Vista Outdoor(VSTO) - 2024 Q2 - Quarterly Report

PART I - Financial Information Unaudited Financial Statements Vista Outdoor Inc. presents its unaudited condensed consolidated financial statements, including balance sheets, income, cash flow, and equity statements, with detailed notes for the quarter ended September 24, 2023 Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | September 24, 2023 | March 31, 2023 | | :--- | :--- | :--- | | Total Current Assets | $1,187,889 | $1,196,114 | | Total Assets | $2,746,799 | $2,798,882 | | Total Current Liabilities | $517,451 | $453,871 | | Long-term Debt | $787,538 | $984,658 | | Total Liabilities | $1,521,055 | $1,667,089 | | Total Stockholders' Equity | $1,225,744 | $1,131,793 | Condensed Consolidated Statements of Comprehensive Income Highlights (in thousands) | Metric | Three Months Ended Sep 24, 2023 | Three Months Ended Sep 25, 2022 | Six Months Ended Sep 24, 2023 | Six Months Ended Sep 25, 2022 | | :--- | :--- | :--- | :--- | :--- | | Sales, net | $676,808 | $781,678 | $1,370,141 | $1,584,290 | | Gross Profit | $208,870 | $262,874 | $435,627 | $556,344 | | Operating Income | $75,785 | $131,167 | $167,971 | $303,592 | | Net Income | $44,422 | $93,455 | $102,522 | $219,470 | | Diluted EPS | $0.76 | $1.62 | $1.75 | $3.78 | Condensed Consolidated Statements of Cash Flows Highlights (in thousands) | Cash Flow Activity | Six Months Ended Sep 24, 2023 | Six Months Ended Sep 25, 2022 | | :--- | :--- | :--- | | Cash provided by operating activities | $107,540 | $193,402 | | Cash used in investing activities | $(13,288) | $(774,084) | | Cash (used in) provided by financing activities | $(139,806) | $625,387 | | Increase (decrease) in cash | $(46,254) | $43,481 | - Subsequent to the quarter-end, the company entered into a definitive agreement to sell its Sporting Products business to Czechoslovak Group a.s. (CSG) for an enterprise value of $1.91 billion, as part of a plan to separate the company into two entities[110] Management's Discussion and Analysis of Financial Condition and Results of Operations Management analyzes Q2 FY2024 financial performance, focusing on the planned Sporting Products sale, segment results, and liquidity, while addressing market and economic impacts - The company announced a definitive agreement to sell its Sporting Products business to Czechoslovak Group a.s. (CSG) for an enterprise value of $1.91 billion, with the transaction expected to close in calendar year 2024 as a key step in separating the company into Sporting Products and Outdoor Products (Revelyst)[124] Segment Net Sales Performance (in thousands) | Segment | Three Months Ended Sep 24, 2023 | Change (YoY) | Six Months Ended Sep 24, 2023 | Change (YoY) | | :--- | :--- | :--- | :--- | :--- | | Sporting Products | $349,500 | -19.2% | $726,092 | -23.0% | | Outdoor Products | $327,308 | -6.3% | $644,049 | +0.4% | | Total | $676,808 | -13.4% | $1,370,141 | -13.5% | - Sporting Products sales decreased due to lower shipments as channel inventory normalized and lower pricing[132][133] - Outdoor Products sales were relatively flat for the six-month period, with contributions from acquired businesses offsetting declines in organic businesses caused by cautious channel partner purchasing and consumer pressure from high interest rates[134][135] Segment Gross Profit Performance (in thousands) | Segment | Three Months Ended Sep 24, 2023 | Change (YoY) | Six Months Ended Sep 24, 2023 | Change (YoY) | | :--- | :--- | :--- | :--- | :--- | | Sporting Products | $115,239 | -27.6% | $247,142 | -31.4% | | Outdoor Products | $93,631 | -12.3% | $188,485 | -5.4% | | Total | $208,870 | -20.5% | $435,627 | -21.7% | - The company's cash position decreased from $86.2 million to $39.9 million between March 31, 2023, and September 24, 2023, primarily due to cash used in financing activities, including debt repayments, though management believes existing cash and credit will be adequate for the next 12 months[152][155] Quantitative and Qualitative Disclosures about Market Risk The company's market risk exposure remains materially unchanged since March 31, 2023, with further details available in the fiscal year 2023 Annual Report on Form 10-K - The company's exposure to market risk has not changed materially since March 31, 2023[166] Controls and Procedures Management confirmed the effectiveness of disclosure controls and procedures as of September 24, 2023, with no material changes to internal control over financial reporting during the quarter - The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective as of September 24, 2023[167] - There were no changes in internal control over financial reporting during the quarter that have materially affected, or are reasonably likely to materially affect, these controls[169] PART II - Other Information Legal Proceedings The company is involved in various legal proceedings but deems no currently pending cases material to its business, financial condition, or operating results - The company does not consider any currently pending legal proceedings to be not material to its business or likely to result in a material adverse effect on its operating results, financial position, or cash flows[172] Risk Factors New risk factors are introduced concerning the pending sale of the Sporting Products business, including transaction completion risks, business uncertainties, and potential litigation - New material risk factors have been added related to the pending sale of the Sporting Products business to Czechoslovak Group a.s. (CSG)[174] - Risks associated with the sale include the failure to satisfy closing conditions (such as stockholder and regulatory approvals), potential adverse effects on stock price and business if the sale is not completed, and business uncertainties and contractual restrictions while the sale is pending[175][176][177][179] - A termination fee of $47.75 million payable to CSG under certain circumstances may discourage competing acquisition proposals[180] Unregistered Sales of Equity Securities and Use of Proceeds This section is reported as not applicable for the current period - Not applicable[183] Defaults Upon Senior Securities This section is reported as not applicable for the current period - Not applicable[184] Mine Safety Disclosures This section is reported as not applicable for the current period - Not applicable[185] Other Information No director or officer adopted or terminated any Rule 10b5-1 trading plan or other 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 any non-Rule 10b5-1 trading arrangement[186] Exhibits This section lists all exhibits filed with the Form 10-Q, including key agreements for the Sporting Products business sale, separation, debt, and officer certifications - A list of exhibits filed with the report is provided, including key agreements such as the Agreement and Plan of Merger for the sale of the Sporting Products business, the Separation Agreement, and various credit and employment agreements[188]