UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
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☒ | | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended December 29, 2019
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☐ | | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number 1-36597
Vista Outdoor Inc.
(Exact name of Registrant as specified in its charter) |
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Delaware | | 47-1016855 |
(State or other jurisdiction of incorporation or organization) | | (I.R.S. Employer Identification No.) |
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1 Vista Way | Anoka | MN | 55303 |
(Address of Principal Executive Offices) | | (Zip Code) |
Registrant's telephone number, including area code: (763) (763) 433-1000
Securities registered pursuant to Section 12(b) of the Act:
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Title of Each Class | | Trading Symbol(s) | | Name of each exchange on which registered |
Common Stock, par value $.01 | | VSTO | | New York Stock Exchange |
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act. |
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Large accelerated filer | ☒☐ | Accelerated filer | ☐☒ | Non-accelerated filer | ☐ | Smaller reporting company | ☐ | Emerging growth company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of January 27, 2020,25, 2021, there were 57,876,76558,323,299 shares of the registrant's voting common stock outstanding.
TABLE OF CONTENTS
TABLE OF CONTENTS
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PART I - Financial Information | |
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PART I— FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
VISTA OUTDOOR INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
| | | | | | | | | | | | | | |
(Amounts in thousands except share data) | | December 27, 2020 | | March 31, 2020 |
ASSETS | | | | |
Current assets: | | | | |
Cash and cash equivalents | | $ | 96,467 | | | $ | 31,375 | |
Net receivables | | 315,709 | | | 313,517 | |
Net inventories | | 353,816 | | | 331,293 | |
Income tax receivable | | 40,496 | | | 7,626 | |
Other current assets | | 20,131 | | | 25,200 | |
Total current assets | | 826,619 | | | 709,011 | |
Net property, plant, and equipment | | 196,624 | | | 184,733 | |
Operating lease assets | | 73,114 | | | 69,024 | |
Goodwill | | 84,539 | | | 83,167 | |
Net intangible assets | | 317,826 | | | 306,100 | |
Deferred charges and other non-current assets, net | | 30,023 | | | 39,254 | |
Total assets | | $ | 1,528,745 | | | $ | 1,391,289 | |
LIABILITIES AND STOCKHOLDERS' EQUITY | | | | |
Current liabilities: | | | | |
Accounts payable | | $ | 117,204 | | | $ | 89,996 | |
Accrued compensation | | 44,536 | | | 38,806 | |
Federal excise, use, and other taxes | | 24,467 | | | 19,702 | |
Other current liabilities | | 142,042 | | | 98,197 | |
Total current liabilities | | 328,249 | | | 246,701 | |
Long-term debt | | 345,683 | | | 511,806 | |
Deferred income tax liabilities | | 15,334 | | | 12,810 | |
Long-term operating lease liabilities | | 78,429 | | | 73,738 | |
Accrued pension and postemployment benefits | | 50,873 | | | 60,225 | |
Other long-term liabilities | | 51,449 | | | 43,504 | |
Total liabilities | | 870,017 | | | 948,784 | |
Commitments and contingencies (Notes 3, 12, and 16) | | 0 | | 0 |
Common stock — $.01 par value: | | | | |
Authorized — 500,000,000 shares | | | | |
Issued and outstanding — 58,320,136 shares as of December 27, 2020 and 58,038,822 shares as of March 31, 2020 | | 583 | | | 580 | |
Additional paid-in capital | | 1,742,543 | | | 1,744,096 | |
Accumulated deficit | | (761,048) | | | (960,048) | |
Accumulated other comprehensive loss | | (94,613) | | | (100,994) | |
Common stock in treasury, at cost — 5,644,303 shares held as of December 27, 2020 and 5,925,617 shares held as of March 31, 2020 | | (228,737) | | | (241,129) | |
Total stockholders' equity | | 658,728 | | | 442,505 | |
Total liabilities and stockholders' equity | | $ | 1,528,745 | | | $ | 1,391,289 | |
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(Amounts in thousands except share data) | | December 29, 2019 | | March 31, 2019 |
ASSETS | | | | |
Current assets: | | | | |
Cash and cash equivalents | | $ | 32,068 |
| | $ | 21,935 |
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Net receivables | | 319,990 |
| | 344,249 |
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Net inventories | | 334,729 |
| | 344,491 |
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Income tax receivable | | 564 |
| | — |
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Assets held for sale | | — |
| | 207,607 |
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Other current assets | | 18,075 |
| | 21,180 |
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Total current assets | | 705,426 |
| | 939,462 |
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Net property, plant, and equipment | | 191,945 |
| | 215,592 |
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Operating lease assets | | 67,934 |
| | — |
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Goodwill | | 204,496 |
| | 204,496 |
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Net intangible assets | | 345,615 |
| | 360,520 |
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Deferred charges and other non-current assets, net | | 33,517 |
| | 17,953 |
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Total assets | | $ | 1,548,933 |
| | $ | 1,738,023 |
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LIABILITIES AND EQUITY | | | | |
Current liabilities: | | | | |
Current portion of long-term debt | | $ | — |
| | $ | 19,335 |
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Accounts payable | | 96,555 |
| | 99,283 |
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Accrued compensation | | 27,263 |
| | 36,456 |
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Accrued income taxes | | — |
| | 436 |
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Federal excise, use, and other taxes | | 18,707 |
| | 18,482 |
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Liabilities held for sale | | — |
| | 46,030 |
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Other current liabilities | | 100,984 |
| | 97,175 |
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Total current liabilities | | 243,509 |
| | 317,197 |
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Long-term debt | | 523,860 |
| | 684,670 |
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Deferred income tax liabilities | | 17,677 |
| | 17,757 |
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Long-term operating lease liabilities | | 72,347 |
| | — |
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Accrued pension and postemployment benefits | | 41,001 |
| | 46,083 |
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Other long-term liabilities | | 45,589 |
| | 63,276 |
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Total liabilities | | 943,983 |
| | 1,128,983 |
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Commitments and contingencies (Notes 3, 13, and 16) | |
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Common stock — $.01 par value: | | | | |
Authorized — 500,000,000 shares | | | | |
Issued and outstanding — 57,909,645 shares as of December 29, 2019 and 57,710,934 shares as of March 31, 2019 | | 578 |
| | 577 |
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Additional paid-in capital | | 1,749,545 |
| | 1,752,419 |
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Accumulated deficit | | (818,834 | ) | | (804,969 | ) |
Accumulated other comprehensive loss | | (78,242 | ) | | (82,967 | ) |
Common stock in treasury, at cost — 6,054,794 shares held as of December 29, 2019 and 6,253,505 shares held as of March 31, 2019 | | (248,097 | ) | | (256,020 | ) |
Total stockholders' equity | | 604,950 |
| | 609,040 |
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Total liabilities and stockholders' equity | | $ | 1,548,933 |
| | $ | 1,738,023 |
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See Notes to the Condensed Consolidated Financial Statements.
VISTA OUTDOOR INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(unaudited)
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| | Three months ended | | Nine months ended |
(Amounts in thousands except per share data) | | December 27, 2020 | | December 29, 2019 | | December 27, 2020 | | December 29, 2019 |
Sales, net | | $ | 574,679 | | | $ | 424,770 | | | $ | 1,628,998 | | | $ | 1,329,560 | |
Cost of sales | | 411,447 | | | 335,980 | | | 1,178,508 | | | 1,055,428 | |
Gross profit | | 163,232 | | | 88,790 | | | 450,490 | | | 274,132 | |
Operating expenses: | | | | | | | | |
Research and development | | 5,483 | | | 5,703 | | | 15,855 | | | 17,750 | |
Selling, general, and administrative | | 88,768 | | | 64,418 | | | 242,355 | | | 231,298 | |
Impairment of held-for-sale assets (Note 2) | | 0 | | | 0 | | | 0 | | | 9,429 | |
Earnings before interest, income taxes, and other | | 68,981 | | | 18,669 | | | 192,280 | | | 15,655 | |
Other income (expense), net (Note 4) | | 18,467 | | | 0 | | | 18,467 | | | (433) | |
Earnings before interest and income taxes | | 87,448 | | | 18,669 | | | 210,747 | | | 15,222 | |
Interest expense, net | | (5,619) | | | (8,373) | | | (17,752) | | | (31,811) | |
Earnings (loss) before income taxes | | 81,829 | | | 10,296 | | | 192,995 | | | (16,589) | |
Income tax (provision) benefit | | (2,950) | | | 4,352 | | | 6,005 | | | 2,724 | |
Net income (loss) | | $ | 78,879 | | | $ | 14,648 | | | $ | 199,000 | | | $ | (13,865) | |
Earnings (loss) per common share: | | | | | | | | |
Basic | | $ | 1.35 | | | $ | 0.25 | | | $ | 3.42 | | | $ | (0.24) | |
Diluted | | $ | 1.31 | | | $ | 0.25 | | | $ | 3.34 | | | $ | (0.24) | |
Weighted-average number of common shares outstanding: | | | | | | | | |
Basic | | 58,303 | | | 57,878 | | | 58,183 | | | 57,812 | |
Diluted | | 60,101 | | | 57,978 | | | 59,594 | | | 57,812 | |
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Net income (loss) (from above) | | $ | 78,879 | | | $ | 14,648 | | | $ | 199,000 | | | $ | (13,865) | |
Other comprehensive income, net of tax: | | | | | | | | |
Pension and other postretirement benefit liabilities: | | | | | | | | |
Reclassification of prior service credits for pension and postretirement benefit plans recorded to net income, net of tax of $0 for each period presented | | (78) | | | (79) | | | (235) | | | (235) | |
Reclassification of net actuarial loss for pension and postretirement benefit plans recorded to net income, net of tax of $0 for each period presented | | 969 | | | 812 | | | 2,907 | | | 2,435 | |
Change in derivatives, net of tax of $0 for each period presented | | 1,151 | | | (725) | | | 2,825 | | | (1,175) | |
Currency translation gains reclassified from accumulated other comprehensive loss | | 0 | | | 0 | | | 0 | | | 3,150 | |
Change in cumulative translation adjustment | | 375 | | | 263 | | | 884 | | | 550 | |
Total other comprehensive income | | 2,417 | | | 271 | | | 6,381 | | | 4,725 | |
Comprehensive income (loss) | | $ | 81,296 | | | $ | 14,919 | | | $ | 205,381 | | | $ | (9,140) | |
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| | Three months ended | | Nine months ended |
(Amounts in thousands except per share data) | | December 29, 2019 | | December 30, 2018 | | December 29, 2019 | | December 30, 2018 |
Sales, net | | $ | 424,770 |
| | $ | 467,771 |
| | $ | 1,329,560 |
| | $ | 1,543,192 |
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Cost of sales | | 335,980 |
| | 373,535 |
| | 1,055,428 |
| | 1,226,861 |
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Gross profit | | 88,790 |
| | 94,236 |
| | 274,132 |
| | 316,331 |
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Operating expenses: | | | | | | | | |
Research and development | | 5,703 |
| | 6,503 |
| | 17,750 |
| | 20,681 |
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Selling, general, and administrative | | 64,418 |
| | 86,418 |
| | 231,298 |
| | 284,754 |
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Goodwill and intangibles impairment (Note 11) | | — |
| | 432,612 |
| | — |
| | 456,023 |
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Impairment of held-for-sale assets (Note 7) | | — |
| | 83,854 |
| | 9,429 |
| | 128,775 |
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Income (loss) before interest, income taxes, and other | | 18,669 |
| | (515,151 | ) | | 15,655 |
| | (573,902 | ) |
Other income (expense), net (Note 7) | | — |
| | (1,871 | ) | | (433 | ) | | (6,796 | ) |
Interest expense, net | | (8,373 | ) | | (16,003 | ) | | (31,811 | ) | | (46,340 | ) |
Earnings (loss) before income taxes | | 10,296 |
| | (533,025 | ) | | (16,589 | ) | | (627,038 | ) |
Income tax provision (benefit) | | (4,352 | ) | | (18,383 | ) | | (2,724 | ) | | (27,230 | ) |
Net income (loss) | | $ | 14,648 |
| | $ | (514,642 | ) | | $ | (13,865 | ) | | $ | (599,808 | ) |
Earnings (loss) per common share: | | | | | | | | |
Basic and Diluted | | $ | 0.25 |
| | $ | (8.94 | ) | | $ | (0.24 | ) | | $ | (10.43 | ) |
Weighted-average number of common shares outstanding: | | | | | | | | |
Basic | | 57,878 |
| | 57,572 |
| | 57,812 |
| | 57,525 |
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Diluted | | 57,978 |
| | 57,572 |
| | 57,812 |
| | 57,525 |
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Net income (loss) (from above) | | $ | 14,648 |
| | $ | (514,642 | ) | | $ | (13,865 | ) | | $ | (599,808 | ) |
Other comprehensive income (loss), net of tax: | | | | | | | | |
Pension and other postretirement benefit liabilities: | | | | | | | | |
Reclassification of prior service credits for pension and postretirement benefit plans recorded to net income, net of tax benefit of $0 and $19 for the three months ended, respectively, and $0 and $57 for the nine months ended, respectively. | | (79 | ) | | (60 | ) | | (235 | ) | | (180 | ) |
Reclassification of net actuarial loss for pension and postretirement benefit plans recorded to net income, net of tax expense of $0 and $(172) for the three months ended, respectively, and $0 and $(516) for the nine months ended, respectively. | | 812 |
| | 543 |
| | 2,435 |
| | 1,629 |
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Change in derivatives, net of tax benefit (expense) of $0 and $88 for the three months ended, respectively, and $0 and $235 for the nine months ended, respectively. | | (725 | ) | | (279 | ) | | (1,175 | ) | | (743 | ) |
Currency translation gains reclassified from accumulated other comprehensive loss | | — |
| | — |
| | 3,150 |
| | — |
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Change in cumulative translation adjustment. | | 263 |
| | 76 |
| | 550 |
| | 29,592 |
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Total other comprehensive income (loss) | | 271 |
| | 280 |
| | 4,725 |
| | 30,298 |
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Comprehensive income (loss) | | $ | 14,919 |
| | $ | (514,362 | ) | | $ | (9,140 | ) | | $ | (569,510 | ) |
See Notes to the Condensed Consolidated Financial Statements.
VISTA OUTDOOR INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
| | | | Nine months ended | | | Nine months ended |
(Amounts in thousands) | | December 29, 2019 | | December 30, 2018 | (Amounts in thousands) | | December 27, 2020 | | December 29, 2019 |
Operating Activities: | | | | | Operating Activities: | | | | |
Net income (loss) | | $ | (13,865 | ) | | $ | (599,808 | ) | Net income (loss) | | $ | 199,000 | | | $ | (13,865) | |
Adjustments to net income (loss) to arrive at cash provided by operating activities: | | | | | Adjustments to net income (loss) to arrive at cash provided by operating activities: | |
Depreciation | | 36,207 |
| | 40,112 |
| Depreciation | | 33,625 | | | 36,207 | |
Amortization of intangible assets | | 14,996 |
| | 19,284 |
| Amortization of intangible assets | | 14,845 | | | 14,996 | |
Impairment of held-for-sale assets (Note 7) | | 9,429 |
| | 128,775 |
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Goodwill and intangibles impairment | | — |
| | 456,023 |
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Impairment of held-for-sale assets (Note 2) | | Impairment of held-for-sale assets (Note 2) | | 0 | | | 9,429 | |
Amortization of deferred financing costs | | 5,569 |
| | 10,458 |
| Amortization of deferred financing costs | | 1,133 | | | 5,569 | |
Gain on sale of business | | Gain on sale of business | | (18,467) | | | — | |
Deferred income taxes | | 348 |
| | (26,610 | ) | Deferred income taxes | | 2,449 | | | 348 | |
(Gain) loss on disposal of property, plant, and equipment | | (48 | ) | | 8,098 |
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Loss on divestitures (Note 7) | | 431 |
| | 4,925 |
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Loss (gain) on disposal of property, plant, and equipment | | Loss (gain) on disposal of property, plant, and equipment | | 1,850 | | | (48) | |
Loss on divestiture | | Loss on divestiture | | — | | | 431 | |
Share-based compensation | | 5,167 |
| | 5,838 |
| Share-based compensation | | 10,013 | | | 5,167 | |
Changes in assets and liabilities: | | | | | Changes in assets and liabilities: | |
Net receivables | | 38,098 |
| | 47,088 |
| Net receivables | | (1,786) | | | 38,098 | |
Net inventories | | (7,510 | ) | | (88,657 | ) | Net inventories | | 6,966 | | | (7,510) | |
Accounts payable | | (4,676 | ) | | 36,961 |
| Accounts payable | | 28,067 | | | (4,676) | |
Accrued compensation | | (9,865 | ) | | (6,911 | ) | Accrued compensation | | 4,015 | | | (9,865) | |
Accrued income taxes | | (3,744 | ) | | (4,872 | ) | Accrued income taxes | | (36,027) | | | (3,744) | |
Federal excise, use, and other taxes | | (2,243 | ) | | (3,630 | ) | Federal excise, use, and other taxes | | 4,729 | | | (2,243) | |
Pension and other postretirement benefits | | (2,521 | ) | | (555 | ) | Pension and other postretirement benefits | | (6,680) | | | (2,521) | |
Other assets and liabilities | | (2,719 | ) | | 34,429 |
| Other assets and liabilities | | 63,587 | | | (2,719) | |
Cash provided by operating activities | | 63,054 |
| | 60,948 |
| Cash provided by operating activities | | 307,319 | | | 63,054 | |
Investing Activities: | | | | | Investing Activities: | |
Capital expenditures | | (21,977 | ) | | (30,911 | ) | Capital expenditures | | (17,603) | | | (21,977) | |
Proceeds from sale of our Firearms business and Eyewear business (Note 7) | | 156,567 |
| | 151,595 |
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Proceeds from sale of business | | Proceeds from sale of business | | 23,654 | | | — | |
Acquisition of Remington (Note 4) | | Acquisition of Remington (Note 4) | | (81,691) | | | 0 | |
Proceeds from sale of our Firearms Business | | Proceeds from sale of our Firearms Business | | — | | | 156,567 | |
Proceeds from the disposition of property, plant, and equipment | | 270 |
| | 365 |
| Proceeds from the disposition of property, plant, and equipment | | 25 | | | 270 | |
Cash provided by investing activities | | 134,860 |
| | 121,049 |
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Cash (used for) provided by investing activities | | Cash (used for) provided by investing activities | | (75,615) | | | 134,860 | |
Financing Activities: | | | | | Financing Activities: | |
Borrowings on lines of credit | | 272,321 |
| | 440,000 |
| Borrowings on lines of credit | | 73,077 | | | 272,321 | |
Payments on lines of credit | | (312,623 | ) | | (180,000 | ) | Payments on lines of credit | | (240,333) | | | (312,623) | |
Proceeds from issuance of long-term debt | | — |
| | 149,343 |
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Payments made on long-term debt | | (144,509 | ) | | (576,000 | ) | Payments made on long-term debt | | 0 | | | (144,509) | |
Payments made for debt issuance costs and prepayment premiums | | (903 | ) | | (10,271 | ) | |
Settlement from former parent | | — |
| | 13,047 |
| |
Payments made for debt issuance costs | | Payments made for debt issuance costs | | 0 | | | (903) | |
Deferred payments for acquisitions | | (1,348 | ) | | (1,348 | ) | Deferred payments for acquisitions | | 0 | | | (1,348) | |
Shares withheld for payroll taxes | | (507 | ) | | (1,001 | ) | |
Proceeds from exercise of stock options | | Proceeds from exercise of stock options | | 1,100 | | | 0 | |
Payment of employee taxes related to vested stock awards | | Payment of employee taxes related to vested stock awards | | (576) | | | (507) | |
Cash used for financing activities | | (187,569 | ) | | (166,230 | ) | Cash used for financing activities | | (166,732) | | | (187,569) | |
Effect of foreign exchange rate fluctuations on cash | | (212 | ) | | (1,013 | ) | Effect of foreign exchange rate fluctuations on cash | | 120 | | | (212) | |
Increase in cash and cash equivalents | | 10,133 |
| | 14,754 |
| Increase in cash and cash equivalents | | 65,092 | | | 10,133 | |
Cash and cash equivalents at beginning of period | | 21,935 |
| | 22,870 |
| Cash and cash equivalents at beginning of period | | 31,375 | | | 21,935 | |
Cash and cash equivalents at end of period | | $ | 32,068 |
| | $ | 37,624 |
| Cash and cash equivalents at end of period | | $ | 96,467 | | | $ | 32,068 | |
Supplemental Cash Flow Disclosures: | | | | | Supplemental Cash Flow Disclosures: | | | | |
Non-cash investing activity: | | | | | Non-cash investing activity: | |
Capital expenditures included in accounts payable | | $ | 1,331 |
| | $ | 1,756 |
| Capital expenditures included in accounts payable | | $ | 1,931 | | | $ | 1,331 | |
.
