OREANDA-NEWS. August 19, 2016. Sportsman's Warehouse Holdings, Inc. ("Sportsman's" or the Company) (Nasdaq:SPWH) today announced financial results for the thirteen weeks and twenty-six weeks ended July 30, 2016.

For the thirteen weeks ended July 30, 2016:

  • Net sales increased by 13.7% to \\$189.8 million from \\$166.9 million in the second quarter of fiscal year 2015. Same store sales increased by 2.9% over the same period. 
     
  • Income from operations was \\$16.7 million, as compared to \\$16.8 million in the second quarter of fiscal year 2015, a decrease of 0.7%. Adjusted income from operations, which excludes the reversal of an accrual related to a litigation in the second quarter of 2015 (see GAAP and Non-GAAP Measures), was \\$16.7 million as compared to \\$12.8 million in the second quarter of fiscal year 2015, an increase of 30.4%.
     
  • The Company opened three new stores in the second quarter of fiscal 2016 and ended the quarter with 70 stores in 20 states, a unit increase of 15% from the end of the second quarter of fiscal 2015.
     
  • Interest expense decreased to \\$3.1 million from \\$3.4 million in the second quarter of fiscal year 2015. 
     
  • Net income was \\$8.3 million compared to \\$8.2 million in the second quarter of fiscal year 2015, an increase of 1.3%. Adjusted net income, which excludes the reversal of an accrual related to a litigation matter in the second quarter of 2015, net of taxes (see GAAP and Non-GAAP Measures), was \\$8.3 million compared to \\$5.7 million for the second quarter of fiscal year 2015, an increase of 44.7%.
     
  • Diluted earnings per share was \\$0.20 compared to \\$0.19 in the second quarter of fiscal year 2015, an increase of 5.3%. Adjusted diluted earnings per share (see "GAAP and Non-GAAP Measures"), was \\$0.20 compared to \\$0.14 in the second quarter of fiscal year 2015, an increase of 42.9%.
     
  • Adjusted EBITDA was \\$22.3 million compared to \\$17.3 million in the second quarter of fiscal year 2015 (see "GAAP and Non-GAAP Measures"), an increase of 28.5%.

John Schaefer, President and Chief Executive Officer, stated: "We are pleased with our second quarter results which came in above our guidance on both the top and bottom line. Our strong performance is a testament to the differentiating attributes of our business model, including our value proposition that resonates with our customers, driving the appeal of Sportsmans Warehouse. Our everyday low pricing, best-in-class customer service and our flexible store layout give us the ability to profitably operate in both smaller and larger markets and continue to grow market share. These characteristics coupled with the disciplined execution of our growth strategies continue to drive our operational and financial performance.

Mr. Schaefer continued, We are encouraged by the progress we continue to make on each of our strategic growth priorities and as we look towards the back half of the year and beyond, we remain focused on building on this progress and delivering on our near and longer term goals.

For the twenty-six weeks ended July 30, 2016:

  • Net sales increased by 11.5% to \\$341.4 million from \\$306.1 million in the first half of fiscal 2015. Same store sales increased 0.5% in the first half of fiscal year 2016 compared to the first half of fiscal year 2015.
     
  • Income from operations increased to \\$19.0 million from \\$18.0 million in the first half of fiscal 2015, an increase of 5.5%. Adjusted income from operations, which excludes expenses related to the Company's secondary offering in April 2016 as well as the reversal of an accrual related to a litigation in the second quarter of 2015 (see GAAP and Non-GAAP Measures), was \\$19.2 million as compared to \\$14.0 million in the first half of fiscal 2015, an increase of 36.6%.
     
  • The Company opened six new stores in the first half of fiscal 2016.
     
  • Interest expense decreased to \\$6.7 million from \\$6.9 million in the first half of fiscal 2015.
     
