SOURCE: Dover Saddlery

Dover Saddlery

August 08, 2013 16:15 ET

Dover Saddlery Reports Second Quarter 2013 Financial Results

LITTLETON, MA--(Marketwired - Aug 8, 2013) - Dover Saddlery, Inc. (NASDAQ: DOVR), the leading multi-channel retailer of equestrian products, today reported financial results for the second quarter ended June 30, 2013.

Second Quarter Results

Total revenues for the second quarter of 2013 increased 8.6%, or $1.8 million, to $22.9 million, compared with $21.1 million achieved in the same period in the prior year. Retail channel revenues increased 23.2%, or $2.2 million, to $11.7 million and same-store sales increased 4.2%. 

Net income for the quarter was $355,000, or $0.06 per diluted share, compared to $400,000, or $0.07 per diluted share, for the corresponding quarter of 2012.

"During the second quarter,we experienced strong sales in our retail stores," said Stephen L. Day, president and CEO of Dover Saddlery. "In mid-April, we had a very successful grand opening of our new store in Huntington, New York. Both long-time direct and new retail customers flocked to the new location and were delighted to have a Dover Saddlery tack store in their midst. This store will serve the very active equestrian community on Long Island and sales throughout the second quarter have been excellent. Direct sales were affected by cold weather at the start of the second quarter and were off by 1.5% for the three months ending June 30. However for the four weeks ending July 28, direct sales were 3% ahead of last year and substantially ahead of plan."

Year-to-Date Results

For the six months ending June 30, 2013, total revenues increased 4.3%, or $1.7 million, to $41.0 million, compared to $39.3 million for the same period in 2012. Revenues from the retail channel increased 15.8%, or $2.6 million, to $19.0 million and same-store sales increased 0.5%.

Net income (loss) for the six months ending June 30, 2013 decreased to $(183,000), or $(0.03) per diluted share, compared to $543,000, or $0.10 per share, for the corresponding period of 2012.

Business Outlook 2013

Dover Saddlery is planning to open three more stores in the fall of 2013, which will bring the total number of retail stores to twenty two. Until there is greater long-term visibility on sustainable economic conditions and consumer behavior, the Company is not providing guidance on other business prospects in 2013.

Today's Teleconference and Webcast

Dover Saddlery executives will host a conference call at 4:15 pm ET today, to discuss the results. Interested parties may access the call by dialing +1-877-712-7037 or may listen to the call live via webcast. To access the webcast please go to http://investor.shareholder.com/DOVR/events.cfm and click on the webcast icon.

About Dover Saddlery, Inc.
Dover Saddlery, Inc. (NASDAQ: DOVR) is the leading multi-channel retailer of equestrian products in the United States. Founded in 1975 in Wellesley, Massachusetts, by United States Equestrian team members, Dover Saddlery has grown to become The Source® for equestrian products. Dover offers a broad and distinctive selection of competitively priced, brand-name products for horse and rider through catalogs, the Internet and company-owned retail stores. Dover Saddlery, Inc. serves the English rider and through Smith Brothers, the Western rider. The Source®, Dover Saddlery® and Smith Brothers® are registered marks of Dover Saddlery.

For more information, please call 1-978-952-8062 or visit www.DoverSaddlery.com.

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 the Company's business outlook for fiscal 2013, overall revenue growth, sales in the direct channel, retail-store and same-store sales increases, 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 Saddler's Annual Report on Form 10-K for the fiscal year ended December 31, 2012. 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.

 
 
DOVER SADDLERY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share data)
(Unaudited)
           
  Three Months Ended     Six Months Ended  
  June 30,     June 30,     June 30,     June 30,  
  2013     2012     2013     2012  
                               
Revenues, net - direct $ 11,211     $ 11,605     $ 21,995     $ 22,905  
Revenues, net - retail stores   11,732       9,525       18,974       16,381  
Revenues, net - total $ 22,943     $ 21,130     $ 40,969     $ 39,286  
Cost of revenues   14,306       13,153       25,932       24,381  
Gross profit   8,637       7,977       15,037       14,905  
Selling, general and administrative expenses   7,810       7,117       15,075       13,654  
Income (loss) from operations   827       860       (38 )     1,251  
Interest expense, financing and other related costs, net   147       153       271       262  
Other investment income   (26 )     (24 )     (37 )     (31 )
Income (loss) before income tax provision (benefit)   706       731       (272 )     1,020  
Provision (benefit) for income taxes   351       331       (89 )     477  
Net income (loss) $ 355     $ 400     $ (183 )   $ 543  
                               
