vsto-20221225

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


☒						QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended December 25, 2022


☐						TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 1-36597

Vista Outdoor Inc.

(Exact name of Registrant as specified in its charter)


Delaware			47-1016855
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

1 Vista Way	Anoka	MN	55303
(Address of Principal Executive Offices)			(Zip Code)

Registrant's telephone number, including area code: (763) 433-1000

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $.01

VSTO

New York Stock Exchange

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of January 30, 2023, there were 56,582,937 shares of the registrant's common stock outstanding.

TABLE OF CONTENTS


		Page
PART I - Financial Information
Item 1.	Unaudited Financial Statements	2
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	25
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	32
Item 4.	Controls and Procedures	33
PART II - Other Information
Item 1.	Legal Proceedings	34
Item 1A.	Risk Factors	34
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	34
Item 3.	Defaults Upon Senior Securities	34
Item 4.	Mine Safety Disclosures	34
Item 5.	Other Information	35
Item 6.	Exhibits	36
SIGNATURES		38

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PART I— FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

VISTA OUTDOOR INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited)


(Amounts in thousands except share data)	December 25, 2022		March 31, 2022
ASSETS
Current assets:
Cash and cash equivalents	$	77,426	$	22,584
Net receivables	375,296		356,773
Net inventories	779,991		642,976
Income tax receivable	41,415		43,560
Other current assets	61,847		45,050
Total current assets	1,335,975		1,110,943
Net property, plant, and equipment	232,843		211,087
Operating lease assets	100,475		78,252
Goodwill	799,367		481,857
Net intangible assets	785,736		459,795
Deferred charges and other non-current assets, net	75,309		54,267
Total assets	$	3,329,705	$	2,396,201
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt	$	140,000	$	—
Accounts payable	158,619		146,697
Accrued compensation	44,468		79,171
Federal excise, use, and other taxes	37,237		40,825
Other current liabilities	179,260		127,180
Total current liabilities	559,584		393,873
Long-term debt	1,078,318		666,114
Deferred income tax liabilities	84,183		29,304
Long-term operating lease liabilities	94,845		80,083
Accrued pension and postemployment benefits	21,489		22,634
Other long-term liabilities	70,634		79,794
Total liabilities	1,909,053		1,271,802
Commitments and contingencies (Notes 3, 13, and 16)
Common stock — $.01 par value:
Authorized — 500,000,000 shares
Issued and outstanding — 56,575,405 shares as of December 25, 2022 and 56,093,456 shares as of March 31, 2022	566		560
Additional paid-in capital	1,722,294		1,730,927
Retained earnings (accumulated deficit)	63,807		(220,810)
Accumulated other comprehensive loss	(76,267)		(76,679)
Common stock in treasury, at cost — 7,389,034 shares held as of December 25, 2022 and 7,870,983 shares held as of March 31, 2022	(289,748)		(309,599)
Total stockholders' equity	1,420,652		1,124,399
Total liabilities and stockholders' equity	$	3,329,705	$	2,396,201

See Notes to the Condensed Consolidated Financial Statements.

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VISTA OUTDOOR INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(unaudited)


	Three months ended				Nine months ended
(Amounts in thousands except per share data)	December 25, 2022		December 26, 2021		December 25, 2022		December 26, 2021
Sales, net	$	754,775	$	794,654	$	2,339,065	$	2,236,026
Cost of sales	515,969		513,184		1,543,915		1,414,208
Gross profit	238,806		281,470		795,150		821,818
Operating expenses:
Research and development	12,382		7,478		31,433		19,786
Selling, general, and administrative	129,738		115,045		363,439		308,690
Earnings before interest, income taxes, and other	96,686		158,947		400,278		493,342
Other income, net (Note 5)	639		—		1,380		—
Earnings before interest and income taxes	97,325		158,947		401,658		493,342
Interest expense, net	(18,953)		(6,695)		(39,197)		(18,302)
Earnings before income taxes	78,372		152,252		362,461		475,040
Income tax provision	(13,225)		(34,115)		(77,844)		(114,638)
Net income	$	65,147	$	118,137	$	284,617	$	360,402
Earnings per common share:
Basic	$	1.15	$	2.07	$	5.03	$	6.26
Diluted	$	1.13	$	2.00	$	4.91	$	6.07
Weighted-average number of common shares outstanding:
Basic	56,574		57,162		56,538		57,540
Diluted	57,843		59,066		58,022		59,404

Net income (from above)	$	65,147	$	118,137	$	284,617	$	360,402
Other comprehensive income (loss), net of tax:
Pension and other postretirement benefit liabilities:
Reclassification of prior service credits for pension and postretirement benefit plans recorded to net income, net of tax benefit of $0 and $0 for the three and nine months ended December 25, 2022, respectively, and $190 and $244 for the three and nine months ended December 26, 2021, respectively	—		(585)		—		(752)
Reclassification of net actuarial loss for pension and postretirement benefit plans recorded to net income, net of tax (expense) of $(221) and $(663) for the three and nine months ended December 25, 2022, respectively, and $(348) and $(867) for the three and nine months ended December 26, 2021, respectively	694		1,072		2,082		2,671
Change in derivatives, net of tax benefit of $164 and $945 for the three and nine months ended December 25, 2022, respectively, and $33 and $154 for the three and nine months ended December 26, 2021, respectively	(515)		(102)		(793)		(475)
Change in cumulative translation adjustment, net of tax (expense) of $(3) and $(171) for the three and nine months ended December 25, 2022, respectively, and $0 and $0 for the three and nine months ended December 26, 2021, respectively	994		(115)		(877)		(246)
Total other comprehensive income	1,173		270		412		1,198
Comprehensive income	$	66,320	$	118,407	$	285,029	$	361,600

See Notes to the Condensed Consolidated Financial Statements.

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VISTA OUTDOOR INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)


	Nine months ended
(Amounts in thousands)	December 25, 2022		December 26, 2021
Operating Activities:
Net income	$	284,617	$	360,402
Adjustments to net income to arrive at cash provided by operating activities:
Depreciation	35,660		33,980
Amortization of intangible assets	31,431		18,031
Amortization of deferred financing costs	4,603		1,057
Change in fair value of contingent consideration	(16,403)		—
Deferred income taxes	(6,165)		(1,287)
Gain on foreign exchange	(586)		—
Loss on disposal of property, plant, and equipment	699		223
Share-based compensation	19,590		20,562
Changes in assets and liabilities:
Net receivables	31,127		(78,120)
Net inventories	(45,568)		(131,994)
Accounts payable	(11,254)		4,367
Accrued compensation	(39,558)		(13,947)
Accrued income taxes	13,538		667
Federal excise, use, and other taxes	(4,643)		8,977
Pension and other postretirement benefits	1,600		(1,536)
Other assets and liabilities	8,828		(1,916)
Cash provided by operating activities	307,516		219,466
Investing Activities:
Capital expenditures	(25,157)		(24,828)
Acquisition of businesses, net of cash received	(761,497)		(528,508)
Proceeds from the disposition of property, plant, and equipment	43		383
Cash used for investing activities	(786,611)		(552,953)
Financing Activities:
Proceeds from credit facility	468,000		300,000
Repayments of credit facility	(223,000)		(80,000)
Debt issuance costs	(16,935)		(1,053)
Proceeds from issuance of long-term debt	350,000		—
Payments on long-term debt	(35,000)		—
Purchase of treasury shares	—		(86,121)
Proceeds from exercise of stock options	205		325
Payment of employee taxes related to vested stock awards	(8,946)		(3,087)
Cash provided by financing activities	534,324		130,064
Effect of foreign exchange rate fluctuations on cash	(387)		(201)
Increase (decrease) in cash and cash equivalents	54,842		(203,624)
Cash and cash equivalents at beginning of period	22,584		243,265
Cash and cash equivalents at end of period	$	77,426	$	39,641
Supplemental Cash Flow Disclosures:
Non-cash investing activity:
Capital expenditures included in accounts payable	$	4,020	$	1,963
Contingent consideration in connection with business combinations	$	11,400	$	26,025

See Notes to the Condensed Consolidated Financial Statements.

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VISTA OUTDOOR INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(unaudited)


(Amounts in thousands except share data)	Shares	Amount		Additional Paid-In Capital		Retained Earnings (Accumulated Deficit)		Accumulated Other Comprehensive Loss		Treasury Stock		Total Equity
Balance, September 25, 2022	56,566,915	$	566	$	1,717,750	$	(1,340)	$	(77,440)	$	(290,085)	$	1,349,451
Comprehensive income	—	—		—		65,147		1,173		—		66,320
Exercise of stock options	1,257	—		(25)		—		—		49		24
Share-based compensation	—	—		4,834		—		—		—		4,834
Restricted stock vested and shares withheld	929	—		(52)		—		—		40		(12)
Employee stock purchase plan	6,195	—		(100)		—		—		243		143
Other	109	—		(113)		—		—		5		(108)
Balance, December 25, 2022	56,575,405	$	566	$	1,722,294	$	63,807	$	(76,267)	$	(289,748)	$	1,420,652

Balance, September 26, 2021	57,288,160	$	573	$	1,731,665	$	(451,771)	$	(82,267)	$	(263,187)	$	935,013
Comprehensive income	—	—		—		118,137		270		—		118,407
Exercise of stock options	5,976	—		(139)		—		—		236		97
Share-based compensation	—	—		6,750		—		—		—		6,750
Restricted stock vested and shares withheld	8,483	—		(486)		—		—		321		(165)
Employee stock purchase plan	2,803	—		(3)		—		—		110		107
Treasury shares purchased	(758,273)	—		—		—		—		(29,882)		(29,882)
Other	3,635	(7)		(137)		—		—		142		(2)
Balance, December 26, 2021	56,550,784	$	566	$	1,737,650	$	(333,634)	$	(81,997)	$	(292,260)	$	1,030,325

(Amounts in thousands except share data)	Shares	Amount		Additional Paid-In Capital		Retained Earnings (Accumulated Deficit)		Accumulated Other Comprehensive Loss		Treasury Stock		Total Equity
Balance, March 31, 2022	56,093,456	$	560	$	1,730,927	$	(220,810)	$	(76,679)	$	(309,599)	$	1,124,399
Comprehensive income	—	—		—		284,617		412		—		285,029
Exercise of stock options	14,407	—		(360)		—		—		565		205
Share-based compensation	—	—		19,590		—		—		—		19,590
Restricted stock vested and shares withheld	415,294	—		(26,016)		—		—		17,251		(8,765)
Employee stock purchase plan	12,197	—		(176)		—		—		478		302
Other	40,051	6		(1,671)		—		—		1,557		(108)
Balance, December 25, 2022	56,575,405	$	566	$	1,722,294	$	63,807	$	(76,267)	$	(289,748)	$	1,420,652

Balance, March 31, 2021	58,561,016	$	585	$	1,731,479	$	(694,036)	$	(83,195)	$	(217,836)	$	736,997
Comprehensive income	—	—		—		360,402		1,198		—		361,600
Exercise of stock options	15,277	—		(278)		—		—		603		325
Share-based compensation	—	—		20,562		—		—		—		20,562
Restricted stock vested and shares withheld	186,208	—		(11,590)		—		—		8,326		(3,264)
Employee stock purchase plan	5,529	—		9		—		—		218		227
Treasury shares purchased	(2,281,956)	—		—		—		—		(86,121)		(86,121)
Other	64,710	(19)		(2,532)		—		—		2,550		(1)
Balance, December 26, 2021	56,550,784	$	566	$	1,737,650	$	(333,634)	$	(81,997)	$	(292,260)	$	1,030,325

See Notes to the Condensed Consolidated Financial Statements.

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VISTA OUTDOOR INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Nine Months Ended December 25, 2022

(Amounts in thousands except per share data and unless otherwise indicated)

1. The Company and Basis of Presentation

Nature of Operations—Vista Outdoor Inc. (together with our subsidiaries, "Vista Outdoor", "we", "our", and "us", unless the context otherwise requires) is a leading global designer, manufacturer, and marketer of outdoor recreation and shooting sports products. We operate through two reportable segments, Sporting Products and Outdoor Products. We are headquartered in Anoka, Minnesota and have manufacturing and distribution facilities in the U.S., Canada, Mexico, Spain, the Netherlands and Puerto Rico along with international customer service, sales and sourcing operations in Asia and Europe. We have a robust global distribution network serving customers in over 100 countries. Vista Outdoor was incorporated in Delaware in 2014.

Basis of Presentation—Our unaudited condensed consolidated financial statements have been prepared in accordance with the requirements of the Securities and Exchange Commission ("SEC") for interim reporting. As permitted under those rules, certain disclosures and other financial information that normally are required by accounting principles generally accepted in the United States have been condensed or omitted. Management is responsible for the unaudited condensed consolidated financial statements included in this report, which in the opinion of management, include all adjustments necessary for a fair presentation of our financial position, results of operations, and cash flows for the periods and dates presented. These unaudited condensed consolidated financial statements should be read in conjunction with our consolidated financial statements and notes included in our Annual Report on Form 10-K for the fiscal year ended March 31, 2022 (“fiscal year 2022”), which was filed with the SEC on May 24, 2022.

