SEC Filing | Sportsman's Warehouse Holdings, Inc.

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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 July 30, 2022

☐	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: (801) 566-6681


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 September 2, 2022, the registrant had 38,868,040 shares of common stock, $0.01 par value per share, outstanding.

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SPORTSMAN’S WAREHOUSE HOLDINGS, INC.

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		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	18

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	28

Item 4.	Controls and Procedures	28

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	29

Item 1A.	Risk Factors	29

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	30

Item 6.	Exhibits	31

	Signatures	32

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 second fiscal quarters ended July 30, 2022 and July 31, 2021 both consisted of 13 weeks and are referred to herein as the second quarter of fiscal year 2022 and the second quarter of fiscal year 2021 respectively. Fiscal year 2022 contains 52 weeks of operations and will end on January 28, 2023. Fiscal year 2021 contained 52 weeks of operations and ended on January 29, 2022.

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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:

●

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;

●

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;

●

our entrance into new markets or operations in existing markets, which may not be successful; and

●

the impact of COVID-19 pandemic on our operations.

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 29, 2022 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.

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

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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.

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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)


	July 30,		January 29,
	2022		2022
Assets
Current assets:
Cash and cash equivalents	$	6,018	$	57,018
Accounts receivable, net		1,911		1,937
Merchandise inventories		437,382		386,560
Prepaid expenses and other		20,855		21,955
Total current assets		466,166		467,470
Operating lease right of use asset		250,936		243,047
Property and equipment, net		137,152		128,304
Goodwill		1,496		1,496
Definite lived intangibles, net		419		264
Total assets	$	856,169	$	840,581

Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	98,845	$	58,916
Accrued expenses		91,040		109,012
Income taxes payable		4,852		9,500
Operating lease liability, current		42,195		40,924
Revolving line of credit		90,780		66,054
Total current liabilities		327,712		284,406
Long-term liabilities:
Deferred income taxes		5,009		5,779
Operating lease liability, noncurrent		243,596		236,227
Total long-term liabilities		248,605		242,006
Total liabilities		576,317		526,412

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; 44,215 issued and 38,867 outstanding on July 30, 2022 and 43,880 shares issued and outstanding on January 29, 2022		442		439
Treasury stock, at cost; 5,348 and 0 shares, respectively		(52,057)		—
Additional paid-in capital		91,976		90,851
Accumulated earnings		239,491		222,879
Total stockholders' equity		279,852		314,169
Total liabilities and stockholders' equity	$	856,169	$	840,581

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

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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				Twenty-Six Weeks Ended
	July 30,		July 31,		July 30,		July 31,
	2022		2021		2022		2021
Net sales	$	351,021	$	361,778	$	660,526	$	688,770
Cost of goods sold		233,482		241,724		443,896		464,669
Gross profit		117,539		120,054		216,630		224,101

Selling, general, and administrative expenses		97,023		95,870		193,108		186,289
Income from operations		20,516		24,184		23,522		37,812
Interest expense		767		266		1,334		492
Income before income taxes		19,749		23,918		22,188		37,320
Income tax expense		5,135		6,195		5,576		9,147
Net income	$	14,614	$	17,723	$	16,612	$	28,173
Earnings per share:
Basic	$	0.35	$	0.40	$	0.39	$	0.64
Diluted	$	0.35	$	0.40	$	0.38	$	0.63
Weighted average shares outstanding:
Basic		41,962		43,860		42,950		43,775
Diluted		42,194		44,716		43,180		44,600

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

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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 July 30, 2022 and July 31, 2021
	Common Stock			Restricted nonvoting Common Stock			Treasury Stock			Additional paid-in- capital		Accumulated (deficit) earnings		Total stockholders' equity
	Shares	Amount		Shares	Amount		Shares	Amount		Amount		Amount		Amount

