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Sportsman's Warehouse Holdings, Inc. Announces Second Quarter 2017 Financial Results

MIDVALE, Utah, Aug. 17, 2017 (GLOBE NEWSWIRE) -- Sportsman's Warehouse Holdings, Inc. ("Sportsman's" or the “Company”) (Nasdaq:SPWH) today announced financial results for the thirteen and twenty-six weeks ended July 29, 2017.

For the thirteen weeks ended July 29, 2017:

  • Net sales increased by 0.9% to $191.5 million from $189.8 million in the second quarter of fiscal year 2016. Same store sales decreased by 9.0% over the same period. 
     
  • Income from operations was $14.2 million compared to $16.7 million in the second quarter of fiscal year 2016.
     
  • The Company opened four new stores in the second quarter of fiscal 2017 and ended the quarter with 83 stores in 22 states, or square footage growth of 12.2% from the end of the second quarter of fiscal year 2016.
     
  • Interest expense increased to $3.4 million from $3.1 million in the second quarter of fiscal year 2016. 
     
  • Net income was $6.6 million compared to $8.3 million in the second quarter of fiscal year 2016.
     
  • Diluted earnings per share were $0.15 compared to $0.20 in the second quarter of fiscal year 2016.
     
  • Adjusted EBITDA decreased to $20.4 million from $22.3 million in the second quarter of fiscal year 2016 (see "GAAP and Non-GAAP Measures").    

John Schaefer, Chief Executive Officer, stated, "Our second quarter topline results were in line with our expectations given the anticipated continued softness in firearm demand as we anniversaried difficult comparisons from the Orlando tragedy in June 2016. Our better than expected bottom line results were driven by stronger gross margins resulting primarily from the higher margin product mix shift that we experienced in the second quarter. We remained focused on continuing to capture market share during the quarter and are encouraged by the progress we made against our strategic priorities of expanding our private label segment, maximizing our loyalty program, investing in our best-in-class customer service and enhancing our e-commerce platform.”

Mr. Schaefer continued, “For the remainder of the year, we continue to expect softness in firearm demand until we anniversary the pre-election run up that drove increased demand in our firearm and ammunition categories last year. Despite the still challenging operating environment, we will continue to execute our key growth priorities that will be centered around driving same store sales, elevating our omni-channel experience and paying down debt as we focus on delivering long-term sustainable growth.”

For the twenty-six weeks ended July 29, 2017:

  • Net sales increased by 2.0% to $348.4 million from $341.4 million in the first half of fiscal year 2016. Same store sales decreased by 8.0% over the same period. 
     
  • Income from operations was $10.5 million compared to $19.0 million in the first half of fiscal year 2016. Adjusted income from operations, which excludes professional and other fees incurred in connection with the evaluation of a strategic acquisition, was $12.2 million, compared to adjusted income from operations of $19.2 million for the first half of fiscal year 2016, which excludes secondary offering expenses (see “GAAP and Non-GAAP Measures").
     
  • The Company opened eight new stores in the first half of fiscal year 2017.
     
  • Interest expense decreased to $6.6 million from $6.7 million in the first half of fiscal year 2016. 
     
  • Net income was $2.0 million compared to $8.6 million in the first half of fiscal year 2016. Adjusted net income, which excludes professional and other fees incurred in connection with the evaluation of a strategic acquisition was $3.1 million compared to an adjusted net income, which excludes secondary offering expenses as well as prior-year tax credits of $8.2 million for the first half of fiscal year 2016 (see “GAAP and Non-GAAP Measures”).
     
  • Diluted earnings per share were $0.05 compared to $0.20 in the first half of fiscal year 2016. Adjusted diluted earnings per share were $0.07 compared to $0.19 in the first half of fiscal year 2016. (See “GAAP and Non-GAAP Measures”)
     
  • Adjusted EBITDA decreased to $24.6 million from $29.7 million in the first half of fiscal year 2016 (see "GAAP and Non-GAAP Measures").

