Vista Outdoor Earnings 2020-06-28
| Balance Sheet | Income Statement | Cash Flow |
|---|---|---|
|
Assets, Equity
|
Rev, G Profit, Net Income
|
Ops, Inv, Fin
|
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 June 28, 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
(Exact name of Registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | ||
(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 | ||
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 | ☐ | ☒ | 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 July 27, 2020, there were 58,062,203 shares of the registrant's common stock outstanding.
TABLE OF CONTENTS
PART I— FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
VISTA OUTDOOR INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
(Amounts in thousands except share data) | June 28, 2020 | March 31, 2020 | ||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | $ | ||||||
Net receivables | ||||||||
Net inventories | ||||||||
Income tax receivable | ||||||||
Other current assets | ||||||||
Total current assets | ||||||||
Net property, plant, and equipment | ||||||||
Operating lease assets | ||||||||
Goodwill | ||||||||
Net intangible assets | ||||||||
Deferred charges and other non-current assets, net | ||||||||
Total assets | $ | $ | ||||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
Current liabilities: | ||||||||
Accounts payable | ||||||||
Accrued compensation | ||||||||
Federal excise, use, and other taxes | ||||||||
Other current liabilities | ||||||||
Total current liabilities | ||||||||
Long-term debt | ||||||||
Deferred income tax liabilities | ||||||||
Long-term operating lease liabilities | ||||||||
Accrued pension and postemployment benefits | ||||||||
Other long-term liabilities | ||||||||
Total liabilities | ||||||||
Commitments and contingencies (Notes 3, 12, and 15) | ||||||||
Common stock — $.01 par value: | ||||||||
Authorized — 500,000,000 shares | ||||||||
Issued and outstanding — 58,066,959 shares as of June 28, 2020 and 58,038,822 shares as of March 31, 2020 | ||||||||
Additional paid-in capital | ||||||||
Accumulated deficit | ( | ) | ( | ) | ||||
Accumulated other comprehensive loss | ( | ) | ( | ) | ||||
Common stock in treasury, at cost — 5,897,480 shares held as of June 28, 2020 and 5,925,617 shares held as of March 31, 2020 | ( | ) | ( | ) | ||||
Total stockholders' equity | ||||||||
Total liabilities and stockholders' equity | $ | $ | ||||||
See Notes to the Condensed Consolidated Financial Statements.
2
VISTA OUTDOOR INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(unaudited)
Three months ended | ||||||||
(Amounts in thousands except per share data) | June 28, 2020 | June 30, 2019 | ||||||
Sales, net | $ | $ | ||||||
Cost of sales | ||||||||
Gross profit | ||||||||
Operating expenses: | ||||||||
Research and development | ||||||||
Selling, general, and administrative | ||||||||
Impairment of held-for-sale assets (Note 2) | ||||||||
Earnings (loss) before interest and income taxes | ( | ) | ||||||
Interest expense, net | ( | ) | ( | ) | ||||
Earnings (loss) before income taxes | ( | ) | ||||||
Income tax provision | ||||||||
Net income (loss) | $ | $ | ( | ) | ||||
Earnings (loss) per common share: | ||||||||
Basic | $ | $ | ( | ) | ||||
Diluted | $ | $ | ( | ) | ||||
Weighted-average number of common shares outstanding: | ||||||||
Basic | ||||||||
Diluted | ||||||||
Net income (loss) (from above) | $ | $ | ( | ) | ||||
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 benefit of $0 and $0 | ( | ) | ( | ) | ||||
Reclassification of net actuarial loss for pension and postretirement benefit plans recorded to net income, net of tax expense of $0 and $0 | ||||||||
Change in derivatives, net of tax benefit (expense) of $0 and $0 | ( | ) | ||||||
Change in cumulative translation adjustment. | ||||||||
Total other comprehensive income | ||||||||
Comprehensive income (loss) | $ | $ | ( | ) | ||||
See Notes to the Condensed Consolidated Financial Statements.
