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May 18, 2017

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

MIDVALE, Utah, May 18, 2017 (GLOBE NEWSWIRE) -- Sportsman's Warehouse Holdings, Inc. ("Sportsman's" or the "Company") (Nasdaq:SPWH) today announced financial results for the thirteen weeks ended April 29, 2017.

For the thirteen weeks ended April 29, 2017:

  • Net sales increased by 3.5% to $156.9 million from $151.6 million in the first quarter of fiscal year 2016. Same store sales decreased by 6.9% over the same period. 
     
  • Income (loss) from operations was ($3.8) million compared to $2.4 million in the first quarter of fiscal year 2016. Adjusted income (loss) from operations, which excludes professional and other fees incurred in connection with the evaluation of a strategic acquisition was ($2.0) million, compared to adjusted income from operations of $2.5 million in the first quarter of fiscal year 2016, which excludes secondary offering expenses (see "GAAP and Non-GAAP Measures).
     
  • The Company opened four new stores in the first quarter of fiscal year 2017 and ended the quarter with 79 stores in 22 states, or square footage growth of 10.7% from the end of the first quarter of fiscal year 2016.
     
  • Interest expense decreased to $3.2 million from $3.6 million in the first quarter of fiscal year 2016. 
     
  • Net income (loss) was ($4.5) million compared to $0.3 million in the first quarter of fiscal year 2016. Adjusted net loss, which excludes professional and other fees incurred in connection with the evaluation of a strategic acquisition, was ($3.4) million, compared to an adjusted loss which excludes secondary offering expenses as well as prior-year tax credits (see "GAAP and Non-GAAP Measures") of ($0.1) million for the first quarter of fiscal year 2016.
     
  • Diluted earnings (loss) per share were $(0.11) compared to $0.01 in the first quarter of fiscal year 2016. Adjusted earnings (loss) per share were $(0.08) compared to $(0.00) in the first quarter of fiscal year 2016. (See "GAAP and Non-GAAP Measures")
     
  • Adjusted EBITDA decreased to $4.2 million from $7.4 million in the first quarter of fiscal year 2016 (see "GAAP and Non-GAAP Measures").

John Schaefer, Chief Executive Officer, stated, "As expected, we saw continued softness in firearm demand during the first quarter as we anniversaried difficult compares post the San Bernardino shooting and executive orders that were issued at the beginning of 2016.  The industry remained highly promotional and we increased our promotional activity in order to maintain our share position, resulting in slightly better than planned sales, and in-line adjusted earnings performance for the first quarter. We are pleased with the progress we continued to make on our key strategic initiatives of maximizing the potential of our loyalty program, growing our private label segment, enhancing our e-commerce platform, and investing in our store teams."

Mr. Schaefer continued, "We are maintaining a conservative approach for the second quarter until we anniversary the unfortunate events that took place in Orlando in June 2016 that caused increased demand in our firearm and ammunition categories. We continue to expect year over year trends in the second half of 2017 to show improvement relative to year on year performance trends in the first half of the year, and are reiterating our full year guidance. Despite the recent slowdown in firearm demand across the industry, we believe we are the best positioned retailer in our niche to capture market share given our extensive offering of brand name products, everyday low pricing strategy and knowledgeable customer service, combined with our convenience as a neighborhood store in larger markets or big box appeal in smaller markets, and our growth plans of opening 12 stores in fiscal year 2017."

Mr. Schaefer concluded, "We are pleased to announce today that we have entered into an amendment to our term loan agreement with our lender which provides us with increased covenant flexibility. In addition, as we look ahead to fiscal year 2018, we are moderating our planned store growth and currently expect to open 5 to 9 stores. While we remain confident in the 300 store potential that we believe exists for Sportsman's Warehouse, given current industry conditions and continued market consolidation, we believe this moderation is prudent. It will also allow us to allocate more free cash flow to debt paydown next year."

