Company Quick10K Filing
Sportsman's Warehouse
Price5.19 EPS0
Shares44 P/E21
MCap226 P/FCF4
Net Debt20 EBIT20
TEV246 TEV/EBIT12
TTM 2019-11-02, in MM, except price, ratios
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SPWH 10Q Quarterly Report

Part I. Financial Information
Item 1. Financial Statements
Item 2. Management’S Discussion and Analysis of Financial Condition and Results of Operations.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II. Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 5. Other Information
Item 6. Exhibits
EX-31.1 spwh-20200502ex3116fa69b.htm
EX-31.2 spwh-20200502ex312ad2e3a.htm
EX-32.1 spwh-20200502ex32152c0ce.htm

Sportsman's Warehouse Earnings 2020-05-02

Balance SheetIncome StatementCash Flow
67552938323791-552014201620182020
Assets, Equity
2451941439241-102014201620182020
Rev, G Profit, Net Income
35205-10-25-402014201620182020
Ops, Inv, Fin

10-Q 1 spwh-20200502x10q.htm 10-Q spwh_Current_Folio_10Q

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549


FORM 10-Q 


(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended May 2, 2020

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 001-36401


SPORTSMAN’S WAREHOUSE HOLDINGS, INC. 

(Exact Name of Registrant as Specified in its Charter)


Delaware

 

39-1975614

(State or other jurisdiction
of incorporation or organization)

 

(I.R.S. Employer
Identification No.)

 

 

 

1475 West 9000 South, Suite A, West Jordan, Utah

 

84088

(Address of principal executive offices)

 

(Zip code)

 

Registrant’s telephone number, including area code: (801) 566-6681


 

 

 

 

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common stock, $.01 par value

SPWH

The Nasdaq Stock Market LLC

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒    No  ☐ 

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

    

 

 

 

 

 

Large accelerated filer

    

Accelerated filer

    

 

 

 

 

 

 

Non-accelerated filer

 

Smaller reporting company

 

 

 

 

 

 

 

Emerging growth company

 

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act: ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐    No  ☒ 

 

As of June 5, 2020, the registrant had 43,455,093 shares of common stock, $0.01 par value per share, outstanding.

 

 

SPORTSMAN’S WAREHOUSE HOLDINGS, INC.

 

TABLE OF CONTENTS

 

 

 

 

 

 

Page

PART I. FINANCIAL INFORMATION 

 

 

 

Item 1. 

Financial Statements (unaudited):

4

 

 

 

 

Condensed Consolidated Balance Sheets

4

 

 

 

 

Condensed Consolidated Statements of Operations

5

 

 

 

 

Condensed Consolidated Statement of Stockholders’ Equity

6

 

 

 

 

Condensed Consolidated Statements of Cash Flows

7

 

 

 

 

Notes to Condensed Consolidated Financial Statements

8

 

 

 

Item 2. 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

19

 

 

 

Item 3. 

Quantitative and Qualitative Disclosures About Market Risk

27

 

 

 

Item 4. 

Controls and Procedures

27

 

 

 

PART II. OTHER INFORMATION 

 

 

 

Item 1. 

Legal Proceedings

29

 

 

 

Item 1A. 

Risk Factors

29

 

 

 

Item 5. 

Other Information

29

 

 

 

Item 6. 

Exhibits

30

 

 

 

 

Signatures

31

 

We operate on a fiscal calendar that, in a given fiscal year, consists of the 52- or 53-week period ending on the Saturday closest to January 31st. Our fiscal first quarters ended May 2, 2020 and May 4, 2019 both consisted of 13 weeks and are referred to herein as the first quarter of fiscal year 2020 and the first quarter of fiscal year 2019, respectively. Fiscal year 2020 contains 52 weeks of operations and will end on January 30, 2021. Fiscal year 2019 contained 52 weeks of operations ended on February 1, 2020.

 

 

References throughout this document to “Sportsman’s Warehouse,” “we,” “us,” and “our” refer to Sportsman’s Warehouse Holdings, Inc. and its subsidiaries, and references to “Holdings” refer to Sportsman’s Warehouse Holdings, Inc. excluding its subsidiaries.

 

STATEMENT REGARDING FORWARD-LOOKING STATEMENTS 

 

This Quarterly Report on Form 10-Q (this “10-Q”) contains statements that constitute forward-looking statements as that term is defined by the Private Securities Litigation Reform Act of 1995. These statements concern our business, operations and financial performance and condition as well as our plans, objectives and expectations for our business operations and financial performance and condition, which are subject to risks and uncertainties. All statements other than statements of historical fact included in this 10-Q are forward-looking statements. These statements may include words such as “aim,” “anticipate,” “assume,” “believe,” “can have,” “could,” “due,” “estimate,” “expect,” “goal,” “intend,” “likely,” “may,” “objective,” “plan,” “potential,” “positioned,” “predict,” “should,” “target,” “will,” “would” and other words and terms of similar meaning in connection with any discussion of the timing or nature of future operating or financial performance or other events or trends. For example, all statements we make relating to our plans and objectives for future operations, growth or initiatives and strategies are forward-looking statements.

 

These forward-looking statements are based on current expectations, estimates, forecasts and projections about our business and the industry in which we operate and our management’s beliefs and assumptions. We derive many of our forward-looking statements from our own operating budgets and forecasts, which are based upon many detailed assumptions. While we believe that our assumptions are reasonable, we caution that predicting the impact of known factors is very difficult, and we cannot anticipate all factors that could affect our actual results.

