Vista Outdoor raised the company’s earnings outlook after reporting second-quarter earnings topped expectations as efforts to grow profitability start to pay off. The company’s sales guidance was lowered for the year due to continued tough conditions in shooting sports.

Vista’s major brands in these areas include Federal Premium, CamelBak, Bushnell, Primos, Camp Chef and BLACKHAWK!.

“Vista Outdoor’s first quarter results exceeded expectations despite continuing headwinds and market challenges,” said Vista Outdoor Chief Executive Officer Chris Metz. “The company generated strong free cash flow, primarily driven by improved working capital management, which we used to pay down $33 million of long-term debt. Our focus on improved profitability is delivering results, we are driving operational excellence through cost savings initiatives and procurement strategies, and we continue to introduce innovative new products into the market.

“Our strategic transformation plan, which we announced in May 2018, is also tracking well. The transformation will allow the company to drive shareholder value by reducing leverage, improving financial flexibility and the efficiency of our capital structure, and providing additional resources to reinvest in our core product categories: ammunition, hunting and shooting accessories, hydration solutions and outdoor cooking.”

On July 9, 2018, Vista Outdoor announced it entered into a definitive agreement to sell its Bollé, Cébé and Serengeti brands. Gross proceeds from the divestiture are expected to be approximately $158 million before net working capital adjustments and transaction costs. The sale is expected to close in the second quarter of FY19 ending September 30, 2018.

“The company continues to explore strategic options for assets that fall outside of our core product categories,” said Metz.

For the first quarter ended July 1, 2018:

  • Sales were $529 million, down 7 percent from the prior-year quarter. Sales fell short of Wall Street’s consensus estimate of $543 million.
  • Gross profit was $113 million, down 23 percent from the prior-year quarter.
  • Operating expenses were $153 million, compared to $107 million in the prior-year quarter. The difference was primarily due to a $45 million impairment in the current period, related to an expected loss on the sale of the company’s held-for-sale assets. The loss is primarily attributable to cumulative foreign currency translation adjustments.
  • Fully diluted earnings per share (EPS) was $(0.91), compared to $0.29 in the prior-year quarter. Adjusted EPS was $0.00 compared to $0.24 in the prior-year quarter. Wall Street’s consensus estimate had been a loss of 12 cents.
  • Cash flow provided by operating activities year to date was $74 million compared to $41 million in the prior-year period. Year-to-date free cash flow generation was $70 million compared to free cash flow of $25 million in the prior-year period.
  • Tax rate was 1.4 percent compared to 38.2 percent in the prior-year quarter, primarily caused by the non-deductible impairment loss in the current period and the income tax effects of The Tax Cuts and Jobs Act. The adjusted tax rate was 119.1 percent compared to 38.4 percent in the prior-year quarter.

Updated Outlook for Fiscal Year 2019

“The company generated strong free cash flow in the first quarter, and delivered results that beat expectations,” said Vista Outdoor Chief Financial Officer Mick Lopez. “We have updated our sales and EPS guidance to reflect the impact of the pending eyewear sale, and despite the ongoing shooting sports market softness and commodity headwinds, we have raised our EPS and free cash flow expectations given the success of our ongoing efforts to drive profitability and to generate cash.”

Vista Outdoor Updates FY19 Financial Guidance

  • Sales in a range of $2.10 billion to $2.16 billion compared to previous sales guidance in a range of $2.205 billion to $2.265 billion
  • Interest expense of approximately $55 million
  • Tax rate reported of approximately 1 percent and an adjusted tax rate of approximately 30 percent compared to previous guidance of a reported and adjusted tax rate of approximately 30 percent
  • Earnings per share in a range of $(0.76) to $(0.56) and adjusted earnings per share in a range of $0.15 to $0.35 compared to previous guidance of earnings per share in a range of $0.04 to $0.24 and adjusted earnings per share in a range of $0.10 to $0.30
  • Capital expenditures of approximately $60 million
  • Free cash flow in a range of $70 million to $100 million compared to previous free cash flow guidance in a range of $55 million to $85 million
  • The company also expects FY19 EBITDA margins in a range of approximately 7.5 percent to 8 percent. The guidance above does not include the impact of any future strategic acquisitions, divestitures, investments, business combinations or other significant transactions.