Balance sheet highlights as of April 29, 2017:

  • Total debt: $212.5 million consisting of $78.1 million outstanding under the Company's revolving credit facility and $134.4 million outstanding under the term loan, net of unamortized discount and debt issuance costs.   
  • Total liquidity (cash plus $33.0 million of availability on revolving credit facility): $35.2 million

Subsequent to April 29, 2017

On May 18, 2017, the Company agreed with its lender to amend certain financial covenants of its term loan, providing additional flexibility for the Company. With this amendment, the Company increased the maximum leverage ratio in each of the remaining quarters by amounts ranging from 0.2x to 1.3x with an average quarterly increase of 0.75x.  The largest increase of the covenant level is in fiscal year 2018 which includes increases of 1.1x to 1.3x. As a result of the amendment, the interest rate on the company's revolver will increase 25 basis points to LIBOR plus 6.25% with a 1.25% LIBOR floor, up from LIBOR plus 6.0% with a 1.25% LIBOR floor previously.

For additional details regarding the amendment, please see exhibit 10.1 included in the Company's 10-Q filing that will be filed with the SEC in the next few days.

Second Quarter and Fiscal Year 2017 Outlook:

For the second quarter of fiscal year 2017, net sales are expected to be in the range of $189.0 million to $194.0 million based on a same store sales decline in the range of 8.0% to 10.0% compared to the corresponding period of fiscal year 2016. Net income is expected to be in the range of $5.1 million to $6.0 million with diluted earnings per share of $0.12 to $0.14 on a weighted average of approximately 42.8 million estimated common shares outstanding.

For fiscal year 2017, the Company is reiterating its previously provided annual guidance. Net sales are expected to be in the range of $825.0 million to $845.0 million based on a same store sales decline in the range of 4.0% to 6.0% compared to fiscal year 2016. Adjusted net income is expected to be in the range of $25.5 million to $29.0 million with adjusted earnings per diluted share of $0.60 to $0.68 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.

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 first quarter 2017 financial results is scheduled for today, May 18, 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. 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 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 Operations (Unaudited)
(in thousands, except share and per share data)
         
         
 For the Thirteen Weeks Ended  
         
 April 29, 2017 % of net
sales
 April 30, 2016 % of net
sales
 
          
Net sales$  156,898  100.0 % $  151,615  100.0 % 
Cost of goods sold   108,283   69.0 %    103,143   68.0 % 
Gross profit   48,615  31.0 %    48,472  32.0 % 
         
Operating expenses:        
Selling, general and administrative expenses       52,382   33.4 %    46,116  30.4 % 
Income from operations   (3,767) (2.4%)    2,356  1.6 % 
Interest expense   (3,150) (2.0%)    (3,588) (2.4 %) 
Income (loss) before income tax benefit   (6,917) (4.4%)    (1,232) (0.8%) 
Income tax benefit   2,410  1.5 %    1,543  1.0 % 
Net (loss) income$  (4,507) (2.9%) $  311  0.2 % 
         
Earnings (loss) per share        
Basic$  (0.11)   $  0.01    
Diluted$  (0.11)   $  0.01    
         
Weighted average shares outstanding        
Basic   42,277        42,032    
Diluted   42,277       42,334    
         

 

     
SPORTSMAN'S WAREHOUSE HOLDINGS, INC.
Condensed Consolidated Balance Sheets (Unaudited)
(in thousands)
     
Assets
    
April 29, 2017 January 28, 2017 
Current assets:    
Cash and cash equivalents$  2,269  $  1,911  
Accounts receivable, net   382     411  
Merchandise inventories   288,308     246,289  
Prepaid expenses and other   11,494     7,313  
Income taxes receivable   2,363     -   
Total current assets   304,816     255,924  
Property and equipment, net   94,940     83,109  
Deferred income taxes   4,212     5,097  
Definite lived intangible assets, net   1,666     2,118  
      Total assets$  405,634  $  346,248  
     
Liabilities and Stockholders' Equity    
Current liabilities:    
Accounts payable$  74,176  $  31,549  
Accrued expenses   54,370     49,586  
Income taxes payable   -      979  
Revolving line of credit   78,067     60,972  
Current portion of long-term debt, net of discount and debt issuance costs   983     983  
Current portion of deferred rent   3,407     3,150  
Total current liabilities   211,003     147,219  
     
Long-term liabilities:    
Long-term debt, net of discount, debt issuance costs, and current portion   133,455     133,721  
Deferred rent credit, net of current portion   35,673     35,307  
Total long-term liabilities   169,128     169,028  
Total liabilities   380,131      316,247  
     