  • Net income was \\$8.6 million compared to \\$6.8 million in the first half of fiscal 2015, an increase of 26.0%. Adjusted net income, which excludes expenses related to the Company's secondary offering in April 2016 and the reversal of an accrual related to a litigation in the second quarter of 2015, net of taxes, as well as prior-year tax credits (see GAAP and Non-GAAP Measures), was \\$8.2 million during the first half of fiscal 2016 compared to adjusted net income of \\$4.4 million in the corresponding period of fiscal 2015, an increase of 86.2%.
     
  • Diluted earnings per share were \\$0.20 compared to diluted earnings per share of \\$0.16 in the first half of fiscal 2015, an increase of 25.0%. Adjusted diluted earnings per share (see GAAP and Non-GAAP Measures), were \\$0.19 compared to adjusted diluted earnings per share of \\$0.10 in the first half of fiscal 2015, an increase of 90.0%.
     
  • Adjusted EBITDA was \\$29.7 million compared to \\$22.7 million in the first half of fiscal 2015, an increase of 30.7%.

Balance sheet highlights as of July 30, 2016:                                                                       

  • Total debt: \\$201.1 million compared to \\$198.6 million at the end of the first quarter of 2016. The \\$201.1 million of total debt as of July 30, 2016 consists of \\$66.1 million outstanding under the Companys revolving credit facility and \\$135.0 million outstanding under the term loan, net of unamortized discount and debt issuance costs.
  • Total liquidity (cash plus \\$44.9 million of availability on revolving credit facility): \\$47.5 million

Third Quarter and Fiscal Year 2016 Outlook:

For the third quarter of fiscal year 2016, net sales are expected to be in the range of \\$212.0 million to \\$217.0 million based on same store sales change in the range of 2.0% to 4.0% compared to the corresponding period of fiscal year 2015. Net income is expected to be in the range of \\$9.8 million to \\$11.1 million, with diluted earnings per share of \\$0.23 to \\$0.26 on approximately 42.6 million estimated weighted average common shares outstanding. Adjusted net income is expected to be in the range of \\$9.8 million to \\$11.1 million, with adjusted diluted earnings per share of \\$0.23 to \\$0.26 on approximately 42.6 million estimated weighted average common shares outstanding.

For fiscal 2016, net sales are expected to be in the range of \\$780.0 million to \\$790.0 million based on opening 11 new stores for the full year and 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 \\$30.1 million to \\$32.6 million, with diluted earnings per share of \\$0.71 to \\$0.77. Adjusted net income is expected to be in the range of \\$29.6 million to \\$32.1 million, with adjusted diluted earnings per share of \\$0.70 to \\$0.76 (see GAAP and Non-GAAP Measures) on approximately 42.5 million estimated weighted average common shares outstanding.

Conference Call Information:

A conference call to discuss second quarter 2016 financial results is scheduled for today, August 18, 2016, at 4:30 PM Eastern Time. The conference call will be webcast and may be accessed via the Investor Relations section of the Companys 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, diluted weighted average shares outstanding, 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 Companys 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 Companys 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 Companys 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 second 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 Companys retail-based business model, general economic conditions and consumer spending, the Companys concentration of stores in the Western United States, competition in the outdoor activities and sporting goods market, changes in consumer demands, the Companys expansion into new markets and planned growth, current and future government regulations, risks related to the Companys continued retention of its key management, the Companys distribution center, quality or safety concerns about the Companys merchandise, events that may affect the Companys 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 Companys Form 10-K for the fiscal year ended January 30, 2016 which was filed with the SEC on March 24, 2016 and the Companys 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 Companys assumptions prove incorrect, the Companys 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 Companys 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.