Balance at May 1, 2021	43,831	$	438	—	$	—	—	$	—	$	88,560	$	124,859	$	213,857
Stock based compensation	—		—	—		—	—		—		1,027		—		1,027
Net Income	—		—	—		—	—		—		—		17,723		17,723
Balance at July 31, 2021	43,831	$	438	—	$	—	—	$	—	$	89,587	$	142,582	$	232,607

Balance at April 30, 2022	44,121	$	441	—	$	—	—	$	—	$	90,362	$	224,877	$	315,680
Repurchase of treasury stock	—		—	—		—	5,348		(52,057)		—		—		(52,057)
Vesting of restricted stock units	30		—	—		—	—		—		—		—		—
Payment of withholdings on restricted stock units	—		—	—		—	—		—		(2)		—		(2)
Issuance of common stock for cash per employee stock purchase plan	64		1	—		—	—		—		525		—		526
Stock based compensation	—		—	—		—	—		—		1,091		—		1,091
Net income	—		—	—		—	—		—		—		14,614		14,614
Balance at July 30, 2022	44,215	$	442	—	$	—	5,348	$	(52,057)	$	91,976	$	239,491	$	279,852


For the Twenty-Six Weeks Ended July 30, 2022 and July 31, 2021
	Common Stock			Restricted nonvoting common stock			Treasury Stock			Additional paid-in- capital		Accumulated (deficit) earnings		Total stockholders' equity
	Shares	Amount		Shares	Amount		Shares	Amount		Amount		Amount		Amount

Balance at January 30, 2021	43,623	$	436	—	$	—	—	$	—	$	89,815	$	114,409	$	204,660
Vesting of restricted stock units	208		2	—		—	—		—		(2)		—		—
Payment of withholdings on restricted stock units	—		—	—		—	—		—		(2,269)		—		(2,269)
Stock based compensation	—		—	—		—	—		—		2,043		—		2,043
Net income	—		—	—		—	—		—		—		28,173		28,173
Balance at July 31, 2021	43,831	$	438	—	$	—	—	$	—	$	89,587	$	142,582	$	232,607

Balance at January 29, 2022	43,880	$	439	—	$	—	—	$	—	$	90,851	$	222,879	$	314,169
Repurchase of treasury stock	—		—	—		—	5,348		(52,057)		—		—		(52,057)
Vesting of restricted stock units	271		2	—		—	—		—		(2)		—		—
Payment of withholdings on restricted stock units	—		—	—		—	—		—		(1,847)		—		(1,847)
Issuance of common stock for cash per employee stock purchase plan	64		1	—		—	—		—		525		—		526
Stock based compensation	—		—	—		—	—		—		2,449		—		2,449
Net income	—		—	—		—	—		—		—		16,612		16,612
Balance at July 30, 2022	44,215	$	442	—	$	—	5,348	$	(52,057)	$	91,976	$	239,491	$	279,852
The accompanying notes are an integral part of these condensed consolidated financial statements

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SPORTSMAN'S WAREHOUSE HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Amounts in Thousands

(unaudited)


	Twenty-Six Weeks Ended
	July 30,		July 31,
	2022		2021
Cash flows from operating activities:
Net income	$	16,612	$	28,173
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation of property and equipment		15,137		12,116
Amortization of deferred financing fees		108		126
Amortization of definite lived intangible		36		20
Noncash lease expense		16,027		7,962
Deferred income taxes		(770)		(238)
Stock-based compensation		2,449		2,043
Change in operating assets and liabilities, net of amounts acquired:
Accounts receivable, net		26		(35)
Operating lease liabilities		(15,276)		(13,926)
Merchandise inventories		(50,822)		(134,919)
Prepaid expenses and other		1,500		2,614
Accounts payable		38,269		32,351
Accrued expenses		(10,681)		(1,403)
Income taxes payable and receivable		(4,648)		(2,666)
Net cash provided by (used in) operating activities		7,967		(67,782)
Cash flows from investing activities:
Purchase of property and equipment, net of amounts acquired		(22,588)		(17,936)
Net cash used in investing activities		(22,588)		(17,936)
Cash flows from financing activities:
Net borrowings on line of credit		24,726		20,191
(Decrease) increase in book overdraft, net		(7,221)		4,891
Proceeds from issuance of common stock per employee stock purchase plan		525		—
Payments to acquire treasury stock		(52,057)		—
Payment of withholdings on restricted stock units		(1,844)		(2,269)
Payment of deferred financing costs		(508)		—
Net cash (used in) provided by financing activities		(36,379)		22,813
Net change in cash and cash equivalents		(51,000)		(62,905)
Cash and cash equivalents at beginning of period		57,018		65,525
Cash and cash equivalents at end of period	$	6,018	$	2,620

Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest, net of amounts capitalized	$	1,220	$	492
Income taxes, net of refunds		10,993		12,051

Supplemental schedule of noncash activities:
Noncash change in operating lease right of use asset and operating lease liabilities from	$	23,972	$	24,443
remeasurement of existing leases and addition of new leases
Purchases of property and equipment included in accounts payable and accrued expenses	$	5,409	$	6,541

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., a Delaware corporation (“Holdings”), and its subsidiaries (collectively, the “Company”) operate retail sporting goods stores. As of July 30, 2022, the Company operated 126 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 29, 2022 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 July 30, 2022 are not necessarily indicative of the results to be obtained for the year ending January 28, 2023. 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 29, 2022 filed with the SEC on March 30, 2022 (the “Fiscal 2021 Form 10-K”).

(2) Summary of Significant Accounting Policies

The Company’s significant accounting policies are described in Note 2 to the Company’s Fiscal 2021 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 FASB issued (ASU) 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. This 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 were phased out in 2021, to alternate reference rates, such as the Secured Overnight Financing Rate.

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.

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(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 rewards 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 which 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 4.0% when no escheat liability to relevant jurisdictions exist. 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 25%.

As it relates to e-commerce sales, the Company accounts for shipping and handling as fulfillment activities, and not as separate performance obligation. Accordingly, the Company recognizes revenue for only one performance obligation, the sale of the product, at the shipping point (when the customer gains control). The costs associated with fulfillment are recorded in costs of goods sold.

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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 July 30, 2022 and January 29, 2022:


	July 30, 2022		January 29, 2022
Right of return assets, which are included in prepaid expenses and other	$	2,438	$	2,142
Estimated gift card contract liability, net of breakage		(20,551)		(23,128)
Estimated loyalty contract liability, net of breakage		(5,400)		(7,211)
Sales return liabilities, which are included in accrued expenses		(3,639)		(3,197)

For the 13 and 26 weeks ended July 30, 2022, the Company recognized approximately $351 and $785 in gift card breakage and approximately $991 and $1,595 in loyalty reward breakage. For the 13 and 26 weeks ended July 31, 2021, the Company recognized approximately $292 and $673 in gift card breakage and approximately $773 and $1,328 in loyalty reward breakage. For the 13 and 26 weeks ended July 30, 2022, the Company recognized revenue of $4,796 and $15,383 relating to contract liabilities that existed at January 29, 2022.

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 26 weeks ended July 30, 2022 and July 31, 2021, was approximately:


		Thirteen Weeks Ended		Twenty-Six Weeks Ended
		July 30,	July 31,	July 30,	July 31,
Department	Product Offerings	2022	2021	2022	2021
Camping	Backpacks, camp essentials, canoes and kayaks, coolers, outdoor cooking equipment, sleeping bags, tents and tools	16.9%	17.8%	14.0%	14.7%
Apparel	Camouflage, jackets, hats, outerwear, sportswear, technical gear and work wear	7.1%	6.6%	7.0%	6.5%
Fishing	Bait, electronics, fishing rods, flotation items, fly fishing, lines, lures, reels, tackle and small boats	13.4%	15.1%	12.0%	13.4%
Footwear	Hiking boots, socks, sport sandals, technical footwear, trail shoes, casual shoes, waders and work boots	6.7%	6.6%	6.5%	6.4%
Hunting and Shooting	Ammunition, archery items, ATV accessories, blinds and tree stands, decoys, firearms, reloading equipment and shooting gear	50.5%	48.1%	55.1%	53.1%
Optics, Electronics, Accessories, and Other	Gift items, GPS devices, knives, lighting, optics, two-way radios, and other license revenue, net of revenue discounts	5.4%	5.8%	5.4%	5.9%
Total		100.0%	100.0%	100.0%	100.0%

(4) Property and Equipment

Property and equipment as of July 30, 2022 and January 29, 2022 were as follows:


	July 30,		January 29,
	2022		2022
Furniture, fixtures, and equipment	$	122,815	$	115,597
Leasehold improvements		150,385		143,064
Construction in progress		14,131		5,007
Total property and equipment, gross		287,331		263,668
Less accumulated depreciation and amortization		(150,179)		(135,364)
Total property and equipment, net	$	137,152	$	128,304

(5) Accrued Expenses

Accrued expenses consisted of the following as of July 30, 2022 and January 29, 2022:


	July 30,		January 29,
	2022		2022
Book overdraft	$	9,031	$	16,252
Unearned revenue		37,902		42,058
Accrued payroll and related expenses		18,135		26,309
Sales and use tax payable		7,058		8,788
Accrued construction costs		344		416
Other		18,570		15,189
Total accrued expenses	$	91,040	$	109,012

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(6) Leases

At the inception of the lease, the Company’s operating leases have remaining certain lease terms of up to 15 years, which typically includes multiple options for the Company to extend the lease which are not reasonably certain.

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, the Company 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 26 weeks ended July 30, 2022, the Company recorded a non-cash increase of $17,594 and $23,972 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.

The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.

In accordance with ASC 842, total lease expense was comprised of the following:



	Thirteen Weeks Ended				Twenty-Six Weeks Ended
	July 30,		July 31,		July 30,		July 31,
	2022		2021		2022		2021
Operating lease expense	$	14,550	$	13,836	$	28,945	$	27,702
Variable lease expense		4,760		4,282		9,062		8,557
Short-term lease expense		314		223		584		480
Total lease expense	$	19,624	$	18,341	$	38,591	$	36,739

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


	Twenty-Six Weeks Ended
	July 30,		July 31,
	2022		2021
Operating cash flows from operating leases	$	(31,351)	$	(29,209)
Cash paid for lease liabilities - operating leases		(31,351)		(29,209)

	As of July 30,		As of July 31,
	2022		2021

Right-of-use assets obtained in exchange for new or remeasured operating lease liabilities	$	23,972	$	24,443
Terminated right-of-use assets and liabilities		—		—
Weighted-average remaining lease term - operating leases		5.75		6
Weighted-average discount rate - operating leases		8.16%		8.33%

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In accordance with ASC 842, maturities of operating lease liabilities as of July 30, 2022 were as follows:


	Operating
Year Endings:	Leases
2022 (remainder)		32,389
2023		62,579
2024		54,350
2025		47,790
2026		42,625
Thereafter		151,658
Undiscounted cash flows	$	391,391
Reconciliation of lease liabilities:
Present values	$	285,791
Lease liabilities - current		42,195
Lease liabilities - noncurrent		243,596
Lease liabilities - total	$	285,791
Difference between undiscounted and discounted cash flows	$	105,600

The Company has excluded in the table above approximately $29.1 million of leases (undiscounted basis) that were entered into as of September 2, 2022. These leases will commence in 2022 and 2023 with lease terms of 10 years.