Significant Accounting Policies—Our accounting policies are described in Note 1 of the notes to the audited consolidated financial statements in our Annual Report on Form 10-K for fiscal year 2022, which was filed with the SEC on May 24, 2022.

Recent Accounting Pronouncements—No recent accounting pronouncements are expected to have a material impact on our condensed consolidated financial statements.

2. Fair Value of Financial Instruments

We measure and disclose our financial assets and liabilities at fair value on a recurring and nonrecurring basis. Fair value is defined as the price that would be received to sell an asset or the price paid to transfer a liability (the exit price) in the principal and most advantageous market for the asset or liability in an orderly transaction between market participants. Assets and liabilities carried at fair value are classified using the three-tier hierarchy:

Level 1—Quoted prices for identical instruments in active markets.

Level 2—Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.

Level 3—Significant inputs to the valuation model are unobservable.

The following section describes the valuation methodologies we use to measure our financial instruments at fair value on a recurring basis:

Derivatives

We periodically enter into commodity forward contracts to hedge our exposure to price fluctuations on certain commodities we use for raw material components in our manufacturing process and to reduce the variability associated with exchange rate fluctuations. When actual commodity prices or foreign exchange rates exceed the fixed price provided by these contracts, we receive this difference from the counterparty, and when actual commodity prices or foreign exchange rates are below the contractually provided fixed price, we pay this difference to the counterparty. We consider these to be Level 2 instruments. See Note 5, Derivative Financial Instruments, for additional information.

Note Receivable

In connection with the sale of our Firearms business in July 2019, we received a $12,000 interest-free, five-year pre-payable promissory note due June 2024. Based on the general market conditions and the credit quality of the buyer at the time of the sale, we discounted the Note Receivable at an effective interest rate of 10% and estimated fair value using a discounted cash flow approach. We consider this to be a Level 3 instrument. Subsequent to our third fiscal quarter end, this promissory note was settled in full. See Note 8, Receivables, for additional information.

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Contingent Consideration

In connection with some of our acquisitions, we recorded contingent consideration liabilities that can be earned by the sellers upon achievement of certain milestones. The liabilities are measured on a recurring basis and recorded at fair value, using a discounted cash flow analysis or a Monte Carlo simulation analysis in a risk-neutral framework with assumptions for volatility, market price of risk adjustment, risk-free rate, and cost of debt, utilizing revenue projections for the respective earn-out period, corresponding targets and approximate timing of payments as outlined in the purchase agreements. The inputs used to calculate the fair value of the contingent consideration liabilities are considered to be Level 3 inputs due to the lack of relevant market activity and significant management judgment. Changes in the fair value of the contingent consideration obligation results from changes in discount periods and rates, and changes in probability assumptions with respect to the likelihood of achieving the performance targets. The fair value adjustments are recorded in selling, general, and administrative in the condensed consolidated statement of comprehensive income. As of December 25, 2022, the estimated fair values of contingent consideration payable related to our acquisitions of QuietKat, Stone Glacier, Fox Racing, Fiber Energy, and HEVI-Shot are $11,823, $9,939, $6,400, $3,625, and $300, respectively. See Note 4, Acquisitions, for additional information.

Contingent consideration liabilities are reported under the following captions in the condensed consolidated balance sheets:


	December 25, 2022		March 31, 2022
Other current liabilities	$	16,811	$	96
Other long-term liabilities	15,276		36,994
Total	$	32,087	$	37,090

Following is a summary of our contingent consideration liability Level 3 activity during fiscal year 2023:


Balance, March 31, 2022	$	37,090
Acquisition of Fox Racing	11,400
Decrease in fair value	(16,403)
Balance, December 25, 2022	$	32,087

Disclosures about the Fair Value of Financial Instruments

The carrying amount of our receivables, inventory, accounts payable, and accrued liabilities as of December 25, 2022 and March 31, 2022 approximates fair value because of the short maturity of these instruments. The carrying values of cash and cash equivalents as of December 25, 2022 and March 31, 2022 are categorized within Level 1 of the fair value hierarchy.

The table below discloses information about carrying values and estimated fair value relating to our financial assets and liabilities:


	December 25, 2022				March 31, 2022
	Carrying amount		Fair value		Carrying amount		Fair value
Fixed-rate debt (1)	$	500,000	$	365,000	$	500,000	$	460,000
Variable-rate debt (2)	730,000		730,000		170,000		170,000

(1) Fixed rate debt —In fiscal year 2021, we issued $500,000 aggregate principal amount of 4.5% Senior Notes which will mature on March 15, 2029. These notes are unsecured and senior obligations. The fair value of the fixed-rate debt is based on market quotes for each issuance. We consider these to be Level 2 instruments. See Note 13, Long-term Debt, for additional information on long-term debt, including certain risks and uncertainties.

(2) Variable rate debt— The carrying value of the amounts outstanding under our 2022 ABL Revolving Credit Facility and 2022 Term Loan approximates the fair value because the interest rates are variable and reflective of market rates as of December 25, 2022. The fair value of this debt is categorized within Level 2 of the fair value hierarchy based on the observable market borrowing rates. See Note 13, Long-term Debt, for additional information on our credit facilities, including certain risks and uncertainties.

We measure certain nonfinancial assets at fair value on a nonrecurring basis if certain indicators are present. These assets include long-lived assets that are written down to fair value when they are held for sale or determined to be impaired.

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3. Leases

We lease certain warehouse and distribution space, manufacturing space, office space, retail locations, equipment, and vehicles. All of these leases are classified as operating leases. Operating lease assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. We use our incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. These rates are assessed on a quarterly basis. The operating lease assets also include any lease payments made less lease incentives. Leases with an initial term of twelve months or less are not recorded on the balance sheet. For operating leases, expense is recognized on a straight-line basis over the lease term. Variable lease payments associated with our leases are recognized upon occurrence of the event, activity, or circumstance in the lease agreement on which those payments are assessed. Tenant improvement allowances are recorded as leasehold improvements with an offsetting adjustment included in our calculation of its right-of-use asset.

Many leases include one or more options to renew, with renewal terms that can extend the lease term up to five years. The exercise of lease renewal options is at our sole discretion. The depreciable life of assets and leasehold improvements are limited by the expected lease term.

The amounts of assets and liabilities related to our operating leases were as follows:


	Balance Sheet Caption	December 25, 2022		March 31, 2022
Assets:
Operating lease assets	Operating lease assets	$	100,475	$	78,252

Liabilities:
Current:
Operating lease liabilities	Other current liabilities	$	16,612	$	11,804
Long-term:
Operating lease liabilities	Long-term operating lease liabilities	94,845		80,083
Total lease liabilities		$	111,457	$	91,887

The components of lease expense are recorded to cost of sales and selling, general, and administration expenses in the condensed consolidated statements of comprehensive income. The components of lease expense were as follows:


	Three months ended				Nine months ended
	December 25, 2022		December 26, 2021		December 25, 2022		December 26, 2021
Fixed operating lease costs (1)	$	7,406	$	5,795	$	20,300	$	16,297
Variable operating lease costs	522		701		1,980		2,284
Operating and sub-lease income	(157)		(180)		(464)		(331)
Net Lease costs	$	7,771	$	6,316	$	21,816	$	18,250

(1) Includes short-term leases


	December 25, 2022		March 31, 2022
Weighted Average Remaining Lease Term (Years):
Operating leases	8.44		8.65

Weighted Average Discount Rate:
Operating leases	8.33	%	7.99	%

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The approximate minimum lease payments under non-cancelable operating leases as of December 25, 2022 are as follows:


Remainder of fiscal year 2023	$	6,148
Fiscal year 2024	24,969
Fiscal year 2025	19,183
Fiscal year 2026	17,633
Fiscal year 2027	16,584
Thereafter	75,961
Total lease payments	160,478
Less imputed interest	(49,021)
Present value of lease liabilities	$	111,457

Supplemental cash flow information related to leases is as follows:


	Nine months ended
	December 25, 2022		December 26, 2021
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows - operating leases	$	16,623	$	14,054
Operating lease assets obtained in exchange for lease liabilities:
Operating leases	33,268		13,472

4. Acquisitions

Simms Fishing

During the second quarter of fiscal year 2023, we acquired Simms Fishing Products (Simms), a premium fishing brand and leading manufacturer of waders, outerwear, footwear and technical apparel. The results of this business are reported within the Outdoor Products reportable segment. We accounted for the acquisition as a business combination using the acquisition method of accounting, and performed a preliminary allocation of the purchase price to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values as of the acquisition date. The preliminary fair values of acquired assets and liabilities assumed represent management’s estimate of fair value and are subject to change if additional information, such as post-close working capital adjustments becomes available. We expect to finalize the purchase price allocation as soon as practicable within the measurement period, but not later than one year following the acquisition date. The excess of the consideration transferred over the estimated fair value of the net assets received has been recorded as goodwill. The factors that contributed to the recognition of goodwill primarily relate to acquisition-driven anticipated cost savings and synergies. Assembled workforce is not recognized separate and apart from goodwill as it is neither separable nor contractual in nature. The acquisition is not significant to our consolidated financial statements and as such we have not included disclosures of the allocation of the purchase price or any pro forma information.

Fox Racing

During the second quarter of fiscal year 2023, we acquired Fox (Parent) Holdings, Inc. (“Fox Racing”), for a base purchase price of $540,000, subject to certain customary adjustments for cash and debt, transaction expenses, and working capital. In connection with the acquisition, we refinanced our 2021 ABL Revolving Credit Facility by entering into the 2022 ABL Revolving Credit Facility, which provides for a $600,000 senior secured asset-based revolving credit facility, and a $350,000 term loan facility (the “2022 Term Loan”). The proceeds of the Term Facility, together with the proceeds of a borrowing under the ABL Credit Facility, were used to finance the acquisition and to pay related fees and expenses. See Note 13, Long-term Debt, for additional information. The agreement includes up to an additional $50,000 of contingent consideration payable to Seller and certain individuals during the second quarter of fiscal year 2024 if Fox Racing achieves certain adjusted Earnings Before Interest, Tax, Depreciation, and Amortization ("EBITDA") targets during the period beginning on January 1, 2022 and ending on December 31, 2022. The initial fair value of the contingent consideration was $11,400, and is included in the total purchase consideration below. See Note 2, Fair Value of Financial Instruments, for additional information related to the initial fair value calculation methodology and current fair value of the contingent consideration.

The results of this business are reported within the Sports Protection operating segment and the Outdoor Products reportable segment. We accounted for the acquisition as a business combination using the acquisition method of accounting, and performed a preliminary allocation of the purchase price to the tangible and intangible assets acquired and liabilities

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assumed based on their estimated fair values as of the acquisition date. The preliminary fair values of acquired assets and liabilities assumed represent management’s estimate of fair value and are subject to change if additional information, such as post-close working capital adjustments becomes available. We expect to finalize the purchase price allocation as soon as practicable within the measurement period, but not later than one year following the acquisition date. The excess of the consideration transferred over the estimated fair value of the net assets received has been recorded as goodwill. The factors that contributed to the recognition of goodwill primarily relate to acquisition-driven anticipated cost savings and synergies. Assembled workforce is not recognized separate and apart from goodwill as it is neither separable nor contractual in nature.

Fox Racing preliminary purchase price allocation:


	August 5, 2022
Cash consideration to the Seller	$	559,134
Cash held in escrow to cover purchase price adjustments	5,000

Fair value of contingent consideration payable	11,400
Total estimated purchase consideration	$	575,534
Fair value of assets acquired:
Accounts receivable	$	39,174
Inventories	96,142
Intangible assets	253,600
Property, plant, and equipment	29,060
Operating lease assets	16,078
Other current assets	17,145
Other long-term assets	5,347
Total assets	456,546
Fair value of liabilities assumed:
Accounts payable	18,584
Long-term operating lease liabilities	11,971
Deferred income taxes	60,512
Other liabilities	39,292
Other long-term liabilities	41
Total liabilities	130,400
Net assets acquired	326,146
Goodwill	$	249,388

Fox Racing intangible assets above include:

Value

Useful life (years)

Tradenames

106,200

Indefinite

Customer relationships

147,400

5 to 15

Fox Racing supplemental pro forma data:

Fox's net sales of $124,523 and net loss of $2,498 since the acquisition date, August 5, 2022, were included in our consolidated results for the nine months ended December 25, 2022, and are reflected in the Outdoor Products reportable segment.

