Vista Outdoor(VSTO) - 2019 Q3 - Quarterly Report

Financial Performance - Quarterly sales for the quarter ended December 30, 2018, were $467,771, a decrease from $581,204 for the same quarter in 2017, driven by lower Outdoor Products sales of $68,436 and Shooting Sports sales of $44,997[126]. - Total net sales for the quarter ended December 30, 2018, were $467,771, a decrease of 19.5% compared to $581,204 in the same quarter of 2017[146]. - Outdoor Products segment sales decreased by 23.2% to $226,442 for the quarter, primarily due to lower sales from the Eyewear business[146][147]. - Shooting Sports segment sales decreased by 15.7% to $241,329 for the quarter, attributed to lower demand for ammunition[146][148]. - Gross profit for the quarter ended December 30, 2018, was $94,236, down from $126,105 in the same quarter of 2017, primarily due to lower sales volumes and the sale of the Eyewear Brands[131]. - Total gross profit for the quarter was $94,236, down 25.3% from $126,105 in the prior year[153]. - Operating expenses increased significantly to $609,387, primarily due to goodwill and intangible asset impairments[157][158]. - Interest expense rose by 28.1% to $16,003 for the quarter, driven by higher average interest rates[160]. Impairments and Charges - The company recorded a pre-tax impairment charge of $432,612 during the fiscal quarter, including $327,772 related to goodwill and $104,840 related to intangible assets[131]. - A goodwill impairment of $429,395 was recorded for the Hunting and Shooting Accessories, Outdoor Recreation, and Action Sports reporting units due to lower projected sales and increased discount rates[138]. - Goodwill impairment in the Outdoor Recreation reporting unit amounted to $129,470, leaving $121,329 of remaining goodwill[140]. - The Action Sports reporting unit experienced a goodwill impairment of $159,916, resulting in no remaining goodwill[141]. Cash Flow and Financing - For the nine months ended December 30, 2018, cash provided by operating activities was $60,948, a decrease of $185,141 compared to $246,089 in the prior year period, primarily due to unfavorable changes in net working capital and decreased gross margin[168]. - Cash provided by investing activities was $121,049, a change of $164,522 compared to cash used of $43,473 in the prior year period, driven by the sale of Eyewear Brands and a decrease in planned capital expenditures[169]. - Cash used for financing activities was $166,230, a decrease of $19,668 from $185,898 in the prior year period, primarily due to additional debt payments in the prior year[170]. - As of December 30, 2018, total principal amount of long-term debt was $759,343, with total debt as a percentage of total capitalization at 53.3%[175]. - The company established a valuation allowance of $29,216 on deferred tax assets due to a cumulative loss position[164]. - The company expects its cash position, combined with anticipated cash flows and access to credit facilities, to be adequate for future growth and obligations over the next 12 months[172]. - The company does not anticipate material impacts on liquidity sources in the near future, although market conditions could affect future borrowings[173]. Strategic Focus and Market Conditions - The outdoor recreation industry presents attractive growth opportunities, with a focus on expanding e-commerce presence and leveraging acquisitions to drive growth across various channels[129]. - The shooting sports industry, representing approximately half of total sales, has faced a market downturn influenced by the political environment and rising commodity prices[130]. - The company plans to focus on core product categories, including ammunition and outdoor cooking products, while exploring strategic options for non-core assets[125]. - The company has a strategic sourcing and pricing strategy to mitigate risks from commodity price fluctuations, particularly in metals like copper, zinc, and lead[191]. - The company anticipates introducing new products and enhancing brand differentiation through focused R&D and marketing investments[129]. Sales and Customer Relationships - Sales to Walmart accounted for 14% of total sales for both the nine months ended December 30, 2018, and December 31, 2017[145]. - Sales to Walmart accounted for 14% of total sales in the nine months ended December 30, 2018, consistent with the prior year[188]. Compliance and Internal Controls - The Chief Executive Officer and Chief Financial Officer evaluated the effectiveness of disclosure controls and procedures as of December 30, 2018, concluding they are effective[196]. - There were no changes in internal control over financial reporting during the quarter ended December 30, 2018, that materially affected internal control[197]. - The company is subject to various legal proceedings but does not consider any currently pending matters to be material to its business[183].