vsto-20230625

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


☒						QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 25, 2023


☐						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)


Delaware			47-1016855
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

1 Vista Way	Anoka	MN	55303
(Address of Principal Executive Offices)			(Zip Code)

Registrant's telephone number, including area code: (763) 433-1000

Securities registered pursuant to Section 12(b) of the Act:

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.

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 July 24, 2023, there were 58,004,682 shares of the registrant's common stock outstanding.

TABLE OF CONTENTS


		Page
PART I - Financial Information
Item 1.	Unaudited Financial Statements	2
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	20
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	27
Item 4.	Controls and Procedures	27
PART II - Other Information
Item 1.	Legal Proceedings	28
Item 1A.	Risk Factors	28
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	28
Item 3.	Defaults Upon Senior Securities	28
Item 4.	Mine Safety Disclosures	28
Item 5.	Other Information	28
Item 6.	Exhibits	29
SIGNATURES		31

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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)	June 25, 2023		March 31, 2023
ASSETS
Current assets:
Cash and cash equivalents	$	63,163	$	86,208
Net receivables	391,464		339,373
Net inventories	710,020		709,897
Other current assets	53,461		60,636
Total current assets	1,218,108		1,196,114
Net property, plant, and equipment	221,137		228,247
Operating lease assets	107,318		106,828
Goodwill	465,709		465,709
Net intangible assets	720,528		733,176
Deferred charges and other non-current assets, net	76,925		68,808
Total assets	$	2,809,725	$	2,798,882
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt	$	100,000	$	65,000
Accounts payable	156,337		136,556
Accrued compensation	46,186		60,719
Accrued income taxes	21,516		6,676
Federal excise, use, and other taxes	35,592		38,543
Other current liabilities	162,370		146,377
Total current liabilities	522,001		453,871
Long-term debt	886,005		984,658
Deferred income tax liabilities	41,994		40,749
Long-term operating lease liabilities	103,820		103,313
Accrued pension and postemployment benefits	24,717		25,114
Other long-term liabilities	51,186		59,384
Total liabilities	1,629,723		1,667,089
Commitments and contingencies (Notes 12 and 15)
Common stock — $.01 par value:
Authorized — 500,000,000 shares
Issued and outstanding — 57,997,650 shares as of June 25, 2023 and 57,085,756 shares as of March 31, 2023	579		570
Additional paid-in capital	1,656,558		1,711,155
Accumulated deficit	(172,428)		(230,528)
Accumulated other comprehensive loss	(78,002)		(80,802)
Common stock in treasury, at cost — 5,966,789 shares held as of June 25, 2023 and 6,878,683 shares held as of March 31, 2023	(226,705)		(268,602)
Total stockholders' equity	1,180,002		1,131,793
Total liabilities and stockholders' equity	$	2,809,725	$	2,798,882

See Notes to the Condensed Consolidated Financial Statements.

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VISTA OUTDOOR INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(unaudited)


	Three months ended
(Amounts in thousands except per share data)	June 25, 2023		June 26, 2022
Sales, net	$	693,333	$	802,612
Cost of sales	466,576		509,142
Gross profit	226,757		293,470
Operating expenses:
Research and development	12,080		7,897
Selling, general, and administrative	122,491		113,148
Operating income	92,186		172,425
Other expense, net (Note 5)	(541)		—
Interest expense, net	(16,218)		(6,310)
Income before income taxes	75,427		166,115
Income tax provision	(17,327)		(40,100)
Net income	$	58,100	$	126,015
Earnings per common share:
Basic	$	1.01	$	2.23
Diluted	$	0.99	$	2.16
Weighted-average number of common shares outstanding:
Basic	57,455		56,486
Diluted	58,541		58,381

Net income (from above)	$	58,100	$	126,015
Other comprehensive income, net of tax:
Pension and other postretirement benefit liabilities:
Reclassification of net actuarial loss for pension and postretirement benefit plans recorded to net income, net of tax (expense) of $(176) for the three months ended June 25, 2023 and $(221) for the three months ended June 26, 2022	562		694
Change in derivatives, net of tax (expense) benefit of $(493) for the three months ended June 25, 2023 and $690 for the three months ended June 26, 2022	1,574		9
Change in cumulative translation adjustment, net of tax (expense) of $0 for the three months ended June 25, 2023 and $(167) for the three months ended June 26, 2022	664		(473)
Total other comprehensive income	2,800		230
Comprehensive income	$	60,900	$	126,245

See Notes to the Condensed Consolidated Financial Statements.

