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Section 1: 10-Q (10-Q)

Document
 
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 3, 2016
 
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, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer," and "smaller reporting 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
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 8, 2016, there were 60,334,620 shares of the registrant's voting common stock outstanding.
 




TABLE OF CONTENTS
 
 
Page
PART I - Financial Information
 
PART II - Other Information
 


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 3, 2016
 
July 5, 2015
Sales, net
 
$
630,269

 
$
514,497

Cost of sales
 
458,892

 
375,205

Gross profit
 
171,377

 
139,292

Operating expenses:
 
 
 
 
Research and development
 
7,831

 
2,355

Selling, general, and administrative
 
104,444

 
77,954

Income before interest and income taxes
 
59,102

 
58,983

Interest expense, net
 
(11,963
)
 
(2,569
)
Income before income taxes
 
47,139

 
56,414

Income tax provision
 
18,015

 
22,523

Net income
 
$
29,124

 
$
33,891

Earnings per common share:
 
 
 
 
Basic
 
$
0.48

 
$
0.54

Diluted
 
$
0.48

 
$
0.53

Weighted-average number of common shares outstanding:
 
 
 
 
Basic
 
60,384

 
63,286

Diluted
 
60,715

 
63,611

 
 


 


Net income (from above)
 
$
29,124

 
$
33,891

Other comprehensive (loss) income, 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 $162 and $158, respectively
 
(274
)
 
(267
)
Reclassification of net actuarial loss for pension and postretirement benefit plans recorded to net income, net of tax expense of $(734) and $(819), respectively
 
1,236

 
1,381

Change in derivatives, net of tax benefit (expense) of $0 and $(54), respectively
 

 
90

Change in cumulative translation adjustment, net of tax benefit of $0 and $0, respectively
 
(4,799
)
 
2,670

Total other comprehensive (loss) income
 
(3,837
)
 
3,874

Comprehensive income
 
$
25,287

 
$
37,765

See Notes to the Condensed Consolidated Financial Statements.

2

Table of Contents

VISTA OUTDOOR INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
(Amounts in thousands except share data)
 
July 3, 2016
 
March 31, 2016
ASSETS
 
 
 
 
Current assets:
 
 
 
 
Cash and cash equivalents
 
$
66,000

 
$
151,692

Net receivables
 
519,762

 
428,398

Net inventories
 
553,631

 
440,240

Other current assets
 
36,337

 
29,334

Total current assets
 
1,175,730

 
1,049,664

Net property, plant, and equipment
 
238,282

 
203,485

Goodwill
 
1,204,046

 
1,023,451

Net intangible assets
 
794,720

 
650,472

Deferred charges and other non-current assets
 
22,319

 
15,562

Total assets
 
$
3,435,097

 
$
2,942,634

LIABILITIES AND EQUITY
 
 
 
 
Current liabilities:
 
 
 
 
Current portion of long-term debt
 
$
122,000

 
$
17,500

Accounts payable
 
139,642

 
147,738

Accrued compensation
 
33,505

 
47,394

Accrued income taxes
 
25,697

 
12,171

Federal excise tax
 
28,386

 
27,701

Other current liabilities
 
160,085

 
116,397

Total current liabilities
 
509,315

 
368,901

Long-term debt
 
936,299

 
652,787

Deferred income tax liabilities
 
182,875

 
135,957

Accrued pension and postemployment liabilities
 
72,548

 
73,503

Other long-term liabilities
 
68,301

 
51,319

Total liabilities
 
1,769,338

 
1,282,467

Commitments and contingencies (Notes 10 and 13)
 

 

Common stock—$.01 par value:
 
 
 
 
Authorized—500,000,000 shares
 
 
 
 
Issued and outstanding— 60,359,234 shares at July 3, 2016 and 60,825,914 shares at March 31, 2016
 
603

 
608

Additional paid-in capital
 
1,746,469

 
1,743,371

Retained earnings
 
195,545

 
166,421

Accumulated other comprehensive loss
 
(114,051
)
 
(110,214
)
Common stock in treasury, at cost— 3,605,205 shares held at July 3, 2016 and 3,138,525 shares held at March 31, 2016
 
(162,807
)
 
(140,019
)
Total stockholders' equity
 
1,665,759

 
1,660,167

Total liabilities and stockholders' equity
 
$
3,435,097

 
$
2,942,634

See Notes to the Condensed Consolidated Financial Statements.