 

All of our forward-looking statements are subject to risks and uncertainties that may cause our actual results to differ materially from our expectations. Important factors that could cause actual results to differ materially from our expectations include, but are not limited to:

 

·

the COVID-19 pandemic and measures intended to reduce its spread;

·

our ability to integrate the eight stores we recently acquired from Dick’s Sporting Goods;

·

our retail-based business model is impacted by general economic conditions and economic and financial uncertainties may cause a decline in consumer spending;

·

current and future government regulations, in particular regulations relating to the sale of firearms and ammunition, may impact the supply and demand for our products and our ability to conduct our business;

·

our concentration of stores in the Western United States makes us susceptible to adverse conditions in this region, which could affect our sales and cause our operating results to suffer;

·

the highly fragmented and competitive industry in which we operate and potential for increased competition;

·

changes in consumer demands, including regional preferences, which we may not be able to identify and respond to in a timely manner;

·

entrance into new markets or operations in existing markets, which may not be successful; and

·

remediation of identified material weaknesses in our internal control over financial reporting.

 

The above is not a complete list of factors or events that could cause actual results to differ from our expectations, and we cannot predict all of them. All written and oral forward-looking statements attributable to us, or persons acting on our behalf, are expressly qualified in their entirety by the cautionary statements disclosed under “Part I. Item 1A. Risk Factors,” appearing in our Annual Report on Form 10-K for the fiscal year ended February 1, 2019 and “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this 10-Q, as such disclosures may be amended, supplemented or superseded from time to time by other reports we file with the Securities and Exchange Commission, including subsequent Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q, and public communications. You should evaluate all forward-looking statements made in this 10-Q and otherwise in the context of these risks and uncertainties.

 

 

2

Potential investors and other readers are urged to consider these factors carefully in evaluating the forward-looking statements and are cautioned not to place undue reliance on any forward-looking statements we make. These forward-looking statements speak only as of the date of this 10-Q and are not guarantees of future performance or developments and involve known and unknown risks, uncertainties and other factors that are in many cases beyond our control. Except as required by law, we undertake no obligation to update or revise any forward-looking statements publicly, whether as a result of new information, future developments or otherwise.

 

3

 

PART I. FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

 

SPORTSMAN’S WAREHOUSE HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

Amounts in Thousands, Except Per Share Data

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

May 2,

 

February 1,

 

 

    

2020

    

2020

 

Assets

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

Cash

 

$

22,090

 

$

1,685

 

Accounts receivable, net

 

 

581

 

 

904

 

Merchandise inventories

 

 

300,851

 

 

275,505

 

Income tax receivable

 

 

4,564

 

 

812

 

Prepaid expenses and other

 

 

14,939

 

 

12,732

 

Total current assets

 

 

343,025

 

 

291,638

 

Operating lease right of use asset

 

 

221,671

 

 

224,520

 

Property and equipment, net

 

 

95,924

 

 

98,767

 

Goodwill

 

 

1,496

 

 

1,496

 

Definite lived intangibles, net

 

 

213

 

 

220

 

Total assets

 

$

662,329

 

$

616,641

 

 

 

 

 

 

 

 

 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

Accounts payable

 

$

86,111

 

$

38,157

 

Accrued expenses

 

 

72,797

 

 

70,118

 

Operating lease liability, current

 

 

35,081

 

 

34,487

 

Revolving line of credit

 

 

118,423

 

 

116,078

 

Current portion of long-term debt, net of discount and debt issuance costs

 

 

1,979

 

 

5,936

 

Total current liabilities

 

 

314,391

 

 

264,776

 

Long-term liabilities:

 

 

 

 

 

 

 

Long-term debt, net of discount, debt issuance costs, and current portion

 

 

23,760

 

 

23,781

 

Deferred income taxes

 

 

3,524

 

 

562

 

Operating lease liability, noncurrent

 

 

211,469

 

 

217,254

 

Total long-term liabilities

 

 

238,753

 

 

241,597

 

Total liabilities

 

 

553,144

 

 

506,373

 

 

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

 

 

 

Preferred stock, $.01 par value; 20,000 shares authorized; 0 shares issued and outstanding

 

 

 —

 

 

 —

 

Common stock, $.01 par value; 100,000 shares authorized; 43,551 and 43,296 shares issued and outstanding, respectively

 

 

436

 

 

433

 

Additional paid-in capital

 

 

86,850

 

 

86,806

 

Accumulated earnings

 

 

21,899

 

 

23,029

 

Total stockholders' equity

 

 

109,185

 

 

110,268

 

Total liabilities and stockholders' equity

 

$

662,329

 

$

616,641

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

4

SPORTSMAN'S WAREHOUSE HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Amounts in Thousands Except Per Share Data

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

Thirteen Weeks Ended

 

 

 

 

May 2,

 

May 4,

 

 

 

 

2020

 

2019

 

 

Net sales

 

$

246,835

 

$

174,017

 

 

Cost of goods sold

 

 

172,061

 

 

119,844

 

 

Gross profit

 

 

74,774

 

 

54,173

 

 

 

 

 

 

 

 

 

 

 

Selling, general, and administrative expenses

 