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The following unaudited pro forma financial information presents our results as if the Fox Racing acquisition had occurred on April 1, 2021:


	Three months ended				Nine months ended
	December 25, 2022		December 26, 2021		December 25, 2022		December 26, 2021
Sales, net	$	754,775	$	861,950	$	2,444,920	$	2,459,785
Net income	68,075		90,309		286,732		324,014

The unaudited supplemental pro forma data above includes the following significant non-recurring adjustments to net income to account for certain costs which would have been incurred if the Fox Racing acquisition had been completed on April 1, 2021:


	Three months ended				Nine months ended
	December 25, 2022		December 26, 2021		December 25, 2022		December 26, 2021
Fees for advisory, legal, and accounting services (1)	$	(99)	$	99	$	(6,064)	$	6,064
Inventory step-up, net (2)	(3,772)		—		(6,287)		$7,544
Interest (3)	—		7,455		10,627		22,895
Depreciation (4)	—		457		719		1,156
Amortization (5)	—		3,065		4,245		9,191
Management Fees (6)	—		(353)		(530)		(1,060)
Income tax provision (benefit) (7)	943		(2,656)		(1,199)		(10,925)

(1) During the three months and nine months ended December 25, 2022, we incurred a total of $99 and $6,064 in acquisition related costs, including legal and other professional fees, all of which were reported in selling, general, and administrative expense in the condensed consolidated statements of comprehensive income. This adjustment is to show the results as if those fees were incurred during the first quarter of fiscal year 2022.

(2) Adjustment reflects the increased cost of goods sold expense resulting from the fair value step-up in inventory, which was expensed over inventory turns.

(3) Adjustment for the estimated interest expense and debt issuance amortization expense on $580,000 in borrowings from Vista's 2022 ABL Revolving Credit Facility and 2022 Term Loan, used to finance the acquisition of Fox Racing. The interest rate assumed for purposes of preparing this pro forma financial information is 5.58%. This rate is the weighted average interest rate for our borrowings under the 2022 ABL Revolving Credit Facility and 2022 Term Loan during the quarter of the acquisition.

(4) Adjustment for depreciation related to the revised fair-value basis of the acquired property, plant and equipment and change in estimated useful lives.

(5) Adjustment for amortization of acquired intangible assets.

(6) Represents an adjustment for management fees historically charged by the previous owner of Fox Racing under the terms of their management agreement.

(7) Income tax effect of the adjustments made at a blended federal, state, and international statutory rate adjusted for any non-deductible acquisition costs.

Stone Glacier

During the fourth quarter of fiscal year 2022, we acquired Stone Glacier, a premium brand focused on ultralightweight, performance hunting gear designed for backcountry use. The addition of Stone Glacier allows us to enter the packs, camping equipment, and technical apparel categories with a fast-growing brand and provide a foundation for us to leverage camping category synergies. The results of this business are reported within the Outdoor Products segment. Contingent consideration with an initial fair value of $9,939 was included in the purchase price. See Note 2, Fair Value of Financial Instruments, for additional information related to the fair value calculation. We accounted for the acquisition as a business combination using the acquisition method of accounting, and performed a preliminary allocation of the purchase price to the tangible and

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intangible assets acquired and liabilities assumed based on their estimated fair values as of the acquisition date. The preliminary fair values of acquired assets and liabilities assumed represent management’s estimate of fair value and are subject to change if additional information, such as post-close working capital adjustments becomes available. We expect to finalize the purchase price allocation as soon as practicable within the measurement period, but not later than one year following the acquisition date. The acquisition is not significant to our consolidated financial statements and as such we have not included disclosures of the allocation of the purchase price or any pro forma information.

Foresight Sports

During the third quarter of fiscal year 2022, we acquired Foresight Sports ("Foresight"), a leading designer and manufacturer of golf performance analysis, entertainment, and game enhancement technologies for approximately $470,772. The purchase agreement includes $5,599 related to employee retention payments, which will be accounted for separately from the business combination as post combination compensation expense. Contingent payments of up to $25,000 if certain net sales targets are met will also be accounted for separately from the business combination as post combination compensation expense. We used cash on hand and available liquidity under our 2021 ABL Revolving Credit Facility to complete the transaction. The results of this business are reported within the Outdoor Products segment.

We accounted for the acquisition as a business combination using the acquisition method of accounting. The purchase price allocation below was allocated to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values as of the acquisition date. The fair values of acquired assets and liabilities assumed represent management’s estimate of fair value and are subject to change if additional information becomes available. We finalized the purchase price allocation during the third quarter of fiscal year 2023, and no significant changes were recorded. The excess of the consideration transferred over the estimated fair value of the net assets received has been recorded as goodwill. The factors that contributed to the recognition of goodwill primarily relate to acquisition-driven anticipated cost savings and synergies. Assembled workforce is not recognized separate and apart from goodwill as it is neither separable nor contractual in nature. The goodwill is deductible for tax purposes.

Foresight preliminary purchase price allocation:


	September 28, 2021
Total consideration transferred			$	470,772
Fair value of assets acquired:
Accounts receivable	$	2,806
Inventories	10,780
Intangible assets	131,500
Property, plant, and equipment	1,870
Operating lease assets	6,506
Other long-term assets	2,006
Total assets	155,468
Fair value of liabilities assumed:
Accounts payable	6,177
Customer deposits	2,084
Long-term operating lease liabilities	5,961
Contract liabilities	2,992
Other liabilities	1,729
Other long-term liabilities	9,182
Total liabilities	28,125
Net assets acquired			127,343
Goodwill			$	343,429

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Foresight intangible assets above include:


	Value		Useful life (years)
Tradenames	$	42,500	20
Patented technology	19,900		5 to 10
Customer relationships	69,100		5 to 15

5. Derivative Financial Instruments

We account for our commodity and foreign currency forward contracts in accordance with ASC Topic 815, “Derivatives and Hedging” (“ASC Topic 815”). ASC Topic 815 requires the recognition of all derivative instruments as either assets or liabilities on the balance sheet, the measurement of those instruments at fair value and the recognition of changes in the fair value of derivatives in earnings in the period of change, unless the derivative qualifies as a designated cash flow hedge that offsets certain exposures. Certain criteria must be satisfied in order for derivative financial instruments to be classified and accounted for as a cash flow hedge. We may use derivatives to hedge certain interest rates, foreign currency exchange rates, and commodity price risks, but do not use derivative financial instruments for trading or other speculative purposes.

Commodity Price Risk

We use designated cash flow hedges to hedge our exposure to price fluctuations on lead we purchase for raw material components in our ammunition manufacturing process that are designated and qualify as effective cash flow hedges. The effectiveness of cash flow hedge contracts is assessed quantitatively at inception and qualitatively thereafter considering the transactions critical terms and counterparty credit quality.

The gains and losses on these hedges are included in accumulated other comprehensive loss and are reclassified into earnings at the time the forecasted revenue or expense is recognized. The gains or losses on the lead forward contracts are recorded in inventory as the commodities are purchased and in cost of sales when the related inventory is sold. As of December 25, 2022, we had outstanding lead forward contracts on approximately 9.3 million pounds of lead. In the event the underlying forecasted transaction does not occur, or it becomes probable that it will not occur, the related change in fair value of the derivative instrument would be reclassified from accumulated other comprehensive loss and recognized in earnings. Assets related to the lead forward contracts as of December 25, 2022 were $1,362 recorded in other current assets, and $43 recorded in other long-term assets.

Foreign Exchange Risk

In the normal course of business, we are exposed to gains and losses resulting from fluctuations in foreign currency exchange rates relating to transactions of our international subsidiaries. We use designated cash flow hedges and non-designated hedges in the form of foreign currency forward contracts as part of our strategy to manage the level of exposure to the risk of fluctuations in foreign currency exchange rates and to mitigate the impact of foreign currency translation on transactions that are denominated primarily in British Pounds, Euros, and Canadian Dollars.

Cash Flow Hedging Instrument

We use foreign currency forward contracts designated as qualifying cash flow hedging instruments to help mitigate our exposure on our foreign subsidiaries' inventory purchases and intercompany transactions, which is different than their functional currency. These contracts generally mature within 12 months to 15 months from their inception. As of December 25, 2022, the notional amounts of our foreign currency forward contracts designated as cash flow hedge instruments were approximately $47,000.

As of December 25, 2022, net losses of $2,920 were recorded in accumulated other comprehensive income related to foreign currency forward contracts. No gains or losses were reclassified from accumulated other comprehensive income for the three and nine months ended December 25, 2022. All unrealized gains and losses as shown as of December 25, 2022 will be recognized in the consolidated statements of comprehensive income in other income, net within the next twelve months at then-current value. The liability related to the foreign forward contracts as of December 25, 2022 of $3,053 is recorded as part of other current liabilities.

Foreign Currency Forward Contracts Not Designated as Hedging Instruments

We have also used non-designated hedges to hedge a portion of U.S. subsidiary sales that are recorded in Canadian Dollars. These contracts generally mature within 12 months from inception. As of December 25, 2022, the notional amounts of our foreign currency forward contracts not designated as cash flow hedge instruments were approximately $2,800.

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We record these derivatives on the balance sheet at fair value with changes in fair value recorded in the consolidated condensed statements of operations. Net loss of $81 and net gain of $515 for the three and nine months ended December 25, 2022 were recognized in the condensed consolidated statement of comprehensive income, as part of other income. The fair value of the foreign exchange forward contracts is $187 and is recorded as part of other current assets. In addition, during the three and nine months ended December 25, 2022, we recognized net foreign currency translation gains of $720 and $866, respectively.

6. Revenue Recognition

The following tables disaggregate our net sales by major product category:


	Three months ended
	December 25, 2022						December 26, 2021
	Sporting Products		Outdoor Products		Total		Sporting Products		Outdoor Products		Total
Sporting Products (1)	$	401,504	$	—	$	401,504	$	459,646	$	—	$	459,646
Outdoor Accessories (2)	—		79,623		79,623		—		119,345		119,345
Action Sports (3)	—		132,322		132,322		—		98,714		98,714
Outdoor Recreation (4)	—		141,326		141,326		—		116,949		116,949
Total	$	401,504	$	353,271	$	754,775	$	459,646	$	335,008	$	794,654

Geographic Region:
United States	$	367,056	$	261,090	$	628,146	$	434,326	$	250,725	$	685,051
Rest of the World	34,448		92,181		126,629		25,320		84,283		109,603
Total	$	401,504	$	353,271	$	754,775	$	459,646	$	335,008	$	794,654

	Nine months ended
	December 25, 2022						December 26, 2021
	Sporting Products		Outdoor Products		Total		Sporting Products		Outdoor Products		Total
Sporting Products (1)	$	1,344,620	$	—	$	1,344,620	$	1,274,127	$	—	$	1,274,127
Outdoor Accessories (2)	—		221,704		221,704		—		334,533		334,533
Action Sports (3)	—		373,139		373,139		—		295,501		295,501
Outdoor Recreation (4)	—		399,602		399,602		—		331,865		331,865
Total	$	1,344,620	$	994,445	$	2,339,065	$	1,274,127	$	961,899	$	2,236,026

Geographic Region:
United States	$	1,244,437	$	693,305	$	1,937,742	$	1,196,309	$	723,902	$	1,920,211
Rest of the World	100,183		301,140		401,323		77,818		237,997		315,815
Total	$	1,344,620	$	994,445	$	2,339,065	$	1,274,127	$	961,899	$	2,236,026

(1) Sporting Products includes the Ammunition operating segment.

(2) Outdoor Accessories includes the Outdoor Accessories operating segment.

(3) Action Sports includes the operating segments: Sports Protection and Cycling.

(4) Outdoor Recreation includes the operating segments: Hydration, Outdoor Cooking, Golf, Fishing and our Stone Glacier business.

For the majority of our contracts with customers, we recognize revenue for our products at a point in time upon the transfer of control of the products to the customer, which typically occurs upon shipment and coincides with our right to payment, the transfer of legal title, and the transfer of the significant risks and rewards of ownership of the product. For our contracts that include bundled hardware and software sales, revenue related to delivered hardware and bundled software is recognized when control has transferred to the customer, which typically occurs upon shipment. Revenue allocated to

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unspecified software update rights is deferred and recognized on a straight-line basis over the estimated period they are expected to be provided.

Typically, our contracts require customers to pay within 30-60 days of product delivery with a discount available to some customers for early payment. In some cases, we offer extended payment terms to customers. However, we do not consider these extended payment terms to be a significant financing component of the contract because the payment terms are less than a year.

In limited circumstances, our contract with a customer may have shipping terms that indicate a transfer of control of the products upon their arrival at the destination rather than upon shipment. In those cases, we recognize revenue only when the product reaches the customer destination, which may require us to estimate the timing of transfer of control based on the expected delivery date. In all cases, however, we consider our costs related to shipping and handling to be a cost of fulfilling the contract with the customer.

The total amount of revenue we recognize for the sale of our products reflects various sales adjustments for discounts, returns, refunds, allowances, rebates, and other customer incentives. These sales adjustments can vary based on market conditions, customer preferences, timing of customer payments, volume of products sold, and timing of new product launches. These adjustments require management to make reasonable estimates of the amount we expect to receive from the customer. We estimate sales adjustments by customer or by product category on the basis of our historical experience with similar contracts with customers, adjusted as necessary to reflect current facts and circumstances and our expectations for the future. Sales taxes, federal excise taxes, and other similar taxes are excluded from revenue.

For the immaterial amount of our contracts that have multiple performance obligations, which represent promises within an arrangement that are distinct, we allocate revenue to all distinct performance obligations based on their relative stand-alone selling prices (“SSPs”). When available, we use observable prices to determine SSPs. When observable prices are not available, SSPs are established that reflect our best estimates of what the selling prices of the performance obligations would be if they were sold regularly on a stand-alone basis. We allocate revenue and any related discounts to these performance obligations based on their relative SSPs.

