Vista Outdoor Inc. reported break-even results on an adjusted basis in the second quarter as sales slid 7 percent on an organic basis. The company again slightly lowered its sales guidance due to continuing ammunition weakness but retained its adjusted earnings outlook.
On a reported basis, earnings guidance was lowered due to additional restructuring activities and asset impairments.
The company’s top brands include Federal Premium, CCI and Speer in the Shooting Sports segment and Bushnell, CamelBak, Camp Chef, Primos, Bell, Giro, RCBS, Hoppe’s, Uncle Mike’s, Gold Tip®, Weaver®, Blackburn, KRASH!, Copilot, Raskullz and Tasco in the Outdoor Products segment.
“We have had a good start to the first half of the year, and have delivered a solid second quarter of results,” said Vista Outdoor Chief Executive Officer Chris Metz. “While we were presented with several significant new challenges in the second quarter, particularly within our Ammunition business unit, we have continued to make progress on our profitability and de-leveraging goals. The decisive actions we have taken to strengthen performance are yielding results. I am confident in the plans we have in place, and in our team’s ability to successfully deliver on our financial guidance for Fiscal Year 2020.”
For the second quarter ended September 29, 2019:
- Sales were $445 million, down 19 percent from the prior-year quarter, down 7 percent on an organic basis, excluding results from the sale of our Eyewear brands, which were sold in the second quarter of Fiscal Year 2019, and our Firearms business which was sold in the second quarter of Fiscal Year 2020.
- Gross profit was $90 million, down 17 percent from the prior year quarter, down 3 percent on an adjusted organic basis, excluding results from the sale of our Eyewear brands and Firearms business.
- Operating expenses were $89 million. This compares to $128 million of operating expenses in the prior-year quarter.
- Adjusted operating expenses were $81 million compared to $94 million in the prior year quarter.
- Fully diluted earnings per share (EPS) was $(0.21), compared to $(0.57) in the prior year quarter. Adjusted EPS was $0.00, compared to $0.05 in the prior year quarter.
- Cash flow used in operating activities year-to-date was $8 million, compared to $58 million provided by operations in the prior year period. Year-to-date free cash flow was negative $23 million, compared to free cash flow of positive $55 million in the prior year period. Free cash flow generated in the quarter was positive $21 million.
For the second quarter ended September 29, 2019 Operating Segment Results:
- The Outdoor Products segment generated $234 million in sales during the second quarter, down 14 percent from the prior-year quarter, down 7 percent on an organic basis, excluding our Eyewear brands.
- Gross profit was $61 million, down 0.3 percent from the prior year quarter, and up 9 percent on an adjusted organic basis.
- The gross profit margin was 26 percent, up 361 bps from the prior year quarter, and was 26 percent on an adjusted organic basis, up 397 bps from the prior year quarter.
- The Shooting Sports segment generated $211 million in sales during the second quarter, down 23 percent from the prior-year quarter, down 6 percent on an organic basis, excluding our Firearms business.
- Gross profit was $29 million, down 39 percent from the prior year quarter, down 22 percent on an adjusted organic basis.
- The gross profit margin was 14 percent, down 353 bps from the prior year quarter, and was 14 percent on an adjusted organic basis, down 277 bps from the prior year quarter.
Outlook for Fiscal Year 2020
“We have continued to deliver on our debt reduction and de-leveraging goals, paying off the balance of our higher interest Junior Term loan in October. We have now reduced our debt by approximately $600 million, which is a 51 percent reduction from our peak long-term debt balance of approximately $1.176 billion. Our transformation initiatives continue to deliver positive impacts in our financial results, and our more efficient, profitable brand platforms are now better positioned to seize growth opportunities going forward,” said Mick Lopez, Vista Outdoor chief financial officer.
Vista Outdoor’s guidance for FY20 is as follows:
- Sales in a range of $1.75 billion to $1.85 billion. That compares to previous guidance of $1.79 billion to $1.89 billion.
- Interest expense reported of approximately $40 million and adjusted of approximately $37 million.
- GAAP Earnings per share in a range of $(0.23) to $(0.08), as compared to previous range of $(0.03) and $0.12 to reflect restructuring and asset impairments. Vista maintained its adjusted earnings per share of $0.10 to $0.25 from previous guidance.
- Capital expenditures are still expected to be approximately $40 million.
- Free cash flow is still expected in a range of $30 million to $40 million.
- The company also expects FY20 EBITDA margins of approximately 6 percent. FY20 guidance does not include the impact of any additional future strategic acquisitions, divestitures, investments, business combinations or other significant transactions.