Vista Outdoor Inc (VSTO) 2016 Q1 法說會逐字稿

Good day and welcome to the Vista Outdoor Q1 FY16 earnings conference call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Michael Pici, Director of Investor Relations. Please go ahead, sir.

Thank you. Good morning and thank you for joining us for our first-quarter FY16 earnings call. With me this morning are Mark DeYoung, Vista Outdoor Chairman and Chief Executive Officer, and Stephen Nolan, Senior Vice President and Chief Financial Officer.

Before we begin, I'd like to remind everyone that during today's call, we will be making several forward-looking statements and we make these statements under the Safe Harbor provisions of the Private Securities Litigation Reform Act. These forward-looking statements reflect our best estimates and assumptions based on our understanding of the information known to us today. These forward-looking statements are subject to the risks and uncertainties that face Vista Outdoor and the industries in which we operate. We encourage you to review today's press release and Vista Outdoors' SEC filings for more information on these risk factors and uncertainties.

Please also note that we have posted presentation materials on our website at VistaOutdoor.com, which supplement our comments this morning and include a reconciliation of non-GAAP financial measures. With that said, I'll turn the call over to you, Mark.

All right. Great, Michael. Good morning, everyone. Thank you for joining us on the call. We appreciate it. This is our first-quarter earnings call for Vista Outdoor, reflecting our first full quarter as a standalone Company. This morning, we will discuss our performance for this quarter and FY16, and we will provide updated guidance for the full year. Stephen Nolan will provide more color on our financial results; however, I'm pleased to report the Company delivered solid quarter, in line with our previously communicated expectations. While the revenue for the recent quarter is as expected, lower than the same period a year ago, due to the shooting sports market correction, we delivered strong sequential quarter-over-quarter growth. In addition, we see several indicators that support our expectations for low single-digit organic growth for the full fiscal year.

In particular, we have recently seen very strong mix check volumes, improved period-to-period excise tax data, and as a result of continued strong demand for our rimfire ammunition, we implemented a modest price increase for rimfire ammunition in July. We delivered outstanding safety performance, and our environmental stewardship was excellent at all locations. We continue to drive operational efficiencies and continuous improvement in our supply chain, in our manufacturing operations, and in our back-office support services.

While delivering a strong quarter, the Vista Outdoor team closed on two very strategic acquisitions for the Company, in line with our strategy to expand into complementary and adjacent markets, serving the individual outdoor recreation consumer and deliver long-term shareholder value. The Jimmy Styks and CamelBak transactions, which were both completed within the last three weeks, support our vision to be the premier provider of individual outdoor recreation products. We acquired Jimmy Styks on July 20th, and this new brand provides Vista Outdoor access into the water sports market. Jimmy Styks is a leading provider of standup paddle boards, and delivers innovative designs and solutions for a number of water activities, ranging from personal fitness to wave-riding to fishing. This acquisition represents opportunities for new product development, channel expansion, and increased distribution capabilities, as well as future international growth.

Jimmy Styks is a well-respected brand and its portfolio of over 30 SKUs serves a fast-growing standup paddle board market. The brand will be part of our Vista Outdoor segment, maintaining its operations in Huntington Beach, California. We paid $40 million in cash for Jimmy Styks, which represents an approximate 5.5 times multiple on our expected 2015 calendar year EBITDA. We have also put in place additional contingent consideration that is payable over the next three years if certain profitability growth milestones are achieved. The founders of Jimmy Styks, both Kyle Reeves and Jeremy Wilkens, remain with Vista Outdoor, and we know we'll benefit greatly from their knowledge of the standup paddle boards market and their innovative approach to product development.

Last week, we also completed the acquisition of CamelBak, just prior to the outdoor retailer show in Salt Lake City. CamelBak is a highly recognized and well-respected brand in the outdoor recreation industry. This acquisition also presents a strategic opportunity for Vista Outdoor to enter markets where we have not typically participated. The CamelBak acquisition increases the scale and reach of our current portfolio, creates numerous cross-selling opportunities, and increases channel presence and access in domestic and in international markets. CamelBak is the leading provider of personal hydration solutions for recreation and also for military use. Last week, I was able to participate with CamelBak in customer meetings during the outdoor retailer show in Salt Lake City, and it's apparent that this brand will help advance our strategy of growth and expand our leadership position in the outdoor recreation industry.

