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 September 27, 2020

☐ 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 October 26, 2020, there were 58,235,588 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	21
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	29
Item 4.	Controls and Procedures	29
PART II - Other Information
Item 1.	Legal Proceedings	30
Item 1A.	Risk Factors	30
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	30
Item 3.	Defaults Upon Senior Securities	30
Item 4.	Mine Safety Disclosures	30
Item 5.	Other Information	30
Item 6.	Exhibits	31
SIGNATURES		32

PART I— FINANCIAL INFORMATION

ITEM 1.    FINANCIAL STATEMENTS

VISTA OUTDOOR INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited)

(Amounts in thousands except share data)	September 27, 2020		March 31, 2020
ASSETS
Current assets:
Cash and cash equivalents	$	40,746	$	31,375
Restricted cash and cash equivalents (Note 18)	12,210		—
Net receivables	336,592		313,517
Net inventories	338,380		331,293
Income tax receivable	29,373		7,626
Other current assets	27,484		25,200
Total current assets	784,785		709,011
Net property, plant, and equipment	170,874		184,733
Operating lease assets	65,208		69,024
Goodwill	83,167		83,167
Net intangible assets	296,426		306,100
Deferred charges and other non-current assets, net	30,861		39,254
Total assets	$	1,431,321	$	1,391,289
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	125,351	$	89,996
Accrued compensation	43,220		38,806
Federal excise, use, and other taxes	22,378		19,702
Other current liabilities	128,090		98,197
Total current liabilities	319,039		246,701
Long-term debt	345,305		511,806
Deferred income tax liabilities	14,520		12,810
Long-term operating lease liabilities	69,852		73,738
Accrued pension and postemployment benefits	51,704		60,225
Other long-term liabilities	56,264		43,504
Total liabilities	856,684		948,784
Commitments and contingencies (Notes 3, 12, and 15)
Common stock — $.01 par value:
Authorized — 500,000,000 shares
Issued and outstanding — 58,256,243 shares as of September 27, 2020 and 58,038,822 shares as of March 31, 2020	583		580
Additional paid-in capital	1,742,645		1,744,096
Accumulated deficit	(839,927)		(960,048)
Accumulated other comprehensive loss	(97,030)		(100,994)
Common stock in treasury, at cost — 5,708,196 shares held as of September 27, 2020 and 5,925,617 shares held as of March 31, 2020	(231,634)		(241,129)
Total stockholders' equity	574,637		442,505
Total liabilities and stockholders' equity	$	1,431,321	$	1,391,289

See Notes to the Condensed Consolidated Financial Statements.

2

VISTA OUTDOOR INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(unaudited)

	Three months ended				Six months ended
(Amounts in thousands except per share data)	September 27, 2020		September 29, 2019		September 27, 2020		September 29, 2019
Sales, net	$	575,179	$	445,016	$	1,054,319	$	904,790
Cost of sales	413,289		354,752		767,061		719,448
Gross profit	161,890		90,264		287,258		185,342
Operating expenses:
Research and development	5,362		5,553		10,372		12,047
Selling, general, and administrative	81,272		82,971		153,587		166,880
Impairment of held-for-sale assets (Note 2)	—		—		—		9,429
Earnings (loss) before interest, income taxes, and other	75,256		1,740		123,299		(3,014)
Other expense, net	—		(433)		—		(433)
Earnings (loss) before interest and income taxes	75,256		1,307		123,299		(3,447)
Interest expense, net	(5,715)		(12,314)		(12,133)		(23,438)
Earnings (loss) before income taxes	69,541		(11,007)		111,166		(26,885)
Income tax provision (benefit)	(10,104)		891		(8,955)		1,628
Net income (loss)	$	79,645	$	(11,898)	$	120,121	$	(28,513)
Earnings (loss) per common share:
Basic	$	1.37	$	(0.21)	$	2.07	$	(0.49)
Diluted	$	1.34	$	(0.21)	$	2.03	$	(0.49)
Weighted-average number of common shares outstanding:
Basic	58,193		57,768		58,124		57,746
Diluted	59,314		57,768		59,066		57,746
Net income (loss) (from above)	$	79,645	$	(11,898)	$	120,121	$	(28,513)
Other comprehensive income, 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 of $0 for each period presented	(79)		(78)		(157)		(156)
Reclassification of net actuarial loss for pension and postretirement benefit plans recorded to net income, net of tax of $0 for each period presented	970		812		1,938		1,623
Change in derivatives, net of tax of $0 for each period presented	693		700		1,674		(450)
Currency translation gains reclassified from accumulated other comprehensive loss	—		3,150		—		3,150
Change in cumulative translation adjustment	160		(477)		509		287
Total other comprehensive income	1,744		4,107		3,964		4,454
Comprehensive income (loss)	$	81,389	$	(7,791)	$	124,085	$	(24,059)