Incentives in the form of cash paid to the customer (or a reduction of a customer cash payment to us) typically are recognized as a reduction of sales unless the incentive is for a distinct benefit that we receive from the customer, e.g., advertising or marketing.

We pay commissions to some of our employees based on agreed-upon sales targets. We recognize the incremental costs of obtaining a contract as an expense when incurred because our sales contracts with commissions are a year or less.

7. Earnings Per Share

The computation of basic earnings per share ("EPS") is based on the weighted average number of shares that were outstanding during the period. The computation of diluted EPS is based on the number of basic weighted average shares outstanding plus the number of common shares that would be issued assuming the exercise of all potentially dilutive common shares, such as common stock to be issued upon exercise of options, contingently issuable shares and restricted stock units, using the treasury stock method.

In computing EPS for the periods presented, earnings, as reported for each respective period, is divided by the number of shares below:


	Three months ended				Nine months ended
(Amounts in thousands except per share data)	December 25, 2022		December 26, 2021		December 25, 2022		December 26, 2021
Numerator:
Net income	$	65,147	$	118,137	$	284,617	$	360,402
Denominator:
Weighted-average number of common shares outstanding basic:	56,574		57,162		56,538		57,540
Dilutive effect of share-based awards (1)	1,269		1,904		1,484		1,864
Diluted shares	57,843		59,066		58,022		59,404
Earnings per common share:
Basic	$	1.15	$	2.07	$	5.03	$	6.26
Diluted	$	1.13	$	2.00	$	4.91	$	6.07

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(1) Potentially dilutive securities, which were not included in the computation of diluted earnings per share, because either the effect would have been anti-dilutive, or the options’ exercise prices were greater than the average market price of the common stock, were 23 and 316 for the three and nine months ended December 25, 2022, respectively, and 0 and 0 for the three and nine months ended December 26, 2021, respectively.

8. Receivables

Our trade account receivables are recorded at net realizable value, which includes an appropriate allowance for estimated credit losses under the expected credit loss model. We maintain an allowance for credit losses related to accounts receivable for future expected credit losses resulting from the inability or unwillingness of our customers to make required payments. We estimate the allowance based upon historical bad debts, current customer receivable balances, age of customer receivable balances and the customers' financial condition, and in relation to a representative pool of assets consisting of a large number of customers with similar risk characteristics. The allowance is adjusted as appropriate to reflect differences in current conditions as well as changes in forecasted macroeconomic conditions. Receivables that do not share risk characteristics are evaluated on an individual basis, including those associated with customers that have a higher probability of default.

Net receivables are summarized as follows:


	December 25, 2022		March 31, 2022
Trade receivables	$	385,285	$	357,584
Other receivables	9,080		13,699
Less: allowance for estimated credit losses and discounts	(19,069)		(14,510)
Net receivables	$	375,296	$	356,773

No customers represented more than 10% of our total trade receivables balance as of December 25, 2022. Walmart represented 14% of our total trade receivables balance as of March 31, 2022.

The following provides a reconciliation of the activity related to the allowance for estimated credit losses for the nine months ended December 25, 2022:


Balance, March 31, 2022	$	14,510
Provision for credit losses	2,355
Write-off of uncollectible amounts, net of recoveries	(206)
Purchase accounting (Note 4)	2,410
Balance, December 25, 2022	$	19,069

Note Receivable is summarized as follows:


	December 25, 2022		March 31, 2022
Principal	$	12,000	$	12,000
Less: unamortized discount	(1,587)		(2,308)
Note receivable, net, included within Deferred charges and other non-current assets	$	10,413	$	9,692

This note receivable was originally due in full in June 2024. Subsequent to the third fiscal quarter end, we entered into an agreement with the debtors to provide them a discount in exchange for accelerated payment. We received a payment of $10,683 in our fourth fiscal quarter, and the note receivable was considered satisfied in full.

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9. Inventories

Current net inventories consist of the following:


	December 25, 2022		March 31, 2022
Raw materials	$	252,972	$	220,425
Work in process	65,868		60,390
Finished goods	461,151		362,161
Net inventories	$	779,991	$	642,976

We consider inventories to be long-term if they are not expected to be sold within one year. Long-term inventories are presented on the balance sheet net of reserves within deferred charges and other non-current assets and totaled $39,684 and $14,662 as of December 25, 2022 and March 31, 2022, respectively.

10. Accumulated Other Comprehensive Loss (AOCL)

The components of AOCL, net of income taxes, are as follows:


	December 25, 2022		March 31, 2022
Derivatives	$	(1,149)	$	(356)
Pension and other postretirement benefits liabilities	(68,993)		(71,075)
Cumulative translation adjustment	(6,125)		(5,248)
Total AOCL	$	(76,267)	$	(76,679)

The following tables detail the amounts reclassified from AOCL to earnings as well as the changes in derivatives, pension and other postretirement benefits, and foreign currency translation, net of income tax:


	Three months ended December 25, 2022								Nine months ended December 25, 2022
	Derivatives		Pension and other postretirement benefits liabilities		Cumulative translation adjustment		Total		Derivatives		Pension and other postretirement benefits liabilities		Cumulative translation adjustment		Total
Beginning balance in AOCL	$	(634)	$	(69,687)	$	(7,119)	$	(77,440)	$	(356)	$	(71,075)	$	(5,248)	$	(76,679)
Change in fair value of derivatives	(421)		—		—		(421)		(670)		—		—		(670)
Net losses (gains) reclassified from AOCL	(94)		—		—		(94)		(123)		—		—		(123)
Net actuarial losses reclassified from AOCL (1)	—		694		—		694		—		2,082		—		2,082
Net change in cumulative translation adjustment	—		—		994		994		—		—		(877)		(877)
Ending balance in AOCL	$	(1,149)	$	(68,993)	$	(6,125)	$	(76,267)	$	(1,149)	$	(68,993)	$	(6,125)	$	(76,267)

(1) Amounts related to our pension and other postretirement benefits that were reclassified from AOCL were recorded as a component of net periodic benefit cost for each period presented.

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	Three months ended December 26, 2021								Nine months ended December 26, 2021
	Derivatives		Pension and other postretirement benefits liabilities		Cumulative translation adjustment		Total		Derivatives		Pension and other postretirement benefits liabilities		Cumulative translation adjustment		Total
Beginning balance in AOCL	$	(212)	$	(76,734)	$	(5,321)	$	(82,267)	$	161	$	(78,166)	$	(5,190)	$	(83,195)
Change in fair value of derivatives	298		—		—		298		1,065		—		—		1,065
Net (gains) reclassified from AOCL	(400)		—		—		(400)		(1,540)		—		—		(1,540)
Net actuarial losses reclassified from AOCL (1)	—		1,072		—		1,072		—		2,671		—		2,671
Prior service costs reclassified from AOCL (1)	—		(585)		—		(585)		—		(752)		—		(752)
Net change in cumulative translation adjustment	—		—		(115)		(115)		—		—		(246)		(246)
Ending balance in AOCL	$	(314)	$	(76,247)	$	(5,436)	$	(81,997)	$	(314)	$	(76,247)	$	(5,436)	$	(81,997)

(1) Amounts related to our pension and other postretirement benefits that were reclassified from AOCL were recorded as a component of net periodic benefit cost for each period presented.

11. Goodwill and Intangible Assets

The carrying value of goodwill by reportable segment was as follows:


	Sporting Products		Outdoor Products		Total
Balance, March 31, 2022	$	86,105	$	395,752	$	481,857
Acquisitions	—		317,510		317,510

Balance, December 25, 2022	$	86,105	$	713,262	$	799,367

See Note 4, Acquisitions, for additional information on business combinations that occurred during the second fiscal quarter of fiscal year 2023.

Intangible assets by major asset class consisted of the following:


	December 25, 2022						March 31, 2022
	Gross carrying amount		Accumulated amortization		Total		Gross carrying amount		Accumulated amortization		Total
Trade names	$	113,915	$	(29,075)	$	84,840	$	113,915	$	(23,756)	$	90,159
Patented technology	36,854		(15,579)		21,275		36,854		(13,324)		23,530
Customer relationships and other	528,620		(141,202)		387,418		328,168		(117,664)		210,504
Total	679,389		(185,856)		493,533		478,937		(154,744)		324,193
Non-amortizing trade names	292,203		—		292,203		135,602		—		135,602
Net intangible assets	$	971,592	$	(185,856)	$	785,736	$	614,539	$	(154,744)	$	459,795

Amortization expense was $12,448 and $7,614 for the three months ended December 25, 2022 and December 26, 2021, respectively, and $31,431 and $18,031 for the nine months ended December 25, 2022 and December 26, 2021, respectively.

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As of December 25, 2022, we expect amortization expense related to these assets to be as follows:


Remainder of fiscal year 2023	$	12,621
Fiscal year 2024	50,484
Fiscal year 2025	50,466
Fiscal year 2026	47,457
Fiscal year 2027	46,007
Thereafter	286,498
Total	$	493,533

12. Other Current Liabilities

The following shows categories of other current liabilities. There are no individually significant categories of other current liabilities over 5% of current liabilities:


	December 25, 2022		March 31, 2022
Accrual for in-transit inventory	$	20,666	$	11,620
Other	158,594		115,560
Total other current liabilities	$	179,260	$	127,180

We provide consumer warranties against manufacturing defects on certain products with warranty periods ranging from one year to the expected lifetime of the product. The estimated costs of such product warranties are recorded at the time the sale is recorded based upon actual past experience, our current production environment as well as specific and identifiable warranties as applicable. The warranty liability recorded at each balance sheet date reflects the estimated liability for warranty coverage for products delivered based on historical information and current trends.

The following is a reconciliation of the changes in our product warranty liability during the periods presented:


Balance, March 31, 2022	$	9,073
Payments made	(3,159)
Warranties issued	3,540
Purchase accounting and other adjustments	320
Balance, December 25, 2022	$	9,774

13. Long-term Debt


Long-term debt consisted of the following:	December 25, 2022		March 31, 2022
2021 ABL Revolving Credit Facility	$	—	$	170,000
2022 ABL Revolving Credit Facility	415,000		—
2022 Term Loan	315,000		—
Total Principal Amount of Credit Agreements	730,000		170,000
4.5% Senior Notes	500,000		500,000
Less: unamortized deferred financing costs related to term loans	(11,682)		(3,886)
Carrying amount of long-term debt	1,218,318		666,114
Less: current portion	(140,000)		—
Carrying amount of long-term debt, excluding current portion	$	1,078,318	$	666,114

Credit Agreements—On August 5, 2022, we refinanced our 2021 ABL Revolving Credit Facility by entering into the 2022 ABL Revolving Credit Facility, which provides for a $600,000 senior secured asset-based revolving credit facility. The amount available under the 2022 ABL Revolving Credit Facility is the lesser of the total commitment of $600,000 or a borrowing base based on percentages of eligible receivables, inventory, and cash, minus certain reserves, but, in each case, subject to the excess availability financial covenant under the 2022 ABL Revolving Credit Facility described below. As of December 25, 2022, the Excess Availability, or the amount available to borrow under the 2022 ABL Revolving Credit Facility, based on the borrowing base less outstanding borrowings of $415,000 and outstanding letters of credit of $15,445, less the

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minimum required borrowing base of $60,000, was $109,555. The 2022 ABL Revolving Credit Facility matures on March 31, 2026 (the “Maturity Date”), subject to a customary springing maturity in respect of the 4.5% Notes due 2029 (described below) and the 2022 Term Loan (described below). Any outstanding revolving loans under the 2022 ABL Revolving Credit Facility will be payable in full on the Maturity Date.

Concurrently with the effectiveness of the 2022 ABL Revolving Credit Facility, we also obtained a $350,000 senior secured asset-based term loan facility (the “2022 Term Loan”). The 2022 Term Loan matures on August 5, 2024 (the "Term Maturity Date") and is subject to quarterly principal payments on the last business day of each quarter, commencing with this fiscal quarter ending December 25, 2022, in an amount equal to (i) 12.5% of the original principal amount of the 2022 Term Loan if the aggregate outstanding principal balance of the 2022 Term Loan exceeds the Term Loan Formula Threshold described below, or (ii) 10.0% of the original principal amount of the 2022 Term Loan if the aggregate outstanding principal balance of the 2022 Term Loan is equal to or less than the Term Loan Formula Threshold described below. As of December 25, 2022, our quarterly principal payments are equal to 10.0% of the original principal amount of the 2022 Term Loan. The 2022 Term Loan is also subject to certain mandatory prepayment requirements, including with respect to the net cash proceeds from the sale of certain collateral, subject to our rights to reinvest such proceeds, and a percentage of our excess cash flow, to be calculated annually. The Term Loan Formula Threshold is based on a percentage of the appraisal value of eligible intellectual property, eligible machinery and equipment, and the fair market value of eligible real property minus certain reserves. Any outstanding term loans under the 2022 Term Loan will be payable in full on the Term Maturity Date.

