VISTA OUTDOOR INC. (Amounts in thousands except per share data and unless otherwise indicated) Forward-Looking Information is Subject to Risk and Uncertainty Some of the statements made and information contained in this report, excluding historical information, are "forward-looking statements," including those that discuss, among other things: our plans, objectives, expectations, intentions, strategies, goals, outlook or other non-historical matters; projections with respect to future revenues, income, earnings per share or other financial measures forVista Outdoor ; and the assumptions that underlie these matters. The words "believe," "expect," "anticipate," "intend," "aim," "should" and similar expressions are intended to identify such forward-looking statements. To the extent that any such information is forward-looking, it is intended to fit within the safe harbor for forward-looking information provided by the Private Securities Litigation Reform Act of 1995. Numerous risks, uncertainties and other factors could cause our actual results to differ materially from the expectations described in such forward-looking statements, including the following: •impacts from the COVID-19 pandemic (including the emergence and spread of coronavirus variants) on our operations, the operations of our customers and suppliers and general economic conditions; •general economic and business conditions inthe United States and our markets outsidethe United States , including conditions affecting employment levels, consumer confidence and spending, conditions in the retail environment, and other economic conditions affecting demand for our products and the financial health of our customers; •our ability to attract and retain key personnel and maintain and grow our relationships with customers, suppliers, and other business partners, including our ability to obtain acceptable third-party licenses; •our ability to adapt our products to changes in technology, the marketplace and customer preferences, including our ability to respond to shifting preferences of the end consumer from brick and mortar retail to online retail; •our ability to maintain and enhance brand recognition and reputation; •others' use of social media to disseminate negative commentary about us, our products, and boycotts; •reductions in or unexpected changes in or our inability to accurately forecast demand for ammunition, accessories, or other outdoor sports and recreation products; •risks associated with our sales to significant retail customers, including unexpected cancellations, delays, and other changes to purchase orders; •supplier capacity constraints, production or shipping disruptions or quality or price issues affecting our operating costs; •our competitive environment; •risks associated with diversification into new international and commercial markets, including regulatory compliance; •changes in the current tariff structures; •the supply, availability and costs of raw materials and components; •increases in commodity, energy, and production costs; •changes in laws, rules and regulations relating to our business, such as federal and state ammunition regulations; •our ability to realize expected benefits from acquisitions and integrate acquired businesses; •our ability to take advantage of growth opportunities in international and commercial markets; •foreign currency exchange rates and fluctuations in those rates; •the outcome of contingencies, including with respect to litigation and other proceedings relating to intellectual property, product liability, warranty liability, personal injury, and environmental remediation; •risks associated with cybersecurity and other industrial and physical security threats; •capital market volatility and the availability of financing; •changes to accounting standards or policies; and •changes in tax rules or pronouncements. You are cautioned not to place undue reliance on any forward-looking statements we make. A more detailed description of risk factors that may affect our operating results can be found in Part 1, Item 1A, Risk Factors, of our Annual Report on 21 -------------------------------------------------------------------------------- Table of Contents Form 10-K for fiscal year 2021 and in the filings we make with theSEC from time to time. We undertake no obligation to update any forward-looking statements, except as otherwise required by law. Business and Products We serve the outdoor sports and recreation markets through a diverse portfolio of well-recognized brands that provide consumers with a wide range of performance-driven, high-quality, and innovative products. Our broad range of consumers include outdoor enthusiasts, hunters and recreational shooters, athletes, as well as law enforcement and military professionals. We sell our products through a wide variety of mass, specialty and independent retailers and distributors, such as Academy, Amazon,Bass Pro Shops /Cabela's , Dick's Sporting Goods, Kiesler Police Supply,Nations Best Sports ,Sports Inc. , Sports South, Sportsman's Warehouse, Target, and Walmart. Some of our products are also sold directly to consumers through the relevant