UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
ý | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the quarterly period ended July 2, 2017 | ||
OR | ||
o | 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 (State or other jurisdiction of incorporation or organization) | 47-1016855 (I.R.S. Employer Identification No.) | |
262 N University Drive Farmington, UT | 84025 | |
(Address of principal executive offices) | (Zip Code) | |
Registrant's telephone number, including area code: (801) 447-3000
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 ý No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes ý No o
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 ý | Accelerated Filer o | Non-Accelerated Filer o (Do not check if a smaller reporting company) | Smaller reporting company o | Emerging growth company o | ||||
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. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No ý
As of August 7, 2017, there were 57,047,196 shares of the registrant's voting common stock outstanding.
TABLE OF CONTENTS
PART I— FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
VISTA OUTDOOR INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(unaudited)
Quarter ended | ||||||||
(Amounts in thousands except per share data) | July 2, 2017 | July 3, 2016 | ||||||
Sales, net | $ | 568,749 | $ | 630,269 | ||||
Cost of sales | 422,191 | 458,892 | ||||||
Gross profit | 146,558 | 171,377 | ||||||
Operating expenses: | ||||||||
Research and development | 7,791 | 7,831 | ||||||
Selling, general, and administrative | 99,426 | 104,444 | ||||||
Income before interest and income taxes | 39,341 | 59,102 | ||||||
Interest expense, net | (12,393 | ) | (11,963 | ) | ||||
Income before income taxes | 26,948 | 47,139 | ||||||
Income tax provision | 10,296 | 18,015 | ||||||
Net income | $ | 16,652 | $ | 29,124 | ||||
Earnings per common share: | ||||||||
Basic | $ | 0.29 | $ | 0.48 | ||||
Diluted | $ | 0.29 | $ | 0.48 | ||||
Weighted-average number of common shares outstanding: | ||||||||
Basic | 56,916 | 60,384 | ||||||
Diluted | 56,957 | 60,715 | ||||||
Net income (from above) | $ | 16,652 | $ | 29,124 | ||||
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 $163 and $162, respectively. | (274 | ) | (274 | ) | ||||
Reclassification of net actuarial loss for pension and postretirement benefit plans recorded to net income, net of tax expense of $(666) and $(734), respectively. | 1,122 | 1,236 | ||||||
Valuation adjustment for pension and postretirement benefit plans, net of tax benefit of $2,154 and $0, respectively | (3,628 | ) | — | |||||
Change in derivatives, net of tax expense of $(14) and $0, respectively. | 23 | — | ||||||
Change in cumulative translation adjustment, net of tax benefit of $0 and $0, respectively. | 8,571 | (4,799 | ) | |||||
Total other comprehensive income (loss) | 5,814 | (3,837 | ) | |||||
Comprehensive income | $ | 22,466 | $ | 25,287 | ||||
See Notes to the Condensed Consolidated Financial Statements.
2
VISTA OUTDOOR INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
(Amounts in thousands except share data) | July 2, 2017 | March 31, 2017 | ||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 53,550 | $ | 45,075 | ||||
Net receivables | 454,789 | 450,715 | ||||||
Net inventories | 542,880 | 562,795 | ||||||
Income tax receivable | 17,944 | 25,658 | ||||||
Other current assets | 26,639 | 25,604 | ||||||
Total current assets | 1,095,802 | 1,109,847 | ||||||
Net property, plant, and equipment | 272,773 | 272,346 | ||||||
Goodwill | 861,114 | 857,631 | ||||||
Net intangible assets | 700,839 | 708,530 | ||||||
Deferred charges and other non-current assets | 30,779 | 28,393 | ||||||
Total assets | $ | 2,961,307 | $ | 2,976,747 | ||||
LIABILITIES AND EQUITY | ||||||||
Current liabilities: | ||||||||
Current portion of long-term debt | $ | 32,000 | $ | 32,000 | ||||
Accounts payable | 102,098 | 127,718 | ||||||
Accrued compensation | 31,773 | 33,663 | ||||||
Federal excise tax | 26,092 | 30,082 | ||||||
Other accrued liabilities | 130,022 | 122,926 | ||||||
Total current liabilities | 321,985 | 346,389 | ||||||
Long-term debt | 1,075,175 | 1,089,252 | ||||||
Deferred income tax liabilities | 159,444 | 160,765 | ||||||
Accrued pension and postemployment benefits | 62,710 | 64,230 | ||||||
Other long-term liabilities | 71,360 | 71,046 | ||||||
Total liabilities | 1,690,674 | 1,731,682 | ||||||
Commitments and contingencies (Notes 10 and 13) | ||||||||
Common stock—$.01 par value: | ||||||||
Authorized—500,000,000 shares | ||||||||
Issued and outstanding — 57,030,534 shares at July 2, 2017 and 57,014,319 shares at March 31, 2017 | 570 | 571 | ||||||
Additional paid-in capital | 1,755,119 | 1,752,903 | ||||||
Accumulated deficit | (91,381 | ) | (108,033 | ) | ||||
Accumulated other comprehensive loss | (107,178 | ) | (112,992 | ) | ||||
Common stock in treasury, at cost — 6,933,905 shares held at July 2, 2017 and 6,950,120 shares held at March 31, 2017 | (286,497 | ) | (287,384 | ) | ||||
Total stockholders' equity | 1,270,633 | 1,245,065 | ||||||
Total liabilities and stockholders' equity | $ | 2,961,307 | $ | 2,976,747 | ||||
See Notes to the Condensed Consolidated Financial Statements.