Balance sheet highlights as of July 29, 2017:                                                           

  • Total debt: $235.6 million consisting of $101.7 million outstanding under the Company’s revolving credit facility and $133.8 million outstanding under the term loan, net of unamortized discount and debt issuance costs.
  • Total liquidity (cash plus $22.9 million of availability on revolving credit facility): $24.7 million

During the second quarter, the Company exercised the available $15.0 million accordion feature on its senior secured revolving credit facility, increasing the line of credit to $150.0 million.  As part of this amendment, the Company also extended the maturity date, decreased the interest rate by 25 basis points and lowered certain fees on the line of credit as described in the 8-K previously filed with the SEC on July 24, 2017.

Third Quarter and Fiscal Year 2017 Outlook:

For the third quarter of fiscal year 2017, net sales are expected to be in the range of $220.0 million to $225.0 million based on a same store sales decline in the range of 6.0% to 8.0% compared to the corresponding period of fiscal year 2016. Net income is expected to be in the range of $10.0 million to $11.2 million with diluted earnings per share of $0.23 to $0.26 on a weighted average of approximately 42.8 million estimated common shares outstanding.

For fiscal year 2017, net sales are expected to be in the range of $825.0 million to $835.0 million based on a same store sales decline in the range of 5.0% to 6.0% compared to fiscal year 2016. Adjusted net income is expected to be in the range of $25.7 million to $28.4 million with adjusted earnings per diluted share of $0.60 to $0.66 on a weighted average of approximately 42.8 million estimated common shares outstanding, when adjusted for the professional fees and other fees incurred in connection with the evaluation of a strategic acquisition in the first quarter of fiscal year 2017 (see “GAAP and Non-GAAP Measures”).

The Company's fiscal year 2017 will include 53 weeks, while fiscal year 2016 included 52 weeks. The estimated fiscal year 2017 impact of the additional week is roughly $10.0 to $12.0 million in revenue and approximately $0.01 on earnings per share. There is no impact on expected same store sales as those are presented on a 52 week comparative basis.

Conference Call Information:

A conference call to discuss second quarter 2017 financial results is scheduled for today, August 17, 2017, at 4:30 PM Eastern Time. The conference call will be webcast and may be accessed via the Investor Relations section of the Company’s website at www.sportsmanswarehouse.com.

Non-GAAP Information

This press release includes the following financial measures defined as non-GAAP financial measures by the Securities and Exchange Commission (the “SEC”): adjusted income from operations, adjusted net income, adjusted diluted earnings per share and adjusted EBITDA. We defined adjusted income from operations as income from operations plus professional and other fees incurred in connection with the evaluation of a strategic acquisition and secondary offering expenses.  Adjusted net income is net income plus professional and other fees incurred in connection with the evaluation of a strategic acquisition, secondary offering expenses and prior year tax credits.   Adjusted diluted earnings per share is diluted earnings per share excluding the impact of professional and other fees incurred in connection with the evaluation of a strategic acquisition, secondary offering expenses and prior year tax credits. We define Adjusted EBITDA as net income plus interest expense, income tax expense, depreciation and amortization, stock-based compensation expense, pre-opening expenses, secondary offering expenses, professional fees, and other gains, losses and expenses that we do not believe are indicative of our ongoing expenses. The Company has reconciled these non-GAAP financial measures with the most directly comparable GAAP financial measures under “GAAP and Non-GAAP Measures” in this release. The Company believes that these non-GAAP financial measures not only provide its management with comparable financial data for internal financial analysis but also provide meaningful supplemental information to investors. Specifically, these non-GAAP financial measures allow investors to better understand the performance of the Company’s business and facilitate a more meaningful comparison of its diluted income per share and actual results on a period-over-period basis. The Company has provided this information as a means to evaluate the results of its ongoing operations. Other companies in the Company’s industry may calculate these items differently than the Company does. Each of these measures is not a measure of performance under GAAP and should not be considered as a substitute for the most directly comparable financial measures prepared in accordance with GAAP. Non-GAAP financial measures have limitations as analytical tools, and investors should not consider them in isolation or as a substitute for analysis of the Company’s results as reported under GAAP.