See Notes to the Condensed Consolidated Financial Statements.

3

VISTA OUTDOOR INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

	Six months ended
(Amounts in thousands)	September 27, 2020		September 29, 2019
Operating Activities:
Net income (loss)	$	120,121	$	(28,513)
Adjustments to net income (loss) to arrive at cash provided by (used for) operating activities:
Depreciation	22,268		26,250
Amortization of intangible assets	9,899		9,782
Impairment of held-for-sale assets (Note 2)	—		9,429
Amortization of deferred financing costs	755		3,890
Deferred income taxes	1,667		(200)
Loss (gain) on disposal of property, plant, and equipment	278		(57)
Loss on divestitures	—		431
Share-based compensation	7,466		3,574
Changes in assets and liabilities:
Net receivables	(22,884)		(5,089)
Net inventories	2,388		(37,468)
Accounts payable	35,996		9,382
Accrued compensation	4,416		(2,290)
Accrued income taxes	(16,980)		1,723
Federal excise, use, and other taxes	2,661		(350)
Pension and other postretirement benefits	(6,740)		(1,435)
Other assets and liabilities	36,514		2,703
Cash provided by (used for) operating activities	197,825		(8,238)
Investing Activities:
Capital expenditures	(9,665)		(17,720)
Proceeds from sale of our Firearms Business	—		156,567
Proceeds from the disposition of property, plant, and equipment	25		260
Cash (used for) provided by investing activities	(9,640)		139,107
Financing Activities:
Borrowings on lines of credit	43,076		192,232
Payments on lines of credit	(210,332)		(197,234)
Payments made on long-term debt	—		(124,509)
Payments made for debt issuance costs	—		(103)
Proceeds from exercise of stock options	805		—
Payment of employee taxes related to vested stock awards	(239)		(307)
Cash used for financing activities	(166,690)		(129,921)
Effect of foreign exchange rate fluctuations on cash and restricted cash	86		(72)
Increase in cash, restricted cash, and cash equivalents	21,581		876
Cash, cash equivalents and restricted cash at beginning of period	31,375		21,935
Cash, cash equivalents and restricted cash at end of period	$	52,956	$	22,811
Supplemental Cash Flow Disclosures:
Non-cash investing activity:
Capital expenditures included in accounts payable	$	1,968	$	1,216

. 

See Notes to the Condensed Consolidated Financial Statements.

4

VISTA OUTDOOR INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(unaudited)

