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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 October 30, 2021

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: (801566-6681

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 December 8, 2021, the registrant had 43,879,984 shares of common stock, $0.01 par value per share, outstanding.

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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 Statements 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

20

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

30

Item 4.

Controls and Procedures

30

PART II. OTHER INFORMATION

Item 1.

Legal Proceedings

32

Item 1A.

Risk Factors

32

Item 5.

Exhibits

33

Signatures

34

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 third quarters ended October 30, 2021 and October 31, 2020 both consisted of 13 weeks and are referred to herein as the third quarter of fiscal year 2021 and the third quarter of fiscal year 2020, respectively. Fiscal year 2021 contains 52 weeks of operations and will end on January 29, 2022. Fiscal year 2020 contained 52 weeks of operations and ended on January 30, 2021.

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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,” “positioned,” “potential,” “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 potential impact of the termination of our merger agreement with Great Outdoors Group, LLC, including any impact on our stock price, business, financial condition and results of operations, and the potential negative impact to our business and employee relationships;
current and future government regulations, in particular regulations relating to the sale of firearms and ammunition, which may impact the supply and demand for our products and our ability to conduct our business;
the impact of COVID-19 pandemic on our operations;
our retail-based business model which is impacted by general economic and market conditions and economic, market and financial uncertainties that may cause a decline in consumer spending;
our concentration of stores in the Western United States which makes us susceptible to adverse conditions in this region, and could affect our sales and cause our operating results to suffer;
the highly fragmented and competitive industry in which we operate and the 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; and
our entrance into new markets or operations in existing markets, which may not be successful.

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 January 30, 2021 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

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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

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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)

October 30,

January 30,

    

2021

    

2021

 

Assets

Current assets:

Cash

$

2,532

$

65,525

Accounts receivable, net

684

581

Merchandise inventories

428,497

243,434

Prepaid expenses and other

15,706

15,113

Total current assets

447,419

324,653

Operating lease right of use asset

241,951

235,262

Property and equipment, net

123,457

99,118

Deferred income taxes

124

Goodwill

1,496

1,496

Definite lived intangibles, net

267

289

Total assets

$

814,714

$

660,818

Liabilities and Stockholders' Equity

Current liabilities:

Accounts payable

$

123,510

$

77,441

Accrued expenses

105,289

109,056

Income taxes payable

2,500

4,917

Operating lease liability, current

39,790

36,014

Revolving line of credit

57,551

Total current liabilities

328,640

227,428

Long-term liabilities:

Deferred income taxes

434

Operating lease liability, noncurrent

231,498

228,296

Total long-term liabilities

231,498

228,730

Total liabilities

560,138

456,158

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; 43,879 and 43,623 shares issued and outstanding, respectively

438

436

Additional paid-in capital

89,693

89,815

Accumulated earnings

164,445

114,409

Total stockholders' equity

254,576

204,660

Total liabilities and stockholders' equity

$

814,714

$

660,818

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

4

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SPORTSMAN'S WAREHOUSE HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Amounts in Thousands Except Per Share Data

(unaudited)

Thirteen Weeks Ended

Thirty-Nine Weeks Ended

October 30,

October 31,

October 30,

October 31,

2021

2020

2021

2020

Net sales

$

401,014

$

385,748

$

1,089,784

$

1,013,572

Cost of goods sold

271,392

255,166

736,061

679,122

Gross profit

129,622

130,582

353,723

334,450

Selling, general, and administrative expenses

99,974

92,252

286,263

251,077

Income from operations

29,648

38,330

67,460

83,373

Bargain purchase gain

(2,218)

(2,218)

Interest expense

413

536

905

3,088

Income before income taxes

29,235

40,012

66,555

82,503

Income tax expense

7,372

9,530

16,519

20,690

Net income

$

21,863

$

30,482

$

50,036

$

61,813

Earnings per share:

Basic

$

0.50

$

0.70

$

1.14

$

1.42

Diluted

$

0.49

$

0.68

$

1.13

$

1.40

Weighted average shares outstanding:

Basic

43,878

43,609

43,809

43,490

Diluted

44,582

44,510

44,471

44,260

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

5

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SPORTSMAN'S WAREHOUSE HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

Amounts in Thousands

(unaudited)

