SOURCE: Dover Saddlery

Dover Saddlery

November 13, 2012 16:00 ET

Dover Saddlery Reports Third Quarter 2012 Financial Results

LITTLETON, MA--(Marketwire - Nov 13, 2012) -  Dover Saddlery, Inc. (NASDAQ: DOVR), the leading multichannel retailer of equestrian products, today reported financial results for the third quarter ended September 30, 2012.

Total revenues for the third quarter of 2012 increased 4.4% or $0.9 million to $20.4 million, compared with $19.5 million achieved in in the same period in 2011. Retail store channel revenues increased 20.0%, or $1.6 million, to $9.8 million, primarily as a result of new store openings, while same-store sales increased 6.6% over the same period in 2011. Net income for the third quarter was $170,000, or $0.03 per diluted share, compared to $332,000 or $0.06 per diluted share for the third quarter of 2011.

Year-to-Date Results
For the first nine months of 2012, total revenues increased 4.5% to $59.6 million, from $57.0 million achieved for the same period in 2011. Revenues from the retail store channel increased 21.3% to $26.0 million, attributable to new store openings and an increase of same-store sales of 7.2%. Net income for the nine months ended September 30, 2012 decreased to $695,000, or $0.12 per diluted share, compared to $1,084,000, or $0.20 per diluted share for the corresponding period of 2011.

"Retail sales continued to grow during the third quarter, reaching 48% of total revenues," commented Stephen L. Day, president and CEO of Dover Saddlery. "In September, we opened our first Dover Saddlery store in Minnesota, bringing the number of Dover Saddlery retail stores to sixteen. Direct sales, however, continued to show some softness which we are addressing with better promotional offers, digital catalogs, and new features on our website to enhance the online shopping experience."

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 earnings release.

Business Outlook

Due to the current uncertain economic environment, the Company is not providing any financial guidance.

Today's Teleconference and Webcast

Dover Saddlery will be hosting a conference call at 4:30 pm, today to discuss the third quarter 2012 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, the prospects for overall revenue growth, gross margins and 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 Saddler's Annual Report on Form 10-K for the fiscal year ended December 31, 2011. 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 INCOME  
(In thousands, except share and per share data)  
(Unaudited)  
             
    Three Months Ended     Nine Months Ended  
    Sept. 30,     Sept. 30,     Sept. 30,     Sept. 30,  
    2012     2011     2012     2011  
                                 
Revenues, net - direct   $ 10,549     $ 11,321     $ 33,584     $ 35,561  
Revenues, net - retail stores     9,820       8,184       26,044       21,477  
Revenues, net - total   $ 20,369     $ 19,505     $ 59,628     $ 57,038  
Cost of revenues     12,842       12,056       37,224       35,540  
Gross profit     7,527       7,449       22,404       21,498  
Selling, general and administrative expenses     7,011       6,780       20,665       19,008  
Income from operations     516       669       1,739       2,490  
Interest expense, financing and other related costs, net     128       124       390       626  
Other investment (income) loss, net     15       12       (16 )     (30 )
Income before income tax provision     373       533       1,365       1,894  
Provision for income taxes     203       201       670       810  
Net income   $ 170     $ 332     $ 695     $ 1,084  
                                 
Net income per share                                
Basic   $ 0.03     $ 0.06     $ 0.13     $ 0.20  
Diluted   $ 0.03     $ 0.06     $ 0.12     $ 0.20  
Number of shares used in per share calculation                                
Basic     5,333,000       5,289,000       5,333,000       5,288,000  
Diluted     5,524,000       5,477,000       5,560,000       5,485,000  
                                 
Other Operating Data:                                
                                 
Number of retail stores(1)     17       14       17       14  
Capital expenditures     716       287       1,837       689  
Gross profit margin     37.0 %     38.2 %     37.6 %     37.7 %
                                 
     
(1)   As of September 30, 2012, includes sixteen Dover-branded stores and one Smith Brothers store. As of September 30, 2011, includes thirteen Dover-branded stores and one Smith Brothers store.
   