Borrowings under the 2022 ABL Revolving Credit Facility bear interest at a rate equal to either the sum of a base rate plus a margin ranging from 0.25% to 0.75% or the sum of a Term Secured Overnight Financing Rate ("Term SOFR") plus a credit spread adjustment of 0.10%, plus a margin ranging from 1.25% to 1.75%. The margins vary based on our Average Excess Availability under the 2022 ABL Revolving Credit Facility. As of December 25, 2022, the margin under the 2022 ABL Revolving Credit Facility was 0.5% for base rate loans and 1.5% for Term SOFR loans. We pay a commitment fee on the unused commitments under the 2022 ABL Revolving Credit Facility of 0.175% per annum.

Borrowings under the 2022 Term Loan bear interest at a rate equal to either the sum of a base rate plus a margin ranging from 2.50% to 3.00% or the sum of Term SOFR plus a credit spread adjustment of 0.10%, plus a margin ranging from 3.50% to 4.00%. The margins vary based on our Term Loan Formula Threshold under the 2022 Term Loan. As of December 25, 2022, the margin under the 2022 Term Loan was 3.00% for base rate loans and 4.00% for Term SOFR loans.

As of December 25, 2022, the weighted average interest rate for our borrowings under the 2022 ABL Revolving Credit Facility and 2022 Term Loan was 6.14%.

We incurred debt issuance costs related to the 2022 ABL Revolving Credit Facility of approximately $6,743 and unamortized debt issuance costs of $785 related to the 2021 ABL Credit Facility were written off during fiscal year 2023. This expense is included in interest expense in the condensed consolidated statements of comprehensive income. The remaining unamortized debt issuance costs of approximately $11,230, including remaining unamortized debt issuance costs related to the 2021 ABL Credit Facility, are being amortized over the term of the 2022 ABL Revolving Credit Facility, and are included within other current and non-current assets.

We incurred debt issuance costs related to the 2022 Term Loan of approximately $10,300. The debt issuance costs associated with the 2022 Term Loan are being amortized to interest expense over 2 years.

Substantially all domestic tangible and intangible assets of Vista Outdoor and our domestic subsidiaries are pledged as collateral under the 2022 ABL Revolving Credit Facility and 2022 Term Loan.

4.5% Notes—In fiscal year 2021, we issued $500,000 aggregate principal amount of 4.5% Notes that mature on March 15, 2029. These notes are unsecured and senior obligations. Interest on the notes is payable semi-annually in arrears on March 15 and September 15 of each year. We have the right to redeem some or all of these notes on or after March 15, 2024 at specified redemption prices. Prior to March 15, 2024, we may redeem some or all of these notes at a price equal to 100% of their principal amount plus accrued and unpaid interest to the date of redemption and a specified make-whole premium. In addition, prior to March 15, 2024, we may redeem up to 40% of the aggregate principal amount of these notes with the net cash proceeds of certain equity offerings, at a price equal to 104.5% of their principal amount plus accrued and unpaid interest to the date of redemption. Debt issuance costs of approximately $4,491 are being amortized to interest expense over eight years, the term of the notes.

Rank and guarantees—The 2022 ABL Revolving Credit Facility and 2022 Term Loan obligations are guaranteed on a secured basis, jointly and severally and fully and unconditionally by substantially all of our domestic subsidiaries. Vista Outdoor (the parent company issuer) has no independent assets or operations. We own 100% of all of these guarantor subsidiaries. The 4.5% Notes are senior unsecured obligations of Vista Outdoor and will rank equally in right of payment with

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any future senior unsecured indebtedness and senior in right of payment to any future subordinated indebtedness of Vista Outdoor. The 4.5% Notes are fully and unconditionally guaranteed, jointly and severally, by our existing and future domestic subsidiaries that guarantee indebtedness under our 2022 ABL Revolving Credit Facility and 2022 Term Loan or that incur or guarantee certain of our other indebtedness, or indebtedness of any subsidiary guarantor, in an aggregate principal amount in excess of $75,000. These guarantees are senior unsecured obligations of the applicable subsidiary guarantors. The guarantee by any subsidiary guarantor of our obligations in respect of the 4.5% Notes will be released in any of the following circumstances:

•if, as a result of the sale of its capital stock, such subsidiary guarantor ceases to be a restricted subsidiary,

•if such subsidiary guarantor is designated as an “Unrestricted Subsidiary”,

•upon defeasance or satisfaction and discharge of the 4.5% Notes, or

•if such subsidiary guarantor has been released from its guarantees of indebtedness under the 2022 ABL Revolving Credit Facility and 2022 Term Loan and all capital markets debt securities

Covenants

2022 ABL Revolving Credit Facility—Our 2022 ABL Revolving Credit Facility and 2022 Term Loan impose restrictions on us, including limitations on our ability to pay cash dividends, incur debt or liens, redeem or repurchase Vista Outdoor stock, enter into transactions with affiliates, make investments, merge or consolidate with others or dispose of assets. Each of the 2022 ABL Revolving Credit Facility and 2022 Term Loan contains a financial covenant which requires that Excess Availability under the 2022 ABL Revolving Credit Facility cannot fall below the greater of (a) 10% of the line cap or (b) $57,000. As a result of this financial covenant, we must maintain Excess Availability of at least the greater of 10% of the line cap or $57,000 at all times in order to satisfy the financial covenant. In addition, as long as the 2022 Term Loan remains outstanding, we also must maintain a maximum consolidated leverage ratio (as defined in the credit agreement) of 3.00:1.00 as of the end of each fiscal quarter. As of December 25, 2022, the consolidated leverage ratio was 1.71. Each of the 2022 ABL Revolving Credit Facility and the 2022 Term Loan includes a covenant that prohibits the spin-off of any line of business of Vista Outdoor or certain of its subsidiaries, including the expected separation of our Outdoor Products segment (the “Planned Separation”), and amendment of each such covenant will require the consent of all lenders under the applicable credit facility in order to permit the Planned Separation. Vista Outdoor anticipates that each of the 2022 ABL Revolving Credit Facility and the 2022 Term Loan will be repaid or refinanced in full prior to or upon the consummation of the Planned Separation. If we do not comply with the covenants in the 2022 ABL Revolving Credit Facility or 2022 Term Loan, the lenders under the applicable facility may, subject to customary cure rights, require the immediate payment of all amounts outstanding under such facility. As noted above, the Excess Availability less the minimum required borrowing base under the 2022 ABL Revolving Credit Facility was $109,555 as of December 25, 2022. Vista Outdoor has the option to increase the amount of the 2022 ABL Revolving Credit Facility in an aggregate principal amount not to exceed $150,000, to the extent that any one or more lenders, whether or not currently party to the 2022 ABL Revolving Credit Facility, commits to be a lender for such amount.

4.5% Notes—The indenture governing the 4.5% Notes contains covenants that, among other things, limit our ability to incur or permit to exist certain liens, sell, transfer or otherwise dispose of assets, consolidate, amalgamate, merge or sell all or substantially all of our assets, enter into transactions with affiliates, enter into agreements restricting our subsidiaries’ ability to pay dividends, incur additional indebtedness, pay dividends or make other distributions or repurchase or redeem our capital stock, prepay, redeem or repurchase certain debt and make loans and investments.

The 2022 ABL Revolving Credit Facility, the 2022 Term Loan, and the indenture governing the 4.5% Notes contain cross-default provisions so that noncompliance with the covenants within one debt agreement could also cause a default under the other debt agreement. As of December 25, 2022, we were in compliance with the covenants of all of our debt agreements. However, we cannot provide assurance that we will be able to comply with such financial covenants in the future due to various risks and uncertainties, some of which may be beyond our control. Any failure to comply with the restrictions in the 2022 ABL Revolving Credit Facility and 2022 Term Loan may prevent us from drawing under these loans and may result in an event of default under the 2022 ABL Revolving Credit Facility and 2022 Term Loan, which default may allow the creditors to accelerate the related indebtedness and the indebtedness under our 4.5% Notes and proceed against the collateral that secures such indebtedness. We may not have sufficient liquidity to repay the indebtedness in such circumstances.

Cash paid for interest on debt, for the three months ended December 25, 2022 and December 26, 2021 totaled $11,800 and $792, respectively. Cash paid for interest on debt, for the nine months ended December 25, 2022 and December 26, 2021 totaled $25,011 and $12,992, respectively.

14. Employee Benefit Plans

We recognized an aggregate net loss (benefit) of $382 and $(293) for employee defined benefit plans during the three months ended December 25, 2022 and December 26, 2021, respectively.

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We recognized an aggregate net loss (benefit) of $1,144 and $(255) for employee defined benefit plans during the nine months ended December 25, 2022 and December 26, 2021, respectively.

Employer contributions and distributions—We made contributions of $0 and $1,300 to our pension trust during the nine months ended December 25, 2022 and December 26, 2021, respectively. No additional contributions are required and we are not expecting to make any contributions to our pension trust for the remainder of fiscal year 2023.

For those same periods, we made no contributions to our other postretirement benefit plans, and we made no distributions to retirees under our non-qualified supplemental executive retirement plan. No additional contributions are required, and we are not expecting to make any contributions to our other postretirement benefit plans, or directly to retirees under our non-qualified supplemental executive retirement plans for the remainder of fiscal year 2023.

15. Income Taxes

Our provision for income taxes includes federal, foreign, and state income taxes. Income tax provisions for interim periods are based on the estimated effective annual income tax rates for the current year and the prior year.

The income tax provisions for the three months ended December 25, 2022 and December 26, 2021 represent effective tax rates of 16.9% and 22.4%, respectively. The decrease in the effective tax rate from the prior year quarter is primarily driven by the true-up of prior year taxes and the non-taxable contingent consideration income.

The income tax provisions for the nine months ended December 25, 2022 and December 26, 2021 represent effective tax rates of 21.5% and 24.1%, respectively. The decrease in the effective tax rate from the prior year period is primarily driven by the true-up of prior year taxes and the non-taxable contingent consideration income.

The effective tax rate for the three and nine months ended December 25, 2022 differed from the federal statutory rate of 21% due to state taxes and the beneficial impact of the prior year tax return filings and non-taxable contingent consideration income. The effective tax rate for the three and nine months ended December 26, 2021 is reflective of the federal statutory rate of 21% increased by the state taxes and reserves for uncertain tax positions.

Income taxes paid, net of refunds, totaled $69,708 and $114,864 for the nine months ended December 25, 2022 and December 26, 2021, respectively.

We have filed amended income tax returns requesting total refunds of $42,193, which are reflected in our income tax receivable of $41,415.

We have classified uncertain tax positions as non-current income tax liabilities unless expected to be paid within one year. The amount of unrecognized tax benefits, including interest and penalties, amounted to $30,639 and $24,719 as of December 25, 2022 and March 31, 2022, respectively. Although the timing and outcome of income tax audit settlements are uncertain, it is expected that a $9,215 reduction of the liability for uncertain tax benefits will occur in the next 12 months. The settlement of these unrecognized tax benefits could result in earnings from $0 to $8,403.

16. Contingencies

Litigation

From time-to-time, we are subject to various legal proceedings, including lawsuits, which arise out of, and are incidental to, the conduct of our business. We do not consider any of such proceedings that are currently pending, individually or in the aggregate, to be material to our business or likely to result in a material adverse effect on our operating results, financial condition, or cash flows.

Environmental liabilities

Our operations and ownership or use of real property are subject to a number of federal, state, and local environmental laws and regulations, as well as applicable foreign laws and regulations, including those governing the discharge of hazardous materials, remediation of contaminated sites, and restoration of damage to the environment. We are obligated to conduct investigation and/or remediation activities at certain sites that we own or operate or formerly owned or operated.

Certain of our former subsidiaries have been identified as potentially responsible parties ("PRPs"), along with other parties, in regulatory agency actions associated with hazardous waste sites. As a PRP, those former subsidiaries may be required to pay a share of the costs of the investigation and clean-up of these sites. In that event, we would be obligated to indemnify those subsidiaries for those costs. While uncertainties exist with respect to the amounts and timing of the ultimate environmental liabilities, based on currently available information, we have concluded that these matters, individually or in the

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aggregate, will not have a material adverse effect on our operating results, financial condition, or cash flows. We have recorded a liability for environmental remediation of $682 and $697 as of December 25, 2022 and March 31, 2022, respectively.

We could incur substantial additional costs, including cleanup costs, resource restoration, fines, and penalties or third-party property damage or personal injury claims, as a result of violations or liabilities under environmental laws or non-compliance with environmental permits. While environmental laws and regulations have not had a material adverse effect on our operating results, financial condition, or cash flows in the past, and we have environmental management programs in place to mitigate these risks, it is difficult to predict whether they will have a material impact in the future.

17. Operating Segment Information

Our business is comprised of eight operating segments, which have been aggregated into two reportable segments, Sporting Products and Outdoor Products. This is consistent with how our chief operating decision maker (CODM), our Chief Executive Officer, allocates resources and makes decisions. Our Ammunition operating segment is in its own reportable segment which has been named Sporting Products. We aggregate our Outdoor Accessories, Sports Protection, Outdoor Cooking, Hydration, Golf, Fishing, and Cycling operating segments into the Outdoor Products reportable segment. The operating segments comprising our respective reportable segments share numerous commonalities, including similar core consumers, distribution channels, and supply chains.

