Vista Outdoor(US:VSTO)2024-11-07 22:06PART I Unaudited Financial Statements This section presents Vista Outdoor's unaudited condensed consolidated financial statements, including balance sheets, income statements, cash flows, and equity, along with detailed notes on significant accounting policies and events Condensed Consolidated Balance Sheets Total assets decreased to $2.35 billion, driven by reduced long-term debt, while stockholders' equity increased to $1.23 billion as of September 30, 2024 Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | September 30, 2024 | March 31, 2024 | | :--- | :--- | :--- | | Total Current Assets | $1,082,659 | $1,075,122 | | Total Assets | $2,353,633 | $2,402,380 | | Total Current Liabilities | $372,957 | $385,298 | | Long-term Debt | $587,519 | $717,238 | | Total Liabilities | $1,121,918 | $1,276,083 | | Total Stockholders' Equity | $1,231,715 | $1,126,297 | | Total Liabilities and Stockholders' Equity | $2,353,633 | $2,402,380 | Condensed Consolidated Statements of Comprehensive Income Net sales slightly decreased to $665.9 million, with net income at $41.8 million and diluted EPS at $0.71 for the three months ended September 30, 2024 Q2 FY2025 vs Q2 FY2024 Performance (in thousands, except per share data) | Metric | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 24, 2023 | | :--- | :--- | :--- | | Sales, net | $665,915 | $676,808 | | Gross Profit | $211,429 | $208,870 | | Operating Income | $65,725 | $75,785 | | Net Income | $41,798 | $44,422 | | Diluted EPS | $0.71 | $0.76 | Six-Month Performance FY2025 vs FY2024 (in thousands, except per share data) | Metric | Six Months Ended Sep 30, 2024 | Six Months Ended Sep 24, 2023 | | :--- | :--- | :--- | | Sales, net | $1,310,096 | $1,370,141 | | Gross Profit | $422,586 | $435,627 | | Operating Income | $146,753 | $167,971 | | Net Income | $98,918 | $102,522 | | Diluted EPS | $1.68 | $1.75 | Condensed Consolidated Statements of Cash Flows Operating activities generated $80.5 million, investing activities provided $29.3 million, and financing activities used $134.0 million, resulting in a $23.3 million net decrease in cash for the six months ended September 30, 2024 Six-Month Cash Flow Summary (in thousands) | Activity | Six Months Ended Sep 30, 2024 | Six Months Ended Sep 24, 2023 | | :--- | :--- | :--- | | Cash provided by operating activities | $80,543 | $107,540 | | Cash provided by (used for) investing activities | $29,252 | $(13,288) | | Cash used for financing activities | $(134,014) | $(139,806) | | Decrease in cash and cash equivalents | $(23,346) | $(46,254) | | Cash and cash equivalents at end of period | $36,925 | $39,954 | Note 7: Divestitures and Acquisitions The company completed two divestitures in the first half of fiscal 2025, selling the RCBS brand for a $19.7 million pre-tax gain and Fiber Energy Products for an $872 pre-tax loss - Completed the divestiture of the RCBS brand on May 1, 2024, recognizing a pre-tax gain of approximately $19.7 million56 - Sold the wood pellet manufacturing company, Fiber Energy Products, on July 7, 2024, recording a pre-tax loss of about $87256 Note 13: Restructuring The GEAR Up transformation program, targeting $40 million to $50 million in pre-tax restructuring charges by fiscal 2027, incurred $12.3 million in costs for the six months ended September 30, 2024 - The GEAR Up transformation program is expected to incur $40 million to $50 million in pre-tax restructuring charges through fiscal 202774 GEAR Up Restructuring Costs (in thousands) | Period | Costs Incurred | | :--- | :--- | | Three months ended Sep 30, 2024 | $7,093 | | Six months ended Sep 30, 2024 | $12,283 | | Incurred since inception | $20,562 | Note 18: Operating Segment Information The company operates four reportable segments, with The Kinetic Group being the largest contributor to sales and operating income for the three months ended September 30, 2024 - The company is organized into four reportable segments: The Kinetic Group (ammunition), Revelyst Outdoor Performance (outdoor cooking, fishing, accessories), Revelyst Adventure Sports (protective gear, e-mobility), and Revelyst Precision Sports Technology (golf tech)105106107 Segment Sales and Operating Income (Three Months Ended Sep 30, 2024, in thousands) | Segment | Sales, net | Operating Income | | :--- | :--- | :--- | | The Kinetic Group | $351,321 | $87,093 | | Revelyst Outdoor Performance | $100,218 | $2,605 | | Revelyst Adventure Sports | $159,471 | $11,053 | | Revelyst Precision Sports Technology | $54,905 | $7,827 | | Total Reportable Segments | $665,915 | $108,578 | Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's performance, including a 1.6% net sales decrease, the planned sale of The Kinetic Group, the GEAR Up program, segment analysis, and liquidity, while addressing industry dynamics and risks Executive Summary and Financial