   
   
DOVER SADDLERY, INC. AND SUBSIDIARIES  
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME  
(In thousands, unaudited)  
   
    Three Months Ended     Nine Months Ended  
    Sept. 30,     Sept. 30,     Sept. 30,     Sept. 30,  
    2012     2011     2012     2011  
                                 
Net income   $ 170     $ 332     $ 695     $ 1,084  
Other comprehensive loss:                                
  Change in fair value of interest rate swap contract, net of tax     (2 )     (85 )     (12 )     (188 )
Total comprehensive income   $ 168     $ 247     $ 683     $ 896  
                                 
                                 
                                 
DOVER SADDLERY, INC. AND SUBSIDIARIES  
CONDENSED CONSOLIDATED BALANCE SHEETS  
(In thousands, unaudited)  
    Sept. 30,
2012
    Dec. 31,
2011
 
ASSETS                
Current assets:                
  Cash and cash equivalents   $ 255     $ 313  
  Accounts receivable     1,795       811  
  Inventory     20,449       19,383  
  Prepaid catalog costs     1,300       1,273  
  Prepaid expenses and other current assets     1,715       896  
  Deferred income taxes     111       261  
                 
Total current assets     25,625       22,937  
                 
Net property and equipment     4,843       3,667  
                 
Other assets:                
  Deferred income taxes     1,108       1,018  
  Intangibles and other assets, net     775       571  
Total other assets     1,883       1,589  
Total assets   $ 32,351     $ 28,193  
                 
LIABILITIES AND STOCKHOLDERS' EQUITY                
Current liabilities:                
  Current portion of capital lease obligations and outstanding checks   $ 830     $ 1,100  
  Accounts payable     2,093       2,201  
  Accrued expenses and other current liabilities     5,061       5,741  
  Income taxes payable     -       308  
Total current liabilities     7,984       9,350  
                 
Long-term liabilities:                
  Revolving line of credit     5,487       987  
  Term note     5,500       5,500  
  Capital lease obligation, net of current portion     147       16  
  Interest rate swap contract     344       322  
Total long-term liabilities     11,478       6,825  
Stockholders' equity:                
  Common stock, par value $0.0001 per share; 15,000,000 shares authorized; 5,334,834 and 5,332,738 issued and outstanding as of September 30, 2012 and December 31, 2011, respectively     1       1  
Additional paid in capital     45,905       45,716  
Treasury stock, 795,865 shares at cost     (6,082 )     (6,082 )
Other comprehensive loss     (202 )     (190 )
Accumulated deficit     (26,733 )     (27,427 )
Total stockholders' equity     12,889       12,018  
Total liabilities and stockholders' equity   $ 32,351     $ 28,193  
                 

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   Nine Months Ended  
    Sept. 30,
2012
  Sept. 30,
2011
  Sept. 30,
2012
    Sept. 30,
2011
 
   
                             
                             
Net income   $ 170*   $ 332   $ 695**     $ 1,084  
Depreciation     237     188     661       554  
Amortization of intangible assets     _     2     -       5  
Stock-based compensation     62     62     186       186  
Interest expense, financing and other related costs, net     128     124     390       626  
Other investment (income) loss, net     15     12     (16 )     (30 )
Provision for income taxes     203     201     670       810  
Adjusted EBITDA   $ 815*   $ 921   $ 2,586**     $ 3,235  
                             
(*)   Includes gift card breakage income of $43,088 for the three months ended September 30, 2012. There was no breakage recorded for the same period in 2011.
(**)   Includes the cumulative impact of the change in gift card breakage income of $684,007 recorded in the first quarter of 2012 and current year breakage income for the nine months ended September 30, 2012 of $129,262. There was no breakage recorded for the same period in 2011.
     

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