See Notes to the Condensed Consolidated Financial Statements.
VISTA OUTDOOR INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(unaudited)
| | | | Common Stock $.01 Par Value | | | | | | | | | | | | | Common Stock $.01 Par Value | |
(Amounts in thousands except share data) | | Shares | | Amount | | Additional Paid-In Capital | | Accumulated Deficit | | Accumulated Other Comprehensive Loss | | Treasury Stock | | Total Equity | (Amounts in thousands except share data) | | Shares | | Amount | | Additional Paid-In Capital | | Accumulated Deficit | | Accumulated Other Comprehensive Loss | | Treasury Stock | | Total Equity |
Balance, September 27, 2020 | | Balance, September 27, 2020 | | 58,256,243 | | | $ | 583 | | | $ | 1,742,645 | | | $ | (839,927) | | | $ | (97,030) | | | $ | (231,634) | | | $ | 574,637 | |
Comprehensive income | | Comprehensive income | | — | | | — | | | — | | | 78,879 | | | 2,417 | | | — | | | 81,296 | |
Exercise of stock options | | Exercise of stock options | | 27,382 | | | — | | | (594) | | | — | | | — | | | 1,110 | | | 516 | |
Share-based compensation | | Share-based compensation | | — | | | — | | | 2,547 | | | — | | | — | | | — | | | 2,547 | |
Restricted stock vested and shares withheld | | Restricted stock vested and shares withheld | | 28,002 | | | — | | | (1,778) | | | — | | | — | | | 1,442 | | | (336) | |
Employee stock purchase plan | | Employee stock purchase plan | | 3,537 | | | — | | | (76) | | | — | | | — | | | 144 | | | 68 | |
Other | | Other | | 4,972 | | | — | | | (201) | | | — | | | — | | | 201 | | | 0 | |
Balance, December 27, 2020 | | Balance, December 27, 2020 | | 58,320,136 | | | $ | 583 | | | $ | 1,742,543 | | | $ | (761,048) | | | $ | (94,613) | | | $ | (228,737) | | | $ | 658,728 | |
| Balance, September 29, 2019 | | 57,787,433 |
| | $ | 578 |
| | $ | 1,752,175 |
| | $ | (833,482 | ) | | $ | (78,513 | ) | | $ | (252,257 | ) | | $ | 588,501 |
| Balance, September 29, 2019 | | 57,787,433 | | | $ | 578 | | | $ | 1,752,175 | | | $ | (833,482) | | | $ | (78,513) | | | $ | (252,257) | | | $ | 588,501 | |
Comprehensive income (loss) | | — |
| | — |
| | — |
| | 14,648 |
| | 271 |
| | — |
| | 14,919 |
| |
Comprehensive income | | Comprehensive income | | — | | | — | | | — | | | 14,648 | | | 271 | | | — | | | 14,919 | |
Share-based compensation | | — |
| | — |
| | 1,593 |
| | — |
| | — |
| | — |
| | 1,593 |
| Share-based compensation | | — | | | — | | | 1,593 | | | — | | | — | | | — | | | 1,593 | |
Restricted stock vested and shares withheld | | 55,385 |
| | — |
| | (3,392 | ) | | — |
| | — |
| | 3,191 |
| | (201 | ) | Restricted stock vested and shares withheld | | 55,385 | | | — | | | (3,392) | | | — | | | — | | | 3,191 | | | (201) | |
Employee stock purchase plan | | 11,980 |
| | — |
| | (419 | ) | | — |
| | — |
| | 489 |
| | 70 |
| Employee stock purchase plan | | 11,980 | | | — | | | (419) | | | — | | | — | | | 489 | | | 70 | |
Other | | 54,847 |
| | — |
| | (412 | ) | | — |
| | — |
| | 480 |
| | 68 |
| Other | | 54,847 | | | — | | | (412) | | | — | | | — | | | 480 | | | 68 | |
Balance, December 29, 2019 | | 57,909,645 |
| | $ | 578 |
| | $ | 1,749,545 |
| | $ | (818,834 | ) | | $ | (78,242 | ) | | $ | (248,097 | ) | | $ | 604,950 |
| Balance, December 29, 2019 | | 57,909,645 | | | $ | 578 | | | $ | 1,749,545 | | | $ | (818,834) | | | $ | (78,242) | | | $ | (248,097) | | | $ | 604,950 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Balance September 30, 2018 | | 57,551,275 |
| | $ | 576 |
| | $ | 1,759,481 |
| | $ | (241,692 | ) | | $ | (74,278 | ) | | $ | (264,888 | ) | | $ | 1,179,199 |
| |
Comprehensive income (loss) | | — |
| | — |
| | — |
| | (514,642 | ) | | 280 |
| | — |
| | (514,362 | ) | |
| | | Common Stock $.01 Par Value | |
(Amounts in thousands except share data) | | (Amounts in thousands except share data) | | Shares | | Amount | | Additional Paid-In Capital | | Accumulated Deficit | | Accumulated Other Comprehensive Loss | | Treasury Stock | | Total Equity |
Balance, March 31, 2020 | | Balance, March 31, 2020 | | 58,038,822 | | | $ | 580 | | | $ | 1,744,096 | | | $ | (960,048) | | | $ | (100,994) | | | $ | (241,129) | | | $ | 442,505 | |
Comprehensive income | | Comprehensive income | | — | | | — | | | — | | | 199,000 | | | 6,381 | | | — | | | 205,381 | |
Exercise of stock options | | Exercise of stock options | | 83,196 | | | — | | | (2,055) | | | — | | | — | | | 3,376 | | | 1,321 | |
Share-based compensation | | — |
| | — |
| | 1,958 |
| | — |
| | — |
| | — |
| | 1,958 |
| Share-based compensation | | — | | | — | | | 10,013 | | | — | | | — | | | — | | | 10,013 | |
Restricted stock vested and shares withheld | | 23,234 |
| | — |
| | (1,368 | ) | | — |
| | — |
| | 1,212 |
| | (156 | ) | Restricted stock vested and shares withheld | | 79,506 | | | — | | | (4,843) | | | — | | | — | | | 4,201 | | | (642) | |
Employee stock purchase plan | | Employee stock purchase plan | | 8,972 | | | — | | | (222) | | | — | | | — | | | 365 | | | 143 | |
Other | | (796 | ) | | — |
| | 4 |
| | — |
| | — |
| | (17 | ) | | (13 | ) | Other | | 109,640 | | | 3 | | | (4,446) | | | — | | | — | | | 4,450 | | | 7 | |
Balance, December 30, 2018 | | 57,573,713 |
| | $ | 576 |
| | $ | 1,760,075 |
| | $ | (756,334 | ) | | $ | (73,998 | ) | | $ | (263,693 | ) | | $ | 666,626 |
| |
Balance, December 27, 2020 | | Balance, December 27, 2020 | | 58,320,136 | | | $ | 583 | | | $ | 1,742,543 | | | $ | (761,048) | | | $ | (94,613) | | | $ | (228,737) | | | $ | 658,728 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Common Stock $.01 Par Value | | | | | | | | | | | |
(Amounts in thousands except share data) | | Shares | | Amount | | Additional Paid-In Capital | | Accumulated Deficit | | Accumulated Other Comprehensive Loss | | Treasury Stock | | Total Equity | |
Balance, March 31, 2019 | | 57,710,934 |
| | $ | 577 |
| | $ | 1,752,419 |
| | $ | (804,969 | ) | | $ | (82,967 | ) | | $ | (256,020 | ) | | $ | 609,040 |
| Balance, March 31, 2019 | | 57,710,934 | | | $ | 577 | | | $ | 1,752,419 | | | $ | (804,969) | | | $ | (82,967) | | | $ | (256,020) | | | $ | 609,040 | |
Comprehensive income (loss) | | — |
| | — |
| | — |
| | (13,865 | ) | | 4,725 |
| | — |
| | (9,140 | ) | Comprehensive income (loss) | | — | | | — | | | — | | | (13,865) | | | 4,725 | | | — | | | (9,140) | |
Share-based compensation | | — |
| | — |
| | 5,167 |
| | — |
| | — |
| | — |
| | 5,167 |
| Share-based compensation | | — | | | — | | | 5,167 | | | — | | | — | | | — | | | 5,167 | |
Restricted stock vested and shares withheld | | 91,110 |
| | — |
| | (5,785 | ) | | — |
| | — |
| | 5,437 |
| | (348 | ) | Restricted stock vested and shares withheld | | 91,110 | | | — | | | (5,785) | | | — | | | — | | | 5,437 | | | (348) | |
Employee stock purchase plan | | 23,008 |
| | — |
| | (777 | ) | | — |
| | — |
| | 940 |
| | 163 |
| Employee stock purchase plan | | 23,008 | | | — | | | (777) | | | — | | | — | | | 940 | | | 163 | |
Other | | 84,593 |
| | 1 |
| | (1,479 | ) | | — |
| | — |
| | 1,546 |
| | 68 |
| Other | | 84,593 | | | 1 | | | (1,479) | | | — | | | — | | | 1,546 | | | 68 | |
Balance, December 29, 2019 | | 57,909,645 |
| | $ | 578 |
| | $ | 1,749,545 |
| | $ | (818,834 | ) | | $ | (78,242 | ) | | $ | (248,097 | ) | | $ | 604,950 |
| Balance, December 29, 2019 | | 57,909,645 | | | $ | 578 | | | $ | 1,749,545 | | | $ | (818,834) | | | $ | (78,242) | | | $ | (248,097) | | | $ | 604,950 | |
| | | | | | | | | | | | | | | |
Balance, March 31, 2018 | | 57,431,299 |
| | $ | 574 |
| | $ | 1,746,182 |
| | $ | (156,526 | ) | | $ | (104,296 | ) | | $ | (268,444 | ) | | $ | 1,217,490 |
| |
Comprehensive income (loss) | | — |
| | — |
| | — |
| | (599,808 | ) | | 30,298 |
| | — |
| | (569,510 | ) | |
Share-based compensation | | — |
| | — |
| | 5,940 |
| | — |
| | — |
| | (102 | ) | | 5,838 |
| |
Restricted stock vested and shares withheld | | 71,192 |
| | — |
| | (3,577 | ) | | — |
| | — |
| | 3,139 |
| | (438 | ) | |
Employee stock purchase plan | | 13,083 |
| | — |
| | (334 | ) | | — |
| | — |
| | 540 |
| | 206 |
| |
Settlement from former parent | | — |
| | — |
| | 13,047 |
| | — |
| | — |
| | — |
| | 13,047 |
| |
Other | | 58,139 |
| | 2 |
| | (1,183 | ) | | — |
| | — |
| | 1,174 |
| | (7 | ) | |
Balance, December 30, 2018 | | 57,573,713 |
| | $ | 576 |
| | $ | 1,760,075 |
| | $ | (756,334 | ) | | $ | (73,998 | ) | | $ | (263,693 | ) | | $ | 666,626 |
| |
See Notes to the Condensed Consolidated Financial Statements.
VISTA OUTDOOR INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
Three and nine months endedNine Months Ended December 29, 201927, 2020
(Amounts in thousands except share and per share data and unless otherwise indicated)
1. Significant Accounting Policies
Nature of Operations—Vista Outdoor Inc. (together with our subsidiaries, "Vista Outdoor", "we", "our", and "us"), unless the context otherwise requires) is a leading global designer, manufacturer and marketer of consumer products in the outdoor and shooting sports products. We conduct our operations through 2 reportable segments, Shooting Sports and recreation markets.Outdoor Products. We operate in 2 segments, Outdoor Products and Shooting Sports. Vista Outdoor isare headquartered in Anoka, Minnesota and hashave 15 manufacturing and distribution facilities in 15 U.S.the United States, Canada, Mexico, and Puerto Rico along with international customer service, sales and sourcing operations in Asia, Canada, and Europe. Vista Outdoor was incorporated in Delaware in 2014. The condensed consolidated financial statements reflect our financial position, results of operations, and cash flows in conformity with accounting principles generally accepted in the United States.
This Quarterly Report on Form 10-Q should be read in conjunction with our consolidated financial statements and notes included in our Annual Report on Form 10-K for the fiscal year ended March 31, 20192020 (“fiscal 2019”2020”).
Reclassifications—Changes to the mathematical sign used to denote income taxes for the three and nine months ended December 29, 2019 were made to conform to the current period presentation in the condensed consolidated statements of income. This reclassification had no impact to our key metrics including Earnings (loss) before income taxes or Net income (loss).
Basis of Presentation—Our unaudited condensed consolidated financial statements have been prepared in accordance with the requirements of the Securities and Exchange Commission ("SEC") for interim reporting. As permitted under those rules, certain disclosures and other financial information that normally are required by accounting principles generally accepted in the United States have been condensed or omitted. Our accounting policies are described in the notes to the consolidated financial statements in our Annual Report on Form 10-K for fiscal 2019.2020. Management is responsible for the condensed consolidated financial statements included in this report, which are unaudited but, in the opinion of management, include all adjustments necessary for a fair presentation of our financial position as of December 29, 201927, 2020 and March 31, 2019,2020, our results of operations for the three and nine months ended December 29, 201927, 2020 and December 30, 2018,29, 2019, and our cash flows for the nine months ended December 29, 201927, 2020 and December 30, 2018.29, 2019.
New Accounting Pronouncements
Our accounting policies are described in Note 1 of the Notes to the Consolidated Financial Statements included in our fiscal year 20192020 Annual Report on Form 10-K. Such significant accounting policies are applicable for periods prior to the following new accounting standards.
Accounting Standards Adopted During this Fiscal Year
In February 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards update ("ASU") 2016-02, “Leases" (Topic 842), which requires lessees to recognize a right-of-use asset and lease liability for all leases with terms of more than 12 months. Recognition, measurement and presentation of expenses will depend on classification as a finance or operating lease. WeOn April 1, 2020, we adopted ASU 2016-02 prospectively startingNo. 2016-13, "Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments" ("Topic 326"). This new standard is intended to improve financial reporting by requiring more timely recording of credit losses on our trade accounts receivable and requires the measurement of all expected credit losses based on historical experience, current conditions, and reasonable and supportable forecasts. The adoption of this ASU did not have a material impact on our condensed consolidated financial statements and disclosures. For further information, see Note 8, Receivables.
On April 1, 2019. As part2020, we adopted ASU No. 2018-13, "Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement." The amendments in this ASU removed, modified or added to the disclosure requirements for fair value measurements in ASC Topic 820, "Fair Value Measurement" ("Topic 820"). The adoption of the adoption, we elected the package of practical expedients, which permits us under the new standardthis ASU did not to reassess historical lease classification, not to recognize short-term leaseshave a material impact on our balance sheet, and not to separate lease and non-lease components for all our leases. In addition, we elected the use of hindsight to determine the lease term of our leases and applied our incremental borrowing rate based on the remaining term of our leases as of the adoption date. The impact upon adoption, on April 1, 2019, resulted in the recognition of right-of-use assets of approximately $75,749, and lease liabilities of approximately $91,604 on our unaudited condensed consolidated balance sheet. See Note 3, Leases, for additional information.financial statements and disclosures.
Accounting Standards Yet to Be Adopted
In August 2018, the FASB issued ASU 2018-15, “Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract.” ASU 2018-15 clarifies the accounting treatment for fees paid by a customer in a cloud computing arrangement (hosting arrangement) by providing guidance for determining when the arrangement includes a software license. ASU 2018-15 is effective for public business entities for fiscal years, and interim periods within those years, beginning after December 15, 2019, with early adoption permitted. ASU 2018-15 may be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption. We are currently assessing the impact that adoption of ASU 2018-15 will have on our consolidated financial statements.
In December 2019, the FASB issued ASU No. 2019-12, Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which simplifies the accounting for income taxes, eliminates certain exceptions within ASC 740, Income Taxes, and clarifies certain aspects of the current guidance to promote consistency among reporting entities. ASU 2019-12 is effective for fiscal years beginning after December 15, 2021, although early adoption is permitted. Most amendments within the standard are
required to be applied on a prospective basis, while certain amendments must be applied on a retrospective or modified retrospective basis. We are currently evaluating the impacts of the provisions of ASU 2019-12 on our consolidated financial statements.
2. Fair Value of Financial Instruments
The current authoritative guidance onWe measure and disclose our financial assets and liabilities at fair value clarifies the definition of fair value, prescribeson a framework for measuring fair value, establishes a fair value hierarchy based on the inputs used to measure fair value,recurring and expands disclosures about the use of fair value measurements.nonrecurring basis. Fair value is defined as the price that would be received to sell an asset or the price paid to transfer a liability (an(the exit price) in the principal orand most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.
The valuation techniques required by the current authoritative literatureparticipants. Assets and liabilities carried at fair value are based upon observable and unobservable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect internal market assumptions. These two types of inputs createclassified using the following fair valuethree-tier hierarchy:
Level 1—Quoted prices for identical instruments in active markets.
Level 2—Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.
Level 3—Significant inputs to the valuation model are unobservable.
The following section describes the valuation methodologies we useduse to measure our financial instruments at fair value.
Long-term Debt—The fair value of the variable-rate long-term debt is calculated based on current market rates for debt of the same risk and maturities. The fair value of the fixed-rate debt is based on market quotes for each issuance. We consider these to be Level 2 instruments.a recurring basis:
Interest Rate Swaps—We periodically enter into floating-to-fixed interest rate swap agreements in order to hedge our forecasted interest payments on our outstanding variable-rate debt. The fair value of those swaps is determined using a pricing model based on observable inputs for similar instruments and other market assumptions. We consider these to be Level 2 instruments. See Note 13,5, Long-term Debt,Derivative Financial Instruments, for additional information.
Commodity Price Hedging Instruments—We periodically enter into commodity forward contracts to hedge our exposure to price fluctuations on certain commodities we use for raw material components in our manufacturing process. When actual commodity prices exceed the fixed price provided by these contracts, we receive this difference from the counterparty, and when actual commodity prices are below the contractually provided fixed price, we pay this difference to the counterparty. We consider these to be Level 2 instruments. See Note 4,5, Derivative Financial Instruments, for additional information.
Note Receivable—In connection with the sale of our Firearms business in July 2019, we received a $12,000 interest-free, five-year pre-payable promissory note due June 2024. Based on the general market conditions and the credit quality of the buyer at the time of the sale, we discounted the Note Receivable at an effective interest rate of 10% and estimated fair value using a discounted cash flow approach. We consider this to be a Level 3 instrument. See Note 8, Receivables, for additional information.
Disclosures about the Fair Value of Financial Instruments
Contingent ConsiderationThe carrying amount of our receivables, inventory, accounts payable and accrued liabilities at December 27, 2020— and March 31, 2020, approximates fair value because of the short maturity of these instruments. The acquisition-related contingent consideration liability representscarrying values of cash and cash equivalents at December 27, 2020 and March 31, 2020 are categorized within Level 1 of the fair value hierarchy.
The table below discloses information about carrying values and estimated fair value of additional future earn-outs payable for acquisitions of businesses that included earn-out clauses. The valuation of the contingent consideration is evaluated on an ongoing basis and is based on management estimates and entity-specific assumptions which are considered Level 3 inputs. On September 1, 2016, we completed the acquisition of privately-owned
Logan Outdoor Products, LLC and Peak Trades, LLC ("Camp Chef"), a leading provider of outdoor cooking solutions. Under the terms of the transaction, approximately $10,000 of the purchase price is earned over a three-year period from the closing date if certain incremental growth milestones are met and key members of Camp Chef management continue their employment with us through the respective milestone dates. The approximately $10,000 is being expensed over the three-year measurement period and isrelating to be paid in 3 equal installments after each milestone is achieved. The growth milestones for all three years have been met and therefore, we paid $3,371 during fiscal 2020, 2019, and 2018. The final installment was paid during the three months ended December 29, 2019.