3
VISTA OUTDOOR INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Three months ended | ||||||||
(Amounts in thousands) | June 28, 2020 | June 30, 2019 | ||||||
Operating Activities: | ||||||||
Net income (loss) | $ | $ | ( | ) | ||||
Adjustments to net income (loss) to arrive at cash provided by (used for) operating activities: | ||||||||
Depreciation | ||||||||
Amortization of intangible assets | ||||||||
Impairment of held-for-sale assets (Note 2) | ||||||||
Amortization of deferred financing costs | ||||||||
Deferred income taxes | ( | ) | ( | ) | ||||
Loss on disposal of property, plant, and equipment | ||||||||
Share-based compensation | ||||||||
Changes in assets and liabilities: | ||||||||
Net receivables | ( | ) | ( | ) | ||||
Net inventories | ( | ) | ( | ) | ||||
Accounts payable | ||||||||
Accrued compensation | ( | ) | ( | ) | ||||
Accrued income taxes | ||||||||
Federal excise, use, and other taxes | ( | ) | ||||||
Pension and other postretirement benefits | ( | ) | ||||||
Other assets and liabilities | ( | ) | ||||||
Cash provided by (used for) operating activities | ( | ) | ||||||
Investing Activities: | ||||||||
Capital expenditures | ( | ) | ( | ) | ||||
Proceeds from the disposition of property, plant, and equipment | ||||||||
Cash used for investing activities | ( | ) | ( | ) | ||||
Financing Activities: | ||||||||
Borrowings on lines of credit | ||||||||
Payments on lines of credit | ( | ) | ( | ) | ||||
Payments made on long-term debt | ( | ) | ||||||
Payments made for debt issuance costs | ( | ) | ||||||
Payment of employee taxes related to vested stock awards | ( | ) | ( | ) | ||||
Cash (used for) provided by financing activities | ( | ) | ||||||
Effect of foreign exchange rate fluctuations on cash | ||||||||
Increase in cash and cash equivalents | ||||||||
Cash and cash equivalents at beginning of period | ||||||||
Cash and cash equivalents at end of period | $ | $ | ||||||
Supplemental Cash Flow Disclosures: | ||||||||
Non-cash investing activity: | ||||||||
Capital expenditures included in accounts payable | $ | $ | ||||||
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 | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||
Comprehensive income | — | — | — | — | |||||||||||||||||||||||
Exercise of stock options | — | ( | ) | — | — | — | |||||||||||||||||||||
Share-based compensation | — | — | — | — | — | ||||||||||||||||||||||
Restricted stock vested and shares withheld | — | ( | ) | — | — | ( | ) | ||||||||||||||||||||
Employee stock purchase plan | — | — | — | ||||||||||||||||||||||||
Other | ( | ) | — | — | |||||||||||||||||||||||
Balance, June 28, 2020 | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||
Balance, March 31, 2019 | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||
Comprehensive loss | — | — | — | ( | ) | — | ( | ) | |||||||||||||||||||
Share-based compensation | — | — | — | — | — | ||||||||||||||||||||||
Restricted stock vested and shares withheld | — | ( | ) | — | — | ( | ) | ||||||||||||||||||||
Employee stock purchase plan | — | ( | ) | — | — | ||||||||||||||||||||||
Other | — | — | — | ( | ) | ||||||||||||||||||||||
Balance, June 30, 2019 | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||
See Notes to the Condensed Consolidated Financial Statements.
5
VISTA OUTDOOR INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
Three Months Ended June 28, 2020
(Amounts in thousands except share and per share data 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 June 28, 2020 and March 31, 2020, our results of operations for the three months ended June 28, 2020 and June 30, 2019, and our cash flows for the three months ended June 28, 2020 and June 30, 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.
6
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 June 28, 2020 and March 31, 2020, approximates fair value because of the short maturity of these instruments. The carrying values of cash and cash equivalents at June 28, 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:
June 28, 2020 | March 31, 2020 | |||||||||||||||
Carrying amount | Fair value | Carrying amount | Fair value | |||||||||||||
Fixed-rate debt (1) | $ | $ | $ | $ | ||||||||||||
Variable-rate debt (2) | ||||||||||||||||
(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.
7
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 three months ended June 28, 2020 there were no impairments recorded related to our assets that are measured at fair value on a nonrecurring basis. During the three months ended June 30, 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 | June 28, 2020 | March 31, 2020 | ||||||||
Assets: | ||||||||||
Operating lease assets | Operating lease assets | $ | $ | |||||||
Liabilities: | ||||||||||
Current: | ||||||||||
Operating lease liabilities | Other current liabilities | $ | $ | |||||||
Long-term: | ||||||||||
Operating lease liabilities | Long-term operating lease liabilities | |||||||||
Total lease liabilities | $ | $ | ||||||||
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 | ||||||||
June 28, 2020 | June 30, 2019 | |||||||
Fixed operating lease costs (1) | $ | $ | ||||||
Variable operating lease costs | ||||||||
Sublease income | ( | ) | ( | ) | ||||
Net Lease costs | $ | $ | ||||||
(1) Includes short-term leases, which are immaterial.
