand for
hunting and shooting-sports related products. Participation rates have remained
strong, and we are seeing an expanded demographic of users. This broadened end
consumer base has resulted in a much larger total addressable market opportunity
for the industry and for our company. We believe we are well-positioned to
succeed and capitalize on this demand given our scale and global operating
platform, which we believe is particularly difficult to replicate in the highly
regulated and capital-intensive ammunition manufacturing sector.
Outdoor Recreation Industry
We believe that long-term outdoor participation trends combined with a larger
base of participants supports our expectation of continued increased demand for
the innovative outdoor recreation-related products produced by our Outdoor
Products brands. Participation rates have remained strong and we are seeing an
expanded demographic within our end users. Our Outdoor Products brands hold a
strong competitive position in the marketplace, and we intend to further
differentiate our brands through focused research and development and marketing
investments including increased use of social media and other digital marketing.
Following significant investments in our brands’ e-commerce capabilities, both
directly and through our E-Commerce Center of Excellence, we believe our brands
are well-positioned to benefit from the ongoing shift in consumer shopping
behavior to utilize online channels.
Results of Operations
Management’s Discussion and Analysis of Financial Condition and Results of
Operations (MD&A) is intended to provide a reader of our financial statements
with a narrative from the perspective of our management on our financial
condition, results of operations, liquidity, and certain other factors that may
affect our future results. The following information should be read in
conjunction with our consolidated financial statements included in this Annual
Report.
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Fiscal Year 2022 Compared to Fiscal Year 2021
Our net sales, gross profit, gross profit as a percentage of net sales (gross
profit margin), EBIT, EBIT as a percentage of net sales (EBIT margin), interest
expense, and tax provision by reporting segment and by corporate and other
(where applicable) are presented below (dollars in thousands):
Years ended March 31, Change
Net Sales: 2022 2021(1) Dollars Percent
Sporting Products $ 1,737,891 $ 1,119,754 $ 618,137 55.2 %
Outdoor Products 1,306,730 1,105,768 200,962 18.2 %
Total $ 3,044,621 $ 2,225,522 $ 819,099 36.8 %
(1) We modified the structure of our reportable segments during the third
quarter of fiscal year 2022. Accordingly, prior period amounts have been
reclassified to conform with the current period presentation. See Note 18,
Operating Segment Information, to the consolidated financial statements in Part
II, Item 8 of this Annual Report.
Sporting Products-The fiscal year 2022 period includes sales from Remington and
HEVI-Shot, which we acquired in the third and fourth quarters, respectively, of
the prior fiscal year. The increase also reflects improved pricing and strong
demand in the market across our Sporting Products line, and production increases
over the prior year at all of our facilities. These increases were partially
offset by a reduction of sales from small rifle ammunition produced at the Lake
City Army Ammunition Plant.
Outdoor Products-The increase in sales was driven by continued demand in the
market for most of our categories, and was not restricted by retail store
closures that impacted the prior year. The increase also reflects sales from
businesses acquired in the current fiscal year. This was partially offset by a
decline in our Outdoor Cooking business caused primarily by declining e-commerce
sales as foot traffic returned to brick and mortar stores.
Years ended March 31, Change
Gross Profit: 2022 2021(1) Dollars Percent
Sporting Products $ 712,160 $ 312,230 $ 399,930 128.1 %
Outdoor Products 399,447 321,423 78,024 24.3 %
Corporate and other (2,375) (693) (1,682) (242.7) %
Total $ 1,109,232 $ 632,960 $ 476,272 75.2 %
Gross profit margin 36.4% 28.4%
Sporting Products-The fiscal year 2022 period gross profit includes profits from
Remington and HEVI-Shot, which we acquired in the third and fourth quarters,
respectively, of the prior fiscal year. The increase also reflects improved
pricing, sales volume and operating efficiencies. These increases were partially
offset by increased commodity and input costs. Gross profit margin was 41.0%
compared to 27.9% in the prior year.
Outdoor Products-The increase in gross profit was primarily driven by sales
volume and operating efficiencies, partially offset by higher logistics costs,
input costs, and sales channel mix. The increase also reflects gross profit from
acquisitions that occurred during the current fiscal year. Gross profit margin
was 30.6% compared to 29.1% in the prior year.