The following table presents our financial assets and liabilitiesliabilities:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | December 27, 2020 | | March 31, 2020 |
| | Carrying amount | | Fair value | | Carrying amount | | Fair value |
Fixed-rate debt (1) | | $ | 350,000 | | | $ | 354,813 | | | $ | 350,000 | | | $ | 284,375 | |
Variable-rate debt (2) | | 0 | | | 0 | | | 167,256 | | | 167,256 | |
(1) In fiscal 2016, we issued $350,000 aggregate principal amount of 5.875% Senior Notes (the "5.875% Notes") that mature on October 1, 2023. These notes are unsecured and senior obligations. The fair value of the fixed-rate long-term debt is calculated based on current market rates for debt of the same risk and maturities, based on market quotes for each issuance. We consider these to be Level 2 instruments. See Note 13, Long-term Debt, for information on long-term debt, including certain risks and uncertainties.
(2) The carrying value of the amounts outstanding under our ABL Revolving Credit Facility approximates the fair value due to the short-term nature of these obligations. The fair value of this debt is categorized within Level 2 of the fair value hierarchy based on the observable market borrowing rates. See Note 13, Long-term Debt, for additional information on our credit facilities, including related certain risks and uncertainties.
We measure certain nonfinancial assets at fair value on a nonrecurring basis if certain indicators are present. These assets include long-lived assets that are notwritten down to fair value when they are held for sale or determined to be impaired. During the three and nine months ended December 27, 2020 there were 0 impairments recorded related to our assets that are measured at fair value on a recurringnonrecurring basis. The carrying values and estimated fair values were as follows:During the nine months ended December 29, 2019, we recognized an impairment of $9,429 related to an expected loss on the sale of the held-for-sale assets of our Firearms business.
|
| | | | | | | | | | | | | | | | |
| | December 29, 2019 | | March 31, 2019 |
| | Carrying amount | | Fair value | | Carrying amount | | Fair value |
Fixed-rate debt | | $ | 350,000 |
| | $ | 337,750 |
| | $ | 350,000 |
| | $ | 326,375 |
|
Variable-rate debt | | 179,699 |
| | 179,699 |
| | 364,509 |
| | 364,509 |
|
3. Leases
We lease certain warehouse and distribution space, manufacturing space, office space, retail locations, equipment and vehicles. All of these leases are classified as operating leases. Operating lease assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. We use our incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. These rates are assessed on a quarterly basis. The operating lease assets also include any lease payments made less lease incentives. Leases with an initial term of twelve months or less are not recorded on the balance sheet. For operating leases, expense is recognized on a straight-line basis over the lease term. Variable lease payments associated with the Company'sour leases are recognized upon occurrence of the event, activity, or circumstance in the lease agreement on which those payments are assessed. Tenant improvement allowances wereare recorded as leasehold improvements with an offsetting adjustment included in the Company’sour calculation of its right-of-use asset.our operating lease assets.
Many leases include one or more options to renew, with renewal terms that can extend the lease term for three years or more. The exercise of lease renewal options is at our sole discretion. The depreciable life of assets and leasehold improvements are limited by the expected lease term.
The amounts of assets and liabilities related to our operating leases follow.were as follows:
|
| | | | | | |
| | Balance Sheet Caption | | December 29, 2019 |
Assets: | | | | |
Operating lease assets | | Operating lease assets | | $ | 67,934 |
|
| | | | |
Liabilities: | | | | |
Current: | | | | |
Operating lease liabilities | | Other current liabilities | | $ | 11,431 |
|
Long-term: | | | | |
Operating lease liabilities | | Long-term operating lease liabilities | | 72,347 |
|
Total lease liabilities | | | | $ | 83,778 |
|
| | | | | | | | | | | | | | | | | | | | |
| | Balance Sheet Caption | | December 27, 2020 | | March 31, 2020 |
Assets: | | | | | | |
Operating lease assets | | Operating lease assets | | $ | 73,114 | | | $ | 69,024 | |
| | | | | | |
Liabilities: | | | | | | |
Current: | | | | | | |
Operating lease liabilities | | Other current liabilities | | $ | 9,983 | | | $ | 10,780 | |
Long-term: | | | | | | |
Operating lease liabilities | | Long-term operating lease liabilities | | 78,429 | | | 73,738 | |
Total lease liabilities | | | | $ | 88,412 | | | $ | 84,518 | |
The components of lease expense are recorded to cost of sales and selling, general and administration expenses in the unaudited condensed consolidated statements of comprehensive income (loss). The components of lease expense were as follows:
| | | | | | | | Three months ended | | Nine months ended |
| | Three months ended December 29, 2019 | | Nine months ended December 29, 2019 | | December 27, 2020 | | December 29, 2019 | | December 27, 2020 | | December 29, 2019 |
Fixed operating lease costs (1) | | $ | 5,733 |
| | $ | 15,349 |
| Fixed operating lease costs (1) | | $ | 5,593 | | | $ | 5,733 | | | $ | 15,704 | | | $ | 15,349 | |
Variable operating lease costs | | 846 |
| | 2,085 |
| Variable operating lease costs | | 806 | | | 846 | | | 2,047 | | | 2,085 | |
Sublease income | | — |
| | (386 | ) | Sublease income | | (67) | | | 0 | | | (732) | | | (386) | |
Net Lease costs | | $ | 6,579 |
| | $ | 17,048 |
| Net Lease costs | | $ | 6,332 | | | $ | 6,579 | | | $ | 17,019 | | | $ | 17,048 | |
(1) Includes short-term leases, which are immaterial.
| | | | | | | | | | | | | | |
| | December 27, 2020 | | March 31, 2020 |
Weighted Average Remaining Lease Term (Years): | | | | |
Operating leases | | 9.52 | | 9.55 |
| | | | |
Weighted Average Discount Rate: | | | | |
Operating leases | | 8.65 | % | | 8.64 | % |
The approximate minimum lease payments under non-cancelable operating leases as of December 27, 2020 are as follows:
|
| | | | | | | |
Remainder of fiscal 2021 | | December 29, 2019$ | 4,429 | |
Weighted Average Remaining Lease Term (Years):Fiscal 2022 | | 16,581 | |
Operating leasesFiscal 2023 | | 9.7415,107 |
|
Fiscal 2024 | | 13,410 | |
Weighted Average Discount Rate:
Fiscal 2025 | | 12,246 | |
Operating leasesThereafter | | 8.6571,628 | % |
Total lease payments | | 133,401 | |
Less imputed interest | | (44,989) | |
Present value of lease liabilities | | $ | 88,412 | |
The approximate future minimum lease payments under operating leases as of December 29, 2019 are as follows:
|
| | | | |
Remainder of fiscal 2020 | | $ | 4,855 |
|
Fiscal 2021 | | 17,157 |
|
Fiscal 2022 | | 13,813 |
|
Fiscal 2023 | | 12,061 |
|
Fiscal 2024 | | 10,650 |
|
Thereafter | | 70,013 |
|
Total lease payments | | 128,549 |
|
Less imputed interest | | (44,771 | ) |
Present value of lease liabilities | | $ | 83,778 |
|
Supplemental cash flow information related to leases is as follows:
| | | | | | Nine months ended |
| | Nine months ended December 29, 2019 | | December 27, 2020 | | December 29, 2019 |
Cash paid for amounts included in the measurement of lease liabilities: | | | Cash paid for amounts included in the measurement of lease liabilities: | | | | |
Operating cash flows - operating leases | | $ | 15,111 |
| Operating cash flows - operating leases | | $ | 13,077 | | | $ | 15,111 | |
Right of use assets obtained in exchange for lease liabilities: | | | |
Operating lease assets obtained in exchange for lease liabilities: | | Operating lease assets obtained in exchange for lease liabilities: | |
Operating leases | | 1,848 |
| Operating leases | | 11,487 | | | 1,848 | |
4. Acquisitions and Divestitures
During the quarter we acquired certain assets related to Remington Outdoor Company, Inc.’s ("Remington") ammunition and accessories businesses, including Remington's ammunition manufacturing facility in Lonoke, Arkansas and related intellectual property. The aggregate consideration of the transaction including working capital adjustments was $81,691 for the net assets acquired, subject to certain customary closing adjustments. We funded the acquisition using a combination of approximately $51,691 of cash on hand and approximately $30,000 drawn from our existing asset-based revolving credit facility. The acquisition will allow us to leverage our current manufacturing infrastructure, distribution channels and scale to restore efficiency, profitability and sustainability to the Remington ammunition and accessories business. 4.
Remington's net sales of $15,334 and a net loss of $7,874 since the acquisition date, October 12, 2020, were included in our consolidated results for the three months ended December 27, 2020, and reflected in the Shooting Sports reportable segment.
We accounted for the acquisition of Remington as a business combination using the acquisition method of accounting. The preliminary purchase price allocation below was allocated to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values as of the acquisition date. The preliminary fair values of acquired assets and liabilities assumed represent management’s estimate of fair value and are subject to change if additional information, such as post-close working capital adjustments becomes available. We expect to finalize the purchase price allocation as soon as practicable within the measurement period, but not later than one year following the acquisition date. The excess of the consideration transferred over the estimated fair value of the net assets received has been recorded as goodwill. The factors that contributed to the recognition of goodwill primarily relate to acquisition-driven anticipated cost savings and synergies along with the assembled workforce acquired. Assembled workforce is not recognized separate and apart from goodwill as it is neither separable nor contractual in nature. The goodwill is deductible for tax purposes.
Remington Preliminary Purchase Price Allocation:
| | | | | | | | | | | | | | |
| | October 12, 2020 |
Total preliminary purchase price: | | | | |
Cash paid | | | | $ | 81,400 | |
Cash paid for working capital | | | | 291 | |
Total purchase price | | | | 81,691 | |
Preliminary fair value of assets acquired: | | | | |
Inventories | | $ | 20,021 | | | |
Intangible assets | | 26,200 | | | |
Property, plant, and equipment | | 31,250 | | | |
Other assets | | 3,363 | | | |
Total assets | | 80,834 | | | |
Preliminary fair value of liabilities assumed: | | | | |
Accounts payable | | 311 | | | |
Other liabilities | | 2,969 | | | |
Total liabilities | | 3,280 | | | |
Net assets acquired | | | | 77,554 | |
Goodwill | | | | $ | 4,137 | |
Intangible assets above include:
| | | | | | | | | | | | | | |
| | Value | | Useful life (years) |
Indefinite lived tradenames | | $ | 24,500 | | | Indefinite |
Customer relationships | | 1,700 | | | 20 |
Supplemental Pro Forma Data:
The following pro forma financial information presents our results as if the Remington acquisition had occurred on April 1, 2019:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three months ended | | Nine months ended |
| | December 27, 2020 | | December 29, 2019 | | December 27, 2020 | | December 29, 2019 |
Sales, net | | $ | 579,332 | | | $ | 463,061 | | | $ | 1,701,872 | | | $ | 1,465,492 | |
Net income (loss) | | 79,476 | | | 3,732 | | | 187,841 | | | (56,133) | |
The unaudited supplemental pro forma data above include the following significant non-recurring adjustments to net income (loss) to account for certain costs which would have been incurred if the Remington acquisition had been completed on April 1, 2019:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three months ended | | Nine months ended |
| | December 27, 2020 | | December 29, 2019 | | December 27, 2020 | | December 29, 2019 |
Fees for advisory, legal, and accounting services (1) | | $ | (1,459) | | | $ | 0 | | | $ | (3,260) | | | $ | 3,260 | |
Inventory step-up, net (2) | | (400) | | | 0 | | | (400) | | | 400 | |
Interest (3) | | 0 | | | 717 | | | 835 | | | 2,936 | |
Depreciation (4) | | 0 | | | 951 | | | 1,902 | | | 2,853 | |
Amortization (5) | | 0 | | | 21 | | | 42 | | | 63 | |
Income taxes (6) | | 290 | | | 0 | | | 2,324 | | | 0 | |
(1) Adjustment for fees that were incurred in connection with the acquisition of Remington during fiscal 2021 as if those fees were incurred during the first quarter of fiscal 2020. Costs were recorded in Selling, general, and administrative expense. We paid a total of $3,260 in transaction costs.
(2) Adjustment reflects the increased cost of goods sold expense resulting from the fair value step-up in inventory which was expensed over the first inventory cycle.
(3) Adjustment to reflect an increase in interest expense resulting from interest on the asset-based revolving credit facility.
(4) Adjustment for depreciation related to the revised basis of the acquired property, plant and equipment and change in estimated useful lives.
(5) Adjustment for amortization of acquired intangible assets.
(6) Income tax effect of the adjustments made at a blended federal and state statutory rate including the impact of the valuation allowance.
The unaudited pro forma financial information has been presented for illustrative purposes only and is not necessarily indicative of results of operations that would have been achieved had the acquisition taken place on the date indicated, or of our future consolidated results of operations. The pro forma financial information presented above has been derived from our historical condensed consolidated financial statements and from the historical accounting records of Remington.
Divestiture of Business:
We entered into an asset purchase agreement during the quarter to sell a non-strategic business in our Shooting Sports segment. As part of the agreement we will provide limited transition services that will be complete by the end of the fiscal year. During the three months ended December 27, 2020 we recognized a pretax gain on this divestiture of approximately $18,467, which is included in other income/(expense) on the condensed consolidating statements of income. This transaction does not meet the criteria for discontinued operations as it does not represent a strategic shift that will have a major effect on the Company's ongoing operations. The assets of this business represented a portion of our Ammunition reporting unit. See Note 11, Goodwill and Intangible Assets.
5. Derivative Financial Instruments
WeIn the normal course of business, we are exposed to market risks arising from adverse changes in:
•commodity prices affecting the cost of raw materials,
interest rates, and
foreign exchange risks.
In the normal course of business, these risks are managed through a variety of strategies, including the use of derivative instruments. See Note 13, •Long-term Debt,interest rates. for additional information on
We record our interest rate swaps.swaps and commodity forward contracts that are accounted for as designated hedges pursuant to ASC Topic 815, “Derivatives and Hedging” ("ASC Topic 815"). ASC Topic 815 requires that an entity recognize all derivatives as either assets or liabilities on the balance sheet, measure those instruments at fair value and recognize changes in the fair value of derivatives in earnings in the period of change unless the derivative qualifies as designated cash flow hedge that offsets certain exposures. Certain criteria must be satisfied in order for derivative financial instruments to be classified and accounted for as a cash flow hedge. Derivatives that are not elected for hedge accounting treatment are recorded immediately in earnings.
From time to time, we have entered into floating-to-fixed interest rate swap agreements in order to hedge our forecasted interest payments on our outstanding variable-rate debt. Gains and losses from the remeasurement of our interest rate swap contract agreement are recorded as a component of accumulated other comprehensive income (loss) and released into earnings as a component of interest expense during the period in which the hedged transaction takes place. There are no cash flow hedge interest rate swaps in place as of December 27, 2020.
We entered into various commodity forward contracts during fiscal 20202021 and 2019.2020. These contracts are used to hedge our exposure to price fluctuations on lead we purchase for raw material components in our ammunition manufacturing process and are designated and qualify as effective cash flow hedges. The effectiveness of cash flow hedge contracts is assessed quantitatively at inception and qualitatively thereafter considering transactions critical terms and counterparty credit quality.
The gains and losses on these hedges are included in accumulated other comprehensive income (loss) and are reclassified into earnings at the time the forecasted revenue or expense is recognized. The fair value ofgains or losses on the lead forward contracts are recorded in inventory as the commodities are purchased and in cost of sales when the related inventory is recorded within other assets or liabilities, as appropriate.sold. As of December 27, 2020, we had outstanding lead forward contracts on approximately 16 million pounds of lead. In the event the underlying forecasted transaction does not occur, or it becomes probable that it will not occur, the related change in fair value of the derivative instrument would be reclassified from accumulated other comprehensive income (loss) and recognized in earnings.
The gains or losses on the lead forward contracts are recorded in inventory as the commodities are purchased and in cost of sales when the related inventory is sold. As of December 29, 2019, we had outstanding lead forward contracts on 8.6 million pounds of lead.
The derivative gains or losses in the unaudited condensed consolidated statements of comprehensive income (loss) related to lead forward contracts during the nine months ended December 29, 2019 were immaterial. The liability27, 2020, there is an asset balance related to the lead forward contractscontracts. The balance is immaterialrecorded within other current and non-current assets and is recorded as partimmaterial.
5. Revenue Recognition
The following tables disaggregate our net sales by major category:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three months ended |
| | December 27, 2020 | | December 29, 2019(1) |
| | Shooting Sports | | Outdoor Products | | Total | | Shooting Sports | | Outdoor Products | | Total |
Ammunition | | $ | 287,855 | | | $ | — | | | $ | 287,855 | | | $ | 202,316 | | | $ | — | | | $ | 202,316 | |
Hunting and Shooting | | 113,662 | | | — | | | 113,662 | | | 83,144 | | | — | | | 83,144 | |
Action Sports | | — | | | 88,907 | | | 88,907 | | | — | | | 75,661 | | | 75,661 | |
Outdoor Recreation (2) | | — | | | 84,255 | | | 84,255 | | | — | | | 63,649 | | | 63,649 | |
Total | | $ | 401,517 | | | $ | 173,162 | | | $ | 574,679 | | | $ | 285,460 | | | $ | 139,310 | | | $ | 424,770 | |
| | | | | | | | | | | | |
Geographic Region: | | | | | | | | | | | | |
United States | | $ | 369,720 | | | $ | 126,567 | | | $ | 496,287 | | | $ | 253,573 | | | $ | 91,427 | | | $ | 345,000 | |
Rest of the World | | 31,797 | | | 46,595 | | | 78,392 | | | 31,887 | | | 47,883 | | | 79,770 | |
Total | | $ | 401,517 | | | $ | 173,162 | | | $ | 574,679 | | | $ | 285,460 | | | $ | 139,310 | | | $ | 424,770 | |
| | | | | | | | | | | | |
| | Nine months ended |
| | December 27, 2020 | | December 29, 2019(1) |
| | Shooting Sports | | Outdoor Products | | Total | | Shooting Sports | | Outdoor Products | | Total |
Ammunition | | $ | 821,837 | | | $ | — | | | $ | 821,837 | | | $ | 626,298 | | | $ | — | | | $ | 626,298 | |
Firearms | | 0 | | | — | | | 0 | | | 24,577 | | | — | | | 24,577 | |
Hunting and Shooting | | 293,525 | | | — | | | 293,525 | | | 243,705 | | | — | | | 243,705 | |
Action Sports | | — | | | 259,213 | | | 259,213 | | | — | | | 227,531 | | | 227,531 | |
Outdoor Recreation (2) | | — | | | 254,423 | | | 254,423 | | | — | | | 207,449 | | | 207,449 | |
Total | | $ | 1,115,362 | | | $ | 513,636 | | | $ | 1,628,998 | | | $ | 894,580 | | | $ | 434,980 | | | $ | 1,329,560 | |
| | | | | | | | | | | | |
Geographic Region: | | | | | | | | | | | | |
United States | | $ | 1,029,848 | | | $ | 393,367 | | | $ | 1,423,215 | | | $ | 793,805 | | | $ | 304,820 | | | $ | 1,098,625 | |
Rest of the World | | 85,514 | | | 120,269 | | | 205,783 | | | 100,775 | | | 130,160 | | | 230,935 | |
Total | | $ | 1,115,362 | | | $ | 513,636 | | | $ | 1,628,998 | | | $ | 894,580 | | | $ | 434,980 | | | $ | 1,329,560 | |
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Three months ended December 29, 2019 | | Three months ended December 30, 2018 |
| | Outdoor Products | | Shooting Sports | | Total | | Outdoor Products | | Shooting Sports | | Total |
Ammunition | | $ | — |
| | $ | 202,316 |
| | $ | 202,316 |
| | $ | — |
| | $ | 197,554 |
| | $ | 197,554 |
|
Firearms | | — |
| | — |
| | — |
| | — |
| | 43,775 |
| | 43,775 |
|
Hunting and Shooting Accessories | | 101,674 |
| | — |
| | 101,674 |
| | 109,287 |
| | — |
| | 109,287 |
|
Action Sports | | 75,661 |
| | — |
| | 75,661 |
| | 73,682 |
| | — |
| | 73,682 |
|
Outdoor Recreation | | 45,119 |
| | — |
| | 45,119 |
| | 43,473 |
| | — |
| | 43,473 |
|
Total | | $ | 222,454 |
| | $ | 202,316 |
| | $ | 424,770 |
| | $ | 226,442 |
| | $ | 241,329 |
| | $ | 467,771 |
|
| | | | | | | | | | | | |
Geographic Region | | | | | | | | | | | | |
United States | | $ | 165,137 |
| | $ | 179,864 |
| | $ | 345,001 |
| | $ | 160,582 |
| | $ | 208,541 |
| | $ | 369,123 |
|
Rest of the World | | 57,317 |
| | 22,452 |
| | 79,769 |
| | 65,860 |
| | 32,788 |
| | 98,648 |
|
Total | | $ | 222,454 |
| | $ | 202,316 |
| | $ | 424,770 |
| | $ | 226,442 |
| | $ | 241,329 |
| | $ | 467,771 |
|
(1) We changed our operating segments during the fourth quarter of fiscal 2020 (see Note 18, Operating Segment Information). Accordingly, prior period amounts have been reclassified to conform with the current period presentation.(2) Outdoor Recreation includes the operating segments: Hydration, Outdoor Cooking, and Golf.
