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EX-32.2 - EX-32.2 - Camping World Holdings, Inc.cwh-20170630ex322319033.htm
EX-32.1 - EX-32.1 - Camping World Holdings, Inc.cwh-20170630ex32119c60b.htm
EX-31.2 - EX-31.2 - Camping World Holdings, Inc.cwh-20170630ex312f3ce30.htm
EX-31.1 - EX-31.1 - Camping World Holdings, Inc.cwh-20170630ex31180ded7.htm

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington,  D.C.  20549

FORM 10-Q/A

(Amendment No. 1)

 

 

[X]

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2017

OR

 

 

[  ]

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____________ to _______________

Commission file number:  001-37908

CAMPING WORLD HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

Delaware

81-1737145

(State or other jurisdiction of

(I.R.S. Employer

incorporation or organization

Identification No.)

 

250 Parkway Drive, Suite 270

Lincolnshire, IL 60069

Telephone: (847) 808-3000

(Address, including zip code, and telephone number, including

area code, of registrant’s principal executive offices)

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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post 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  

(Do not check if a 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 August 8, 2017, the registrant had 29,419,813 shares of Class A common stock, 57,031,184 shares of Class B common stock and one share of Class C common stock outstanding.

 

 

 

 


 

EXPLANATORY NOTE

Camping World Holdings, Inc. (the “Company”) is filing this Amendment No. 1 to its Quarterly Report on Form 10-Q (this “Amendment”) to restate and amend the Company’s previously issued condensed consolidated financial statements and related financial information as of and for the three and six months ended June 30, 2017 and 2016 previously included in its Quarterly Report on Form 10-Q for the quarter ended June 30, 2017 (the “Original Filing”), which was previously filed with the Securities and Exchange Commission (the “SEC”) on May 4, 2017 (the “Original Filing Date”). ”). In connection therewith, this Amendment amends and restates in their entirety the following items in the Original Filing: Item 1 of Part I “Financial Statements”; Item 2 of Part I “Management’s Discussion and Analysis of Financial Condition and Results of Operations”; and Item 4 of Part I “Controls and Procedures”. For the convenience of the reader, this Amendment sets forth the Original Filing, as modified where necessary to reflect the foregoing restatement and revisions. In addition, pursuant to Rule 12b-15 of the Securities Exchange Act of 1934, as amended, Item 6 of Part II of the Original Filing has been amended to contain currently dated certifications from the Company’s Chief Executive Officer and Chief Financial Officer, as required by Sections 302 and 906 of the Sarbanes-Oxley Act of 2002, which are attached as Exhibits 31.1, 31.2, 32.1, 32.2 to this Amendment. We have also updated our financial statements formatted in Extensible Business Reporting Language (XBRL) in Exhibit 101.

As described in the Company’s Current Report on Form 8-K filed March 13, 2018, on March 10, 2018, the Audit Committee of our Board of Directors (the “Audit Committee”), after discussion with Company management and Ernst & Young LLP, our independent registered public accounting firm, determined that the audited consolidated financial statements as of and for the year ended December 31, 2016 included in our Annual Report on Form 10-K for the year ended December 31, 2016 and the unaudited condensed consolidated financial statements as of and for the three and six months ended June 30, 2017 included in our Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2017 previously filed with the SEC should no longer be relied upon and should be amended to reflect the adjustments described herein.

Except as described herein, this Amendment does not amend, update or change any other items or disclosures in the Original Filing and does not purport to reflect any information or events subsequent to the Original Filing Date. As such, this Amendment speaks only as of the Original Filing Date, and the Company has not undertaken to amend, supplement or update any information contained in the Original Filing to give effect to any subsequent events. Accordingly, this Amendment should be read in conjunction with the Company’s filings made with the SEC subsequent to the filing of the Original Filing, including any amendment to those filings.