 

75,219

 

 

59,530

 

 

Loss from operations

 

 

(445)

 

 

(5,357)

 

 

Interest expense

 

 

1,534

 

 

2,105

 

 

Loss before income taxes

 

 

(1,979)

 

 

(7,462)

 

 

Income tax benefit

 

 

(849)

 

 

(2,003)

 

 

Net loss

 

$

(1,130)

 

$

(5,459)

 

 

Loss per share:

 

 

 

 

 

 

 

 

Basic

 

$

(0.03)

 

$

(0.13)

 

 

Diluted

 

$

(0.03)

 

$

(0.13)

 

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

Basic

 

 

43,327

 

 

43,003

 

 

Diluted

 

 

43,327

 

 

43,003

 

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

5

SPORTSMAN'S WAREHOUSE HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

Amounts in Thousands

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Thirteen Weeks Ended May 2, 2020 and May 4, 2019

 

 

Common Stock

 

Restricted nonvoting
common stock

 

Additional
paid-in-
capital

 

Accumulated
(deficit) earnings

 

Total
stockholders'
equity

 

    

Shares

    

Amount

    

Shares

    

Amount

    

Amount

    

Amount

    

Amount

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at February 2, 2019

 

42,978

 

$

430

 

 —

 

$

 —

 

$

84,671

 

$

(6,441)

 

$

78,660

Impact of change for ASC 842 adoption

 

 —

 

 

 —

 

 —

 

 

 —

 

 

 —

 

 

9,255

 

 

9,255

Vesting of restricted stock units

 

196

 

 

 2

 

 —

 

 

 —

 

 

(2)

 

 

 —

 

 

 —

Payment of withholdings on restricted stock units

 

 —

 

 

 —

 

 —

 

 

 —

 

 

(369)

 

 

 —

 

 

(369)

Stock based compensation

 

 —

 

 

 —

 

 —

 

 

 —

 

 

453

 

 

 —

 

 

453

Net loss

 

 —

 

 

 —

 

 —

 

 

 —

 

 

 —

 

 

(5,459)

 

 

(5,459)

Balance at May 4, 2019

 

43,174

 

$

432

 

 —

 

$

 —

 

$

84,753

 

$

(2,645)

 

$

82,540

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at February 1, 2020

 

43,296

 

$

433

 

 —

 

$

 —

 

$

86,806

 

$

23,029

 

$

110,268

Vesting of restricted stock units

 

255

 

 

 3

 

 —

 

 

 —

 

 

(3)

 

 

 —

 

 

 —

Payment of withholdings on restricted stock units

 

 —

 

 

 —

 

 —

 

 

 —

 

 

(689)

 

 

 —

 

 

(689)

Stock based compensation

 

 —

 

 

 —

 

 —

 

 

 —

 

 

736

 

 

 —

 

 

736

Net loss

 

 —

 

 

 —

 

 —

 

 

 —

 

 

 —

 

 

(1,130)

 

 

(1,130)

Balance at May 2, 2020

 

43,551

 

$

436

 

 —

 

$

 —

 

$

86,850

 

$

21,899

 

$

109,185


The accompanying notes are an integral part of these condensed consolidated financial statements

 

 

6

SPORTSMAN'S WAREHOUSE HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Amounts in Thousands

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

Thirteen Weeks Ended

 

 

 

May 2,

 

May 4,

 

    

 

2020

 

2019

Cash flows from operating activities:

 

 

 

 

 

 

 

Net loss

 

 

$

(1,130)

 

$

(5,459)

Adjustments to reconcile net loss to net cash provided by operating activities:

 

 

 

 

 

 

 

Depreciation of property and equipment

 

 

 

5,326

 

 

4,606

Amortization and write-off of discount on debt and deferred financing fees

 

 

 

84

 

 

84

Amortization of definite lived intangible

 

 

 

 7

 

 

 7

(Gain) loss on asset dispositions

 

 

 

803

 

 

(311)

Noncash lease expense

 

 

 

6,076

 

 

7,610

Deferred income taxes

 

 

 

2,962

 

 

431

Stock-based compensation

 

 

 

736

 

 

453

Change in operating assets and liabilities, net of amounts acquired:

 

 

 

 

 

 

 

Accounts receivable, net

 

 

 

323

 

 

(40)

Operating lease liabilities

 

 

 

(7,321)

 

 

(8,513)

Merchandise inventories

 

 

 

(23,298)

 

 

(14,862)

Prepaid expenses and other

 

 

 

(2,270)

 

 

1,786

Accounts payable

 

 

 

46,645

 

 

25,340

Accrued expenses

 

 

 

6,090

 

 

(5,254)

Income taxes payable and receivable

 

 

 

(3,752)

 

 

(2,435)

Net cash provided by operating activities

 

 

 

31,281

 

 

3,443

Cash flows from investing activities:

 

 

 

 

 

 

 

Purchase of property and equipment, net of amounts acquired

 

 

 

(4,833)

 

 

(3,402)

Acquisition of Field and Stream stores, net of cash acquired

 

 

 

(1,024)

 

 

 —

Proceeds from sale of property and equipment

 

 

 

 —

 

 

311

Net cash used in investing activities

 

 

 

(5,857)

 

 

(3,091)

Cash flows from financing activities:

 

 

 

 

 

 

 

