Sportsman's Warehouse Holdings, Inc. Announces Third Quarter 2016 Financial Results

MIDVALE, Utah, Nov. 17, 2016 (GLOBE NEWSWIRE) -- Sportsman's Warehouse Holdings, Inc. ("Sportsman's" or the "Company") (Nasdaq:SPWH) today announced financial results for the thirteen weeks and thirty-nine weeks ended October 29, 2016.

For the thirteen weeks ended October 29, 2016:
  • Net sales increased by 13.0% to $217.2 million from $192.1 million in the third quarter of fiscal year 2015. Same store sales increased by 2.1% over the same period.   
  • Income from operations increased 7.2% to $20.5 million from $19.2 million in the third quarter of fiscal year 2015. Adjusted income from operations, which excludes expenses related to the Company's secondary offering in the third quarter of fiscal 2015 (see "GAAP and Non-GAAP Measures"), increased 3.3% to $20.5 million from $19.9 million in the prior year period.  
  • The Company opened five new stores in the third quarter of fiscal year 2016 and ended the quarter with 75 stores in 20 states, a unit increase of 17.2% from the end of the third quarter of fiscal year 2015. 
  • Interest expense decreased to $3.4 million from $3.7 million in the third quarter of fiscal year 2015.   
  • Net income increased 10.2% to $10.5 million from $9.5 million in the third quarter of fiscal year 2015. Adjusted net income increased 5.3% to $10.5 million from $10.0 million in the third quarter of fiscal year 2015. Adjusted net income excludes offering costs related to the Company's secondary offering incurred during the third quarter 2015.  
  • Diluted earnings per share increased 8.7% to $0.25 from $0.23 in the third quarter of fiscal year 2015. Adjusted diluted earnings per share (see "GAAP and Non-GAAP Measures") increased 4.2% to $0.25 from $0.24 in the third quarter of fiscal 2015. 
  • Adjusted EBITDA increased 8.3% to $26.1 million from $24.1 million in the third quarter of fiscal year 2015 (see "GAAP and Non-GAAP Measures").

John Schaefer, President and Chief Executive Officer, stated: "We are very pleased with our third quarter results as we again met each of our financial targets while maintaining and, in some cases, improving category level gross margins against an industry backdrop that remained very promotional at both the national and the local level. We believe our unique localization strategy, efficient business model and disciplined execution allowed us to continue to take share in our hard goods as well as apparel and footwear categories in the third quarter, as we further strengthen our position as the high growth retailer in the outdoor sporting goods segment of the retail marketplace."

Mr. Schaefer continued, "We continue to make progress on our strategic priorities that enhance both our in store experience and e-commerce platform, which are resonating with our customer. As we look toward the fourth quarter and beyond, we remain focused on building on our track record of consistently delivering against our operational and financial goals."

For the thirty nine weeks ended October 29, 2016:
  • Net sales increased by 12.1% to $558.6 million from $498.2 million in the corresponding period of fiscal year 2015. Same store sales increased by 1.1% in the first three quarters of fiscal year 2016 compared to the same period of fiscal year 2015. 
  • Income from operations increased 6.4% to $39.6 million from $37.2 million in the first three quarters of fiscal year 2015. Adjusted income from operations, which excludes expenses related to the Company's secondary offerings in April 2016 and September 2015, as well as the reversal of an accrual related to a litigation matter in the second quarter of 2015 (see "GAAP and Non-GAAP Measures"), increased 17.1% to $39.7 million as compared to $33.9 million in the first three quarters of fiscal year 2015.  
  • The Company opened eleven new stores in the first three quarters of fiscal year 2016.  
  • Interest expense decreased to $10.1 million from $10.6 million in the first three quarters of fiscal year 2015. 
  • Net income increased 16.8% to $19.1 million from $16.4 million in the first three quarters of fiscal year 2015. Adjusted net income, which excludes expenses related to the Company's secondary offerings in April 2016 and September 2015, as well as the reversal of an accrual related to a litigation matter in the second quarter of 2015, net of taxes, and prior-year tax credits (see "GAAP and Non-GAAP Measures"), increased 29.9% to $18.7 million during the first three quarters of fiscal year 2016 compared to adjusted net income of $14.4 million in the corresponding period of fiscal year 2015.  
  • Diluted earnings per share increased 15.4% to $0.45 from diluted earnings per share of $0.39 in the first three quarters of fiscal year 2015. Adjusted diluted earnings per share (see "GAAP and Non-GAAP Measures"), increased 29.4% to $0.44 from adjusted diluted earnings per share of $0.34 in the first three quarters of fiscal year 2015. 
  • Adjusted EBITDA increased 19.2% to $55.9 million from $46.9 million in the first three quarters of fiscal year 2015.