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VISTA OUTDOOR INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)


	Three months ended
(Amounts in thousands)	June 25, 2023		June 26, 2022
Operating Activities:
Net income	$	58,100	$	126,015
Adjustments to net income to arrive at cash provided by operating activities:
Depreciation	12,220		11,280
Amortization of intangible assets	12,707		8,036
Amortization of deferred financing costs	2,078		353
Change in fair value of contingent consideration	—		(112)
Deferred income taxes	576		163
Gain on foreign exchange	(1,272)		—
(Gain)/loss on disposal of property, plant, and equipment	(59)		139
Share-based compensation	3,307		7,257
Changes in assets and liabilities:
Net receivables	(51,915)		(73,105)
Net inventories	(6,117)		(29,504)
Accounts payable	21,850		33,468
Accrued compensation	(14,546)		(36,347)
Accrued income taxes	16,231		39,342
Federal excise, use, and other taxes	(2,951)		5,292
Pension and other postretirement benefits	341		341
Other assets and liabilities	23,151		14,959
Cash provided by operating activities	73,701		107,577
Investing Activities:
Capital expenditures	(7,616)		(4,910)
Proceeds from the disposition of property, plant, and equipment	129		43
Cash used for investing activities	(7,487)		(4,867)
Financing Activities:
Proceeds from credit facility	30,000		15,000
Repayments of credit facility	(95,000)		(95,000)
Debt issuance costs	(31)		—
Payments on long-term debt	(90)		—
Payments made for contingent consideration	(8,585)		—
Proceeds from exercise of stock options	39		147
Payment of employee taxes related to vested stock awards	(16,024)		(8,923)
Cash used in financing activities	(89,691)		(88,776)
Effect of foreign exchange rate fluctuations on cash	432		94
Increase (decrease) in cash and cash equivalents	(23,045)		14,028
Cash and cash equivalents at beginning of period	86,208		22,584
Cash and cash equivalents at end of period	$	63,163	$	36,612
Supplemental Cash Flow Disclosures:
Non-cash investing activity:
Capital expenditures included in accounts payable	$	2,313	$	1,701

See Notes to the Condensed Consolidated Financial Statements.

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VISTA OUTDOOR INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(unaudited)






















(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, 2023	57,085,756	$	570	$	1,711,155	$	(230,528)	$	(80,802)	$	(268,602)	$	1,131,793
Comprehensive income	—	—		—		58,100		2,800		—		60,900
Exercise of stock options	2,410	—		(55)		—		—		94		39
Share-based compensation	—	—		3,307		—		—		—		3,307
Restricted stock vested and shares withheld	901,094	—		(57,520)		—		—		41,483		(16,037)

Other	8,390	9		(329)		—		—		320		—
Balance, June 25, 2023	57,997,650	$	579	$	1,656,558	$	(172,428)	$	(78,002)	$	(226,705)	$	1,180,002

Balance, March 31, 2022	56,093,456	$	560	$	1,730,927	$	(220,810)	$	(76,679)	$	(309,599)	$	1,124,399
Comprehensive income	—	—		—		126,015		230		—		126,245
Exercise of stock options	9,150	—		(212)		—		—		359		147
Share-based compensation	—	—		7,257		—		—		—		7,257
Restricted stock vested and shares withheld	413,089	—		(25,892)		—		—		17,156		(8,736)

Treasury shares purchased	—	—		—		—		—		—		—
Other	8,387	5		(321)		—		—		316		—
Balance, June 26, 2022	56,524,082	$	565	$	1,711,759	$	(94,795)	$	(76,449)	$	(291,768)	$	1,249,312

See Notes to the Condensed Consolidated Financial Statements.