Net (payments) borrowings on line of credit

 

 

 

2,345

 

 

(2,734)

(Decrease) increase in book overdraft

 

 

 

(2,675)

 

 

4,919

Payment of withholdings on restricted stock units

 

 

 

(689)

 

 

(369)

Principal payments on long-term debt

 

 

 

(4,000)

 

 

(2,000)

Net cash used in financing activities

 

 

 

(5,019)

 

 

(184)

Net change in cash

 

 

 

20,405

 

 

168

Cash at beginning of period

 

 

 

1,685

 

 

1,547

Cash at end of period

 

 

$

22,090

 

$

1,715

 

 

 

 

 

 

 

 

Supplemental disclosures of cash flow information:

 

 

 

 

 

 

 

Cash paid during the period for:

 

 

 

 

 

 

 

Interest, net of amounts capitalized

 

 

$

1,308

 

$

2,021

Income taxes, net of refunds

 

 

 

(59)

 

 

 —

 

 

 

 

 

 

 

 

Supplemental schedule of noncash activities:

 

 

 

 

 

 

 

Noncash change in operating lease right of use asset and operating lease liabilities from

 

 

$

2,150

 

$

13,149

     remeasurement of existing leases and addition of new leases

 

 

 

 

 

 

 

Purchases of property and equipment included in accounts payable and accrued expenses

 

 

$

661

 

$

1,356

Payable to seller relating to acquisition of Field and Stream stores

 

 

$

1,024

 

$

 —

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

7

 

SPORTSMAN’S WAREHOUSE HOLDINGS, INC.

AND SUBSIDIARIES

 

Notes to Condensed Consolidated Financial Statements (Unaudited)

Amounts reported in thousands, except per share data and store count data

(1) Description of Business and Basis of Presentation

Description of Business

Sportsman’s Warehouse Holdings, Inc. (“Holdings”) and its subsidiaries (collectively, the “Company”) operate retail sporting goods stores. As of May 2, 2020, the Company operated 105 stores in 27 states. The Company also operates an e-commerce platform at www.sportsmans.com. The Company’s stores and website are aggregated into one single operating and reportable segment.

Basis of Presentation

The condensed consolidated financial statements included herein are unaudited and have been prepared by management of the Company pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been condensed or omitted pursuant to such rules and regulations. The Company’s condensed consolidated balance sheet as of February 1, 2020 was derived from the Company’s audited consolidated balance sheet as of that date. All other condensed consolidated financial statements contained herein are unaudited and reflect all adjustments that are, in the opinion of management, necessary to summarize fairly our condensed consolidated financial statements for the periods presented. All of these adjustments are of a normal recurring nature. The results of the fiscal quarter ended May 2, 2020 are not necessarily indicative of the results to be obtained for the year ending January  30, 2021. These condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended February 1, 2020 filed with the SEC on April 9, 2020 (the “Fiscal 2019 Form 10-K”).

 

Impact of COVID-19 Pandemic

 

During March 2020, the World Health Organization declared the rapidly growing coronavirus outbreak to be a global pandemic. The COVID-19 pandemic has significantly impacted health and economic conditions throughout the United States. Beginning in March 2020, the Company reduced store hours to allow sufficient time to restock its shelves and perform additional cleaning, and the Company has also limited the number of customers in its stores at any one time. The Company may further restrict the operations of its stores and its distribution facility if it deems this necessary or if recommended or mandated by authorities.

 

 

(2) Summary of Significant Accounting Policies

 

The Company’s significant accounting policies are described in Note  2 to the Company’s Fiscal 2019 Form 10-K. Except for the changes below, the Company has consistently applied the accounting policies to all periods presented in these condensed consolidated financial statements.

 

Recently Issued Accounting Pronouncements

 

In December 2019, the FASB issued ASU 2019-12, Income Taxes (“Topic 740”)-Simplifying the Accounting for Income Taxes, which removes certain exception to the general principles in Topic 740 and amends existing guidance to improve consistent application. For public entities, ASU 2019-12 is required to be adopted for annual periods beginning after December 15, 2020, including interim periods within those fiscal years. Early adoption is permitted. Management is currently evaluating the impact of the adoption of this ASU on our consolidated financial statements and related disclosures.

8

(3) Revenue Recognition

 

Revenue recognition accounting policy

 

The Company operates solely as an outdoor retailer, which includes both retail stores and an e-commerce platform, that offers a broad range of products in the United States and online. Generally, all revenues are recognized when control of the promised goods is transferred to customers, in an amount that reflects the consideration in exchange for those goods. Accordingly, the Company implicitly enters into a contract with customers to deliver merchandise inventory at the point of sale. Collectability is reasonably assured since the Company only extends credit for immaterial purchases to certain municipalities.

 

Substantially all of the Company’s revenue is for single performance obligations for the following distinct items:

 

·

Retail store sales

 

·

E-commerce sales

 

·

Gift cards and loyalty reward program

 

For performance obligations related to retail store and e-commerce sales contracts, the Company typically transfers control, for retail stores, upon consummation of the sale when the product is paid for and taken by the customer and, for e-commerce sales, when the products are tendered for delivery to the common carrier.