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Nine months ended December 29, 2019 | | Nine months ended December 30, 2018 |
| | Outdoor Products | | Shooting Sports | | Total | | Outdoor Products | | Shooting Sports | | Total |
Ammunition | | $ | — |
| | $ | 626,298 |
| | $ | 626,298 |
| | $ | — |
| | $ | 639,158 |
| | $ | 639,158 |
|
Firearms | | — |
| | 24,577 |
| | 24,577 |
| | — |
| | 134,347 |
| | 134,347 |
|
Hunting and Shooting Accessories | | 303,484 |
| | — |
| | 303,484 |
| | 327,211 |
| | — |
| | 327,211 |
|
Action Sports | | 227,531 |
| | — |
| | 227,531 |
| | 230,117 |
| | — |
| | 230,117 |
|
Outdoor Recreation | | 147,670 |
| | — |
| | 147,670 |
| | 160,500 |
| | — |
| | 160,500 |
|
Eyewear | | — |
| | — |
| | — |
| | 51,859 |
| | — |
| | 51,859 |
|
Total | | $ | 678,685 |
| | $ | 650,875 |
| | $ | 1,329,560 |
| | $ | 769,687 |
| | $ | 773,505 |
| | $ | 1,543,192 |
|
| | | | | | | | | | | | |
Geographic Region | | | | | | | | | | | | |
United States | | $ | 516,142 |
| | $ | 582,483 |
| | $ | 1,098,625 |
| | $ | 541,646 |
| | $ | 679,144 |
| | $ | 1,220,790 |
|
Rest of the World | | 162,543 |
| | 68,392 |
| | 230,935 |
| | 228,041 |
| | 94,361 |
| | 322,402 |
|
Total | | $ | 678,685 |
| | $ | 650,875 |
| | $ | 1,329,560 |
| | $ | 769,687 |
| | $ | 773,505 |
| | $ | 1,543,192 |
|
Product Sales:
We recognize revenue for our products at a point in time upon the transfer of control of the products to the customer, which typically occurs upon shipment and coincides with our right to payment, the transfer of legal title, and the transfer of the significant risks and rewards of ownership of the product.
Typically, our contracts require customers to pay within 30-60 days of product delivery with a discount available to some customers for early payment. In some cases, we offer extended payment terms to customers. However, we do not consider these extended payment terms to be a significant financing component of the contract because the payment terms are less than a year.
We recognize revenue for our products at a point in time upon the transferIn limited circumstances, our contract with a customer may have shipping terms that indicate a transfer of control of the products upon their arrival at the destination rather than upon shipment. In those cases, we recognize revenue only when the product reaches the customer destination, which may require us to estimate the timing of transfer of control based on the expected delivery date. In all cases, however, we consider our costs related to shipping and handling to be a cost of fulfilling the contract with the customer.
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.
Incentives in the form of cash paid to the customer (or a reduction of a customer cash payment to us) typically are recognized as a reduction of sales unless the incentive is for a distinct benefit that we receive from the customer (e.g., advertising or marketing).
We provide consumer warranties against manufacturing defects on certain products within the Shooting Sports and Outdoor Products segments. Our warranty periods typically range from one year to the lifetime of the product. The costs of such product warranties are recognized upon delivery of the product at the time the sale is recorded and are estimated based on our past experience.
We pay commissions to some of our employees based on agreed-upon sales targets. We recognize the incremental costs of obtaining a contract as an expense when incurred because our sales contracts with commissions are a year or less.
6.7. Earnings Per Share
The computation of basic earnings per share ("EPS") is based on the weighted average number of shares that were outstanding during the period. The computation of diluted EPS is based on the number of basic weighted average shares outstanding plus the number of common shares that would be issued assuming the exercise of all potentially dilutive common shares, such as common stock to be issued upon exercise of options, contingently issuable shares and restricted stock units, using the treasury stock method.
The following tables set forth the computation of basic and diluted earnings per share:
|
| | | | | | | | | | | | | | | | |
| | Three months ended | | Nine months ended |
(Amounts in thousands except per share data unless otherwise indicated) | | December 29, 2019 | | December 30, 2018 | | December 29, 2019 | | December 30, 2018 |
Numerator: | | | | | | | | |
Net income (loss) | | $ | 14,648 |
| | $ | (514,642 | ) | | $ | (13,865 | ) | | $ | (599,808 | ) |
Denominator: | | | | | | | | |
Weighted-average number of common shares outstanding basic:
| | 57,878 |
| | 57,572 |
| | 57,812 |
| | 57,525 |
|
Dilutive effect of share-based awards (1) | | 100 |
| | — |
| | — |
| | — |
|
Diluted shares | | 57,978 |
| | 57,572 |
| | 57,812 |
| | 57,525 |
|
Earnings (loss) per common share: | | |
| | |
| | | | |
Basic and Diluted | | $ | 0.25 |
| | $ | (8.94 | ) | | $ | (0.24 | ) | | $ | (10.43 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three months ended | | Nine months ended |
(Amounts in thousands except per share data) | | December 27, 2020 | | December 29, 2019 | | December 27, 2020 | | December 29, 2019 |
Numerator: | | | | | | | | |
Net income (loss) | | $ | 78,879 | | | $ | 14,648 | | | $ | 199,000 | | | $ | (13,865) | |
Denominator: | | | | | | | | |
Weighted-average number of common shares outstanding basic: | | 58,303 | | | 57,878 | | | 58,183 | | | 57,812 | |
Dilutive effect of share-based awards (1) | | 1,798 | | | 100 | | | 1,411 | | | 0 | |
Diluted shares | | 60,101 | | | 57,978 | | | 59,594 | | | 57,812 | |
Earnings (loss) per common share: | | | | | | | | |
Basic | | $ | 1.35 | | | $ | 0.25 | | | $ | 3.42 | | | $ | (0.24) | |
Diluted | | $ | 1.31 | | | $ | 0.25 | | | $ | 3.34 | | | $ | (0.24) | |
(1) Due to the loss from continuing operations for the three months ended December 30, 2018 and for the nine months ended December 29, 2019 and December 30, 2018, there are no common shares added to calculate dilutive EPS because the effect would be antidilutive. Potentially dilutive securities, which were not included in the computation of diluted earnings per share, because either the effect would have been anti-dilutive, or the options’ exercise prices were greater than the average market price of the common stock, were 22 and 296 for the three and nine months ended December 27, 2020, respectively, and 958 for the three months ended December 29, 2019.
7. Divestitures and Held2019. Due to the loss from continuing operations for Sale
On July 5, 2019, Vista Outdoor Inc. and one of its subsidiaries, Vista Outdoor Operations LLC, sold our Firearms business, which was part of our Shooting Sports segment and comprised our Firearms reporting unit, for a total purchase price of $170,000. We received cash proceeds net of transactions costs of $154,123 and $12,000 in the form of a sellers note due on July 5, 2024. See Notes 2, Fair Value of Financial Instruments and 8, Receivables for additional information. The proceeds from this sale were used to pay off the balance of our Term Loan and reduce our ABL Revolving Credit Facility. See Note 13, Long-term Debt.
During the nine months ended, December 29, 2019 we recognizedthere are no common shares added to calculate dilutive EPS because the effect would be antidilutive.
8. Receivables
Our trade accounts receivable are recorded at net realizable value, which includes an appropriate allowance for estimated credit losses as described in Note 1, Significant Accounting Policies. Under ASC Topic 326, the “expected credit loss” model replaces the “incurred loss” model and will require consideration of a pretax lossbroader range of information to estimate expected credit losses over the life of the asset. Our prior methodology for estimating credit losses on this divestituretrade accounts receivable did not differ significantly from the new requirements of $433, which is included in other expense.ASC 326.
During the nine months ended December 29, 2019, we recognizedWe maintain an impairment of $9,429allowance for credit losses related to accounts receivable for future expected credit losses resulting from the expected loss on the saleinability or unwillingness of our Firearms business when it was held for sale.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. Receivables that do not share risk characteristics are evaluated on an individual basis, including those associated with customers that have a higher probability of default. Our estimate of credit losses includes expected current and future economic and market conditions surrounding the COVID-19 pandemic, which did not significantly impact our allowance.
8. Receivables
Net receivables are summarized as follows:
|
| | | | | | | | |
| | December 29, 2019 | | March 31, 2019 |
Trade receivables | | $ | 330,483 |
| | $ | 356,035 |
|
Other receivables | | 4,102 |
| | 7,106 |
|
Less: allowance for doubtful accounts and discounts | | (14,595 | ) | | (18,892 | ) |
Net receivables | | $ | 319,990 |
| | $ | 344,249 |
|
| | | | | | | | | | | | | | |
| | December 27, 2020 | | March 31, 2020 |
Trade receivables | | $ | 323,668 | | | $ | 323,436 | |
Other receivables | | 7,282 | | | 4,841 | |
Less: allowance for estimated credit losses and discounts | | (15,241) | | | (14,760) | |
Net receivables | | $ | 315,709 | | | $ | 313,517 | |
Walmart represented 12%15% and 14%13% of theour total trade receivables balance as of December 29, 201927, 2020 and March 31, 2019,2020, respectively. No other customer represented more than 10% of our total trade receivables balance as of December 29, 2019 and27, 2020 or March 31, 2019.2020.
The following provides a reconciliation of the activity related to the allowance for estimated credit losses and discounts during the nine months ended December 27, 2020:
| | | | | | | | |
Balance, March 31, 2020 | | $ | 14,760 | |
Provision for credit losses | | 1,780 | |
Write-off of uncollectible amounts, net of recoveries | | (863) | |
Discounts and other adjustments | | (436) | |
Balance, December 27, 2020 | | $ | 15,241 | |
Note Receivable is summarized as follows:
| | | | December 29, 2019 | | March 31, 2019 | | December 27, 2020 | | March 31, 2020 |
Principal | | $ | 12,000 |
| | $ | — |
| Principal | | $ | 12,000 | | | $ | 12,000 | |
Less: unamortized discount | | (4,176 | ) | | — |
| Less: unamortized discount | | (3,394) | | | (3,990) | |
Note receivable, net, included within Deferred charges and other non-current assets | | $ | 7,824 |
| | $ | — |
| Note receivable, net, included within Deferred charges and other non-current assets | | $ | 8,606 | | | $ | 8,010 | |
9. Inventories
NetCurrent net inventories consist of the following: |
| | | | | | | | |
| | December 29, 2019 | | March 31, 2019 |
Raw materials | | $ | 75,320 |
| | $ | 65,240 |
|
Work in process | | 35,619 |
| | 32,213 |
|
Finished goods | | 223,790 |
| | 247,038 |
|
Net inventories | | $ | 334,729 |
| | $ | 344,491 |
|
| | | | | | | | | | | | | | |
| | December 27, 2020 | | March 31, 2020 |
Raw materials | | $ | 102,671 | | | $ | 85,609 | |
Work in process | | 40,274 | | | 33,622 | |
Finished goods | | 210,871 | | | 212,062 | |
Net inventories | | $ | 353,816 | | | $ | 331,293 | |
We consider inventories to be long-term if they are not expected to be sold within one year. Long-term inventories are presented on the balance sheet net of reserves within deferred charges and other non-current assets and totaled $24,595$17,354 and $16,227$27,984 as of December 29, 201927, 2020 and March 31, 2019,2020, respectively.
10. Accumulated Other Comprehensive Loss (AOCL)
The components of AOCL, net of income taxes, are as follows:
|
| | | | | | | | |
| | December 29, 2019 | | March 31, 2019 |
Pension and other postretirement benefits | | $ | (72,470 | ) | | $ | (74,670 | ) |
Derivatives | | (440 | ) | | 735 |
|
Cumulative translation adjustment | | (5,332 | ) | | (9,032 | ) |
Total AOCL | | $ | (78,242 | ) | | $ | (82,967 | ) |
| | | | | | | | | | | | | | |
| | December 27, 2020 | | March 31, 2020 |
Derivatives | | $ | 1,399 | | | $ | (1,426) | |
Pension and other postretirement benefits liabilities | | (90,681) | | | (93,353) | |
Cumulative translation adjustment | | (5,331) | | | (6,215) | |
Total AOCL | | $ | (94,613) | | | $ | (100,994) | |
The following tables summarizedetail the amounts reclassified from AOCL to earnings as well as the changes in the balance of AOCL,derivatives, pension and other postretirement benefits and foreign currency translation, net of income tax:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three months ended December 27, 2020 | | Nine months ended December 27, 2020 |
| | Derivatives | | Pension and other postretirement benefits liabilities | | Cumulative translation adjustment | | Total | | Derivatives | | Pension and other postretirement benefits liabilities | | Cumulative translation adjustment | | Total |
Beginning balance in AOCL | | $ | 248 | | | $ | (91,572) | | | $ | (5,706) | | | $ | (97,030) | | | $ | (1,426) | | | $ | (93,353) | | | $ | (6,215) | | | $ | (100,994) | |
Change in fair value of derivatives | | 1,220 | | | — | | | — | | | 1,220 | | | 1,813 | | | — | | | — | | | 1,813 | |
Net (gains) losses reclassified from AOCL | | (69) | | | — | | | — | | | (69) | | | 1,012 | | | — | | | — | | | 1,012 | |
Net actuarial losses reclassified from AOCL (1) | | — | | | 969 | | | — | | | 969 | | | — | | | 2,907 | | | — | | | 2,907 | |
Prior service costs reclassified from AOCL (1) | | — | | | (78) | | | — | | | (78) | | | — | | | (235) | | | — | | | (235) | |
Net change in cumulative translation adjustment | | — | | | — | | | 375 | | | 375 | | | — | | | — | | | 884 | | | 884 | |
Ending balance in AOCL | | $ | 1,399 | | | $ | (90,681) | | | $ | (5,331) | | | $ | (94,613) | | | $ | 1,399 | | | $ | (90,681) | | | $ | (5,331) | | | $ | (94,613) | |
(1) Amounts related to our pension and other postretirement benefits that were reclassified from AOCL were recorded as a component of net periodic benefit cost for each period presented.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three months ended December 29, 2019 | | Nine months ended December 29, 2019 |
| | Derivatives | | Pension and other postretirement benefits liabilities | | Cumulative translation adjustment | | Total | | Derivatives | | Pension and other postretirement benefits liabilities | | Cumulative translation adjustment | | Total |
Beginning balance in AOCL | | $ | 285 | | | $ | (73,203) | | | $ | (5,595) | | | $ | (78,513) | | | $ | 735 | | | $ | (74,670) | | | $ | (9,032) | | | $ | (82,967) | |
Change in fair value of derivatives | | (725) | | | — | | | — | | | (725) | | | (1,175) | | | — | | | — | | | (1,175) | |
Net actuarial losses reclassified from AOCL (1) | | — | | | 812 | | | — | | | 812 | | | — | | | 2,435 | | | — | | | 2,435 | |
Prior service costs reclassified from AOCL (1) | | — | | | (79) | | | — | | | (79) | | | — | | | (235) | | | — | | | (235) | |
Currency translation gains reclassified from AOCL (2) | | — | | | — | | | 0 | | | 0 | | | — | | | — | | | 3,150 | | | 3,150 | |
Net change in cumulative translation adjustment | | — | | | — | | | 263 | | | 263 | | | — | | | — | | | 550 | | | 550 | |
Ending balance in AOCL | | $ | (440) | | | $ | (72,470) | | | $ | (5,332) | | | $ | (78,242) | | | $ | (440) | | | $ | (72,470) | | | $ | (5,332) | | | $ | (78,242) | |
(1) Amounts related to our pension and other postretirement benefits that were reclassified from AOCL were recorded as a component of net periodic benefit cost for each period presented.
(2) Amounts related to the foreign currency translation gains realized upon the divestiture of our Firearms business in the three months ended September 29, 2019.
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three months ended December 29, 2019 | | Nine months ended December 29, 2019 |
| | Pension and other postretirement benefits | | Derivatives | | Cumulative translation adjustment | | Total | | Pension and other postretirement benefits | | Derivatives | | Cumulative translation adjustment | | Total |
Beginning balance in AOCL | | $ | (73,203 | ) | | $ | 285 |
| | $ | (5,595 | ) | | $ | (78,513 | ) | | $ | (74,670 | ) | | $ | 735 |
| | $ | (9,032 | ) | | $ | (82,967 | ) |
Net actuarial losses reclassified from AOCL (1) | | 812 |
| | — |
| | — |
| | 812 |
| | 2,435 |
| | — |
| | — |
| | 2,435 |
|
Prior service costs reclassified from AOCL (1) | | (79 | ) | | — |
| | — |
| | (79 | ) | | (235 | ) | | — |
| | — |
| | (235 | ) |
Net change in fair value of derivatives | | — |
| | (725 | ) | | — |
| | (725 | ) | | — |
| | (1,175 | ) | | — |
| | (1,175 | ) |
Currency translation gains reclassified from AOCL (2) | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 3,150 |
| | 3,150 |
|
Net change in cumulative translation adjustment | | — |
| | — |
| | 263 |
| | 263 |
| | — |
| | — |
| | 550 |
| | 550 |
|
Ending balance in AOCL | | $ | (72,470 | ) | | $ | (440 | ) | | $ | (5,332 | ) | | $ | (78,242 | ) | | $ | (72,470 | ) | | $ | (440 | ) | | $ | (5,332 | ) | | $ | (78,242 | ) |
| |
(1) | Amounts related to our pension and other postretirement benefits that were reclassified from AOCL were recorded as a component of net periodic benefit cost for each period presented. |
| |
(2) | Amounts related to the foreign currency translation gains realized upon the divestiture of our Firearms business in the three months ended September 29, 2019. |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three months ended December 30, 2018 | | Nine months ended December 30, 2018 |
| | Pension and other postretirement benefits | | Derivatives | | Cumulative translation adjustment | | Total | | Pension and other postretirement benefits | | Derivatives | | Cumulative translation adjustment | | Total |
Beginning balance in AOCL | | $ | (65,690 | ) | | $ | 1,440 |
| | $ | (10,028 | ) | | $ | (74,278 | ) | | $ | (66,656 | ) | | $ | 1,904 |
| | $ | (39,544 | ) | | $ | (104,296 | ) |
Net actuarial losses reclassified from AOCL (1) | | 543 |
| | — |
| | — |
| | 543 |
| | 1,629 |
| | — |
| | — |
| | 1,629 |
|
Prior service costs reclassified from AOCL (1) | | (60 | ) | | — |
| | — |
| | (60 | ) | | (180 | ) | | — |
| | — |
| | (180 | ) |
Net change in fair value of derivatives
| | — |
| | (279 | ) | | — |
| | (279 | ) | | — |
| | (743 | ) | | — |
| | (743 | ) |
Net change in cumulative translation adjustment | | — |
| | — |
| | 76 |
| | 76 |
| | — |
| | — |
| | 29,592 |
| | 29,592 |
|
Ending balance in AOCL | | $ | (65,207 | ) | | $ | 1,161 |
| | $ | (9,952 | ) | | $ | (73,998 | ) | | $ | (65,207 | ) | | $ | 1,161 |
| | $ | (9,952 | ) | | $ | (73,998 | ) |
| |
(1) | Amounts related to our pension and other postretirement benefits that were reclassified from AOCL were recorded as a component of net periodic benefit cost for each period presented. |
11. Goodwill and Intangible Assets
There were 0 changesThe entire goodwill balance as of December 27, 2020 and March 31, 2020 is allocated to our Ammunition reporting unit within the Shooting Sports segment. The change in the carrying amountvalue of goodwill was as follows:
| | | | | | | | |
| | Shooting Sports |
Balance at March 31, 2020 | | $ | 83,167 | |
Acquisitions | | 4,137 | |
Divestitures | | (2,765) | |
Balance at December 27, 2020 | | $ | 84,539 | |
The acquired goodwill during the ninethree months ended December 29, 2019. The carrying amounts27, 2020 is related to our Remington acquisition. In conjunction with a divestiture during the quarter, we allocated a portion of the goodwill to this divested business based on the relative fair value method according to ASC 350 "Intangibles - Goodwill and Other." As a result, allocated goodwill of $2,765 was included in the assets disposed. See Note 4, Acquisitions and Divestitures,for our Outdoor Productsadditional information on these acquisitions and Shooting Sports segments as of December 29, 2019 were $121,329 and $83,167, respectively, for a consolidated balance of $204,496.divestitures.