                 
SPORTSMANS 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 30, 2016 % of net sales August 1, 2015 % of net sales July 30, 2016 % of net sales August 1, 2015 % of net sales 
                 
Net sales\\$  189,804   100.0 % \\$  166,935   100.0 % \\$  341,419   100.0 % \\$  306,093   100.0 % 
Cost of goods sold   123,619   65.1 %    108,933   65.3 %    226,762   66.4 %    204,940   67.0 % 
Gross profit   66,185   34.9 %    58,002   34.7 %    114,657   33.6 %    101,153   33.0 % 
                 
Operating expenses:                
Selling, general and administrative expenses   49,514   26.1 %    41,216   24.6 %    95,630   28.0 %    83,119   27.1 % 
Income from operations   16,671   8.8 %    16,786   10.1 %    19,027   5.6 %    18,034   5.9 % 
Interest expense   (3,141)  (1.7%)    (3,448)  (2.1%)    (6,729)  (2.0%)    (6,908)  (2.3%) 
Income before income tax expense   13,530   7.1 %    13,338   8.0 %    12,298   3.6 %    11,126   3.6 % 
Income tax expense   (5,226)  (2.8%)    (5,138)  (3.1%)    (3,683)  (1.1%)    (4,286)  (1.4%) 
Net income\\$  8,304   4.3 % \\$  8,200   4.9 % \\$  8,615   2.5 % \\$  6,840   2.2 % 
                 
Earnings per share                
Basic\\$  0.20    \\$  0.20    \\$  0.20    \\$  0.16    
Diluted\\$  0.20    \\$  0.19    \\$  0.20    \\$  0.16    
                 
Weighted average shares outstanding                
Basic   42,217       42,004       42,125       41,927    
Diluted   42,490       42,336       42,406       42,242    
                 
      
SPORTSMANS WAREHOUSE HOLDINGS, INC. 
Condensed Consolidated Balance Sheets (Unaudited) 
(in thousands) 
      
      
Assets     
July 30, 2016 January 30, 2016  
Current assets:     
Cash and cash equivalents\\$  2,578  \\$  2,109   
Accounts receivable, net   309     469   
Merchandise inventories   265,718     217,794   
Prepaid expenses and other   6,845     9,337   
Deferred income taxes   -      3,001   
Total current assets   275,450     232,710   
Property and equipment, net   82,396     62,432   
Deferred income taxes   4,976     2,263   
Definite lived intangible assets, net    3,021     3,923   
 \\$  365,843  \\$  301,328   
 . .  
Liabilities and Stockholders Equity (Deficit)     
Current liabilities:     
Accounts payable\\$  70,525  \\$  46,698   
Accrued expenses   48,889     42,480   
Income taxes payable   2,167     1,779   
Revolving line of credit   66,071     25,263   
Current portion of long-term debt, net of discount and debt issuance costs   983     8,683   
Current portion of deferred rent   2,858     3,018   
Total current liabilities   191,493     127,921   
      
Long-term liabilities:     
Long-term debt, net of discount, debt issuance costs, and current portion   134,028     146,333   
Deferred rent credit, net of current portion   33,178     29,133   
Total long-term liabilities   167,206     175,466   
Total liabilities   358,699     303,387   
      
Stockholders equity (deficit):     
Common stock   422     420   
Additional paid-in capital   78,343     77,757   
Accumulated deficit   (71,621)    (80,236)  
Total stockholders equity (deficit)   7,144     (2,059)  
 \\$  365,843  \\$  301,328   
      
      
           
SPORTSMANS WAREHOUSE HOLDINGS, INC.
Condensed Consolidated Statements of Cash Flows (Unaudited)
(in thousands)
           
        July 30, 2015 August 1, 2015
CASH FLOWS FROM OPERATING ACTIVITIES       
Net income    \\$  8,615  \\$  6,840 
Adjustments to reconcile net income to net       
cash used in operating activities:       
Depreciation and amortization      5,565     4,629 
Amortization of discount on debt and deferred financing fees      549     362 
Amortization of Intangible      902     902 
Change in deferred rent      3,885     705 
Deferred taxes      288     1,954 
Excess tax benefits from stock-based compensation arrangements      (449)    (283)
Stock based compensation      1,558     1,077 
Change in assets and liabilities:      
Accounts receivable, net         160     6 
Merchandise inventory         (47,924)    (49,537)
Prepaid expenses and other         2,412     3,334 
Accounts payable         23,827     31,712 
Accrued expenses         174     (4,245)
Income taxes         837     1,810 
Net cash provided by (used in) operating activities      399     (734)
           