 

The transaction price for each contract is the stated price on the product, reduced by any stated discounts at that point in time. The Company does not engage in sales of products that attach a future material right which could result in a separate performance obligation for the purchase of goods in the future at a material discount. The implicit point-of-sale contract with the customer, as reflected in the transaction receipt, states the final terms of the sale, including the description, quantity, and price of each product purchased. Payment for the Company’s contracts is due in full upon delivery. The customer agrees to a stated price implicit in the contract that does not vary over the contract.

 

The transaction price relative to sales subject to a right of return reflects the amount of estimated consideration to which the Company expects to be entitled. This amount of variable consideration included in the transaction price, and measurement of net sales, is included in net sales only to the extent that it is probable that there will be no significant reversal in a future period. Actual amounts of consideration ultimately received may differ from the Company’s estimates. The allowance for sales returns is estimated based upon historical experience and a provision for estimated returns is recorded as a reduction in sales in the relevant period. The estimated merchandise inventory cost related to the sales returns is recorded in prepaid expenses and other. The estimated refund liabilities are recorded in accrued expenses.  If actual results in the future vary from the Company’s estimates, the Company adjusts these estimates, which would affect net sales and earnings in the period such variances become known.

 

Contract liabilities are recognized primarily for gift card sales and our loyalty reward program. Cash received from the sale of gift cards is recorded as a contract liability in accrued expenses, and the Company recognizes revenue upon the customer’s redemption of the gift card. Gift card breakage is recognized as revenue in proportion to the pattern of customer redemptions by applying a historical breakage rate of 3.5% when no escheat liability to relevant jurisdictions exists. Based upon historical experience, gift cards are predominantly redeemed in the first two years following their issuance date. The Company does not sell or provide gift cards that carry expiration dates.

 

ASC 606 requires the Company to allocate the transaction price between the goods and the loyalty reward points based on the relative stand alone selling price. The Company recognized revenue for the breakage of loyalty reward points as revenue in proportion to the pattern of customer redemption of the points by applying a historical breakage rate of 50% when no escheat liability to relevant jurisdictions exists.

 

Taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction, that are collected by the Company from a customer, are excluded from revenue.

 

9

Sales returns

 

The Company allows customers to return items purchased within 30 days provided the merchanides is in resaleable condition with original packaging and the original sales/gift receipt is presented.  The Company estimates a reserve for sales returns and records the respective reserve amounts, including a right to return asset when a product is expected to be returned and resold. Historical experience of actual returns and customer return rights are the key factors used in determining the estimated sales returns.

 

Contract balances

 

The following table provides information about right of return assets, contract liabilities, and sales return liabilities with customers as of May 2, 2020:

 

 

 

 

 

 

 

 

 

    

May 2, 2020

    

February 1, 2020

Right of return assets, which are included in prepaid expenses and other

 

$

1,687

 

$

1,683

Estimated gift card contract liability, net of breakage

 

 

(16,236)

 

 

(13,575)

Estimated loyalty contract liability, net of breakage

 

 

(8,370)

 

 

(9,621)

Sales return liabilities, which are included in accrued expenses

 

 

(2,518)

 

 

(2,512)

 

For the 13 weeks ended May 2, 2020, the Company recognized approximately $276 in gift card breakage and approximately $555 in loyalty reward breakage, respectively. For the 13 weeks ended May 4, 2019, the Company recognized approximately $290 in gift card breakage and approximately $310 in loyalty reward breakage, respectively.

 

The current balance of the right of return assets is the expected amount of inventory to be returned that is expected to be resold. The current balance of the contract liabilities primarily relates to the gift card and loyalty reward program liabilities. The Company expects the revenue associated with these liabilities to be recognized in proportion to the pattern of customer redemptions over the next two years. The current balance of sales return liabilities is the expected amount of sales returns from sales that have occurred.

 

Disaggregation of revenue from contracts with customers

 

In the following table, revenue from contracts with customers is disaggregated by department. The percentage of net sales related to the Company’s departments for the 13 weeks ended May 2, 2020 and May 4, 2019, was approximately:

 

 

 

 

 

 

 

 

 

 

 

 

Thirteen Weeks Ended

 

 

 

 

May 2,

 

May 4,

Department

    

Product Offerings

    

2020

    

2019

Camping

 

Backpacks, camp essentials, canoes and kayaks, coolers, outdoor cooking equipment, sleeping bags, tents and tools

 

10.2%

 

11.9%

Clothing

 

Camouflage, jackets, hats, outerwear, sportswear, technical gear and work wear

 

4.4%

 

8.0%

Fishing

 

Bait, electronics, fishing rods, flotation items, fly fishing, lines, lures, reels, tackle and small boats

 

10.1%

 

12.1%

Footwear

 

Hiking boots, socks, sport sandals, technical footwear, trail shoes, casual shoes, waders and work boots

 

4.4%

 

7.4%

Hunting and Shooting

 

Ammunition, archery items, ATV accessories, blinds and tree stands, decoys, firearms, reloading equipment and shooting gear

 

65.6%

 

53.6%

Optics, Electronics, Accessories, and Other

 

Gift items, GPS devices, knives, lighting, optics (e.g. binoculars), two-way radios, and other license revenue, net of revenue discounts

 

5.3%

 

7.0%

Total

 

 

 

100.0%

 

100.0%

 

10

(4) Property and Equipment

Property and equipment as of May 2, 2020 and February 1, 2020 were as follows:

 

 

 

 

 