Balance sheet highlights as of October 29, 2016:  
  • Total debt: $220.3 million consisting of $85.3 million outstanding under the Company's revolving credit facility and $135.0 million outstanding under the term loan, net of unamortized discount and debt issuance costs.
  • Total liquidity (cash plus $25.4 million of availability on revolving credit facility): $28.1 million

Fourth Quarter and Fiscal Year 2016 Outlook:

For the fourth quarter of fiscal year 2016, net sales are expected to be in the range of $230.0 million to $235.0 million based on same store sales change in the range of (1.0%) to 1.0% compared to the corresponding period of fiscal year 2015. Net income is expected to be in the range of $11.4 million to $12.6 million. Earnings per diluted share is expected to be $0.27 to $0.30 on a weighted average of approximately 42.6 million estimated common shares outstanding.

For fiscal year 2016, net sales are expected to be in the range of $789.0 million to $794.0 million based on same store sales change in the range of 0.0% to 2.0% compared to fiscal year 2015. Net income is expected to be in the range of $30.5 million to $31.7 million, with diluted earnings per share of $0.72 to $0.75. Adjusted net income is expected to be in the range of $30.0 million to $31.2 million with adjusted earnings per diluted share of $0.71 to $0.74 (see "GAAP and Non-GAAP Measures") on a weighted average of approximately 42.5 million estimated common shares outstanding.

Conference Call Information:

A conference call to discuss third quarter 2016 financial results is scheduled for today, November 17, 2016, 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. 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 it 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 fourth quarter and full fiscal year 2016.  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 30, 2016 which was filed with the SEC on March 24, 2016 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 Thirty-Nine Weeks Ended    
                               
  October 29, 2016   % of net sales   October 31, 2015   % of net sales   October 29, 2016   % of net sales   October 31, 2015   % of net sales
                               
Net sales $ 217,161       100.0 %   $ 192,122       100.0 %   $ 558,580       100.0 %   $ 498,215       100.0 %
Cost of goods sold   142,896       65.8 %     125,557       65.4 %     369,658       66.2 %     330,497       66.3 %
Gross profit   74,265       34.2 %     66,565       34.6 %     188,922       33.8 %     167,718       33.7 %
                               
Operating expenses:                              
Selling, general and administrative expenses   53,719       24.7 %     47,396       24.6 %     149,348       26.7 %     130,515       26.1 %
Income from operations   20,546       9.5 %     19,169       10.0 %     39,574       7.1 %     37,203       7.6 %
Interest expense   (3,402 )     (1.6 %)     (3,659 )     (1.9 %)     (10,132 )     (1.8 %)     (10,567 )     (2.1 %)
Income before income tax expense   17,144       7.9 %     15,510       8.1 %     29,442       5.3 %     26,636       5.5 %
Income tax expense   (6,630 )     (3.1 %)     (5,969 )     (3.1 %)     (10,313 )     (1.8 %)     (10,255 )     (2.1 %)
Net income $ 10,514       4.8 %   $ 9,541       5.0 %   $ 19,129       3.5 %   $ 16,381       3.4 %
                               