3
VISTA OUTDOOR INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Three months ended | ||||||||
(Amounts in thousands) | July 2, 2017 | July 3, 2016 | ||||||
Operating Activities: | ||||||||
Net income | $ | 16,652 | $ | 29,124 | ||||
Adjustments to net income to arrive at cash provided by (used for) operating activities: | ||||||||
Depreciation | 13,552 | 13,676 | ||||||
Amortization of intangible assets | 9,110 | 10,106 | ||||||
Amortization of deferred financing costs | 728 | 2,172 | ||||||
Deferred income taxes | 2 | 52 | ||||||
Loss on disposal of property, plant, and equipment | 77 | 41 | ||||||
Stock-based compensation | 3,357 | 3,310 | ||||||
Changes in assets and liabilities, net of acquisition of businesses: | ||||||||
Net receivables | (2,323 | ) | (12,908 | ) | ||||
Net inventories | 17,550 | (57,697 | ) | |||||
Accounts payable | (20,953 | ) | (33,196 | ) | ||||
Accrued compensation | (2,559 | ) | (19,322 | ) | ||||
Accrued income taxes | 8,423 | 14,396 | ||||||
Federal excise tax | (4,036 | ) | 737 | |||||
Pension and other postretirement benefits | (4,841 | ) | 579 | |||||
Other assets and liabilities | 4,170 | 26,772 | ||||||
Cash provided by (used for) operating activities | 38,909 | (22,158 | ) | |||||
Investing Activities: | ||||||||
Capital expenditures | (16,430 | ) | (21,006 | ) | ||||
Acquisition of businesses, net of cash acquired | — | (405,943 | ) | |||||
Proceeds from the disposition of property, plant, and equipment | 13 | 34 | ||||||
Cash used for investing activities | (16,417 | ) | (426,915 | ) | ||||
Financing Activities: | ||||||||
Borrowings on line of credit | 145,000 | 115,000 | ||||||
Payments made on line of credit | (150,000 | ) | (25,000 | ) | ||||
Proceeds from issuance of long-term debt | — | 307,500 | ||||||
Payments made on long-term debt | (8,000 | ) | (8,000 | ) | ||||
Payments made for debt issuance costs | (1,805 | ) | (3,660 | ) | ||||
Purchase of treasury shares | — | (22,058 | ) | |||||
Proceeds from employee stock compensation plans | 298 | — | ||||||
Cash provided by (used for) financing activities | (14,507 | ) | 363,782 | |||||
Effect of foreign exchange rate fluctuations on cash | 490 | (401 | ) | |||||
(Decrease) increase in cash and cash equivalents | 8,475 | (85,692 | ) | |||||
Cash and cash equivalents at beginning of period | 45,075 | 151,692 | ||||||
Cash and cash equivalents at end of period | $ | 53,550 | $ | 66,000 | ||||
Supplemental Cash Flow Disclosures: | ||||||||
Non-cash investing activity: | ||||||||
Capital expenditures included in accounts payable | $ | 5,598 | $ | 2,065 | ||||
Non-cash financing activity: | ||||||||
Treasury shares purchased included in other accrued liabilities | $ | — | $ | 998 | ||||
See Notes to the Condensed Consolidated Financial Statements.
4
VISTA OUTDOOR INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(unaudited)
Common Stock $.01 Par Value | |||||||||||||||||||||||||||
(Amounts in thousands except share data) | Shares | Amount | Additional Paid-In Capital | (Accumulated Deficit) Retained Earnings | Accumulated Other Comprehensive Loss | Treasury Stock | Total Equity | ||||||||||||||||||||
Balance, March 31, 2016 | 60,825,914 | $ | 608 | $ | 1,743,371 | $ | 166,421 | $ | (110,214 | ) | $ | (140,019 | ) | $ | 1,660,167 | ||||||||||||
Comprehensive income (loss) | — | — | — | 29,124 | (3,837 | ) | — | 25,287 | |||||||||||||||||||
Restricted stock grants net of forfeitures | (11,344 | ) | — | (141 | ) | — | — | 37 | (104 | ) | |||||||||||||||||
Share-based compensation | — | — | 3,310 | — | — | — | 3,310 | ||||||||||||||||||||
Restricted stock vested and shares withheld | 912 | — | (71 | ) | — | — | (548 | ) | (619 | ) | |||||||||||||||||
Treasury stock purchased | (461,525 | ) | — | — | — | — | (22,277 | ) | (22,277 | ) | |||||||||||||||||
Other | 5,277 | (5 | ) | — | — | — | — | (5 | ) | ||||||||||||||||||
Balance, July 3, 2016 | 60,359,234 | $ | 603 | $ | 1,746,469 | $ | 195,545 | $ | (114,051 | ) | $ | (162,807 | ) | $ | 1,665,759 | ||||||||||||
Balance, March 31, 2017 | 57,014,319 | $ | 571 | $ | 1,752,903 | $ | (108,033 | ) | $ | (112,992 | ) | $ | (287,384 | ) | $ | 1,245,065 | |||||||||||
Comprehensive income | — | — | — | 16,652 | 5,814 | — | 22,466 | ||||||||||||||||||||
Exercise of stock options | 18,476 | — | (465 | ) | — | — | 763 | 298 | |||||||||||||||||||
Restricted stock grants net of forfeitures | (16,286 | ) | — | (89 | ) | — | — | (357 | ) | (446 | ) | ||||||||||||||||
Share-based compensation | — | — | 3,357 | — | — | — | 3,357 | ||||||||||||||||||||
Restricted stock vested and shares withheld | 6,827 | — | (423 | ) | — | — | 177 | (246 | ) | ||||||||||||||||||
Employee stock purchase plan | 6,510 | — | (130 | ) | — | — | 269 | 139 | |||||||||||||||||||
Other | 688 | (1 | ) | (34 | ) | — | — | 35 | — | ||||||||||||||||||
Balance, July 2, 2017 | 57,030,534 | $ | 570 | $ | 1,755,119 | $ | (91,381 | ) | $ | (107,178 | ) | $ | (286,497 | ) | $ | 1,270,633 | |||||||||||
See Notes to the Condensed Consolidated Financial Statements.
5
VISTA OUTDOOR INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
Quarter ended July 2, 2017
(Amounts in thousands except share and per share data unless otherwise indicated)
1. Basis of Presentation and Responsibility for Interim Financial Statements
Nature of Operations. Vista Outdoor Inc. (together with our subsidiaries, "we", "our", and "us") is a leading global designer, manufacturer, and marketer of consumer products in the growing outdoor sports and recreation markets. We operate in two segments, Outdoor Products and Shooting Sports. Vista Outdoor is headquartered in Farmington, Utah and has manufacturing operations and facilities in 13 U.S. States, Canada, Mexico, and Puerto Rico along with international customer service, sales, and sourcing operations in Asia, Australia, Canada, and Europe. Vista Outdoor was incorporated in Delaware in 2014.
This Quarterly Report on Form 10-Q should be read in conjunction with our consolidated and combined financial statements and notes included in our annual report on Form 10-K for the fiscal year ended March 31, 2017.
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 can be condensed or omitted. Our accounting policies are described in the notes to the consolidated and combined financial statements in our Annual Report on Form 10-K for the fiscal year ended March 31, 2017 (“fiscal 2017”). Management is responsible for the condensed consolidated financial statements included in this document, which are unaudited but, in the opinion of management, include all adjustments necessary for a fair presentation of our financial position as of July 2, 2017 and March 31, 2017, our results of operations and cash flows for the quarters ended July 2, 2017 and July 3, 2016.
