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Section 1: 8-K (8-K)

Document


 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 8-K
 
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 
Date of Report (Date of earliest event reported):  August 10, 2017
 389855237_vistaoutdoora07a03.jpg
 Vista Outdoor Inc.
(Exact name of registrant as specified in its charter)
 
Delaware
 
1-36597
 
47-1016855
(State or other jurisdiction
of incorporation)
 
(Commission
File Number)
 
(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
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
 
o            Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
o            Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
o            Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
o            Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 





Item 2.02 Results of Operations and Financial Condition
 
On August 10, 2017, Vista Outdoor Inc. (Vista Outdoor) issued a press release reporting its financial results for the fiscal quarter and nine months ended July 2, 2017. A copy of the press release is furnished as Exhibit 99.1 to this report and incorporated herein by reference.

Note: Information in this report (including the exhibit) furnished pursuant to Item 2.02 of Form 8-K shall not be deemed to be “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that section.
 
Item 9.01. Financial Statements and Exhibits
 
(d)                                 Exhibits.
 
Exhibit
No.
 
Description
99.1

 
Press release, dated August 10, 2017, reporting Vista Outdoor’s financial results for the fiscal quarter ended July 2, 2017.


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SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
 
 
 
VISTA OUTDOOR INC.
 
 
 
 
 
 
By:
/s/ Scott D. Chaplin
 
 
Name:
Scott D. Chaplin
 
 
Title:
Senior Vice President, General Counsel and Secretary
 
 
 
 
 
 
 
 
Date:
August 10, 2017
 
 


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Section 2: EX-99.1 (EXHIBIT 99.1)

Exhibit
Exhibit 99.1


389855237_vistaoutdoora08a03.jpg  
 
News Release
Corporate Communications
262 N. University Dr.
Farmington, UT 84025
Phone:  801-447-3000

 
For Immediate Release
 
 
 
Media Contact:
Investor Contact:
 
 
Amanda Covington
Michael Pici
Phone: 801-447-3035
Phone: 801-447-3168
E-mail: media.relations@vistaoutdoor.com
E-mail: investor.relations@vistaoutdoor.com
 
Vista Outdoor Announces FY18 First Quarter Operating Results

Vista Outdoor Reaffirms FY18 Financial Guidance

Farmington, Utah, August 10, 2017 Vista Outdoor Inc. (NYSE: VSTO) today reported operating results for the first quarter of its Fiscal Year 2018 (FY18), which ended on July 2, 2017.

"We delivered a solid start to Fiscal Year 2018 in the face of a challenging retail environment," said Vista Outdoor Interim Chairman and Chief Executive Officer Michael Callahan. "The company continues its focus on new product development, improved operational performance, and cost savings."

For the first quarter ended July 2, 2017:
Sales were $569 million, down 10 percent from the prior-year quarter, including $21 million of additional sales from the acquisition of Camp Chef. Sales were down 13 percent on an organic basis.
Gross profit was $147 million, down 14 percent from the prior-year quarter. This includes $7 million of gross profit from the Camp Chef acquisition, offset by an 18 percent decrease in organic gross profit.
Operating expenses were $107 million, compared to $112 million in the prior-year quarter.
Fully diluted earnings per share (EPS) was $0.29, compared to $0.48 in the prior-year quarter. Adjusted EPS was $0.24, compared to $0.48 in the prior-year quarter.
Cash flow provided by operating activities was $39 million, compared to a use of $22 million for operating activities in the prior-year period. Year-to-date free cash flow generation was $23 million, compared to free cash flow use of $41 million in the prior-year period.
    
Please see the tables in the press release for a reconciliation of non-GAAP adjusted gross profit, operating profit, tax rate, fully diluted earnings per share, and free cash flow to the comparable GAAP measures.

Outlook for Fiscal Year 2018

"We are pleased with our performance in the quarter," said Vista Outdoor Chief Financial Officer Stephen Nolan. "Our working capital reduction efforts are delivering results, with strong cash performance in a quarter when traditionally the company has had a net cash use. Margins were helped by the timing of some general overhead spending and by a late introduction in the quarter of ammunition promotional programs. This late introduction pushed the impact of those programs into later quarters. Our sales programs also resulted in the company pulling ahead some revenue from the second quarter into the latter part of our first quarter. Nonetheless, we are reaffirming previously issued guidance for the full year."