3

Table of Contents

VISTA OUTDOOR INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
 
 
Three months ended
(Amounts in thousands)
 
July 3, 2016
 
July 5, 2015
Operating Activities:
 
 
 
 
Net income
 
$
29,124

 
$
33,891

Adjustments to net income to arrive at cash provided by operating activities:
 
 
 
 
Depreciation
 
13,676

 
9,255

Amortization of intangible assets
 
10,106

 
7,302

Amortization of deferred financing costs
 
2,172

 
538

Deferred income taxes
 
52

 
1,005

Loss on disposal of property, plant, and equipment
 
41

 
30

Stock-based compensation
 
3,310

 
2,949

Excess tax benefits from share-based plans
 

 
(206
)
Changes in assets and liabilities, net of acquisition of businesses:
 
 
 
 
Net receivables
 
(12,908
)
 
(67,242
)
Net inventories
 
(57,697
)
 
(54,480
)
Accounts payable
 
(33,196
)
 
(728
)
Accrued compensation
 
(19,322
)
 
(4,531
)
Accrued income taxes
 
14,396

 
13,849

Federal excise tax
 
737

 
386

Pension and other postretirement benefits
 
579

 
1,791

Other assets and liabilities
 
26,772

 
14,272

Cash used for operating activities
 
(22,158
)
 
(41,919
)
Investing Activities:
 
 
 
 
Capital expenditures
 
(21,006
)
 
(10,557
)
Acquisition of businesses, net of cash acquired
 
(405,943
)
 

Proceeds from the disposition of property, plant, and equipment
 
34

 
20

Cash used for investing activities
 
(426,915
)
 
(10,537
)
Financing Activities:
 
 
 
 
Borrowings on line of credit
 
115,000

 

Payments on line of credit
 
(25,000
)
 

Proceeds from issuance of long-term debt
 
307,500

 

Payments made on long-term debt
 
(8,000
)
 
(4,375
)
Payments made for debt issuance costs
 
(3,660
)
 

Purchase of treasury shares
 
(22,058
)
 
(23,743
)
Excess tax benefits from share-based plans
 

 
206

Proceeds from employee stock compensation plans
 

 
438

Cash provided by (used for) financing activities
 
363,782

 
(27,474
)
Effect of foreign exchange rate fluctuations on cash
 
(401
)
 
254

Decrease in cash and cash equivalents
 
(85,692
)
 
(79,676
)
Cash and cash equivalents at beginning of period
 
151,692

 
263,951

Cash and cash equivalents at end of period
 
$
66,000

 
$
184,275

 
 
 
 
 
Supplemental Cash Flow Disclosures:
 
 
 
 
Noncash investing activity:
 
 
 
 
Capital expenditures included in accounts payable
 
$
2,065

 
$
1,274

Noncash financing activity:
 
 
 
 
Treasury Shares purchased included in other accrued liabilities
 
$
998

 
$
941

 
  See Notes to the Condensed Consolidated Financial Statements.

4

Table of Contents

VISTA OUTDOOR INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
 
 
Common Stock $.01 Par Value
 
 
 
 
 
 
 
 
 
 
(Amounts in thousands except share data)
 
Shares
 
Amount
 
Additional
Paid-In
Capital
 
Retained
Earnings
 
Accumulated
Other
Comprehensive
Loss
 
Treasury
Stock
 
Total
Equity
Balance, March 31, 2015
 
63,878,499

 
$
639

 
$
1,742,125

 
$
19,384

 
$
(110,303
)
 
$
(3,081
)
 
$
1,648,764

Comprehensive income
 

 

 

 
33,891

 
3,874

 

 
37,765

Exercise of stock options
 
20,078

 

 
(426
)
 

 

 
864

 
438

Restricted stock grants net of forfeitures
 
44,050

 

 
(1,880
)
 

 

 
1,880

 

Share-based compensation
 

 

 
2,944

 

 

 

 
2,944

Restricted stock vested and shares withheld
 
(22,019
)
 

 
955

 

 

 
(955
)
 

Treasury stock purchased
 
(511,814
)
 

 

 

 

 
(22,908
)
 
(22,908
)
Employee plans and other
 

 

 

 

 

 
(3
)
 
(3
)
Tax benefit related to share based plans and other
 

 
(5
)
 
206

 

 

 

 
201

Contributions from former parent
 

 

 
(785
)
 

 

 

 
(785
)
Balance, July 5, 2015
 
63,408,794

 
$
634

 
$
1,743,139

 
$
53,275

 
$
(106,429
)
 
$
(24,203
)
 
$
1,666,416

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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

Exercise of stock options
 

 

 

 

 

 

 

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
)
Contribution from former parent and 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

See Notes to the Condensed Consolidated Financial Statements.


5

Table of Contents

VISTA OUTDOOR INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
Quarter ended July 3, 2016
(Amounts in thousands 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, Europe, and New Zealand. 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 fiscal 2016 financial statements as filed on Form 8-K on August 10, 2016.

Basis of Presentation.    Our unaudited condensed consolidated financial statements have been prepared in accordance with the requirements of the SEC for interim reporting. As permitted under those rules, certain disclosures and other financial information that are normally 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, 2016 (“fiscal 2016”). 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 3, 2016 and March 31, 2016, and our results of operations and cash flows for the quarters ended July 3, 2016 and July 5, 2015.

New Accounting Pronouncements.

On February 25, 2016, the FASB issued ASU 2016-02, Leases. The new guidance was issued to increase transparency and comparability among companies by requiring most leases be included on the balance sheet and by expanding disclosure requirements. Based on the current effective dates, the new guidance would first apply in the first quarter of our fiscal 2020. We are still in the process of evaluating the effect of adoption on our financial statements.