For the Thirteen Weeks Ended October 30, 2021 and October 31, 2020

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 August 1, 2020

43,591

$

436

$

$

87,941

$

54,360

$

142,737

Stock based compensation

882

882

Net Income

30,482

30,482

Balance at October 31, 2020

43,591

$

436

$

$

88,823

$

84,842

$

174,101

Balance at July 31, 2021

43,831

$

438

$

$

89,587

$

142,582

$

232,607

Payment of withholdings on restricted stock units

(88)

(88)

Stock based compensation

48

194

194

Net income

21,863

21,863

Balance at October 30, 2021

43,879

$

438

$

$

89,693

$

164,445

$

254,576

For the Thirty-Nine Weeks Ended October 30, 2021 and October 31, 2020

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 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)

Issuance of common stock for cash per employee stock purchase plan

40

273

273

Stock based compensation

2,436

2,436

Net income

61,813

61,813

Balance at October 31, 2020

43,591

$

436

$

$

88,823

$

84,842

$

174,101

Balance at January 30, 2021

43,623

$

436

$

$

89,815

$

114,409

$

204,660

Vesting of restricted stock units

256

2

(2)

Payment of withholdings on restricted stock units

(2,356)

(2,356)

Stock based compensation

2,236

2,236

Net income

50,036

50,036

Balance at October 30, 2021

43,879

$

438

$

$

89,693

$

164,445

$

254,576


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

6

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SPORTSMAN'S WAREHOUSE HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Amounts in Thousands

(unaudited)

Thirty-Nine Weeks Ended

October 30,

October 31,

    

2021

2020

Cash flows from operating activities:

Net income

$

50,036

$

61,813

Adjustments to reconcile net income to net cash (used in) provided by operating activities:

Depreciation of property and equipment

18,778

15,992

Amortization of deferred financing fees

188

422

Amortization of definite lived intangible

23

21

Loss on asset dispositions

937

Gain on bargain purchase

(2,218)

Noncash lease expense

21,204

17,760

Deferred income taxes

(558)

2,801

Stock-based compensation

2,236

2,436

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

Accounts receivable, net

(103)

442

Operating lease liabilities

(20,915)

(20,781)

Merchandise inventories

(185,063)

(38,887)

Prepaid expenses and other

(781)

(2,021)

Accounts payable

41,723

94,900

Accrued expenses

(2,694)

31,992

Income taxes payable and receivable

(2,417)

6,127

Net cash (used in) provided by operating activities

(78,343)

171,736

Cash flows from investing activities:

Purchase of property and equipment, net of amounts acquired

(38,463)

(15,394)

Acquisition of Field and Stream stores, net of cash acquired

(4,778)

Net cash used in investing activities

(38,463)

(20,172)

Cash flows from financing activities:

Net borrowings/ (payments) on line of credit

57,551

(116,078)

Increase in book overdraft, net

(1,382)

4,559

Proceeds from issuance of common stock per employee stock purchase plan

273

Payment of withholdings on restricted stock units

(2,356)

(689)

Principal payments on long-term debt

(22,000)

Net cash provided by (used in) financing activities

53,813

(133,935)

Net change in cash

(62,993)

17,629

Cash at beginning of period

65,525

1,685

Cash at end of period

$

2,532

$

19,314

Supplemental disclosures of cash flow information:

Cash paid during the period for:

Interest, net of amounts capitalized

$

905

$

3,087

Income taxes, net of refunds

19,494

11,763

Supplemental schedule of noncash activities:

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

$

27,979

$

33,392

remeasurement of existing leases and addition of new leases

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

$

6,606

$

1,991

Payable to seller relating to acquisition of Field and Stream stores

$

$

1,774

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

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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 October 30, 2021, the Company operated 119 stores in 29 states. The Company also operates an e-commerce platform at www.sportsmans.com. The Company’s stores and website are aggregated into one 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 January 30, 2021 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 October 30, 2021 are not necessarily indicative of the results to be obtained for the year ending January 29, 2022. 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 January 30, 2021 filed with the SEC on April 2, 2021 (the “Fiscal 2020 Form 10-K”).