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VISTA OUTDOOR INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Three Months Ended June 25, 2023

(Amounts in thousands except per share data and unless otherwise indicated)

1. The Company and Basis of Presentation

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 outdoor recreation and shooting sports products. We operate through two reportable segments, Sporting Products and Outdoor Products. We are headquartered in Anoka, Minnesota and have manufacturing and distribution facilities in the United States, Canada, Mexico, and Puerto Rico along with international customer service, sales and sourcing operations in Asia and Europe. We have a robust global distribution network serving customers in over 100 countries. Vista Outdoor was incorporated in Delaware in 2014.

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. Management is responsible for the unaudited condensed consolidated financial statements included in this report, which in the opinion of management, include all adjustments necessary for a fair presentation of our financial position, results of operations, and cash flows for the periods and dates presented. These unaudited condensed consolidated financial statements 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, 2023 (“fiscal year 2023”), which was filed with the SEC on May 25, 2023.

Change in Presentation—In connection with our preparation of the condensed consolidated financial statements for the three months ended June 25, 2023, we changed the presentation of "Earnings before interest and income taxes" to "Operating income" within the consolidated statements of comprehensive income. This correction did not affect previously reported net income and is immaterial to the previously issued financial statements.

New Accounting Pronouncements—Our accounting policies are described in Note 1 of the audited consolidated financial statements in our Annual Report on Form 10-K for fiscal year 2023, which was filed with the SEC on May 25, 2023. Such significant accounting policies are applicable for periods prior to the following new accounting standards.

Accounting Standards Adopted During this Fiscal Year—In September 2022, the FASB issued ASU 2022-04, Liabilities—Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations, which requires a buyer in a supplier finance program to disclose qualitative and quantitative information about its program to allow a user of the financial statements to understand the program’s nature, activity during the period, changes from period to period, and potential magnitude. The amendments in ASU 2022-04 are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022, with the exception for the amendment on roll-forward information, which is effective for fiscal years beginning after December 15, 2023. The guidance should be applied retrospectively, except for the amendment on roll-forward information, which should be applied prospectively. This ASU was effective for us in the first quarter of fiscal year 2024, with the exception of the amendment on roll-forward information, which will be effective for us in our Form 10-K for fiscal year 2025. We adopted this ASU during the first quarter of fiscal 2024 and the adoption did not have an impact on our condensed consolidated financial statement disclosures.

2. Fair Value of Financial Instruments

The following section describes the valuation methodologies we use to measure our financial instruments at fair value on a recurring basis:

Derivative Financial Instruments

Hedging instruments (See Note 5, Derivative Financial Instruments) and ( Note 12, Long-term Debt) are re-measured on a recurring basis using broker quotes, daily market foreign currency rates and interest rate curves as applicable and are therefore categorized within Level 2 of the fair value hierarchy.

Contingent Consideration

In connection with some of our acquisitions, we recorded contingent consideration liabilities that can be earned by the sellers upon achievement of certain milestones. The liabilities are measured on a recurring basis and recorded at fair value, using a discounted cash flow analysis or a Monte Carlo simulation analysis in a risk-neutral framework with assumptions for volatility, market price of risk adjustment, risk-free rate, and cost of debt, utilizing revenue projections for the respective earn-

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out period, corresponding targets and approximate timing of payments as outlined in the purchase agreements. The inputs used to calculate the fair value of the contingent consideration liabilities are considered to be Level 3 inputs due to the lack of relevant market activity and significant management judgment. Changes in the fair value of the contingent consideration obligation results from changes in discount periods and rates, and changes in probability assumptions with respect to the likelihood of achieving the performance targets. The fair value adjustments are recorded in selling, general, and administrative in the condensed consolidated statements of comprehensive income. As of June 25, 2023, the estimated fair values of contingent consideration payable related to our acquisitions of QuietKat, Stone Glacier, and Fox Racing are $5,769, and $5,920 and $0, respectively. Cash payouts during the quarter related to our Fox Racing and QuietKat liabilities. See Note 4, Acquisitions, for additional information regarding the Fox Racing acquisition.