Vista Outdoor reaffirmed its FY18 financial guidance. The company expects:
 

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Sales in a range of $2.36 billion to $2.42 billion.
Interest expense of approximately $50 million.
Adjusted tax rate of approximately 37 percent.
Adjusted EPS in a range of $1.10 to $1.30.
Capital expenditures of approximately $70 million.
Free cash flow in a range of $175 million to $200 million.

The guidance above does not include the impact of any future strategic acquisitions, divestitures, investments, business combinations or other significant transactions, nor the impact of transition expenses for already-completed acquisitions.

Earnings Conference Call Webcast Information

Vista Outdoor will hold an investor conference call to discuss its first quarter FY18 financial results on August 10, 2017, at 9 a.m. ET. The conference call will be accessible through live webcast. Interested investors and other individuals can access the webcast and view and/or download the earnings press release, including a reconciliation of non-GAAP financial measures, and the related earnings release presentation slides, which will also include detailed segment information, via Vista Outdoor’s website (www.vistaoutdoor.com). Choose "Investors" then "Events and Presentations." For those who cannot participate in the live webcast, a telephone recording of the conference call will be available for one month after the call. The telephone number for the recorded call is 719-457-0820, and the confirmation code is 1265259.




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Reconciliation of Non-GAAP Financial Measures
 
Gross Profit, Operating Profit, and Earnings Per Share
 
The adjusted gross profit, operating expenses, operating profit (adjusted EBIT), adjusted tax rate, and adjusted earnings per share (adjusted EPS) presented below are non-GAAP financial measures. Vista Outdoor defines these measures as gross profit, operating profit (EBIT), tax rate, and EPS excluding, where applicable, the impact of costs incurred for current and possible transactions, pension curtailment, change in value of future payments of contingent consideration, transition costs for the Action Sports acquisition, and acquisition inventory step-up. Vista Outdoor management is presenting these measures so a reader may compare gross profit, EBIT, tax rate, and EPS excluding these items, as the measures provide investors with an important perspective on the operating results of the company. Vista Outdoor management uses this measurement internally to assess business performance, and Vista Outdoor’s definition may differ from those used by other companies.

 
 
 
 
 
 
 
 
 
Vista Outdoor
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Quarter ended July 2, 2017:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(in thousands)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gross Profit
 
Operating Expenses
 
Operating Profit
 
Income Tax
 
Income Tax Rate
 
Net Income
 
EPS
 
As reported
 
$
146,558

 
$
107,217

 
$
39,341

 
$
10,296

 
38.2
%
 
$
16,652

 
$
0.29

 
Pension curtailment
 

 
5,783

 
(5,783
)
 
(2,154
)
 
 
 
(3,629
)
 
(0.06
)
 
Contingent consideration
 

 
(843
)
 
843

 
314

 
 
 
529

 
0.01

 
Transaction costs
 

 
(84
)
 
84

 
31

 
 
 
53

 

 
As adjusted
 
$
146,558

 
$
112,073

 
$
34,485

 
$
8,487

 
38.4
%
 
$
13,605

 
$
0.24

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Quarter ended July 3, 2016:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(in thousands)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gross Profit
 
Operating Expenses
 
Operating Profit
 
Income Tax
 
Income Tax Rate
 
Net Income
 
EPS
 
As reported
 
$
171,377

 
$
112,275

 
$
59,102

 
$
18,015

 
38.2
%
 
$
29,124

 
$
0.48

 
Contingent consideration revaluation
 

 
3,396

 
(3,396
)
 
(1,274
)
 
 
 
(2,122
)
 
(0.04
)
 
Transaction and transition costs
 

 
(2,002
)
 
2,002

 
130

 
 
 
1,872

 
0.03

 
Inventory step-up
 
817

 

 
817

 
310

 
 
 
507

 
0.01

 
As adjusted
 
$
172,194

 
$
113,669

 
$
58,525

 
$
17,181

 
36.9
%
 
$
29,381

 
$
0.48

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Outdoor Products
 
 
 
 
 
Quarter ended July 3, 2016:
 
 
 
 
 
(in thousands)
 
 
 
 
 
 
 
 
 
Gross Profit
 
As reported
 
 
 
$
80,897

 
Inventory step-up
 
 
 
817

 
As adjusted
 
 
 
$
81,714

 
 
 
 
 
 
 



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*NOTE: Adjustments to "as reported" results are items that are excluded to arrive at the "as adjusted" results for the quarters ended July 2, 2017 and July 3, 2016.