On March 30, 2016, the FASB issued Accounting Standard Update No. 2016-09 Improvements to Employee Share-Based Payment Accounting, which simplifies several aspects of the accounting for employee share-based payment transactions including the accounting for income taxes, forfeitures and classification in the statement of cash flows. The standard allows for early adoption. As of March 31, 2016 we have elected to early adopt this standard and prospectively present the change to the financial statements given the immaterial nature of the prior period balances.

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 clarifies the definition of fair value, prescribes a framework for measuring fair value, establishes a fair value hierarchy based on the inputs used to measure fair value, and expands 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.
Level 3—Significant inputs to the valuation model are unobservable.

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Table of Contents
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Continued)
(Amounts in thousands unless otherwise indicated)
2. Fair Value of Financial Instruments (Continued)

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 have considered these to be Level 2 instruments.
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. 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 3, 2016
 
March 31, 2016
 
 
Carrying
amount
 
Fair
value
 
Carrying
amount
 
Fair
value
Fixed-rate debt
 
$
350,000

 
$
365,750

 
$
350,000

 
$
366,625

Variable-rate debt
 
722,000

 
722,000

 
332,500

 
332,500


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 3, 2016 and July 5, 2015, earnings, as reported for each respective period, is divided by (in thousands):
 
 
Quarter ended
 
 
July 3, 2016
 
July 5, 2015
Basic EPS shares outstanding
 
60,384

 
63,286

Dilutive effect of stock-based awards
 
331

 
325

Diluted EPS shares outstanding
 
60,715

 
63,611

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
 
71

 
122

Share Repurchases
On February 25, 2015, our Board of Directors authorized a new share repurchase program of up to $200,000 worth of shares of our common stock, executable over two years. The shares may 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 allows us to make repurchases under Rule 10b5-1 of the Securities Exchange Act of 1934. During the quarters ended July 3, 2016 and July 5, 2015, we repurchased 461,525 shares for $22,277 and 512,000 shares for $22,900, respectively. Since the inception of the program through July 3, 2016, we have repurchased 3,802,611 shares for $171,347.
Any additional repurchases would be subject to market conditions and our compliance with our debt covenants.

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Table of Contents
NOTES TO THE CONDENSED CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (unaudited) (Continued)
(Amounts in thousands unless otherwise indicated)
4. Acquisitions


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. The acquisition includes brands Bell, Giro, Blackburn, CoPilot, Krash, and Raskullz. Under the terms of the transaction, we paid $400,000 utilizing cash on hand and borrowings under our existing credit facilities, subject to customary working capital adjustments, 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 utilizing the Black Scholes option pricing model; 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, cash flows, 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 three years. The discounted cash flows are based on our estimates of future performance of the business.

Action Sports remains headquartered in Scotts Valley, California and operates facilities in the U.S., Canada, Europe and Asia. The acquisition of Action Sports includes more than 600 employees worldwide. The preliminary purchase price allocation is subject to further refinement and may require significant adjustments to arrive at the final purchase price allocation. A portion of the goodwill generated in this acquisition will be deductible for tax purposes.

Acquisition of CamelBak Products

On August 3, 2015, we completed the acquisition of CamelBak Products, LLC ("CamelBak") for total consideration of $412,500, subject to a customary working capital adjustment, utilizing cash on hand and borrowings under our existing credit facilities. CamelBak is the leading provider of personal hydration solutions for outdoor, recreation and military use. CamelBak’s products include hydration packs, reusable bottles and individual purification and filtration systems. The preliminary purchase price allocation is subject to further refinement and may require significant adjustments to arrive at the final purchase price allocation. A portion of the goodwill generated in this acquisition will be deductible for tax purposes.

Acquisition of Jimmy Styks

On July 20, 2015, we completed the acquisition of Jimmy Styks, LLC ("Jimmy Styks"), using $40,000 of cash on hand with additional contingent consideration payable if incremental profitability growth milestones are achieved over the next three years. We determined a value of the future contingent consideration as of the acquisition date of $4,471 utilizing the Black Scholes option pricing model; 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, cash flows, 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 three years. The discounted cash flows are based on our estimates of future performance of the business. As of July 3, 2016, the value of the future contingent consideration was $1,075. The reduction from the original estimate was primarily a result of not achieving the first growth milestone.

Jimmy Styks is a leading designer and marketer of stand up paddle boards and related accessories. Jimmy Styks’ stand up paddle board portfolio provides easy-to-use platforms for water sport enthusiasts engaging in activities ranging from personal fitness to fishing and will help us expand our Outdoor Products operating segment. Jimmy Styks offers nearly 30 SKUs in epoxy, inflatable, soft and thermoform boards, as well as accessories. The preliminary purchase price allocation is subject to further refinement and may require significant adjustments to arrive at the final purchase price allocation. The majority of the goodwill generated in this acquisition will be deductible for tax purposes. Jimmy Styks is an immaterial acquisition to our company.

