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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
vsto-20220925_g1.jpg
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 ClassTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $.01VSTONew 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
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, 2022March 31, 2022
ASSETS  
Current assets:  
Cash and cash equivalents$66,065 $22,584 
Net receivables431,703 356,773 
Net inventories777,974 642,976 
Income tax receivable49,010 43,560 
Other current assets67,119 45,050 
Total current assets1,391,871 1,110,943 
Net property, plant, and equipment231,795 211,087 
Operating lease assets101,942 78,252 
Goodwill804,820 481,857 
Net intangible assets798,200 459,795 
Deferred charges and other non-current assets, net69,295 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 payable178,732 146,697 
Accrued compensation58,049 79,171 
Federal excise, use, and other taxes40,652 40,825 
Other current liabilities194,002 127,180 
Total current liabilities611,435 393,873 
Long-term debt1,167,262 666,114 
Deferred income tax liabilities89,140 29,304 
Long-term operating lease liabilities96,663 80,083 
Accrued pension and postemployment benefits21,748 22,634 
Other long-term liabilities62,224 79,794 
Total liabilities2,048,472 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 capital1,717,750 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' equity1,349,451 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 endedSix months ended
(Amounts in thousands except per share data)September 25, 2022September 26, 2021September 25, 2022September 26, 2021
Sales, net$781,678 $778,460 $1,584,290 $1,441,372 
Cost of sales518,804 479,539 1,027,946 901,024 
Gross profit262,874 298,921 556,344 540,348 
Operating expenses:  
Research and development11,154 6,440 19,051 12,308 
Selling, general, and administrative120,553 101,742 233,701 193,645 
Earnings before interest, income taxes, and other131,167 190,739 303,592 334,395 
Other income, net (Note 5)741 — 741 — 
Earnings before interest and income taxes131,908 190,739 304,333 334,395 
Interest expense, net(13,934)(5,929)(20,244)(11,607)
Earnings before income taxes117,974 184,810 284,089 322,788 
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:    
Basic56,553 57,353 56,520 57,732 
Diluted57,814 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, 2022September 26, 2021
Operating Activities:  
Net income $219,470 $242,265 
Adjustments to net income to arrive at cash provided by operating activities:
Depreciation23,317 22,267 
Amortization of intangible assets18,983 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 equipment551 99 
Share-based compensation14,756 13,812 
Changes in assets and liabilities:
Net receivables(25,601)(112,256)
Net inventories(36,042)(105,269)
Accounts payable10,092 16,957 
Accrued compensation(26,233)(8,489)
Accrued income taxes4,313 32,250 
Federal excise, use, and other taxes(1,261)9,494 
Pension and other postretirement benefits944 (1,299)
Other assets and liabilities(115)(16,038)
Cash provided by operating activities193,402 105,180 
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 equipment43 8 
Cash used for investing activities(774,084)(22,919)
Financing Activities:
Proceeds from credit facility465,000 — 
Repayments of credit facility(165,000)— 
Payments made for debt issuance costs (15,905)(1,018)
Proceeds from issuance of debt350,000 — 
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 activities625,387 (60,068)
Effect of foreign exchange rate fluctuations on cash
(1,224)(157)
Increase in cash and cash equivalents43,481 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)SharesAmountAdditional
Paid-In
Capital		Accumulated Deficit Accumulated
Other
Comprehensive
Loss		Treasury
Stock		Total
Equity
Balance, March 31, 202256,093,456 $560 $1,730,927 $(220,810)$(76,679)$(309,599)$1,124,399 
Comprehensive income— — — 126,015 230 — 126,245 
Exercise of stock options9,150 — (212)— — 359 147 
Share-based compensation— — 7,257 — — — 7,257 
Restricted stock vested, net of shares withheld413,089 — (25,892)— — 17,156 (8,736)
Other8,387 5 (321)— — 316 — 
Balance, June 26, 202256,524,082 $565 $1,711,759 $(94,795)$(76,449)$(291,768)$1,249,312 
Comprehensive income (loss)— — — 93,455 (991)— 92,464 
Exercise of stock options4,000 — (123)— — 157 34 
Share-based compensation— — 7,499 — — — 7,499 
Restricted stock vested and shares withheld1,276 — (72)— — 55 (17)
Employee stock purchase plan6,002 — (76)— — 235 159 
Other31,555 1 (1,237)— — 1,236 — 
Balance, September 25, 202256,566,915 $566 $1,717,750 $(1,340)$(77,440)$(290,085)$1,349,451 
Balance, March 31, 202158,561,016 $585 $1,731,479 $(694,036)$(83,195)$(217,836)$736,997 
Comprehensive income— — — 102,725 995 — 103,720 