During the quarter ended July 2, 2017, we announced changes to our qualified and non-qualified defined benefit pension plans that resulted in a one-time pension curtailment gain of $6 million. The curtailment is effective July 31, 2017, with employees receiving a pro-rated pay credit for 2017 and no future pay credits beginning in 2018. Given the nature of this item, we believe the gain is not indicative of the ongoing operations of the company. The tax effect of the pension curtailment was calculated based on a blended statutory rate of approximately 37 percent.

During the quarter ended July 2, 2017, Vista Outdoor incurred transaction costs associated with possible transactions, including advisory, legal, and accounting service fees. Given the nature of transaction costs, and differences in these amounts from one acquisition to another, we feel these costs are not indicative of operations of the company. The tax effect of the transaction costs was calculated based on a blended statutory rate of approximately 37 percent.

During the quarter ended July 2, 2017, Vista Outdoor recorded a portion of the $10 million of compensation for Camp Chef earn-out, which will be paid over the next three years, subject to continued Camp Chef leadership employment and the achievement of certain incremental profitability growth milestones. Given this balance is related to the purchase price of the company and is not normal compensation of the employees and will not be a continuing cost, we do not believe these costs are indicative of operations of the company. The tax effect of the contingent consideration cost was calculated based on a blended statutory rate of approximately 37 percent.

During the quarter ended July 3, 2016, Vista Outdoor incurred transaction and transition costs associated with the completed transaction of Action Sports as well as other possible transactions, including advisory, legal, and accounting service fees, a portion of which were non-deductible for tax purposes. Transition costs for the Action Sports business include one-time costs related to the integration of the business into the company including vendor change fees, insurance policy start up fees, and severance costs. The tax effect of the deductible transaction and transition costs was calculated based on a blended statutory rate of approximately 38 percent.

For the quarter ended July 3, 2016, as result of not attaining the level of growth required to achieve the first-year growth milestone earnout for the Jimmy Styks acquisition, the company revalued the contingent consideration based on expected incremental profitability growth milestones and reduced the liability. The tax effect of the contingent consideration revaluation was calculated based on a blended statutory rate of approximately 38 percent.

For the quarter ended July 3, 2016, as a result of the acquisitions of Action Sports, Vista Outdoor recorded a step-up in the inventory balances, which is the purchase accounting fair value adjustment. The inventory step-up will be expensed to the income statement over the first inventory cycle. The tax effect of the inventory step-up was calculated based on a blended statutory rate of approximately 38 percent.

Free Cash Flow
 
Free cash flow is defined as cash provided by (used for) operating activities less capital expenditures and excluding transaction and transition costs net of taxes incurred to date. Vista Outdoor management believes free cash flow provides investors with an important perspective on the cash available for debt repayment, share repurchases and acquisitions after making the capital investments required to support ongoing business operations. Vista Outdoor management uses free cash flow internally to assess both business performance and overall liquidity.
(in thousands)
 
Three months ended July 2, 2017
 
Three months ended July 3, 2016
 
Projected year ending March 31, 2018
Cash provided by (used for) operating activities
 
$
38,909

 
$
(22,158
)
 
$244,947–$269,947

Capital expenditures
 
(16,430
)
 
(21,006
)
 
~(70,000)

Transaction and transition costs paid to date, net of tax
 
53

 
2,419

 
53

Free cash flow
 
$
22,532

 
$
(40,745
)
 
$175,000–$200,000

 

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Adjusted Earnings Per Share - Guidance Reconciliation Table

The projected adjusted earnings per share (EPS), excluding the impact of costs incurred for current and possible transactions, changes in value of future payments of pension curtailment and contingent consideration, is a non-GAAP financial measure that Vista Outdoor defines as EPS excluding the impact of these items. Vista Outdoor management is presenting this measure so a reader may compare EPS, excluding these items, as this measure provides investors with an important perspective on the operating results of the company. Vista Outdoor management uses this measurement internally to assess business performance, and Vista Outdoor’s definition may differ from those used by other companies.

 
 
 
Current FY18 Full-Year Adjusted EPS Guidance
 
 
 
 
 
 
 
 
 
 
 
 
 
Low
 
High
 
EPS guidance including pension curtailment, contingent consideration revaluation, and transaction costs incurred to date
 
$
1.15

 
$
1.35

 
Pension curtailment
 
(0.06
)
 
(0.06
)
 
Contingent consideration
 
0.01

 
0.01

 
Adjusted EPS guidance
 
$
1.10

 
$
1.30

 
 
 
 
 
 
 

Vista Outdoor is a leading global designer, manufacturer and marketer of consumer products in the growing outdoor sports and recreation markets. The company operates in two segments, Outdoor Products and Shooting Sports, and has a portfolio of well-recognized brands that provides consumers with a wide range of performance-driven, high-quality, and innovative products for individual outdoor recreational pursuits. Vista Outdoor products are sold at leading retailers and distributors across North America and worldwide. Vista Outdoor is headquartered in 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, and Europe.