Our CODM relies on internal management reporting that analyzes consolidated results to the net income level and our operating segment's EBIT, which is defined as earnings before interest and income taxes. Certain corporate-related costs and other non-recurring costs are not allocated to the segments in order to present comparable results from period to period and are not utilized by management in determining segment profitability.

Our Sporting Products and Outdoor Products reportable segments generated approximately 57% and 43%, respectively, of our external sales in the nine months ended December 25, 2022.

No single customer contributed 10% or more of our sales in the nine months ended December 25, 2022 and December 26, 2021.

The following tables contain information utilized by management to evaluate our operating segments for the interim periods presented:


	Three months ended December 25, 2022								Nine months ended December 25, 2022
	Sporting Products		Outdoor Products		(a) Corporate and other reconciling items		Total		Sporting Products		Outdoor Products		(a) Corporate and other reconciling items		Total
Sales, net	$	401,504	$	353,271	$	—	$	754,775	$	1,344,620	$	994,445	$	—	$	2,339,065
Gross Profit	141,459		102,396		(5,049)		238,806		501,558		301,675		(8,083)		795,150
EBIT	117,935		14,114		(34,724)		97,325		427,573		72,271		(98,186)		401,658
Depreciation and amortization	6,171		17,598		1,022		24,791		18,951		44,948		3,192		67,091


	Three months ended December 26, 2021								Nine months ended December 26, 2021
	Sporting Products		Outdoor Products		(a) Corporate and other reconciling items		Total		Sporting Products		Outdoor Products		(a) Corporate and other reconciling items		Total
Sales, net	$	459,646	$	335,008	$	—	$	794,654	$	1,274,127	$	961,899	$	—	$	2,236,026
Gross Profit	178,062		104,655		(1,247)		281,470		529,659		293,790		(1,631)		821,818
EBIT	149,671		42,277		(33,001)		158,947		449,895		127,946		(84,499)		493,342
Depreciation and amortization	6,304		11,537		1,486		19,327		19,178		29,433		3,400		52,011

(a) Reconciling items for the three and nine months ended December 25, 2022 included post-acquisition compensation expense of $3,530 and $11,130, inventory fair value step-up expenses related to the Fox Racing and Simms acquisitions of $5,043 and $8,079, and contingent consideration fair value adjustment of $4,978 and $16,403, respectively. Reconciling items for the three and nine months ended December 26, 2021 included a fair value step-up in inventory allocated from acquisitions of $1,247 and $1,631, respectively, and post-acquisition compensation expense allocated from acquisitions of $2,780 and $4,572, respectively.

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Sales, net exclude all intercompany sales between Sporting Products and Outdoor Products, which were not material for the three and nine months ended December 25, 2022 and December 26, 2021.

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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Amounts in thousands except per share data and unless otherwise indicated)

Forward-Looking Information is Subject to Risk and Uncertainty

Some of the statements made and information contained in this report, excluding historical information, are "forward-looking statements," including those that discuss, among other things: our 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 our actual results to differ materially from the expectations described in such forward-looking statements, including the following:

•supplier capacity constraints, production or shipping disruptions or quality or price issues affecting our operating costs;

•the supply, availability and costs of raw materials and components;

•increases in commodity, energy, and production costs;

•seasonality and weather conditions;

•our ability to complete acquisitions, realize expected benefits from acquisitions and integrate acquired businesses;

•reductions in or unexpected changes in or our inability to accurately forecast demand for ammunition, accessories, or other outdoor sports and recreation products;

•disruption in the service or significant increase in the cost of our primary delivery and shipping services for our products and components or a significant disruption at shipping ports;

•risks associated with diversification into new international and commercial markets, including regulatory compliance;

•our ability to take advantage of growth opportunities in international and commercial markets;

•our ability to obtain and maintain licenses to third-party technology;

•our ability to attract and retain key personnel;

•disruptions caused by catastrophic events;

•risks associated with our sales to significant retail customers, including unexpected cancellations, delays, and other changes to purchase orders;

•our competitive environment;

•our ability to adapt our 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;

•our ability to maintain and enhance brand recognition and reputation;

•others' use of social media to disseminate negative commentary about us, our products, and boycotts;

•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;

•our ability to comply with extensive federal, state and international laws, rules and regulations;

•changes in laws, rules and regulations relating to our business, such as federal and state ammunition regulations;

•risks associated with cybersecurity and other industrial and physical security threats;

•interest rate risk;

•changes in the current tariff structures;

•changes in tax rules or pronouncements;

•capital market volatility and the availability of financing;

•foreign currency exchange rates and fluctuations in those rates;

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•general economic and business conditions in the United States and our markets outside the United States, including as a result of the war in Ukraine and the imposition of sanctions on Russia, the COVID-19 pandemic, conditions affecting employment levels, consumer confidence and spending, conditions in the retail environment, and other economic conditions affecting demand for our products and the financial health of our customers; and

•risks related to the separation of our Outdoor Products and Sporting Products segments, including that the process of exploring the transaction and potentially completing the transaction could disrupt or adversely affect the consolidated or separate businesses, results of operations and financial condition, that the transaction may not achieve some or all of any anticipated benefits with respect to either business and that the transaction may not be completed in accordance with our expected plans or anticipated timelines, or at all.

You are cautioned not to place undue reliance on any forward-looking statements we make. A more detailed description of risk factors that may affect our operating results can be found in Part 1, Item 1A, Risk Factors, of our Annual Report on Form 10-K for fiscal year 2022 and in the filings we make with Securities and Exchange Commission (the "SEC") from time to time. We undertake no obligation to update any forward-looking statements, except as otherwise required by law.

Business and Products

We serve the outdoor sports and recreation markets through a diverse portfolio of well-recognized brands that provide consumers with a wide range of performance-driven, high-quality, and innovative products. Our broad range of consumers include outdoor enthusiasts, hunters and recreational shooters, athletes, as well as law enforcement and military professionals. We sell our products through a wide variety of mass, specialty and independent retailers and distributors, such as Academy, Amazon, Bass Pro Shops/Cabela's, Dick's Sporting Goods, Kiesler Police Supply, Nations Best Sports, Sports Inc., Sports South, Sportsman's Warehouse, Target, and Walmart. Some of our products are also sold directly to consumers through the relevant brand's website. We have a scalable, integrated portfolio of brands that allows us to leverage our deep customer knowledge, product development and innovation, supply chain and distribution, and sales and marketing functions across product categories to better serve our retail partners and consumers.

Reportable Segments and Products

We operate under eight operating segments, which have been aggregated into two reportable segments, Sporting Products and Outdoor Products.

•Our Sporting Products reportable segment designs, develops, distributes and manufactures ammunition, primers, components and related equipment and accessories and serves devoted hunters, recreational shooters, federal and local law enforcement agencies and the military. Ammunition products include pistol, rifle, rimfire, shotshell ammunition and primers. Our Sporting Products reportable segment consists of our Ammunition operating segment, which includes our ammunition-related businesses, including Federal, Remington, CCI, Speer, and HEVI-Shot.

•Our Outdoor Products reportable segment designs, develops, distributes and manufactures gear and equipment to enhance the outdoor experiences of a wide variety of end users, including hunters, hikers, campers, cyclists, skiers, snowboarders, anglers and golfers. Products from the businesses included in this reportable segment include sport optics and archery and hunting accessories, e-bikes, helmets, goggles and accessories for cycling, snow sports, motocross and power sports, pellet grills, cookware, pellets and camp stoves, hydration packs, water bottles, drinkware and coolers, launch monitors, laser rangefinders, GPS devices, golf simulators and other technology products, waders, sportswear, outerwear, footwear and fishing tools and accessories. Our Outdoor Products reportable segment consists of:

•Our Outdoor Accessories operating segment, which includes our Bushnell Optics, Primos, RCBS, BlackHawk!, and Eagle businesses;

•Our Sports Protection operating segment, which includes our Bell, Giro and Fox Racing businesses;

•Our Cycling operating segment, which is comprised of our QuietKat business;

•Our Outdoor Cooking operating segment, which includes our Camp Chef and Fiber Energy businesses;

•Our Hydration operating segment, which is comprised of our CamelBak business;

•Our Golf operating segment, which includes our Bushnell Golf and Foresight businesses; and

•Our Fishing operating segment, which is comprised of our Simms Fishing business.

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Planned Separation of Outdoor Products and Sporting Products

On May 5, 2022, we announced that our Board of Directors has unanimously approved preparations for the separation of our Outdoor Products and Sporting Products reportable segments into two independent, publicly-traded companies. We anticipate that the transaction will be in the form of a distribution to our shareholders of 100% of the stock of Outdoor Products, which will become a new, independent publicly traded company. The distribution is intended to be tax-free to U.S. shareholders for U.S. federal income tax purposes. We currently expect the transaction will be completed in calendar year 2023, subject to final approval by our Board of Directors, a Form 10 registration statement being declared effective by the U.S. Securities and Exchange Commission, our receipt of the necessary regulatory approvals and satisfaction of other conditions. There can be no assurance regarding the ultimate timing of the proposed transaction or that the transaction will be completed.

We expect that the Planned Separation will create a number of benefits for Outdoor Products and Sporting Products, including:

•Enhanced strategic focus with supporting resources: Each company will have enhanced strategic focus with resources to support its specific operational needs and growth drivers.

•Tailored capital allocation priorities: Each company will have a tailored capital allocation philosophy that is better suited to support its distinctive business model and long-term goals.

•Strengthened ability to attract and retain top talent: Each company will benefit from enhanced ability to attract and retain top talent that is ideally suited to execute its strategic and operational objectives.

•Compelling value for shareholders: Each company will present a differentiated and compelling investment opportunity based on its particular business model.

•Expanded strategic opportunities: Improved focus will allow Outdoor Products to further cement its reputation as the acquirer of choice through continued M&A in the outdoor recreation products marketplace and enable Sporting Products to secure attractive partnerships with other manufacturers.

Executive Summary

Financial highlights and notable events for the three months ended December 25, 2022 included the following:

•Net sales decreased $39,879, or 5.0%, over the comparable quarter last year.

◦ Sporting Products net sales decreased $58,142, or 12.6%.

◦ Outdoor Products net sales increased $18,263, or 5.5%.

•Gross profit decreased $42,664, or 15.2%, as compared to the comparable quarter last year. Gross profit margin decreased to 31.6%, a decrease of 380 basis points over the comparable quarter last year.

◦ Sporting Products gross profit decreased $36,603, or 20.6%.

◦ Outdoor Products gross profit decreased $2,259, or 2.2%.

•EBIT decreased $61,622, or 38.8%, over the comparable quarter last year. EBIT margin decreased to 12.9%, a decrease of 710 basis points over the comparable quarter last year.

•Net income decreased to $65,147, or $1.13 per diluted share, compared to net income of $118,137, or $2.00 per diluted share, for the comparable quarter last year.

Sporting Products Industry

Sales of hunting and shooting-sports related products, including ammunition, are heavily influenced by hunting and recreational shooting participation rates, civil unrest and the political environment. We believe that long-term participation trends support our expectation of continued increased demand for hunting and shooting-sports related products. Participation rates have remained strong, and we are seeing an expanded demographic of users. This broadened end consumer base has resulted in a much larger total addressable market opportunity for the industry and for our company. We believe we are well-positioned to succeed and capitalize on this demand given our scale and global operating platform, which we believe is particularly difficult to replicate in the highly regulated and capital-intensive ammunition manufacturing sector.

Outdoor Recreation Industry

We believe that long-term outdoor participation trends combined with a larger base of participants supports our expectation of continued increased demand for the innovative outdoor recreation-related products produced by our Outdoor

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Products brands. We believe that demand for our Outdoor Products is being temporarily impacted by higher inflation causing a contraction in disposable income. Rising inflation and the absence of stimulus payments have had an impact on the opening price points of certain categories. However, outdoor participation trends and demand for premium price points remain strong across our brand portfolio. Our Outdoor Products brands hold a strong competitive position in the marketplace, and we intend to further differentiate our brands through focused research and development and marketing investments including increased use of social media and other digital marketing. Following significant investments in our brands’ e-commerce capabilities, both directly and through our E-Commerce Center of Excellence, we believe our brands are well-positioned to benefit from the ongoing shift in consumer shopping behavior to utilize online channels.

This Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") is intended to provide a reader of our financial statements with a narrative from the perspective of our management on results of operations, our financial condition, liquidity, and certain other factors that may affect our future results. The following information should be read in conjunction with our condensed consolidated financial statements included in this Quarterly Report on Form 10-Q.

Results of Operations

Segment results for the three and nine months ended December 25, 2022 compared to the three and nine months ended December 26, 2021

Our net sales, gross profit, and EBIT by reportable segment and by corporate and other (where applicable) are presented below (dollars in thousands):


	Three months ended				Change				Nine months ended				Change
Net Sales:	December 25, 2022		December 26, 2021		Dollars		Percent		December 25, 2022		December 26, 2021		Dollars		Percent
Sporting Products	$	401,504	$	459,646	$	(58,142)	(12.6)	%	$	1,344,620	$	1,274,127	$	70,493	5.5	%
Outdoor Products	353,271		335,008		18,263		5.5	%	994,445		961,899		32,546		3.4	%
Total net sales	$	754,775	$	794,654	$	(39,879)	(5.0)	%	$	2,339,065	$	2,236,026	$	103,039	4.6	%

Three months ended

Sporting Products— The decrease in net sales was a result of lower shipments, primarily of pistol ammunition, as channel inventory has normalized, the timing of shotshell shipments, and the termination of the Lake City contract at the beginning of the quarter.