Background

On October 13, 2016, the Company completed an initial public offering of 11,363,636 shares of the Company’s Class A common stock at a public offering price of $22.00 per share (the “IPO”). The Company received $233.4 million in proceeds, net of underwriting discounts and commissions, which were used to purchase 11,363,636 newly-issued common units from CWGS Enterprises, LLC (“CWGS, LLC”) at a price per unit equal to the initial public offering price per share of Class A common stock in the IPO less underwriting discounts and commissions. In addition, on November 4, 2016, the underwriters exercised their option, in part, to purchase an additional 508,564 shares of Class A common stock. On November 9, 2016, the Company closed on the purchase of the additional 508,564 shares of Class A common stock and received $10.4 million in additional proceeds, net of underwriting discounts and commissions, which were used to purchase 508,564 newly-issued common units from CWGS, LLC at a price per unit equal to the initial public offering price per share of Class A common stock in the IPO less underwriting discounts and commissions.

On May 31, 2017, the Company completed a public offering (the “May 2017 Public Offering”) in which the Company sold 4,000,000 shares of the Company’s Class A common stock at a public offering price of $27.75 per share. The Company received $106.6 million in proceeds, net of underwriting discounts and commissions, which were used to purchase 4,000,000 newly-issued common units from CWGS, LLC at a price per unit equal to the public offering price per share of Class A common stock in the May 2017 Public Offering, less underwriting discounts and commissions. In addition, on June 5, 2017, the underwriters

 


 

exercised their option to purchase an additional 600,000 shares of Class A common stock. On June 9, 2017, the Company closed on the purchase of the additional 600,000 shares of Class A common stock and received $16.0 million in additional proceeds, net of underwriting discounts and commissions, which were used to purchase 600,000 newly-issued common units from CWGS, LLC at a price per unit equal to the public offering price per share of Class A common stock in the May 2017 Public Offering, less underwriting discounts and commissions.

Following the purchase of newly-issued common units from CWGS, LLC as described above, the Company’s deferred tax balances have reflected the differences in the book and tax basis of its investment in CWGS, LLC (i.e., outside basis). In connection with preparing its financial statements for the 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 interest in CWGS, LLC through newly issued LLC units is not expected to be realized unless the Company were to dispose of its investment in CWGS, LLC, which the Company has no current plan to do. Accordingly, the Company has determined that it should have established a valuation allowance of $102.7 million against this portion of its deferred tax asset that was recorded through equity as of December 31, 2016. 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, in accordance with generally accepted accounting principles, and at June 30, 2017 the valuation allowance against this portion of its deferred tax asset was $138.6 million.

Additional information regarding the impact of the valuation allowance against the portion of the Company’s outside basis deferred tax asset related to its acquisition of a direct interest in CWGS, LLC through newly issued LLC units as of December 31, 2016 and June 30, 2017, is contained under the caption “Restatement of Previously Issued Financial Statements” in Note 1 “Summary of Significant Accounting Policies” to our unaudited condensed consolidated financial statements included in this Amendment.

Along with restating our financial statements for the correction discussed above, we are making adjustments for certain immaterial items with respect to the three months ended March 31, 2017 and 2016. The Company determined the effect of these corrections was not material to the previously issued financial statements for the years ended December 31, 2016 and 2015, the interim quarterly periods therein or the interim quarterly periods in the year ended December 31, 2017.  In conjunction with the restatement described above, we have determined it would be appropriate within this Amendment to record these adjustments for the respective periods. Please refer to the section under the caption “Restatement of Previously Issued Financial Statements” in Note 1 “Summary of Significant Accounting Policies” to our unaudited condensed consolidated financial statements in this Amendment for more information regarding the effect of these adjustments.

Restatement of Conclusion Regarding Disclosure Controls and Procedures

At the time of the Original Filing, our chief executive officer (“CEO”) (principal executive officer) and chief financial officer (“CFO”) (principal financial officer) concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of June 30, 2017. Subsequent to that evaluation, our CEO and CFO concluded that our disclosure controls and procedures were not effective at the reasonable assurance level as of June 30, 2017 because of the material weaknesses in internal control over financial reporting described in Item 4 of Part I “Controls and Procedures” of this Amendment. As a result, we have restated Item 4 of Part I “Controls and Procedures” to reflect the revised conclusion and to include disclosure of the material weaknesses.

 

 

 

 

 


 

Camping World Holdings, Inc.

