SOURCE: Dover Saddlery

Dover Saddlery

March 25, 2015 16:00 ET

Dover Saddlery Announces Fourth Quarter and Full Year 2014 Financial Results

LITTLETON, MA--(Marketwired - Mar 25, 2015) - Dover Saddlery, Inc. (NASDAQ: DOVR), the leading omni-channel retailer of equestrian products, today announced financial results for the fourth quarter and fiscal year ended December 31, 2014.

Fourth quarter results

Total revenues for the fourth quarter of 2014 increased 9.3% to $33.1 million over the same period in the prior year. Revenues from the retail channel increased 14.8% to $15.0 million, and revenues from the direct channel increased 5.0% to $18.0 million. Same-store sales increased 4.9% in the fourth quarter of 2014.

Net income for the quarter was $1,302,000, or $0.23 per diluted share, compared to $1,331,000 or $0.23 achieved in the corresponding quarter of the prior year. "In November, we opened a very large Dover Saddlery store in an excellent location in Wellington, Florida," said Stephen L. Day, president and chief executive officer of Dover Saddlery. "Wellington has become the global center for equestrian activity during the winter months and as expected this store is performing extremely well."

Full Year Results

Total revenues for the fiscal year 2014 increased 8.5% to $101.8 million, from $93.8 million achieved during 2013.

Retail store revenues increased 16.0% to $50.4 million. This increase was due to new store openings and same-store sales increasing 4.3%. The company opened three Dover Saddlery retail stores during 2014, in Cincinnati, OH, Houston, TX and Wellington, FL, bringing the total number of retail stores to twenty-five. Revenues from the direct channel increased 2.0% to $51.4 million.

Net income for fiscal 2014 was $1,231,000, or $0.21 per diluted share, compared to $1,591,000, or $0.29 per diluted share, achieved in the fiscal year 2013. Adjusted EBITDA for the fiscal year 2014 was $4.9 million, compared to $5.0 million achieved in 2013. A reconciliation of the net income calculated in accordance with GAAP and the non-GAAP Adjusted EBITDA measure is provided in the table accompanying this press release. 

Business Outlook

Dover Saddlery is planning to open five to seven retail stores in 2015. Until there is greater long-term visibility on sustainable economic conditions and consumer behavior, the Company is not providing guidance on other business prospects.

Strategic Initiatives

Since the Company's announcement in September 2013 of a strategic initiatives review, its board of directors and senior management have conducted extensive evaluations of the Company's existing and projected risks, opportunities and strategic alternatives. These deliberations have resulted in a current round of negotiations for a transaction in which all of Dover's shares would be acquired. Dover cautioned that no definitive agreement has been signed and the transaction terms remain under discussion.

There is no assurance that a definitive agreement will be reached; that the current transaction focus or the board's exploration of other strategic alternatives will result in any transaction being pursued, entered into or consummated; and there is no set timetable for the strategic review process. The Company does not intend to comment further regarding its evaluation of strategic alternatives until such time as the board has determined the outcome of the process or otherwise has deemed that disclosure is appropriate.

Today's Teleconference and Webcast
Dover Saddlery will be hosting a conference call at 4:30 P.M. ET today to discuss the fourth quarter and full year 2014 results. Investors are invited to listen to the earnings conference call over the Internet through the company's website at This webcast will be archived for a year.

Forward-Looking Statements

This press release includes "forward-looking statements" within the meaning of section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including without limitation statements made about a potential transaction, the outcome of the strategic initiatives process, the Company's business outlook for fiscal 2015, the prospects for overall revenue growth, profitability, consumer sentiment and the opening of new stores. All statements other than statements of historical fact included in this press release regarding the company's strategies, plans, objectives, expectations, and future operating results are forward-looking statements. Although Dover believes that the expectations reflected in such forward-looking statements are reasonable at this time, it can give no assurance that such expectations will prove to have been correct. These forward-looking statements involve significant risks and uncertainties, including those discussed in this release and others that can be found in "Item 1A Risk Factors" of Dover Saddlery's Annual Report on Form 10-K for the fiscal year ended December 31, 2013. Dover Saddlery is providing this information as of this date and does not undertake any obligation to update any forward-looking statements contained in this document as a result of new information, future events or otherwise. No forward-looking statement can be guaranteed and actual results may differ materially from those Dover Saddlery projects.