brand's website. We have a scalable, integrated portfolio of brands that allows us to leverage our deep customer knowledge, product development and innovation, supply chain and distribution, and sales and marketing functions across product categories to better serve our retail partners and consumers. Operating and Reportable Segments We operate under seven operating segments, which have been aggregated into two reportable segments,Shooting Sports and Outdoor Products. This is consistent with how our chief operating decision maker ("CODM"), our Chief Executive Officer, allocates resources and makes decisions. •Shooting Sports generated approximately 71% of our external sales in the six months endedSeptember 26, 2021 . This segment currently designs, develops, distributes and manufactures ammunition, primers, components and related equipment and accessories and serves devoted hunters, recreational shooters, federal and local law enforcement agencies and the military. Shooting Sports is comprised of our ammunition and hunting and shooting accessories product lines. Ammunition products include pistol, rifle, rimfire, shotshell ammunition and primers. Hunting and shooting accessories products include binoculars, riflescopes, laser rangefinders, trail cameras, archery accessories, blinds, decoys, game calls, gun care products, mounts, holsters, powder, reloading equipment, targets, target systems, and accessories. Our brands include Federal, Bushnell, Remington Ammunition, Primos, Blackhawk, CCI, and more. •Outdoor Products generated approximately 29% of our external sales in the six months endedSeptember 26, 2021 . This segment currently designs, develops, distributes and manufactures personal hydration solutions, outdoor cooking solutions, action sports helmets and goggles, footwear and cycling accessories, eBikes, audio speakers and golf GPS and laser rangefinders and serves hikers, campers, cyclists, skiers, golfers, families and a variety of other outdoor recreation participants. Our brands include CamelBak,Camp Chef , Bell, Giro, Bushnell Golf, Blackburn, KRASH!, Copilot, Raskullz, QuietKat, Venor, and more. Outdoor Products is comprised of sports protection, outdoor cooking, golf, hydration, and cycling product lines. Business Strategy In fiscal year 2021, we built upon the capabilities developed during the first two years of our strategic transformation, with an additional emphasis on driving long-term, profitable organic sales growth.Vista Outdoor has implemented plans under each of its five strategic pillars to deliver long-term, sustainable, profitable growth and continued cash generation, solidifying our position as the outdoor sports and recreation market leader. The pandemic accelerated many consumer trends that favored our business, and we believe that these trends will fuel long-term success in fiscal year 2022 and beyond. To achieve this long-term success, we remain relentlessly focused on the following five strategic pillars, which define our key priorities and investment focus areas: 1. Talent and Culture-Invest in talent and foster our culture of agility, efficiency, and innovation while focusing on diversity and inclusion in hiring, marketing, and product development. 2. Organic Growth-Identify and capture opportunities for organic growth and market share expansion by: a.allocating capital to our brands to aid in their development of new and innovative products that serve the needs and preferences of their core consumers; and b.leveraging and expanding our distribution channels to expand the commercial presence of all of our brands and efficiently deliver product to meet consumer demand and shopping behavior. 3. Centers of Excellence-Leverage our shared resources, expertise and scale to achieve a level of excellence that would be out of reach for our individual brands, with a focus on: a.operational excellence to improve margins, supply chain resiliency, and agility; 22 -------------------------------------------------------------------------------- Table of Contents b.e-commerce, direct-to-consumer, and digital marketing capabilities; c.acquisition target selection, deal execution, and integration. 4. Acquisitions-Acquire complementary businesses that we can take to the next level in terms of sales and profitability. 5. Capital Allocation-Maintain a conservative balance sheet, healthy margins and strong cash flow generation to provide financial flexibility and enable us to thrive and grow at all points in the market demand cycle while driving shareholder value. Executive Summary We had a strong performance for the second quarter of fiscal year 2022. Financial highlights and notable events for the three months endedSeptember 26, 2021 included the following: •Net sales increased$203,281 , or 35.3%, over the comparable quarter last year. •Shooting Sports net sales increased$186,662 , or 49.2%. • Outdoor Products net sales increased$16,619 , or 8.5%. •Gross profit increased$137,031 , or 84.6%, as compared to the comparable quarter last year. Gross profit margin increased to 38.4 percent, an increase of 1,025 basis points over the comparable quarter last year. •Shooting Sports