I'm excited about CamelBak's innovative products. They have a highly skilled employee workforce, and I appreciate the go-to-market strategies. Sally McCoy, who is CamelBak's CEO, will continue to lead that business and support Vista Outdoor as we execute our strategy to expand and create value in a $63-billion domestic outdoor recreation market and an even larger global outdoor recreation market. CamelBak is headquartered in Petaluma, California and will remain there. We paid $412.5 million CamelBak, using cash on hand and borrowings from our existing credit facilities. The purchase price included future tax benefits that have net present value of approximately $35 million. The purchase price, net of the tax asset, represents a resulting effective multiple of approximately 11 times CamelBak's expected calendar year of 2015 EBITDA. I've asked Stephen Nolan to expand more on our financing approach for both acquisitions in a few minutes.

Integration efforts have already begun for both acquisitions. Vista Outdoor has a strong acquisition pipeline and we'll continue to strategically pursue opportunities where we can increase value and strengthen our leading product portfolio. This morning, we announced some updated guidance, which reflects the two acquisitions, both of which are expected to be accretive in FY16 EPS, absent the one-time transaction and transition costs. We also finalized the lease for our new worldwide corporate headquarters in Farmington this past week, and construction has already begun. We anticipate moving into the new facility mid-next year. And we continue to make good progress under the transition services agreement with Orbital ATK. In fact, in most areas, we are already operating on a completely stand-alone basis, and most of the remaining activity will transition to Vista Outdoor by the end of this calendar year.

Our investment in new product innovation continues across all of our product areas and in a both segments of the Company. We've launched the Legend series line of binoculars from Bushnell, which has been very well-received by our customers and by end users and consumers, including receiving Outdoor Life magazines' Great Buy award this year. Our Serengeti convertible collection of sunglasses won Australia's 2015 ODMA Awards of Excellence in the category of men's eyewear. And the Bushnell Golf Tour X rangefinder has won numerous accolades in several high-profile magazine articles, included in magazines like Forbes, Maxim, and Golf Digest. The Vista Outdoor vision and strategy has been well received by the investment community, our customers, community partners, and our employees. The entire Vista Outdoor team is deserving of the recent Ernst & Young Entrepreneur of the Year award in the Utah region for retail and consumer products, and I am very proud of what our employees have done, as we have stood up Vista, launched our strategy, and had very crisp execution in this first full quarter.

We've had great accomplishments. The team has a great tenacity for success and for delivering long-term shareholder value. We continue to deliver on our commitments to efficiency and to safety and being a wise environmental steward. Next week, we'll publish our annual corporate social responsibility report. This report reflects our commitment to be a strong community partner, focused on conservation, safety, education, and support of military members and their families. The acquisition of brands like Jimmy Styks and CamelBak support our mission to bring the world outside, expand our leadership position, attract new customers, and introduce Vista Outdoor products and brands to new consumers. The execution of our strategy during the first quarter demonstrated our commitment to our shareholders, our customers, and our employees, and I look forward to sharing more success with you in the coming quarters.

Stephen will now take a minute and walk through additional details in the financial results for the first quarter and walk through the updated outlook for FY16. Stephen?

Thank you, Mark. Good morning, everyone, and thank you for joining the call. To assist you in your understanding of the underlying numbers, and to assist in comparison to prior periods, we've disclosed both as-reported and adjusted results in our press release. We have also posted a more detailed financial presentation of our first-quarter FY16 performance on the website. I will start by commenting on the overall Vista Outdoor adjusted results, and then add some more drivers as I talk about the segment results.

The Company achieved first-quarter sales of $514 million, down 9% from the prior-year quarter but up 6% on a sequential basis. The year-over-year decrease is in line with our previously communicated expectation for organic decline, resulting from the shooting sports market correction, offset by a sales increase in outdoor products. Outdoor product sales would have been even higher were it not be for an unfavorable impact from foreign exchange. First-quarter gross profit was $139 million compared to $143 million in the prior-year quarter. This represents 13% sequential growth over Q4 FY15. The year-over-year decrease resulted primarily from decreased sales, largely offset by improved product mix and operating efficiencies. Our operating expense for the first quarter were $80 million compared to $69 million in the prior-year quarter. The increase reflects standalone Company costs, stock-based compensation, additional selling and marketing investments, and a portion of the $10 million in one-time expenses that we disclosed on our last earnings call.