	Common Stock $.01 Par Value
(Amounts in thousands except share data)	Shares	Amount		Additional Paid-In Capital		Accumulated Deficit		Accumulated Other Comprehensive Loss		Treasury Stock		Total Equity
Balance, March 31, 2020	58,038,822	$	580	$	1,744,096	$	(960,048)	$	(100,994)	$	(241,129)	$	442,505
Comprehensive income	—	—		—		40,476		2,220		—		42,696
Exercise of stock options	5,000	—		(203)		—		—		203		—
Share-based compensation	—	—		4,404		—		—		—		4,404
Restricted stock vested and shares withheld	21,824	—		(1,324)		—		—		1,224		(100)
Other	1,313	1		(54)		—		—		53		—
Balance, June 28, 2020	58,066,959	$	581	$	1,746,919	$	(919,572)	$	(98,774)	$	(239,649)	$	489,505
Comprehensive income	—	—		—		79,645		1,744		—		81,389
Exercise of stock options	50,814	—		(1,258)		—		—		2,063		805
Share-based compensation	—	—		3,062		—		—		—		3,062
Restricted stock vested and shares withheld	29,680	—		(1,741)		—		—		1,535		(206)
Employee stock purchase plan	5,435	—		(146)		—		—		221		75
Other	103,355	2		(4,191)		—		—		4,196		7
Balance, September 27, 2020	58,256,243	$	583	$	1,742,645	$	(839,927)	$	(97,030)	$	(231,634)	$	574,637
	Common Stock $.01 Par Value
(Amounts in thousands except share data)	Shares	Amount		Additional Paid-In Capital		Accumulated Deficit		Accumulated Other Comprehensive Loss		Treasury Stock		Total Equity
Balance, March 31, 2019	57,710,934	$	577	$	1,752,419	$	(804,969)	$	(82,967)	$	(256,020)	$	609,040
Comprehensive income (loss)	—	—		—		(16,615)		347		—		(16,268)
Share-based compensation	—	—		2,190		—		—		—		2,190
Restricted stock vested and shares withheld	23,059	—		(1,534)		—		—		1,428		(106)
Employee stock purchase plan	11,028	—		(358)		—		—		451		93
Other	724	—		43		—		—		(43)		—
Balance, June 30, 2019	57,745,745	$	577	$	1,752,760	$	(821,584)	$	(82,620)	$	(254,184)	$	594,949
Comprehensive income (loss)	—	—		—		(11,898)		4,107		—		(7,791)
Share-based compensation	—	—		1,384		—		—		—		1,384
Restricted stock vested and shares withheld	12,666	—		(859)		—		—		818		(41)
Other	29,022	1		(1,110)		—		—		1,109		—
Balance, September 29, 2019	57,787,433	$	578	$	1,752,175	$	(833,482)	$	(78,513)	$	(252,257)	$	588,501

See Notes to the Condensed Consolidated Financial Statements.

5

VISTA OUTDOOR INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Six Months Ended September 27, 2020

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

1. Significant Accounting Policies

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 and shooting sports products. We conduct our operations through two reportable segments, Shooting Sports and Outdoor Products. We are headquartered in Anoka, Minnesota and have 14 manufacturing and distribution facilities in the United States, Canada, Mexico, and Puerto Rico along with international customer service, sales and sourcing operations in Asia, Canada, and Europe. Vista Outdoor was incorporated in Delaware in 2014. The condensed consolidated financial statements reflect our financial position, results of operations, and cash flows in conformity with accounting principles generally accepted in the United States.

This Quarterly Report on Form 10-Q 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, 2020 (“fiscal 2020”).

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. Our accounting policies are described in the notes to the consolidated financial statements in our Annual Report on Form 10-K for fiscal 2020. Management is responsible for the condensed consolidated financial statements included in this report, which are unaudited but, in the opinion of management, include all adjustments necessary for a fair presentation of our financial position as of September 27, 2020 and March 31, 2020, our results of operations for the three and six months ended September 27, 2020 and September 29, 2019, and our cash flows for the six months ended September 27, 2020 and September 29, 2019.

New Accounting Pronouncements

Our accounting policies are described in Note 1 of the Notes to Consolidated Financial Statements included in our fiscal year 2020 Annual Report on Form 10-K. Such significant accounting policies are applicable for periods prior to the following new accounting standards.

Accounting Standards Adopted During this Fiscal Year

On April 1, 2020, we adopted ASU No. 2016-13, "Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments" ("Topic 326"). This new standard is intended to improve financial reporting by requiring more timely recording of credit losses on our trade account receivable and requires the measurement of all expected credit losses based on historical experience, current conditions, and reasonable and supportable forecasts. The adoption of this ASU did not have a material impact on our condensed consolidated financial statements and disclosures. For further information, see Note 7, Receivables.

On April 1, 2020, we adopted ASU No. 2018-13, "Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement." The amendments in this ASU removed, modified or added to the disclosure requirements for fair value measurements in ASC Topic 820, "Fair Value Measurement" ("Topic 820"). The adoption of this ASU did not have a material impact on our condensed consolidated financial statements and disclosures.

