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

MIDVALE, Utah, Nov. 16, 2017 (GLOBE NEWSWIRE) -- Sportsman's Warehouse Holdings, Inc. ("Sportsman's" or the “Company”) (Nasdaq:SPWH) today announced financial results for the thirteen and thirty-nine weeks ended October 28, 2017.

For the thirteen weeks ended October 28, 2017:

  • Net sales increased by 0.4% to $218.1 million from $217.2 million in the third quarter of fiscal year 2016. Same store sales decreased by 7.0% over the same period.
  • Income from operations was $19.5 million compared to $20.5 million in the third quarter of fiscal year 2016.
  • The Company opened three new stores in the third quarter of fiscal 2017 and ended the quarter with 86 stores in 22 states, or square footage growth of 10.8% from the end of the third quarter of fiscal year 2016.
  • Interest expense increased to $3.5 million from $3.4 million in the third quarter of fiscal year 2016.
  • Net income was $9.8 million compared to $10.5 million in the third quarter of fiscal year 2016.
  • Diluted earnings per share were $0.23 compared to $0.25 in the third quarter of fiscal year 2016.
  • Adjusted EBITDA was $25.1 million compared to $26.1 million in the third quarter of fiscal year 2016 (see "GAAP and Non-GAAP Measures").

John Schaefer, Chief Executive Officer, stated, “Our third quarter results were largely in line with our expectations and reflected continued softness in firearms and ammunition as well as a shift in the timing of a planned third quarter new store opening into the fourth quarter. We again navigated a difficult operating environment but were pleased to deliver gross margin expansion of 110 basis points, pay down debt for a quarter-ending leverage ratio of 2.78x, reduce inventory by 8.7% on a per store basis and make continued progress against our key strategic priorities as we focus on driving further market share gains.”

Mr. Schaefer added, “As we look to the remainder of the year, we are modifying our fourth quarter outlook. While the difficult firearm comparisons that we anniversaried through the first three quarters of fiscal year 2017 will be behind us, we expect a heightened promotional environment which we are reflecting in our sales and margin outlook. Our differentiating attributes of everyday low pricing, unparalleled breadth of product offering and knowledgeable customer service position us well as we continue to navigate these headwinds and remain focused on delivering sustainable long-term growth.”

For the thirty-nine weeks ended October 28, 2017:

  • Net sales increased by 1.4% to $566.5 million from $558.6 million in the first three quarters of fiscal year 2016. Same store sales decreased by 7.6% over the same period.
  • Income from operations was $30.0 million compared to $39.6 million in the first three quarters 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 $31.7 million, compared to adjusted income from operations of $39.7 million for the first three quarters of fiscal year 2016, which excludes secondary offering expenses (see “GAAP and Non-GAAP Measures).
  • The Company opened eleven new stores in the first three quarters of fiscal year 2017.
  • Interest expense was flat at $10.1 million in the first three quarters of fiscal year 2017 and 2016.
  • Net income was $11.9 million compared to $19.1 million in the first three quarters of fiscal year 2016. Adjusted net income, which excludes professional and other fees incurred in connection with the evaluation of a strategic acquisition, was $12.9 million compared to an adjusted net income, which excludes secondary offering expenses and prior-year tax credits, of $18.7 million for the first three quarters of fiscal year 2016 (see “GAAP and Non-GAAP Measures”).
  • Diluted earnings per share were $0.28 compared to $0.45 in the first three quarters of fiscal year 2016. Adjusted diluted earnings per share were $0.30 compared to $0.44 in the first three quarters of fiscal year 2016. (See “GAAP and Non-GAAP Measures”)
  • Adjusted EBITDA was $49.8 million compared to $55.9 million in the first three quarters of fiscal year 2016 (see "GAAP and Non-GAAP Measures").