We've previously communicated that we would complete our facility rationalization plan at the Blackhawk facility in Meridian, Idaho in the first quarter; however, we slowed the exit process a bit to make sure that there weren't any disruptions to our customers. As a result, we didn't exit the facility until early in the second quarter, and therefore, we will report all of the estimated $2 million expense in the second quarter rather than in the first quarter, as we had initially anticipated. We reported operating profit of $60 million in the first quarter, an approximately $15 million, or 20% decrease, from the prior-year period. The decrease was a result of reduced sales and increased operating expense that I just discussed. Interest expense for the quarter was $3 million compared to $9 million in the prior-year period. The interest expense in the prior-year period was an allocation to Vista Outdoor from ATK, while our current period interest expense reflect actual interest on our $350-million term loan. The tax rate for the quarter was 39.9% compared to 37.5% in the prior-year quarter. The higher tax rate is due primarily to a one-time discrete revaluation of a deferred tax asset. For the first quarter, we recorded net income of $34 million, down 17% from $41 million in the prior-year quarter, resulting in EPS of $0.54 (sic -- see press release "$0.53") compared to $0.64 in the prior-year quarter.

Turning to free cash flow, we typically make seasonal investments in working capital in the first half of the year, which generally results in the use of cash with strong cash generation in the second half of the year. Free cash flow use for the first quarter was $52 million, compared to a use of $82 million in the prior year. The year-over-year improvement in free cash flow was largely driven by how we accounted for inter-Company activity with Orbital ATK prior to the spinoff. Pre-spin, items such as inter-Company purchases, income tax, and interest were settled with Orbital ATK immediately. As a standalone entity, our results reflect a more normal timing for these types of payments.

In February, our Board of Directors authorized a $200 million share repurchase program. The Company repurchased approximately 512,000 shares for $22.9 million in the first quarter. During the second quarter to date, we repurchased approximately 213,000 more shares for $9.5 million. Since the program's inception in the fourth quarter of last year, we've repurchased approximately 887,000 shares for $39.3 million. The Company will continue to opportunistically repurchase shares.

Now turning to our business segments where we report both sales and gross profit. Shooting sports recorded first-quarter sales of $332 million, down 14% from $388 million in the prior-year quarter, but up 6% sequentially. The year-over-year decrease was caused by lower sales in centerfire ammunition and reloading components, partially offset by an increase in rimfire ammunition and firearms. This decrease was in line with our previously communicated expectations for overall results in this segment, in light of the ongoing market correction. First-quarter gross profit in shooting sports was $87 million, down 8% from the prior-year quarter, but up 12% sequentially. The year-over-year decrease was the result of the previously noted reduction in sales, partially offset by improved product mix and operational efficiencies. First-quarter sales in outdoor products were $183 million, up 2% from $178 million in the prior-year quarter, and up 6% sequentially. The year-over-year increase was driven by increased volume across several product categories, partially offset by foreign exchange impacts. Given the global nature of this business segment, foreign exchange impacts were more significant than in our other segments. Gross profit in the first quarter for outdoor products was $53 million, up 7% from $50 million in the prior-year quarter, and up 12% sequentially. The year-over-year increase was driven by the previously noted sales increase and improved operational performance.

Before I provide updated guidance for FY16, I want to comment on the financing we announced last week. We have now put in place $350 million of senior unsecured notes due in 2023. The notes have an interest rate of 5.875%, with interest payable semiannually in April and October. Following the issuance of the notes, we repaid $300 million of the borrowing under the revolving credit facility, after which we have $60 million drawn and [$340] million available. We intend to use the remaining proceeds, together with cash generated by operations, to repay the remaining borrowings during our second quarter.