Quarterly Report on Form 10-Q/A

For the Quarterly Period Ended June 30, 2017

 

TABLE OF CONTENTS

 

 

 

 

 

 

Page

 

 

 

 

PART I. FINANCIAL INFORMATION 

 

Item 1 

Financial Statements (unaudited)

5

 

Unaudited Condensed Consolidated Balance Sheets – June 30, 2017 and December 31, 2016

5

 

Unaudited Condensed Consolidated Statements of Operations – Three and Six Months Ended June 30, 2017 and 2016

6

 

Unaudited Condensed Consolidated Statement of Stockholders’ Equity (Deficit) – Six Months Ended June 30, 2017

7

 

Unaudited Condensed Consolidated Statements of Cash Flows – Six Months Ended June 30, 2017 and 2016

8

 

Notes to Unaudited Condensed Consolidated Financial Statements

10

Item 2 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

29

Item 3 

Quantitative and Qualitative Disclosures About Market Risk

53

Item 4 

Controls and Procedures

54

 

 

 

PART II. OTHER INFORMATION 

 

Item 1 

Legal Proceedings

55

Item 1A 

Risk Factors

55

Item 2 

Unregistered Sales of Equity Securities and Use of Proceeds

55

Item 3 

Defaults Upon Senior Securities

55

Item 4 

Mine Safety Disclosures

56

Item 5 

Other Information

56

Item 6 

Exhibits

56

 

 

 

Exhibit Index 

56

Signatures 

58

 

 

 

 

 


 

BASIS OF PRESENTATION

As used in this Quarterly Report on Form 10-Q/A, unless the context otherwise requires, references to:

·

“we,” “us,” “our,” the “Company,” “Camping World” and similar references refer to Camping World Holdings, Inc., and, unless otherwise stated, all of its subsidiaries, including CWGS Enterprises, LLC, which we refer to as “CWGS, LLC” and, unless otherwise stated, all of its subsidiaries.

·

“Annual Report” refers to our Annual Report on Form 10-K for the year ended December 31, 2016 filed with the Securities and Exchange Commission (“SEC”) on March 13, 2017.

·

“Continuing Equity Owners” refers collectively to ML Acquisition, funds controlled by Crestview Partners II GP, L.P. and the Former Profit Unit Holders and each of their permitted transferees that continue to own common units in CWGS, LLC after the IPO and the Reorganization Transactions (each as defined in Note 1 – Summary of Significant Accounting Policies to our consolidated financial statements included in Part I, Item 1 of this Form 10-Q/A) and who may redeem at each of their options their common units for, at our election (determined solely by our independent directors within the meaning of the rules of the New York Stock Exchange who are disinterested), cash or newly issued shares of our Class A common stock.

·

“Crestview” refers to Crestview Advisors, L.L.C., a registered investment adviser to private equity funds, including funds affiliated with Crestview Partners II GP, L.P.

·

“CWGS LLC Agreement” refers to CWGS, LLC’s amended and restated limited liability company agreement, as amended to date.

·

“Former Equity Owners” refers to those Original Equity Owners controlled by Crestview Partners II GP, L.P. that have exchanged their direct or indirect ownership interests in CWGS, LLC for shares of our Class A common stock in connection with the consummation of our IPO.

·

“Former Profit Unit Holders” refers collectively to our named executive officers (excluding Marcus Lemonis), Andris A. Baltins and K. Dillon Schickli, who are members of our board of directors, and certain other current and former non-executive employees and former directors, in each case, who held existing common units in CWGS, LLC pursuant to CWGS, LLC’s equity incentive plan that was in existence prior to our IPO and who received common units of CWGS, LLC in exchange for their profit units in connection with our IPO.

·

“ML Acquisition” refers to ML Acquisition Company, LLC, a Delaware limited liability company, indirectly owned by each of Stephen Adams and our Chairman and Chief Executive Officer, Marcus Lemonis.

·

“ML Related Parties” refers to ML Acquisition and its permitted transferees of common units.

·

“ML RV Group” refers to ML RV Group, LLC, a Delaware limited liability company, wholly owned by our Chairman and Chief Executive Officer, Marcus Lemonis.