 

 

 

 

 

 

May 2,

 

February 1,

 

 

    

2020

    

2020

 

Furniture, fixtures, and equipment

 

$

85,733

 

$

84,059

 

Leasehold improvements

 

 

102,787

 

 

103,791

 

Construction in progress

 

 

3,037

 

 

1,571

 

Total property and equipment, gross

 

 

191,557

 

 

189,421

 

Less accumulated depreciation and amortization

 

 

(95,633)

 

 

(90,654)

 

Total property and equipment, net

 

$

95,924

 

$

98,767

 

 

 

(5) Accrued Expenses

Accrued expenses consisted of the following as of May 2, 2020 and February 1, 2020:

 

 

 

 

 

 

 

 

 

 

May 2,

 

February 1,

 

    

2020

    

2020

Book overdraft

 

$

13,152

 

$

15,827

Unearned revenue

 

 

28,956

 

 

25,705

Accrued payroll and related expenses

 

 

11,106

 

 

11,436

Sales and use tax payable

 

 

5,974

 

 

5,169

Accrued construction costs

 

 

300

 

 

1,112

Other

 

 

13,309

 

 

10,869

Total accrued expenses

 

$

72,797

 

$

70,118

 

(6) Leases

At the inception of the lease, the Company’s operating leases have remaining certain lease terms of up to 10 years, which typically includes multiple options for the Company to extend the lease which are not reasonably certain and as such are excluded from the measurement of the right of used asset and liability.

We determine whether a contract is or contains a lease at contract inception. Beginning in fiscal 2019, operating lease assets and operating lease liabilities are recognized at commencement date based on the present value of remaining fixed lease payments over the lease term. As the rate implicit in the lease is not readily determinable in most of our leases, we use our incremental borrowing rate based on the information available at commencement date to determine the present value of lease payments. The Company's incremental borrowing rate for a lease is the rate of interest it would have to pay on a collateralized basis to borrow an amount equal to the lease payments under similar terms. The operating lease asset also includes any fixed lease payments made and includes lease incentives and incurred initial direct costs. Operating lease expense for fixed lease payments is recognized on a straight-line basis over the lease term. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Additionally, our leases do not contain any material residual guarantees or material restrictive covenants 

In the 13 weeks ended May 2, 2020, the Company recorded a non-cash increase, net of terminations, of $2,150 to the ROU assets and operating lease liabilities resulting from lease remeasurements from the exercise of lease extension options, acquired leases, and new leases added. 

In accordance with ASC 842, total lease expense, including common area maintenance (CAM), recorded during the 13 weeks ended May 2, 2020 and May 4, 2019 was $16,547 and $14,384, respectively.

11

In accordance with ASC 842, other information related to leases was as follows:

 

 

 

 

 

 

 

 

 

 

Thirteen Weeks Ended

 

 

May 2,

 

May 4,

 

    

2020

 

2019

Operating cash flows from operating leases

 

$

(13,464)

 

$

(11,868)

    Cash paid for amounts included in the measurement of lease liabilities -  operating leases

 

 

(13,464)

 

 

(11,868)

 

 

 

 

 

 

 

 

 

As of May 2,

 

As of May 4,

 

    

2020

 

2019

 

 

 

 

 

 

 

Right-of-use assets obtained in exchange for new or remeasured operating lease liabilities

 

$

5,352

 

$

13,149

Terminated right-of-use assets and liabilities

 

 

(3,202)

 

 

 —

Weighted-average remaining lease term - operating leases

 

 

6.12

 

 

6.11

Weighted-average discount rate - operating leases

 

 

8.03%

 

 

7.80%

 

In accordance with ASC 842, maturities of operating lease liabilities as of May 2, 2020 were as follows:

 

 

 

 

 

 

 

Operating

Year Endings:

Leases

2020 (remainder)

 

$

41,019

2021

 

 

52,270

2022

 

 

48,109

2023

 

 

43,426

2024

 

 

34,995

Thereafter

 

 

132,450

Undiscounted cash flows

 

$

352,269

Reconciliation of lease liabilities:

 

 

 

    Present values

 

$

246,550

    Lease liabilities - current

 

 

35,081

    Lease liabilities - noncurrent

 

 

211,469

Lease liabilities - total

 

$

246,550

    Difference between undiscounted and discounted cash flows

 

$

105,719

 

The Company has excluded in the table above approximately $9.4 million of leases (undiscounted basis) that have not yet commenced. These leases will commence in the second quarter of fiscal year 2020 with lease terms of five to ten years.

(7) Revolving Line of Credit

 

On May 23, 2018, Sportsman’s Warehouse, Inc. (“SWI”), a wholly owned subsidiary of the Company, as lead borrower, and Wells Fargo Bank, National Association (“Wells Fargo”), with a consortium of banks led by Wells Fargo, entered into an Amended and Restated Credit Agreement (as amended, restated, supplemented or otherwise modified, the “Amended Credit Agreement”). The Amended Credit Agreement governs the Company’s senior secured revolving credit facility (“Revolving Line of Credit”) and a $40,000 term loan (the “Term Loan”).  The Revolving Line of Credit provides a borrowing capacity of up to $250,000, subject to a borrowing base calculation.  Information on the Term Loan is provided in Note 8. 