gross profit increased$134,219 , or 127.8%. • Outdoor Products gross profit increased$2,812 , or 4.9%. •EBIT increased$115,483 , or 153.5%, for the three months endedSeptember 26, 2021 as compared to the three months endedSeptember 27, 2020 . EBIT margin increased to 24.5%, an increase of 1,142 basis points over the comparable quarter last year. •Net income was$139,540 , or$2.36 per diluted share, compared to net income of$79,645 , or$1.34 per diluted share for the comparable quarter last year. •We repurchased 311 shares for the three months endedSeptember 26, 2021 under our share repurchase program, which was adopted onMay 6, 2021 . See Part II, Item 2, Unregistered Sales ofEquity Securities and Use of Proceeds. •Subsequent to quarter-end, we acquiredForesight Sports , a leading designer and manufacturer of golf performance analysis, entertainment, and game enhancement technologies. See Note 18, Subsequent Event, to the unaudited condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q, which is incorporated herein by this reference. We believe that long-term participation trends support our expectation of continued increased demand for our outdoor recreation and hunting and shooting-sports related products. Participation rates in fiscal year 2022 have remained strong, and we are seeing an expanded and more diverse demographic of users in all categories. We expect to see continued increases in participation as consumers continue to look to local outdoor activities as a substitute for travel and other competing pursuits impacted by the COVID-19 pandemic. We believe that we are well-positioned to succeed and continue to capitalize on this demand given our scale, operating expertise, and strong balance sheet. Following significant investments in our brands' e-commerce capabilities, both directly and through ourE-Commerce Center of Excellence , our brands are also well-positioned to benefit from the ongoing shift in consumer shopping behavior to utilize online channels. 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 results of operations, our financial condition, liquidity, and certain other factors that may affect our future results. The following information should be read in conjunction with our Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q. Results of Operations Segment results for the three and six months endedSeptember 26, 2021 compared to the three and six months endedSeptember 27, 2020 . The Company's net sales, gross profit, and EBIT by reporting segment and by corporate and other (where applicable) are presented below (dollars in thousands): 23
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Three months ended Change Six months ended Change
September 26, September 27, September 26, September 27,
Net Sales: 2021 2020 Dollars Percent 2021 2020 Dollars Percent
Shooting Sports $ 566,349 $ 379,687 $ 186,662 49.2 % $ 1,029,668 $ 713,844 $ 315,824 44.2 %
Outdoor Products 212,111 195,492 16,619 8.5 % 411,704 340,475 71,229 20.9 %
Total net sales $ 778,460 $ 575,179 $ 203,281 35.3 % $ 1,441,372 $ 1,054,319 $ 387,053 36.7 %
Three months ended
Shooting Sports - The fiscal year 2022 period includes sales from acquisitions
that occurred in the third and fourth quarters of the prior fiscal year. The
increase also reflects improved pricing and strong demand in the market across
our Ammunition and Hunting and Shooting categories. These increases were
partially offset by a reduction of small rifle ammunition sales due to reduced
supply from the Lake City Army Ammunition Plant.
Outdoor Products- The increase in sales was driven by continued demand in our
Hydration, Golf, and Action Sports businesses and included sales attributable to
QuietKat, which we acquired in the first quarter of the current fiscal year.
Six months ended
Shooting Sports - The fiscal year 2022 period includes sales from acquisitions
that occurred in the third and fourth quarters of the prior fiscal year. The
increase also reflects improved pricing and strong demand in the market across
our Ammunition and Hunting and Shooting categories. These increases were
partially offset by a reduction of small rifle ammunition sales due to reduced
supply from 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. In addition, the fiscal year 2022 period
includes sales attributable to QuietKat, which we acquired in the first quarter
of the current fiscal year.
Three months ended Change Six months ended Change
September 26, September 27, September 26, September 27,
Gross Profit: 2021 2020 Dollars Percent 2021 2020 Dollars Percent
Shooting Sports $ 239,202 $ 104,983 $ 134,219 127.8 % $ 420,530 $ 189,484 $ 231,046 121.9 %
Outdoor Products 59,719 56,907 2,812 4.9 % 120,202 97,774 22,428 22.9 %
Corporate and other - - - - % (384) $ - (384) - %
Total gross profit $ 298,921 $ 161,890 $ 137,031 84.6 % $ 540,348 $ 287,258 $ 253,090 88.1 %
Gross profit margin 38.4% 28.1% 37.5% 27.2%
Three months ended
Shooting Sports-The fiscal year 2022 period gross profit includes profits from
acquisitions that occurred in the third and fourth quarters 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 42.2% compared to 27.6% in the prior year.
