SALT LAKE CITY (BRAIN) — Vista Outdoors is facing a $5 million lawsuit over allegations that it misled investors about the financial condition of its shooting sports division during a six-month period from Aug. 11, 2016 through Jan. 13, 2017.
Patrick Lentsch is suing Vista claiming that its executives failed to state the true financial status of the company's Outdoor Division. That division designs, develops and manufacturers ammunition, long guns and related accessories for hunters, law enforcement and the military.
Vista also owns Camelbak, Giro, Bell and Blackburn. Vista is a conglomerate with 50 brands in its portfolio with annual sales projected at more than $2.7 billion for its fiscal year ending March 31. The company has not filed a response to the complaint and a spokesman was not immediately available to talk to BRAIN on Tuesday.
Named in the lawsuit are Mark DeYoung, Vista's chairman and CEO, Stephen Nolan, senior vice president and CFO, and Vista's former Outdoor Division president, Kelly Grindle.
It was a $400 to $450 million "impairment" charge, which the company announced Jan. 11, that prompted Lentsch to sue the company in Utah's U.S. District Court. Vista's offices are in Farmington, Utah. According to the lawsuit, Vista executives issued press releases and other financial guidance after its first and second quarter for the fiscal year noting the strong performance of its shooting sports segment. The company also filed quarterly reports with the Security and Exchange Commission reaffirming its projected financial results.
But on Jan. 11 Vista announced it was taking a non-cash intangible asset impairment charge. These are essentially accounting expenses that represent meaningful changes to a company's financial standing that can reduce earnings but may not affect short-term capital or cash flow.
In making its announcement, the company cited it was taking the charge due to an "acceleration of trends seen in its first and second quarters" including a softening at retail. Its share price tumbled 21.7 percent closing at $29.58.
Two days after announcing the impairment charge, Dave Allen, Vista's then senior vice president of sales, replaced the division's president, Kelly Grindle. Grindle left to pursue other opportunities, a statement said. Its share price fell 88 cents per share to $28.70 when Grindle's departure was announced. Vista's share price has tumbled from its August high of $42.75 and is currently trading at approximately $25.15. Vista trades on the NYSE under VSTO.
Lentsch claims that Vista knew its retail sales were faltering and failed to inform investors. Executives also knew that the division was experiencing both revenue and gross margin declines, and that it would have to begin an impairment assessment for its Outdoor Product's division in its third quarter.
"As a result. ... Vista's business, operations and prospects were false, misleading and/or lacked a reasonable basis," the suit claims.