Net intangibleIntangible assets other than goodwillby major asset class consisted of the following:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | December 27, 2020 | | March 31, 2020 |
| | Gross carrying amount | | Accumulated amortization | | Total | | Gross carrying amount | | Accumulated amortization | | Total |
Trade names | | $ | 48,360 | | | $ | (17,228) | | | $ | 31,132 | | | $ | 48,360 | | | $ | (14,428) | | | $ | 33,932 | |
Patented technology | | 16,684 | | | (11,143) | | | 5,541 | | | 16,684 | | | (10,490) | | | 6,194 | |
Customer relationships and other | | 240,590 | | | (95,040) | | | 145,550 | | | 238,220 | | | (83,349) | | | 154,871 | |
Total | | 305,634 | | | (123,411) | | | 182,223 | | | 303,264 | | | (108,267) | | | 194,997 | |
Non-amortizing trade names | | 135,603 | | | — | | | 135,603 | | | 111,103 | | | — | | | 111,103 | |
Net intangible assets | | $ | 441,237 | | | $ | (123,411) | | | $ | 317,826 | | | $ | 414,367 | | | $ | (108,267) | | | $ | 306,100 | |
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| | December 29, 2019 | | March 31, 2019 |
| | Gross carrying amount | | Accumulated amortization | | Total | | Gross carrying amount | | Accumulated amortization | | Total |
Trade names | | $ | 48,360 |
| | $ | (13,494 | ) | | $ | 34,866 |
| | $ | 48,360 |
| | $ | (10,694 | ) | | $ | 37,666 |
|
Patented technology | | 16,684 |
| | (10,273 | ) | | 6,411 |
| | 16,684 |
| | (9,604 | ) | | 7,080 |
|
Customer relationships and other | | 238,742 |
| | (79,768 | ) | | 158,974 |
| | 238,595 |
| | (68,185 | ) | | 170,410 |
|
Total | | 303,786 |
| | (103,535 | ) | | 200,251 |
| | 303,639 |
| | (88,483 | ) | | 215,156 |
|
Non-amortizing trade names | | 145,364 |
| | — |
| | 145,364 |
| | 145,364 |
| | — |
| | 145,364 |
|
Net intangible assets | | $ | 449,150 |
| | $ | (103,535 | ) | | $ | 345,615 |
| | $ | 449,003 |
| | $ | (88,483 | ) | | $ | 360,520 |
|
Amortization expense for the three months ended December 27, 2020 and December 29, 2019 was $4,946 and December 30, 2018 was $5,214, and $5,664, respectively, and for the nine months ended December 27, 2020 and December 29, 2019 was $14,845 and December 30, 2018 was $14,996, and $19,284, respectively.
As of December 29, 2019,27, 2020, we expect amortization expense related to these assets to be as follows:
| | | | | | | | |
Remainder of fiscal 2021 | | $ | 4,986 | |
Fiscal 2022 | | 19,916 | |
Fiscal 2023 | | 19,800 | |
Fiscal 2024 | | 19,748 | |
Fiscal 2025 | | 19,730 | |
Thereafter | | 98,043 | |
Total | | $ | 182,223 | |
|
| | | | |
Remainder of fiscal 2020 | | $ | 4,974 |
|
Fiscal 2021 | | 19,886 |
|
Fiscal 2022 | | 19,831 |
|
Fiscal 2023 | | 19,715 |
|
Fiscal 2024 | | 19,663 |
|
Thereafter | | 116,182 |
|
Total | | $ | 200,251 |
|
12. Other Current and Non-Current Liabilities
Other current and non-current liabilities consisted of the following: |
| | | | | | | | |
| | December 29, 2019 | | March 31, 2019 |
Other current liabilities: | | | | |
Accrual for in-transit inventory | | $ | 10,374 |
| | $ | 11,275 |
|
Rebate accrual | | 15,692 |
| | 13,911 |
|
Other | | 74,918 |
| | 71,989 |
|
Total other current liabilities | | $ | 100,984 |
| | $ | 97,175 |
|
| | | | |
Other non-current liabilities: | | | | |
Non-current portion of accrued income tax liability | | $ | 31,402 |
| | $ | 34,118 |
|
Other | | 14,187 |
| | 29,158 |
|
Total other non-current liabilities | | $ | 45,589 |
| | $ | 63,276 |
|
| | | | | | | | | | | | | | |
| | December 27, 2020 | | March 31, 2020 |
Rebates | | $ | 14,154 | | | $ | 16,225 | |
Accrual for in-transit inventory | | 37,380 | | | 11,064 | |
Other | | 90,508 | | | 70,908 | |
Total other current liabilities | | $ | 142,042 | | | $ | 98,197 | |
| | | | |
Long-term portion of accrued income tax liability | | $ | 26,978 | | | $ | 30,159 | |
Other | | 24,471 | | | 13,345 | |
Total other long-term liabilities | | $ | 51,449 | | | $ | 43,504 | |
We provide consumer warranties against manufacturing defects on certain products within the Shooting Sports and Outdoor Products segments with warranty periods ranging from one year to the expected lifetime of the product. The estimated costs of such product warranties are recorded at the time the sale is recorded based upon actual past experience, our current production environment as well as specific and identifiable warranties as applicable. The warranty liability recorded at each balance sheet date reflects the estimated liability for warranty coverage for products delivered based on historical information and current trends.
The following is a reconciliation of the changes in our product warranty liability during the periods presented:
|
| | | | |
Balance, March 31, 2019 | | $ | 8,144 |
|
Payments made | | (2,786 | ) |
Warranties issued | | 3,753 |
|
Other adjustments | | (100 | ) |
Changes related to pre-existing warranties | | (79 | ) |
Balance, December 29, 2019 | | $ | 8,932 |
|
| | | | | | | | | | | | | | |
Balance, March 31, 2020 | | | | $ | 9,149 | |
Payments made | | | | (2,998) | |
Warranties issued | | | | 1,584 | |
Changes related to pre-existing warranties and other adjustments | | | | (306) | |
Balance, December 27, 2020 | | | | $ | 7,429 | |
13. Long-term Debt
Long-term debt including the current portion, consisted of the following:
| | | | | | | | | | | | | | |
| | December 27, 2020 | | March 31, 2020 |
ABL Revolving Credit Facility | | $ | 0 | | | $ | 167,256 | |
5.875% Senior Notes | | 350,000 | | | 350,000 | |
Principal amount of long-term debt | | 350,000 | | | 517,256 | |
Less: unamortized deferred financing costs | | (4,317) | | | (5,450) | |
Carrying amount of long-term debt | | $ | 345,683 | | | $ | 511,806 | |
|
| | | | | | | | |
| | December 29, 2019 | | March 31, 2019 |
Credit Agreements: | | | | |
ABL Revolving Credit Facility | | $ | 179,699 |
| | $ | 220,000 |
|
Term Loan | | — |
| | 104,509 |
|
Junior Term Loan | | — |
| | 40,000 |
|
Total principal amount of Credit Agreements | | 179,699 |
| | 364,509 |
|
5.875% Senior Notes | | 350,000 |
| | 350,000 |
|
Principal amount of long-term debt | | 529,699 |
| | 714,509 |
|
Less: unamortized deferred financing costs | | (5,839 | ) | | (10,504 | ) |
Carrying amount of long-term debt | | 523,860 |
| | 704,005 |
|
Less: current portion | | — |
| | (19,335 | ) |
Carrying amount of long-term debt, excluding current portion | | $ | 523,860 |
| | $ | 684,670 |
|
Credit Agreements—In fiscal 2019, we refinanced our Amended and Restated Credit Agreement dated April 1, 2016, by entering into the New Credit Facilities, which provide for (a) a $450,000 senior secured asset-based revolving credit facility (the “ABL Revolving Credit Facility”), comprised of $20,000 in first-in, last-out (“FILO”) revolving credit commitments and $430,000 in non-FILO revolving credit commitments, (b) a $109,343 senior secured asset-based term loan facility (the “Term Loan”) and (c) the $40,000 Junior Term Loan. The amount available under the ABL Revolving Credit Facility is the lesser of the total commitment of $450,000 or a borrowing base based on percentages of eligible receivables, inventory, and cash, minus certain reserves. As of December 29, 2019,27, 2020, based on the borrowing base less outstanding borrowings of $179,699$0 and outstanding letters of credit of $28,436,$22,685, the amount available to us under the ABL Revolving Credit Facility was $150,072.$373,269.
The New Credit Facilities each mature on November 19, 2023 (the “Maturity Date”), subject to a customary springing maturity in respect of the 5.875% Notes due 2023. The Term Loan was subject to quarterly principal repayments of $4,834 on the first business day of each January, April, July, and October, with the remaining balance due on the Maturity Date. During the nine months ended December 29, 2019, we used proceeds from the sale of our Firearms business to pay off the balance of theThe Term Loan and the Junior Term Loan have been paid in full, and have no future required principal payments. Debt issuance costs of approximately $6,300 are being amortized over the term of the New Credit Facilities. This expense is included in interest expense in the condensed consolidated statements of comprehensive income (loss).
The FILO commitments under the ABL Revolving Credit Facility are subject to reductions of $1,667 on the first business day of each fiscal quarter beginning on April 1, 2019. The balance of the FILO revolving credit commitment as of December 29, 201927, 2020 was $14,999.$8,333. Any outstanding revolving loans under the ABL Revolving Credit Facility will be payable in full on the Maturity Date.
The payoff of Term Loan and the Junior Term Loan reduced our interest rate on the ABL revolving Credit Facility. As of December 29, 2019,27, 2020, borrowings under the ABL Revolving Credit Facility bear interest at a rate equal to, in the case of (a) non-FILO revolving credit loans, either the sum of a base rate plus a margin ranging from 0.25% to 0.75% or the sum of a LIBO rate plus a margin ranging from 1.25% to 1.75%, and (b) FILO revolving credit loans, a rate that is 1.00% higher than the rate paid on the non-FILO revolving credit loans. All such rates vary based on our Average Excess Availability under the ABL Revolving Credit Facility. As of December 29, 2019,27, 2020, the margin under the (1) ABL Revolving Credit Facility was, in the case of (a) non-FILO revolving credit loans, 0.50%0.25% for base rate loans and 1.50%1.25% for LIBO rate loans and (b) FILO revolving credit loans, 1.50%1.25% for base rate loans and 2.50%2.25% for LIBO rate loans. The weighted average interest rate for ourWe had 0 outstanding borrowings under the New Credit Facilities as of December 29, 2019 was 3.51%, excluding the impact of the interest rate swaps that are discussed below.27, 2020. We pay a commitment fee on the unused commitments under the ABL Revolving Credit Facility of 0.25% per annum.
Substantially all domestic tangible and intangible assets of Vista Outdoor and our domestic subsidiaries, as well as the tangible and intangible assets of Advanced Arrow S. de R.L. de C.V. and Hydrosport, S. de R.L. de C.V., are pledged as collateral under the New Credit Facilities.
In connection with the repayment of the Term Loan and the Junior Term Loan, unamortized debt issuance costs of $3,428 were written off during the nine months ended December 29, 2019. This expense is included in interest expense in the condensed consolidated statements of comprehensive income (loss). The remaining debt issuance costs of approximately $6,300 are being amortized over the term of the New Credit Facilities.
5.875% Notes—In fiscal 2016, we issued $350,000 aggregate principal amount of 5.875% Senior Notes (the "5.875% Notes") that mature on October 1, 2023. These notes are unsecured and senior obligations. Interest on the notes is payable semi-annually in arrears on April 1 and October 1 of each year. We have the right to redeem some or all of these notes from time to time at specified redemption prices. Debt issuance costs of approximately $4,300 are being amortized to interest expense over eight years, the term of the notes.
Rank and guarantees—The New Credit Facilities' obligations are guaranteed on a secured basis, jointly and severally and fully and unconditionally by substantially all of our domestic subsidiaries and by Advanced Arrow S. de R.L. de C.V. and Hydrosport, S. de R.L. de C.V. Vista Outdoor (the parent company issuer) has no independent assets or operations. We own 100% of all of these guarantor subsidiaries. The 5.875% Notes are senior unsecured obligations of Vista Outdoor and will rank equally in right of payment with any future senior unsecured indebtedness and senior in right of payment to any future subordinated indebtedness of Vista Outdoor. The 5.875% Notes are fully and unconditionally guaranteed, jointly and severally, by our existing and future domestic subsidiaries that guarantee indebtedness under our New Credit Facilities or that guarantee certain of our other indebtedness, or indebtedness of any subsidiary guarantor, in an aggregate principal amount in excess of $50,000. These guarantees are senior unsecured obligations of the applicable subsidiary guarantors. The guarantee by any subsidiary guarantor of our obligations in respect of the 5.875% Notes will be released in any of the following circumstances:
•if, as a result of the sale of its capital stock, such subsidiary guarantor ceases to be a restricted subsidiarysubsidiary;
•if such subsidiary guarantor is designated as an “Unrestricted Subsidiary”;
•upon defeasance or satisfaction and discharge of the 5.875% NotesNotes; or
•if such subsidiary guarantor has been released from its guarantees of indebtedness under the New Credit Facilities and all capital markets debt securities
Interest rate swaps—During fiscal 2018, we entered into floating-to-fixed interest rate swap agreements in order to hedge our forecasted interest payments on our outstanding variable-rate debt. As of December 29, 2019, we had the following cash flow hedge interest rate swap in place: |
| | | | | | | | | | | | |
| | Notional | | Fair Value | | Pay Fixed | | Receive Floating | | Maturity Date |
Non-amortizing swap | | 100,000 |
| | 24 |
| | 1.629% | | 1.691% | | June 2020 |
securities.
The amount paid or received under these swaps is recorded as an adjustment to interest expense. The asset related to the swaps is recorded as part of other current assets.
Covenants
New Credit Facilities— Our New Credit Facilities impose restrictions on us, including limitations on our ability to pay cash dividends, incur debt or liens, redeem or repurchase Vista Outdoor stock, enter into transactions with affiliates, make investments, merge or consolidate with others or dispose of assets. During the three months ending September 30, 2019, the Term Loan was paid in full, and during the three months ended December 29, 2019, the Junior Term Loan was paid in full, which triggered theThe financial covenants of the New Credit Facilities to be reduced. Our new requirement which is in effect beginning with the quarter ending December 29, 2019 isrequire us to maintain Excess Availability under the ABL Revolving Credit Facility of $42,500 at all times. If Excess Availability falls below $42,500 we must maintain a Consolidated Fixed Charge Coverage Ratio ("FCCR"), as defined below, of not less than 1.00:1.00. As noted above, the Excess Availability under the ABL Revolving Credit Facility was $150,072 at$373,269 as of December 29, 2019.27, 2020. If we do not comply with the covenants in any one of the New Credit Facilities, the lenders may, subject to customary cure rights, require the immediate payment of all amounts outstanding under each of the New Credit Facilities.
The FCCR is Covenant EBITDA ("earnings before interest, taxes, depreciation, and amortization"), (whichwhich includes adjustments for items such as non-recurring or extraordinary items, non-cash charges related to stock-based compensation, and intangible asset impairment charges, as well as adjustments for acquired or divested business units on a pro forma basis)basis, less capital expenditures (subject to certain adjustments) for the past four fiscal quarters, divided by fixed charges, (whichwhich includes debt principal and interest payments made over the past four fiscal quarters; plus income tax payments and restricted payments over the past four fiscal quarters).quarters.
5.875% Notes—The indenture governing the 5.875% Notes contains covenants that, among other things, limit our ability to incur or permit to exist certain liens, sell, transfer or otherwise dispose of assets, consolidate, amalgamate, merge or sell all or substantially all of our assets, enter into transactions with affiliates, enter into agreements restricting our subsidiaries’ ability to pay dividends, incur additional indebtedness, pay dividends or make other distributions or repurchase or redeem our capital stock, prepay, redeem or repurchase certain debt and make loans and investments.
The New Credit Facilities and the indenture governing the 5.875% Notes contain cross-default provisions so that noncompliance with the covenants within one debt agreement could also cause a default under the other debt agreements. As of December 29, 2019,27, 2020, we were in compliance with the covenants of all of the debt agreements. However, we cannot provide assurance that we will be able to comply with such financial covenants in the future because ofdue to various risks and uncertainties, some of which may be beyond our control. Any failure to comply with the restrictions in the New Credit Facilities may prevent us from drawing under the ABL Revolving Credit Facility and may result in an event of default under the New Credit Facilities, which default may allow the creditors to accelerate the related indebtedness and the indebtedness under our 5.875% Notes and proceed against the collateral that secures the indebtedness. We may not have sufficient liquidity to repay the indebtedness in such circumstances.
Cash paid for interest on debt—Cash paid for interest on debt, including commitment fees and prepayment premium fees, for the three months ended December 27, 2020 and December 29, 2019 totaled $10,579 and December 30, 2018 totaled $12,880, and $15,108, respectively. Cash paid for interest on debt, including commitment fees and prepayment premium fees, for the nine months ended December 27, 2020 and December 29, 2019 totaled $18,535 and December 30, 2018 totaled $32,912, and $29,646, respectively.
14. Employee Benefit Plans
During the three months ended December 29, 2019,27, 2020, we recognized an aggregate net benefit for employee defined benefit plans of $101$23 compared to $186$101 during the three months ended December 30, 2018. The decrease in income was primarily due to expected return on plan assets.29, 2019.
During the nine months ended December 29, 2019,27, 2020, we recognized an aggregate net benefit for employee defined benefit plans of $305$66 compared to $556$305 during the nine months ended December 30, 2018. The decrease in income was primarily due to expected return on plan assets.29, 2019.
Employer contributions and distributions—We made the entire fiscal 2021 required contributions to theour pension trust during the threenine months ended December 27, 2020 of $7,100, and we made $2,400 of required contributions during the nine months ended December 29, 2019 and December 30, 2018 of $2,400 and $0, respectively.2019. For those same periods, we made 0 contributions to our other postretirement benefit plans, and we made 0 distributions to retirees under theour non-qualified supplemental executive retirement plan.
DuringNaN additional contributions are required to be made to the pension trust for the remainder of fiscal 2020,2021. NaN additional contributions are required, and we expectare not expecting to make additional contributions to the pension trust of $1,200. There are no expectedany contributions to our other postretirement benefit plans, or directly to retirees under our non-qualified supplemental executive retirement plans.
plans for the remainder of fiscal 2021.
15. Income Taxes
Our provision for income taxes includes federal, foreign, and state income taxes. Income tax provisions for interim periods are based on the estimated effective annual income tax rates for the current year and the year-to-date effective tax rate for boththe prior year.
On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was enacted in response to the COVID-19 pandemic. The CARES Act, among other things, permits businesses to offset 100% of taxable income with net operating loss ("NOL") carryovers and carrybacks for taxable years prior to 2021. In addition, the CARES Act allows NOLs incurred in tax years 2018, 2019, and 2020 to be carried back to each of the five preceding taxable years to generate a refund of previously paid income taxes. The CARES Act also raises the limit on business interest deductions for tax years beginning in 2019 and 2020.
Further, during the quarter ended September 27, 2020, the IRS issued additional regulations addressing interest expense deductions and net operating loss carry back rules. The combination of the CARES Act and IRS regulations favorably impacts our tax provision for the tax year ending March 31, 2021. This is driven by the increased allowable interest expense deduction in the current and prior year.two tax years and the ability for us to submit NOL carryback refunds claims for the prior two tax years to higher tax rate years. Further, the tax law changes allow us to offset prior year income with tax attributes that result in a reduction in the valuation allowance.