New Accounting Pronouncements. On May 28, 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2014-09 Revenue from Contracts with Customers (Topic 606), which supersedes existing revenue recognition requirements. The new guidance will be effective for the company in the first quarter of our fiscal 2019 (beginning April 1, 2018). We continue to assess the impact of the standard on our financial statements. We currently believe that the majority of our businesses and revenue streams will not be impacted; although there could be minor changes to the timing of recognition of revenues related to warranty and certain discount programs. We tentatively plan to adopt this standard using the modified retrospective transition method. Under this method, we will recognize the cumulative effect of the changes in retained earnings at the date of adoption, but will not restate prior periods.
On February 25, 2016, the FASB issued ASU 2016-02, Leases. The new guidance was issued to increase transparency and comparability among companies by reporting most leases on the balance sheet and by expanding disclosure requirements. Based on the current effective dates, the new guidance would apply in the first quarter of our fiscal 2020. We are in the process of evaluating the effect of adoption on our financial statements.
Other than those noted above and in our fiscal 2017 financial statements, there are no other new accounting pronouncements that are expected to have a significant impact on our condensed consolidated financial statements.
2. Fair Value of Financial Instruments
The current authoritative guidance on fair value prescribes a framework for measuring fair value, establishes a fair value hierarchy based on the inputs used to measure fair value, and requires disclosures about the use of fair value measurements. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or 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 literature 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 create the following fair value 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.
6
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)
(Amounts in thousands except share and per share data unless otherwise indicated)
Level 3—Significant inputs to the valuation model are unobservable.
The following section describes the valuation methodologies we used 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 long-term debt is based on market quotes for the outstanding notes. We consider these to be Level 2 instruments.
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 10 for further details.
Contingent Consideration—The acquisition-related contingent consideration liability represents the estimated fair value of additional future earn-outs payable for acquisitions of businesses that included earn-out clauses. The valuation of the contingent consideration will be evaluated on an ongoing basis and is based on management estimates and entity-specific assumptions which are considered Level 3 inputs. As of July 2, 2017, there was no value for the contingent consideration related to the Jimmy Styks acquisition. See Note 4 for further details.
The following table presents our financial assets and liabilities that are not measured at fair value on a recurring basis. The carrying values and estimated fair values were as follows:
July 2, 2017 | March 31, 2017 | |||||||||||||||
Carrying amount | Fair value | Carrying amount | Fair value | |||||||||||||
Fixed-rate debt | $ | 350,000 | $ | 360,252 | $ | 350,000 | $ | 341,250 | ||||||||
Variable-rate debt | 770,000 | 770,000 | 783,000 | 783,000 | ||||||||||||
3. Earnings Per Share
The computation of earnings per share ("EPS") includes Basic EPS computed based upon the weighted average number of common shares outstanding for each period. Diluted EPS is computed based on the weighted average number of common shares and common equivalent shares. Common equivalent shares represent the effect of stock-based awards during each period presented, which, if exercised or earned, would have a dilutive effect on EPS.
In computing EPS for the quarters ended July 2, 2017 and July 3, 2016, earnings, as reported for each respective period, is divided by:
Quarter ended | ||||||
(in thousands) | July 2, 2017 | July 3, 2016 | ||||
Basic EPS shares outstanding | 56,916 | 60,384 | ||||
Dilutive effect of stock-based awards | 41 | 331 | ||||
Diluted EPS shares outstanding | 56,957 | 60,715 | ||||
Shares excluded from the calculation of diluted EPS because the option exercise/threshold price was greater than the average market price of the common shares | 358 | 71 | ||||
Share Repurchases
In fiscal 2015, our Board of Directors authorized a share repurchase program of up to $200,000 worth of shares of our common stock, which was completed during fiscal 2017. Our Board of Directors then authorized a new share repurchase program of up to $100,000 worth of our common stock, executable through March 31, 2018, which was completed during fiscal 2017. The purchase authorization allowed for the shares to be purchased from time to time in open market, block purchase, or negotiated transactions, subject to compliance with applicable laws and regulations. The repurchase authorization also allowed us to make repurchases under Rule 10b5-1 of the Securities Exchange Act of 1934. We had no repurchases of shares during the quarter ended July 2, 2017. During the quarter ended July 3, 2016, we repurchased 461,525 shares for $22,277.
7
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Continued)
(Amounts in thousands except share and per share data unless otherwise indicated)
4. Acquisitions
In accordance with the accounting standards for business combinations, the results of acquired businesses are included in our consolidated condensed financial statements from the date of acquisition. The purchase price for each acquisition is allocated to the acquired assets and liabilities based on fair value. The excess purchase price over estimated fair value of the net assets acquired is recorded as goodwill.
Acquisition of Camp Chef
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, we paid $60,000 subject to customary working capital adjustments, utilizing cash on hand and borrowings under our existing credit facility. An additional $4,000 has been deferred and will be paid in equal installments on the first, second and third anniversary of the closing date, and $10,000 will be payable if incremental profitability growth milestones are met and key members of Camp Chef management continue their employment with us. The $10,000 will be expensed over the three-year measurement period and paid at each milestone date. The preliminary purchase price allocation is subject to further refinement and may require significant adjustments to arrive at the final purchase price allocation. A majority of the goodwill generated in this acquisition will be deductible for tax purposes. Camp Chef is an immaterial acquisition to our company.
Acquisition of Action Sports
On April 1, 2016, we completed the acquisition of BRG Sports Inc.’s Action Sports division, operated by Bell Sports Corp. ("Action Sports"). The acquisition includes brands Bell, Giro, Blackburn, CoPilot, Krash, and Raskullz. Under the terms of the transaction, we paid $400,000, subject to customary working capital adjustments, utilizing cash on hand and borrowings under our existing credit facilities, and additional contingent consideration payable if incremental profitability growth milestones within the Bell Powersports product line are achieved. We determined a value of the future contingent consideration as of the acquisition date of $4,272, using a risk-neutral Monte Carlo simulation in an option pricing framework; the total amount paid may differ from this value. The option pricing model requires us to make assumptions including the risk-free rate, expected volatility, profitability growth, and expected life. The risk-free rate is based on U.S. Treasury zero-coupon issues with a remaining term that approximates the expected life assumed at the date of grant. The expected option life is based on the contractual term of the agreement. Expected volatility is based on the average volatility of similar public companies' stock over the past two years. The profitability growth is based on simulated estimates of future performance of the business using a geometric Brownian risk-neutral framework. As of July 2, 2017, the value of the future contingent consideration was $4,886. The increase from the original estimate was primarily a result of improved profitability forecasts over the remainder of the earnout period.
Action Sports remains headquartered in Scotts Valley, California and operates facilities primarily in the U.S., Canada, and Asia. The acquisition of Action Sports includes more than 600 employees worldwide. The purchase price allocation was finalized in the fourth quarter of fiscal 2017. A portion of the goodwill generated in this acquisition will be deductible for tax purposes.