Net income (loss) per share                              
Basic $ 0.07     $ 0.07     $ (0.03 )   $ 0.10  
Diluted $ 0.06     $ 0.07     $ (0.03 )   $ 0.10  
Number of shares used in per share calculation                              
Basic   5,338,000       5,333,000       5,338,000       5,333,000  
Diluted   5,515,000       5,567,000       5,338,000       5,580,000  
                               
Other Operating Data:                              
                               
Number of retail stores(1)   19       16       19       16  
Capital expenditures   369       679       745       1,121  
Gross profit margin   37.6 %     37.8 %     36.7 %     37.9 %
 
(1) Includes eighteen Dover-branded stores and one Smith Brothers store.
 
 
 
DOVER SADDLERY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
 (In thousands, unaudited)
           
  Three Months Ended     Six Months Ended  
  June 30,   June 30,     June 30,     June 30,  
  2013   2012     2013     2012  
                             
Net income (loss) $ 355   $ 400     $ (183 )   $ 543  
Other comprehensive loss:                            
  Change in fair value of interest rate swap contract, net of tax   33     (20 )     50       (10 )
Total comprehensive income (loss) $ 388   $ 380     $ (133 )   $ 533  
                             
                             
 
DOVER SADDLERY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, unaudited)
             
    June 30,
2013
    Dec. 31,
2012
 
ASSETS                
Current assets:                
  Cash and cash equivalents   $ 254     $ 299  
  Accounts receivable     989       1,778  
  Inventory     22,493       19,915  
  Prepaid catalog costs     745       784  
  Prepaid expenses and other current assets     1,565       1,116  
  Deferred income taxes     317       300  
                 
Total current assets     26,363       24,192  
                 
Net property and equipment     5,232       5,034  
                 
Other assets:                
  Deferred income taxes     1,085       1,201  
  Intangibles and other assets, net     832       784  
Total other assets     1,917       1,985  
Total assets   $ 33,512     $ 31,211  
                 
LIABILITIES AND STOCKHOLDERS' EQUITY                
Current liabilities:                
  Current portion of capital lease obligations and outstanding checks   $ 568     $ 337  
  Current portion - Term notes     786       589  
  Current portion - Capex term loan     468       --  
  Accounts payable     1,617       1,837  
  Accrued expenses and other current liabilities     4,689       6,348  
  Income taxes payable     --       936  
Total current liabilities     8,128       10,047  
                 
Long-term liabilities:                
  Revolving line of credit     4,452       1,515  
  Capex term loan, net of current portion     1,794       --  
  Term notes, net of current portion     4,518       4,911  
  Capital lease obligation, net of current portion     92       121  
  Interest rate swap contract     223       320  
Total long-term liabilities     11,079       6,867  
Stockholders' equity:                
  Common stock, par value $0.0001 per share; 15,000,000 shares authorized; 6,134,043 and 6,133,343 issued and 5,338,178 and 5,337,478 outstanding as of June 30, 2013 and December 31, 2012, respectively     1       1  
Additional paid in capital     46,114       45,973  
Treasury stock, 795,865 shares at cost     (6,082 )     (6,082 )
Other comprehensive loss     (139 )     (189 )
Accumulated deficit     (25,589 )     (25,406 )
Total stockholders' equity     14,305       14,297  
Total liabilities and stockholders' equity   $ 33,512     $ 31,211  
                 
                 

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     Six Months Ended  
    June 30,
2013
    June 30,
2012
    June 30,
2013
    June 30,
2012
 
   
                                 
Net income (loss)   $ 355*     $ 400*     $ (183)**     $ 543**  
Depreciation     284       217       547       424  
Amortization of intangible assets     17       --       34       --  
Stock-based compensation     70       62       139       124  
Interest expense, financing and other related costs, net     147       153       271       262  
Other investment income     (26 )     (24 )     (37 )     (31 )
Provision for income taxes     351       331       (89 )     477  
Adjusted EBITDA   $ 1,198*     $ 1,139*     $ 682**     $ 1,799**  
                                 
                                 

(*) For the three months ended June 30, 2013 gift card breakage income was $30,146. For the three months ended June 30, 2012 gift card breakage income was $41,632.

(**) For the six months ended June 30, 2013 gift card breakage income was $60,292. For the six months ended June 30, 2012 includes the cumulative impact of the change in accounting for gift card breakage income of $441,362 plus gift card breakage income for the period of $83,265.

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