Highlights Net sales decreased 1.6% year-over-year, driven by Revelyst declines, while the company reduced total debt to $590 million and amended the Kinetic Group sale agreement to $2.225 billion - For the three months ended September 30, 2024, net sales decreased 1.6% YoY The Kinetic Group sales increased 0.5% due to price, while Revelyst segments' sales decreased 3.9% due to lower volumes and divestitures128 - The company reduced outstanding borrowings under its ABL Revolving Credit Facility by $130 million in the first six months of FY2025, lowering total debt to $590 million129 - The agreement to sell The Kinetic Group to CSG was amended multiple times, with the Sixth Amendment on October 4, 2024, setting the base purchase price at $2.225 billion and cash consideration to stockholders at $25.75 per share138 Results of Operations Total net sales decreased 1.6% to $665.9 million, with varied segment performance and overall operating income declining 13.3% to $65.7 million for the three months ended September 30, 2024 Net Sales by Segment (Three Months Ended, in thousands) | Segment | Sep 30, 2024 | Sep 24, 2023 | Change (%) | | :--- | :--- | :--- | :--- | | The Kinetic Group | $351,321 | $349,500 | 0.5% | | Revelyst Outdoor Performance | $100,218 | $107,281 | (6.6)% | | Revelyst Adventure Sports | $159,471 | $168,700 | (5.5)% | | Revelyst Precision Sports Technology | $54,905 | $51,327 | 7.0% | | Total | $665,915 | $676,808 | (1.6)% | Operating Income (Loss) by Segment (Three Months Ended, in thousands) | Segment | Sep 30, 2024 | Sep 24, 2023 | Change (%) | | :--- | :--- | :--- | :--- | | The Kinetic Group | $87,093 | $92,348 | (5.7)% | | Revelyst Outdoor Performance | $2,605 | $(3,356) | 177.6% | | Revelyst Adventure Sports | $11,053 | $7,515 | 47.1% | | Revelyst Precision Sports Technology | $7,827 | $8,695 | (10.0)% | | Total | $65,725 | $75,785 | (13.3)% | Liquidity and Capital Resources The company maintains sufficient liquidity with $336.1 million available under its ABL Revolving Credit Facility and a 32% total debt-to-capitalization ratio as of September 30, 2024 - As of September 30, 2024, the company had $336,050 available to borrow under its 2022 ABL Revolving Credit Facility183 - Total debt as a percentage of total capitalization was 32% as of September 30, 2024183 Quantitative and Qualitative Disclosures about Market Risk The company's market risk exposure has not materially changed since March 31, 2024, with further details available in the FY2024 Form 10-K - The company's exposure to market risk has not changed materially since March 31, 2024193 Controls and Procedures Management concluded that disclosure controls and procedures were effective as of September 30, 2024, with no material changes to internal control over financial reporting during the quarter - The Co-CEOs and CFO concluded that disclosure controls and procedures were effective as of September 30, 2024194 - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, internal controls195 PART II - Other Information Legal Proceedings The company is subject to various legal proceedings, none of which are considered material to its business, operating results, or financial condition - Current legal proceedings are not considered individually or in aggregate to be material to the company's business or financial position197 Risk Factors New risk factors related to the Revelyst Transaction include consummation conditions, uncertain merger consideration, potential termination, and the impact of termination fees on other acquisition offers - A new material risk factor has been added concerning the Revelyst Transaction, supplementing the risks in the FY2024 Form 10-K199 - The Revelyst Transaction is subject to numerous conditions, including regulatory approvals and the consummation of the Sporting Products Sale, and failure to satisfy these could prevent or delay the merger201 - Termination fees of $47.75 million (for the Merger Agreement) and $28.125 million (for the Revelyst Merger Agreement) may discourage competing acquisition proposals211 Unregistered Sales of Equity Securities and Use of Proceeds This item is not applicable for the reporting period - Not applicable219 Other Information No director or officer adopted or terminated any Rule 10b5-1 trading plan or other trading arrangement during the last fiscal quarter - No director or officer of the company has adopted or terminated a Rule 10b5-1 trading plan or other trading arrangement in the last fiscal quarter221 Exhibits This section lists all exhibits filed with the Form 10-Q, including multiple amendments to the Agreement and Plan of Merger for The Kinetic Group sale and other key legal documents - Lists key legal documents filed with the report, including six amendments to the Agreement and Plan of Merger with CSG and the Agreement and Plan of Merger for the Revelyst Transaction223224