(7) Revolving Line of Credit

On May 27, 2022, Sportsman’s Warehouse, Inc. (“SWI”), a wholly owned subsidiary of Holdings, as lead borrower, Holdings and other subsidiaries of the Company, each as borrowers or guarantors, 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 “Credit Agreement”). The Credit Agreement governs the Company’s senior secured revolving credit facility (“Revolving Line of Credit”). The Revolving Line of Credit provides borrowing capacity of up to $350,000, subject to a borrowing base calculation.

In conjunction with the Credit Agreement, the Company incurred $508 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.

As of July 30, 2022 and January 29, 2022, the Company had $105,719 and $76,976, in outstanding revolving loans under the Revolving Line of Credit and the Company’s previous revolving line of credit, respectively. Amounts outstanding are offset on the condensed consolidated balance sheets by amounts in depository accounts under lock-box type arrangements, which were $14,939 and $10,923 as of July 30, 2022 and January 29, 2022, respectively. As of July 30, 2022, the Company had stand-by commercial letters of credit of $1,967 under the terms of the Revolving Line of Credit.

Borrowings under the Revolving Line of Credit bear interest based on either the base rate or Term SOFR, at the Company’s option, in each case plus an applicable margin. The base rate is the greatest of (1) the floor rate (as defined in the credit agreement as a rate of interest equal to 0.0%) (2) Wells Fargo’s prime rate, (3) the federal funds rate (as defined in the Amended Credit Agreement) plus 0.50% or (4) the one-month Term SOFR (as defined in the Amended Credit Agreement) plus 1.00%. The applicable margin for loans under the revolving credit facility, which varies based on the average daily availability, ranges from 0.25% to 0.50% per year for base rate loans and from 1.35% to 1.60% per year for Term SOFR loans. The Company is required to pay a commitment fee for the unused portion of the revolving credit facility, which will range from 0.20% to 0.225% per annum, depending on the average daily availability under the Revolving Line of Credit.

The Company may be required to make mandatory prepayments under the Revolving Line of Credit in the event of a disposition of certain property or assets, in the event of receipt of certain insurance or condemnation proceeds, upon the issuance of certain debt or equity securities, upon the incurrence of certain indebtedness for borrowed money or upon the receipt of certain payments not received in the ordinary course of business.

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The 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 Credit Agreement also requires the Company to maintain a minimum availability at all times of not less than 10% of the gross borrowing base and contains customary events of default. The Revolving Line of Credit matures on May 27, 2027.

Each of the subsidiaries of Holdings is a borrower under the Revolving Line of Credit, and all obligations under the Revolving Line of Credit are guaranteed by Holdings. All of the obligations under the Revolving Line of Credit are secured by a lien on substantially all of Holdings’ tangible and intangible working capital assets and the tangible and intangible working capital assets of all of Holdings’ subsidiaries, including a pledge of all capital stock of each of Holdings’ subsidiaries. The lien securing the obligations under the Revolving Line of Credit is a first priority lien as to certain liquid assets, including cash, accounts receivable, deposit accounts and inventory.

As of July 30, 2022 and January 29, 2022, the Credit Agreement and the Company’s prior credit agreement had $733 and $333, respectively, in deferred financing fees. During the 13 and 26 weeks ended July 30, 2022, the Company recognized $46 and $108 of non-cash interest expense with respect to the amortization of deferred financing fees. During the 13 and 26 weeks ended July 31, 2021, the Company recognized $63 and $126 of non-cash interest expense with respect to the amortization of deferred financing fees.