Impact of COVID-19 Pandemic

Beginning in March 2020, the Company reduced store hours to allow sufficient time to restock its shelves and perform additional cleaning, and the Company also limited the number of customers in its stores at any one time. During the second quarter of fiscal 2020, the Company returned to normal operating hours in each of its stores and continues to operate normally as of the end of the third quarter of fiscal 2021.

(2) Summary of Significant Accounting Policies

The Company’s significant accounting policies are described in Note 2 to the Company’s Fiscal 2020 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 March 2020, the Financial Accounting Standards Board issued Accounting Standards Update (“ASU”) 2020-04Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial ReportingThis ASU provides temporary optional expedients and exceptions to existing guidance on contract modifications and hedge accounting to facilitate the market transition from existing reference rates, such as the London Inter-Bank Offered Rate (“LIBOR”), certain tenors of which are being phased out in 2021, to alternate reference rates, such as the Secured Overnight Financing Rate.

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The standard is currently effective and upon adoption may be applied prospectively to contract modifications made on or before December 31, 2022. The provisions have impact as contract modifications and other changes occur while LIBOR is phased out. The Company is in the process of evaluating the optional relief guidance provided within this ASU. Management will continue its assessment and monitor regulatory developments during the LIBOR transition period.

(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 and 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 the Company’s 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.

Accounting Standards Codification (“ASC”) 606 requires the Company to allocate the transaction price between the goods and the loyalty reward points based on the relative standalone 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.

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Table of Contents

The Company offers promotional financing and credit cards issued by a third-party bank that manages and directly extends credit to the Company’s customers. The Company provides a license to its brand and marketing services, and the Company facilitates credit applications in its stores and online. The banks are the sole owners of the accounts receivable generated under the program and, accordingly, the Company does not hold any customer receivables related to these programs and acts as an agent in the financing transactions with customers. The Company is eligible to receive a profit share from certain of its banking partners based on the annual performance of their corresponding portfolio, and the Company receives monthly payments based on forecasts of full-year performance. This is a form of variable consideration. The Company records such profit share as revenue over time using the most likely amount method, which reflects the amount earned each month when it is determined that the likelihood of a significant revenue reversal is not probable, which is typically monthly. Profit-share payments occur monthly, shortly after the end of each program month.

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.

Sales returns

The Company allows customers to return items purchased within 30 days provided the merchandise 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 October 30, 2021 and January 30, 2021:

    

October 30, 2021

    

January 30, 2021

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

$

2,552

$

2,940

Estimated gift card contract liability, net of breakage

(15,257)

(22,069)

Estimated loyalty contract liability, net of breakage

(13,525)

(12,131)

Sales return liabilities, which are included in accrued expenses

(3,809)

(4,388)

For the 13 and 39 weeks ended October 30, 2021, the Company recognized approximately $275 and $948 in gift card breakage, respectively and approximately $1,581 and $4,202 in loyalty reward breakage, respectively. For the 13 and 39 weeks ended October 31, 2020, the Company recognized approximately $287 and $809 in gift card breakage, respectively and approximately $820 and $2,148 in loyalty reward breakage, respectively. For the 13 and 39 weeks ended October 30, 2021, the Company recognized revenue of $1,465 and $11,341, respectively, relating to contract liabilities that existed at January 30, 2021.

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.

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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 and 39 weeks ended October 30, 2021 and October 31, 2020, was approximately:

Thirteen Weeks Ended

Thirty-Nine Weeks Ended

October 30,

October 31,

    

October 30,

    

October 31,

Department

    

Product Offerings

    

2021

    

2020

    

2021

    

2020

Camping

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

12.6%

12.9%

13.9%

13.8%

Apparel

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

9.1%

8.6%

7.4%

6.5%

Fishing

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

7.7%

7.8%

11.3%

11.5%

Footwear

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

6.4%

5.6%

6.3%

5.3%

Hunting and Shooting

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

55.4%

57.4%

53.7%

56.3%

Optics, Electronics, Accessories, and Other

Gift items, GPS devices, knives, lighting, optics, two-way radios, and other license revenue, net of revenue discounts

8.8%

7.7%

7.4%

6.6%

Total

100.0%

100.0%

100.0%

100.0%

(4) Property and Equipment

Property and equipment as of October 30, 2021 and January 30, 2021 were as follows:

October 30,

January 30,

    

2021

    

2021

 