8
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)
(Amounts in thousands except share and per share data unless otherwise indicated)
Allocation of Consideration Transferred to Net Assets Acquired for Action Sports:
The following amounts represent the final determination of the fair value of identifiable assets acquired and liabilities for our acquisition of Action Sports. The purchase price allocation was completed during the quarter ended March 31, 2017.
Action Sports Final Purchase Price Allocation:
April 1, 2016 | ||||||||
Purchase price net of cash acquired: | ||||||||
Cash paid | $ | 400,000 | ||||||
Estimated earnout value | 4,272 | |||||||
Cash received for working capital | (1,289 | ) | ||||||
Total purchase price | 402,983 | |||||||
Fair value of assets acquired: | ||||||||
Receivables | $ | 78,090 | ||||||
Inventories | 56,527 | |||||||
Tradename, customer relationship, and technology intangibles | 155,100 | |||||||
Property, plant, and equipment | 34,114 | |||||||
Other assets | 6,425 | |||||||
Total assets | 330,256 | |||||||
Fair value of liabilities assumed: | ||||||||
Accounts payable | 30,240 | |||||||
Deferred tax liabilities | 43,991 | |||||||
Other liabilities | 33,168 | |||||||
Total liabilities | 107,399 | |||||||
Net assets acquired | 222,857 | |||||||
Goodwill | $ | 180,126 | ||||||
5. Net Receivables
Net receivables are summarized as follows:
July 2, 2017 | March 31, 2017 | |||||||
Trade receivables | $ | 477,080 | $ | 472,233 | ||||
Other receivables | 2,106 | 3,136 | ||||||
Less: allowance for doubtful accounts and discounts | (24,397 | ) | (24,654 | ) | ||||
Net receivables | $ | 454,789 | $ | 450,715 | ||||
As of July 2, 2017 and March 31, 2017, Walmart represented 17% and 13%, respectively, of the total trade receivables balance. No other customer represented more than 10% of total trade receivables balance as of July 2, 2017 and March 31, 2017.
9
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)
(Amounts in thousands except share and per share data unless otherwise indicated)
6. Net Inventories
Net inventories consist of the following:
July 2, 2017 | March 31, 2017 | |||||||
Raw materials | $ | 103,862 | $ | 101,635 | ||||
Work in process | 47,212 | 51,004 | ||||||
Finished goods | 391,806 | 410,156 | ||||||
Net inventories | $ | 542,880 | $ | 562,795 | ||||
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 within deferred charges and other non-current assets and totaled $27,949 and $23,504 as of July 2, 2017 and March 31, 2017, respectively. The long-term inventories are recorded net of inventory reserves of $17,844 and $18,759 as of July 2, 2017 and March 31, 2017, respectively.
7. Accumulated Other Comprehensive Loss
The components of AOCL, net of income taxes, are as follows:
July 2, 2017 | March 31, 2017 | ||||||
Pension and other postretirement benefits | $ | (59,709 | ) | $ | (56,929 | ) | |
Derivatives | 23 | — | |||||
Cumulative translation adjustment | (47,492 | ) | (56,063 | ) | |||
Total AOCL | $ | (107,178 | ) | $ | (112,992 | ) | |
The following tables summarize the changes in the balance of AOCL, net of income tax:
Quarter ended July 2, 2017 | |||||||||||||||
Derivatives | Pension and other postretirement benefits | Cumulative translation adjustment | Total | ||||||||||||
Beginning balance in AOCL | $ | — | $ | (56,929 | ) | $ | (56,063 | ) | $ | (112,992 | ) | ||||
Net actuarial losses reclassified from AOCL (1) | — | 1,122 | — | 1,122 | |||||||||||
Prior service costs reclassified from AOCL (1) | (274 | ) | — | (274 | ) | ||||||||||
Valuation adjustment for pension and postretirement benefit plans(2) | — | (3,628 | ) | — | (3,628 | ) | |||||||||
Net increase in fair value of derivatives | 23 | — | — | 23 | |||||||||||
Net change in cumulative translation adjustment | — | — | 8,571 | 8,571 | |||||||||||
Ending balance in AOCL | $ | 23 | $ | (59,709 | ) | $ | (47,492 | ) | $ | (107,178 | ) | ||||
(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) | See Note 11 for a description of the pension curtailment gain recognized in the quarter ended July 2, 2017. |
10
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)
(Amounts in thousands except share and per share data unless otherwise indicated)
Quarter ended July 3, 2016 | |||||||||||
Pension and other postretirement benefits | Cumulative translation adjustment | Total | |||||||||
Beginning balance in AOCL | $ | (63,667 | ) | $ | (46,547 | ) | $ | (110,214 | ) | ||
Net actuarial losses reclassified from AOCL (1) | 1,236 | — | 1,236 | ||||||||
Prior service costs reclassified from AOCL (1) | (274 | ) | — | (274 | ) | ||||||
Net change in cumulative translation adjustment | — | (4,799 | ) | (4,799 | ) | ||||||
Ending balance in AOCL | $ | (62,705 | ) | $ | (51,346 | ) | $ | (114,051 | ) | ||
(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. |
8. Goodwill and Net Intangible Assets
The changes in the carrying amount of goodwill by segment were as follows:
Outdoor Products | Shooting Sports | Total | ||||||||||
Balance, March 31, 2017 | $ | 652,896 | $ | 204,735 | $ | 857,631 | ||||||
Effect of foreign currency exchange rates | 3,331 | 152 | 3,483 | |||||||||
Balance, July 2, 2017 | $ | 656,227 | $ | 204,887 | $ | 861,114 | ||||||
The goodwill recorded within the Outdoor Products segment is presented net of $401,706 of accumulated impairment losses of which $47,791 was recorded prior to fiscal 2015 and $353,915 was recorded in fiscal 2017. The goodwill recorded within the Shooting Sports segment is presented net of $41,020 of accumulated impairment losses, which were recorded in fiscal 2015.
