Gander Mountain Company fourth quarter sales increased 16.4% to $326.9 million. Comparable store sales increased 0.4% on a 14-week comparable basis. Income from operations was $29.2 million, an increase of 12.1%. For the quarter, the company reported net income of $15.3 million, or 85 cents per diluted share, compared to net income of $22.2 million, or $1.45 per diluted share, in the fourth quarter of 2005.
Income for the 2006 fourth quarter includes a pre-tax non-cash charge of $9.0 million or ($0.50) per diluted share related to a previously announced fourth quarter transaction as described below.
On December 12, 2006, Gander Mountain Company announced that David C. Pratt had entered into an agreement to purchase 5,701,255 newly issued shares of common stock at a price of $8.77 per share for a total purchase price of $50.0 million. The purchase price in the equity financing was paid with $30 million in cash and the surrender and cancellation of the company's $20 million note originally issued to a Pratt family trust. The non-cash charge of $9.0 million is due to technical accounting requirements related to the conversion of debt to equity securities. It is a one-time, non-cash charge and has no impact on total shareholders' equity or cash provided by operations.
For the fiscal year ended February 3, 2007, Gander Mountain reported sales of $911.4 million, an increase of 13.3% over 2005. Comparable store sales declined 1.1% on a 53 week comparable basis. Income from operations improved to $15.0 million from a loss of $2.2 million for fiscal 2005. The company reported a net loss for the fiscal year of $13.2 million, or 88 cents per diluted share, compared to a net loss of $13.3 million, or 93 cents per diluted share for fiscal 2005. In addition to the non-cash charge discussed above, which was 60 cents per share on a diluted basis, the results for fiscal 2006 include a $1.4 million pre-tax gain from the insurance settlement related to the flooding of the company's Binghamton, N.Y. store in June 2006. The results for fiscal 2005 include a pre-tax payment to Gander Mountain of $2.5 million related to the termination of the company's previous co-branded credit card agreement.
“I am pleased to report a good year at Gander Mountain, with record sales and operating income,” said Mark Baker, president and CEO. “The December equity transaction positions us for stronger performance with increased financial flexibility to support profitable growth. Our investment in 13 new stores in the coming year will continue to diversify our geographic base.”
Fourth Quarter and Full Year 2006 Financial Highlights:
— The company opened eight stores on the year, bringing the total number
of stores operated at year end to 105, including one relocation. The
company plans to open 13 stores in fiscal 2007, including three
relocations.
— For the year, operating income increased to a record $15.0 million.
For the quarter, operating income increased to a record $29.2 million.
— Gross profit increased 16.8 percent to $224.7 million in fiscal 2006.
As a percent of sales, gross profit increased 80 basis points to
24.7 percent. For the fourth quarter, gross profit increased
19.6 percent to $90.8 million and as a percentage of sales, increased
80 basis points to 27.8 percent.
— In fiscal 2006, store operating expense increased 8.4 percent to
$167.5 million. As a percent of sales, store operating expenses
decreased from 19.2 percent to 18.4 percent. For the quarter, store
operating expenses increased 23.5 percent to $50.6 million. As a
percent of sales, store operating expenses increased from 14.6 percent
to 15.5 percent as planned efforts designed to drive sales resulted in
increased advertising and labor costs.
— General and administrative expense (G&A) increased 12.2 percent in
fiscal 2006 to $40.4 million, but declined as a percent of sales from
4.5 to 4.4 percent. For the year, G&A was affected by approximately
$900,000 of stock option expense resulting from the adoption of
FASB 123® at the beginning of fiscal 2006. For the fourth quarter,
G&A increased 23.6 percent to $11.0 million. As a percent of sales, G&A
increased to 3.4 from 3.2 percent.
— Borrowings on the credit facility at year end were $168.5 million, with
availability of $51.3 million at the end of the period.
“Thanks to the hard work and enthusiasm of our associates, we have built the Gander Mountain brand and expanded our network of retail stores. In 2006, we were encouraged by successful new stores openings in markets like Florida, Texas, Tennessee, and Alabama, which support our strategy of regional diversification,” said Baker. “In the coming year, as we build on the consistent execution in merchandising we saw in the second half of 2006, our customers will see new products and services from Gander Mountain, including great new offerings like Tracker boats, improved apparel assortments for women and children, and new presentations in hunting and fishing.”
Gander Mountain Company
Statements of Operations
(In thousands, except per share data)
4th Quarter Fiscal Year
14 weeks 13 weeks 53 weeks 52 weeks
February January February January
3, 28, 3, 28,
2007 2006 2007 2006
Sales $326,885 $280,822 $911,438 $804,474
Cost of goods sold 236,132 204,949 686,722 612,029
Gross profit 90,753 75,873 224,716 192,445
Operating expenses:
Store operating expenses 50,576 40,950 167,456 154,542
General and administrative
expenses 10,984 8,885 40,433 36,049
Pre-opening expenses - - 3,245 6,555
Gain on insurance settlement - - (1,400) -
Gain on contract settlement - - - (2,500)
Income (loss) from operations 29,193 26,038 14,982 (2,201)
Interest expense, net 4,898 3,856 19,187 11,106
Debt conversion charge 9,037 - 9,037 -
Income (loss) before income taxes 15,258 22,182 (13,242) (13,307)
Income tax provision - - - -
Net income (loss) $15,258 $22,182 $(13,242) $(13,307)
Income (loss) per common share
Basic $0.88 $1.55 $(0.88) $(0.93)
Diluted $0.85 $1.45 $(0.88) $(0.93)
Weighted average common shares
outstanding
Basic 17,340 14,271 15,100 14,257
Diluted 18,101 15,539 15,100 14,257
