Vista Outdoor, formerly the Sporting Group of Alliant Techsystems Inc. (ATK), reported sales slid 3.3 percent in its third quarter ended Dec. 28, to $506.9 million.
As reported, ATK is spinning off its Sporting Group business as Vista Outdoor as part of a plan to merge its Aerospace and Defense Groups with Orbital Sciences Corp. The transaction is expected to be completed on Feb. 9, and Vista Outdoor will trade on the New York Stock Exchange under the symbol, VSTO.
Adjusted to include full-quarter results of Bushnell, acquired on Nov. 1, 2013, pro-forma revenues at Vista Outdoor in the third quarter declined 13 percent.
In the Shooting Sports segment, sales fell 19.5 percent to $308.8 million. The decrease was driven primarily by reduced volume of .223/5.56 ammunition (which is primarily sourced from ATK), primers and firearms as a result of softening market demand. Gross profits in the segment declined 22.6 percent to $81.0 million, reflecting the revenue decline, product mix and targeted promotional activity in response to market conditions.
Brands under the Shooting Sports segment include: American Eagle, Blazer, CCI, Estate Cartridge, Federal Premium, Fusion, Savage Arms, Speer and Stevens.
In the Outdoor Products segment, sales jumped 40.8 percent to $198.1 million, quarter, reflecting the Bushnell acquisition. Sales from the Bushnell acquisition were $151 million in the current year period compared to $85 million in the prior-year period. On a pro-forma basis adjusted for full Bushnell results in both periods, sales inched up 0.6 percent. Growth in the optics business offset a softening in the tactical accessories and reloading business.
Gross profits rose 91.9 percent to $54.2 million, including results from the Bushnell acquisition and the absence of facility rationalization costs incurred in the prior-year quarter. Gross profit from the Bushnell acquisition was $44 million in the current-year period compared to $21 million in the prior-year period, including inventory step-up and transition costs.
The Outdoor Products segment includes: Alliant Powder, Bee Stinger, BLACKHAWK!, Bollé, Bushnell, Butler Creek, Cébé, Champion Target, Eagle, Final Approach, GunMate, Gunslick Pro, Gold Tip, Hoppe's, Millett, Night Optics, Outers, Primos, RCBS, Serengeti, Simmons, Stoney Point, Tasco, Uncle Mike's and Weaver Optics.
Overall gross profit edged up 0.3 percent to $134.0 million. As previously announced, the quarter included a pre-tax charge of $52 million goodwill/trade name impairment charge associated with the Savage acquisition. Vista said a major factor to the impairment was “the significant impact to the valuations of other firearms market participants.” Also, contributing to this impairment was a decline in the company's near-term projected cash flows in the firearms business.
Reflecting the charge, operating profits tumbled 81.8 percent to $11.4 million. Excluding the goodwill/trade name impairment and transaction costs in both the current and prior-year periods, operating earnings were down 12.0 percent to $66 million. The decline reflected the sales dip and higher general and administrative costs, primarily due to a full-quarter of the Bushnell acquisition.
The net loss came to $11.2 million in the period against net income of $33.4 million a year ago.
Stephen Nolan, the CFO-appointee for Vista Outdoor, said the shooting sports market is “settling back” to normalized demand levels.
“Our results are in line with our expectations for the market correction and recovery,” said Nolan. “The average market correction period is approximately 18 months. Consistent with previous expectations, we see Vista Outdoor generating modest growth for FY16, primarily in the second half of the year.”
Launches such as the Bushnell Tour-X Golf Laser Range Finder and the Savage A17 rifle are expected to spur growth.
Mark DeYoung, ATK’s president and CEO and Vista CEO-appointee, said Vista remains uniquely positioned to grow in the $63 billion outdoor recreation market.
“Despite the recent market conditions in certain segments of the shooting sports industry, our ability to outperform our competitors, maintain attractive margins, deliver innovative products and strategically position our portfolio with a variety of customers enables Vista Outdoor to position itself for new market opportunities and utilize proven execution excellence to deliver results for our shareholders,” said DeYoung.