Looking forward, we continue to expect our pre-acquisition business to deliver low single-digit revenue growth for the full fiscal year, with low double-digit margins, and continue to expect EBITDA margins to be at the lower end of the previously disclosed 14% to 16% range. However, we have now updated FY16 financial guidance to include the recently announced acquisitions of Jimmy Styks and CamelBak. We now expect FY16 sales in a range of $2.17 billion to $2.24 billion, and EPS in the range of $2.05 to $2.30 per share. As discussed in our press release, EPS guidance excludes transaction costs incurred to date. Additionally, we now expect capital expenditures of approximately $45 million and free cash flow in a range of $150 million to $180 million. The effective tax rate for the year is expected to be approximately 38%.

With that, we'll open it up for questions.

(Operator Instructions)

Greg Konrad, Jefferies.

Good morning and thank you for taking my questions. Just wanted to follow up, congratulations on getting the two deals done in the quarter. Just from the outside, can you help us understand the framework you go through when looking at the revenue synergy's potential and maybe some of the metrics that you look that for these acquisitions? If we look at three to four years out, what you think you can do with the companies?

Sure, I appreciate that question. In terms of the acquisition pipeline, we continue to work that. We've mentioned previously on our prior call that we had a healthy and robust pipeline; that is still the case, even after those two acquisitions. This comes back to the strategic overview we gave when we launched Vista Outdoor, which is that the recreation -- individual outdoor recreation industry in the United States is this $63-billion highly fragmented market with a lot of common consumers in the space that enjoy a variety of outdoor recreation products and activities. So we are executing consistent with that strategy and consistent with that theme. We're looking at adjacent categories that speak to this rugged outdoor recreation enthusiast. Our brands were -- are outdoor focused. Familiar consumers and customers in that space help us ensure that we will be successful as we integrate and as we own the companies we acquire. We also look for opportunities that you are describing, to improve the brand equity of the brands or increase the distribution of the products or apply operational excellence in ways maybe where those companies haven't been as robust in the past. And then, of course, we always only pay the right price and add a company at the right time to strengthen the strategy and benefit the portfolio.

So those are the guiding principles that we look for. And in the case of CamelBak, for example, we see opportunity for cross-selling there between areas of distribution where CamelBak traditionally has been very strong in mainstream consumer outlets and mountaineering sports outlets like REI and others. And we are very strong in areas where CamelBak has an opportunity to expand in categories like Sportsman's Warehouse and Dick's, Cabela's, Bass Pro Shop. So it's a nice fit in terms of revenue strategies and accomplishing what we said we would do with these acquisitions, in terms of looking at ways to expand their distribution and their presence in the market. We also look for cost synergies. I think Bushnell and Savage were good examples of acquisitions in this space where we knew we could improve their cost. We knew there were opportunities to reduce cost, because of similar structures or similar consumer -- and a customer base and we've been successful, I think in good integrations, driving both revenue and cost synergies, and we will continue to look for assets where we can do that.

And Greg, just as we look three years out, we have previously disclosed that we certainly have a significant focus in looking at the discounted cash flow value of the business we acquire, and make sure pre-synergy, that value is at least equal to the purchase price. Then additionally, as we've disclosed in our proxy, our long-term financial incentives are partially structured around three-year average ROIC. And that is something we certainly look at when we layer in synergies. So as you look three years out, we certainly look to improve upon those metrics that are in our existing organic plan.

Thank you for that. And then in terms of firearms, I know it's probably mid high single digits of the portfolio now. But on the way down, you used to say that Savage was tracking the long guns, and in the past month, we saw quite a stair-step improvement in that metric. And can you maybe talk about what you are seeing in terms of Savage and if we should look at the long gun mix checks for July as a proxy for where that business is going?

Yes, we are beginning to see some returns. Long gun mix checks in July were up about 5%, as you know, so that does I think bode well for our Savage firearm line. Also Savage has seen some increased demand in just orders in the first quarter, and we continue, sitting here today, to ramp-up production up time and throughput. We've done some hiring and call back of employees, where we had to reduce headcount last year. So we are seeing those favorable trends. Our rimfire rifles were strong in Q1. Centerfire rifles, we continue to be able to take market share there and support gains at the shelf and increasing our shelf space and presentation. And then on the shotgun side, shotguns have been strong in home defense shotguns, which seem to be showing some more improvement coming back a little bit. So we're focused on those segments within Savage, and the turnaround is beginning to manifest itself there.