Furniture, fixtures, and equipment

$

109,375

$

96,085

Leasehold improvements

125,061

112,338

Construction in progress

16,956

2,614

Total property and equipment, gross

251,392

211,037

Less accumulated depreciation and amortization

(127,935)

(111,919)

Total property and equipment, net

$

123,457

$

99,118

(5) Accrued Expenses

Accrued expenses consisted of the following as of October 30, 2021 and January 30, 2021:

October 30,

January 30,

    

2021

    

2021

Book overdraft

$

12,064

$

13,445

Unearned revenue

41,413

38,454

Accrued payroll and related expenses

24,128

28,453

Sales and use tax payable

8,087

7,317

Accrued construction costs

411

339

Other

19,186

21,048

Total accrued expenses

$

105,289

$

109,056

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(6) Leases

At the inception of the lease, the Company’s operating leases have certain lease terms of up to 13 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 use asset and liability.

The Company determines whether a contract is or contains a lease at contract inception. As the rate implicit in the lease is not readily determinable in most of the Company’s leases, it uses its 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. The Company’s lease terms may include options to extend or terminate the lease. Additionally, the Company’s leases do not contain any material residual guarantees or material restrictive covenants.

In the 13 and 39 weeks ended October 30, 2021, the Company recorded a non-cash increase of $3,536 and $27,979, respectively, to the right of use 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 and 39 weeks ended October 30, 2021 was $18,936 and $55,675, respectively. In accordance with ASC 842, total lease expense, including CAM, recorded during the 13 and 39 weeks ended October 31, 2020 was $17,068 and $50,270, respectively.

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

Thirty-Nine Weeks Ended

October 30,

October 31,

    

2021

    

2020

Operating cash flows from operating leases

$

(44,094)

$

(41,257)

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

(44,094)

(41,257)

As of October 30,

As of October 31,

    

2021

    

2020

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

$

27,979

$

33,392

Terminated right-of-use assets and liabilities

(3,202)

Weighted-average remaining lease term - operating leases

5.83

5.11

Weighted-average discount rate - operating leases

8.29%

8.09%

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In accordance with ASC 842, maturities of operating lease liabilities as of October 30, 2021 were as follows:

Operating

Year Endings:

Leases

2021 (remainder)

$

15,408

2022

62,128

2023

57,161

2024

48,485

2025

41,925

Thereafter

164,227

Undiscounted cash flows

$

389,334

Reconciliation of lease liabilities:

Present values

$

271,288

Lease liabilities - current

39,790

Lease liabilities - noncurrent

231,498

Lease liabilities - total

$

271,288

Difference between undiscounted and discounted cash flows

$

118,046

(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 borrowing capacity of up to $250,000, subject to a borrowing base calculation. The Term Loan was repaid in full during the 39-week period ended October 31, 2020.

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 expenses and other assets.

Amounts outstanding under the Revolving Line of Credit are offset on the condensed consolidated balance sheets by amounts in depository accounts under lock-box or similar arrangements, which were $16,212 and $13,553 as of October 30, 2021 and January 30, 2021, respectively. As of both October 30, 2021 and January 30, 2021, borrowings outstanding under the Revolving Line of Credit were $73,763 and $0, respectively. As of October 30, 2021, the Company had stand-by commercial letters of credit of $1,955 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 October 30, 2021, the Revolving Line of Credit had $395 in deferred financing fees and as of January 30, 2021, the Revolving Line of Credit had $583 in deferred financing fees. During the 13 and 39 weeks ended October 30, 2021, the Company recognized $63 and $188, respectively, of non-cash interest expense with respect to the amortization of deferred financing fees. During the 13 and 39 weeks ended October 31, 2020, the Company recognized $63 and $188, respectively, of non-cash interest expense with respect to the amortization of deferred financing fees.

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Table of Contents

For the 13 and 39 weeks ended October 30, 2021, gross borrowings under the Revolving Line of Credit were $477,879 and $1,270,059, respectively. For the 13 and 39 weeks ended October 31, 2020, gross borrowing under the Revolving Line of Credit were $403,960 and $984,577, respectively. For the 13 and 39 weeks ended October 30, 2021, gross paydowns under the Revolving Line of Credit were $441,531 and $1,197,001, respectively. For the 13 and 39 weeks ended October 31, 2020, gross paydowns under the Revolving Line of Credit were $424,826 and $1,110,758, respectively.