Accounting Standards Yet to Be Adopted

In December 2019, the FASB issued ASU No. 2019-12, Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which simplifies the accounting for income taxes, eliminates certain exceptions within ASC 740, Income Taxes, and clarifies certain aspects of the current guidance to promote consistency among reporting entities. ASU 2019-12 is effective for fiscal years beginning after December 15, 2021, although early adoption is permitted. Most amendments within the standard are required to be applied on a prospective basis, while certain amendments must be applied on a retrospective or modified retrospective basis. We are currently evaluating the impacts of the provisions of ASU 2019-12 on our consolidated financial statements.

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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 following 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:

Interest Rate Swaps—We periodically enter into floating-to-fixed interest rate swap agreements in order to hedge our forecasted interest payments on our outstanding variable-rate debt. The fair value of those swaps is determined using a pricing model based on observable inputs for similar instruments and other market assumptions. We consider these to be Level 2 instruments. See Note 4, Derivative Financial Instruments, for additional information.

Commodity Price Hedging Instruments—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. When actual commodity prices exceed the fixed price provided by these contracts, we receive this difference from the counterparty, and when actual commodity prices are below the contractually provided fixed price, we pay this difference to the counterparty. We consider these to be Level 2 instruments. See Note 4, 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. See Note 7, Receivables, for additional information.

Disclosures about the Fair Value of Financial Instruments

The carrying amount of our receivables, inventory, accounts payable and accrued liabilities at September 27, 2020 and March 31, 2020, approximates fair value because of the short maturity of these instruments. The carrying values of cash, restricted cash and cash equivalents at September 27, 2020 and March 31, 2020 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:

	September 27, 2020				March 31, 2020
	Carrying amount		Fair value		Carrying amount		Fair value
Fixed-rate debt (1)	$	350,000	$	352,100	$	350,000	$	284,375
Variable-rate debt (2)	—		—		167,256		167,256

(1) In fiscal 2016, we issued $350,000 aggregate principal amount of 5.875% Senior Notes (the "5.875% Notes") that mature on October 1, 2023. These notes are unsecured and senior obligations. The fair value of the fixed-rate long-term debt is calculated based on current market rates for debt of the same risk and maturities, based on market quotes for each issuance. We consider these to be Level 2 instruments. See Note 12, Long-term Debt, for information on long-term debt, including certain risks and uncertainties.

(2) The carrying value of the amounts outstanding under our ABL Revolving Credit Facility approximates the fair value due to the short-term nature of these obligations. 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 12, Long-term Debt, for additional information on our credit facilities, including related certain risks and uncertainties.

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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. During the six months ended September 27, 2020 there were no impairments recorded related to our assets that are measured at fair value on a nonrecurring basis. During the six months ended September 29, 2019, we recognized an impairment of $9,429 related to an expected loss on the sale of the held-for-sale assets of our Firearms business.

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 our operating lease assets.

Many leases include one or more options to renew, with renewal terms that can extend the lease term for three years or more. 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	September 27, 2020		March 31, 2020
Assets:
Operating lease assets	Operating lease assets	$	65,208	$	69,024
Liabilities:
Current:
Operating lease liabilities	Other current liabilities	$	10,457	$	10,780
Long-term:
Operating lease liabilities	Long-term operating lease liabilities	69,852		73,738
Total lease liabilities		$	80,309	$	84,518

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

	Three months ended				Six months ended
	September 27, 2020		September 29, 2019		September 27, 2020		September 29, 2019
Fixed operating lease costs (1)	$	5,052	$	4,686	$	10,111	$	9,703
Variable operating lease costs	659		704		1,241		1,239
Sublease income	(277)		(192)		(665)		(473)
Net Lease costs	$	5,434	$	5,198	$	10,687	$	10,469

(1) Includes short-term leases, which are immaterial.