Corporate and Other-The decrease in corporate gross profit was due to inventory
step-up expenses from acquisitions during the current year.
Years ended March 31, Change
EBIT: 2022 2021(1) Dollars Percent
Sporting Products $ 600,415 $ 222,713 $ 377,702 169.6 %
Outdoor Products 164,494 137,942 26,552 19.2 %
Corporate and other (118,687) (75,697) (42,990) (56.8) %
Total $ 646,222 $ 284,958 $ 361,264 126.8 %
EBIT margin 21.2% 12.8%
Sporting Products-The increase in EBIT was primarily driven by the gross profit
increase, partially offset by higher selling, general, and administrative
expenses from the acquisitions of Remington and HEVI-Shot and higher selling and
marketing expenses to support increased sales. EBIT margin was 34.5% compared to
19.9% in the prior year.
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Outdoor Products-The increase in EBIT was primarily driven by the gross profit
increase, partially offset by increased selling, general, and administrative
expenses from the current year acquisitions and investments in selling and
marketing expenses to support increased sales and industry events, such as trade
shows that returned this fiscal year. EBIT margin was 12.6% compared to 12.5% in
the prior year.
Corporate and Other-The decrease in EBIT was primarily driven by the prior
fiscal year pretax gain related to the divestiture of a non-strategic business
in our Sporting Products segment. Additionally, the current fiscal year has
higher share-based and incentive compensation expense, higher post-acquisition
compensation, and investments in human capital which support our centers of
excellence.
Years ended March 31, Change
Interest expense, net: 2022 2021 Dollars Percent
Corporate and other $ 25,264 $ 25,574 $ (310) (1.2) %
The decrease in interest expense was due to a decrease in debt issuance cost
write-offs and a reduction in our interest rate on the 4.5% Notes, offset by an
increase in our average debt balance.
Years ended March 31,
Effective Effective
Income tax provision: 2022 Rate 2021 Rate Change
Corporate and other $ (147,732) 23.8 % $ 6,628 (2.6) % $ (154,360)
See Note 15, Income Taxes, to the consolidated financial statements in Part II,
Item 8 of this Annual Report, for information regarding income taxes.
The increase in the current period tax rate is primarily due to the impact of
the prior year decrease in the valuation allowance driven by earnings, the
benefit of the loss carrybacks to prior profitable years as permitted under IRS
regulations under the CAREs Act which permitted us to realize previously valued
assets, and the release of the reserves for uncertain tax positions due to
statute expiration in the prior year.
Our provision for income taxes includes federal, state and foreign income taxes.
The effective tax rate for fiscal year 2022 of 23.8% differs from the federal
statutory rate of 21% primarily due to the impact of state taxes and is
partially offset by changes in tax contingency.
The effective tax rate for fiscal year 2021 of (2.6)% differs from the federal
statutory rate of 21% primarily due to the impact of the decrease in the
valuation allowance, the release of uncertain tax positions, and the impact of
the CAREs Act.
As of March 31, 2022 and 2021, the total amount of unrecognized tax benefits was
$24,719 and $23,000, respectively, of which $21,139 and $20,283, respectively,
would affect the effective tax rate, if recognized. The remaining balance is
related to deferred tax items which only impact the timing of tax payments.
Although the timing and outcome of audit settlements are uncertain, it is
reasonably possible that a $3,419 reduction of the uncertain tax benefits will
occur in the next 12 months. The settlement of these unrecognized tax benefits
could result in earnings from $0 to $2,753. See Note 15, Income Taxes, to the
consolidated financial statements included in this Annual Report for further
details.
Fiscal Year 2021 Compared to Fiscal Year 2020
Our net sales, gross profit, gross profit as a percentage of net sales (gross
profit margin), EBIT, EBIT as a percentage of net sales (EBIT margin), interest
expense, and tax provision by reporting segment and by corporate and other
(where applicable) are presented below (dollars in thousands):
Years ended March 31, Change
Net Sales: 2021(1) 2020(1) Dollars Percent
Sporting Products $ 1,119,754 $ 871,550 $ 248,204 28.5 %
Outdoor Products 1,105,768 884,321 221,447 25.0 %
Total $ 2,225,522 $ 1,755,871 $ 469,651 26.7 %
(1) We modified the structure of our reportable segments during the third
quarter of fiscal year 2022. Accordingly, prior period amounts have been
reclassified to conform with the current period presentation. See Note 18,
Operating Segment Information, to the consolidated financial statements in Part
II, Item 8 of this Annual Report.
