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 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 October 31, 2022, there were 56,573,110 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	24
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	31
Item 4.	Controls and Procedures	31
PART II - Other Information
Item 1.	Legal Proceedings	32
Item 1A.	Risk Factors	32
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	32
Item 3.	Defaults Upon Senior Securities	32
Item 4.	Mine Safety Disclosures	32
Item 5.	Other Information	32
Item 6.	Exhibits	33
SIGNATURES		35

1

PART I— FINANCIAL INFORMATION

ITEM 1.    FINANCIAL STATEMENTS

VISTA OUTDOOR INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited)

(Amounts in thousands except share data)	September 25, 2022		March 31, 2022
ASSETS
Current assets:
Cash and cash equivalents	$	66,065	$	22,584
Net receivables	431,703		356,773
Net inventories	777,974		642,976
Income tax receivable	49,010		43,560
Other current assets	67,119		45,050
Total current assets	1,391,871		1,110,943
Net property, plant, and equipment	231,795		211,087
Operating lease assets	101,942		78,252
Goodwill	804,820		481,857
Net intangible assets	798,200		459,795
Deferred charges and other non-current assets, net	69,295		54,267
Total assets	$	3,397,923	$	2,396,201
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt	$	140,000	$	—
Accounts payable	178,732		146,697
Accrued compensation	58,049		79,171
Federal excise, use, and other taxes	40,652		40,825
Other current liabilities	194,002		127,180
Total current liabilities	611,435		393,873
Long-term debt	1,167,262		666,114
Deferred income tax liabilities	89,140		29,304
Long-term operating lease liabilities	96,663		80,083
Accrued pension and postemployment benefits	21,748		22,634
Other long-term liabilities	62,224		79,794
Total liabilities	2,048,472		1,271,802
Commitments and contingencies (Notes 3, 13, and 16)
Common stock — $.01 par value:
Authorized — 500,000,000 shares
Issued and outstanding — 56,566,915 shares as of September 25, 2022 and 56,093,456 shares as of March 31, 2022	566		560
Additional paid-in capital	1,717,750		1,730,927
Accumulated deficit	(1,340)		(220,810)
Accumulated other comprehensive loss	(77,440)		(76,679)
Common stock in treasury, at cost — 7,397,524 shares held as of September 25, 2022 and 7,870,983 shares held as of March 31, 2022	(290,085)		(309,599)
Total stockholders' equity	1,349,451		1,124,399
Total liabilities and stockholders' equity	$	3,397,923	$	2,396,201

See Notes to the Condensed Consolidated Financial Statements.

2

VISTA OUTDOOR INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(unaudited)

	Three months ended				Six months ended
(Amounts in thousands except per share data)	September 25, 2022		September 26, 2021		September 25, 2022		September 26, 2021
Sales, net	$	781,678	$	778,460	$	1,584,290	$	1,441,372
Cost of sales	518,804		479,539		1,027,946		901,024
Gross profit	262,874		298,921		556,344		540,348
Operating expenses:
Research and development	11,154		6,440		19,051		12,308
Selling, general, and administrative	120,553		101,742		233,701		193,645
Earnings before interest, income taxes, and other	131,167		190,739		303,592		334,395
Other income, net (Note 5)	741		—		741		—
Earnings before interest and income taxes	131,908		190,739		304,333		334,395
Interest expense, net	(13,934)		(5,929)		(20,244)		(11,607)
Earnings before income taxes	117,974		184,810		284,089		322,788
Income tax provision	(24,519)		(45,270)		(64,619)		(80,523)
Net income	$	93,455	$	139,540	$	219,470	$	242,265
Earnings per common share:
Basic	$	1.65	$	2.43	$	3.88	$	4.20
Diluted	$	1.62	$	2.36	$	3.78	$	4.07
Weighted-average number of common shares outstanding:
Basic	56,553		57,353		56,520		57,732
Diluted	57,814		59,216		58,098		59,577
Net income (from above)	$	93,455	$	139,540	$	219,470	$	242,265
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 six months ended September 25, 2022, respectively, and $31 and $54 for the three and six months ended September 26, 2021, respectively	—		(95)		—		(167)
Reclassification of net actuarial loss for pension and postretirement benefit plans recorded to net income, net of tax (expense) of $(221) and $(442) for the three and six months ended September 25, 2022, respectively, and $(260) and $(519) for the three and six months ended September 26, 2021, respectively	694		801		1,388		1,599
Change in derivatives, net of tax benefit of $92 and $781 for the three and six months ended September 25, 2022, respectively, and $141 and $121 for the three and six months ended September 26, 2021, respectively	(287)		(436)		(278)		(373)
Change in cumulative translation adjustment, net of tax benefit (expense) of $0 and $(167) for the three and six months ended September 25, 2022, respectively, and $0 and $0 for the three and six months ended September 26, 2021, respectively	(1,398)		(337)		(1,871)		(131)
Total other comprehensive (loss) income	(991)		(67)		(761)		928
Comprehensive income	$	92,464	$	139,473	$	218,709	$	243,193