Outdoor Products-The increase in our gross profit was primarily driven by sales
volume and operating efficiencies, partially offset by higher logistics costs
and sales channel mix. Gross profit margin was 28.2% compared to 29.1% in the
prior year.
Six months ended
Shooting Sports-The fiscal year 2022 period gross profit includes profits from
acquisitions that occurred in the third and fourth quarters 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 40.8% compared to 26.5% in the prior year.
Outdoor Products-The increase in our gross profit was primarily driven by sales
volume and operating efficiencies, partially offset by higher logistics costs
and sales channel mix. Gross profit margin was 29.2% compared to 28.7% in the
prior year.
Corporate and Other-The decrease in corporate gross profit was due to inventory
step-up expenses during the current year.
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Three months ended Change Six months ended Change
September 26, September 27, September 26, September 27,
EBIT: 2021 2020 Dollars Percent 2021 2020 Dollars Percent
Shooting Sports $ 194,582 $ 70,337 $ 124,245 176.6 % $ 336,304 $ 124,901 $ 211,403 169.3 %
Outdoor Products 23,662 26,385 (2,723) (10.3) % 49,589 37,892 11,697 30.9 %
Corporate and other (27,505) (21,466) (6,039) (28.1) % (51,498) (39,494) (12,004) (30.4) %
Total EBIT $ 190,739 $ 75,256 $ 115,483 153.5 % $ 334,395 $ 123,299 $ 211,096 171.2 %
EBIT margin 24.5% 13.1% 23.2% 11.7%
Three months ended
Shooting Sports-The increase in EBIT was primarily driven by the increase in
gross profit, partially offset by higher selling, general, and administrative
expenses from acquisitions and higher selling and marketing expenses to support
increased sales. EBIT margin was 34.4% compared to 18.5% in the prior year.
Outdoor Products-The decrease in EBIT was primarily driven by higher selling,
general, and administrative expenses from the current year acquisitions and
higher selling and marketing expenses to support increased sales. These were
partially offset by the gross profit increase. EBIT margin was 11.2% compared to
13.5% in the prior year.
Corporate and Other-The decrease in EBIT was primarily driven by higher
share-based and incentive compensation expense, higher post-acquisition
compensation in the current year, and investments in human capital which support
our centers of excellence.
Six months ended
Shooting Sports-The increase in EBIT was primarily driven by the gross profit,
partially offset by higher selling, general, and administrative expenses from
acquisitions and higher selling and marketing expenses to support increased
sales. EBIT margin was 32.7% compared to 17.5% in the prior year.
Outdoor Products-The increase in EBIT was primarily driven by the gross profit
increase, partially offset by higher selling, general, and administrative
expenses from the current year acquisitions and higher selling and marketing
expenses to support increased sales. EBIT margin was 12.0% compared to 11.1% in
the prior year.
Corporate and Other-The decrease in EBIT was primarily driven by higher
share-based and incentive compensation expense, higher post-acquisition
compensation and transaction costs in the current year, and investments in human
capital which support our centers of excellence.
Three months ended Change Six months ended Change
September 27, September 26, September 27,
Interest expense, net: September 26, 2021 2020 Dollars Percent 2021 2020 Dollars Percent
Corporate and other $ 5,929 $ 5,715 $ 214 3.7 % $ 11,607 $ 12,133 $ (526) (4.3) %
For the three months ended September 26, 2021 , the increase in interest expense
is due to our higher average debt balance, offset by a reduction in our interest
rate on the 4.5% Notes. For the six months ended September 26, 2021 , the
decrease in our interest expense is due to a reduction in our interest rate on
the 4.5% Notes.