	September 27, 2020		March 31, 2020
Weighted Average Remaining Lease Term (Years):
Operating leases	9.34		9.55
Weighted Average Discount Rate:
Operating leases	8.68	%	8.64	%

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The approximate minimum lease payments under non-cancelable operating leases as of September 27, 2020 are as follows:

Remainder of fiscal 2021	$	8,799
Fiscal 2022	15,271
Fiscal 2023	13,546
Fiscal 2024	11,912
Fiscal 2025	10,718
Thereafter	60,788
Total lease payments	121,034
Less imputed interest	(40,725)
Present value of lease liabilities	$	80,309

Supplemental cash flow information related to leases is as follows:

	Six months ended
	September 27, 2020		September 29, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows - operating leases	$	9,080	$	10,475
Operating lease assets obtained in exchange for lease liabilities:
Operating leases	1,285		1,143

4. Derivative Financial Instruments

In the normal course of business, we are exposed to market risks arising from adverse changes in:

•commodity prices affecting the cost of raw materials, and

•interest rates.

We record our interest rate swaps and commodity forward contracts that are accounted for as designated hedges pursuant to ASC Topic 815, “Derivatives and Hedging” ("ASC Topic 815"). ASC Topic 815 requires that an entity recognize all derivatives as either assets or liabilities on the balance sheet, measure those instruments at fair value and recognize changes in the fair value of derivatives in earnings in the period of change unless the derivative qualifies as 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. Derivatives that are not elected for hedge accounting treatment are recorded immediately in earnings.

From time to time, we have entered into floating-to-fixed interest rate swap agreements in order to hedge our forecasted interest payments on our outstanding variable-rate debt. Gains and losses from the remeasurement of our interest rate swap contract agreement are recorded as a component of accumulated other comprehensive income (loss) and released into earnings as a component of interest expense during the period in which the hedged transaction takes place. There are no cash flow hedge interest rate swaps in place as of September 27, 2020.

We entered into various commodity forward contracts during fiscal 2021 and 2020. These contracts are used to hedge our exposure to price fluctuations on lead we purchase for raw material components in our ammunition manufacturing process and 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 transactions critical terms and counterparty credit quality.

The gains and losses on these hedges are included in accumulated other comprehensive income (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 September 27, 2020, we had outstanding lead forward contracts on approximately 21 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 income (loss) and recognized in earnings. As of September 27, 2020, there is a net asset balance related to the lead forward contracts. The balance is recorded as within other current and non-current assets and is immaterial.

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5. Revenue Recognition

The following tables disaggregate our net sales by major category:

	Three months ended
	September 27, 2020						September 29, 2019(1)
	Shooting Sports		Outdoor Products		Total		Shooting Sports		Outdoor Products		Total
Ammunition	$	272,219	$	—	$	272,219	$	210,172	$	—	$	210,172
Firearms	—		—		—		560		—		560
Hunting and Shooting	107,468		—		107,468		89,592		—		89,592
Action Sports	—		97,447		97,447		—		83,961		83,961
Outdoor Recreation (2)	—		98,045		98,045		—		60,731		60,731
Total	$	379,687	$	195,492	$	575,179	$	300,324	$	144,692	$	445,016
Geographic Region:
United States	$	352,740	$	151,783	$	504,523	$	272,409	$	100,060	$	372,469
Rest of the World	26,947		43,709		70,656		27,915		44,632		72,547
Total	$	379,687	$	195,492	$	575,179	$	300,324	$	144,692	$	445,016
	Six months ended
	September 27, 2020						September 29, 2019(1)
	Shooting Sports		Outdoor Products		Total		Shooting Sports		Outdoor Products		Total
Ammunition	$	533,981	$	—	$	533,981	$	423,982	$	—	$	423,982
Firearms	—		—		—		24,577		—		24,577
Hunting and Shooting	179,863		—		179,863		160,562		—		160,562
Action Sports	—		170,306		170,306		—		151,869		151,869
Outdoor Recreation (2)	—		170,169		170,169		—		143,800		143,800
Total	$	713,844	$	340,475	$	1,054,319	$	609,121	$	295,669	$	904,790
Geographic Region:
United States	$	660,127	$	266,800	$	926,927	$	540,232	$	213,393	$	753,625
Rest of the World	53,717		73,675		127,392		68,889		82,276		151,165
Total	$	713,844	$	340,475	$	1,054,319	$	609,121	$	295,669	$	904,790

(1) We changed our operating segments during the fourth quarter of fiscal 2020 (see Note 17, Operating Segment Information). Accordingly, prior period amounts have been reclassified to conform with the current period presentation.

(2) Outdoor Recreation includes the operating segments: Hydration, Outdoor Cooking, and Golf.

