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Vista Outdoor Announces FY16 Third Quarter Operating Results
PR Newswire
Vista Outdoor Updates FY16 Financial Guidance
Vista Outdoor Reports Both Sequential and Year-Over-Year Organic Growth

CLEARFIELD, Utah, Feb. 11, 2016 /PRNewswire/ -- Vista Outdoor Inc. (NYSE: VSTO) today reported operating results for the third quarter of its Fiscal Year 2016 (FY16), which ended on January 3, 2016. 

Vista Outdoor Inc. logo

"During the third quarter, we again delivered sequential and year-over-year organic growth," said Vista Outdoor Chairman and Chief Executive Officer Mark DeYoung. "Sales increased 17 percent over the prior-year period, including results from our recent acquisitions. Gross profit was up 25 percent year over year. Adjusted EPS was up 15 percent in the quarter over the prior-year period. We are in the middle of our winter show season and have received strong support for our new products as well as our ability to leverage distribution opportunities across a broad and growing portfolio. Looking ahead, we expect a solid fourth quarter, which is reflected in our raised revenue and adjusted EPS guidance.

"It has been one year since we launched Vista Outdoor, and I could not be more proud of the strong team we have put in place, the acquisitions we have completed, and the credibility we have gained within the industry and with stakeholders, who have seen us not only vocalize a visionary strategy, but execute it. We have also demonstrated our ability to act on a balanced capital deployment plan with our performance on the share repurchase program."

For the third quarter ended January 3, 2016:

  • Sales were $593 million, up 17 percent from the prior-year quarter, and up 5 percent on an organic sequential basis. The year-over-year increase primarily reflects an increase in the Shooting Sports segment and $41 million of sales from the Jimmy Styks and CamelBak acquisitions.
  • Gross profit was $168 million, up 25 percent from the prior-year quarter. The increase includes $17 million of gross profit from the recent acquisitions as well as increased organic gross profit in the Shooting Sports segment.
  • Operating expenses were $92 million, compared to $123 million in the prior-year quarter. The decrease reflects the absence of a $52 million non-cash, goodwill/trade name impairment charge in the prior year, partially offset by additional expenses as a result of acquisitions, standalone company costs, stock-based compensation, and additional investments in R&D, selling and marketing.
  • The tax rate for the quarter was 36 percent down from 468 percent in the prior-year quarter. The decrease was primarily caused by the tax impact of the previously mentioned, non-deductible goodwill impairment charge that occurred in the prior year.
  • Fully diluted earnings per share (EPS) was $0.70, compared to $(0.17) in the prior-year quarter. Adjusted EPS was $0.70, compared to $0.61 in the prior-year quarter.
  • Year-to-date free cash flow was $51 million, compared to $80 million in the prior-year period.
  • The company repurchased approximately 1.4 million shares in the quarter for $61 million. Since January 3, 2016, Vista Outdoor repurchased approximately 360,000 additional shares for $16 million.

"Vista Outdoor delivered strong results across the portfolio," said Vista Outdoor Chief Financial Officer Stephen Nolan. "We overcame several headwinds, including unfavorable foreign exchange rates and the warm fall hunting season, to deliver 9 percent organic growth over the prior-year period. We were particularly pleased with the performance of our Shooting Sports segment, which grew 15 percent organically year-over-year and again grew sequentially, with revenue 5 percent higher than in the second quarter. Outdoor Products, which was more affected by both foreign exchange rates and the warm weather, still delivered 3 percent organic sequential growth, but was down 2 percent year-over-year on an organic basis. In the first complete quarter for our two recent acquisitions, we also drove strong performance with $41 million in revenue, even though we were out of season for both acquired brands."

Updated Outlook for Fiscal Year 2016

"Given the strong performance year to date, we are raising our revenue and adjusted EPS guidance for the year," said Nolan. "We still expect higher operating expenses and continued promotional activity for the balance of the year. Additionally, we anticipate continued investment in working capital to support both increased inventory availability and promotion-related payment terms, resulting in a modest reduction of the top end of our free cash flow guidance."