June 28, 2020 | March 31, 2020 | |||||
Weighted Average Remaining Lease Term (Years): | ||||||
Operating leases | ||||||
Weighted Average Discount Rate: | ||||||
Operating leases | % | % | ||||
8
The approximate minimum lease payments under non-cancelable operating leases as of June 28, 2020 are as follows:
Remainder of fiscal 2021 | $ | |||
Fiscal 2022 | ||||
Fiscal 2023 | ||||
Fiscal 2024 | ||||
Fiscal 2025 | ||||
Thereafter | ||||
Total lease payments | ||||
Less imputed interest | ( | ) | ||
Present value of lease liabilities | $ | |||
Supplemental cash flow information related to leases is as follows:
Three months ended | ||||||||
June 28, 2020 | June 30, 2019 | |||||||
Cash paid for amounts included in the measurement of lease liabilities: | ||||||||
Operating cash flows - operating leases | $ | $ | ||||||
Operating lease assets obtained in exchange for lease liabilities: | ||||||||
Operating leases | ||||||||
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 June 28, 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 June 28, 2020, we had outstanding lead forward contracts on 25.25 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. The asset related to the lead forward contracts is immaterial and is recorded as part of other non-current assets. The liability related to the lead forward contracts is immaterial and is recorded as part of other current liabilities.
9
5. Revenue Recognition
The following tables disaggregate our net sales by major category:
Three months ended | ||||||||||||||||||||||||
June 28, 2020 | June 30, 2019(1) | |||||||||||||||||||||||
Shooting Sports | Outdoor Products | Total | Shooting Sports | Outdoor Products | Total | |||||||||||||||||||
Ammunition | $ | $ | — | $ | $ | $ | — | $ | ||||||||||||||||
Firearms | — | — | ||||||||||||||||||||||
Hunting and Shooting | — | — | ||||||||||||||||||||||
Action Sports | — | — | ||||||||||||||||||||||
Outdoor Recreation (2) | — | — | ||||||||||||||||||||||
Total | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
Geographic Region: | ||||||||||||||||||||||||
United States | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
Rest of the World | ||||||||||||||||||||||||
Total | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
(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.
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.
10
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 | ||||||||
(Amounts in thousands except per share data unless otherwise indicated) | June 28, 2020 | June 30, 2019 | ||||||
Numerator: | ||||||||
Net income (loss) | $ | $ | ( | ) | ||||
Denominator: | ||||||||
Weighted-average number of common shares outstanding basic: | ||||||||
Dilutive effect of share-based awards (1) | ||||||||
Diluted shares | ||||||||
Earnings (loss) per common share: | ||||||||
Basic | $ | $ | ( | ) | ||||
Diluted | $ | $ | ( | ) | ||||
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.
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:
June 28, 2020 | March 31, 2020 | |||||||
Trade receivables | $ | $ | ||||||
Other receivables | ||||||||
Less: allowance for estimated credit losses and discounts | ( | ) | ( | ) | ||||
Net receivables | $ | $ | ||||||
Walmart represented 15 % and 13 % of the total trade receivables balance as of June 28, 2020 and March 31, 2020, respectively. No other customer represented more than 10% of our total trade receivables balance as of June 28, 2020 or March 31, 2020.