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Forward-Looking Statements

Certain statements in this press release and other oral and written statements made by Vista Outdoor from time to time are forward-looking statements, including those that discuss, among other things: Vista Outdoor's plans, objectives, expectations, intentions, strategies, goals, outlook or other non-historical matters; projections with respect to future revenues, income, earnings per share or other financial measures for Vista Outdoor; and the assumptions that underlie these matters. The words 'believe', 'expect', 'anticipate', 'intend', 'aim', 'should' and similar expressions are intended to identify such forward-looking statements. To the extent that any such information is forward-looking, it is intended to fit within the safe harbor for forward-looking information provided by the Private Securities Litigation Reform Act of 1995. Numerous risks, uncertainties and other factors could cause Vista Outdoor's actual results to differ materially from expectations described in such forward-looking statements, including the following: general economic and business conditions in the U.S. and Vista Outdoor's other markets, including conditions affecting employment levels, consumer confidence and spending, the conditions in the retail environment, and other economic conditions affecting demand for our products and the financial health of our customers; Vista Outdoor's ability to attract and retain key personnel and maintain and grow its relationships with customers, suppliers and other business partners, including Vista Outdoor's ability to obtain acceptable third party licenses; Vista Outdoor's ability to adapt its products to changes in technology, the marketplace and customer preferences, including our ability to respond to shifting preferences of the end consumer from brick and mortar retail to online retail; Vista Outdoor's ability to maintain and enhance brand recognition and reputation; reductions, unexpected changes in or our inability to accurately forecast demand for ammunition, firearms or accessories or other outdoor sports and recreation products; risks associated with Vista Outdoor's sales to significant customers, including unexpected cancellations, delays and other changes to purchase orders; supplier capacity constraints, production disruptions or quality or price issues affecting Vista Outdoor's operating costs; Vista Outdoor's competitive environment; risks associated with compliance and diversification into international and commercial markets; the supply, availability and costs of raw materials and components; increases in commodity, energy and production costs; changes in laws, rules and regulations relating to Vista Outdoor's business, such as federal and state firearms and ammunition regulations; Vista Outdoor's ability to execute its long-term growth strategy, including our ability to complete and realize expected benefits from acquisitions and integrate acquired businesses; Vista Outdoor's ability to take advantage of growth opportunities in international and commercial markets; foreign currency exchange rates and fluctuations in those rates; the outcome of contingencies, including with respect to litigation and other proceedings relating to intellectual property, product liability, warranty liability, personal injury and environmental remediation; risks associated with cybersecurity and other industrial and physical security threats; capital market volatility and the availability of financing; changes to accounting standards or policies; and changes in tax rules or pronouncements. Vista Outdoor undertakes no obligation to update any forward-looking statements. For further information on factors that could impact Vista Outdoor, and statements contained herein, please refer to Vista Outdoor's filings with the Securities and Exchange Commission.
 
#          #          #

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VISTA OUTDOOR INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(preliminary and unaudited)

 
 
Quarter ended
(Amounts in thousands except per share data)
 
July 2, 2017
 
July 3, 2016
Sales, net
 
$
568,749

 
$
630,269

Cost of sales
 
422,191

 
458,892

Gross profit
 
146,558

 
171,377

Operating expenses:
 


 
 
Research and development
 
7,791

 
7,831

Selling, general, and administrative
 
99,426

 
104,444

Income before interest and income taxes
 
39,341

 
59,102

Interest expense, net
 
(12,393
)
 
(11,963
)
Income before income taxes
 
26,948

 
47,139

Income tax provision
 
10,296

 
18,015

Net income
 
$
16,652

 
$
29,124

Earnings per common share:
 
 

 
 

Basic
 
$
0.29

 
$
0.48

Diluted
 
$
0.29

 
$
0.48

Weighted-average number of common shares outstanding:
 


 
 

Basic
 
56,916

 
60,384

Diluted
 
56,957

 
60,715



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VISTA OUTDOOR INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(preliminary and unaudited)
 
(Amounts in thousands except share data)
 
July 2, 2017
 
March 31, 2017
ASSETS
 
 

 
 

Current assets:
 
 

 
 