Stockholders' equity:    
Common stock   425     422  
Additional paid-in capital   80,154     80,146  
Accumulated deficit   (55,076)    (50,567) 
Total stockholders' equity   25,503     30,001  
       Total liabilities and stockholders' equity$  405,634  $  346,248  
     
     

 

     
SPORTSMAN'S WAREHOUSE HOLDINGS, INC.
Condensed Consolidated Statements of Cash Flows (Unaudited)
(in thousands)
     
  April 29, 2017 April 30, 2016
CASH FLOWS FROM OPERATING ACTIVITIES     
Net income (loss) $  (4,507) $  311 
  Adjustments to reconcile net income (loss) to net cash used in operating activities:     
Depreciation and amortization    3,490     2,681 
Amortization of discount on debt and deferred financing fees   173     355 
Amortization of Intangible    452     451 
Change in deferred rent    624     1,906 
Deferred taxes    885     633 
Excess tax benefits from stock-based compensation arrangements   -     (470)
Stock based compensation    650     625 
  Change in assets and liabilities:     
Accounts receivable, net    29     23 
Merchandise inventory    (42,019)    (33,171)
Prepaid expenses and other    (4,221)    4,498 
Accounts payable    42,049     11,913 
Accrued expenses    (3,115)    (2,037)
Income taxes    (3,342)    (3,364)
   Net cash used in operating activities    (8,852)    (15,646)
     
CASH FLOWS FROM INVESTING ACTIVITIES:    
Purchase of property and equipment     (13,204)    (8,720)
   Net cash used in investing activities    (13,204)    (8,720)
      
CASH FLOWS FROM FINANCING ACTIVITIES:    
Net borrowings on line of credit    17,094     38,076 
Increase in book overdraft    6,359     7,887 
Payment of withholdings on restricted stock units   (639)    (1,228)
Principal payments on long-term debt    (400)    (20,074)
   Net cash provided by financing activities    22,414     24,661 
     
Net change in cash and cash equivalents    358     295 
Cash and cash equivalents at beginning of year   1,911      2,109 
Cash and cash equivalents at end of period $  2,269  $  2,404 
     

 

      
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 
  April 29, 2017 April 30, 2016 
Income (loss) from operations$(3,767) $2,356  
Secondary offering expenses (1) -   143  
Professional fees (2)  1,744   -  
Adjusted income (loss) from operations$(2,023) $2,499  
      
Reconciliation of GAAP net income (loss) and GAAP diluted weighted average shares outstanding to adjusted net income (loss) and adjusted weighted average shares outstanding: 
      
Numerator:    
 Net income (loss)$(4,507) $311  
 Secondary offering expenses (1) -   143  
 Professional Fees (2) 1,744   -  
 Prior year tax credits (3) -   (602) 
 Less tax impact of the above items (677)  -  
 Adjusted net income (loss)$(3,440) $(148) 
      
Denominator:    
 Diluted weighted average shares outstanding 42,277   42,334  
      
Reconciliation of earnings (loss) per share:    
Dilutive earnings (loss) per share$(0.11) $0.01  
Impact of adjustments to numerator 0.03   (0.01) 
Adjusted earnings (loss) per share$(0.08) $-  
      
Reconciliation of net income (loss) to adjusted EBITDA:    
Net income (loss)$(4,507) $ 311  
Interest expense 3,150   3,588  
Income tax benefit (2,410)  (1,543) 
Depreciation and amortization 3,942   3,132  
Stock-based compensation expense (4) 650   625  
Pre-opening expenses (5) 1,629   1,189  
Secondary offering expenses (1) -   143  
Professional Fees (2) 1,744   -  
Adjusted EBITDA$4,198  $7,445  
      
(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 2017 full year guidance:   
  Estimated FY '17
     
  Low High
     
Numerator:   
 Net income$  23,800 $  27,500
 Professional Fees (1)   1,744    1,744
 Adjusted net income $  25,544 $  29,244
     
Denominator:   
 Diluted weighted average shares outstanding   42,800    42,800
     
Reconciliation of earnings per share:   
Diluted earnings per share$  0.56 $  0.64
Impact of adjustments to numerator and denominator   0.04    0.04
Adjusted diluted earnings per share$  0.60 $  0.68
     
(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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Source: Sportsman's Warehouse Holdings, Inc.

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