Forward-Looking Statements

This press release includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 as contained in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.  Forward-looking statements in this release include, but are not limited to, our outlook for the third quarter and full fiscal year 2017.  Investors can identify these statements by the fact that they use words such as "continue", "expect", "may", “opportunity”, "plan", "future", “ahead” and similar terms and phrases. The Company cannot assure investors that future developments affecting the Company will be those that it has anticipated. Actual results may differ materially from these expectations due to risks relating to the Company’s retail-based business model, general economic conditions and consumer spending, the Company’s concentration of stores in the Western United States, competition in the outdoor activities and sporting goods market, changes in consumer demands, the Company’s expansion into new markets and planned growth, current and future government regulations, risks related to the Company’s continued retention of its key management, the Company’s distribution center, quality or safety concerns about the Company’s merchandise, events that may affect the Company’s vendors, trade restrictions, and other factors that are set forth in the Company's filings with the SEC, including under the caption “Risk Factors” in the Company’s Form 10-K for the fiscal year ended January 28, 2017 which was filed with the SEC on March 24, 2017 and the Company’s other public filings made with the SEC and available at www.sec.gov. If one or more of these risks or uncertainties materialize, or if any of the Company’s assumptions prove incorrect, the Company’s actual results may vary in material respects from those projected in these forward-looking statements. Any forward-looking statement made by the Company in this release speaks only as of the date on which the Company makes it. Factors or events that could cause the Company’s actual results to differ may emerge from time to time, and it is not possible for the Company to predict all of them. The Company undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by any applicable securities laws.

About Sportsman's Warehouse Holdings, Inc.

Sportsman's Warehouse is a high-growth outdoor sporting goods retailer focused on meeting the everyday needs of the seasoned outdoor veteran, the first-time participant and every enthusiast in between. Our mission is to provide a one-stop shopping experience that equips our customers with the right quality, brand name hunting, shooting, fishing and camping gear to maximize their enjoyment of the outdoors.

For press releases and certain additional information about the Company, visit the Investor Relations section of the Company's website at www.sportsmanswarehouse.com.

                                   
SPORTSMAN’S WAREHOUSE HOLDINGS, INC.  
Condensed Consolidated Statements of Income (Unaudited)  
(in thousands, except share and per share data)  
                                   
                                   
    For the Thirteen Weeks Ended       For the Twenty Six-Weeks Ended      
                                   
    July 29, 2017   % of net
sales
  July 30, 2016   % of net
sales
  July 29, 2017   % of net
sales
  July 30, 2016   % of net
sales
 
                                   
Net sales   $   191,493     100.0 %   $   189,804     100.0 %   $   348,391     100.0 %   $   341,419     100.0 %  
Cost of goods sold       122,875     64.2 %       123,619     65.1 %       231,158     66.4 %       226,762     66.4 %  
Gross profit       68,618     35.8 %       66,185     34.9 %       117,233     33.6 %       114,657     33.6 %  
                                   
Operating expenses:                                  
Selling, general and administrative expenses       54,383     28.4 %       49,514     26.1 %       106,766     30.6 %       95,630     28.0 %  
Income from operations       14,235     7.4 %       16,671     8.8 %       10,467     3.0 %       19,027     5.6 %  
Interest expense       (3,436 )   (1.8 %)       (3,141 )   (1.7 %)       (6,586 )   (1.9 %)       (6,729 )   (2.0 %)  
Income before income tax expense       10,799     5.6 %       13,530     7.1 %       3,881     1.1 %       12,298     3.6 %  
Income tax expense       (4,245 )   (2.2 %)       (5,226 )   (2.8 %)       (1,835 )   (0.5 %)       (3,683 )   (1.1 %)  
Net income   $   6,554     3.4 %   $   8,304     4.3 %   $   2,046     0.6 %   $   8,615     2.5 %  
                                   
Earnings per share                                  
Basic   $   0.15         $   0.20         $   0.05         $   0.20        
Diluted   $   0.15         $   0.20         $   0.05         $   0.20        
                                   
Weighted average shares outstanding                                  
Basic       42,536             42,217             42,406             42,125        
Diluted       42,587             42,490             42,457             42,406        
                                   

 