·

“Original Equity Owners” refers to the direct and certain indirect owners of interests in CWGS, LLC, collectively, prior to the Reorganization Transactions and Recapitalization (as defined in Note 1 – Summary of Significant Accounting Policies and Note 13 – Stockholders’ Equity to our consolidated financial statements included in Part I, Item 1 of this Form 10-Q/A, respectively) which includes ML Acquisition, funds controlled by Crestview Partners II GP, L.P. and the Former Profit Unit Holders.

·

“Tax Receivable Agreement” refers to the tax receivable agreement that the Company entered into with CWGS, LLC, each of the Continuing Equity Owners and Crestview Partners II GP, L.P. in connection with the Company’s IPO.

1


 

 

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

This Form 10-Q/A contains forward-looking statements. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements other than statements of historical facts contained in this Form 10-Q/A may be forward-looking statements. Statements regarding our future results of operations and financial position, business strategy and plans and objectives of management for future operations, including, among others, statements regarding expected new retail location openings, including greenfield locations and acquired locations; profitability of new retail locations; future capital expenditures and debt service obligations; refinancing, retirement or exchange of outstanding debt; expectations regarding consumer behavior and growth; our comparative advantages and our plans and ability to expand our consumer base; our ability to respond to changing business and economic conditions; volatility in sales; our ability to drive growth; anticipated impact of the acquisition of Gander Mountain Company (“Gander Mountain”) and its Overton’s boating business (the “Gander Mountain Acquisition”); the number of Gander Mountain locations the Company expects to operate; expectations regarding assumption and rejection of leases for the locations acquired under the Gander Mountain Acquisition; expectations regarding increase of certain expenses; and the Company’s plan with regards to the disposition of its investments in CWGS, LLC and its expectations related to realization of a portion of certain outside basis deferred tax asset are forward-looking statements. In some cases, you can identify forward-looking statements by terms such as ‘‘may,’’ ‘‘will,’’ ‘‘should,’’ ‘‘expects,’’ ‘‘plans,’’ ‘‘anticipates,’’ ‘‘could,’’ ‘‘intends,’’ ‘‘targets,’’ ‘‘projects,’’ ‘‘contemplates,’’ ‘‘believes,’’ ‘‘estimates,’’ ‘‘predicts,’’ ‘‘potential’’ or ‘‘continue’’ or the negative of these terms or other similar expressions.

Forward-looking statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. We believe that these important factors include, but are not limited to, the following:

·

the availability of financing to us and our customers;

·

fuel shortages, or high prices for fuel;

·

the well-being, as well as the continued popularity and reputation for quality, of our manufacturers;

·

general economic conditions in our markets, and ongoing economic and financial uncertainties;

·

our ability to attract and retain customers;

·

competition in the market for services, protection plans, products and resources targeting the RV lifestyle or RV enthusiast;

·

our expansion into new, unfamiliar markets as well as delays in opening or acquiring new retail locations;

·

unforeseen expenses, difficulties, and delays frequently encountered in connection with expansion through acquisitions;

·

our failure to maintain the strength and value of our brands;

·

our ability to successfully order and manage our inventory to reflect consumer demand in a volatile market and anticipate changing consumer preferences and buying trends;

·

fluctuations in our same store sales and whether they will be a meaningful indicator of future performance;

·

the cyclical and seasonal nature of our business;

2


 

·

our ability to operate and expand our business and to respond to changing business and economic conditions, which depends on the availability of adequate capital;

·

the restrictive covenants in our Senior Secured Credit Facilities and Floor Plan Facility;

·

our reliance on three fulfillment and distribution centers for our retail, e-commerce and catalog businesses;

·

natural disasters, whether or not caused by climate change, unusual weather condition, epidemic outbreaks, terrorist acts and political events;

·

our dependence on our relationships with third party providers of services, protection plans, products and resources and a disruption of these relationships or of these providers’ operations;

·

whether third party lending institutions and insurance companies will continue to provide financing for RV purchases;

·

our inability to retain senior executives and attract and retain other qualified employees;

·

our ability to meet our labor needs;

·

our inability to maintain the leases for our retail locations or locate alternative sites for our stores in our target markets and on terms that are acceptable to us;

·

our business being subject to numerous federal, state and local regulations;