The income tax provisions for the three months ended December 29, 201927, 2020 and December 30, 201829, 2019 represent effective tax rates of 3.6% and (42.3)% and 3.4%, respectively. The decreaseincrease in the rate from the prior year quarter is primarily caused by the release in the prior year quarter of uncertain tax positions and the impact of the decrease in the current period. The effective tax rate forvaluation allowance in the three months ended December 29, 2019 was lower thanprior year
quarter in relation to the statutory rate primarily becauseincrease in income of the release of uncertain tax positions. The effective tax rate for the three months ended December 30, 2018 was lower than the statutory rate primarily because of the recognition of nondeductible impairment charges.
current quarter. The income tax provisions for the nine months ended December 29, 201927, 2020 and December 30, 201829, 2019 represent effective tax rates of 16.4%(3.1)% and 4.3%16.4%, respectively. The increasedecrease in the rate from the prior year period is primarily caused by recognition in the current period of the benefit of loss carrybacks to prior profitable years as permitted under IRS regulations recently issued under the CARES Act and by the release in the prior year period of uncertain tax positions. The release in the prior period of the uncertain tax positions caused an increase in the rate.
The effective tax rate for the three and nine months ended December 27, 2020 was lower than the statutory rate primarily due to the decrease to the valuation allowance as a result of current year pre-tax income, release of tax reserves for uncertain tax positions indue to statute expirations, and the current period. Becausebenefit of losses inloss carrybacks to prior profitable years which is permitted under IRS regulations recently issued under the current and prior period, favorable tax adjustments cause an increase in the rate.CARES Act. The effective tax rate for the three and nine months ended December 29, 2019 was lower than the statutory rate primarily because of the loss in the currentprior period, which caused unfavorable tax adjustments such as interest expense on uncertain tax positions, to decrease the rate, partially offset by the release of uncertain tax positions. The effective tax rate for the nine months ended December 30, 2018 was lower than the statutory rate primarily because of the nondeductible impairment charges.
On February 9, 2015, we entered into a Tax Matters Agreement with Orbital ATK that governs the respective rights, responsibilities and obligations of Vista Outdoor and Orbital ATK following the distribution of all of the shares of our common stock on a pro rata basis to the holders of Alliant Techsystems Inc. common stock (the “Spin-Off”) with respect to tax liabilities and benefits, tax attributes, tax contests and other tax sharing regarding U.S. federal, state, local and foreign income taxes, other tax matters and related tax returns. We have joint and several liability with Orbital ATK to the IRS for the consolidated U.S. federal income taxes of the Orbital ATK consolidated group relating to the taxable periods in which we were part of that group. However, the Tax Matters Agreement specifies the portion, if any, of this tax liability for which we bear responsibility, and Orbital ATK agrees to indemnify us against any amounts for which we are not responsible. The Tax Matters Agreement also provides special rules for allocating tax liabilities in the event that the Spin-Off is determined not to be tax-free. Though valid between the parties, the Tax Matters Agreement is not binding on the IRS.
The allocation of tax liabilities for the period from April 1, 2014 through the date of the Spin-Off was settled on June 15, 2018. Orbital ATK paid Vista Outdoor $13,047 to settle this matter, which was reflected as an adjustment to the distribution from Vista Outdoor to Orbital ATK at the time of the Spin-Off.
Prior to the Spin-Off, Orbital ATK or one of its subsidiaries filed income tax returns in the U.S. federal and various U.S. state jurisdictions that included Vista Outdoor. In addition, certain of our subsidiaries filed income tax returns in foreign jurisdictions. Since the Spin-Off, we file income tax returns in the U.S. federal, foreign and various U.S. state jurisdictions. With a few exceptions, Orbital ATK and its subsidiaries and Vista Outdoor are no longer subject to U.S. federal, state and local, or foreign income tax examinations by tax authorities prior to 2012.2013. The IRS has completed the audits of Orbital ATK through fiscal 2014 and is currently auditing Orbital ATK's tax return for fiscal 2015. The IRS has also completed the audit of our tax return for the period that began after the Spin-Off (February 9, 2015) and ended on March 31, 2015. We believe appropriate provisions for all outstanding issues relating to our portion of these returns have been made for all remaining open years in all jurisdictions.
Income taxes paid, net of refunds, totaled $294$27,524 and $3,780$294 for the nine months ended December 27, 2020 and December 29, 2019, and December 30, 2018, respectively.
Although the timing and outcome of income tax audit settlements are uncertain, it is reasonably possible that a $13,414$8,802 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 $12,286.$7,860.
16. 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 potentially responsible parties (“PRP”), 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 have concluded that these matters, individually or in the aggregate, will not have a material adverse effect on our operating results, financial condition, or cash flows. We have recorded a liability for environmental remediation of $710$694 and $729$710 as of December 29, 201927, 2020 and March 31, 2019,2020, respectively.
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.
17. Condensed ConsolidatingConsolidated Financial Statements
In accordance with the provisions of the 5.875% Notes, the outstanding notes are guaranteed on an unsecured basis, jointly and severally and fully and unconditionally, by substantially all of Vista Outdoor domestic subsidiaries and by Advanced Arrow S. de R.L. de C.V. and Hydrosport, S. de R.L. de C.V. The parent company has no independent assets or operations. All of these guarantor subsidiaries are 100% owned by Vista Outdoor and any subsidiaries of the parent company other than the subsidiary guarantors are minor. There are no significant restrictions on the Company’s ability, or the ability of any guarantor, to obtain funds from its subsidiaries through dividends or loans, and there are no material restrictions on the ability of our consolidated and unconsolidated subsidiaries to transfer funds to the Company in the form of cash dividends, loans or advances. These guarantees are senior or senior subordinated obligations, as applicable, of the applicable subsidiary guarantors.
18. Operating Segment Information
We operateDuring the fourth quarter of fiscal 2020, we realigned our businessinternal reporting structure within 2and modified our operating segments, which are defined based on the reporting and review process used by thesegment structure to provide investors with improved disclosure that is consistent with how our chief operating decision maker (CODM), our Chief Executive Officer. Management reviews theOfficer, allocates resources and makes decisions. Based on these changes, management concluded that we had 6 operating segments, basedwhich have been aggregated into 2 reportable segments, Shooting Sports and Outdoor Products.
Shooting Sports is comprised of our Ammunition and Hunting and Shooting operating segments. Outdoor Products is comprised of our Action Sports, Outdoor Cooking, Hydration, and Golf operating segments. The operating segments comprising the Company’s respective reportable segments share numerous commonalities, including similar core consumers, distribution channels and supply chains.
Our CODM relies on internal management reporting that analyzes consolidated results to the net salesincome level and gross profit.operating segment's EBIT, which is defined as earnings (loss) before interest and income taxes. Certain significant sellingcorporate-related costs and general and administrative expensesother non-recurring costs are not allocated to the segments. Each segmentsegments in order to present comparable results from period to period. These include impairment charges, restructuring related-costs, merger and acquisition costs, and other non-recurring items.
•Shooting Sports generated approximately 68% of our sales in the nine months ended December 27, 2020. Shooting Sports is described below: comprised of ammunition and hunting and shooting accessories product lines. Ammunition products include centerfire ammunition, rimfire ammunition, shotshell ammunition and reloading components. Hunting and shooting accessories products include high-performance hunting arrows, game calls, hunting blinds, game cameras, decoys, reloading equipment, clay targets, premium gun care products, holsters, duty gear, bags, packs and optics products such as binoculars, riflescopes, and telescopes. Our Firearms business was divested early in the second quarter of fiscal 2020.
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• | Outdoor Products generated approximately 51% of our external sales in the nine months ended December 29, 2019. The Outdoor Products product lines are action sports, archery/hunting accessories, outdoor cooking, golf, hydration products, optics, shooting accessories, and tactical products. Action sports includes helmets, goggles, and accessories for cycling, snow sports, action sports, and powersports. Archery/hunting accessories include high-performance hunting arrows, game calls, hunting blinds, game cameras, and decoys. Golf products include laser rangefinders. Hydration products include hydration packs and water bottles. Optics products include binoculars, riflescopes, and telescopes. Shooting accessories products include reloading equipment, clay targets, and premium gun care products. Tactical products include holsters, duty gear, bags and packs.
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• | Shooting Sports generated approximately 49% of our external sales in the nine months ended December 29, 2019. Shooting Sports product lines include centerfire ammunition, rimfire ammunition, shotshell ammunition, reloading components, and firearms. Our Firearms business was divested early in the second quarter ending September 29, 2019.
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•Outdoor Products generated approximately 32% of our external sales in the nine months ended December 27, 2020. Outdoor Products is comprised of sports protection, outdoor cooking, golf, and hydration product lines. Sports protection includes helmets, goggles, and accessories for cycling, snow sports, action sports and powersports. Outdoor cooking includes grills and stoves. Golf products include laser rangefinders and other golf technology products. Hydration products include hydration packs and water bottles.
No single customer contributed 10% or more of our sales in the nine months ended December 27, 2020. Sales to Walmart represented 14% of our sales in the nine months ended December 29, 2019 and December 30, 2018. No other single customer contributed 10% or more of our sales in the nine months ended December 29, 2019 and December 30, 2018.2019.
The following summarizestables contain information utilized by management to evaluate our results by segment:operating segments for the interim periods presented:
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| | | | | | | | | | | | | | | | |
| | Three months ended | | Nine months ended |
| | December 29, 2019 | | December 30, 2018 | | December 29, 2019 | | December 30, 2018 |
Sales to external customers: | | | | | | | | |
Outdoor Products | | $ | 222,454 |
| | $ | 226,442 |
| | $ | 678,685 |
| | $ | 769,687 |
|
Shooting Sports | | 202,316 |
| | 241,329 |
| | 650,875 |
| | 773,505 |
|
Total sales to external customers | | $ | 424,770 |
| | $ | 467,771 |
| | $ | 1,329,560 |
| | $ | 1,543,192 |
|
| | | | | | | | |
Gross Profit | | | | | | | | |
Outdoor Products | | $ | 56,035 |
| | $ | 54,143 |
| | $ | 173,190 |
| | $ | 186,759 |
|
Shooting Sports | | 32,755 |
| | 40,095 |
| | 100,942 |
| | 129,577 |
|
Corporate | | — |
| | (2 | ) | | — |
| | (5 | ) |
Total gross profit | | $ | 88,790 |
| | $ | 94,236 |
| | $ | 274,132 |
| | $ | 316,331 |
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The sales above exclude intercompany sales between Outdoor Products and Shooting Sports of $118 and $1,749, and of$1,251 and $5,530 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three months ended December 27, 2020 | | Nine months ended December 27, 2020 |
| | Shooting Sports | | Outdoor Products | | (a) Corporate and other reconciling items | | Total | | Shooting Sports | | Outdoor Products | | (a) Corporate and other reconciling items | | Total |
Sales, net | | $ | 401,517 | | | $ | 173,162 | | | $ | 0 | | | $ | 574,679 | | | $ | 1,115,362 | | | $ | 513,636 | | | $ | 0 | | | $ | 1,628,998 | |
Gross Profit | | 113,928 | | | 49,704 | | | (400) | | | 163,232 | | | 303,412 | | | 147,478 | | | (400) | | | 450,490 | |
EBIT | | 72,504 | | | 18,489 | | | (3,545) | | | 87,448 | | | 197,406 | | | 56,381 | | | (43,040) | | | 210,747 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three months ended December 29, 2019 (b) | | Nine months ended December 29, 2019 (b) |
| | Shooting Sports | | Outdoor Products | | (a) Corporate and other reconciling items | | Total | | Shooting Sports | | Outdoor Products | | (a) Corporate and other reconciling items | | Total |
Sales, net | | $ | 285,460 | | | $ | 139,310 | | | $ | 0 | | | $ | 424,770 | | | $ | 894,580 | | | $ | 434,980 | | | $ | 0 | | | $ | 1,329,560 | |
Gross Profit | | 51,849 | | | 36,941 | | | 0 | | | 88,790 | | | 157,312 | | | 117,543 | | | (723) | | | 274,132 | |
EBIT | | 25,075 | | | 8,785 | | | (15,191) | | | 18,669 | | | 57,888 | | | 25,963 | | | (68,629) | | | 15,222 | |
(a) Reconciling items for the three and nine months ended December 27, 2020 included an $18,467 gain on divestiture and $400 in inventory step-up amortization from the Remington acquisition. There were no reconciling items for the three months ended December 29, 2019. Reconciling items for the nine months ended December 29, 2019 include $9,429 of held for sale impairment charges, $7,292 of restructuring and asset impairment charges, contingent consideration expenses of $1,685 and transaction costs of $483.
(b) We modified the structure of our reportable segments during the fourth quarter of fiscal 2020. Accordingly, prior period amounts have been reclassified to conform with the current period presentation.
There were 0 significant intersegment sales for the nine months ended December 27, 2020 and December 30, 2018, respectively.29, 2019.
19. Subsequent Event
On January 31, 2021, Vista Outdoor completed the acquisition of Hevi-Shot Ammunition, which will immediately add a high-end offering, specialized lead-free ammunition capabilities and another iconic brand to our ammunition portfolio. The acquisition is not significant to our consolidated financial statements. The results of this business will be reported within the Ammunition product line included in our Shooting Sports reportable segment.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Dollar amounts in thousands 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 for Vista 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 on our operations, the operations of our customers and suppliers and general economic conditions;
•general economic and business conditions in the United States and our markets outside the 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 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 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 execute our strategic transformation plan, including our ability to realize expected benefits from the divestiture of non-core brands and profitability improvement initiatives;
•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 Form 10-K for fiscal 20192020 and in the filings we make with the SEC from time to time. We undertake no obligation to update any forward-looking statements, except as otherwise required by law.
Business Overview
We serve the outdoor sports and recreation markets through a diverse portfolio of nearly 40 well-recognized brands that provide consumers with a wide range of performance-driven, high-quality and innovative products, including sporting ammunition, golf rangefinders, hydration products, outdoor accessories, outdoor cooking solutions, and protectionprotective equipment for certain action sports. We serve a broad range of end consumers, including outdoor enthusiasts, hunters and recreational shooters, athletes, as well as law enforcement and military professionals. Our products are sold through a wide variety of mass, specialty and independent retailers and distributors, such as Academy, Amazon, Bass Pro Shops/Cabela's, Big Rock Sports, Sports South, Sportsman's Warehouse, Target, and Walmart. We also sell certain of our products directly to consumers through the relevant brand's website.website and third party e-tail websites. 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 andin the channel as well as end consumer.consumers.
Organizational Structure
We conduct our operations through two operatingreportable segments which are defined based on the reporting and review process used by the chief operating decision maker, our Chief Executive Officer. As of December 29, 2019, our27, 2020, Vista Outdoor's two operating segments were Shooting Sports and Outdoor Products:
•Shooting Sports generated approximately 68% of our external sales in the nine months ended December 27, 2020. Shooting Sports is comprised of ammunition and hunting and shooting accessories product lines. Ammunition products include centerfire ammunition, rimfire ammunition, shotshell ammunition and reloading components. Hunting and shooting accessories products include high-performance hunting arrows, game calls, hunting blinds, game cameras, decoys, reloading equipment, clay targets, premium gun care products, holsters, duty gear, bags, packs and optics products such as binoculars, riflescopes, and telescopes. Our Firearms business was divested early in the second quarter of fiscal 2020.
•Outdoor Products generated approximately 32% of our external sales in the nine months ended December 27, 2020. Outdoor Products is comprised of sports protection, outdoor cooking, golf, and Shooting Sports:
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• | Outdoor Products generated approximately 51% of our external sales in the nine months ended December 29, 2019. The Outdoor Products product lines are action sports, archery/hunting accessories, outdoor cooking, golf, hydration products, optics, shooting accessories, and tacticalhydration product lines. Sports protection includes helmets, goggles, and accessories for cycling, snow sports, action sports and powersports. Outdoor cooking includes grills and stoves. Golf products include laser rangefinders and other golf technology products. Action sports includes helmets, goggles, and accessories for cycling, snow sports, action sports, and powersports. Archery/hunting accessories include high-performance hunting arrows, game calls, hunting blinds, game cameras, and decoys. Golf products include laser rangefinders. Hydration products include hydration packs and water bottles. Optics products include binoculars, riflescopes, and telescopes. Shooting accessories products include reloading equipment, clay targets, and premium gun care products. Tactical products include holsters, duty gear, bags and packs.
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• | Shooting Sports generated approximately 49% of our external sales in the nine months ended December 29, 2019. Shooting Sports product lines include centerfire ammunition, rimfire ammunition, shotshell ammunition, reloading components, and firearms. Our Firearms business was divested early in the second quarter ending September 29, 2019.
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Business Strategy
Our currentIn fiscal year 2019, Vista Outdoor embarked on its multi-year strategic businesstransformation plan to reposition the Company to be the leading designer, manufacturer, and marketer of consumer products in the outdoor sports and recreation markets. The primary goal of the transformation plan is designed to allow usdrive profitable growth by delivering innovative products and industry leading customer and online customer experiences. Cost savings delivered are re-invested into improvements needed in capabilities, systems, innovation and organic and inorganic growth opportunities. Vista Outdoor believes this plan will deliver long-term sustainable and profitable growth and ultimately create value for its shareholders.
To achieve its multi-year strategic transformation goals, we are relentlessly focused on the following five strategic pillars, which define key priorities and investment focus areas for the organization:
•Optimize our Organizational Structure: Invest in talent while reducing costs and building a culture of agility, efficiency, and innovation.
•Create Leading Centers of Excellence in Operational Excellence and E-Commerce: Leverage our shared resources, expertise and scale to:
◦achieve operational excellence and improve margins across each of our brands; and
◦accelerate and enhance e-commerce, direct-to-consumer and digital marketing capabilities across all of our brands.
•Maintain Conservative Financial Leverage: Maintain strong balance sheet and cash flow generation to focusprovide financial flexibility to enable the Company to thrive and grow at all points in the market demand cycle.
•Return to Organic Growth: Identify and capture opportunities for organic growth and market share expansion by:
◦Allocating capital to our resources on pursuing growthbrands to aid in our market-leading brands by serving our target consumer withtheir development of new and innovative products; leveragingproducts that serve the needs and preferences of their core consumers; and
◦Leveraging and expanding our channel relationships anddistribution channels to expand the reputationcommercial presence of all of our brands and efficiently deliver product to meet consumer demand and shopping behavior.
•Tuck-in Acquisitions: With a stronger balance sheet in place complementing our organic growth initiatives, identify and acquire smaller, complimentary, synergistic businesses that, through the help of our Centers of Excellence, we can take to the next level in terms of sales and profitability.
The first phase of our strategic transformation plan focused on stabilizing our business and building a strong foundation for the future by improving profitability, enhancing operational efficiency, and reducing financial leverage through enhanced cash-flow generation and the divestiture of non-core businesses. Vista Outdoor has made significant progress to date toward these goals by making key leadership changes, investing in digital and e-commerce platforms, addressing the Company’s cost structure and strengthening the Company’s balance sheet. Lessons from the last two years have been incorporated into our forward-looking plans to continue to improve both financial and operational performance and accelerate value creation.
For the remainder of fiscal year 2021, we intend to build on the capabilities developed during the first two years of our transformation, with an additional emphasis going forward on driving long-term, profitable sales growth. Vista Outdoor has plans in place under each of its five strategic pillars to deliver long-term, sustainable, profitable growth and improved cash generation, solidifying our end consumers; expanding our e-commerce capabilities;position as the outdoor sports and continuously improving operations.recreation market leader.
Financial Highlights and Notable Events
Certain notable events or activities affecting our third quarter fiscal 20202021 financial results included the following:
•During the quarter, Vista acquired certain assets related to Remington Outdoor Company, Inc.’s ("Remington") ammunition and accessories businesses. Remington is included in the Shooting Sports segment and contributed $15,334 in quarterly sales since the acquisition. See Note 4, Acquisitions and Divestitures, for additional information.
•Quarterly sales increased $149,909 or 35.3% for the three months ended December 27, 2020 as compared to three months ended December 29, 2019. Shooting Sports increased $116,057 or 40.7% which was primarily driven by continued consumer trends towards personal protection and resurgence in outdoor recreation activities, which resulted in increased sales in our centerfire rifle and pistol ammunition and hunting and shooting accessories products. Also contributing to the increase in sales were $424,770our improved pricing strategies and $467,771the sales related to the recently acquired Remington businesses. Our Outdoor Products sales increased $33,852 or 24.3% driven by the continued resurgence in outdoor recreation activities and an increase in E-commerce channel sales as a percentage of total sales across all of our Outdoor Product businesses.