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Sporting Products-The increase in sales was primarily driven by strong demand in
the market across nearly all categories, and improved pricing. Acquisitions
accounted for $44,583 of net sales in fiscal year 2021. These increases were
partially offset by the sale of our Firearms Business in fiscal year 2020, which
accounted for approximately $25,000 of net sales.
Outdoor Products-The increase in sales was driven by strong demand in our
Outdoor Accessories, Action Sports, Outdoor Cooking, and Golf businesses. This
strong demand was partially offset by retail store closures in our first quarter
of fiscal year 2021 and continued supply chain interruptions.
Years ended March 31, Change
Gross Profit: 2021(1) 2020(1) Dollars Percent
Sporting Products $ 312,230 $ 137,914 $ 174,316 126.4 %
Outdoor Products 321,423 222,372 99,051 44.5 %
Corporate and other (693) (1,520) 827 54.4 %
Total $ 632,960 $ 358,766 $ 274,194 76.4 %
Gross profit margin 28.4% 20.4%
Sporting Products-The increase in gross profit was primarily driven by sales
volume and pricing as described above and operating efficiencies. These
increases were partially offset by the sale of our Firearms Business in fiscal
year 2020. Gross profit margin was 27.9% in fiscal year 2021, compared to 15.8%
in the previous year.
Outdoor Products-The increase in our gross profit was primarily driven by sales
volume as described above and strong direct-to-consumer sales, partially offset
by increased shipping, tariff, and product costs. Gross profit margin was 29.1%
in fiscal year 2021, compared to 25.1% in the previous year.
Corporate and Other-The increase in corporate gross profit was due to fiscal
year 2020 business restructuring costs, partially offset by inventory step-up
expenses during fiscal year 2021.
Years ended March 31, Change
EBIT: 2021(1) 2020(1) Dollars Percent
Sporting Products $ 222,713 $ 66,898 $ 155,815 232.9 %
Outdoor Products 137,942 43,125 94,817 219.9 %
Corporate and other (75,697) (242,259) 166,562 68.8 %
Total $ 284,958 $ (132,236) $ 417,194 315.5 %
EBIT margin 12.8% (7.5)%
Sporting Products-The increase in EBIT was primarily driven by the gross profit
increase as described above, decreased travel and trade show expenses due to the
COVID-19 pandemic, benefits from fiscal year 2020 cost savings initiatives,
partially offset by losses attributable to initial marketing and start-up costs
at Remington, increased incentive compensation accruals and the sale of our
Firearms Business in fiscal year 2020. EBIT margin was 19.9% in fiscal year
2021, compared to 7.7% in the previous year.
Outdoor Products-The increase in EBIT was primarily driven by the gross profit
increase as described above, partially offset by increased incentive
compensation accruals and higher selling and marketing costs. EBIT margin was
12.5% in fiscal year 2021, compared to 4.9% in the previous year.
Corporate and Other-The increase in EBIT was primarily driven by fiscal year
2020 goodwill and intangible impairment expenses of $155,588, pretax gain on
divestiture of $18,467 in fiscal year 2021, fiscal year 2020 held for sale asset
impairment of $9,429 in our Firearms business, and a reduction of fiscal year
2020 restructuring expenses. These were partially offset by higher incentive
compensation accrual, the loss on extinguishment of debt and higher transaction
and transition costs in the fiscal year 2021.
Liquidity and Capital Resources
We manage our business to maximize operating cash flows as the primary source of
liquidity. In addition to cash on hand and cash generated by operations, our
sources of liquidity include committed credit facilities and access to the
public debt and equity markets. We use our cash primarily to fund investments in
our existing businesses and for debt payments, acquisitions, share repurchases,
and other activities.