CASH FLOWS FROM INVESTING ACTIVITIES:       
Purchase of property and equipment        (23,395)    (19,414)
Net cash used in investing activities       (23,395)    (19,414)
           
CASH FLOWS FROM FINANCING ACTIVITIES:       
Net borrowings on LOC       40,808     6,460 
Increase in book overdraft       4,101     14,073 
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       (20,474)    (800)
Net cash provided by financing activities       23,465     18,980 
           
Net change in cash and cash equivalents        469     (1,168)
Cash and cash equivalents at beginning of year       2,109     1,751 
Cash and cash equivalents at end of period     \\$  2,578  \\$  583 
           
         
SPORTSMANS 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 30, 2016 August 1, 2015 July 30, 2016 August 1, 2015
Income from operations\\$  16,671  \\$  16,786  \\$  19,027  \\$  18,034 
Secondary offering expenses (1)   -      -      143     -  
Litigation accrual reversal (2)   -      (4,000)    -      (4,000)
Adjusted income from operations\\$  16,671  \\$  12,786  \\$  19,170  \\$  14,034 
         
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\\$  8,304  \\$  8,200  \\$  8,615  \\$  6,840 
 Secondary offering expenses (1)   -      -      143     -  
 Prior year tax credits (3)   -      -      (602)    -  
 Litigation accrual reversal (2)   -      (4,000)    -      (4,000)
 Less tax benefit related to litigation accrual reversal   -      1,540     -      1,540 
 Adjusted net income \\$  8,304  \\$  5,740  \\$  8,156  \\$  4,380 
         
Denominator:       
 Diluted weighted average shares outstanding   42,490     42,336     42,406     42,242 
         
Reconciliation of earnings per share:       
Dilutive earnings per share\\$  0.20  \\$  0.19  \\$  0.20  \\$  0.16 
Impact of adjustments to numerator and denominator   -      (0.05)    (0.01)    (0.06)
Adjusted earnings per share\\$  0.20  \\$  0.14  \\$  0.19  \\$  0.10 
         
Reconciliation of net income to adjusted EBITDA:       
Net income\\$  8,304  \\$  8,200  \\$  8,615  \\$  6,840 
Interest expense   3,141     3,448     6,729     6,908 
Income tax expense   5,226     5,138     3,683     4,286 
Depreciation and amortization   3,334     2,909     6,466     5,531 
Stock-based compensation expense (4)   933     480     1,558     1,077 
Pre-opening expenses (5)   1,335     1,164     2,524     2,091 
Secondary offering expenses (1)   -      -      143     -  
Litigation accrual reversal (2)   -      (4,000)    -      (4,000)
Adjusted EBITDA\\$  22,273  \\$  17,339  \\$  29,718  \\$  22,733 
         
(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 courts 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.
         
         
SPORTSMANS WAREHOUSE HOLDINGS, INC.
GAAP and Non-GAAP Measures (Unaudited)
(in thousands, except per share data)
         
Reconciliation of third quarter and 2016 full year guidance:       
         
  Estimated Q3 '16 Estimated FY '16
         
  Low High Low High
         
Numerator:       
 Net income\\$  9,800  \\$  11,100  \\$  30,100  \\$  32,600 
 Secondary offering expenses (1)   -      -      143     143 
 Prior year tax credits (2)   -      -      (602)    (602)
 Adjusted net income \\$  9,800  \\$  11,100  \\$  29,641  \\$  32,141 
         
Denominator:       
 Diluted weighted average shares outstanding   42,600     42,600     42,500     42,500 
         
Reconciliation of earnings per share:       
Diluted earnings per share\\$  0.23  \\$  0.26  \\$  0.71  \\$  0.77 
Impact of adjustments to numerator and denominator   -      -      (0.01)    (0.01)
Adjusted diluted earnings per share\\$  0.23  \\$  0.26  \\$  0.70  \\$  0.76 
         
(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.