Steve Cahall, Royal Bank of Canada.

Thank you, good morning. Maybe a first one to follow on with Greg's question on the ammo side of things. Is it safe to assume that rimfire was up sequentially, and probably pistol was up sequentially? And then, can you give us a sense of what the sequential trend has been in centerfire and shot sales?

Yes, so rimfire continues to see strong demand. That demand is beginning to settle in terms of backlog on orders. But in terms of rimfire in general and pistol in general, there is some sequential growth coming into both of those categories, as you mentioned.

And how about is centerfire still down sequentially or is it stabilized?

Centerfire was I would say generally flat.

Okay. Thank you. And then on CamelBak, we were able to get some historicals from the previous owner. And as we think about maybe going forward, your opportunity with CamelBak, I was wondering if you could just give us a little bit of color of how we think about the growth rate of that business? Is it growth accretive to outdoor products? Is it in line? And also in terms of the gross margin, do you see the gross margin as sticking pretty flat for that part of the business, or are there any kind of puts and takes that would make it go up and down? And just related to that, is there anything we should think about in the near term with things like inventory step-up that can impact the margin of that contribution?

CamelBak's growth rate generally will be in line with our longer-term growth rate projections that we had previously discussed in the mid-single-digit 6% to 7% range, seems to be fairly consistent for that business. So at this point in time, that's a little bit of a growth lift to the segment, as our growth begins to recover in shooting sports, particularly in the back half of the year as we had described. And in terms of gross margin for that business, it's a very well-run business. They have an excellent sourcing strategy. Their new product innovation categories they are bringing out I think will be very, very well received. So I think we see stability in terms of the operational gross margins generated by that business, with reasonable growth consistent with market-trend growth.

Jay Sole, Morgan Stanley.

Good morning. Question on the M&A strategy. So with these two deals now under your belt, what does the timing look like? You said the pipeline is full, but do you feel like you need some time to integrate these two new businesses, or do you feel like at this point, they are really already been folded into the Company?

In terms of integration, it's a good question. In terms of integration, both Jimmy Styks and CamelBak will require significantly less integration effort than did Savage or Bushnell. So with Savage and Bushnell, when we bought those companies, we saw a distribution model for them to retail and wholesale, which was very much like our own core portfolio in the shooting sports. And so there was significant opportunity to consolidate sales structures, to consolidate how to go to market and branding structures, to consolidate our media presence, advertising and marketing strategies. We consolidated, as you know, we announced and we are consolidating, wrapping up the distribution consolidation between the core business we had and the Bushell acquisition as well. So there was a lot of synergies.

And I think I had mentioned on a previous call, Jay, that we had a line item of 700 integration line items on Bushnell, and a very detailed project plan for that integration. Camel and Jimmy Styks will be much, much simpler. Jimmy Styks integration is really going to be in supply chain management. We can learn from them, and I believe they can learn from us. Also in sales and distribution, similar opportunity there, but a light touch, I think, integration is only required on the paddle board business, because it so new to us and it's not right on top of current strengths. It's really a diversification and an expansion for us. CamelBak there will be a little more integration, particularly in how we go to market in terms of sales and distribution. But it's a very well-run Company. It's really complementary to what we're currently doing. So we're off already beginning the integration. We've already had cross-customer meetings. We've already begun the cross-selling of CamelBak, with meetings with our key customers where maybe CamelBak is underrepresented. And we've also had meetings with some of the key CamelBak customers where perhaps Bushnell and some of our other products are underrepresented.

So I think execution of these will go very well, and I think integration will be a less complicated process.

As a result of that, Jay, I think we would expect to continue to look for opportunistic acquisitions. Obviously as before, we're not going to comment on the likely timing of any, but we certainly do not feel constrained based on the certain ongoing integration effort in terms of completing additional acquisitions.

Yes, these will not create a bandwidth drain that will inhibit us from continuing to pursue M&A.

Got it. And then maybe if I could just ask one more about the guidance. Can you just maybe give us some color on gross margin and SG&A, directionally speaking, where you see those playing out and how copper prices might impact gross margin the rest of the year?