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Financial Condition
Cash decreased to $22,584 at March 31, 2022 from $243,265 at March 31, 2021,
primarily due to cash paid for acquisitions and the repurchase of shares,
partially offset by cash provided from our operating activities and proceeds
from our ABL Revolving Credit Facility during the last twelve months.
Operating Activities
Net cash provided by operating activities decreased $27,063 from the prior
fiscal year. The decrease was primarily driven by inventory purchases in the
current fiscal year to position ourselves for future growth and to mitigate
supply chain disruption risks caused by the COVID-19 pandemic, timing of
accounts payable, and higher accounts receivable balances due to higher sales
volume. These decreases were partially offset by net income.
Investing Activities
Cash used for investing activities increased $485,820 from the prior fiscal
year. The current fiscal year cash usage was driven by the acquisition of
businesses.
Financing Activities
Net cash provided by financing activities was $48,967 compared to a use of cash
of $31,640 during the prior fiscal year. The increase was primarily driven by
net proceeds from our ABL Revolving Credit Facility, partially offset by the
decrease in the net cash received from the issuance of our 4.5% Notes and
redemption of our 5.875% Notes in fiscal year 2021, and cash used for the
repurchase of shares of $113,195 during fiscal year 2022.
Liquidity
In addition to our normal operating cash requirements, our principal future cash
requirements will be to fund capital expenditures, debt repayments, employee
benefit obligations, share repurchases, and any strategic acquisitions. Our
short-term cash requirements for operations are expected to consist mainly of
capital expenditures to maintain production facilities and working capital
requirements. Our debt service requirements over the next two years consist of
required interest payments due under our 4.5% Notes and 2021 ABL Revolving
Credit Facility.
Based on our current financial condition, management believes that our cash
position, combined with anticipated generation of cash flows and the
availability of funding, if needed, under our 2021 ABL Revolving Credit
Facility, access to debt and equity markets, as well as other potential sources
of funding including additional bank financing, will be adequate to fund future
growth, to service our currently anticipated long-term debt obligations, make
capital expenditures over the next 12 months and fund the 2022 Share Repurchase
Program. As of March 31, 2022, based on the borrowing base less outstanding
borrowings of $170,000, outstanding letters of credit of $16,791, less the
minimum required borrowing base of $45,000, the amount available under the 2021
ABL Revolving Credit Facility was $218,209.
There can be no assurance that the cost or availability of future borrowings, if
any, will not be materially impacted by capital market conditions, including any
disruptions to capital markets as a result of the COVID-19 pandemic (including
the emergence and spread of vaccine resistant coronavirus variants), the
military conflict in Ukraine and imposition of sanctions on Russia, or our
future financial condition and performance. Furthermore, because our 2021 ABL
Revolving Credit Facility is secured in large part by receivables from our
customers, a sustained deterioration in general economic conditions, including
as a result of the COVID-19 pandemic (including the emergence and spread of
vaccine resistant coronavirus variants) or the military conflict in Ukraine and
imposition of sanctions on Russia, that adversely affects the creditworthiness
of our customers could have a negative effect on our future available liquidity
under the 2021 ABL Revolving Credit Facility.
Share Repurchases
As of March 31, 2022, there is $186,105 remaining under our $200,000 2022 Share
Repurchase Program, which we intend to fund through the fourth fiscal quarter of
2024. Additional information regarding our share repurchases during fiscal year
2022 is presented in Part II, Item 5 of this Annual Report.
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Long-Term Debt and Credit Agreements
As of March 31, 2022, we had actual total indebtedness of $670,000, which
consisted of the following:
March 31, 2022
Credit Agreements:
2021 ABL Revolving Credit Facility $ 170,000
4.5% Senior Notes 500,000
Less: unamortized deferred financing costs (3,886)
Carrying amount of long-term debt $ 666,114
Our total debt as a percentage of total capitalization (total debt and
stockholders’ equity) was 37% as of March 31, 2022.
See Note 13, Long-term Debt, to the consolidated financial statements in
Part II, Item 8 of this Annual Report, for a detailed discussion of our
indebtedness.