Outdoor Products— The increase in net sales was driven by acquired businesses and golf, partially offset by declines in other organic businesses, which were primarily caused by reduced purchasing from international, big box, and other wholesale.

Nine months ended

Sporting Products— The increase in net sales was driven by improved pricing and higher volume in primer and rimfire, partially offset by volume declines in pistol, and termination of the Lake City contract at the beginning of the third fiscal quarter.

Outdoor Products— The increase in net sales was driven by acquired businesses and pricing, partially offset by declines in our organic businesses, which were primarily caused by reduced purchasing from big box retailers, and international and other wholesale vendors.


	Three months ended				Change				Nine months ended				Change
Gross Profit:	December 25, 2022		December 26, 2021		Dollars		Percent		December 25, 2022		December 26, 2021		Dollars		Percent
Sporting Products	$	141,459	$	178,062	$	(36,603)	(20.6)	%	$	501,558	$	529,659	$	(28,101)	(5.3)	%
Outdoor Products	102,396		104,655		(2,259)		(2.2)	%	301,675		293,790		7,885		2.7	%
Corporate and other	(5,049)		(1,247)		(3,802)		—	%	(8,083)		$	(1,631)	(6,452)		—	%
Total gross profit	$	238,806	$	281,470	$	(42,664)	(15.2)	%	$	795,150	$	821,818	$	(26,668)	(3.2)	%
Gross profit margin	31.6%		35.4%						34.0%		36.8%

Three months ended

Sporting Products—The decrease in gross profit was caused by lower volume, unfavorable mix, and increased commodity and freight costs. These decreases were partially offset by pricing. Gross profit margin was 35.2% compared to 38.7% in the prior year quarter.

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Outdoor Products—The decrease in gross profit was primarily caused by organic business volume declines, increased amortization costs from acquired businesses, increased promotional activity and unfavorable mix, partially offset by volume from acquired businesses. Gross profit margin was 29.0% compared to 31.2% in the prior year quarter.

Corporate and Other—The decrease in corporate gross profit was due to inventory step-up expenses related to acquisitions completed in the second quarter of fiscal year 2023.

Nine months ended

Sporting Products—The decrease in gross profit was caused by increased commodity and freight costs. These increases were partially offset by improved pricing. Gross profit margin was 37.3% compared to 41.6% in the prior year period.

Outdoor Products—The increase in gross profit was primarily driven by volume from acquired businesses and price. These increases were partially offset by organic business volume declines. Gross profit margin was 30.3% compared to 30.5% in the prior year period.

Corporate and Other—The decrease in corporate gross profit was due to inventory step-up expenses related to acquisitions completed in the second quarter of fiscal year 2023.


	Three months ended				Change				Nine months ended				Change
EBIT:	December 25, 2022		December 26, 2021		Dollars		Percent		December 25, 2022		December 26, 2021		Dollars		Percent
Sporting Products	$	117,935	$	149,671	$	(31,736)	(21.2)	%	$	427,573	$	449,895	$	(22,322)	(5.0)	%
Outdoor Products	14,114		42,277		(28,163)		(66.6)	%	72,271		127,946		(55,675)		(43.5)	%
Corporate and other	(34,724)		(33,001)		(1,723)		(5.2)	%	(98,186)		(84,499)		(13,687)		(16.2)	%
Total EBIT	$	97,325	$	158,947	$	(61,622)	(38.8)	%	$	401,658	$	493,342	$	(91,684)	(18.6)	%
EBIT margin	12.9%		20.0%						17.2%		22.1%

Three months ended

Sporting Products—The decrease in EBIT was primarily caused by decreased gross profit, partially offset by decreased incentive compensation. EBIT margin was 29.4% compared to 32.6% in the prior year quarter.

Outdoor Products—The decrease in EBIT was primarily caused by decreased gross profit in the organic businesses, as well as increased selling, general, and administrative costs related to acquired businesses. EBIT margin was 4.0% compared to 12.6% in the prior year quarter.

Corporate and Other—The decrease in EBIT was primarily due to increased planned separation costs and decreased gross profit, partially offset by a decrease in contingent consideration and lower incentive compensation.

Nine months ended

Sporting Products—The decrease in EBIT was primarily driven by the decrease in gross profit, partially offset by decreased incentive compensation. EBIT margin was 31.8% compared to 35.3% in the prior year period.

Outdoor Products—The decrease in EBIT was primarily caused by decreased gross profit in the organic businesses, as well as increased selling, general, and administrative costs related to the acquired businesses, partially offset by decreases in incentive compensation. EBIT margin was 7.3% compared to 13.3% in the prior year period.

Corporate and Other—The decrease in EBIT was primarily caused by increased planned separation costs, and increased transaction and transition costs, partially offset by a decrease in the fair value of the contingent consideration liabilities and lower incentive compensation.


	Three months ended				Change				Nine months ended				Change
Interest expense, net:	December 25, 2022		December 26, 2021		Dollars		Percent		December 25, 2022		December 26, 2021		Dollars		Percent
Corporate and other	$	18,953	$	6,695	$	12,258	183.1	%	$	39,197	$	18,302	$	20,895	114.2	%

For the three and nine months ended December 25, 2022, the increase in interest expense is due to a higher average interest rate and debt balance, along with increased debt issuance cost associated with our debt refinancing.

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	Three months ended										Nine months ended
Income tax provision:	December 25, 2022		Effective Rate		December 26, 2021		Effective Rate		$ Change		December 25, 2022		Effective Rate		December 26, 2021		Effective Rate		$ Change
Corporate and other	$	(13,225)	16.9	%	$	(34,115)	22.4	%	$	20,890	$	(77,844)	21.5	%	$	(114,638)	24.1	%	$	36,794

See Note 15, Income Taxes, to the condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for more details regarding income taxes.

The decrease in the effective rate for the three and nine months ended December 25, 2022 in relation to the comparable prior year periods is primarily driven by the true-up of prior year taxes and the non-taxable contingent consideration income.

Financial condition

Cash increased to $77,426 at December 25, 2022 compared to $22,584 at March 31, 2022, primarily due to cash provided by advances on the 2022 ABL Revolving Credit Facility, 2022 Term Loan, and cash provided by operating activities, which was partially offset by payments for acquisitions completed during this fiscal year.

Operating Activities

Cash provided by operating activities increased by $88,050 in the nine months ended December 25, 2022 compared to the prior year period. The increase was primarily due to the timing of payments by customers, decreased payments for inventory, and decreased income tax payments as compared to the prior year period. These increases were partially offset by increased payments for incentive compensation and timing of payments to vendors.

Investing Activities

Cash used for investing activities increased by $233,658 for the nine months ended December 25, 2022 compared to the prior-year period. The increase was primarily driven by the acquisition of businesses during the second quarter of fiscal year 2023.

Financing Activities

Cash provided by financing activities increased by $404,260 for the nine months ended December 25, 2022 compared to the prior year period. The increase primarily relates to proceeds from the 2022 ABL Revolving Credit Facility and 2022 Term Loan and a reduction in the repurchase of treasury shares, partially offset by increased payments on our credit facilities and increased payments for debt issuance costs, as compared to the prior year period.

Liquidity and Capital Resources

In addition to our normal operating cash requirements, our principal future cash requirements are to fund capital expenditures, debt repayments, employee benefit obligations, share repurchases, earn-outs related to previous acquisitions, and any strategic acquisitions. Our short-term cash requirements for operations are expected to consist mainly of capital expenditures to maintain production facilities and working capital requirements. Our debt service requirements over the next two years consist of required interest payments due under our 4.5% Notes, 2022 Term Loan and 2022 ABL Revolving Credit Facility, and principal prepayments due under the 2022 Term Loan. Each of the 2022 ABL Revolving Credit Facility and the 2022 Term Loan includes a covenant that prohibits the spin-off of any line of business of Vista Outdoor or certain of its subsidiaries, including the expected separation of our Outdoor Products segment (the “Planned Separation”), and amendment of each such covenant will require the consent of all lenders under the applicable credit facility in order to permit the Planned Separation. We anticipate that each of the 2022 ABL Revolving Credit Facility and the 2022 Term Loan will be repaid or refinanced in full prior to or upon the consummation of the Planned Separation.

Based on our current financial condition, management believes that our cash position, combined with anticipated generation of cash flows and the availability of funding, if needed, under our 2022 ABL Revolving Credit Facility, access to debt and equity markets, as well as other potential sources of funding including additional bank financing, will be adequate to fund future growth to service our currently anticipated long-term debt and pension obligations, make capital expenditures, pay earn-outs related to previous acquisitions, and fund the 2022 Share Repurchase Program over the next 12 months. As of December 25, 2022, based on the borrowing base less outstanding borrowings of $415,000, outstanding letters of credit of $15,445, and the minimum required borrowing base of $60,000, the amount available under the 2022 ABL Revolving Credit Facility was $109,555. Our total debt as a percentage of total capitalization (total debt and stockholders' equity) was 46.4% as of December 25, 2022.

There can be no assurance that the cost or availability of future borrowings, if any, will not be materially impacted by capital market conditions, including any disruptions to capital markets caused by COVID-19 pandemic (including the

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emergence and spread of vaccine resistant coronavirus variants), the war in Ukraine and imposition of sanctions on Russia, or our future financial condition and performance. Furthermore, because our 2022 ABL Revolving Credit Facility is secured in large part by receivables from our customers, a sustained deterioration in general economic conditions, including as a result of the COVID-19 pandemic (including the emergence and spread of vaccine resistant coronavirus variants) or the war in Ukraine and imposition of sanctions on Russia, that adversely affects the creditworthiness of our customers could have a negative effect on our future available liquidity under the 2022 ABL Revolving Credit Facility

Additional information about our long-term debt is presented in Note 13, Long-term Debt, to the condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for more details.

Contractual Obligations and Commitments

We lease certain warehouse, distribution and office facilities, vehicles and office equipment under operating leases. As of December 25, 2022, current and long-term operating lease liabilities of $16,612 and $94,845, respectively, were recorded in the accompanying condensed consolidated balance sheets. For further discussion on minimum lease payment obligations, see Note 3, Leases, to the condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for more details.

Except as discussed in Note 13, Long-term Debt, to the condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q, and under Liquidity and Capital Resources above, there have been no material changes with respect to the contractual obligations and commitments or off-balance sheet arrangements described in our Annual Report on Form 10-K for fiscal year 2022.

Contingencies

Litigation

From time-to-time, we are subject to various legal proceedings, including lawsuits, which arise out of and are incidental to, the conduct of our business. We do not consider any of such proceedings that are currently pending, individually or in the aggregate, to be material to our business or likely to result in a material adverse effect on our operating results, financial condition, or cash flows.

Environmental Liabilities

Our operations and ownership or use of real property are subject to a number of federal, state, and local environmental laws and regulations, as well as applicable foreign laws and regulations, including those governing the discharge of hazardous materials, remediation of contaminated sites, and restoration of damage to the environment. We are obligated to conduct investigations and/or remediation activities at certain sites that we own or operate or formerly owned or operated.

Certain of our former subsidiaries have been identified as potentially responsible parties ("PRPs"), along with other parties, in regulatory agency actions associated with hazardous waste sites. As a PRP, those former subsidiaries may be required to pay a share of the costs of the investigation and clean-up of these sites. In that event, we would be obligated to indemnify those subsidiaries for those costs. While uncertainties exist with respect to the amounts and timing of the ultimate environmental liabilities, based on currently available information, we do not currently expect that these potential liabilities, individually or in the aggregate, will have a material adverse effect on our operating results, financial condition, or cash flows.

Critical Accounting Policies and Estimates

There have been no changes to our critical accounting policies and estimates from the information provided in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” included in our Annual Report on Form 10-K for fiscal year 2022.

Dependence on Key Customers; Concentration of Credit

No single customer contributed 10% or more of our sales in the nine months ended December 25, 2022 and December 26, 2021.

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If a key customer fails to meet payment obligations, our operating results and financial condition could be adversely affected.

Inflation and Commodity Price Risk

We are exposed to inflationary factors such as increases in labor, supplier, logistics and overhead costs that may adversely affect our operating results. Although we do not believe that inflation has had a material impact on our financial position or results of operations to date, a high rate of inflation in the future may have an adverse effect on our ability to maintain current levels of gross margin and operating expenses, if the selling prices of our products are not able to offset these increased costs. Additionally, inflation may potentially impact demand as consumers reduce discretionary spending.

We have been impacted by changes in the prices of raw materials used in production as well as changes in oil and energy costs. In particular, the prices of commodity metals, such as copper, zinc, and lead continue to be volatile. These prices generally impact our Sporting Products Segment. See Note 5, Derivative Financial Instruments, to the condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for more details.