For the 13 and 26 weeks ended July 30, 2022, gross borrowings under the Revolving Line of Credit and the Company’s prior revolving line of credit were $379,778 and $752,494, respectively. For the 13 and 26 weeks ended July 31, 2021 gross borrowing under the Company’s prior revolving line of credit were $434,702 and $792,180, respectively. For the 13 and 26 weeks ended July 30, 2022, gross paydowns under the Revolving Line of Credit and the Company’s prior revolving line of credit were $387,886 and $725,525, respectively. For the 13 and 26 weeks ended July 31, 2021, gross paydowns under the Company’s prior revolving line of credit were $397,830 and $755,470, 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 July 30, 2022, 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 income tax expense of $5,135 and $6,195, respectively, in the 13 weeks ended July 30, 2022 and July 31, 2021. The Company’s effective tax rate for the 13 weeks ended July 30, 2022 and July 31, 2021 was 26.0% and 25.9%, respectively. The Company recognized income tax expense of $5,576 and $9,147, respectively, in the 26 weeks ended July 30, 2022 and July 31, 2021. The Company’s effective tax rate for the 26 weeks ended July 30, 2022 and July 31, 2021 was 25.1% and 24.5%, 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) Stockholder’s Equity

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.

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The following table sets forth the computation of basic and diluted earnings per common share:


	Thirteen Weeks Ended				Twenty-Six Weeks Ended
		July 30,		July 31,		July 30,		July 31,
		2022		2021		2022		2021
Net income	$	14,614	$	17,723	$	16,612	$	28,173
Weighted-average shares of common stock outstanding:
Basic		41,962		43,860		42,950		43,775
Dilutive effect of common stock equivalents		232		856		230		825
Diluted		42,194		44,716		43,180		44,600
Basic earnings per share	$	0.35	$	0.40	$	0.39	$	0.64
Diluted earnings per share	$	0.35	$	0.40	$	0.38	$	0.63
Restricted stock units considered anti-dilutive and excluded in the calculation		166		2		150		5

Treasury Stock

On March 24, 2022 the Company announced that its Board of Directors authorized a share repurchase program (the “Repurchase Program”) to allow for the repurchase of up to $75.0 million outstanding shares of the Company’s common stock, $.01 par value per share commencing on March 31, 2022 (the “Commencement Date”). The Repurchase Program will terminate on the first anniversary of the Commencement Date. During the 13 weeks ended July 30, 2022 the Company repurchased approximately 5.3 million shares of its common stock for $52.1 million, utilizing cash on hand.

(10) Stock-Based Compensation

Stock-Based Compensation

During the 13 and 26 weeks ended July 30, 2022 the Company recognized total stock-based compensation expense of $1,091 and $2,449. During the 13 and 26 weeks ended July 31, 2021, the Company recognized total stock-based compensation expense of $1,027 and $2,043. 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.

Employee Stock Plans

As of July 30, 2022, the number of shares available for awards under the 2019 Performance Incentive Plan (the “2019 Plan”) was 1,637. As of July 30, 2022, there were 1,366 unvested stock awards outstanding under the 2019 Plan.

Employee Stock Purchase Plan

The Company also has 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 weeks ended July 30, 2022, 64 shares were issued under the ESPP and, as of July 30, 2022, the number of shares available for issuance was 310.

Nonvested Performance-Based Stock Awards

During the 13 weeks ended July 30, 2022, the Company issued 47 nonvested performance-based stock awards to employees at a weighted average grant date fair value of $9.65 per share. During the 26 weeks ended July 30, 2022, the Company issued 188 nonvested performance-based stock awards to employees at a weighted average grant date fair value of $10.88 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 issued is contingent on management achieving fiscal year 2022, 2023, and 2024 performance targets for total revenue growth and adjusted EPS. If minimum threshold performance targets are not achieved, no shares will vest. The maximum number of shares subject to the award is 376, and the “target” number of shares subject to the award is 188 as reported below. Following the end of the performance period (fiscal years 2022, 2023, and 2024), the number of shares eligible to vest, based on actual performance, will be fixed and vesting will then be subject to each employee’s continued employment over the remaining service period.

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During the 13 weeks ended July 31, 2021, the Company did not issue any nonvested performance-based stock awards.

The following table sets forth the rollforward of outstanding nonvested performance-based stock awards (per share amounts are not in thousands):


				Weighted