11
The following provides a reconciliation of the activity related to the allowance for estimated credit losses and discounts during the three months ended June 28, 2020:
Balance, March 31, 2020 | $ | |||
Provision for credit losses | ||||
Write-off of uncollectible amounts, net of recoveries | ( | ) | ||
Discounts and other adjustments | ( | ) | ||
Balance, June 28, 2020 | $ | |||
Note Receivable is summarized as follows:
June 28, 2020 | March 31, 2020 | |||||||
Principal | $ | $ | ||||||
Less: unamortized discount | ( | ) | ( | ) | ||||
Note receivable, net, included within Deferred charges and other non-current assets | $ | $ | ||||||
8. Inventories
Current net inventories consist of the following:
June 28, 2020 | March 31, 2020 | |||||||
Raw materials | $ | $ | ||||||
Work in process | ||||||||
Finished goods | ||||||||
Net inventories | $ | $ | ||||||
9. Accumulated Other Comprehensive Loss (AOCL)
The components of AOCL, net of income taxes, are as follows:
June 28, 2020 | March 31, 2020 | |||||||
Derivatives | $ | ( | ) | $ | ( | ) | ||
Pension and other postretirement benefits liabilities | ( | ) | ( | ) | ||||
Cumulative translation adjustment | ( | ) | ( | ) | ||||
Total AOCL | $ | ( | ) | $ | ( | ) | ||
12
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 June 28, 2020 | ||||||||||||||||
Derivatives | Pension and other postretirement benefits liabilities | Cumulative translation adjustment | Total | |||||||||||||
Beginning balance in AOCL | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
Change in fair value of derivatives | ( | ) | — | — | ( | ) | ||||||||||
Net losses reclassified from AOCL | — | — | ||||||||||||||
Net actuarial losses reclassified from AOCL (1) | — | — | ||||||||||||||
Prior service costs reclassified from AOCL (1) | — | ( | ) | — | ( | ) | ||||||||||
Net change in cumulative translation adjustment | — | — | ||||||||||||||
Ending balance in AOCL | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
(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.
Three months ended June 30, 2019 | ||||||||||||||||
Derivatives | Pension and other postretirement benefits liabilities | Cumulative translation adjustment | Total | |||||||||||||
Beginning balance in AOCL | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||
Change in fair value of derivatives | ( | ) | — | — | ( | ) | ||||||||||
Net actuarial losses reclassified from AOCL (1) | — | — | ||||||||||||||
Prior service costs reclassified from AOCL (1) | — | ( | ) | — | ( | ) | ||||||||||
Net change in cumulative translation adjustment | — | |||||||||||||||
Ending balance in AOCL | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
(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.
10. Goodwill and Intangible Assets
There were no changes in the carrying amount of goodwill during the three months ended June 28, 2020. The entire goodwill balance of $83,167 as of June 28, 2020 and March 31, 2020 is allocated to our Shooting Sports segment.
Intangible assets by major asset class consisted of the following:
June 28, 2020 | March 31, 2020 | |||||||||||||||||||||||
Gross carrying amount | Accumulated amortization | Total | Gross carrying amount | Accumulated amortization | Total | |||||||||||||||||||
Trade names | $ | $ | ( | ) | $ | $ | $ | ( | ) | $ | ||||||||||||||
Patented technology | ( | ) | ( | ) | ||||||||||||||||||||
Customer relationships and other | ( | ) | ( | ) | ||||||||||||||||||||
Total | ( | ) | ( | ) | ||||||||||||||||||||
Non-amortizing trade names | — | — | ||||||||||||||||||||||
Net intangible assets | $ | $ | ( | ) | $ | $ | $ | ( | ) | $ | ||||||||||||||
Amortization expense for the three months ended June 28, 2020 and June 30, 2019 was $4,953 and $5,097 , respectively.
As of June 28, 2020, we expect amortization expense related to these assets to be as follows:
Remainder of fiscal 2021 | $ | |||
Fiscal 2022 | ||||
Fiscal 2023 | ||||
Fiscal 2024 | ||||
Fiscal 2025 | ||||
Thereafter | ||||
Total | $ | |||
13
11. Other Current and Non-Current Liabilities
Other current and non-current liabilities consisted of the following:
June 28, 2020 | March 31, 2020 | |||||||
Other current liabilities: | ||||||||
Rebates | $ | $ | ||||||
Accrual for in-transit inventory | ||||||||
Other | ||||||||
Total other current liabilities | $ | $ | ||||||
Other non-current liabilities: | ||||||||
Non-current portion of accrued income tax liability | $ | $ | ||||||
Other | ||||||||
Total other non-current liabilities | $ | $ | ||||||
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, 2020 | $ | |||||
Payments made | ( | ) | ||||
Warranties issued | ||||||
Changes related to pre-existing warranties and other adjustments | ( | ) | ||||
Balance, June 28, 2020 | $ | |||||
12. Long-term Debt
Long-term debt consisted of the following:
June 28, 2020 | March 31, 2020 | |||||||
ABL Revolving Credit Facility | $ | $ | ||||||
5.875% Senior Notes | ||||||||
Principal amount of long-term debt | ||||||||
Less: unamortized deferred financing costs | ( | ) | ( | |||||