Earnings per share                              
Basic $ 0.25         $ 0.23         $ 0.45         $ 0.39      
Diluted $ 0.25         $ 0.23         $ 0.45         $ 0.39      
                               
Weighted average shares outstanding                              
Basic   42,245           42,004           42,125           41,953      
Diluted   42,558           42,362           42,465           42,286      
                               

 
SPORTSMAN'S WAREHOUSE HOLDINGS, INC.
Condensed Consolidated Balance Sheets (Unaudited)
(in thousands)
       
       
Assets      
October 29, 2016   January 30, 2016
Current assets:      
Cash and cash equivalents $ 2,691     $ 2,109  
Accounts receivable, net   469       469  
Merchandise inventories   304,044       217,794  
Prepaid expenses and other   4,725       9,337  
Deferred income taxes   -       3,001  
Total current assets   311,929       232,710  
Property and equipment, net   83,446       62,432  
Deferred income taxes   4,902       2,263  
Definite lived intangible assets, net   2,569       3,923  
  $ 402,846     $ 301,328  
  .   .
Liabilities and Stockholders' Equity (Deficit)      
Current liabilities:      
Accounts payable $ 71,408     $ 46,698  
Accrued expenses   54,168       42,480  
Income taxes payable   1,276       1,779  
Revolving line of credit   85,313       25,263  
Current portion of long-term debt, net of discount and debt issuance costs   983       8,683  
Current portion of deferred rent   3,291       3,018  
Total current liabilities   216,439       127,921  
       
Long-term liabilities:      
Long-term debt, net of discount, debt issuance costs, and current portion   133,970       146,333  
Deferred rent credit, net of current portion   33,875       29,133  
Total long-term liabilities   167,845       175,466  
Total liabilities   384,284       303,387  
       
Stockholders' equity (deficit):      
Common stock   422       420  
Additional paid-in capital   79,249       77,757  
Accumulated deficit   (61,109 )     (80,236 )
Total stockholders' equity (deficit)   18,562       (2,059 )
  $ 402,846     $ 301,328  
       

 
SPORTSMAN'S WAREHOUSE HOLDINGS, INC.
Condensed Consolidated Statements of Cash Flows (Unaudited)
(in thousands)
         
    October 29, 2016   October 31, 2015
CASH FLOWS FROM OPERATING ACTIVITIES          
Net income   $ 19,129     $ 16,381  
Adjustments to reconcile net income to net          
cash used in operating activities:          
Depreciation and amortization     8,808       7,210  
Amortization of discount on debt and deferred financing fees     932       552  
Amortization of Intangible     1,354       1,354  
Change in deferred rent     5,015       1,413  
Deferred taxes     362       1,725  
Excess tax benefits from stock-based compensation arrangements     (449 )     (283 )
Stock based compensation     2,463       1,671  
Change in assets and liabilities:          
Accounts receivable, net     -       32  
Merchandise inventory     (86,250 )     (67,973 )
Prepaid expenses and other     4,492       1,656  
Accounts payable     24,709       33,408  
Accrued expenses     4,346       (1,029 )
Income taxes     (54 )     7,739  
Net cash provided by (used in) operating activities       (15,143 )     3,856  
         
CASH FLOWS FROM INVESTING ACTIVITIES:          
Purchase of property and equipment     (30,757 )     (29,820 )
Proceeds from sale-leaseback transactions     2,741       7,764  
Net cash used in investing activities       (28,016 )     (22,056 )
         
CASH FLOWS FROM FINANCING ACTIVITIES:          
Net borrowings on LOC     60,050       7,777  
Increase in book overdraft     5,535       12,566  
Issuance of common stock per employee stock purchase plan     258       -  
Excess tax benefits from stock-based compensation     -       283  
Payment of withholdings on restricted stock units     (1,228 )     (1,036 )
Principal payments on long-term debt     (20,874 )     (1,200 )
Net cash provided by financing activities       43,741       18,390  
         