Current quarter results for acquisitions

For the quarter ended July 3, 2016, Vista Outdoor recorded sales of approximately $134,070 and gross profit of approximately $42,329, associated with the operations of these acquired businesses and reflected in the Outdoor Products segment results.


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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Continued)
(Amounts in thousands unless otherwise indicated)
4. Acquisitions (Continued)


Preliminary Allocation of Consideration Transferred to Net Assets Acquired for Action Sports and CamelBak:

The following amounts represent the preliminary determination of the fair value of identifiable assets acquired and liabilities assumed from the Action Sports and CamelBak acquisitions. The final determination of the fair value of certain assets and liabilities will be completed within the required measurement period, which will be no later than 12 months from the date of acquisition. The size and breadth of the Action Sports and CamelBak acquisitions will necessitate the use of this measurement period to adequately analyze and assess a number of the factors used in establishing the asset and liability fair values as of the acquisition date, including the significant contractual and operational factors underlying the trade name and customer relationship intangible assets and the related tax impacts of any changes made. Any potential adjustments made could be material in relation to the preliminary values presented below:


Action Sports Preliminary Purchase Price Allocation:
 
 
April 1, 2016
Purchase price net of cash acquired:
 
 
 
 
Cash paid
 
 
 
$
400,000

Estimated earnout value
 
 
 
4,272

Cash paid for working capital
 
 
 
1,671

Total purchase price
 
 
 
405,943

Fair value of assets acquired:
 
 
 
 
Receivables
 
$
79,328

 
 
Inventories
 
56,527

 
 
Tradename, customer relationship, and technology intangibles
 
155,100

 
 
Property, plant, and equipment
 
34,114

 
 
Other assets
 
7,270

 
 
Total assets
 
332,339

 
 
Fair value of liabilities assumed:
 
 
 
 
Accounts payable
 
30,240

 
 
Deferred tax liabilities
 
46,393

 
 
Other liabilities
 
32,816

 
 
Total liabilities
 
109,449

 
 
Net assets acquired
 
 
 
222,890

Goodwill
 
 
 
$
183,053



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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Continued)
(Amounts in thousands unless otherwise indicated)
4. Acquisitions (Continued)


CamelBak Preliminary Purchase Price Allocation:
 
 
August 3, 2015
Purchase price net of cash acquired:
 
 
 
 
Cash paid
 
 
 
$
412,500

Cash paid for working capital
 
 
 
9,810

Total purchase price
 
 
 
422,310

Fair value of assets acquired:
 
 
 
 
Receivables
 
$
30,093

 
 
Inventories
 
30,916

 
 
Tradename, customer relationship, and technology intangibles
 
133,800

 
 
Property, plant, and equipment
 
7,985

 
 
Other assets
 
6,902

 
 
Total assets
 
209,696

 
 
Fair value of liabilities assumed:
 
 
 
 
Accounts payable
 
8,219

 
 
Other liabilities
 
8,024

 
 
Total liabilities
 
16,243

 
 
Net assets acquired
 
 
 
193,453

Goodwill
 
 
 
$
228,857



Intangible assets above include:
 
 
Value
 
Useful life (years)
Action Sports
 
 
 
 
Indefinite lived tradenames
 
$
76,700

 
Indefinite

Definite lived tradenames
 
1,400

 
15

Customer relationships
 
74,700

 
15-20

Technology
 
2,300

 
10

 
 
 
 
 
CamelBak
 
 
 
 
Indefinite lived tradename
 
$
79,400

 
Indefinite

Customer relationships
 
49,400

 
10-20

Technology
 
5,000

 
7-17


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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Continued)
(Amounts in thousands unless otherwise indicated)
4. Acquisitions (Continued)


Supplemental Pro Forma Data for Action Sports and CamelBak:

We used the acquisition method of accounting to account for these acquisitions and, accordingly, the results of Action Sports and CamelBak are included in our consolidated financial statements for the period subsequent to the date of acquisition. The following unaudited supplemental pro forma data for the quarters ended July 3, 2016 and July 5, 2015 present consolidated information as if the CamelBak acquisition had been completed on April 1, 2014 and the Action Sports acquisition had been completed on April 1, 2015. The pro forma results were calculated by combining our results with the standalone results of Action Sports and CamelBak for the pre-acquisition periods, which were adjusted to account for certain costs which would have been incurred during this pre-acquisition period:
 
 
Quarter ended
(Amounts in thousands except per share data)
 
July 3, 2016
 
July 5, 2015
Sales
 
$
630,269

 
$
640,250

Net income
 
29,564

 
36,464

Basic earnings per common share
 
0.49

 
0.58

Diluted earnings per common share
 
0.49

 
0.57


The unaudited supplemental pro forma data above include the following significant non-recurring adjustments made to account for certain costs which would have been incurred if the CamelBak acquisition had been completed on April 1, 2014 and the Action Sports acquisition had been completed on April 1, 2015, as adjusted for the applicable tax impact:
 