(In thousands, except share and per share data)  
    Three Months Ended (unaudited)     Twelve Months Ended  
    Dec. 31,     Dec. 31,     Dec. 31,     Dec. 31,  
    2014     2013     2014     2013  
Revenues, net- direct   $ 18,036     $ 17,171     $ 51,375     $ 50,346  
Revenues, net - retail stores     15,028       13,088       50,448       43,497  
Revenues, net - total   $ 33,064     $ 30,259     $ 101,823     $ 93,843  
Cost of revenues     19,560       17,151       62,320       57,127  
Gross profit     13,504       13,108       39,503       36,716  
Selling, general and administrative expenses     10,839       10,537       36,590       33,252  
Income from operations     2,665       2,571       2,913       3,464  
Interest expense, financing and other related costs, net     174       150       655       576  
Other investment (income) loss     45       46       (14 )     13  
Income before income tax provision     2,446       2,375       2,272       2,875  
Provision for income taxes     1,144       1,044       1,041       1,284  
Net income   $ 1,302     $ 1,331     $ 1,231     $ 1,591  
Net income per share                                
Basic   $ 0.24     $ 0.25     $ 0.23     $ 0.30  
Diluted   $ 0.23     $ 0.23     $ 0.21     $ 0.29  
Number of shares used in per share calculation                                
Basic     5,399,000       5,339,000       5,370,000       5,343,000  
Diluted     5,714,000       5,703,000       5,740,000       5,548,000  
Other Operating Data:                                
Number of retail stores(1)     25       22       25       22  
Capital expenditures     880       579       2,729       1,891  
Gross profit margin     40.8 %     43.3 %     38.8 %     39.1 %

(1) Includes twenty-four Dover-branded stores and one Smith Brothers store.

(In thousands)
    Three Months Ended (unaudited)   Twelve Months Ended
    Dec. 31,   Dec. 31,   Dec. 31,   Dec. 31,
    2014   2013   2014   2013
Net income   $ 1,302   $ 1,331   $ 1,231   $ 1,591
Other comprehensive loss:                        
  Change in fair value of interest rate swap contract, net of tax     4     13     34     66
Total comprehensive income   $ 1,306   $ 1,344   $ 1,265   $ 1,717
(In thousands, except share and per share data)  
    Dec. 31,
    Dec. 31,
Current assets:                
  Cash and cash equivalents   $ 315     $ 319  
  Accounts receivable     1,644       1,300  
  Inventory     28,260       23,633  
  Prepaid catalog costs     1,267       974  
  Prepaid expenses and other current assets     1,943       1,277  
  Deferred income taxes     347       355  
Total current assets     33,776       27,858  
Net property and equipment     7,019       5,763  
Other assets:                
  Deferred income taxes     1,772       1,495  
  Intangibles and other assets, net     717       758  
Total other assets     2,489       2,253  
Total assets   $ 43,284     $ 35,874  
Current liabilities:                
  Current portion of capital lease obligations and outstanding checks   $ 1,522     $ 290  
  Current portion - term notes     786       786  
  Current portion - Capex term loan     792       630  
  Accounts payable     2,577       2,352  
  Accrued expenses and other current liabilities     7,432       7,201  
  Income taxes payable     551       1,006  
Total current liabilities     13,660       12,265  
Long-term liabilities:                
  Revolving line of credit     3,992       95  
  Capex term loan, net of current portion     4,006       2,818  
  Term notes, net of current portion     3,339       4,125  
  Capital lease obligation, net of current portion     57       96  
  Interest rate swap contract     128       189  
Total long-term liabilities     11,522       7,323  
Stockholders' equity:                
  Common stock, par value $0.0001 per share; 15,000,000 shares authorized; 6,205,357 and 6,147,263 issued and 5,409,492 and 5,351,398 outstanding as of December 31, 2014 and 2013, respectively     1       1  
  Additional paid in capital     46,856       46,304  
  Treasury stock, 795,865 shares at cost     (6,082 )     (6,082 )
  Other comprehensive loss     (89 )     (122 )
  Accumulated deficit     (22,584 )     (23,815 )
  Total stockholders' equity     18,102       16,285  
  Total liabilities and stockholders' equity   $ 43,284     $ 35,874  

Non-GAAP Financial Measures and Information

From time to time, in addition to financial results determined in accordance with generally accepted accounting principles in the United States ("GAAP"), the Company provides financial information determined by methods other than in accordance with GAAP. The Company's management uses these non-GAAP measures in its analysis of the Company's performance and ongoing operations. The Company believes that these non-GAAP operating measures supplement our GAAP financial information and provide useful information to investors for evaluating the Company's operating results and trends that may be affecting the Company's business, as they allow investors to more readily compare our operations to prior financial results and our future performance. These disclosures should not be viewed as a substitute for operating results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies.

When we use the term "Adjusted EBITDA," we are referring to net income minus interest income, investment income and other income plus interest expense, income taxes, non-cash stock-based compensation, depreciation, amortization and other investment loss. We present Adjusted EBITDA because we consider it an important measure of our performance, and the Company ties its executive and employee bonus pools directly to this measure. We also believe it is frequently used by securities analysts, investors and other interested parties in the evaluation of companies in our industry.

The following table reconciles net income to Adjusted EBITDA (in thousands):

    Three Months Ended (unaudited)   Twelve Months Ended
    Dec. 31,
  Dec. 31,
  Dec. 31,
    Dec. 31,
Net income   $ 1,302   $ 1,331   $ 1,231     $ 1,591
Depreciation     396     319     1,473       1,162
Amortization of intangible assets     11     17     64       69
Stock-based compensation     109     91     440       310
Interest expense, financing and other related costs, net     174     150     655       576
Other investment (income) loss     45     46     (14 )     13
Provision for income taxes     1,144     1,044     1,041       1,284
Adjusted EBITDA   $ 3,181   $ 2,998   $ 4,890     $ 5,005

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