           
SPORTSMAN’S WAREHOUSE HOLDINGS, INC.          
Condensed Consolidated Balance Sheets (Unaudited)          
(in thousands)          
           
           
Assets          
    July 29, 2017   January 28, 2017  
Current assets:          
Cash and cash equivalents   $   1,821     $   1,911    
Accounts receivable, net       441         411    
Merchandise inventories       302,229         246,289    
Prepaid expenses and other       7,101         7,313    
Income taxes receivable       717       -    
Total current assets       312,309         255,924    
  Property and equipment, net       103,848         83,109    
  Deferred income taxes       4,350         5,097    
  Definite lived intangible assets, net        1,215         2,118    
Total assets   $   421,722     $   346,248    
           
Liabilities and Stockholders’ Equity          
Current liabilities:          
Accounts payable   $   60,761     $   31,549    
Accrued expenses       52,653         49,586    
Income taxes payable     -         979    
Revolving line of credit       101,744         60,972    
Current portion of long-term debt, net of discount and debt issuance costs       896         983    
Current portion of deferred rent       3,864         3,150    
Total current liabilities       219,918         147,219    
           
Long-term liabilities:          
Long-term debt, net of discount, debt issuance costs, and current portion       132,931         133,721    
Deferred rent credit, net of current portion       36,131         35,307    
Total long-term liabilities       169,062         169,028    
Total liabilities       388,980         316,247    
           
Stockholders’ equity:          
Common stock       426         422    
Additional paid-in capital       80,839         80,146    
Accumulated deficit       (48,523 )       (50,567 )  
Total stockholders’ equity       32,742         30,001    
Total liabilities and stockholders' equity   $   421,722     $   346,248    
           
           

 

         
SPORTSMAN’S WAREHOUSE HOLDINGS, INC.        
Condensed Consolidated Statements of Cash Flows (Unaudited)        
(in thousands)        
         
    July 29, 2017   July 30, 2016
 CASH FLOWS FROM OPERATING ACTIVITIES         
  Net income    $   2,046     $   8,615  
  Adjustments to reconcile net income to net         
   cash (used in) provided by operating activities:         
  Depreciation and amortization        7,431         5,565  
  (Gain) on asset disposition        (14 )       -  
  Amortization of discount on debt and deferred financing fees        344         549  
  Amortization of Intangible        903         902  
  Change in deferred rent        1,538         3,885  
  Deferred taxes        747         288  
  Excess tax benefits from stock-based compensation arrangements        -         (449 )
  Stock based compensation        1,052         1,558  
  Change in assets and liabilities:        -      
  Accounts receivable, net        (30 )       160  
  Merchandise inventory        (55,940 )       (47,924 )
  Prepaid expenses and other        132         2,412  
  Accounts payable        31,365         23,827  
  Accrued expenses        (6,001 )       174  
  Income taxes        (1,696 )       837  
  Net cash (used in) provided by operating activities        (18,123 )       399  
         
 CASH FLOWS FROM INVESTING ACTIVITIES:         
  Purchase of property and equipment        (31,864 )       (23,395 )
  Proceeds from sale of property and equipment        14      
  Proceeds from sale-leaseback transactions        503         -  
  Net cash used in investing activities        (31,347 )       (23,395 )
         
 CASH FLOWS FROM FINANCING ACTIVITIES:         
  Net borrowings on line of credit        40,772         40,808  
  Increase in book overdraft        10,105         4,101  
  Payments of deferred financing fees        (341 )    
  Payment of withholdings on restricted stock units        (639 )       (1,228 )
  Principal payments on long-term debt        (800 )       (20,474 )
  Issuance of common stock per employee stock purchase plan        283         258  
  Net cash provided by financing activities        49,380         23,465  
         
 Net change in cash and cash equivalents        (90 )       469  
 Cash and cash equivalents at beginning of year        1,911         2,109  
 Cash and cash equivalents at end of period    $   1,821     $   2,578  
         

 

                   
SPORTSMAN’S WAREHOUSE HOLDINGS, INC.  
GAAP and Non-GAAP Measures (Unaudited)  
(in thousands, except per share data)  
                   