Balance sheet highlights as of October 28, 2017:

  • Total debt: $214.0 million consisting of $78.5 million outstanding under the Company’s revolving credit facility and $135.5 million outstanding under the term loan, net of unamortized discount and debt issuance costs.
  • Total liquidity (cash plus $46.5 million of availability on revolving credit facility): $48.7 million

Fourth Quarter and Fiscal Year 2017 Outlook:

For the fourth quarter of fiscal year 2017, net sales are expected to be in the range of $240.0 million to $245.0 million based on a same store sales decline in the range of 4.0% to 6.0% compared to the corresponding period of fiscal year 2016. Net income is expected to be in the range of $11.0 million to $12.4 million with diluted earnings per share of $0.26 to $0.29 on a weighted average of approximately 42.6 million estimated common shares outstanding.

For fiscal year 2017, net sales are expected to be in the range of $807.0 million to $812.0 million based on a same store sales decline in the range of 6.0% to 7.0% compared to fiscal year 2016. Adjusted net income is expected to be in the range of $23.9 million to $25.3 million with adjusted earnings per diluted share of $0.56 to $0.59 on a weighted average of approximately 42.6 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 $9.0 to $11.0 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 third quarter 2017 financial results is scheduled for today, November 16, 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 and adjusted net income as income from operations and net income, respectively, in each case, 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 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.

Investor Contact:
ICR, Inc.
Farah Soi/Rachel Schacter
(203) 682-8200
investors@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 28, 2017 % of net
sales
October 29, 2016 % of net
sales
October 28, 2017 % of net
sales
October 29, 2016 % of net
sales
Net sales$218,115 100.0 % $217,161 100.0 % $566,506 100.0 % $558,580 100.0 %
Cost of goods sold 141,152 64.7 % 142,896 65.8 % 372,310 65.7 % 369,658 66.2 %
Gross profit 76,963 35.3 % 74,265 34.2 % 194,196 34.3 % 188,922 33.8 %
Operating expenses:
Selling, general and administrative expenses 57,443 26.3 % 53,719 24.7 % 164,207 29.0 % 149,348 26.7 %
Income from operations 19,520 9.0 % 20,546 9.5 % 29,989 5.3 % 39,574 7.1 %
Interest expense (3,494) (1.5%) (3,402) (1.5%) (10,081) (1.8%) (10,132) (1.8%)
Income before income tax expense 16,026 7.5 % 17,144 8.0 % 19,908 3.5 % 29,442 5.3 %
Income tax expense (6,218) (2.9%) (6,630) (3.1%) (8,053) (1.4%) (10,313) (1.8%)
Net income$9,808 4.6 % $10,514 4.9 % $11,855 2.1 % $19,129 3.5 %
Earnings per share
Basic$0.23 $0.25 $0.28 $0.45
Diluted$0.23 $0.25 $0.28 $0.45
Weighted average shares outstanding
Basic 42,576 42,245 42,464 42,165
Diluted 42,611 42,558 42,501 42,465

SPORTSMAN’S WAREHOUSE HOLDINGS, INC.
Condensed Consolidated Balance Sheets (Unaudited)
(in thousands)
Assets
October 28, 2017 January 28, 2017
Current assets:
Cash and cash equivalents$2,155 $1,911
Accounts receivable, net 404 411
Merchandise inventories 318,323 246,289
Prepaid expenses and other 4,005 7,313
Total current assets 324,887 255,924
Property and equipment, net 98,890 83,109
Deferred income taxes 4,485 5,097
Definite lived intangible assets, net 763 2,118
Total assets$429,025 $346,248
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable$69,453 $31,549
Accrued expenses 54,641 49,586
Income taxes payable 3,210 979
Revolving line of credit 78,454 60,972
Current portion of long-term debt, net of discount and debt issuance costs 935 983
Current portion of deferred rent 3,949 3,150
Total current liabilities 210,642 147,219
Long-term liabilities:
Long-term debt, net of discount, debt issuance costs, and current portion 132,656 133,721
Deferred rent credit, net of current portion 42,793 35,307
Total long-term liabilities 175,449 169,028
Total liabilities 386,091 316,247
Stockholders’ equity:
Common stock 426 422
Additional paid-in capital 81,224 80,146
Accumulated deficit (38,716) (50,567)
Total stockholders’ equity 42,934 30,001
Total liabilites and stockholders' equity$429,025 $346,248