 
Quarter ended
 
 
July 3, 2016
 
July 5, 2015
Inventory step-up, net(1)
 
$
(502
)
 
$
502

Fees for advisory, legal, accounting services(2)
 
(946
)
 
946

(1) Adjustment reflects the increased cost of goods sold expense resulting from the fair value step-up in inventory of $817 which was expensed over the first inventory cycle.
(2) We removed the fees that were incurred in connection with the acquisition of Action Sports from fiscal 2017 and considered those fees as incurred during the first quarter of fiscal 2016. Costs were recorded in Selling, general, and administrative expense. We have incurred total of $2,837 in fees in connection with the acquisition of Action Sports during fiscal 2016 and 2017.
5. Net Receivables
Net receivables are summarized as follows:
 
 
July 3, 2016
 
March 31, 2016
Trade receivables
 
$
535,505

 
$
446,032

Other receivables
 
2,315

 
1,778

Less allowance for doubtful accounts and discounts
 
(18,058
)
 
(19,412
)
Net receivables
 
$
519,762

 
$
428,398

One customer represented 16% and 13% of the total trade receivables balance as of July 3, 2016 and March 31, 2016, respectively.

11


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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Continued)
(Amounts in thousands except share and per share data and unless otherwise indicated)

6. Net Inventories
Net inventories consist of the following:
 
 
July 3, 2016
 
March 31, 2016
Raw materials
 
$
103,504

 
$
91,898

Work in process
 
60,618

 
61,864

Finished goods
 
389,509

 
286,478

Net inventories
 
$
553,631

 
$
440,240

7. Accumulated Other Comprehensive Loss
The components of AOCL, net of income taxes, are as follows:
 
 
July 3, 2016
 
March 31, 2016
Pension and other postretirement benefits
 
$
(62,705
)
 
$
(63,667
)
Cumulative translation adjustment
 
(51,346
)
 
(46,547
)
Total AOCL
 
$
(114,051
)
 
$
(110,214
)
The following table summarizes the changes in the balance of AOCL, net of income tax:
 
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.

 
Quarter ended July 5, 2015
 
Derivatives
 
Pension and other postretirement benefits
 
Cumulative translation adjustment
 
Total
Beginning balance in AOCL
$

 
$
(58,155
)
 
$
(52,148
)
 
$
(110,303
)
Net increase in fair value of derivatives
97

 

 

 
97

Net losses reclassified from AOCL, offsetting the price paid to suppliers (1)
(7
)
 

 

 
(7
)
Net actuarial losses reclassified from AOCL (2)

 
1,381

 

 
1,381

Prior service costs reclassified from AOCL (2)

 
(267
)
 

 
(267
)
Net change in cumulative translation adjustment

 

 
2,670

 
2,670

Ending balance in AOCL
$
90

 
$
(57,041
)
 
$
(49,478
)
 
$
(106,429
)
(1) Amounts related to our derivative instruments that were reclassified from AOCL and recorded as a component of cost of sales.
(2) 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.


12

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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Continued)
(Amounts in thousands unless otherwise indicated)


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, 2016
 
$
818,560

 
$
204,891

 
$
1,023,451

Acquisition
 
183,053

 

 
183,053

Effect of foreign currency exchange rates
 
(2,467
)
 
9

 
(2,458
)
Balance, July 3, 2016
 
$
999,146

 
$
204,900

 
$
1,204,046


The acquisition in Outdoor Products related to the preliminary purchase price allocation for Action Sports as previously discussed.
The goodwill recorded within Outdoor Products and Shooting Sports segments are presented net of $47,791 and $41,020 of accumulated impairment losses, respectively.
Net intangibles consisted of the following:

 
 
July 3, 2016
 
March 31, 2016
 
 
Gross
carrying
amount
 
Accumulated
amortization
 
Total
 
Gross
carrying
amount
 
Accumulated
amortization
 
Total
Trade names
 
$
186,562

 
$
(49,945
)
 
$
136,617

 
$
185,162

 
$
(46,812
)
 
$
138,350

Patented technology
 
30,200

 
(10,406
)
 
19,794

 
27,900

 
(9,949
)
 
17,951

Customer relationships and other
 
346,341

 
(57,229
)
 
289,112

 
272,431

 
(50,757
)
 
221,674

Total
 
563,103

 
(117,580
)
 
445,523

 
485,493

 
(107,518
)
 
377,975

Non-amortizing trade names
 
349,197

 

 
349,197

 
272,497

 

 
272,497

Net intangibles
 
$
912,300

 
$
(117,580
)
 
$
794,720

 
$
757,990

 
$
(107,518
)
 
$
650,472


The gross amount of amortizable and non-amortizable intangible assets increased from March 31, 2016 due to the acquisition of Action Sports. The assets in the table above are being amortized using a straight-line method over a weighted average remaining period of approximately 12.5 years. Amortization expense for the quarters ended July 3, 2016 and July 5, 2015 was $10,106 and $7,302, respectively. We expect amortization expense related to these assets to be as follows:

Remainder of fiscal 2017
 
$
30,561

Fiscal 2018
 
40,748

Fiscal 2019
 
38,004

Fiscal 2020
 
37,121

Fiscal 2021
 
37,054

Thereafter
 
262,035

Total
 
$
445,523



13


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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Continued)
(Amounts in thousands unless otherwise indicated)


9. Other Current and Non-current Liabilities
Other current and non-current liabilities consisted of the following:
 
 
July 3, 2016
 
March 31, 2016
Other current liabilities:
 
 
 
 
In-transit inventory and other
 
$
85,145

 
$
40,242

Rebate
 
28,127

 
17,957

Employee benefits and insurance
 
12,312

 
11,131

Accrued advertising
 
12,140

 
10,315

Warranty
 
8,036

 
8,611

Interest
 
5,471

 
13,157

Freight accrual
 
2,459

 
2,446

Customer obligations
 
2,501

 
9,613

Product liability
 
2,043

 
1,622

Accrued taxes
 
1,851

 
1,303

Total other current liabilities
 
$
160,085

 
$
116,397

 
 
 
 
 
Other non-current liabilities:
 
 
 
 
Non-current portion of accrued income tax liability
 
$
26,225

 
$
25,421

Product liability
 
5,525

 

Contingent consideration
 
5,347

 
4,471

Management non-qualified deferred compensation plan
 
2,949

 
2,668

Environmental remediation
 
740

 
745

Other
 
27,515

 
18,014

Total other non-current liabilities
 
$
68,301

 
$
51,319

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, 2016
$
8,611

Payments made
(571
)
Warranties issued
146

Changes related to preexisting warranties
(150
)
Balance, July 3, 2016
$
8,036


14

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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Continued)
(Amounts in thousands except share and per share data and unless otherwise indicated)


10. Long-term Debt
Long-term debt, including the current portion, consisted of the following:
 
 
July 3, 2016
 
March 31, 2016
Senior Credit Facility:
 
 
 
 
Term Loan
 
$
632,000

 
$
332,500

Revolving Credit Facility
 
90,000

 

Total principal amount of Credit Agreement
 
722,000

 
332,500

5.875% Senior Notes due 2023
 
350,000

 
350,000

Principal amount of long-term debt
 
1,072,000

 
682,500

Less: Unamortized deferred financing costs
 
13,701

 
12,213

Carrying amount of long-term debt
 
1,058,299

 
670,287

Less: current portion
 
122,000

 
17,500

Carrying amount of long-term debt, excluding current portion
 
$
936,299

 
$
652,787


Credit Agreement

On April 1, 2016, we entered into an Amended and Restated Credit Agreement (the “2016 Credit Agreement”), which replaced our 2014 Credit Agreement. The 2016 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. Borrowings under the 2016 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 2016 Credit Agreement. Based on the ratio in effect as of July 3, 2016, the base rate margin was 0.50% and the Eurodollar margin was 1.50%. The interest rate for the Term Loan as of July 3, 2016 was 1.96%. 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 0.25%. As of July 3, 2016, we had $90,000 in borrowings against our $400,000 Revolving Credit Facility and had outstanding letters of credit of $29,172, which reduced amounts available on the Revolving Credit Facility to $280,828.

With the exception of Action Sports and its subsidiaries, substantially all domestic tangible and intangible assets of Vista Outdoor and its subsidiaries and by Advanced Arrow S. de R.L. de C.V. and Hydrosport, S. de R.L. de C.V. are pledged as collateral under the 2016 Credit Agreement. The domestic tangible and intangible assets of Action Sports and its subsidiaries are expected to be pledged as collateral during fiscal 2017. Debt issuance costs of approximately $12,000 are being amortized over the term of the 2016 Credit Agreement.

In fiscal 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 in the quarter ended July 3, 2016.

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.

15

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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Continued)
(Amounts in thousands except share and per share data and unless otherwise indicated)
10. Long-term Debt (Continued)


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 with the exception of the Action Sports subsidiaries, and by Advanced Arrow S. de R.L. de C.V. and Hydrosport, S. de R.L. de C.V., as described above. 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.

The guarantee by any subsidiary guarantor of our obligations in respect of the 2016 Credit Agreement
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 subsidiary;
if such subsidiary guarantor ceases to be a Domestic Subsidiary; or
upon repayment of all obligations under the Credit Agreement.

Cash Paid for Interest on Debt

Cash paid for interest on debt, including commitment fees, for the quarters ended July 3, 2016 and July 5, 2015 totaled $17,236 and $2,407, respectively.
11. Employee Benefit Plans
The total expense for employee benefit plans for the quarters ended July 3, 2016 and July 5, 2015 was $1,690 and $1,825, respectively.
Employer Contributions. During the quarter ended July 3, 2016, we made the legally required minimum contribution of $1,100 directly to the pension trust, $12 directly to retirees under the non-qualified supplemental executive retirement plan and no contributions to our other postretirement benefit plans. During the quarter ended July 5, 2015, we made no contributions directly to the pension trust, to retirees under the non-qualified supplemental executive retirement plan, and to our other postretirement benefit plans. We also expect to contribute an additional $3,300 directly to the pension trust and distribute approximately $688 directly to retirees under our supplemental executive retirement plans, and to contribute approximately $174 to our other postretirement benefit plans during the remainder of fiscal 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 3, 2016 and July 5, 2015 represent effective tax rates of 38.2% and 39.9%, respectively. The decrease in the rate from the prior year quarter is primarily caused by a one-time discrete revaluation of a deferred tax asset in the prior year partially offset by nondeductible acquisition costs in the current year.