•Gross profit increased $74,442 or 83.8% for the three months ended December 27, 2020 as compared to three months ended December 29, 2019. Gross profit for Shooting Sports increased $62,079 or 119.7% primarily driven by sales volume and pricing as described above and operating efficiencies. Gross profit for Outdoor Products increased $12,763 or 34.5%, primarily driven by sales volume and strong direct-to-consumer sales.
•EBIT increased $68,779 or 368% for the three months ended December 27, 2020 as compared to three months ended December 29, 2019. The increase is primarily due the reasons described above regarding gross profit and the pretax gain on divestiture of approximately $18,467. These increases were partially offset by losses attributable to initial marketing and start-up costs at Remington, digital marketing costs and higher incentive compensation accruals.
•We are reporting $1.31 of diluted EPS for the three months ended December 27, 2020 as compared to diluted EPS of $0.25 for the three months ended December 29, 2019 and December 30, 2018, respectively. The decrease was largely due to the sale of our Firearm business, which accounted for $43,775 of the decrease in Shooting Sports, which was offset by an increase of $4,762 in our Ammunition business for the reasons described in the Results of Operations section below. Outdoor Products sales decreased $3,988 for the reasons described in the Results of Operations section below.2019.
Gross profit was $88,790 and $94,236 for the three months ended December 29, 2019 and December 30, 2018, respectively. •The decrease in gross profit was primarily due to the sale of our Firearm business, which accounted for $11,458 of the decrease in Shooting Sports, which was offset by an increase in gross profit of $4,120 in our Ammunition business and an increase in Outdoor Products gross profit of $1,892 for the reasons described in the Results of Operations section below.
Income (loss) before interest, income taxes, and other was $18,669 and $(515,151) for the three months ended December 29, 2019 and December 30, 2018, respectively. The increase was primarily due to the decrease in impairment charges and for the reasons described in the Results of Operations section below.
During the three months ended December 29, 2019, we paid the remaining principal balance on the Junior Term Loan using cash generated from operations and advances from our ABL Revolving Credit Facility.Facility remains at $0 at the end of the quarter, and cash increased by $55,721 since the end of our last fiscal quarter.
Outlook
Shooting Sports Industry
Hunting and shooting-sports related products currently represent a majority of our sales. We design, source, manufacture, and sell ammunition and hunting and shooting related optics and accessories through our Federal, Remington, CCI, Speer,
Bushnell and Primos brands, among others. Among these categories, we derive the largest portion of our sales from ammunition, which is a consumable, repeat purchase product.
Sales of hunting and shooting-sports related products, including ammunition, are heavily influenced by participation rates and the political environment. The market for shooting sports products softened dramatically following the 2016 United States presidential election but began to recover in the third quarter of our fiscal year 2020. There continues to be a growing trend in the industry with our end users towards empowerment and personal protection. The extent and duration of this increase in demand for hunting and shooting-sports related products is uncertain. We expect that during our fiscal year 2021 demand for hunting and shooting-sports related products will be influenced by nationwide civil unrest, the COVID-19 pandemic, the 2020 United States presidential election cycle, and their associated impacts on general economic and retail conditions.
We believe that these long-term participation trends support our expectation of increasing demand for hunting and shooting-sports related products. Participation rates have remained strong despite the COVID-19 pandemic and nationwide civil unrest, and we are seeing an expanded demographic of users. We expect to see continued increases in participation as consumers look to local outdoor activities as a substitute for travel and other competing pursuits impacted by the COVID-19 pandemic. 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
The outdoor recreation industry represents a large and accessories business currently represents approximately 51%growing focus area of our sales. Examplesbusiness. We design, source, manufacture, and sell outdoor recreation products through our Bell, Giro, CamelBak, Camp Chef and Bushnell Golf brands, among others. These brands operate in highly competitive and global markets serving cycling, snow sports, hiking, camping, outdoor cooking and golf enthusiasts.
During fiscal 2020, our Outdoor Products brands experienced a challenging retail environment driven by a variety of factors, including the sports and activities we target include archery, camping, cycling, golf, hiking, hunting, snow skiing, target shooting, and wildlife watching. Our consumers often participateongoing shift in more than one of these activities.
Shooting Sports Industry
Shooting sports products currently represent approximately 49% of our sales. Examples of the shooting sports activities we target include target shooting, hunting,consumer preferences to utilize online platforms, as well as ammunitionother market pressures. Many of our brands have been able to respond and capitalize on the trend towards on-line shopping platforms, including our brands’ direct-to-consumer websites, but in some cases the shift away from in-person shopping experiences has resulted in a net decrease in sales. We expect that these trends will offset the impact of the ongoing COVID-19 pandemic on general economic and retail conditions, including store closures, shelter-in-place orders and social distancing. However, a return to widespread store closures, or COVID-19 pandemic related disruption, resulting in deterioration of general economic conditions may adversely affect the brands in our Outdoor Products segment for the remainder of fiscal 2021.
We believe that long-term participation trends support our expectation of increasing 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. We expect participation to continue to increase during the global recovery from the COVID-19 pandemic as consumers look to local law enforcement, the U.S. government and international markets. The shooting sports industry historically has beenoutdoor activities as a cyclical business and can be impacted by the current political climate, the timing of national elections,substitute for travel and other market factors.competing pursuits. Our Outdoor Products brands hold a strong competitive position in the market-place, and we intend to further differentiate our brands through focused R&D 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, our brands are also well-positioned to benefit from the ongoing shift in consumer shopping behavior to utilize on-line channels.
Results of Operations
We have six operating segments which are aggregated into two reportable segments, Shooting Sports and Outdoor Products.
Shooting Sports is comprised of our Ammunition and Hunting and Shooting operating segments. Outdoor Products is comprised of our Action Sports, Outdoor Cooking, Hydration and Golf operating segments. The followingoperating segments comprising the Company’s respective new reportable segments share numerous commonalities, including similar core consumers, distribution channels and supply chains.
The CODM evaluates the performance of our reportable segments based on sales, gross profit and EBIT, which is a discussiondefined as earnings (loss) before interest and analysisincome taxes. Certain corporate-related costs and other non-recurring costs included in Corporate and other below are not allocated to the reporting segments in order to present comparable results from period to period. These costs include impairment charges, business transformation fees and restructuring related-costs, merger and acquisition costs, and other non-recurring items.
For further information about our segments, see Note 18, Operating Segment Information, to the financial measures that management believesNotes to the Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q.
Fiscal 2021 Compared to Fiscal 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):
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| | Three months ended | | Nine months ended |
Net Sales: | | December 27, 2020 | | December 29, 2019 (1) | | $ Change | | % Change | | December 27, 2020 | | December 29, 2019 (1) | | $ Change | | % Change |
Shooting Sports | | $ | 401,517 | | | $ | 285,460 | | | $ | 116,057 | | | 40.7 | % | | 1,115,362 | | | 894,580 | | | $ | 220,782 | | | 24.7 | % |
Outdoor Products | | 173,162 | | | 139,310 | | | 33,852 | | | 24.3 | % | | 513,636 | | | 434,980 | | | 78,656 | | | 18.1 | % |
Total net sales | | $ | 574,679 | | | $ | 424,770 | | | $ | 149,909 | | | 35.3 | % | | $ | 1,628,998 | | | $ | 1,329,560 | | | $ | 299,438 | | | 22.5 | % |
(1) We modified the key performance indicators for managing and assessingstructure of our reportable segments during the resultsfourth quarter of Vista Outdoor Inc.'s consolidated financial condition and results of operations. The discussion should be read in conjunctionfiscal 2020. Accordingly, prior period amounts have been reclassified to conform with the accompanying unaudited condensed consolidated financial statements and notes thereto.current period presentation.
Sales to Walmart represented 14% of our sales in the nineThree months ended December 29, 2019 and December 30, 2018. As a result of Walmart's announcement on September 3, 2019, we expect reduced ammunition and accessories sales to Walmart
Shooting Sports— The increase in the future. No other single customer contributed 10% or more of our sales in the nine months ended December 29, 2019 and December 30, 2018.
Net Sales
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| Three months ended | | Nine months ended |
| December 29, 2019 | | December 30, 2018 | | $ Change | | % Change | | December 29, 2019 | | December 30, 2018 | | $ Change | | % Change |
Outdoor Products | $ | 222,454 |
| | $ | 226,442 |
| | $ | (3,988 | ) | | (1.8 | )% | | $ | 678,685 |
| | $ | 769,687 |
| | $ | (91,002 | ) | | (11.8 | )% |
Shooting Sports | 202,316 |
| | 241,329 |
| | (39,013 | ) | | (16.2 | )% | | 650,875 |
| | 773,505 |
| | (122,630 | ) | | (15.9 | )% |
Total net sales | $ | 424,770 |
| | $ | 467,771 |
| | $ | (43,001 | ) | | (9.2 | )% | | $ | 1,329,560 |
| | $ | 1,543,192 |
| | $ | (213,632 | ) | | (13.8 | )% |
The total change in net sales was driven by the changes within the operating segments as described below.
Three months ended
Outdoor Products—The decreasecontinued consumer trends towards personal protection and resurgence in sales was primarily due to lower demand ofoutdoor recreation activities. These trends were evident in our centerfire rifle and pistol ammunition and hunting and shooting accessories products, in our hunt/shoot business, which was offset partially by increased sales in our tactical, hydration and bike products.
Shooting Sports—The decrease in sales was primarily due to the sale of our Firearms business whichcombination with improved pricing. Remington accounted for $43,775$15,334 of the decrease, which was partially offset by increased demand in the market for centerfire ammunition.
Nine months ended
Outdoor Products—The decrease in sales was primarily due to the sale of our Eyewear brands, which accounted for $51,859 of the decrease. In addition, the hunt/shoot business was impacted by lower demand as well as by increased tariffs. Additional decreases were caused by reduced demand for some products in our other businesses as a result of increased tariffs, as well as increased competition, which were offset partially by increased sales in tactical and bike products.
Shooting Sports—The decrease in sales was primarily due to the sale of our Firearms business and lower demand in the market for firearms, which together accounted for approximately $109,770 of the decrease. Additional decreases were due to continued weak demand in the rimfire market, which were partially offset by increased demand in the market for centerfire ammunition.
Gross Profit
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| Three months ended | | Nine months ended |
| December 29, 2019 | | December 30, 2018 | | $ Change | | % Change | | December 29, 2019 | | December 30, 2018 | | $ Change | | % Change |
Outdoor Products | $ | 56,035 |
| | $ | 54,143 |
| | $ | 1,892 |
| | 3.5 | % | | $ | 173,190 |
| | $ | 186,759 |
| | $ | (13,569 | ) | | (7.3 | )% |
Shooting Sports | 32,755 |
| | 40,095 |
| | (7,340 | ) | | (18.3 | )% | | 100,942 |
| | 129,577 |
| | (28,635 | ) | | (22.1 | )% |
Corporate | — |
| | (2 | ) | | 2 |
| | 100.0 | % | | — |
| | (5 | ) | | 5 |
| | 100.0 | % |
Total gross profit | $ | 88,790 |
| | $ | 94,236 |
| | $ | (5,446 | ) | | (5.8 | )% | | $ | 274,132 |
| | $ | 316,331 |
| | $ | (42,199 | ) | | (13.3 | )% |
The total change in gross profit was driven by the changes within the operating segments as described below.
Three months endednet sales.
Outdoor Products—The increase in gross profitsales was caused primarilydriven by reduced business transformation consulting costsincreased demand in our Outdoor Cooking, Action Sports, and Golf businesses, resulting from the prior year quarter andcontinued resurgence in outdoor recreation activities. E-commerce channel sales have increased as a percentage of total sales volume in someacross all of our brands as described above. Also contributing tobusinesses.
Nine months ended
Shooting Sports— The increase in sales was primarily driven by strong demand in the increase was operating efficienciesmarket for our products particularly centerfire rifle and benefits from restructuring activities.pistol ammunition and hunting and shooting accessories, and improved pricing. Remington accounted for $15,334 of net sales. These increases were partially offset by lowerthe sale of our Firearms Business in July 2019, which accounted for approximately $25,000 of net sales.
Outdoor Products—The increase in sales volumeswas driven by strong demand in our hunt/shoot business.Outdoor Cooking, Action Sports and Golf businesses. This strong demand was partially offset by retail store closures in our first quarter, and continued supply chain interruptions.
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| | Three months ended | | Nine months ended |
Gross Profit: | | December 27, 2020 | | December 29, 2019 (1) | | $ Change | | % Change | | December 27, 2020 | | December 29, 2019 (1) | | $ Change | | % Change |
Shooting Sports | | $ | 113,928 | | | $ | 51,849 | | | $ | 62,079 | | | 119.7 | % | | $ | 303,412 | | | $ | 157,312 | | | $ | 146,100 | | | 92.9 | % |
Outdoor Products | | 49,704 | | | 36,941 | | | 12,763 | | | 34.5 | % | | 147,478 | | | 117,543 | | | 29,935 | | | 25.5 | % |
Corporate and other | | (400) | | | — | | | (400) | | | — | % | | $ | (400) | | | $ | (723) | | | $ | 323 | | | 44.7 | % |
Total gross profit | | $ | 163,232 | | | $ | 88,790 | | | $ | 74,442 | | | 83.8 | % | | $ | 450,490 | | | $ | 274,132 | | | $ | 176,358 | | | 64.3 | % |
Three months ended
Shooting Sports—The decreaseincrease in gross profit was primarily due todriven by sales volume and pricing as described above and operating efficiencies.
Outdoor Products—The increase in our gross profit was primarily driven by sales volume as described above, and strong direct-to-consumer sales.
Nine months ended
Shooting Sports—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 July 2019.
Outdoor Products—The increase in our gross profit was primarily driven by sales volume as described above and strong direct-to-consumer sales.
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| | Three months ended | | Nine months ended |
EBIT: | | December 27, 2020 | | December 29, 2019 (1) | | $ Change | | % Change | | December 27, 2020 | | December 29, 2019 (1) | | $ Change | | % Change |
Shooting Sports | | $ | 72,504 | | | $ | 25,075 | | | $ | 47,429 | | | 189.1 | % | | $ | 197,406 | | | $ | 57,888 | | | $ | 139,518 | | | 241.0 | % |
Outdoor Products | | 18,489 | | | 8,785 | | | 9,704 | | | 110.5 | % | | 56,381 | | | 25,963 | | | 30,418 | | | 117.2 | % |
Corporate and other | | (3,545) | | | (15,191) | | | 11,646 | | | 76.7 | % | | (43,040) | | | (68,629) | | | 25,589 | | | 37.3 | % |
Total EBIT | | $ | 87,448 | | | $ | 18,669 | | | $ | 68,779 | | | 368.4 | % | | $ | 210,747 | | | $ | 15,222 | | | $ | 195,525 | | | (1,284.5) | % |
Three months ended
Shooting Sports—The increase in EBIT was primarily driven by the gross profit increase, partially offset by losses attributable to initial marketing and start-up costs at Remington, and higher incentive compensation accruals.
Outdoor Products—The increase in EBIT was primarily driven by the gross profit increase, partially offset by an increase in digital marketing.
Corporate and Other—The increase in EBIT was primarily driven by the pretax gain related to the divestiture of approximately $18,467, partially offset by an increase in transaction costs and higher incentive compensation accruals in the current year.
Nine months ended
Shooting Sports—The increase in EBIT was primarily driven by the gross profit as described above, decreased travel and trade show expenses due to the COVID-19 pandemic, benefits from prior year 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 July 2019.
Outdoor Products—The increase in EBIT was primarily driven by the gross profit increase as described above.
Corporate and Other—The increase in EBIT was primarily driven by the pretax gain on the divestiture of approximately $18,467 during the current year, prior year held for sale asset impairment of $9,429 in our Firearms business, which accounted for $11,458and a reduction of the decrease.prior year restructuring and contingent consideration expenses. These decreases were partially offset by increased sales volume as described abovehigher incentive compensation accrual and favorable raw material prices.
Nine months ended
Outdoor Products—The decrease in gross profit was caused primarily by the sale of our Eyewear brands, which accounted for $22,208 of the decrease and lower sales volumes as described above. These decreases were partially offset by reduced transformationhigher transaction costs from the prior year quarter and increased sales volume in our tactical business as described above along with savings driven by operating efficiencies and benefits from restructuring activities compared to the prior year to date.
Shooting Sports—The decrease in gross profit was primarily due to the sale of our Firearms business and lower demand in the market for firearms, which together accounted for $26,632 of the decrease. Additional decreases resulted from lower sales volumes as described above, partially offset by decreased raw material costs and production costs along with lower business transformation consulting costs compared to the prior year to date.current year.
Operating Expenses
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| Three months ended | | Nine months ended |
| December 29, 2019 | | As a % of Sales | | December 30, 2018 | | As a % of Sales | | $ Change | | December 29, 2019 | | As a % of Sales | | December 30, 2018 | | As a % of Sales | | $ Change |
Research and development | $ | 5,703 |
| | 1.3 | % | | $ | 6,503 |
| | 1.4 | % | | $ | (800 | ) | | $ | 17,750 |
| | 1.3 | % | | $ | 20,681 |
| | 1.3 | % | | $ | (2,931 | ) |
Selling, general, and administrative | 64,418 |
| | 15.2 | % | | 86,418 |
| | 18.5 | % | | (22,000 | ) | | 231,298 |
| | 17.4 | % | | 284,754 |
| | 18.5 | % | | (53,456 | ) |
Goodwill and intangibles impairment | — |
| | — | % | | 432,612 |
| | 92.5 | % | | (432,612 | ) | | $ | — |
| | — | % | | 456,023 |
| | 29.6 | % | | (456,023 | ) |
Impairment of held-for-sale assets | — |
| | — | % | | 83,854 |
| | 17.9 | % | | (83,854 | ) | | 9,429 |
| | 0.7 | % | | 128,775 |
| | 8.3 | % | | (119,346 | ) |
Total operating expenses | $ | 70,121 |
| | 16.5 | % | | $ | 609,387 |
| | 130.3 | % | | $ | (539,266 | ) | | $ | 258,477 |
| | 19.4 | % | | $ | 890,233 |
| | 57.7 | % | | $ | (631,756 | ) |
Three months ended
Operating expenses decreased $539,266 primarily due to a decrease in impairment charges related to intangibles, goodwill, held-for-sale assets and our corporate headquarters, reduced business transformation consulting costs and transaction costs from the prior year quarter and a decrease of approximately $5,362 from the sale of our Firearms business.
Nine months ended
Operating expenses decreased $631,756 primarily due to a decrease in impairment charges related to intangibles, goodwill, held-for-sale assets and our corporate headquarters, a decrease of approximately $27,707 from the sale of our Eyewear brands and Firearms business, and reduced business transformation consulting and transaction costs from the prior year which were offset partially by an increase in restructuring costs of during the current year.
Net Interest Expense
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| Three months ended | | Nine months ended |
| December 29, 2019 | | December 30, 2018 | | $ Change | | % Change | | December 29, 2019 | | December 30, 2018 | | $ Change | | % Change |
Interest expense, net | $ | 8,373 |
| | $ | 16,003 |
| | $ | (7,630 | ) | | (47.7 | )% | | $ | 31,811 |
| | $ | 46,340 |
| | $ | (14,529 | ) | | (31.4 | )% |
Three months ended
The decrease in interest expense was due to a reduction in debt amortization costs, a decrease in the write-off of debt issuance costs, and reduction in our average principal debt balance.
Nine months ended | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three months ended | | Nine months ended |
Interest expense, net: | | December 27, 2020 | | December 29, 2019 | | $ Change | | % Change | | December 27, 2020 | | December 29, 2019 | | $ Change | | % Change |
Corporate and other | | $ | 5,619 | | | $ | 8,373 | | | $ | (2,754) | | | (32.9) | % | | $ | 17,752 | | | $ | 31,811 | | | $ | (14,059) | | | (44.2) | % |
The decrease in interest expense was due to a reduction in our average principal debt balance a decrease in the write-off of debt issuance costs and a reduction in debt amortization costs.our interest rate on the ABL Revolving Credit Facility.
Income Tax Provision | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three months ended | | Nine months ended |
Income Tax Provision: | | December 27, 2020 | | Effective Rate | | December 29, 2019 | | Effective Rate | | $ Change | | December 27, 2020 | | Effective Rate | | December 29, 2019 | | Effective Rate | | $ Change |
Corporate and other | | $ | (2,950) | | | 3.6 | % | | $ | 4,352 | | | (42.3) | % | | $ | (7,302) | | | $ | 6,005 | | | (3.1) | % | | $ | 2,724 | | | 16.4 | % | | $ | 3,281 | |
See Note 15, Income Taxes, to the unaudited condensed consolidated financial statements in Item 1 of Part I of this report for information regarding income taxes.