SPORTSMAN’S WAREHOUSE HOLDINGS, INC.
Condensed Consolidated Statements of Cash Flows (Unaudited)
(in thousands)
October 28, 2017 October 29, 2016
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $11,855 $19,129
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Depreciation and amortization 11,551 8,808
(Gain) on asset disposition (14) -
Amortization of discount on debt and deferred financing fees 534 932
Amortization of Intangible 1,355 1,354
Change in deferred rent 8,284 5,015
Deferred taxes 612 362
Excess tax benefits from stock-based compensation arrangements - (449)
Stock based compensation 1,437 2,463
Change in assets and liabilities:
Accounts receivable, net 7 -
Merchandise inventory (72,037) (86,250)
Prepaid expenses and other 3,202 4,492
Accounts payable 40,638 24,709
Accrued expenses (2,078) 4,346
Income taxes 2,231 (54)
Net cash (used in) provided by operating activities 7,577 (15,143)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (39,220) (30,757)
Proceeds from sale of property and equipment 14 -
Proceeds from sale-leaseback transactions 6,130 2,741
Net cash used in investing activities (33,076) (28,016)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings on line of credit 17,482 60,050
Increase in book overdraft 10,157 5,535
Payments of deferred financing fees (341) -
Payment of withholdings on restricted stock units (638) (1,228)
Principal payments on long-term debt (1,200) (20,874)
Issuance of common stock per employee stock purchase plan 283 258
Net cash provided by financing activities 25,743 43,741
Net change in cash and cash equivalents 244 582
Cash and cash equivalents at beginning of year 1,911 2,109
Cash and cash equivalents at end of period $2,155 $2,691

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 28, 2017 October 29, 2016 October 28, 2017 October 29, 2016
Income from operations$19,520 $20,546 $29,989 $39,574
Secondary offering expenses (1) - - - 143
Professional fees (2) - - 1,744 -
Adjusted income from operations$19,520 $20,546 $31,733 $39,717
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$9,808 $10,514 $11,855 $19,129
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$9,808 $10,514 $12,922 $18,670
Denominator:
Diluted weighted average shares outstanding 42,611 42,558 42,501 42,465
Reconciliation of earnings per share:
Dilutive earnings per share$0.23 $0.25 $0.28 $0.45
Impact of adjustments to numerator and denominator - - 0.02 (0.01)
Adjusted diluted earnings per share$0.23 $0.25 $0.30 $0.44
Reconciliation of net income to adjusted EBITDA:
Net income$9,808 $10,514 $11,855 $19,129
Interest expense 3,494 3,402 10,081 10,132
Income tax expense 6,218 6,630 8,053 10,313
Depreciation and amortization 4,572 3,696 12,906 10,162
Stock-based compensation expense (4) 388 906 1,437 2,463
Pre-opening expenses (5) 667 985 3,691 3,509
Secondary offering expenses (1) - - - 143
Professional Fees (2) - - 1,744 -
Adjusted EBITDA$25,147 $26,133 $49,767 $55,851
(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) 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 fourth quarter and 2017 full year guidance:
Estimated Q4 '17 Estimated FY '17
Low High Low High
Numerator:
Net income$11,000 $12,400 $22,850 $24,250
Professional Fees (1) - - 1,067 1,067
Adjusted net income$11,000 $12,400 $23,917 $25,317
Denominator:
Diluted weighted average shares outstanding 42,600 42,600 42,600 42,600
Reconciliation of earnings per share:
Diluted earnings per share$0.26 $0.29 $0.54 $0.57
Impact of adjustments to numerator and denominator - - 0.03 0.03
Adjusted diluted earnings per share$0.26 $0.29 $0.56 $0.59
(1) Professional and other fees incurred in connection with the evaluation of a strategic acquisition.


Source:Sportsman's Warehouse Holdings, Inc.