Cash and cash equivalents
 
$
53,550

 
$
45,075

Net receivables
 
454,789

 
450,715

Net inventories
 
542,880

 
562,795

Income tax receivable
 
17,944

 
25,658

Other current assets
 
26,639

 
25,604

Total current assets
 
1,095,802

 
1,109,847

Net property, plant, and equipment
 
272,773

 
272,346

Goodwill
 
861,114

 
857,631

Net intangible assets
 
700,839

 
708,530

Deferred charges and other non-current assets
 
30,779

 
28,393

Total assets
 
$
2,961,307

 
$
2,976,747

LIABILITIES AND EQUITY
 
 

 
 

Current liabilities:
 
 

 
 

Current portion of long-term debt
 
$
32,000

 
$
32,000

Accounts payable
 
102,098

 
127,718

Accrued compensation
 
31,773

 
33,663

Federal excise tax
 
26,092

 
30,082

Other accrued liabilities
 
130,022

 
122,926

Total current liabilities
 
321,985

 
346,389

Long-term debt
 
1,075,175

 
1,089,252

Deferred income tax liabilities
 
159,444

 
160,765

Accrued pension and postemployment benefits
 
62,710

 
64,230

Other long-term liabilities
 
71,360

 
71,046

Total liabilities
 
1,690,674

 
1,731,682

 
 
 
 
 
Common stock—$.01 par value:
 
 
 
 
Authorized—500,000,000 shares
 
 
 
 
Issued and outstanding — 57,030,534 shares at July 2, 2017 and 57,014,319 shares at March 31, 2017
 
570

 
571

Additional paid-in capital
 
1,755,119

 
1,752,903

Accumulated deficit
 
(91,381
)
 
(108,033
)
Accumulated other comprehensive loss
 
(107,178
)
 
(112,992
)
Common stock in treasury, at cost — 6,933,905 shares held at July 2, 2017 and 6,950,120 shares held at March 31, 2017
 
(286,497
)
 
(287,384
)
Total stockholders' equity
 
1,270,633

 
1,245,065

Total liabilities and stockholders' equity
 
$
2,961,307

 
$
2,976,747


8


VISTA OUTDOOR INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(preliminary and unaudited)

 
 
Three months ended
(Amounts in thousands)
 
July 2, 2017
 
July 3, 2016
Operating Activities:
 
 
 
 
Net income
 
$
16,652

 
$
29,124

Adjustments to net income to arrive at cash provided by (used for) operating activities:
 
 
 
 
Depreciation
 
13,552

 
13,676

Amortization of intangible assets
 
9,110

 
10,106

Amortization of deferred financing costs
 
728

 
2,172

Deferred income taxes
 
2

 
52

Loss on disposal of property, plant, and equipment
 
77

 
41

Stock-based compensation
 
3,357

 
3,310

Changes in assets and liabilities, net of acquisition of businesses:
 
 
 
 
Net receivables
 
(2,323
)
 
(12,908
)
Net inventories
 
17,550

 
(57,697
)
Accounts payable
 
(20,953
)
 
(33,196
)
Accrued compensation
 
(2,559
)
 
(19,322
)
Accrued income taxes
 
8,423

 
14,396

Federal excise tax
 
(4,036
)
 
737

Pension and other postretirement benefits
 
(4,841
)
 
579

Other assets and liabilities
 
4,170

 
26,772

Cash provided by (used for) operating activities
 
38,909

 
(22,158
)
Investing Activities:
 
 
 
 
Capital expenditures
 
(16,430
)
 
(21,006
)
Acquisition of businesses, net of cash acquired
 

 
(405,943
)
Proceeds from the disposition of property, plant, and equipment
 
13

 
34

Cash used for investing activities
 
(16,417
)
 
(426,915
)
Financing Activities:
 
 
 
 
Borrowings on line of credit
 
145,000

 
115,000

Payments made on line of credit
 
(150,000
)
 
(25,000
)
Proceeds from issuance of long-term debt
 

 
307,500

Payments made on long-term debt
 
(8,000
)
 
(8,000
)
Payments made for debt issuance costs
 
(1,805
)
 
(3,660
)
Purchase of treasury shares
 

 
(22,058
)
Proceeds from employee stock compensation plans
 
298

 

Cash provided by (used for) financing activities
 
(14,507
)
 
363,782

Effect of foreign exchange rate fluctuations on cash
 
490

 
(401
)
(Decrease) increase in cash and cash equivalents
 
8,475

 
(85,692
)
Cash and cash equivalents at beginning of period
 
45,075

 
151,692

Cash and cash equivalents at end of period
 
$
53,550

 
$
66,000


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