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 25, 2022		September 26, 2021
Operating Activities:
Net income	$	219,470	$	242,265
Adjustments to net income to arrive at cash provided by operating activities:
Depreciation	23,317		22,267
Amortization of intangible assets	18,983		10,417
Amortization of deferred financing costs	2,518		701
Change in fair value of contingent consideration	(11,425)		—
Deferred income taxes	(124)		269
(Gain) on Foreign Exchange	(741)		—
Loss on disposal of property, plant, and equipment	551		99
Share-based compensation	14,756		13,812
Changes in assets and liabilities:
Net receivables	(25,601)		(112,256)
Net inventories	(36,042)		(105,269)
Accounts payable	10,092		16,957
Accrued compensation	(26,233)		(8,489)
Accrued income taxes	4,313		32,250
Federal excise, use, and other taxes	(1,261)		9,494
Pension and other postretirement benefits	944		(1,299)
Other assets and liabilities	(115)		(16,038)
Cash provided by operating activities	193,402		105,180
Investing Activities:
Capital expenditures	(12,957)		(14,439)
Acquisition of businesses, net of cash received	(761,170)		(8,488)
Proceeds from the disposition of property, plant, and equipment	43		8
Cash used for investing activities	(774,084)		(22,919)
Financing Activities:
Proceeds from credit facility	465,000		—
Repayments of credit facility	(165,000)		—
Payments made for debt issuance costs	(15,905)		(1,018)
Proceeds from issuance of debt	350,000		—
Purchase of treasury shares	—		(56,239)
Proceeds from exercise of stock options	181		228
Payment of employee taxes related to vested stock awards	(8,889)		(3,039)
Cash provided by (used ) for financing activities	625,387		(60,068)
Effect of foreign exchange rate fluctuations on cash	(1,224)		(157)
Increase in cash and cash equivalents	43,481		22,036
Cash and cash equivalents at beginning of period	22,584		243,265
Cash and cash equivalents at end of period	$	66,065	$	265,301
Supplemental Cash Flow Disclosures:
Non-cash investing activity:
Capital expenditures included in accounts payable	$	2,681	$	3,085
Contingent consideration in connection with business combinations	$	11,400	$	22,400

See Notes to the Condensed Consolidated Financial Statements.

4

VISTA OUTDOOR INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(unaudited)