 

In conjunction with the Amended Credit Agreement, the Company incurred $1,331 of fees paid to various parties which were capitalized. Fees associated with the Revolving Line of Credit were recorded in prepaid and other assets. Fees associated with the Term Loan offset the loan balance on the condensed consolidated balance sheet of the Company.

 

As of May 2, 2020, and February 1, 2020, the Company had $132,923 and $123,478 in outstanding revolving loans under the Revolving Line of Credit, respectively. Amounts outstanding are offset on the condensed consolidated balance sheets by amounts in depository accounts under lock-box or similar arrangements, which were $14,499 and $7,400 as of

12

May 2, 2020 and February 1, 2020, respectively. As of May 2, 2020, the Company had stand-by commercial letters of credit of $1,705 under the terms of the Revolving Line of Credit.

 

The Amended Credit Agreement contains customary affirmative and negative covenants, including covenants that limit the Company’s ability to incur, create or assume certain indebtedness, to create, incur or assume certain liens, to make certain investments, to make sales, transfers and dispositions of certain property and to undergo certain fundamental changes, including certain mergers, liquidations and consolidations. The Amended Credit Agreement also requires the Company to maintain a minimum availability at all times of not less than 10% of the gross borrowing base. The Amended Credit Agreement contains customary events of default. The Revolving Line of Credit matures on May 23, 2023.

 

As of May 2, 2020, the Revolving Line of Credit had $772 in deferred financing fees and as of February 1, 2020, the Revolving Line of Credit had $834 in deferred financing fees. During the 13 weeks ended May 2, 2020, the Company recognized $63 of non-cash interest expense with respect to the amortization of these deferred financing fees. During the 13 weeks ended May 4, 2019, the Company recognized $63 of non-cash interest expense with respect to the amortization of deferred financing fees.

 

For the 13 weeks ended May 2, 2020, gross borrowings under the Revolving Line of Credit were $274,959. For the 13 weeks ended May 4, 2019 gross borrowing under the Revolving Line of Credit were $185,616. For the 13 weeks ended May 2, 2020, gross paydowns under the Revolving Line of Credit were $266,798. For the 13 weeks ended May 4, 2019, gross paydowns under the Revolving Line of Credit were $189,280.  

(8) Long-Term Debt

Long-term debt consisted of the following as of May 2, 2020 and February 1, 2020:

 

 

 

 

 

 

 

 

 

 

 

May 2,

 

February 1,

 

 

    

2020

    

2020

 

Term loan

 

$

26,000

 

 

30,000

 

Less debt issuance costs

 

 

(261)

 

 

(283)

 

 

 

 

25,739

 

 

29,717

 

Less current portion, net of discount and debt issuance costs

 

 

(1,979)

 

 

(5,936)

 

Long-term portion

 

$

23,760

 

$

23,781

 

 

Term Loan

On May 23, 2018, Sportsman’s Warehouse, a wholly owned subsidiary of Holdings, as lead borrower, and Wells Fargo, with a consortium of banks led by Wells Fargo, entered into the Amended Credit Agreement.  The Amended Credit Agreement governs the Revolving Line of Credit and the Term Loan.  The Term Loan was issued at a price of 100% of the aggregate principal amount of $40,000 and has a maturity date of May 23, 2023.  Information on the Revolving Credit Facility is provided in Note 7.

 

The Term Loan bears interest at a rate of LIBOR plus 5.75%. The effective rate for the Term Loan as of May 2, 2020 was 6.75%

 

As of May 2, 2020, and February 1, 2020, the Term Loan had an outstanding balance of $26,000 and $30,000, respectively. The outstanding amounts under the Term Loan as of May 2, 2020 and February 1, 2020 are offset on the condensed consolidated balance sheets by debt issuance costs of $261 and $283, respectively.

 

During the 13 weeks ended May 2, 2020, the Company recognized $22 of non-cash interest expense with respect to the amortization of the deferred financing fees. During the 13 weeks ended May 4, 2019, the Company recognized $22 of non-cash interest expense with respect to the amortization of the deferred financing fees.  

 

During the 13 weeks ended May 2, 2020, the Company made the required quarterly payment on the Term Loan of $4,000.

 

13

Restricted Net Assets

The provisions of the Term Loan and the Revolving Line of Credit restrict all of the net assets of the Company’s consolidated subsidiaries, which constitute all of the net assets on the Company’s condensed consolidated balance sheet as of May 2, 2020, from being used to pay any dividends without prior written consent from the financial institutions party to the Company’s Term Loan and Revolving Line of Credit.

(9) Income Taxes

The Company recognized an income tax benefit of $849 and $2,003 in the 13 weeks ended May 2, 2020 and May 4, 2019, respectively. The Company’s effective tax rate for the 13 weeks ended May 2, 2020 and May 4, 2019 was 42.9% and 26.8%, respectively. The change in the effective tax rate for the 13 weeks ended May 2, 2020 was primarly due to near breakeven profit before tax for the period and various discrete items. The Company’s effective tax rate will generally differ from the U.S. Federal statutory rate of 21.0%, due to state taxes, permanent items, and discrete items relating to stock award deductions.

(10) Earnings Per Share

Basic earnings per share is calculated by dividing net income by the weighted-average number of shares of common stock outstanding, reduced by the number of shares repurchased and held in treasury, during the period. Diluted earnings per share represents basic earnings per share adjusted to include the potentially dilutive effect of outstanding share option awards, nonvested share awards and nonvested share unit awards.