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

16

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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Continued)
(Amounts in thousands unless otherwise indicated)
12. Income Taxes (Continued)

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 2009. The IRS has completed the audits of Orbital ATK through fiscal year 2012 and is currently auditing Orbital ATK's tax returns for fiscal years 2013 and 2014. 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 $5,470 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 $4,624.
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 also have been identified as a potentially responsible party (“PRP”), along with other parties, in a regulatory agency action 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 $765 as of July 3, 2016 and March 31, 2016.
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 Vista Outdoor's domestic subsidiaries with the exception of the Action Sports 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.


17

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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Continued)
(Amounts in thousands unless otherwise indicated)
14. Condensed Consolidating Financial Statements (Continued)

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.

VISTA OUTDOOR INC.
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(unaudited)
 
 
Quarter ended July 3, 2016
(Amounts in thousands except per share data)
 
Parent Issuer
 
Guarantors
 
Non-Guarantors
 
Eliminations
 
Consolidated
Sales, net
 
$

 
$
517,190

 
$
136,718

 
$
(23,639
)
 
$
630,269

Cost of sales
 

 
385,115

 
97,176

 
(23,399
)
 
458,892

Gross profit
 

 
132,075

 
39,542

 
(240
)
 
171,377

Operating expenses:
 
 
 
 
 
 
 
 
 
 
Research and development
 

 
4,343

 
3,488

 

 
7,831

Selling, general, and administrative
 

 
73,833

 
30,611

 

 
104,444

Income before interest and income taxes
 

 
53,899

 
5,443

 
(240
)
 
59,102

Equity in income of subsidiaries
 
36,601

 
3,837

 

 
(40,438
)
 

Interest expense, net
 
(11,963
)
 

 

 

 
(11,963
)
Income before income taxes
 
24,638

 
57,736

 
5,443

 
(40,678
)
 
47,139

Income tax provision
 
(4,486
)
 
21,135

 
1,449

 
(83
)
 
18,015

Net income
 
$
29,124

 
$
36,601

 
$
3,994

 
$
(40,595
)
 
$
29,124

Other comprehensive (loss) income, net of tax:
 
 
 
 
 
 
 
 
 
 
Net income (from above)
 
$
29,124

 
$
36,601

 
$
3,994

 
$
(40,595
)
 
$
29,124

Total other comprehensive (loss) income
 
(3,837
)
 
(3,837
)
 
(4,799
)
 
8,636

 
(3,837
)
Comprehensive (loss) income
 
$
25,287

 
$
32,764

 
$
(805
)
 
$
(31,959
)
 
$
25,287




18

Table of Contents
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Continued)
(Amounts in thousands unless otherwise indicated)
14. Condensed Consolidating Financial Statements (Continued)

VISTA OUTDOOR INC.
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(unaudited)
 
 
Quarter ended July 5, 2015
(Amounts in thousands except per share data)
 
Parent Issuer
 
Guarantors
 
Non-Guarantors
 
Eliminations
 
Consolidated
Sales, net
 
$

 
$
477,628

 
$
60,626

 
$
(23,757
)
 
$
514,497

Cost of sales
 

 
359,532

 
39,725

 
(24,052
)
 
375,205

Gross profit
 

 
118,096

 
20,901

 
295

 
139,292

Operating expenses:
 
 
 
 
 
 
 
 
 
 
Research and development
 

 
2,355

 

 

 
2,355

Selling, general, and administrative
 

 
64,689

 
13,265

 

 
77,954

Income before interest and income taxes
 

 
51,052

 
7,636

 
295

 
58,983

Equity in income of subsidiaries
 
35,497

 
5,569

 

 
(41,066
)
 

Interest expense, net
 
(2,569
)
 

 

 

 
(2,569
)
Income before income taxes
 
32,928

 
56,621

 
7,636

 
(40,771
)
 
56,414

Income tax provision
 
(963
)
 
21,124

 
2,250

 
112

 
22,523

Net income
 
$
33,891

 
$
35,497

 
$
5,386

 
$
(40,883
)
 
$
33,891

Other comprehensive income, net of tax:
 
 
 
 
 
 
 
 
 
 
Net income (from above)
 
$
33,891

 
$
35,497

 
$
5,386

 
$
(40,883
)
 
$
33,891

Total other comprehensive income
 
3,874

 
3,874

 
2,670

 
(6,544
)
 