Yes, so taking those few questions. So we have not disclosed gross margin guidance and we are not going to start that now. As I disclosed in my remarks, our series of contributing factors to growth in SG&A operating expense, we turned it year over year. I won't list those all again now, but some of them are the increased -- the standalone Company costs, stock-based comp, the increase selling and marketing investments we disclosed previously, and then a small portion of that $10 million of expenses which occurred in this quarter. But obviously within the full year, you will see those full $10 million of one-time expenses. Additionally, this year, there will be some difference. Again, for the full year not for this quarter, but for the full year, you will see some difference, as a result of the absence of our broad-based employee incentive payouts, which did not occur last year due to the market correction where the business fell short of plan. And therefore, those payments were not made last year. We -- at this time of the year, we'd expect to be making those broad-based payments this year, and so that will be additional increase for the full fiscal year.

On the commodities part of your question, as you notice Stephen and I will just tag-team these questions today. On the commodities side of your question, we mentioned in the past we purchased commodities with a strategy that focuses on cost stability. It doesn't focus on trying to play the market, play the commodities market, become commodities traders. What we do though, is we pursue cost stability in our structure so we can manage pricing and margin in the market. That has served us very, very well for many, many years; we continue to do that with long-term purchase contracts, hedging when it make sense to us, and we continue to do that now. I think over the long run, obviously, if commodities continue to soften and continue to decline, over the long run, it will create margin opportunity. But our goal has been cost stability. So we are often locking in commodities costs in 6- to 12-month windows.

Gautam Khanna, Cowen and Company.

This is Bill Ledley on for Gautam. Thank you for taking my question. I wanted to follow up on the acquisitions. In the press releases, you disclosed CamelBak's calendar 2015 year revenue. Can you just talk about what that's like for FY16 for you. Is that roughly a good run rate? And then also looking at some other inputs, the accretion [math], do you expect interest rate to step up or intangibles Could you just help us understand that better.

Sure, I can try to give some color there. So first off, in terms of calendar 2015 revenue compared to FY16, obviously, we are dealing with different time periods and different period of months. We bought this business somewhat into our second quarter, so obviously we have certainly less than the full fiscal year of the revenue. So I think using calendar 2016 would be -- using calendar 2015 would be inappropriate for FY16. I think all I can disclose in that is our revenue guidance, which we have provided the new revenue guidance, which includes both the revenue we expect from both Jimmy Styks and from CamelBak.

In terms of the other questions you have around accretion and so forth, as we announced, we have our interest on our $350-million existing term A loan, which we disclosed in this quarter, we would expect to continue. And in addition, we obviously have the $350 million now in senior notes at the 5.875% interest levels. So both of those should continue each quarter for the balance of the year. So certainly, there would be a step-up in interest from what we disclosed in Q1. Obviously, it will continue to be difficult to compare to prior-year periods, because as we discussed in the prior year, the interest expense we were recognizing was merely an allocation for our previous corporate parent, and not an actual interest incurred.

In terms of intangibles and other things like inventory step up, we are still working through some of those allocations of purchase price to various assets. So at this time, we don't have anything further to say about the likely intangible amortization, other than to say that our guidance we have provided on EPS is net of recurring costs, such as amortization, but does not include one-time transaction and transition costs, as we disclosed. The transition and the transaction costs we've already incurred to date we are excluding from our guidance. And finally, obviously our EBITDA guidance, which we have provided, being at the lower end of the 14% to 16% range, is obviously before any amortization that we would see on the purchase price.

Okay, thank you, that's helpful. And then on ammo trends, I know you guys announced a slight increase in the rimfire in July. Can you just talk about unit sales and how many rounds you were able to sell? It still sounds like centerfire is weak. Is there any pricing pressure around centerfire? I know you mentioned sales are flat. Can you just talk about the unit and price dynamic a little bit more.