Vista Outdoor updated FY16 financial guidance:

  • Sales in a range of $2.24 billion to $2.26 billion;
  • Adjusted EPS in a range of $2.40 to $2.50;
  • Capital expenditures of approximately $45 million;
  • Free cash flow in a range of $150 million to $170 million; and
  • Tax rate of approximately 38 percent.

Please see the tables below for a reconciliation of non-GAAP adjusted EPS, operating profit and free cash flow to the comparable GAAP measures.

Earnings Conference Call Webcast Information

Vista Outdoor will hold an investor conference call to discuss its third quarter FY16 financial results on February 11, 2016, at 9 a.m. Eastern Standard Time. 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 9450270.

Reconciliation of Non-GAAP Financial Measures

Operating Profit and Earnings Per Share

The adjusted operating profit (adjusted EBIT), and adjusted earnings per share (adjusted EPS) presented above are non-GAAP financial measures that Vista Outdoor defines as operating profit (EBIT) and EPS excluding, where applicable, the impact of costs incurred in the period for current and possible transactions, acquisition inventory step-up, and goodwill/trade name impairment. Vista Outdoor management is presenting these measures so a reader may compare EBIT 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 these measurements internally to assess business performance, and Vista Outdoor's definition may differ from those used by other companies. 


Quarter ended January 3, 2016:























Operating Profit


Income
Tax


Income Tax Rate


Net Income


EPS

As reported


$

75,232



$

24,297



36.0

%


$

43,159



$

0.70


Transaction costs


265



101





164




Inventory step-up


505



192





313




As adjusted


$

76,002



$

24,590



36.0

%


$

43,636



$

0.70













Quarter ended December 28, 2014:
























Operating Profit


Income
Tax


Income Tax Rate


Net Income (Loss)


EPS

As reported


$

11,394



$

14,206



467.8

%


$

(11,169)



$

(0.17)


Goodwill/trade name impairment


52,220



4,144





48,076



0.75


Transaction costs


2,597



1,000





1,597



0.03


As adjusted


$

66,211



$

19,350



33.4

%


$

38,504



$

0.61













*NOTE: Adjustments to "as reported" results are items that are excluded to arrive at the "as adjusted" results for the quarters  ended January 3, 2016 and December 28, 2014.

During the quarter ended January 3, 2016, Vista Outdoor incurred transaction costs associated with the completed transactions for CamelBak and Jimmy Styks as well as other possible transactions including advisory, legal and accounting service fees, a portion of which were non-deductible for tax purposes. For the quarter ended December 28, 2014, a portion of the transaction costs incurred by Orbital ATK in conjunction with the spin-off and merger were allocated to Vista Outdoor and have been included in the "as reported" results.

For the quarter ended January 3, 2016, as a result of the acquisitions of CamelBak and Jimmy Styks, 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.

For the quarter ended December 28, 2014, Vista Outdoor recorded a $52 million ($48 million, net of tax) non-cash, goodwill/trade name impairment charge associated with the Savage acquisition with only partial tax benefits.

Free Cash Flow

Free cash flow is defined as cash provided by operating activities less capital expenditures, allocated interest expense, and excluding transaction costs paid to date, net of tax. 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.