Exercise of stock options7,373 — (94)— — 291 197 
Share-based compensation— — 7,038 — — — 7,038 
Restricted stock vested, net of shares withheld174,885 — (10,937)— — 7,896 (3,041)
Treasury shares purchased(1,212,496)— — — — (44,232)(44,232)
Other7,380 (10)(282)— — 292 — 
Balance, June 27, 202157,538,158 $575 $1,727,204 $(591,311)$(82,200)$(253,589)$800,679 
Comprehensive income— — — 139,540 (67)— 139,473 
Exercise of stock options1,928 — (45)— — 76 31 
Share-based compensation— — 6,774 — — — 6,774 
Restricted stock vested and shares withheld2,840 — (167)— — 109 (58)
Employee stock purchase plan2,726 — 12 — — 108 120 
Treasury shares purchased(311,187)— — — — (12,007)(12,007)
Other53,695 (2)(2,113)— — 2,116 1 
Balance, September 26, 202157,288,160 $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, 2022March 31, 2022
Other current liabilities$21,837 $96 
Other long-term liabilities15,228 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 Racing11,400 
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, 2022March 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 CaptionSeptember 25, 2022March 31, 2022
Assets:
Operating lease assetsOperating lease assets$101,942 $78,252 
Liabilities:
Current:
Operating lease liabilitiesOther current liabilities$15,980 $11,804 
Long-term:
Operating lease liabilitiesLong-term operating lease liabilities96,663 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 endedSix months ended
September 25, 2022September 26, 2021September 25, 2022September 26, 2021
Fixed operating lease costs (1)$7,089 $5,386 $12,894 $10,502 
Variable operating lease costs995 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, 2022March 31, 2022
Weighted Average Remaining Lease Term (Years):
Operating leases8.618.65
Weighted Average Discount Rate:
Operating leases8.28 %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 202424,320 
Fiscal year 202518,617 
Fiscal year 202616,940 
Fiscal year 202716,012 
Thereafter75,219 
Total lease payments163,168 
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, 2022September 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 leases30,378 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 adjustments5,000 
Estimated working capital true-up6,216 
Fair value of contingent consideration payable11,400 
Total estimated purchase consideration$582,398 
Fair value of assets acquired:
Accounts receivable$39,140 
Inventories95,759 
Intangible assets253,600 
Property, plant, and equipment29,060 
Operating lease assets16,078 
Other current assets16,743 
Other long-term assets5,347 
Total assets455,727 
Fair value of liabilities assumed:
Accounts payable18,584 
Long-term operating lease liabilities11,971 
Deferred income taxes59,986 
Other liabilities38,998 
Other long-term liabilities41 
Total liabilities129,580 
Net assets acquired326,147 
Goodwill$256,251 
Fox Racing intangible assets above include:
ValueUseful life (years)
Tradenames$106,200 Indefinite
Customer relationships147,400 
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.
10
The following unaudited pro forma financial information presents our results as if the Fox Racing acquisition had occurred on April 1, 2021:
Three months endedSix months ended
September 25, 2022September 26, 2021September 25, 2022September 26, 2021
Sales, net$809,357 $866,547 $1,690,145 $1,597,835 
Net income94,611 139,541 218,657 233,704 
The unaudited supplemental pro forma data above includes the following significant non-recurring adjustments to net income to account for certain costs which would have been incurred if the Fox Racing acquisition had been completed on April 1, 2021:
Three months endedSix months ended
September 25, 2022September 26, 2021September 25, 2022September 26, 2021
Fees for advisory, legal, and accounting services (1)$(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
11
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 
Inventories10,780 
Intangible assets131,500 
Property, plant, and equipment1,870 
Operating lease assets6,506 
Other long-term assets2,006 
Total assets155,468 
Fair value of liabilities assumed:
Accounts payable6,177 
Customer deposits2,084 
Long-term operating lease liabilities5,961 
Contract liabilities2,992 
Other liabilities1,729 
Other long-term liabilities9,182 
Total liabilities28,125 
Net assets acquired127,343 
Goodwill$343,429 
12
Foresight intangible assets above include:
ValueUseful life (years)
Tradenames$42,500 20
Patented technology19,900 
5 to 10
Customer relationships69,100 
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 Pounds2,693 
Canadian Dollars6,724 
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, 2022September 26, 2021 (5)
Sporting ProductsOutdoor ProductsTotalSporting ProductsOutdoor ProductsTotal
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 $