Yes, so we did not disclose units of specific calibers or ammunition categories, so we won't be able to do that today. I'll try and give you some help with your question. In terms of trends, as I mentioned, we're seeing some modest improvements depending on category of ammunition sales. As we mentioned, centerfire has remained fairly flat. I think rimfire is beginning to stabilize a little bit in terms of supply and demand. Promo shotshell is very popular and remains in demand in the marketplace. So as is always the case in ammunition, it's a little bit of a mixed bag with ups and downs. Generally, in terms of pricing, we are not seeing broad wholesale discounting by our competitors, and we are not engaged in any broad discounting of price. We continue to maintain our strategy of price stability. With the price increase we did on rimfire, that was our first price increase in the last 18 months to two years, I guess. It was a modest price increase. We felt it was clearly warranted based upon supply and demand. But largely, we are pursuing stability in terms of pricing, and that seems to be the trend in the industry.

Brian Ruttenber, BB&T.

Thank you very much. My first question is around guidance. Your EPS guidance, I believe, excludes certain costs, and I'm just trying to understand what GAAP EPS would be or what the transaction cost would be for FY16.

As we have said in there, it excludes transaction costs incurred to date. We disclosed in the GAAP reconciliation table in the press release what those were for the first quarter, and it was relatively small, from less than $1 million in first quarter so it was not a material adjustment. We have not yet disclosed what we have set full-year transaction costs to be, partially because we don't know what additional transactions are going to occur in this year. So we always provide our guidance, excluding transaction costs incurred to date, and obviously excluding any future projection of transaction costs, since those are uncertain. So I can't give you a solid answer to your question at this stage. But as we go through each quarter, we will obviously update on any transaction costs we've incurred in that quarter. But those will not be reflected in any guidance adjustments as we go forward, consistent with our existing practice.

But you know the transaction costs from the last two transactions that closed post quarter right?

We certainly know the transaction costs we've incurred in those; we have not disclosed that. We will disclose that as part of our Q2 earnings call since those are Q2 expenses.

Okay, and then last question. Just on the gross margins, again, on -- it appears from looking at what you have stated from previous questions, that on the shooting sports side, that gross margins around the 26% should be in the ballpark. Given that demand is rising and that you are increasing your prices on the rimfire part of your business, it doesn't seem like there's going to be a dip from those levels. How about phrasing the question that; I don't see a decrease in gross margins.

Again, we don't provide gross margin guidance. So I think you can judge from our guidance, which we have provided where we've talk about EBIT margins in the low double-digit range and EBITDA margins in the lower end of the 14% to 16% range. And also, what we've disclosed on operating expenses and back into a number that I think would provide you the answer you are looking for.

I think some of the actions we are taking, which are bearing fruit, we're still seeing synergy benefits in terms of profitability from the Bushnell acquisition in our outdoor product segment. We're seeing benefits from our cost initiatives and distribution consolidation with our distribution centers. We're focused on efficiency, like we have always been, as a core DNA value within Vista Outdoor and our manufacturing operations. All of that is a daily focus for us, which will add to stability in our margins, and we'll continue to drive that every day.

Jim Chartier, Monness, Crespi, & Hardt.

Good morning. Thank you, for taking my question. First question, I was just curious how quickly do you expect to realize the cross-selling benefits from the recent acquisitions? Do you think you'll start to see some benefit for spring 2016?

Yes, I think obviously, we would be focused on getting those benefits as quickly as possible. As I mentioned, we've already begun having meetings, we've already begun having discussions. We're not guiding for spring 2016, which would be into our next fiscal year. But in general, answer to your question, we will capture those as quickly as we can and deliver some of that upside in that timeframe.

Great. And then the tax benefits related to the CamelBak acquisition, over what timeframe do you expect to realize those benefits?

On those, and there's some information available from the public information from the prior owner, Compass Diversified, who is obviously a public company. But it's clearly a multi-year benefit, so I would not expect to see a significant benefit either in this year or in FY17. When we provide guidance on tax rate FY17, we'll obviously talk about the impact there for the full year. But it is a multi-year benefit.

It does appear we have no further questions at this time. I'll return the program back to our presenters for any closing remarks.

Thank you very much. We appreciate you calling in today. We appreciate your interest in the Company. As I mentioned, were very pleased with the quick start we've got on Vista Outdoor in executing our strategy and at the same time delivering a strong quarter. We look forward to talking to you again next quarter. Thank you.

Ladies and gentlemen, this does conclude today's program. And we thank you for your participation. You may now disconnect. Have a great day.