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| Three months ended | | Nine months ended |
| December 29, 2019 | | Effective Rate | | December 30, 2018 | | Effective Rate | | $ Change | | December 29, 2019 | | Effective Rate | | December 30, 2018 | | Effective Rate | | $ Change |
Income tax provision (benefit) | $ | (4,352 | ) | | (42.3 | )% | | $ | (18,383 | ) | | 3.4 | % | | $ | 14,031 |
| | $ | (2,724 | ) | | 16.4 | % | | $ | (27,230 | ) | | 4.3 | % | | $ | 24,506 |
|
Three months ended
The decrease in the tax rate from the prior year quarter was primarily caused by the release of uncertain tax positions due to statute of limitation expirations.
Nineand nine months ended
The increase in the tax rate from the prior yearthree-month period was primarily caused by the release in the prior year quarter of uncertain tax positions due to statute of limitation expirations. Becauseand the impact of the lossdecrease in the valuation allowance in the prior year period quarter in relation to the increase in income of the current quarter.
The decrease in the tax rate from the prior year nine-month period was primarily caused by recognition in the current period favorable tax adjustments cause an increaseof the benefit of loss carrybacks to prior profitable years. This is allowed under recently issued IRS regulations due to the CARES Act. As of March 31, 2020, there were approximately $38 million of tax-effected operating loss, credits and interest deduction carryforwards included in our deferred tax rate.assets. Over $17 million was utilized in the loss carrybacks and we anticipate that the remainder will be used to reduce our tax liability in fiscal 2021 and future years if qualifying taxable income is generated. Additionally we had $102 million gross or $25 million net of capital loss carryforwards at the beginning of the
year. In the current quarter, we utilized $22 million gross or $5 million net of the capital loss carryforward to offset a capital gain on the divestiture. The remaining amount could be utilized to reduce our cash taxes and our tax expense in the event we have additional qualifying capital gains. In total we have released $32 million of valuation allowances during the current fiscal year.
We have filed for federal carryback claims of $43 million, which had a favorable rate impact of approximately $8 million in the prior year, and $35 million favorable impact on the tax rate in the current year.
In addition to the federal carryback claims and the utilization of the capital loss carryforward, we have recognized a current year benefit of approximately $45 million gross and $10 million net due to the use of interest deduction carryforwards and other timing items. Additionally we have a current year benefit of approximately $190 million gross and $7 million net due to the use of state NOL carryforwards as a result of current year income and their related reduction of the valuation allowance. We have also recognized a current year benefit of approximately $1.2 million net due to the use of R&D credit carryforwards as a result of current year income and their related reduction of the valuation allowance.
We intend to continue maintaining a valuation allowance on our deferred tax assets until there is sufficient positive evidence to support the reversal of all or some portion of these allowances which we currently anticipate could happen in the next twelve months. Reduction of any portion of the valuation allowance would result in the recognition of certain deferred tax assets and a decrease to income tax expense for the period the release is recorded. However, the exact timing and amount of any valuation allowance reduction is subject to change on the basis of the level of profitability that we are able to actually achieve.
Liquidity and Capital Resources
Liquidity
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.
Our cash flows from operating, investing and financing activities for the nine months ended December 29, 2019 and December 30, 2018 are summarized as follows:
| | | | | | | | Nine months ended |
| | December 29, 2019 | | December 30, 2018 | |
Cash Flows: | | Cash Flows: | | December 27, 2020 | | December 29, 2019 |
Cash provided by operating activities | | $ | 63,054 |
| | $ | 60,948 |
| Cash provided by operating activities | | $ | 307,319 | | | $ | 63,054 | |
Cash provided by investing activities | | 134,860 |
| | 121,049 |
| |
Cash (used for) provided by investing activities | | Cash (used for) provided by investing activities | | (75,615) | | | 134,860 | |
Cash used for financing activities | | (187,569 | ) | | (166,230 | ) | Cash used for financing activities | | (166,732) | | | (187,569) | |
Effect of foreign exchange rate fluctuations on cash | | (212 | ) | | (1,013 | ) | Effect of foreign exchange rate fluctuations on cash | | 120 | | | (212) | |
Net cash flows | | $ | 10,133 |
| | $ | 14,754 |
| Net cash flows | | $ | 65,092 | | | $ | 10,133 | |
Operating Activities—Cash provided by operating activities was $63,054increased $244,265 in the nine months ended December 29, 201927, 2020 compared to cash provided of $60,948 in the prior year period, an increase of $2,106.period. The change from the prior-year period was primarily driven by increased net income, timing of vendor payments, a resultreduction in purchases of decreased operating expenseinventory and the deferral of certain employer payroll tax payments under the CARES Act. These increases were partially offset by unfavorable change in net working capital. The change in net working capital was driven primarily byincreased accounts receivable due to increased sales and the timing of supplier payments, interest payments and inventory purchases.income tax refunds as compared to the prior year period.
Investing Activities—Cash provided byused for investing activities was $134,860 in$75,615 for the nine months ended December 29, 201927, 2020 compared to $121,049cash provided of $134,860 in the prior-year period. The current period an increase of $13,811. The changecash usage was driven by a decrease in capital expenditures in the current fiscal year and increasedacquisition of Remington offset by proceeds from a business divestiture. The prior period cash provided related to proceeds from the divestiture of our divestitures year over year.Firearms business.
Financing Activities—Cash used for financing activities was $187,569 indecreased by $20,837 for the nine months ended December 29, 201927, 2020 compared to cash used for financing activities of $166,230 in the prior year period. The current period an increase of $21,339. The changeusage was primarily driven by the timing of borrowings andrelated to net payments on long-term debt and the ABL Revolving Credit Facility, a favorable settlement withFacility. The prior period usage was related primarily to the payoff of our former parent inTerm Loan and Junior Term Loan of approximately $144,000 and net payments on the prior year period and a decrease in payments for debt issuance costs year over year.ABL Revolving Credit Facility.
Capital Resources
In addition to our normal operating cash requirements, our principal future cash requirements will be to fund capital expenditures, debt repayments, employee benefit obligations, any share repurchases, and any strategic acquisitions. Our short-termshort-
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 the New Credit Facilities and our 5.875% Notes, as discussed further below.Notes.
Our business experiences a certain level of seasonality, which impacts our cash flow. Due to this seasonality, we expect to use cash during the first half of our fiscal year and generate cash during the second half of the year. 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 ABL Revolving Credit Facility, access to debt and equity markets, as well as other potential future sources of funding including additional bank financing, will be adequate to fund future growth and as to service our currently anticipated long-term debt and pension obligations and make capital expenditures over the next 12 months. As of December 27, 2020, based on the borrowing base less outstanding borrowings of $0 and outstanding letters of credit of $22,685, the amount available to us under the ABL Revolving Credit Facility was $373,269.
We do not expect that our access to liquidity sources will be materially impacted in the near future. There can be no assurance, however, 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, or our future financial condition and performance.
The allocation of tax liabilities for the period Furthermore, because our ABL Revolving Credit Facility is secured in large part by receivables from April 1, 2014 through the dateour customers, a sustained deterioration in general economic conditions as a result of the Spin-Off as required byCOVID-19 pandemic that adversely affects the Tax Matters Agreement with Orbital ATK, as discussed further in Note 15, Income Taxes, was settledcreditworthiness of our customers could have a negative effect on June 15, 2018. Orbital ATK paid Vista Outdoor $13,047 to settle this matter, which was reflected as an adjustment toour future available liquidity under the distribution from us to Orbital ATK at the time of the Spin-off.
Long-Term Debt andABL Revolving Credit Agreement
As of December 29, 2019, our indebtedness consisted of the following:
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| December 29, 2019 |
ABL Revolving Credit Facility | $ | 179,699 |
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5.875% Senior Notes | 350,000 |
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Principal amount of long-term debt | 529,699 |
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Less: Unamortized deferred financing costs | (5,839 | ) |
Carrying amount of long-term debt | 523,860 |
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Less: current portion | — |
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Carrying amount of long-term debt, excluding current portion | $ | 523,860 |
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Facility.Our total debt as a percentage of total capitalization (total debt and stockholders' equity) was 46.7%34.7% as of December 29, 2019.
27, 2020.
See NoteAdditional information about our ABL Revolving Credit Facility, and long-term debt is presented in 13, Long-term Debt, to the Notes to the unaudited condensed consolidated financial statements in Part I, Item 1 of this report for additional discussion of the 5.875% Notes and the New Credit Facilities.
During fiscal 2019, we refinanced our Amended and Restated Credit Agreement dated April 1, 2016Quarterly Report on Form 10-Q, which is incorporated herein by entering into new credit facilities (collectively, the “New Credit Facilities”) consisting of (a) a $450,000 senior secured asset-based revolving credit facility (the “ABL Revolving Credit Facility”), comprised of $20,000 in first-in, last-out (“FILO”) revolving credit commitments and $430,000 in non-FILO revolving credit commitments, (b) a $109,343 senior secured asset-based term loan facility (the “Term Loan”) and (c) a $40,000 junior secured term loan facility (the “Junior Term Loan”). The FILO commitments under the ABL Revolving Credit Facility are subject to reductions of $1,667 on the first business day of each fiscal quarter beginning on April 1, 2019. The balance of the FILO revolving credit commitment as of December 29, 2019 was $14,999.
During fiscal 2020, the Term Loan and the Junior Term Loan were paid in full, using proceeds from the sale of our Firearms business, cash generated from operations and advances from our ABL Revolving Credit Facility.
The payoff of Term Loan and the Junior Term Loan reduced our interest rate on the ABL revolving Credit Facility. As of December 29, 2019, borrowings under the ABL Revolving Credit Facility bear interest at a rate equal to, in the case of (a) non-FILO revolving credit loans, either the sum of a base rate plus a margin ranging from 0.25% to 0.75% or the sum of a LIBO rate plus a margin ranging from 1.25% to 1.75%, and (b) FILO revolving credit loans, a rate that is 1.00% higher than the rate paid on the non-FILO revolving credit loans. All such rates vary based on our Average Excess Availability under the ABL Revolving Credit Facility.
Covenants
New Credit Facilitiesthis reference.—Our New Credit Facilities impose restrictions on us, including limitations on our ability to pay cash dividends, incur debt or liens, redeem or repurchase Vista Outdoor stock, enter into transactions with affiliates, make investments, merge or consolidate with others or dispose of assets. As noted above, during the three months ended December 29, 2019, the Junior Term Loan was paid in full which triggered the financial covenants of the New Credit Facilities to be reduced. Our new requirement in effect for the quarter ending December 29, 2019 is to maintain Excess Availability under the ABL Revolving Credit Facility of $42,500 at all times. If Excess Availability falls below $42,500 we must maintain a Consolidated Fixed Charge Coverage Ratio ("FCCR") of not less than 1.00:1.00. If we do not comply with the covenants in any of the New Credit Facilities, the lenders may, subject to customary cure rights, require the immediate payment of all amounts outstanding under each of the New Credit Facilities.
The FCCR is Covenant EBITDA ("earnings before interest, taxes, depreciation, and amortization"), which includes adjustments for items such as non-recurring or extraordinary items, non-cash charges related to stock-based compensation, and intangible asset impairment charges, as well as adjustments for acquired or divested business units on a pro forma basis) less capital expenditures (subject to certain adjustments) for the past four fiscal quarters, divided by fixed charges (which includes debt principal and interest payments paid since October 28, 2018, annualized; plus income tax payments and restricted payments over the past four fiscal quarters).
5.875% Notes—The indenture governing the 5.875% Notes contains covenants that, among other things, limit our ability to incur or permit to exist certain liens, sell, transfer or otherwise dispose of assets, consolidate, amalgamate, merge or sell all or substantially all of our assets, enter into transactions with affiliates, enter into agreements restricting our subsidiaries’ ability to pay dividends, incur additional indebtedness, pay dividends or make other distributions or repurchase or redeem our capital stock, prepay, redeem or repurchase certain debt and make loans and investments. A failure to comply with the covenants in the indenture could result in an event of default, which could allow the holders of the 5.875% Notes to accelerate the 5.875% Notes. We may not have sufficient liquidity to repay the 5.875% Notes in such circumstances.
The New Credit Facilities and the indenture governing the 5.875% Notes contain cross-default provisions so that non-compliance with the covenants within one debt agreement could cause a default under other the debt agreements as well. As of December 29, 2019, we were in compliance with the covenants of all the debt agreements and expect to be in compliance for the foreseeable future. However, our business, financial position and results of operations are subject to various risks and uncertainties, including some that may be beyond our control, and we cannot provide any assurance that we will be able to comply with all such financial covenants in the future. For example, during periods in which we experience declines in sales or otherwise experience the adverse impact of seasonality, we may not be able to comply with such financial covenants.
Contractual Obligations and Commitments
The Company leases certain warehouse, distribution and office facilities, vehicles and office equipment under operating leases. The amounts presented in this line item represent commitments for minimum lease payments under non-cancelable operating leases. As of December 29, 2019,27, 2020 and March 31, 2020, current and long-term operating lease liabilities of $11,431$9,983 and $72,347,$78,429 and $10,780 and $73,738, 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.
Other than the changes to debt and lease obligationsliabilities noted above, 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 2019.2020.
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 potentially responsible parties (“PRP”), 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 theour ultimate environmental liabilities, based on currently available information, we have concludeddo not currently expect that these matters, individually or in the aggregate, will not 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.
NewCritical Accounting PronouncementsPolicies and Estimates
SeeThere have been no material 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 the our Annual Report on Form 10-K for the fiscal year ended March 31, 2020, except for our adoption of the Accounting Standards Update ("ASU") No 2016-13, "Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments" which became effective as of April 1, 2020. 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 Item 1 of Part I of this report.
Dependence on Key Customers; Concentration of Credit
The loss of any key customer and our inability to replace revenues provided by a key customer may have a material adverse effect on our business and financial condition. No single customer contributed 10% or more of our sales in the nine months ended December 27, 2020. Sales to Walmart represented 14% of our sales in the nine months ended December 29, 2019 and December 30, 2018. As a result of Walmart's announcement on September 3, 2019, we expect reduced ammunition and accessories sales to Walmart in the future. No other single customer contributed 10% or more of our sales in the nine months ended December 29, 2019 and December 30, 2018.2019.
If a key customer fails to meet payment obligations, our operating results and financial condition could be adversely affected.
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 our Shooting Sports Segment. See Note 4,5, Derivative Financial Instruments, 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.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposedMarket risks relating to market riskour operations result primarily from changes in interest rates, commodity prices and foreign currency exchange rates. We manage theseOur market risks by entering into hedging transactions including interest rate swaps, commodity forward contracts and foreign currency forward contracts through derivative financial instruments that have been authorized pursuantat December 27, 2020 are similar to corporate policies. We do not use derivative financial instruments for trading or other speculative purposes. Additional information regarding these financial instruments is included in Note 2,Fair Value of Financial Instruments, to the unaudited condensed consolidated financial statements in Item 1 of Part I of this report.
We measure market risk related to holdings of financial instruments based on changes in interest rates utilizing a sensitivity analysis. The sensitivity analysis measures the potential loss in fair values, cash flows, and earnings based on a hypothetical change (increase and decrease) in interest rates. We used current market rates on the debt portfolio to perform the sensitivity analysis. Certain items such as lease contracts, insurance contracts, and obligations for pension and other postretirement benefits were not included in the analysis.
We are exposed to market risk from changes in interest rates. To mitigate the risks from interest rate exposure, we may enter into hedging transactions, mainly interest rate swaps. Our objective in managing the exposure to changes in interest rates is to limit the impact of such changes on earnings and cash flow.
Lead used for raw material components in our ammunition manufacturing process in the normal course of our operations is subject to price volatility. Depending on market conditions, we may enter into forward contracts in order to reduce the impact of commodity price fluctuations. Potential increases in our cost of inventory purchased, would be substantially offset by a corresponding increase in the value of related hedging instruments.
We conduct business through our subsidiaries in many different countries, and fluctuations in currency exchange rates could have a significant impact on the reported results of operations, which are presented in U.S. dollars. Cross-border transactions, both with external parties and intercompany relationships, result in increased exposure to foreign exchange effects. Accordingly, significant changes in currency exchange rates, particularly the Euro, the British pound, the Chinese renminbi (yuan), and the Canadian dollar, could cause fluctuations in the reported results of our businesses’ operations that could negatively affect our results of operations.
In addition, sales and expenses of our non-U.S. businesses are also translated into U.S. dollars for reporting purposes and the strengthening or weakening of the U.S. dollar could result in unfavorable translation effects. There have been no material changes to the market risksthose disclosed in our Annual Report on Form 10-K for fiscal 2019.2020. The information concerning market risk set forth in Part II, Item 7A. of our Annual Report on Form 10-K for fiscal 2020, as filed with the SEC on June 3, 2020, under the caption "Quantitative and Qualitative Disclosures About Market Risk," is hereby incorporated by reference into this Quarterly Report on Form 10-Q.
ITEM 4. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
As of December 29, 2019,27, 2020, our Chief Executive Officer and Chief Financial Officer evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934) and have concluded that our disclosure controls and procedures are effective to ensure that information we are required to disclose in reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. These disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in the reports we file or submit is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
During the threenine months ended December 29, 2019,27, 2020, there were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934) that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II—OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
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.
Certain of our former subsidiaries have been identified as potentially responsible parties (“PRP”), 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 our ultimate environmental liabilities, based on currently available information, we do not currently expect that these matters, individually or in the aggregate, will have a material adverse effect on our operating results, financial condition, or cash flows.
ITEM 1A. RISK FACTORS
While we attempt to identify, manage and mitigate risks and uncertainties associated with our business, some level of risk and uncertainty will always be present. Item 1A of Part I of our Annual Report on Form 10-K for the fiscal year ended March 31, 20192020 describes the known material risks and uncertainties associated with our business. These risks and uncertainties have the potential to materially affect our business, financial condition, results of operations, cash flows, projected results, and future prospects. There have been no material changes to the Risk Factors disclosed in our Annual Report on Form 10-K for the fiscal year ended March 31, 2019.2020.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS
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31.1
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101 | | The following financial statements from the Company’s Quarterly Report on Form 10-Q for the quarter ended December 27, 2020, formatted in Inline Extensible Business Reporting Language (iXBRL): (i) /Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Comprehensive Income (Loss), (iii) Condensed Consolidated Statements of Cash Flows, (iv) Condensed Consolidated Statements of Stockholders’ Equity, and (v) Notes to the Condensed Consolidated Financial Statements, tagged as blocks of text and including detailed tags. |
101.INS104 | | XBRL Instance Document- the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. |
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101.SCH | | XBRL Taxonomy Extension Schema Document. |
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101.CAL | | XBRL Taxonomy Extension Calculation Linkbase Document. |
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101.LAB | | XBRL Taxonomy Extension Labels Linkbase Document. |
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101.DEF | | XBRL Taxonomy Extension Definition Linkbase Document. |
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101.PRE | | XBRL Taxonomy Extension Presentation Linkbase Document. |
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104 | | The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2019,December 27, 2020, formatted in Inline XBRL.Extensible Business Reporting Language (iXBRL) (included as Exhibit 101). |
* Incorporated by reference.
+ Schedules to exhibits have been omitted from this filing pursuant to Item 601(b)(2) of Regulation S-K. Vista Outdoor agrees to furnish supplementally a copy of any omitted schedules to the SEC upon its request; provided, however, that we may request confidential treatment pursuant to Rule 24b-2 of the Exchange Act for any document so furnished.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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| | | | | VISTA OUTDOOR INC. |
Date: | February 4, 2021 | | By: | | /s/ Sudhanshu Priyadarshi |
| | | Name: | | Sudhanshu Priyadarshi |
| | | Title: | | Senior Vice President and Chief Financial Officer |
| | | | | (On behalf of the Registrant and as Principal Financial Officer) |
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| | | | | VISTA OUTDOOR INC. |
Date: | February 6, 2020 | | By: | | /s/ Mark R. Kowalski |
| | | Name: | | Mark R. Kowalski |
| | | Title: | | Controller and Chief Accounting Officer
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| | | | | (On behalf of the Registrant and as principal accounting officer) |
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