Reconciliation of GAAP income from operations to adjusted income from operations:          
                   
    For the Thirteen Weeks Ended   For the Twenty Six-Weeks Ended  
                   
    July 29, 2017   July 30, 2016   July 29, 2017   July 30, 2016  
Income from operations $   14,235   $   16,671   $   10,467     $   19,027    
Secondary offering expenses (1)   -     -     -         143    
Professional fees (2)   -     -       1,744         -     
Adjusted income from operations $   14,235   $   16,671   $   12,211     $   19,170    
                   
Reconciliation of GAAP net income and GAAP diluted weighted average shares outstanding          
to adjusted net income and adjusted weighted average shares outstanding:            
                   
Numerator:                
  Net income $   6,554   $   8,304   $   2,046     $   8,615    
  Secondary offering expenses (1)   -     -     -         143    
  Prior year tax credits (3)   -     -     -         (602 )  
  Professional fees (2)   -     -       1,744       -    
  Less tax benefit related to professional fees   -     -       (677 )     -    
  Adjusted net income  $   6,554   $   8,304   $   3,113     $   8,156    
                   
Denominator:                
  Diluted weighted average shares outstanding     42,587       42,490       42,457         42,406    
                   
Reconciliation of earnings per share:                
Dilutive earnings per share $   0.15   $   0.20   $   0.05     $   0.20    
Impact of adjustments to numerator and denominator   -     -       0.02         (0.01 )  
Adjusted diluted earnings per share $   0.15   $   0.20   $   0.07     $   0.19    
                   
Reconciliation of net income to adjusted EBITDA:                
Net income $   6,554   $   8,304   $   2,046     $   8,615    
Interest expense     3,436       3,141       6,586         6,729    
Income tax expense     4,245       5,226       1,835         3,683    
Depreciation and amortization     4,393       3,334       8,334         6,466    
Stock-based compensation expense (4)     399       933       1,052         1,558    
Pre-opening expenses (5)     1,395       1,335       3,023         2,524    
Secondary offering expenses (1)   -     -     -         143    
Professional Fees (2)   -     -       1,744       -    
Adjusted EBITDA $   20,422   $   22,273   $   24,620     $   29,718    
                   
(1) Expenses paid by us in connection with secondary offerings of our common stock by affiliates of Seidler Equity Partners III, L.P.  
(2) Professional and other fees incurred in connection with the evaluation of a strategic acquisition.          
(3) Tax credits recognized in the year that were not previously taken in prior years.            
(4) Stock-based compensation expense represents non-cash expenses related to equity instruments granted to employees under our 2013 Performance
Incentive Plan and Employee Stock Purchase Plan.                
(5) Pre-opening expenses include expenses incurred in the preparation and opening of a new store location, such as payroll, travel and supplies, but do  
not include the cost of the initial inventory or capital expenditures required to open a location.          
                   

 

                 
SPORTSMAN’S WAREHOUSE HOLDINGS, INC.
GAAP and Non-GAAP Measures (Unaudited)
(in thousands, except per share data)
                 
Reconciliation of third quarter and 2017 full year guidance:              
                 
    Estimated Q3 '17   Estimated FY '17
                 
    Low   High   Low   High
                 
Numerator:              
  Net income $   10,000   $   11,200   $   24,650   $   27,350
  Professional Fees (1)   -     -       1,067       1,067
  Adjusted net income  $   10,000   $   11,200   $   25,717   $   28,417
                 
Denominator:              
  Diluted weighted average shares outstanding     42,800       42,800       42,800       42,800
                 
Reconciliation of earnings per share:              
Diluted earnings per share $   0.23   $   0.26   $   0.58   $   0.64
Impact of adjustments to numerator and denominator   -     -       0.02       0.02
Adjusted diluted earnings per share $   0.23   $   0.26   $   0.60   $   0.66
                 
(1) Professional and other fees incurred in connection with the evaluation of a strategic acquisition.        
                 
Investor Contact:
                    ICR, Inc. 
                    Farah Soi/Rachel Schacter
                    (203) 682-8200
                    investors@sportsmanswarehouse.com

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