Net intangibles consisted of the following:
July 2, 2017 | March 31, 2017 | |||||||||||||||||||||||
Gross carrying amount | Accumulated amortization | Total | Gross carrying amount | Accumulated amortization | Total | |||||||||||||||||||
Trade names | $ | 106,159 | $ | (18,986 | ) | $ | 87,173 | $ | 106,159 | $ | (17,048 | ) | $ | 89,111 | ||||||||||
Patented technology | 19,066 | (7,978 | ) | 11,088 | 19,066 | (7,703 | ) | 11,363 | ||||||||||||||||
Customer relationships and other | 372,966 | (85,355 | ) | 287,611 | 371,099 | (78,010 | ) | 293,089 | ||||||||||||||||
Total | 498,191 | (112,319 | ) | 385,872 | 496,324 | (102,761 | ) | 393,563 | ||||||||||||||||
Non-amortizing trade names | 314,967 | — | 314,967 | 314,967 | — | 314,967 | ||||||||||||||||||
Net intangibles | $ | 813,158 | $ | (112,319 | ) | $ | 700,839 | $ | 811,291 | $ | (102,761 | ) | $ | 708,530 | ||||||||||
The assets in the table above are being amortized using a straight-line method over a weighted average remaining period of approximately 12.6 years. The amount of amortizing tradename and technology intangible assets for the Outdoor Products segment is presented net of a $61,054 impairment charge recorded in fiscal 2017. The amount of non-amortizing tradename intangible assets in the Outdoor Products and Shooting Sports segments are presented net of impairment losses of $34,230 recorded in fiscal 2017 and $11,200 recorded in fiscal 2015, respectively. Amortization expense for the quarters ended July 2, 2017 and July 3, 2016 was $9,110 and $10,106, respectively.
11
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)
(Amounts in thousands except share and per share data unless otherwise indicated)
We expect amortization expense related to these assets to be as follows:
Remainder of fiscal 2018 | $ | 27,666 | ||
Fiscal 2019 | 34,144 | |||
Fiscal 2020 | 33,317 | |||
Fiscal 2021 | 33,301 | |||
Fiscal 2022 | 33,293 | |||
Thereafter | 224,151 | |||
Total | $ | 385,872 | ||
9. Other Current and Non-current Liabilities
Other current and non-current liabilities consisted of the following:
July 2, 2017 | March 31, 2017 | |||||||
Other current liabilities: | ||||||||
Accrual for in-transit inventory | $ | 25,427 | $ | 17,505 | ||||
Rebate | 22,433 | 19,325 | ||||||
Other | 82,162 | 86,096 | ||||||
Total other current liabilities | $ | 130,022 | $ | 122,926 | ||||
Other non-current liabilities: | ||||||||
Non-current portion of accrued income tax liability | $ | 33,469 | $ | 32,842 | ||||
Other | 37,891 | 38,204 | ||||||
Total other non-current liabilities | $ | 71,360 | $ | 71,046 | ||||
We provide consumer warranties against manufacturing defects on certain products within the Outdoor Products and Shooting Sports segments with warranty periods ranging typically from one year to a lifetime. 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 period presented:
Balance, March 31, 2017 | $ | 10,014 | |
Payments made | (915 | ) | |
Warranties issued | 1,274 | ||
Changes related to preexisting warranties | 89 | ||
Balance, July 2, 2017 | $ | 10,462 | |
12
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)
(Amounts in thousands except share and per share data unless otherwise indicated)
10. Long-term Debt
Long-term debt, including the current portion, consisted of the following:
July 2, 2017 | March 31, 2017 | |||||||
Credit Agreement: | ||||||||
Term Loan | $ | 600,000 | $ | 608,000 | ||||
Revolving Credit Facility | 170,000 | 175,000 | ||||||
Total principal amount of Credit Agreement | 770,000 | 783,000 | ||||||
5.875% Senior Notes | 350,000 | 350,000 | ||||||
Principal amount of long-term debt | 1,120,000 | 1,133,000 | ||||||
Less: unamortized deferred financing costs | (12,825 | ) | (11,748 | ) | ||||
Carrying amount of long-term debt | 1,107,175 | 1,121,252 | ||||||
Less: current portion | (32,000 | ) | (32,000 | ) | ||||
Carrying amount of long-term debt, excluding current portion | $ | 1,075,175 | $ | 1,089,252 | ||||
Credit Agreement
On April 1, 2016, we entered into an Amended and Restated Credit Agreement (the “Credit Agreement”), which replaced our 2014 Credit Agreement. The Credit Agreement is comprised of a Term A Loan of $640,000 and a $400,000 Revolving Credit Facility, both of which mature on April 1, 2021. The Term A Loan is subject to quarterly principal payments of $8,000, with the remaining balance due on April 1, 2021. Substantially all domestic tangible and intangible assets of Vista Outdoor and our 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 Credit Agreement. Borrowings under the Credit Agreement bear interest at a rate equal to either the sum of a base rate plus a specified margin or the sum of a Eurodollar rate plus a specified margin. Each margin is based on our consolidated leverage ratio, as defined in the Credit Agreement, and based on the ratio in effect as of July 2, 2017, the base rate margin was 1.00% and the Eurodollar margin was 2.00%. The weighted average interest rate for our borrowings under the Credit Agreement as of July 2, 2017 was 3.22%, excluding the impact of the interest rate swaps that are discussed below. We pay a commitment fee on the unused portion of the Revolving Credit Facility based on our consolidated leverage ratio, and based on the current ratio, this fee is 0.35%. As of July 2, 2017, we had $170,000 in borrowings against our $400,000 Revolving Credit Facility and had outstanding letters of credit of $25,854, which reduced amounts available on the Revolving Credit Facility to $204,146. Debt issuance costs of approximately $14,000 are being amortized over the term of the Credit Agreement.
In December 2014, we entered into a credit agreement (the "2014 Credit Agreement"), which was comprised of a Term A Loan of $350,000 and a Revolving Credit Facility of $400,000, both of which were to mature on February 9, 2020. During the quarter ended July 3, 2016, we refinanced this agreement as noted above. In connection with this transaction, we wrote off $1,521 of unamortized deferred debt issuance costs.
During the quarter ended July 2, 2017, we entered into an amendment to the Credit Agreement (the "Amendment") to amend, among other things, certain financial covenants. The Amendment provides that the Consolidated Leverage Ratio (as defined in the Credit Agreement) must not exceed the following levels on the last day of any fiscal quarter for the following periods: (i) from July 2, 2017 through December 30, 2018, 4.75 to 1.00; (ii) from March 31, 2019 through December 29, 2019, 4.25 to 1.00; and (iii) from March 31, 2020 and thereafter, 4.00 to 1.00. The Amendment also provides that the Consolidated Senior Secured Leverage Ratio (as defined in the Credit Agreement) must not exceed the following levels on the last day of any fiscal quarter for the following periods: (i) from July 2, 2017 through December 30, 2018, 3.50 to 1.00; and (ii) from March 31, 2019 and thereafter, 3.00 to 1.00. In addition, the limitation on Restricted Payments (as defined in the Credit Agreement) was amended so that it is equal to $150,000 plus proceeds of any equity issuances plus 50% of net income since April 1, 2017. The rate at which borrowings under the Revolving Credit Facility and Term A Loan bear interest was also amended so that borrowings bear interest at a rate equal to either the sum of a base rate plus a margin ranging from 0.50% to 1.50%, or the sum of a Eurodollar rate plus a margin ranging from 1.50% to 2.50%, with both margins varying depending on our Consolidated Leverage Ratio. We are also required to continue to pay a commitment fee for unused commitments under the Revolving Credit Facility, if any, at a rate ranging from 0.25% to 0.45% per annum depending on our Consolidated Leverage Ratio. Debt
13
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)
(Amounts in thousands except share and per share data unless otherwise indicated)
issuance costs related to the Amendment of approximately $1,800 are being amortized over the remaining term of the Credit Agreement.