Contingent consideration liabilities are reported under the following captions in the condensed consolidated balance sheets:


	June 25, 2023		March 31, 2023
Other current liabilities	$	8,604	$	8,586
Other long-term liabilities	3,085		11,688
Total	$	11,689	$	20,274

Following is a summary of our contingent consideration liability Level 3 activity during fiscal year 2023:


Balance, March 31, 2023	$	20,274
Payments made	(8,585)
Balance, June 25, 2023	$	11,689

Disclosures about the Fair Value of Financial Instruments

The carrying amount of our receivables, inventory, accounts payable, and accrued liabilities as of June 25, 2023 and March 31, 2023 approximates fair value because of the short maturity of these instruments. The carrying values of cash and cash equivalents as of June 25, 2023 and March 31, 2023 are categorized within Level 1 of the fair value hierarchy.

The table below discloses information about carrying values and estimated fair value relating to our financial assets and liabilities:


	June 25, 2023				March 31, 2023
	Carrying amount		Fair value		Carrying amount		Fair value
Fixed-rate debt (1)	$	500,000	$	410,000	$	500,000	$	404,000
Variable-rate debt (2)	494,910		494,910		560,000		560,000

(1) Fixed rate debt —In fiscal year 2021, we issued $500,000 aggregate principal amount of 4.5% Senior Notes which will mature on March 15, 2029. These notes are unsecured and senior obligations. The fair value of the fixed-rate debt is based on market quotes for each issuance. We consider these to be Level 2 instruments. See Note 12, Long-term Debt, for additional information on long-term debt, including certain risks and uncertainties.

(2) Variable rate debt— The carrying value of the amounts outstanding under our 2022 ABL Revolving Credit Facility and 2022 Term Loan approximates the fair value because the interest rates are variable and reflective of market rates as of June 25, 2023. 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 12, Long-term Debt, for additional information on our credit facilities, including 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 written down to fair value when they are held for sale or determined to be impaired.

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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 our leases are recognized upon occurrence of the event, activity, or circumstance in the lease agreement on which those payments are assessed. Tenant improvement allowances are recorded as leasehold improvements with an offsetting adjustment included in our calculation of its right-of-use asset.

Many leases include one or more options to renew, with renewal terms that can extend the lease term up to five years. 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 were as follows:


	Balance Sheet Caption	June 25, 2023		March 31, 2023
Assets:
Operating lease assets	Operating lease assets	$	107,318	$	106,828

Liabilities:
Current:
Operating lease liabilities	Other current liabilities	$	15,898	$	16,351
Long-term:
Operating lease liabilities	Long-term operating lease liabilities	103,820		103,313
Total lease liabilities		$	119,718	$	119,664

The components of lease expense are recorded to cost of sales and selling, general, and administrative expenses in the condensed consolidated statements of comprehensive income. The components of lease expense were as follows:


	Three months ended
	June 25, 2023		June 26, 2022
Fixed operating lease costs (1)	$	7,101	$	5,805
Variable operating lease costs	1,210		463
Operating and sub-lease income	(192)		(151)
Net Lease costs	$	8,119	$	6,117

(1) Includes short-term leases, which are immaterial.

The weighted average remaining lease term and weighted average discount rate is as follows:

June 25, 2023

March 31, 2023

Weighted Average Remaining Lease Term (Years):

Operating leases

9.60

9.71

Weighted Average Discount Rate:

Operating leases

SEC Form 10-Q filed by Vista Outdoor Inc.