We have a strategic sourcing, pricing and hedging strategy to mitigate risk from commodity price fluctuation. We will continue to evaluate the need for future price changes in light of these trends, our competitive landscape, and our financial results. If our sourcing and pricing strategy is unable to offset impacts of the commodity price fluctuations, our future results from operations and cash flows would be materially impacted.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Fluctuations

We are exposed to interest rate risk from our credit facilities. A significant portion of our indebtedness consists of borrowings with variable rates of interest that expose us to interest rate risk. Outstanding borrowings under these credit facilities accrue interest as described in Note 13, Long-term Debt, in the Notes to Consolidated Condensed Financial Statements in Part I, Item 1, and in “Liquidity and Capital Resources” in Part I, Item 2 of this Form 10-Q. If interest rates increase, our debt service obligations on our variable rate indebtedness will increase even if the amount borrowed remains the same, and our net income and cash flows will correspondingly decrease. Assuming $730 million of variable-rate indebtedness, a change of 1/2 of one percent in interest rates would result in a $3.7 million change over the 12-month period ending December 26, 2023. To mitigate the risks from interest rate exposure, we may enter into hedging transactions, mainly interest rate swaps, through derivative financial instruments that have been authorized pursuant to corporate policies. Our objective in managing exposure to changes in interest rates is to limit the impact of such changes on earnings and cash flow.

We measure market risk related to holdings of financial instruments based on changes in interest rates utilizing a sensitivity analysis. The sensitivity analysis measures the potential loss in fair values, cash flows, and earnings based on a hypothetical change (increase and decrease) in interest rates. We used current market rates on the debt portfolio to perform the sensitivity analysis. Certain items such as lease contracts, insurance contracts, and obligations for pension and other postretirement benefits were not included in the analysis.

Foreign Currency Fluctuations

We conduct business through our subsidiaries in many different countries, and fluctuations in currency exchange rates could have a significant impact on the reported results of operations, which are presented in U.S. dollars. Cross-border transactions, both with external parties and intercompany relationships, result in increased exposure to foreign exchange effects. Accordingly, significant changes in currency exchange rates, particularly the Euro, the British pound, and the Canadian dollar, could cause fluctuations in the reported results of our businesses’ operations that could negatively affect our results of operations. To mitigate the risks from foreign currency exposure, we enter into hedging transactions, mainly foreign currency forward contracts, through derivative financial instruments that have been authorized pursuant to corporate policies.

In addition, the remeasurement of certain balance sheet payables and receivables denominated in foreign currencies, as well as gains and losses resulting from the translation of the operating results of our international subsidiaries into U.S. dollars for financial reporting purposes and the strengthening or weakening of the U.S. dollar could result in unfavorable translation effects.

We use derivative financial instruments to mitigate our exposure to changes in foreign currency exchange rates, see Note 5, Derivative Financial Instruments, in the Notes to Consolidated Condensed Financial Statements in Part 1, Item 1 of this Form 10-Q).

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ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

As of December 25, 2022, our Chief Executive Officer and Chief Financial Officer evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934) and have concluded that our disclosure controls and procedures are effective to ensure that information we are required to disclose in reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized, and reported within the time periods specified in the SEC's rules and forms. These disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in the reports we file or submit is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

During the three months ended September 25, 2022, we completed the acquisition of Fox Racing. Prior to the acquisition, Fox Racing was a privately-held company and was not subject to the Sarbanes-Oxley Act of 2002, the rules and regulations of the SEC, or other corporate governance requirements applicable to public reporting companies. As part of our ongoing integration activities, we are continuing to incorporate our controls and procedures into Fox Racing and to augment our company-wide controls to reflect the risks that may be inherent in acquisitions of privately-held companies of this magnitude.

During the nine months ended December 25, 2022, there were no other changes in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934) that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II—OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

From time to time, we are subject to various legal proceedings, including lawsuits, which arise out of, and are incidental to, the conduct of our business. We do not consider any of such proceedings that are currently pending, individually or in the aggregate, to be material to our business or likely to result in a material adverse effect on our operating results, financial condition, or cash flows.

Certain of our former subsidiaries have been identified as PRPs, along with other parties, in regulatory agency actions associated with hazardous waste sites. As a PRP, those former subsidiaries may be required to pay a share of the costs of the investigation and clean-up of these sites. In that event, we would be obligated to indemnify those subsidiaries for those costs. While uncertainties exist with respect to the amounts and timing of our ultimate environmental liabilities, based on currently available information, we do not currently expect that these matters, individually or in the aggregate, will have a material adverse effect on our operating results, financial condition, or cash flows.

ITEM 1A. RISK FACTORS

While we attempt to identify, manage and mitigate risks and uncertainties associated with our business, some level of risk and uncertainty will always be present. Item 1A of Part I of our Annual Report on Form 10-K for the fiscal year ended March 31, 2022 describes the known material risks and uncertainties associated with our business. These risks and uncertainties have the potential to materially affect our business, financial condition, results of operations, cash flows, projected results, and future prospects. There are no material changes from the disclosure provided in the Form 10-K for the fiscal year ended March 31, 2022 with respect to the Risk Factors, other than the addition of the Risk Factor below.

Recent changes in our executive management team may be disruptive to, or cause uncertainty in, our business, results of operations and the price of our common stock, and we may not successfully manage the transition associated with the resignations of our Chief Financial Officer and Chief Executive Officer.

On October 21, 2022, Sudhanshu Priyadarshi provided the Board with notice of his decision to resign from the position of Chief Financial Officer of the Company to pursue another opportunity. Mr. Priyadarshi continued with the Company through the release of the Company’s financial results for the second quarter of fiscal year 2023 and departed in November 2022. In connection therewith, the Board appointed Andrew Keegan, previously the Company’s Vice President of Finance and Treasury, to serve as the Company’s interim Chief Financial Officer. On February 2, 2023, the Board announced that Christopher T. Metz resigned, effective as of February 1, 2023, from his position as Chief Executive Officer at the request of the Board, based on the Board’s loss of confidence in his leadership for reasons not involving financial reporting or internal controls. In connection therewith, the Board appointed Gary L. McArthur, previously an independent member of the Board, to serve as interim Chief Executive Officer. The Board has undertaken a search to identify a permanent Chief Financial Officer and a permanent Chief Executive Officer.

These changes to our executive management team and Board may be disruptive to, or cause uncertainty in, our business, results of operations and the price of our common stock. Leadership transitions are inherently difficult to manage and may result in the loss of institutional knowledge and changes to business strategy or objectives. In addition, these changes have the potential to negatively impact our operations and relationships with employees and customers due to increased or unanticipated expenses, operational inefficiencies, uncertainty regarding changes in strategy, decreased employee morale and productivity and increased turnover.

If we are unable to attract and retain qualified candidates to become the permanent Chief Financial Officer and permanent Chief Executive Officer in a timely manner, our financial performance and ability to meet operational goals and strategic plans may be adversely impacted. The interim nature of our current Chief Financial Officer and Chief Executive Officer may also distract our employees and management team and lead to attrition of qualified employees, increasing our hiring and retention risks.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Not applicable.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

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ITEM 5. OTHER INFORMATION

None.

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ITEM 6. EXHIBITS


Exhibit Number						Description of Exhibit (and document from which incorporated by reference, if applicable)

2.1*+						Tax Matters Agreement, dated as of February 9, 2015, among Alliant Techsystems Inc. and Vista Outdoor Inc. (Exhibit 2.5 to Vista Outdoor Inc.’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on February 10, 2014).
2.2*+						Stock Purchase Agreement, dated as of July 5, 2019, by and among Vista Outdoor Operations LLC, Caliber Company, Long Range Acquisition LLC, and Vista Outdoor Inc. (Exhibit 2.1 to Vista Outdoor Inc.’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on July 8, 2019).
2.3*+						Stock Purchase Agreement, dated as of September 9, 2021, by and among Vista Outdoor Inc., the Seller Guarantors named therein, the Sellers named therein, WAWGD, Inc. (d/b/a Foresight Sports, Inc.), WAWGD NEWCO, Inc., and Fortis Advisors LLC, as Seller Representative
2.4*+						Share Purchase Agreement, dated as of June 30, 2022, by and among Fox Parent Holdings, LLC, Fox (Parent) Holdings, Inc., Vista Outdoor Operations LLC and Vista Outdoor Inc. (solely in its capacity as a guarantor)(Exhibit 2.1 to Vista Outdoor Inc.’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on July 6, 2022)
2.5*+						Agreement and Plan of Merger, dated as of July 22, 2022, by and among Vista Outdoor Operations LLC, Trophy Merger Sub, LLC, Simms Fishing Products LLC, Shareholder Representative Services LLC, as the Equityholder Representative and Vista Outdoor Inc. (solely in its capacity as a guarantor) (Exhibit 2.1 to Vista Outdoor Inc.’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on July 27, 2022)
3.1*						Amended and Restated Certificate of Incorporation of Vista Outdoor Inc. (Exhibit 3.1 to Vista Outdoor Inc.’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on February 10, 2014).
3.2*						Certificate of Amendment to Vista Outdoor Inc. Amended and Restated Certificate of Incorporation (Exhibit 3.1 to Vista Outdoor Inc.’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on August 10, 2018).
3.3*						Vista Outdoor Inc. Amended and Restated Bylaws (Exhibit 3.2 to Vista Outdoor Inc.’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on August 10, 2018).
4.1*						Specimen Common Stock Certificate of Vista Outdoor Inc. (Exhibit 4.1 to Vista Outdoor Inc.’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on February 10, 2014).
4.2*						Description of Common Stock (Exhibit 4.7 to Vista Outdoor Inc.’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on May 23, 2019).
4.3*						Indenture, dated as of March 3, 2021, among Vista Outdoor Inc., the subsidiaries of Vista Outdoor Inc. party thereto and The Bank of New York Mellon Trust Company, N.A., as trustee (Exhibit 4.1 to Vista Outdoor Inc.’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on March 3, 2021).
4.4*						Supplemental Indenture, dated as of March 3, 2021, among Vista Outdoor Inc., the subsidiaries of Vista Outdoor Inc. party thereto and The Bank of New York Mellon Trust Company, N.A., as trustee (Exhibit 4.2 to Vista Outdoor Inc.’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on March 3, 2021).
4.5*						Form of 4.500% Senior Note due 2029 (included as Exhibit A to the Supplemental Indenture filed as Exhibit 4.2) (Exhibit 4.3 to Vista Outdoor Inc.’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on March 3, 2021).
10.1*						Asset-Based Revolving Credit Agreement dated as of August 5, 2022 among Vista Outdoor Inc., the additional borrowers from time to time party thereto, each lender from time to time party thereto, each L/C issuer from time to time party thereto and Capital One, National Association, as administrative agent. (Exhibit 10.1 to Vista Outdoor, Inc.’s Current Report on Form 8-K, filed with the Securities Exchange Commission on August 8, 2022)
10.2*						Term Loan Credit Agreement dated as of August 5, 2022, among Vista Outdoor Inc., the other borrowers from time to time party thereto, the lenders from time to time party thereto and JPMorgan Chase Bank, N.A., as administrative agent. (Exhibit 10.2 to Vista Outdoor, Inc.’s Current Report on Form 8-K, filed with the Securities Exchange Commission on August 8, 2022)
10.3*						Restricted Stock Unit Retention Award Agreement, January 5, 2023, by and between Vista Outdoor Inc. and Mark Kowalski (Exhibit 10.1 to Vista Outdoor Inc.’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on January 6, 2023)
10.4*						General Release and Resignation Agreement, dated as of February 1, 2023, between Vista Outdoor Inc. and Christopher T. Metz. (Exhibit 10.1 to Vista Outdoor Inc.’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on February 2, 2023)
31.1						Certification of Principal Executive Officer.

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31.2						Certification of Principal Financial Officer.
32						Certification of Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101						The following financial statements from Vista Outdoor's Quarterly Report on Form 10-Q for the quarter ended December 25, 2022, formatted in Inline Extensible Business Reporting Language (iXBRL): (i) /Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Comprehensive Income (Loss), (iii) Condensed Consolidated Statements of Cash Flows, (iv) Condensed Consolidated Statements of Stockholders’ Equity, and (v) Notes to the Condensed Consolidated Financial Statements, tagged as blocks of text and including detailed tags.
104						The cover page from Vista Outdoor's Quarterly Report on Form 10-Q for the quarter ended December 25, 2022, formatted in Inline Extensible Business Reporting Language (iXBRL) (included as Exhibit 101).

* Incorporated by reference.

+ Schedules to exhibits have been omitted from this filing pursuant to Item 601(b)(2) of Regulation S-K. Vista Outdoor agrees to furnish supplementally a copy of any omitted schedules to the SEC upon its request; provided, however, that we may request confidential treatment pursuant to Rule 24b-2 of the Exchange Act for any document so furnished.

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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 thereunto duly authorized.

VISTA OUTDOOR INC.

Date:

February 3, 2023

By:

/s/ Andrew Keegan

Name:

Andrew Keegan

Title:

Vice President and Interim Chief Financial Officer

(On behalf of the Registrant and as Principal Financial Officer)