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Vista Outdoor Improper Calculations of Impairment Securities Class Action

Wall Full of Vista Outdoor Gear

The complaint for this securities class action claims that Vista Outdoor, Inc. kept its stock at inflated prices by making false or misleading statements, overstating its financial results, and failing to disclose certain material facts about its business. These statements, the complaint claims, were violations of the Securities Exchange Act of 1934.

The class for this action is all person and entities who acquired Vista’s securities between August 11, 2016 and November 9, 2017.

Vista makes consumer products for outdoor sports and recreation, such as sporting firearms and ammunition, hunting and shooting accessories, outdoor sports optics, golf rangefinders, performance eyewear, hydration products, and stand-up paddle boards. It sells it products online and through retailers, such as Walmart, Dick’s Sporting Goods, Cabela’s, and Target.

During the class period, the complaint alleges, the company knowingly miscalculated goodwill by a number of means, including using baseless and unattainable forecasts, particularly in the Hunting & Shooting Accessories and Sports Protection units.

In these areas, the complaint claims, the company did not take into consideration high channel inventories, lack of demand for products, lack of new product development and success, continual changes in key management positions, and deteriorating market conditions. The complaint claims that the company was also “pulling products” by offering substantial discounts or moving sales to an earlier period to inflate results. Other negative factors included retailer bankruptcies, softening of retail demand, industry consolidation, and a warm hunting season for the second year in a row.

Still, the complaint says that the company insisted it was “on track” and would have a strong second half of the year for fiscal 2017.

The complaint claims that significant impairment charges should have been taken in July 2016, yet it was not until January 2017 that the company announced a charge of $449.2 million. At this news, the company’s stock price fell by over 21%.

This was not all however; the complaint says that the company was still using flawed assumptions for its calculations, requiring an additional $152 million impairment be taken in November 2017. That brought the total to over $600 million and changed what would have been an earnings gain of $25 million into a loss of $139 million.

At this, the stock fell again, falling 23% before the market even opened and ending up 41% below a high that had occurred just three weeks earlier.

The complaint claims that the company did not adequately disclose the unreliability of its assumptions or the falseness of the hopes represented by the numbers it used; it also says that the Sarbanes-Oxley certifications on its statements were false when they claimed that the company had adequate controls of reporting. 

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