SOURCE: Dover Saddlery

Dover Saddlery

August 11, 2014 16:00 ET

Dover Saddlery Reports Second Quarter 2014 Financial Results

LITTLETON, MA--(Marketwired - Aug 11, 2014) - Dover Saddlery, Inc. (NASDAQ: DOVR), the leading omni-channel retailer of equestrian products, today reported financial results for the second quarter ended June 30, 2014.

Second Quarter Results

Total revenues for the second quarter of 2014 increased 6.2% to $24.4 million, compared to revenues of $22.9 million achieved in the second quarter of 2013. Retail store channel revenues increased 13.2% to $13.3 million, primarily due to the opening of new stores, while same-store sales increased 5.8% versus the second quarter of 2013.

Net income for the second quarter decreased to $261,000, compared to $355,000 achieved in the second quarter of 2013. Resulting earnings per diluted share decreased to $0.05, versus earnings per diluted share of $0.06 in the corresponding period of the prior year.

"The second quarter was a very strong one for our retail channel," said Stephen L. Day, president and CEO of Dover Saddlery, "which helped power a recovery in earnings per diluted share to $0.05, from a loss of ($0.10) in the first quarter. Our stores are well-stocked, so that along with our outstanding customer service, we can assist our customers with all their needs during show season. Our retail stores are outperforming the domestic sporting goods industry, with our same-stores sales growing at 5.8% versus an average decline of 4.5% for the industry, according to data from the U.S. Department of Commerce."

Adjusted EBITDA for the second quarter of 2014 declined to $1,102,000, from $1,198,000 in the second quarter of 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.

Year-to-Date Results

For the first six months of 2014, total revenues increased 7.6% to $44.1 million from $41.0 million achieved in the same period in 2013. Revenues from the retail channel increased 16.4% to $22.1 million and same-store sales increased 5.0%. Net loss for the first six months of 2014 was ($281,000) compared to ($183,000) for the prior period. The resulting loss per diluted share increased to $(0.05) from $(0.03) in the first half of 2013.

Business Outlook 2014

Dover Saddlery is planning to open four to six retail stores in 2014. Until there is greater long-term visibility on sustainable economic conditions and consumer behavior, the Company is not providing guidance on other business prospects.

Today's Teleconference and Webcast

Dover Saddlery will be hosting a conference call at 4:30 P.M. EDT today to discuss the first quarter 2014 results. Investors are invited to listen to the earnings conference call over the Internet through the company's website at http://investor.shareholder.com/DOVR/, this web cast will be archived for a year.

About Dover Saddlery, Inc. Dover Saddlery, Inc. (NASDAQ: DOVR) is the leading multichannel 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 2014, the prospects for overall revenue growth, growth and relative performance of the retail channel, profitability, 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.

 
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,  
    2014     2013     2014     2013  
                         
Revenues, net - direct   $ 11,092     $ 11,211     $ 22,004     $ 21,995  
Revenues, net - retail stores     13,281       11,732       22,081       18,974  
Revenues, net - total   $ 24,373     $ 22,943       44,085     $ 40,969  
Cost of revenues     15,005       14,306       27,642       25,932  
Gross profit     9,368       8,637       16,443       15,037  
Selling, general and administrative expenses     8,747       7,810       16,772       15,075  
Income (loss) from operations     621       827       (329 )     (38 )
Interest expense, financing and other related costs, net     168       147       309       271  
Other investment income     (56 )     (26 )     (55 )     (37 )
Income (loss) before income tax provision (benefit)     509       706       (583 )     (272 )
Provision (benefit) for income taxes     248       351       (302 )     (89 )
Net income (loss)   $ 261     $ 355     $ (281 )   $ (183 )
                                 
Net income (loss) per share                                
Basic   $ 0.05     $ 0.07     $ (0.05 )   $ (0.03 )
Diluted   $ 0.05     $ 0.06     $ (0.05 )   $ (0.03 )
Number of shares used in per share calculation                                
Basic     5,364,000       5,338,000       5,358,000       5,338,000  
Diluted     5,771,000       5,515,000       5,358,000       5,338,000  
                                 
Other Operating Data:                                
                                 
Number of retail stores(1)     22       19       22       19  
Capital expenditures     586       369       925       745  
Gross profit margin     38.4 %     37.6 %     37.3 %     36.7 %
                                 

(1) Includes twenty-one 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,  
    2014   2013   2014     2013  
                     
Net income (loss)   $ 261   $ 355   $ (281 )   $ (183 )
Other comprehensive loss:                            
  Change in fair value of interest rate swap contract, net of tax     4     33     13       50  
Total comprehensive income (loss)   $ 265   $ 388   $ (268 )   $ (133 )
                             
 
 
DOVER SADDLERY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
(Unaudited)
 
 
    June 30,
2014
    Dec. 31,
2013
 
ASSETS            
Current assets:                
  Cash and cash equivalents   $ 209     $ 319  
  Accounts receivable     1,161       1,300  
  Inventory     27,301       23,633  
  Prepaid catalog costs     1,013       974  
  Prepaid expenses and other current assets     2,436       1,277  
  Deferred income taxes     354       355  
                 
Total current assets     32,474       27,858  
                 
Net property and equipment     5,993       5,763  
                 
Other assets:                
  Deferred income taxes     1,410       1,495  
  Intangibles and other assets, net     782       758  
Total other assets     2,192       2,253  
Total assets   $ 40,659     $ 35,874  
                 
LIABILITIES AND STOCKHOLDERS' EQUITY                
Current liabilities:                
  Current portion of capital lease obligations and outstanding checks   $ 1,005     $ 290  
  Current portion - term notes     786       786  
  Current portion - Capex term loan     792       630  
  Accounts payable     2,191       2,352  
  Accrued expenses and other current liabilities     5,392       7,201  
  Income taxes payable     -       1,006  
Total current liabilities     10,166       12,265  
                 
Long-term liabilities:                
  Revolving line of credit     7,835       95  
  Capex term loan, net of current portion     2,422       2,818  
  Term notes, net of current portion     3,732       4,125  
  Capital lease obligation, net of current portion     76       96  
  Interest rate swap contract     166       189  
Total long-term liabilities     14,231       7,323  
Stockholders' equity:                
  Common stock, par value $0.0001 per share; 15,000,000 shares authorized; 6,160,103 and 6,147,263 issued and 5,364,238 and 5,351,398 outstanding as of June 30, 2014 and December 31, 2013, respectively     1       1  
Additional paid in capital     46,548       46,304  
Treasury stock, 795,865 shares at cost     (6,082 )     (6,082 )
Other comprehensive loss     (109 )     (122 )
Accumulated deficit     (24,096 )     (23,815 )
Total stockholders' equity     16,262       16,285  
Total liabilities and stockholders' equity   $ 40,659     $ 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     Six Months Ended  
    June 30,
2014
    June 30,
2013
    June 30,
2014
    June 30,
2013
 
   
                         
                                 
Net income (loss)   $ 261     $ 355     $ (281 )   $ (183 )
Depreciation     353       284       695       547  
Amortization of intangible assets     18       17       37       34  
Stock-based compensation     110       70       220       139  
Interest expense, financing and other related costs, net     168       147       309       271  
Other investment income     (56 )     (26 )     (55 )     (37 )
Provision (Benefit) for income taxes     248       351       (302 )     (89 )
Adjusted EBITDA   $ 1,102     $ 1,198     $ 623     $ 682  
                                 

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