Vista Outdoor(VSTO) - 2024 Q1 - Quarterly Report

Part I - Financial Information Item 1. Unaudited Financial Statements This section presents Vista Outdoor Inc.'s unaudited condensed consolidated financial statements for the quarter ended June 25, 2023, including balance sheets, income, cash flows, and explanatory notes Condensed Consolidated Balance Sheets Total assets increased slightly to $2.81 billion, while total liabilities decreased to $1.63 billion, and stockholders' equity rose to $1.18 billion as of June 25, 2023 Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 25, 2023 | March 31, 2023 | | :--- | :--- | :--- | | Total Assets | $2,809,725 | $2,798,882 | | Total Current Assets | $1,218,108 | $1,196,114 | | Total Liabilities | $1,629,723 | $1,667,089 | | Long-term debt | $886,005 | $984,658 | | Total Stockholders' Equity | $1,180,002 | $1,131,793 | Condensed Consolidated Statements of Comprehensive Income Net sales decreased to $693.3 million, resulting in net income of $58.1 million or $0.99 per diluted share for the three months ended June 25, 2023 Income Statement Summary (in thousands, except per share data) | Metric | Three months ended June 25, 2023 | Three months ended June 26, 2022 | | :--- | :--- | :--- | | Sales, net | $693,333 | $802,612 | | Gross profit | $226,757 | $293,470 | | Operating income | $92,186 | $172,425 | | Net income | $58,100 | $126,015 | | Diluted EPS | $0.99 | $2.16 | Condensed Consolidated Statements of Cash Flows Operating activities generated $73.7 million in cash, while investing used $7.5 million and financing used $89.7 million, leading to a $23.0 million net decrease in cash for the quarter Cash Flow Summary (in thousands) | Activity | Three months ended June 25, 2023 | Three months ended June 26, 2022 | | :--- | :--- | :--- | | Cash provided by operating activities | $73,701 | $107,577 | | Cash used for investing activities | $(7,487) | $(4,867) | | Cash used in financing activities | $(89,691) | $(88,776) | | Increase (decrease) in cash | $(23,045) | $14,028 | Notes to the Condensed Consolidated Financial Statements These notes provide detailed information on operations, accounting policies, fair value, revenue, debt, segment performance, and contingencies supporting the financial statements - The company operates two reportable segments: Sporting Products (including Ammunition) and Outdoor Products (aggregating seven operating segments like Outdoor Accessories and Cooking)[17][92] Net Sales by Reportable Segment (in thousands) | Segment | Three months ended June 25, 2023 | Three months ended June 26, 2022 | | :--- | :--- | :--- | | Sporting Products | $376,593 | $510,626 | | Outdoor Products | $316,740 | $291,986 | | Total | $693,333 | $802,612 | Long-Term Debt Composition (in thousands) | Debt Instrument | June 25, 2023 | March 31, 2023 | | :--- | :--- | :--- | | 2022 ABL Revolving Credit Facility | $290,000 | $355,000 | | 2022 Term Loan | $204,910 | $205,000 | | 4.5% Senior Notes | $500,000 | $500,000 | | Total Principal Amount | $994,910 | $1,060,000 | - As of June 25, 2023, the company was in compliance with all debt covenants, with a consolidated leverage ratio of 1.74, below the 3.00:1.00 maximum requirement[76][78] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the quarter's financial results, including a 13.6% net sales decrease driven by Sporting Products, an 8.5% Outdoor Products growth, and the planned segment separation Business Overview and Planned Separation Vista Outdoor is proceeding with a plan to separate its Sporting Products and Outdoor Products segments into two independent public companies, expected to be completed in calendar year 2023 - The Board of Directors has approved preparations for the separation of the Outdoor Products and Sporting Products segments into two independent, publicly-traded companies[111] - The transaction is anticipated to be a tax-free distribution to shareholders and is expected to be ready for completion in calendar year 2023[111] - Expected benefits of the separation include enhanced strategic focus, tailored capital allocation, and expanded strategic opportunities[113] Results of Operations Total net sales decreased 13.6% to $693.3 million, driven by a 26.2% decline in Sporting Products, while Outdoor Products sales increased 8.5%, leading to a 46.5% drop in operating income Net Sales by Segment (in thousands) | Segment | Q1 FY24 | Q1 FY23 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Sporting Products | $376,593 | $510,626 | $(134,033) | (26.2)% | | Outdoor Products | $316,740 | $291,986 | $24,754 | 8.5% | | Total | $693,333 | $802,612 | $(109,279) | (13.6)% | - The decrease in Sporting Products sales was attributed to lower shipments due to channel inventory normalization and the termination of the Lake City contract[119] - The increase in Outdoor Products sales was driven by acquired businesses, partially offset by declines in organic businesses due to high channel inventory[120] Operating Income by Segment (in thousands) | Segment | Q1 FY24 | Q1 FY23 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Sporting Products | $108,464 | $176,086 | $(67,622) | (38.4)% | | Outdoor Products | $6,524 | $27,686 | $(21,162) | (76.4)% | | Corporate and other | $(22,802) | $(31,347) | $8,545 | 27.3% | | Total | $92,186 | $172,425 | $(80,239) | (46.5)% | Financial Condition, Liquidity and Capital Resources Cash and cash equivalents decreased by $23.0 million to $63.2 million, with $73.7 million from operations used for debt and capital expenditures, while $199.98 million remains available under the ABL Revolving Credit Facility - Cash decreased from $86.2 million at March 31, 2023, to $63.2 million at June 25, 2023, primarily due to $89.7 million used in financing activities exceeding $73.7 million from operations[130] - The company's total debt as a percentage of total capitalization was 45.7% as of June 25, 2023[133] - As of June 25, 2023, $199,981 thousand was available to borrow under the 2022 ABL Revolving Credit Facility[133] Item 3. Quantitative and Qualitative Disclosures about Market Risk There have been no material changes in the company's market risk exposure since March 31, 2023, with further details available in the fiscal year 2023 Form 10-K - The company's exposure to market risk has not materially changed since March 31, 2023[144] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of June 25, 2023, with ongoing integration of Fox Racing's controls - The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective as of June 25, 2023[145] - As part of ongoing integration, the company is incorporating its controls and procedures into Fox Racing, acquired in the second quarter of fiscal year 2023[146] Part II - Other Information Item 1. Legal Proceedings The company is subject to various legal proceedings but does not consider any currently pending cases material to its business or financial condition - The company does not consider any currently pending legal proceedings material to its business or likely to result in a material adverse effect[150] Item 1A. Risk Factors There have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the fiscal year ended March 31, 2023 - There are no material changes from the risk factors disclosed in the Form 10-K for the fiscal year ended March 31, 2023[152] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This item is reported as not applicable for the period - Not applicable[153] Item 5. Other Information No director or officer adopted or terminated any Rule 10b5-1 trading plan or non-Rule 10b5-1 trading arrangement during the last fiscal quarter - During the last fiscal quarter, no director or officer adopted or terminated any Rule 10b5-1(c) trading plan or arrangement[156] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including agreements, corporate governance documents, and officer certifications - A list of exhibits filed with the report is provided, including certifications of the Principal Executive Officer and Principal Financial Officer[158]