5.875% Notes
On August 11, 2015, 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 these notes is payable semi-annually in arrears on April 1 and October 1 of each year, starting on April 1, 2016. We have the right to redeem some or all of these notes from time to time on or after October 1, 2018, at specified redemption prices. Prior to October 1, 2018, we may redeem some or all of these notes at a price equal to 100% of their principal amount plus accrued and unpaid interest to the date of redemption and a specified make-whole premium. In addition, prior to October 1, 2018, we may redeem up to 35% of the aggregate principal amount of these notes with the net cash proceeds of certain equity offerings, at a price equal to 105.875% of their principal amount plus accrued and unpaid interest to the date of redemption. Debt issuance costs of approximately $4,300 are being amortized to interest expense over 8 years, the term of the notes.
Rank and Guarantees
The Credit Agreement 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 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. The 5.875% Notes are fully and unconditionally guaranteed, jointly and severally, by our existing and future domestic subsidiaries that guarantee indebtedness under our Credit Agreement 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 subsidiary; |
• | if such subsidiary guarantor is designated as an “Unrestricted Subsidiary;” |
• | upon defeasance or satisfaction and discharge of the 5.875% Notes; or |
• | if such subsidiary guarantor has been released from its guarantees of indebtedness under the Credit Agreement and all capital markets debt securities. |
Interest Rate Swaps
During the quarter ended July 2, 2017, we entered into floating-to-fixed interest rate swap agreements in order to hedge our forecasted interest payments on our outstanding variable-rate debt. At July 2, 2017, we had the following cash flow hedge interest rate swaps in place:
Notional | Fair Value | Pay Fixed | Receive Floating | Maturity Date | ||||||||||
Non-amortizing swap | $ | 100,000 | $ | 2 | 1.519% | 1.226% | June 2019 | |||||||
Non-amortizing swap | 100,000 | 35 | 1.629% | 1.226% | June 2020 | |||||||||
The amount to be paid or received under these swaps is recorded as an adjustment to interest expense.
Cash Paid for Interest on Debt
Cash paid for interest on debt, including commitment fees, for the quarters ended July 2, 2017 and July 3, 2016 totaled $16,197 and $17,236, respectively.
14
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)
(Amounts in thousands except share and per share data unless otherwise indicated)
11. Employee Benefit Plans
The expense for employee benefit plans for the quarters ended July 2, 2017 and July 3, 2016 was $1,431 and $1,690, respectively. In addition to the employee benefit expense for the quarter ended July 2, 2017, we recognized a one-time gain of $5,783 associated with the pension curtailment, as discussed below. In aggregate, we recorded a net gain of $4,352 and an expense of $1,690 for the employee benefit plans during the quarters ended July 2, 2017 and July 3, 2016, respectively.
Employer Contributions. During the quarter ended July 2, 2017, we made the legally required contribution of $1,600 directly to the pension trust, and no contributions to our other postretirement benefit plans. We made no distributions directly to retirees under the non-qualified supplemental executive retirement plan. During the quarter ended July 3, 2016, we contributed $1,100 directly to the pension trust, made no contributions to our other postretirement benefit plans, and made distributions of $12 to retirees under the non-qualified supplemental executive retirement plan. We expect to make $7,200 in additional contributions directly to the pension trust, and we expect to contribute approximately $159 to our other postretirement benefit plans, and distribute approximately $11,125 directly to retirees under our non-qualified supplemental executive retirement plans, during the remainder of fiscal 2018.
Pension Curtailment. In June 2017, we announced changes to our qualified and non-qualified defined benefit pension plans. The benefits under the affected plans are determined by a cash balance formula that provides participating employees with an annual “pay credit” as a percentage of their eligible pay based on their age and eligible service. The curtailment is effective July 31, 2017, with employees receiving a pro-rated pay credit for 2017 and no future pay credits beginning in 2018. However, a participating employee’s benefit will continue to grow based on annual interest credits applied to the employee’s cash balance account until commencement of the employee’s benefit. As a result of the changes, we recognized a one-time gain of $5,783 during the quarter ended July 2, 2017.
12. Income Taxes
Our provision for income taxes includes federal, foreign, and state income taxes. Income tax provisions for interim periods are based on estimated effective annual income tax rates.
The income tax provisions for the quarters ended July 2, 2017 and July 3, 2016 represent effective tax rates of 38.2% and 38.2%, respectively. There was no change in the rate from the prior year quarter because of nondeductible acquisition costs in the prior year being offset by lower deductions in the current year related to stock based compensation.
We entered into a Tax Matters Agreement with Orbital ATK that governs the respective rights, responsibilities and obligations of Vista Outdoor and Orbital ATK after 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 as between the parties, the Tax Matters Agreement is not binding on the IRS.
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 which included Vista Outdoor. In addition, certain of our subsidiaries filed income tax returns in foreign jurisdictions. After the Spin-Off we are filing 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 are no longer subject to U.S. federal, state and local, or foreign income tax examinations by tax authorities prior to 2010. 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 is also currently auditing our tax return for the period that begins after the Spin-Off (February 9, 2015) and ends 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.
Although the timing and outcome of audit settlements are uncertain, it is reasonably possible that a $2,681 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 $1,776.
15
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)
(Amounts in thousands except share and per share data and unless otherwise indicated)
13. 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.
We have been identified as a potentially responsible party (“PRP”), along with other parties, in regulatory agency actions associated with hazardous waste sites. As a PRP, we may be required to pay a share of the costs of the investigation and clean-up of these sites. 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 $747 and $750 as of July 2, 2017 and March 31, 2017, 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.
14. Condensed Consolidating Financial Statements
The 5.875% Notes are guaranteed on an unsecured 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.
The parent company has no independent assets or operations. All of these guarantor subsidiaries are 100% owned by Vista Outdoor. These guarantees are senior or senior subordinated obligations, as applicable, of the applicable subsidiary guarantors. In conjunction with the registration of the 5.875% Notes the consolidating financial information of the guarantor and non-guarantor subsidiaries is presented on the following pages.