 

The following table sets forth the computation of basic and diluted income per common share:

 

 

 

 

 

 

 

 

 

 

 

 

Thirteen Weeks Ended

 

 

 

 

 

May 2,

 

 

May 4,

 

 

 

    

 

2020

    

 

2019

    

 

Net loss

 

$

(1,130)

 

$

(5,459)

 

 

Weighted-average shares of common stock outstanding:

 

 

 

 

 

 

 

 

Basic

 

 

43,327

 

 

43,003

 

 

Dilutive effect of common stock equivalents

 

 

 —

 

 

 —

 

 

Diluted

 

 

43,327

 

 

43,003

 

 

Basic loss per share

 

$

(0.03)

 

$

(0.13)

 

 

Diluted loss per share

 

$

(0.03)

 

$

(0.13)

 

 

Restricted stock units considered anti-dilutive and excluded in the calculation

 

 

 6

 

 

155

 

 

 

 

(11) Stock-Based Compensation

 

Stock-Based Compensation

During the 13 weeks ended May 2, 2020 and May 4, 2019, the Company recognized total stock-based compensation expense of $736 and $453, respectively. Compensation expense related to the Company's stock-based payment awards is recognized in selling, general, and administrative expenses in the condensed consolidated statements of operations.

 

Employee Stock Plans

As of May 2, 2020, the number of shares available for awards under the 2019 Performance Incentive Plan (the “2019 Plan”) was 2,558. As of May 2, 2020, there were 1,309 unvested stock awards outstanding under the 2019 Plan.

 

Employee Stock Purchase Plan

The Company also has an Employee Stock Purchase Plan (“ESPP”) that was approved by shareholders in fiscal year 2015, under which 800 shares of common stock have been authorized. Shares are issued under the ESPP twice yearly at the end of each offering period. For the 13 weeks ended May 2, 2020, no shares were issued under the ESPP and the number of shares available for issuance was 446.

 

14

Nonvested Restricted Stock Awards

During the 13 weeks ended May 2, 2020 and May 4, 2019, the Company did not issue any nonvested restricted stock awards to employees.

The following table sets forth the rollforward of outstanding nonvested stock awards (per share amounts are not in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

Weighted

 

 

 

 

 

average

 

 

 

 

 

grant-date

 

 

    

Shares

    

fair value

 

Balance at February 2, 2019

 

26

 

$

11.25

 

Grants

 

 —

 

 

 —

 

Forfeitures

 

 —

 

 

 —

 

Vested

 

(26)

 

 

11.25

 

Balance at May 4, 2019

 

 —

 

$

 —

 

 

Nonvested Performance-Based Stock Awards

During the 13 weeks ended May 2, 2020, the Company issued 198 nonvested performance-based stock awards to employees at a weighted average grant date fair value of $5.63 per share. The nonvested performance-based stock awards issued to employees vest in full on the third anniversary of the grant date. The number of shares issued is contingent on management achieving fiscal year 2020, 2021, and 2022 performance targets for total revenue growth and adjusted EPS. If minimum threshold performance targets are not achieved, no shares will vest. The maximum number of shares subject to the award is 396, and the “target” number of shares subject to the award is 198 as reported below. Following the end of the performance period (fiscal years 2020, 2021, and 2022), the number of shares eligible to vest, based on actual performance, will be fixed and vesting will then be subject to each employee’s continued employment over the remaining service period.

 

During the 13 weeks ended May 4, 2019, the Company did not issue any nonvested performance-based stock awards.

 

The following table sets forth the rollforward of outstanding nonvested performance-based stock awards (per share amounts are not in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

Weighted

 

 

 

 

 

average

 

 

 

 

 

grant-date

 

 

    

Shares

    

fair value

 

Balance at February 1, 2020

 

250

 

$

3.66

 

Grants

 

198

 

 

5.63

 

Forfeitures

 

 —

 

 

 —

 

Vested

 

 —

 

 

 —

 

Balance at May 2, 2020

 

448

 

$

4.53

 

 

 

 

 

 

 

 

 

 

 

 

Weighted

 

 

 

 

 

average

 

 

 

 

 

grant-date

 

 

 

Shares

    

fair value

 

Balance at February 2, 2019

 

34

 

$

6.07

 

Grants

 

 —

 

 

 —

 

Forfeitures

 

 —

 

 

 —

 

Vested

 

(6)

 

 

11.25

 

Balance at May 4, 2019

 

28

 

$

4.91

 

 

15

Nonvested Stock Unit Awards

During the 13 weeks ended May 2, 2020, the Company issued 382 nonvested stock units to employees of the Company at an average value of $5.63 per share. The shares issued to employees of the Company vest over a three year period with one third of the shares vesting on each grant date anniversary.

 

During the 13 weeks ended May 4, 2019, the Company issued 157 nonvested stock units to employees of the Company at an average value of $4.89 per share.

 

The following table sets forth the rollforward of outstanding nonvested stock units (per share amounts are not in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

Weighted

 

 

 

 

 

average

 

 

 

 

 

grant-date

 

 

    

Shares

    

fair value

 

Balance at February 1, 2020

 

744

 

$

4.32

 

Grants

 

382

 

 

5.63

 

Forfeitures

 

(5)