Nine months ended
January 3, 2016


Nine months ended
December 28, 2014


Projected year ending
March 31, 2016

Cash provided by operating activities


$

71,288



$

79,174



$189,337–$209,337

Capital expenditures


(26,301)



(30,630)



~(45,000)

Allocated interest expense




25,281



Transaction costs paid to date, net of tax


5,663



6,115



5,663

Free cash flow


$

50,650



$

79,940



$150,000–$170,000

Adjusted Earnings Per Share - Guidance Reconciliation Table

The projected adjusted earnings per share (EPS) excluding transaction costs, facility rationalization costs, and inventory step-up incurred to date associated with current and possible transactions 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 FY16 Full-Year Adjusted EPS Guidance














Low


High


EPS guidance including transaction costs, facility rationalization, and inventory step-up
incurred to date


$

2.29



$

2.39



Transaction costs incurred to date


0.08



0.08



Facility rationalization


$

0.02



$

0.02



Inventory step-up


$

0.01



$

0.01



Adjusted EPS guidance


$

2.40



$

2.50









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, Shooting Sports and Outdoor Products, and has well-recognized brands that provide consumers with a range of performance-driven, high-quality and innovative products in the ammunition, firearms and outdoor accessories categories. 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 10 U.S. States, Canada, Mexico and Puerto Rico along with international sales and sourcing operations in Asia, Australia, Canada, Europe and New Zealand.

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: Vista Outdoor's ability to realize anticipated benefits and cost savings from acquisitions; Vista Outdoor's ability to retain and hire key personnel and maintain relationships with customers, suppliers and other business partners of acquired businesses; costs or difficulties related to the integration of acquired businesses; general economic and business conditions in the U.S. and Vista Outdoor's other markets, including conditions affecting employment levels, consumer confidence and spending; Vista Outdoor's ability to operate successfully as a standalone business; Vista Outdoor's ability to retain and hire 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; Vista Outdoor's ability to maintain and enhance brand recognition and reputation; reductions or unexpected changes in demand for ammunition, firearms or accessories or other outdoor sports and recreation products; risks associated with Vista Outdoor's sales to significant retail 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; seasonality and weather conditions in Vista Outdoor's markets; 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; changes 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; Vista Outdoor's ability to take advantage of growth opportunities in international and commercial markets; changes in interest rates or credit availability; 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; risks associated with pension asset returns and assumptions regarding future returns, discount rates and service costs; 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, including the company's annual report on Form 10-K.


VISTA OUTDOOR INC.
CONDENSED CONSOLIDATED AND COMBINED STATEMENT OF INCOME (LOSS)
(preliminary and unaudited)








Quarter ended


Nine months ended

(Amounts in thousands except per share data)


January 3,
2016


December 28,
2014


January 3,
2016


December 28,
2014

Sales, net


$

592,557



$

506,881



$

1,658,431



$

1,598,025


Cost of sales


425,053



372,844



1,202,611



1,191,942


Gross profit


167,504



134,037



455,820



406,083


Operating expenses:









Research and development


3,681



2,318



8,851



7,043


Selling, general, and administrative


88,591



68,105



252,011



201,399


Goodwill and tradename impairment




52,220





52,220


Income before interest and income taxes


75,232



11,394



194,958



145,421


Interest expense


(7,776)



(8,357)



(16,908)



(25,281)


Income before income taxes


67,456



3,037



178,050



120,140


Income tax provision


24,297



14,206



68,326



56,519


Net income (loss)


$

43,159



$

(11,169)



$

109,724



$

63,621


Earnings (loss) per common share:









Basic


$

0.70



$

(0.17)



$

1.76



$

1.00


Diluted


$

0.70



$

(0.17)



$

1.75



$

1.00


Weighted-average number of common shares outstanding:









Basic


61,717



63,875



62,175



63,875


Diluted


62,092



63,875



62,534



63,875


 

VISTA OUTDOOR INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(preliminary and unaudited)






(Amounts in thousands except share data)


January 3, 2016


March 31, 2015

ASSETS





Current assets:





Cash and cash equivalents


$

71,134



$

263,951


Net receivables


430,034



361,694


Net inventories


482,190



375,621


Deferred income taxes


49,222



50,343


Other current assets


30,269



13,452


Total current assets


1,062,849



1,065,061


Net property, plant, and equipment


189,894



190,607


Goodwill


1,019,003



782,163


Net intangible assets


658,039



517,482


Deferred charges and other non-current assets


19,254



17,811


Total assets


$

2,949,039



$

2,573,124


LIABILITIES AND EQUITY





Current liabilities:





Current portion of long-term debt


$

17,500



$

17,500


Accounts payable


104,950



134,432


Accrued compensation


43,475



27,146


Accrued income taxes


11,535



9,569


Federal excise tax


28,875



23,194


Other current liabilities


137,588



96,071


Total current liabilities


343,923



307,912


Long-term debt


669,375



332,500


Non-current deferred income tax liabilities


191,486



193,382


Accrued pension and postemployment liabilities


58,394



59,345


Other non-current liabilities


41,107



31,221


Total liabilities


1,304,285



924,360







Common stock—$.01 par value:





Authorized—500,000,000 shares





Issued and outstanding—  61,338,105 shares at January 3, 2016 and 63,878,499
shares at March 31, 2015


613



639


Additional paid-in capital


1,742,184



1,742,125


Retained earnings


129,108



19,384


Accumulated other comprehensive loss


(111,715)



(110,303)


Common stock in treasury, at cost— 2,626,334 shares held at January 3, 2016 and
85,940 shares held at March 31, 2015


(115,436)



(3,081)


Total stockholders' equity


1,644,754



1,648,764


Total liabilities and stockholders' equity


$

2,949,039



$

2,573,124


 

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






Nine months ended

(Amounts in thousands)


January 3,
2016


December 28,
2014

Operating Activities





Net income


$

109,724



$

63,621


Adjustments to net income to arrive at cash provided by operating activities:





Depreciation


28,134



24,384


Amortization of intangible assets


24,602



23,112


Amortization of deferred financing costs


1,831



1,923


Goodwill and tradename impairment




52,220


Deferred income taxes


697



(3,873)


(Gain) loss on disposal of property


(180)



1,129


Stock-based compensation


9,055




Excess tax benefits from share-based plans


(206)




Changes in assets and liabilities, net of acquisition of businesses:





Net receivables


(36,387)



(71,034)


Net inventories


(75,437)



3,552


Accounts payable


(32,909)



(45,303)


Accrued compensation


5,328



(8,840)


Accrued income taxes


(4,543)



9,628


Federal excise tax


5,688



(2,672)


Pension and other postretirement benefits


3,458




Other assets and liabilities


32,433



31,327


Cash provided by operating activities


71,288



79,174


Investing Activities:





Capital expenditures


(26,301)



(30,630)


Acquisition of businesses, net of cash acquired


(462,116)




Proceeds from the disposition of property, plant, and equipment


696



(4)


Cash used for investing activities


(487,721)



(30,634)


Financing Activities:





Borrowings on line of credit


360,000




Payments on line of credit


(360,000)




Proceeds from issuance of long-term debt


350,000




Net transfers from parent




(7,386)


Payment from former parent


6,500




Payments made on long-term debt to parent




(13,225)


Proceeds from issuance of long-term debt to parent




50,000


Payments made to extinguish debt




(50,000)


Payments made on long-term debt


(13,125)




Payments made for debt issuance costs


(4,379)



(501)


Purchase of treasury shares


(115,194)




Proceeds from employee stock compensation plans


438




Excess tax benefits from share-based plans


206




Cash provided by (used for) financing activities


224,446



(21,112)


Effect of foreign exchange rate fluctuations on cash


(830)



(1,666)


(Decrease) increase in cash and cash equivalents


(192,817)



25,762


Cash and cash equivalents at beginning of period


263,951



40,004


Cash and cash equivalents at end of period


$

71,134



$

65,766


 

Media Contact:

Investor Contact:



Amanda Covington

Michael Pici

Phone: 801-779-4625

Phone: 801-779-4614

E-mail: media.relations@vistaoutdoor.com

E-mail: investor.relations@vistaoutdoor.com

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SOURCE Vista Outdoor Inc.

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