Restricted Net Assets

The provisions of 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 October 30, 2021, from being used to pay any dividends without prior written consent from the financial institutions party to the Company’s Revolving Line of Credit.

(8) Income Taxes

The Company recognized an income tax expense of $7,372 and $9,530, respectively, in the 13 weeks ended October 30, 2021 and October 31, 2020. The Company’s effective tax rate for the 13 weeks ended October 30, 2021 and October 31, 2020 was 25.2% and 23.8%, respectively. The Company recognized an income tax expense of $16,519 and $20,690, respectively, for the 39 weeks ended October 30, 2021 and October 31, 2020. The Company’s effective tax rate for the 39 weeks ended October 30, 2021 and October 31, 2020 was 24.8% and 25.1%, respectively. 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.

(9) 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

Thirty-Nine Weeks Ended

October 30,

October 31,

October 30,

October 31,

    

2021

    

2020

    

2021

    

2020

Net income

$

21,863

$

30,482

$

50,036

$

61,813

Weighted-average shares of common stock outstanding:

Basic

43,878

43,609

43,809

43,490

Dilutive effect of common stock equivalents

704

901

662

770

Diluted

44,582

44,510

44,471

44,260

Basic earnings per share

$

0.50

$

0.70

$

1.14

$

1.42

Diluted earnings per share

$

0.49

$

0.68

$

1.13

$

1.40

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

8

4

26

25

(10) Stock-Based Compensation

Stock-Based Compensation

During the 13 and 39 weeks ended October 30, 2021 the Company recognized total stock-based compensation expense of $194 and $2,236, respectively. During the 13 and 39 weeks ended October 31, 2020, the Company recognized total stock-based compensation expense of $882 and $2,436, 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.

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Table of Contents

Employee Stock Plans

As of October 30, 2021, the number of shares available for awards under the 2019 Performance Incentive Plan (the “2019 Plan”) was 2,334. As of October 30, 2021, there were 1,108 unvested stock awards outstanding under the 2019 Plan.

Employee Stock Purchase Plan

The Company also had an Employee Stock Purchase Plan (“ESPP”) that was approved by shareholders in fiscal year 2015, under which 800 shares of common stock were authorized. For the 13 and 39 weeks ended October 30, 2021, no shares were issued under the ESPP and, as of October 30, 2021, the number of shares available for issuance was 374. As of January 30, 2021, due to the proposed merger with the Great Outdoors Group (as defined below), the Company discontinued its ESPP in accordance with the plan document.

Nonvested Performance-Based Stock Awards

During the 13 and 39 weeks ended October 30, 2021, the Company did not issue any nonvested performance-based stock awards.

During the 13 weeks ended October 31, 2020, the Company did not issue any nonvested performance-based stock awards. During the 39 weeks ended October 31, 2020, the Company issued 206 nonvested performance-based stock awards to employees at a weighted average grant date fair value of $5.95 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 issuable 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. Based on the performance conditions met for fiscal year 2020, 412 shares were issued, which was the maximum number of shares subject to the award. Vesting of the shares issued is subject to the employees’ continued employment with the Company.

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 January 30, 2021

624

$

5.13

Grants

Forfeitures

(111)

5.14

Vested

(22)

4.91

Balance at October 30, 2021

491

$

5.13

Weighted

average

grant-date

Shares

    

fair value

Balance at February 1, 2020

250

$

3.66

Grants

206

5.95

Forfeitures

(38)

4.33

Vested

Balance at October 31, 2020

418

$

4.73

Nonvested Stock Unit Awards

During the 13 and 39 weeks ended October 31, 2021, the Company issued 110 and 359, nonvested stock units, respectively, to employees and directors of the Company at an average value of $17.44 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. The shares issued to members of the Board of Directors of the Company vest over a twelve-month period.

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During the 13 and 39 weeks ended October 31, 2020, the Company issued 4 and 430, nonvested stock units, respectively, to employees and Directors of the Company at an average value of $6.37 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. The shares issued to members of the Board of Directors of the Company vest over a twelve-month period.

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 January 30, 2021

779

$

5.19

Grants

359

17.44

Forfeitures

(191)

7.72

Vested