(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, 2022	56,093,456	$	560	$	1,730,927	$	(220,810)	$	(76,679)	$	(309,599)	$	1,124,399
Comprehensive income	—	—		—		126,015		230		—		126,245
Exercise of stock options	9,150	—		(212)		—		—		359		147
Share-based compensation	—	—		7,257		—		—		—		7,257
Restricted stock vested, net of shares withheld	413,089	—		(25,892)		—		—		17,156		(8,736)
Other	8,387	5		(321)		—		—		316		—
Balance, June 26, 2022	56,524,082	$	565	$	1,711,759	$	(94,795)	$	(76,449)	$	(291,768)	$	1,249,312
Comprehensive income (loss)	—	—		—		93,455		(991)		—		92,464
Exercise of stock options	4,000	—		(123)		—		—		157		34
Share-based compensation	—	—		7,499		—		—		—		7,499
Restricted stock vested and shares withheld	1,276	—		(72)		—		—		55		(17)
Employee stock purchase plan	6,002	—		(76)		—		—		235		159
Other	31,555	1		(1,237)		—		—		1,236		—
Balance, September 25, 2022	56,566,915	$	566	$	1,717,750	$	(1,340)	$	(77,440)	$	(290,085)	$	1,349,451
Balance, March 31, 2021	58,561,016	$	585	$	1,731,479	$	(694,036)	$	(83,195)	$	(217,836)	$	736,997
Comprehensive income	—	—		—		102,725		995		—		103,720
Exercise of stock options	7,373	—		(94)		—		—		291		197
Share-based compensation	—	—		7,038		—		—		—		7,038
Restricted stock vested, net of shares withheld	174,885	—		(10,937)		—		—		7,896		(3,041)
Treasury shares purchased	(1,212,496)	—		—		—		—		(44,232)		(44,232)
Other	7,380	(10)		(282)		—		—		292		—
Balance, June 27, 2021	57,538,158	$	575	$	1,727,204	$	(591,311)	$	(82,200)	$	(253,589)	$	800,679
Comprehensive income	—	—		—		139,540		(67)		—		139,473
Exercise of stock options	1,928	—		(45)		—		—		76		31
Share-based compensation	—	—		6,774		—		—		—		6,774
Restricted stock vested and shares withheld	2,840	—		(167)		—		—		109		(58)
Employee stock purchase plan	2,726	—		12		—		—		108		120
Treasury shares purchased	(311,187)	—		—		—		—		(12,007)		(12,007)
Other	53,695	(2)		(2,113)		—		—		2,116		1
Balance, September 26, 2021	57,288,160	$	573	$	1,731,665	$	(451,771)	$	(82,267)	$	(263,187)	$	935,013

See Notes to the Condensed Consolidated Financial Statements.

5

VISTA OUTDOOR INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Six Months Ended September 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.

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. See Note 8, Receivables, for additional information.

6

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 September 25, 2022, the estimated fair values of contingent consideration payable related to our acquisitions of QuietKat, Fox Racing, Fiber Energy, Stone Glacier, and HEVI-Shot are $11,824, $11,400, $3,625, $9,939 and $277, respectively. See Note 4, Acquisitions, for additional information.

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

	September 25, 2022		March 31, 2022
Other current liabilities	$	21,837	$	96
Other long-term liabilities	15,228		36,994
Total	$	37,065	$	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	(11,425)
Balance, September 25, 2022	$	37,065

Disclosures about the Fair Value of Financial Instruments

The carrying amount of our receivables, inventory, accounts payable, and accrued liabilities as of September 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 September 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:

	September 25, 2022				March 31, 2022
	Carrying amount		Fair value		Carrying amount		Fair value
Fixed-rate debt (1)	$	500,000	$	366,500	$	500,000	$	460,000
Variable-rate debt (2)	820,000		820,000		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 September 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.

7

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	September 25, 2022		March 31, 2022
Assets:
Operating lease assets	Operating lease assets	$	101,942	$	78,252
Liabilities:
Current:
Operating lease liabilities	Other current liabilities	$	15,980	$	11,804
Long-term:
Operating lease liabilities	Long-term operating lease liabilities	96,663		80,083
Total lease liabilities		$	112,643	$	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				Six months ended
	September 25, 2022		September 26, 2021		September 25, 2022		September 26, 2021
Fixed operating lease costs (1)	$	7,089	$	5,386	$	12,894	$	10,502
Variable operating lease costs	995		914		1,458		1,583
Operating and sub-lease income	(156)		(107)		(307)		(151)
Net Lease costs	$	7,928	$	6,193	$	14,045	$	11,934

(1) Includes short-term leases

	September 25, 2022		March 31, 2022
Weighted Average Remaining Lease Term (Years):
Operating leases	8.61		8.65
Weighted Average Discount Rate:
Operating leases	8.28	%	7.99	%

8

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

Remainder of fiscal year 2023	$	12,060
Fiscal year 2024	24,320
Fiscal year 2025	18,617
Fiscal year 2026	16,940
Fiscal year 2027	16,012
Thereafter	75,219
Total lease payments	163,168
Less imputed interest	(50,525)
Present value of lease liabilities	$	112,643

Supplemental cash flow information related to leases is as follows:

	Six months ended
	September 25, 2022		September 26, 2021
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows - operating leases	$	10,409	$	8,966
Operating lease assets obtained in exchange for lease liabilities:
Operating leases	30,378		5,785

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 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 fair value calculation of 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

9

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	$	559,782
Cash held in escrow to cover purchase price adjustments	5,000
Estimated working capital true-up	6,216
Fair value of contingent consideration payable	11,400
Total estimated purchase consideration	$	582,398
Fair value of assets acquired:
Accounts receivable	$	39,140
Inventories	95,759
Intangible assets	253,600
Property, plant, and equipment	29,060
Operating lease assets	16,078
Other current assets	16,743
Other long-term assets	5,347
Total assets	455,727
Fair value of liabilities assumed:
Accounts payable	18,584
Long-term operating lease liabilities	11,971
Deferred income taxes	59,986
Other liabilities	38,998
Other long-term liabilities	41
Total liabilities	129,580
Net assets acquired	326,147
Goodwill	$	256,251

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 $57,379 and net income of $4,805 since the acquisition date, August 5, 2022, were included in our consolidated results for the three months ended September 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				Six months ended
	September 25, 2022		September 26, 2021		September 25, 2022		September 26, 2021
Sales, net	$	809,357	$	866,547	$	1,690,145	$	1,597,835
Net income	94,611		139,541		218,657		233,704

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				Six months ended
	September 25, 2022		September 26, 2021		September 25, 2022		September 26, 2021
Fees for advisory, legal, and accounting services (1)	$	(4,051)	$	—	$	(5,965)	$	5,965
Inventory step-up, net (2)	(2,515)		3,772		(2,515)		$7,544
Interest (3)	3,197		7,605		10,627		15,440
Depreciation (4)	180		367		719		699
Amortization (5)	1,176		3,064		4,245		6,126
Management Fees (6)	(133)		(353)		(530)		(707)
Income tax provision (benefit) (7)	39		(3,614)		(2,142)		(8,270)

(1) During the three months and six months ended September 25, 2022, we incurred a total of $4,051 and $5,965 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 as of September 25, 2022.

(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 intangible assets acquired and liabilities assumed based on their estimated fair values as of the acquisition date. The preliminary

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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 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 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

Commodity Price Risk

We entered into various commodity forward contracts during fiscal year 2023. 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 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 September 25, 2022, we had outstanding lead forward contracts on approximately 10.1 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. The liability related to the lead forward contracts is immaterial and is recorded as part of other current liabilities and other long-term liabilities.

Foreign Exchange Risk

To manage our foreign exchange risk, we entered into forward contracts to reduce the variability associated with exchange rate fluctuations. We hedge a portion of our foreign subsidiaries inventory purchases and intercompany transactions executed in U.S. dollars, which is different than their functional currency. Certain U.S. subsidiaries also hedge a portion of their future sales in Canadian Dollars. These forward contracts are not designated as hedging instruments.

All unrealized gains and losses as shown as of September 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. Realized gains and losses are recognized in the condensed consolidated statement of comprehensive income, and is recorded as part of other income, net. The fair value of the foreign exchange forward contracts is immaterial and is recorded as part of other current assets. As of September 25, 2022, we had outstanding foreign currency forward contracts in place to purchase U.S. Dollars and sell foreign currencies in the following amounts:

	Notional amount of currency
Foreign currency:
Euro	$	4,670
British Pounds	2,693
Canadian Dollars	6,724
Total	$	14,087

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6. Revenue Recognition

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

	Three months ended
	September 25, 2022						September 26, 2021 (5)
	Sporting Products		Outdoor Products		Total		Sporting Products		Outdoor Products		Total
Sporting Products (1)	$	432,489	$	—	$	432,489	$	450,193	$	—	$	450,193
Outdoor Accessories (2)	—		73,995		73,995		—		116,156		116,156
Action Sports (3)	—		150,761		150,761		—		104,645		104,645
Outdoor Recreation (4)	—		124,433		124,433		—		107,466		107,466
Total	$	432,489	$	349,189	$	781,678	$	450,193	$	328,267	$	778,460
Geographic Region:
United States	$	396,302	$	229,657	$	625,959	$	431,704	$	245,502	$	677,206
Rest of the World	36,187		119,532		155,719