Three months ended Six months ended
September 26, Effective September 27, Effective September26, Effective September 27, Effective Income tax provision: 2021 Rate 2020 Rate $ Change 2021 Rate 2020 Rate $ Change Corporate and other$ (45,270) 24.5 % $
10,104 (14.5) %$ (55,374) $ (80,523) 24.9 %$ 8,955 (8.1) %$ (89,478) See Note 15, Income Taxes, to the unaudited condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for information regarding income taxes. The increase in the effective rate for both the three and six months endedSeptember 26, 2021 in relation to the comparable prior year periods is primarily caused by the impact of the prior year decrease in the valuation allowance driven by earnings and benefit of the loss carrybacks, which permitted us to realize previously valued tax assets. 25 -------------------------------------------------------------------------------- Table of Contents Financial condition Cash increased to$265,301 atSeptember 26, 2021 from$52,956 of cash and restricted cash atSeptember 27, 2020 , primarily due to increases in cash provided by operating activities and proceeds from long-term debt during the last twelve months, partially offset by cash paid for acquisitions, capital expenditures and the repurchase of shares. Operating Activities Cash provided by operating activities decreased$92,645 in the six months endedSeptember 26, 2021 compared to the prior year period. Increases in inventory purchases, accounts receivable due to higher sales volume, and the timing of income tax payments, were partially offset by increased net income. Investing Activities Cash used for investing activities increased$13,279 for the six months endedSeptember 26, 2021 compared to the prior-year period. The current period cash usage was driven by the acquisition of businesses and increased capital expenditures. Financing Activities Cash used for financing activities decreased by$106,622 for the six months endedSeptember 26, 2021 compared to the prior year period. The decrease is due to a reduction in net debt payments, partially offset by the repurchase of approximately 1.5 million shares for$56,239 during fiscal year 2022. 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, and other activities. 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. As ofSeptember 26, 2021 , there is$43,761 remaining under our$100,000 2021 Share Repurchase Program, which we intend to fund through the first fiscal quarter of 2024. This amount is currently well below the covenants in our 2021 ABL Revolving Credit Facility that limit our share repurchases. 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 and pension obligations, make capital expenditures over the next 12 months and fund the 2021 Share Repurchase Program. As ofSeptember 26, 2021 , based on the borrowing base less outstanding borrowings of$0 , outstanding letters of credit of$19,200 , and minimum required borrowing base of$45,000 , the amount available under the 2021 ABL Revolving Credit Facility was$385,800 . Our total debt as a percentage of total capitalization (total debt and stockholders' equity) was 34.8% as ofSeptember 26, 2021 . Subsequent to quarter end, we partially funded the acquisition of Foresight with$250,000 in borrowings from the ABL Revolving Credit Facility. See Note 18, Subsequent Event, to the unaudited condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q, which is incorporated herein by this reference. 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 coronavirus variants), 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 as a result of the COVID-19 pandemic (including the emergence and spread of coronavirus variants) 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. Additional information about our 2021 ABL Revolving Credit Facility, and long-term debt is presented in Note 13, Long-term Debt, to the unaudited condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q, which is incorporated herein by this reference. 26 -------------------------------------------------------------------------------- Table of Contents Contractual Obligations and Commitments The Company leases certain warehouse, distribution and office facilities, vehicles and office equipment under operating leases. As ofSeptember 26, 2021 , current and long-term operating lease liabilities of$11,277 and$78,126 , respectively, were recorded in the accompanying unaudited condensed consolidated balance sheets. For further discussion on minimum lease payment obligations, see Note 3, Leases, to the unaudited condensed consolidated financial statements in Part I, Item 1 of this report. There have been no material changes with respect to the contractual obligations and commitments or off-balance sheet arrangements described in our Annual Report on Form 10-K for fiscal year 2021. 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 investigations 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 potentially responsible parties ("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 those costs. While uncertainties exist with respect to the amounts and timing of the ultimate environmental liabilities, based on currently 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. Critical Accounting Policies and Estimates There have been no changes to our critical accounting policies and estimates from the information provided in Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations," included in our Annual Report on Form 10-K for fiscal year 2021, except for our adoption of the Accounting Standards Updates ("ASU") No 2019-12, "Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes" and No 2020-06, "Debt-Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity's Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity's Own Equity" which both became effective as ofApril 1, 2021 . For further discussion on the adoption of new accounting standards please see Note 1, Significant Accounting Policies, to the unaudited condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q. Dependence on Key Customers; Concentration of Credit No single customer contributed 10% or more of our sales in the six months endedSeptember 26, 2021 . Walmart represented approximately 10% of our sales in the six months endedSeptember 27, 2020 . If a key customer fails to meet payment obligations, our operating results and financial condition could be adversely affected. 27
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Table of Contents Inflation and Commodity Price Risk In management's opinion, inflation has not had a significant impact upon the results of our operations. However, 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 ourShooting Sports Segment. See Note 5, Derivative Financial Instruments, to the unaudited condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q 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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