Material Cash Requirements
The following tables summarize our material cash requirements as of March 31,
2022:
Material cash requirements by period
Less than More than
Total 1 year Years 2 – 3 Years 4 – 5 5 years
Long-term debt $ 670,000 $ – $ – $ 170,000 $ 500,000
Interest on debt 172,517 26,255 52,508 48,754 45,000
Operating leases 130,630 18,484 31,051 25,519 55,576
Purchase commitments and other 259,108 106,220 152,888 – –
Total $ 1,232,255 $ 150,959 $ 236,447 $ 244,273 $ 600,576
Payments for interest is based on outstanding debt as of March 31, 2022.
Pension benefit obligation has been excluded from the Contractual Obligations
table (see Note 14, Employee Benefit Plans), to the consolidated financial
statements in Part II, Item 8 of this Annual Report, for details on our required
contributions to our pension trust.
The total liability for uncertain tax positions as of March 31, 2022 was
approximately $24,719 (see Note 15, Income Taxes, to the consolidated financial
statements in Part II, Item 8, of this Annual Report), none of which is expected
to be paid within 12 months. We are unable to provide a reasonably reliable
estimate of the timing of future payments relating to the non-current uncertain
tax position obligations.
Contingencies
Litigation
From time-to-time, we are subject to various legal proceedings, including
lawsuits, which arise out of and are incidental to, the conduct of our business.
We do not consider any of such proceedings that are currently pending,
individually or in the aggregate, to be material to our business or likely to
result in a material adverse effect on our operating results, financial
condition, or cash flows.
Environmental Liabilities
Our operations and ownership or use of real property are subject to a number of
federal, state, and local environmental laws and regulations, as well as
applicable foreign laws and regulations, including those governing the discharge
of hazardous materials, remediation of contaminated sites, and restoration of
damage to the environment. We are obligated to conduct investigation and/or
remediation activities at certain sites that we own or operate or formerly owned
or operated.
Certain of our former subsidiaries have been identified as PRPs, along with
other parties, in regulatory agency actions associated with hazardous waste
sites. As a PRP, those former subsidiaries may be required to pay a share of the
costs of the investigation and clean-up of these sites. In that event, we would
be obligated to indemnify those subsidiaries for such costs. While uncertainties
exist with respect to the amounts and timing of the ultimate environmental
liabilities, based on currently
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available information, we do not currently expect that these potential
liabilities, individually or in the aggregate, will have a material adverse
effect on our operating results, financial condition, or cash flows.
We could incur substantial additional costs, including cleanup costs, resource
restoration, fines, and penalties or third-party property damage or personal
injury claims, as a result of violations or liabilities under environmental laws
or non-compliance with environmental permits. While environmental laws and
regulations have not had a material adverse effect on our operating results,
financial condition, or cash flows in the past, and we have environmental
management programs in place to mitigate these risks, it is difficult to predict
whether they will have a material impact in the future.
See Note 16, Commitments and Contingencies, to the consolidated financial
statements included in this Annual Report for additional information.
Dependence on Key Customers; Concentration of Credit
No customer contributed more than 10% of sales during fiscal years 2022 and
2021; however, Walmart accounted for approximately 13% of our total fiscal year
2020 sales. If a key customer fails to meet payment obligations, our operating
results and financial condition could be adversely affected.
Inflation and Commodity Price Risk
We are exposed to inflationary factors such as increases in labor, supplier,
logistics and overhead costs that may adversely affect our operating results.
Although we do not believe that inflation has had a material impact on our
financial position or results of operations to date, a high rate of inflation in
the future may have an adverse effect on our ability to maintain current levels
of gross margin and operating expenses, if the selling prices of our products
are not able to offset these increased costs. Additionally, inflation may
potentially impact demand as consumers reduce discretionary spending. We have
been impacted by changes in the prices of raw materials used in production as
well as changes in oil and energy costs. In particular, the prices of commodity
metals, such as copper, zinc, and lead continue to be volatile. These prices
generally impact our Sporting Products Segment. See Note 4, Derivative Financial
Instruments, to the consolidated financial statements included in this Annual
Report for additional information.
We have a strategic sourcing, pricing and hedging strategy to mitigate risk from
commodity price fluctuation. We will continue to evaluate the need for future
price changes in light of these trends, our competitive landscape, and our
financial results. If our sourcing and pricing strategy is unable to offset
impacts of the commodity price fluctuations, our future results from operations
and cash flows would be materially impacted.
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