Net change in cash and cash equivalents     582       190  
Cash and cash equivalents at beginning of year     2,109       1,751  
Cash and cash equivalents at end of period   $ 2,691     $ 1,941  
         

 
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 Thirty-Nine Weeks Ended
                 
    October 29, 2016   October 31, 2015   October 29, 2016   October 31, 2015
Income from operations $ 20,546     $ 19,169     $ 39,574     $ 37,203  
Secondary offering expenses (1)   -       727       143       727  
Litigation accrual reversal (2)   -       -       -       (4,000 )
Adjusted income from operations $ 20,546     $ 19,896     $ 39,717     $ 33,930  
                 
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 $ 10,514     $ 9,541     $ 19,129     $ 16,381  
  Secondary offering expenses (1)   -       727       143       727  
  Prior year tax credits (3)   -       -       (602 )     -  
  Litigation accrual reversal (2)   -       -       -       (4,000 )
  Less tax impact of the above items   -       (280 )     -       1,260  
  Adjusted net income $ 10,514     $ 9,988     $ 18,670     $ 14,368  
                 
Denominator:              
  Diluted weighted average shares outstanding   42,558       42,362       42,465       42,286  
                 
Reconciliation of earnings per share:              
Dilutive earnings per share $ 0.25     $ 0.23     $ 0.45     $ 0.39  
Impact of adjustments to numerator   -       0.01       (0.01 )     (0.05 )
Adjusted earnings per share $ 0.25     $ 0.24     $ 0.44     $ 0.34  
                 
Reconciliation of net income to adjusted EBITDA:              
Net income $ 10,514     $ 9,541     $ 19,129     $ 16,381  
Interest expense   3,402       3,659       10,132       10,567  
Income tax expense   6,630       5,969       10,313       10,255  
Depreciation and amortization   3,696       3,033       10,162       8,564  
Stock-based compensation expense (4)   906       594       2,463       1,671  
Pre-opening expenses (5)   985       606       3,509       2,697  
Secondary offering expenses (1)   -       727       143       727  
Litigation accrual reversal (2)   -       -       -       (4,000 )
Adjusted EBITDA $ 26,133     $ 24,129     $ 55,851     $ 46,862  
                 
(1) Expenses paid by us in connection with a secondary offering of our common stock by affiliates of Seidler Equity Partners III, L.P.
(2) Based on the court's most recent judgment in our favor regarding the Lacey Marketplace litigation, we determined that the likelihood of loss in this case is not probable, and, as such, we reversed the previous accrual of $4.0 million in our results for the 13 weeks and 26 weeks ended August 1, 2015.
(3) Tax credits recognized in the current 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 fourth quarter and 2016 full year guidance:              
                 
    Estimated Q4 '16   Estimated FY '16
                 
    Low   High   Low   High
                 
Numerator:              
  Net income $ 11,370     $ 12,600     $ 30,500     $ 31,700  
  Secondary offering expenses (1)   -       -       143       143  
  Prior year tax credits (2)   -       -       (602 )     (602 )
  Adjusted net income $ 11,370     $ 12,600     $ 30,041     $ 31,241  
                 
Denominator:              
  Diluted weighted average shares outstanding   42,600       42,600       42,500       42,500  
                 
Reconciliation of earnings per share:              
Diluted earnings per share $ 0.27     $ 0.30     $ 0.72     $ 0.75  
Impact of adjustments to numerator and denominator   -       -       (0.01 )     (0.01 )
Adjusted diluted earnings per share $ 0.27     $ 0.30     $ 0.71     $ 0.74  
                 
(1) Expenses paid by us in connection with a secondary offering of our common stock by affiliates of Seidler Equity Partners III, L.P.
                 
(2) Tax credits recognized in the current year that were not previously taken in prior years.

Investor Contact:ICR, Inc. Farah Soi/Rachel Schacter(203) 682-8200investors@sportsmanswarehouse.com

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