Product Sales

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.

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.

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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, firearms and ammunition excise tax and other similar taxes are excluded from revenue.

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.

6. 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.

The following tables set forth the computation of basic and diluted earnings per share:

	Three months ended				Six months ended
(Amounts in thousands except per share data)	September 27, 2020		September 29, 2019		September 27, 2020		September 29, 2019
Numerator:
Net income (loss)	$	79,645	$	(11,898)	$	120,121	$	(28,513)
Denominator:
Weighted-average number of common shares outstanding basic:	58,193		57,768		58,124		57,746
Dilutive effect of share-based awards (1)	1,121		—		942		—
Diluted shares	59,314		57,768		59,066		57,746
Earnings (loss) per common share:
Basic	$	1.37	$	(0.21)	$	2.07	$	(0.49)
Diluted	$	1.34	$	(0.21)	$	2.03	$	(0.49)

(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 26 for the three months ended September 27, 2020 and 296 for the six months ended September 27, 2020. Due to the loss from continuing operations for the three and six months ended, September 29, 2019, there are no common shares added to calculate dilutive EPS because the effect would be antidilutive.

7. Receivables

Our trade accounts receivable are recorded at net realizable value, which includes an appropriate allowance for estimated credit losses as described in Note 1, Significant Accounting Policies. Under ASC Topic 326, the “expected credit loss” model replaces the “incurred loss” model and will require consideration of a broader range of information to estimate expected credit losses over the life of the asset. Our prior methodology for estimating credit losses on trade accounts receivable did not differ significantly from the new requirements of ASC 326. 

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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. Our estimate of credit losses includes expected current and future economic and market conditions surrounding the COVID-19 pandemic, which did not significantly impact our allowance.

Net receivables are summarized as follows:

	September 27, 2020		March 31, 2020
Trade receivables	$	343,410	$	323,436
Other receivables	7,590		4,841
Less: allowance for estimated credit losses and discounts	(14,408)		(14,760)
Net receivables	$	336,592	$	313,517

Walmart represented 19% and 13% of our total trade receivables balance as of September 27, 2020 and March 31, 2020, respectively. No other customer represented more than 10% of our total trade receivables balance as of September 27, 2020 or March 31, 2020.

The following provides a reconciliation of the activity related to the allowance for estimated credit losses and discounts during the six months ended September 27, 2020:

Balance, March 31, 2020	$	14,760
Provision for credit losses	1,146
Write-off of uncollectible amounts, net of recoveries	(523)
Discounts and other adjustments	(975)
Balance, September 27, 2020	$	14,408

Note Receivable is summarized as follows:

	September 27, 2020		March 31, 2020
Principal	$	12,000	$	12,000
Less: unamortized discount	(3,599)		(3,990)
Note receivable, net, included within Deferred charges and other non-current assets	$	8,401	$	8,010

8. Inventories

Current net inventories consist of the following:

	September 27, 2020		March 31, 2020
Raw materials	$	96,523	$	85,609
Work in process	35,239		33,622
Finished goods	206,618		212,062
Net inventories	$	338,380	$	331,293

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 $18,637 and $27,984 as of September 27, 2020 and March 31, 2020, respectively.

9. Accumulated Other Comprehensive Loss (AOCL)

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

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	September 27, 2020		March 31, 2020
Derivatives	$	248	$	(1,426)
Pension and other postretirement benefits liabilities	(91,572)		(93,353)
Cumulative translation adjustment	(5,706)		(6,215)
Total AOCL	$	(97,030)	$	(100,994)

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 September 27, 2020								Six months ended September 27, 2020
	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	$	(445)	$	(92,463)	$	(5,866)	$	(98,774)	$	(1,426)	$	(93,353)	$	(6,215)	$	(100,994)
Change in fair value of derivatives	598		—		—		598		593		—		—		593
Net losses reclassified from AOCL	95		—		—		95		1,081		—		—		1,081
Net actuarial losses reclassified from AOCL (1)	—		970		—		970		—		1,938		—		1,938
Prior service costs reclassified from AOCL (1)	—		(79)		—		(79)		—		(157)		—		(157)
Net change in cumulative translation adjustment	—		—