Camping World Holdings Inc. updated its fourth-quarter results to reflect the benefit of a deferred tax asset.
On February 27, 2018, the company initially reported earnings for the fourth quarter and fiscal year 2017. In early March 2018, after the company had released earnings for the quarter and year ended December 31, 2017, the company determined that a portion of the outside basis deferred tax asset related to its acquisition of the direct interests in CWGS Enterprises, LLC through newly issued LLC units are not expected to be realized in the foreseeable future, and, as a result, the company should have established a valuation allowance on a portion of the outside basis deferred tax asset.
Accordingly, the company restated its consolidated financial statements as of and for the year ended December 31, 2016 to reflect a valuation allowance against the portion of the deferred tax asset related to the outside basis difference of $102.7 million. Following the establishment of the valuation allowance as of December 31, 2016, the company recognizes subsequent changes to the valuation allowance through the provision for income taxes or equity, as applicable. The effect of the correction of the foregoing error decreased Deferred Tax Assets, Net and Additional Paid-in Capital on the company’s balance sheet.
The result of the restatement improved fourth quarter net income (loss) by $47.0 million through a corresponding $47.0 million reduction in income tax expense. Accordingly, the fourth quarter 2017 net loss of $52.5 million was reduced to a net loss of $5.5 million, improving diluted earnings per share to ($0.52) from ($1.87).
This non-cash adjustment had no impact on revenue, income from operations, EBITDA, Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Pro Forma Net Income and Adjusted Pro Forma Earnings per Fully Exchanged and Diluted Share. The updated earnings release and restatement details are below.
Fourth Quarter 2017 Summary
- Total revenue increased 32.9 percent to $889.0 million;
- Gross profit increased 37.1 percent to $266.6 million and gross margin increased 92 basis points to 30.0 percent;
- Income from operations increased 37.9 percent to $44.3 million and operating margin increased 18 basis points to 5.0 percent;
- Net loss was $5.5 million and included a $99.8 million tax receivable liability adjustment to other income and $118.4 million of income taxes related to changes stemming from the U.S. tax reform enacted in December 2017. Net loss margin was 0.6 percent and diluted earnings per share(2) was ($0.52);
- Adjusted Pro Forma Net Income(1) increased 112.8 percent to $22.0 million and Adjusted Pro Forma Earnings per Fully Exchanged and Diluted Share(1) increased 100.0 percent to $0.25; and
- Adjusted EBITDA(1) increased 76.0 percent to $65.3 million and Adjusted EBITDA Margin(1) increased 180 basis points to 7.3 percent.
Fiscal 2017 Summary
- Total revenue increased 21.8 percent to $4.3 billion;
- Gross profit increased 25.1 percent to $1.2 billion and gross margin increased 77 basis points to 29.1 percent;
- Income from operations increased 29.4 percent to $361.4 million, and operating margin increased 50 basis points to 8.4 percent,
- Net income was $233.0 million and included a $99.7 million tax receivable liability adjustment to other income, and $118.4 million of income taxes related to changes stemming from the U.S. tax reform enacted in December 2017. Net income margin was 5.4 percent and diluted earnings per share(2) was $1.07;
- Adjusted Pro Forma Net Income(1) increased 51.0 percent to $198.7 million and Adjusted Pro Forma Earnings per Fully Exchanged and Diluted Share(1) increased 45.9 percent to $2.29; and
- Adjusted EBITDA(1) increased 38.2 percent to $399.6 million and Adjusted EBITDA Margin(1) increased 111 basis points to 9.3 percent.
(1) Adjusted Pro Forma Net Income, Adjusted Pro Forma Earnings per Fully Exchanged and Diluted Share, Adjusted EBITDA and Adjusted EBITDA Margin are non-GAAP measures. For reconciliations of these non-GAAP measures to the most directly comparable GAAP measures, see the “Non-GAAP Financial Measures” section later in this press release.
(2) Diluted earnings per share of Class A common stock is applicable only for periods after the company’s initial public offering. For a discussion of earnings per share see the “Earnings Per Share” section later in this press release.
Fully-stated results can be seen here.