3,874

Comprehensive income
 
$
37,765

 
$
39,371

 
$
8,056

 
$
(47,427
)
 
$
37,765



19

Table of Contents
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Continued)
(Amounts in thousands unless otherwise indicated)
14. Condensed Consolidating Financial Statements (Continued)

VISTA OUTDOOR INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(unaudited)

 
 
July 3, 2016
(Amounts in thousands except share data)
 
Parent Issuer
 
Guarantors
 
Non-Guarantors
 
Eliminations
 
Consolidated
ASSETS
 
 
 
 
 
 
 
 
 
 
Current assets:
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
 
$

 
$
32,421

 
$
33,579

 
$

 
$
66,000

Net receivables
 

 
399,000

 
120,762

 

 
519,762

Due from affiliates, current
 

 
17,240

 

 
(17,240
)
 

Net inventories
 

 
439,091

 
119,074

 
(4,534
)
 
553,631

Other current assets
 

 
28,352

 
7,985

 

 
36,337

Total current assets
 

 
916,104

 
281,400

 
(21,774
)
 
1,175,730

Net property, plant, and equipment
 

 
194,981

 
43,301

 


 
238,282

Investment in subsidiaries
 
2,963,535

 
45,541

 

 
(3,009,076
)
 

Goodwill
 

 
911,715

 
292,331

 

 
1,204,046

Net intangible assets
 

 
605,684

 
189,036

 

 
794,720

Long-term due from affiliates
 

 
278,899

 

 
(278,899
)
 

Deferred charges and other non-current assets
 

 
14,543

 
7,776

 

 
22,319

Total assets
 
$
2,963,535

 
$
2,967,467

 
$
813,844

 
$
(3,309,749
)
 
$
3,435,097

LIABILITIES AND EQUITY
 
 
 
 
 
 
 
 
 
 
Current liabilities:
 
 
 
 
 
 
 
 
 
 
Current portion of long-term debt
 
$
122,000

 
$

 
$

 
$

 
$
122,000

Accounts payable
 

 
93,035

 
46,607

 

 
139,642

Due to affiliates, current
 

 

 
17,240

 
(17,240
)
 

Accrued compensation
 

 
26,779

 
6,726

 

 
33,505

Accrued income taxes
 

 
26,010

 
(313
)
 

 
25,697

Federal excise tax
 

 
26,608

 
1,778

 

 
28,386

Other current liabilities
 

 
134,774

 
25,311

 

 
160,085

Total current liabilities
 
122,000

 
307,206

 
97,349

 
(17,240
)
 
509,315

Long-term debt
 
936,299

 

 

 

 
936,299

Deferred income tax liabilities
 

 
174,842

 
8,116

 
(83
)
 
182,875

Accrued pension and postemployment liabilities
 

 
72,548

 

 

 
72,548

Long-term due to affiliates
 
239,470

 

 
39,429

 
(278,899
)
 

Other long-term liabilities
 

 
52,734

 
15,567

 

 
68,301

Total liabilities
 
1,297,769

 
607,330

 
160,461

 
(296,222
)
 
1,769,338

Equity
 
 
 
 
 
 
 
 
 
 
Total stockholders' equity
 
1,665,766

 
2,360,137

 
653,383

 
(3,013,527
)
 
1,665,759

Total liabilities and stockholders' equity
 
$
2,963,535

 
$
2,967,467

 
$
813,844

 
$
(3,309,749
)
 
$
3,435,097



20

Table of Contents
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Continued)
(Amounts in thousands unless otherwise indicated)
14. Condensed Consolidating Financial Statements (Continued)

VISTA OUTDOOR INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(unaudited)
 
 
March 31, 2016
(Amounts in thousands except share data)
 
Parent Issuer
 
Guarantors
 
Non-Guarantors
 
Eliminations
 
Consolidated
ASSETS
 
 
 
 
 
 
 
 
 
 
Current assets:
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
 
$

 
$
133,503

 
$
18,189

 
$

 
$
151,692

Net receivables
 

 
382,662

 
45,736

 

 
428,398

Due from affiliates, current
 

 
19,912

 

 
(19,912
)
 

Net inventories
 

 
379,658

 
64,867

 
(4,285
)
 
440,240

Other current assets
 

 
26,517

 
2,817

 

 
29,334

Total current assets
 

 
942,252

 
131,609

 
(24,197
)
 
1,049,664

Net property, plant, and equipment
 

 
192,674

 
10,811

 

 
203,485

Investment in subsidiaries
 
2,530,524

 
36,865

 

 
(2,567,389
)
 

Goodwill
 

 
911,715

 
111,736

 

 
1,023,451

Net intangible assets
 

 
613,869

 
36,603

 

 
650,472

Long-term due from affiliates
 

 
241,598

 

 
(241,598
)
 

Deferred charges and other non-current assets
 

 
11,833

 
3,729

 

 
15,562

Total assets
 
$
2,530,524

 
$
2,950,806

 
$
294,488

 
$
(2,833,184
)
 
$
2,942,634

LIABILITIES AND EQUITY