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 subsidiary;
• if such subsidiary guarantor is designated as an “Unrestricted Subsidiary;”
• upon defeasance or satisfaction and discharge of the 5.875% Notes; or
• | if such subsidiary guarantor has been released from its guarantees of indebtedness under the Credit Agreement and all capital markets debt securities. |
16
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)
(Amounts in thousands except share and per share data unless otherwise indicated)
VISTA OUTDOOR INC.
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(unaudited)
Quarter ended July 2, 2017 | ||||||||||||||||||||
(Amounts in thousands) | Parent Issuer | Guarantors | Non-Guarantors | Eliminations | Consolidated | |||||||||||||||
Sales, net | $ | — | $ | 539,559 | $ | 50,697 | $ | (21,507 | ) | $ | 568,749 | |||||||||
Cost of sales | — | 410,957 | 33,229 | (21,995 | ) | 422,191 | ||||||||||||||
Gross profit | — | 128,602 | 17,468 | 488 | 146,558 | |||||||||||||||
Operating expenses: | ||||||||||||||||||||
Research and development | — | 7,791 | — | — | 7,791 | |||||||||||||||
Selling, general, and administrative | — | 87,296 | 12,130 | — | 99,426 | |||||||||||||||
Income before interest and income taxes | — | 33,515 | 5,338 | 488 | 39,341 | |||||||||||||||
Equity in income of subsidiaries | 24,399 | 3,965 | — | (28,364 | ) | — | ||||||||||||||
Interest expense, net | (12,393 | ) | — | — | — | (12,393 | ) | |||||||||||||
Income before income taxes | 12,006 | 37,480 | 5,338 | (27,876 | ) | 26,948 | ||||||||||||||
Income tax provision (benefit) | (4,646 | ) | 13,081 | 1,706 | 155 | 10,296 | ||||||||||||||
Net income | $ | 16,652 | $ | 24,399 | $ | 3,632 | $ | (28,031 | ) | $ | 16,652 | |||||||||
Other comprehensive income, net of tax: | ||||||||||||||||||||
Net income (from above) | $ | 16,652 | $ | 24,399 | $ | 3,632 | $ | (28,031 | ) | $ | 16,652 | |||||||||
Total other comprehensive income | 5,814 | 5,814 | 8,571 | (14,385 | ) | 5,814 | ||||||||||||||
Comprehensive income | $ | 22,466 | $ | 30,213 | $ | 12,203 | $ | (42,416 | ) | $ | 22,466 | |||||||||
17
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)
(Amounts in thousands except share and per share data unless otherwise indicated)
VISTA OUTDOOR INC.
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS)
(unaudited)
Quarter ended July 3, 2016 | ||||||||||||||||||||
(Amounts in thousands) | Parent Issuer | Guarantors | Non-Guarantors | Eliminations | Consolidated | |||||||||||||||
Sales, net | $ | — | $ | 599,314 | $ | 54,594 | $ | (23,639 | ) | $ | 630,269 | |||||||||
Cost of sales | — | 445,549 | 36,742 | (23,399 | ) | 458,892 | ||||||||||||||
Gross profit | — | 153,765 | 17,852 | (240 | ) | 171,377 | ||||||||||||||
Operating expenses: | ||||||||||||||||||||
Research and development | — | 7,831 | — | — | 7,831 | |||||||||||||||
Selling, general, and administrative | — | 90,616 | 13,828 | — | 104,444 | |||||||||||||||
Income before interest and income taxes | — | 55,318 | 4,024 | (240 | ) | 59,102 | ||||||||||||||
Equity in income of subsidiaries | 36,601 | 2,459 | — | (39,060 | ) | — | ||||||||||||||
Interest expense, net | (11,963 | ) | — | — | — | (11,963 | ) | |||||||||||||
Income before income taxes | 24,638 | 57,777 | 4,024 | (39,300 | ) | 47,139 | ||||||||||||||
Income tax provision (benefit) | (4,486 | ) | 21,176 | 1,408 | (83 | ) | 18,015 | |||||||||||||
Net income | $ | 29,124 | $ | 36,601 | $ | 2,616 | $ | (39,217 | ) | $ | 29,124 | |||||||||
Other comprehensive income (loss), net of tax: | ||||||||||||||||||||
Net income (from above) | $ | 29,124 | $ | 36,601 | $ | 2,616 | $ | (39,217 | ) | $ | 29,124 | |||||||||
Total other comprehensive (loss) | (3,837 | ) | (3,837 | ) | (4,799 | ) | 8,636 | (3,837 | ) | |||||||||||
Comprehensive income (loss) | $ | 25,287 | $ | 32,764 | $ | (2,183 | ) | $ | (30,581 | ) | $ | 25,287 | ||||||||
18
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)
(Amounts in thousands except share and per share data unless otherwise indicated)
VISTA OUTDOOR INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(unaudited)
July 2, 2017 | ||||||||||||||||||||
(Amounts in thousands) | Parent Issuer | Guarantors | Non-Guarantors | Eliminations | Consolidated | |||||||||||||||
ASSETS | ||||||||||||||||||||
Current assets: | ||||||||||||||||||||
Cash and cash equivalents | $ | — | $ | 30,596 | $ | 22,954 | $ | — | $ | 53,550 | ||||||||||
Net receivables | — | 412,794 | 41,995 | — | 454,789 | |||||||||||||||
Due from affiliates, current | — | 1,027 | — | (1,027 | ) | — | ||||||||||||||
Net inventories | — | 491,742 | 55,660 | (4,522 | ) | 542,880 | ||||||||||||||
Income tax receivable | — | 12,991 | 1,640 | 3,313 | 17,944 | |||||||||||||||
Other current assets | — | 24,038 | 2,601 | — | 26,639 | |||||||||||||||
Total current assets | — | 973,188 | 124,850 | (2,236 | ) | 1,095,802 | ||||||||||||||
Net property, plant, and equipment | — | 263,280 | 9,493 | — | 272,773 | |||||||||||||||
Investment in subsidiaries | 2,571,297 | 204,266 | — | (2,775,563 | ) | — | ||||||||||||||
Goodwill | — | 749,898 | 111,216 | — | 861,114 | |||||||||||||||
Net intangible assets | — | 668,165 | 32,674 | — | 700,839 | |||||||||||||||
Long-term due from affiliates | — | 235,466 | — | (235,466 | ) | — | ||||||||||||||
Deferred charges and other non-current assets | — | 24,869 | 5,910 | — | 30,779 | |||||||||||||||
Total assets | $ | 2,571,297 | $ | 3,119,132 | $ | 284,143 | $ | (3,013,265 | ) | $ | 2,961,307 | |||||||||
LIABILITIES AND EQUITY | ||||||||||||||||||||
Current liabilities: | ||||||||||||||||||||
Current portion of long-term debt | $ | 32,000 | $ | — | $ | — | $ | — | $ | 32,000 | ||||||||||
Accounts payable | — | 95,138 | 6,960 | — | 102,098 | |||||||||||||||
Due to affiliates, current | — | — | 1,027 | (1,027 | ) | — | ||||||||||||||
Accrued compensation | — | 28,817 | 2,956 | — | 31,773 | |||||||||||||||
Federal excise tax | — | 24,318 | 1,774 | — | 26,092 | |||||||||||||||
Other accrued liabilities | — | 115,921 | 14,101 | — | 130,022 | |||||||||||||||
Total current liabilities | 32,000 | 264,194 | 26,818 | (1,027 | ) | 321,985 | ||||||||||||||
Long-term debt | 1,075,175 | — | — | — | 1,075,175 | |||||||||||||||
Deferred income tax liabilities | — | 150,452 | 7,336 | 1,656 | 159,444 | |||||||||||||||
Accrued pension and postemployment benefits | — | 62,710 | — | — | 62,710 | |||||||||||||||
Long-term due to affiliates | 193,489 | — | 41,977 | (235,466 | ) | — | ||||||||||||||
Other long-term liabilities | — | 69,688 | 1,672 | — | 71,360 | |||||||||||||||
Total liabilities | 1,300,664 | 547,044 | 77,803 | (234,837 | ) | 1,690,674 | ||||||||||||||
Equity | ||||||||||||||||||||
Total stockholders' equity | 1,270,633 | 2,572,088 | 206,340 | (2,778,428 | ) | 1,270,633 | ||||||||||||||
Total liabilities and stockholders' equity | $ | 2,571,297 | $ | 3,119,132 | $ | 284,143 | $ | (3,013,265 | ) | $ | 2,961,307 | |||||||||
19
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)
(Amounts in thousands except share and per share data unless otherwise indicated)
VISTA OUTDOOR INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(unaudited)
March 31, 2017 | ||||||||||||||||||||
(Amounts in thousands) | Parent Issuer | Guarantors | Non-Guarantors | Eliminations | Consolidated | |||||||||||||||
ASSETS | ||||||||||||||||||||
Current assets: | ||||||||||||||||||||
Cash and cash equivalents | $ | — | $ | 23,027 | $ | 22,048 | $ | — | $ | 45,075 | ||||||||||
Net receivables | — | 409,177 | 41,538 | — | 450,715 | |||||||||||||||
Due from affiliates, current | — | 1,787 | — | (1,787 | ) | — | ||||||||||||||
Net inventories | — | 510,754 | 57,050 | (5,009 | ) | 562,795 | ||||||||||||||
Income tax receivable | — | 22,394 | 1,303 | 1,961 | 25,658 | |||||||||||||||
Other current assets | — | 23,177 | 2,427 | — | 25,604 | |||||||||||||||
Total current assets | — | 990,316 | 124,366 | (4,835 | ) | 1,109,847 | ||||||||||||||
Net property, plant, and equipment | — | 262,711 | 9,635 | — | 272,346 | |||||||||||||||
Investment in subsidiaries | 2,552,948 | 196,547 | — | (2,749,495 | ) | — | ||||||||||||||
Goodwill | — | 749,898 | 107,733 | — | 857,631 | |||||||||||||||
Net intangible assets | — | 676,576 | 31,954 | — | 708,530 | |||||||||||||||
Long-term due from affiliates | — | 230,669 | — | (230,669 | ) | — | ||||||||||||||
Deferred charges and other non-current assets | — | 23,482 | 4,911 | — | 28,393 | |||||||||||||||
Total assets | $ | 2,552,948 | $ | 3,130,199 | $ | 278,599 | $ | (2,984,999 | ) | $ | 2,976,747 | |||||||||
LIABILITIES AND EQUITY | ||||||||||||||||||||
Current liabilities: | ||||||||||||||||||||
Current portion of long-term debt | $ | 32,000 | $ | — | $ | — | $ | — | $ | 32,000 | ||||||||||
Accounts payable | — | 117,650 | 10,068 | — | 127,718 | |||||||||||||||
Due to affiliates, current | — | — | 1,787 | (1,787 | ) | — | ||||||||||||||
Accrued compensation | — | 30,173 | 3,490 | — | 33,663 | |||||||||||||||
Federal excise tax | — | 29,042 | 1,040 | — | 30,082 | |||||||||||||||
Other accrued liabilities | — | 110,321 | 12,605 | — | 122,926 | |||||||||||||||
Total current liabilities | 32,000 | 287,186 | 28,990 | (1,787 | ) | 346,389 | ||||||||||||||
Long-term debt | 1,089,252 | — | — | — | 1,089,252 | |||||||||||||||
Deferred income tax liabilities | — | 153,636 | 6,979 | 150 | 160,765 | |||||||||||||||
Accrued pension and postemployment benefits | — | 64,230 | — | — | 64,230 | |||||||||||||||
Long-term due to affiliates | 186,631 | — | 44,038 | (230,669 | ) | — | ||||||||||||||
Other long-term liabilities | — | 69,384 | 1,662 | — | 71,046 | |||||||||||||||
Total liabilities | 1,307,883 | 574,436 | 81,669 | (232,306 | ) | 1,731,682 | ||||||||||||||
Equity | ||||||||||||||||||||
Total stockholders' equity | 1,245,065 | 2,555,763 | 196,930 | (2,752,693 | ) | 1,245,065 | ||||||||||||||
Total liabilities and stockholders' equity | $ | 2,552,948 | $ | 3,130,199 | $ | 278,599 | $ | (2,984,999 | ) | $ | 2,976,747 | |||||||||
20
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)
(Amounts in thousands except share and per share data unless otherwise indicated)
VISTA OUTDOOR INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(unaudited)
Quarter ended July 2, 2017 | ||||||||||||||||||||
(Amounts in thousands) | Parent Issuer | Guarantors | Non-Guarantors | Eliminations | Consolidated | |||||||||||||||
Operating Activities: | ||||||||||||||||||||
Cash provided by (used for) operating activities | $ | (7,018 | ) | $ | 40,269 | $ | 5,658 | $ | — | $ | 38,909 | |||||||||
Investing Activities: | ||||||||||||||||||||
Capital expenditures | — | (16,248 | ) | (182 | ) | — | (16,430 | ) | ||||||||||||
Due from affiliates | — | (16,452 | ) | — | 16,452 | — | ||||||||||||||
Acquisition of businesses, net of cash acquired | — | — | — | — | — | |||||||||||||||
Proceeds from the disposition of property, plant, and equipment | — | — | 13 | — | ||||||||||||||||