·

regulations applicable to the sale of extended service contracts;

·

our dealerships’ susceptibility to termination, non-renewal or renegotiation of dealer agreements if state dealer laws are repealed or weakened;

·

our failure to comply with certain environmental regulations;

·

climate change legislation or regulations restricting emission of ‘‘greenhouse gases;’’

·

a failure in our e-commerce operations, security breaches and cybersecurity risks;

·

our inability to enforce our intellectual property rights and accusations of our infringement on the intellectual property rights of third parties;

·

our inability to maintain or upgrade our information technology systems or our inability to convert to alternate systems in an efficient and timely manner;

·

disruptions to our information technology systems or breaches of our network security;

·

Marcus Lemonis, through his beneficial ownership of our shares directly or indirectly held by ML Acquisition Company, LLC and ML RV Group, LLC, has substantial control over us and may approve or disapprove substantially all transactions and other matters requiring approval by our stockholders, including, but not limited to, the election of directors;

·

the exemptions from certain corporate governance requirements that we will qualify for, and intend to rely on, due to the fact that we are a ‘‘controlled company’’ within the meaning of the New York Stock Exchange, or NYSE, listing requirements;

·

whether we are able to realize any tax benefits that may arise from our organizational structure and any redemptions or exchanges of CWGS Enterprises, LLC common units for cash or stock; and

·

the other factors set forth under ‘‘Risk Factors’’ in Item 1A of Part I of our Annual Report.

3


 

We qualify all of our forward-looking statements by these cautionary statements. The forward-looking statements in this Form 10-Q/A are only predictions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations. Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified, you should not rely on these forward-looking statements as predictions of future events. The events and circumstances reflected in our forward-looking statements may not be achieved or occur and actual results could differ materially from those projected in the forward-looking statements. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein, whether as a result of any new information, future events, changed circumstances or otherwise. For a further discussion of the risks relating to our business, see “Item 1A—Risk Factors” in Part I of our Annual Report.

4


 

Part I – FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

Camping World Holdings, Inc. and Subsidiaries

Unaudited Condensed Consolidated Balance Sheets

(In Thousands Except Per Share Amounts)

 

 

 

 

 

 

 

 

 

 

June 30, 

 

December 31, 

 

  

2017

    

2016

 

 

 

(Restated)

 

 

(Restated)

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

252,161

 

$

114,196

Contracts in transit

 

 

86,114

 

 

29,012

Accounts receivable, net

 

 

73,164

 

 

58,488

Inventories, net

 

 

1,100,383

 

 

902,711

Prepaid expenses and other assets

 

 

24,189

 

 

21,755

Total current assets

 

 

1,536,011

 

 

1,126,162

Property and equipment, net

 

 

151,965

 

 

130,760

Deferred tax assets, net

 

 

106,452

 

 

24,433

Intangibles assets, net

 

 

21,785

 

 

3,386

Goodwill

 

 

289,884

 

 

153,105

Other assets

 

 

17,871

 

 

17,931

Total assets

 

$

2,123,968

 

$

1,455,777

Liabilities and stockholders' equity (deficit)

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

142,236

 

$

68,655

Accrued liabilities

 

 

115,374

 

 

78,044

Deferred revenues and gains

 

 

72,592

 

 

71,128

Current portion of capital lease obligations

 

 

985

 

 

1,224

Current portion of Tax Receivable Agreement liability

 

 

6,469

 

 

991

Current portion of long-term debt

 

 

7,400

 

 

6,450

Notes payable – floor plan, net

 

 

780,905

 

 

625,185

Other current liabilities

 

 

24,812

 

 

16,745

Total current liabilities

 

 

1,150,773

 

 

868,422

Capital lease obligations, net of current portion

 

 

389

 

 

841

Right to use liability

 

 

10,270

 

 

10,343

Tax Receivable Agreement liability, net of current portion

 

 

86,857

 

 

18,190

Long-term debt, net of current portion

 

 

710,649

 

 

620,303

Deferred revenues and gains

 

 

62,473

 

 

57,659

Other long-term liabilities

 

 

31,688

 

 

24,156

Total liabilities

 

 

2,053,099

 

 

1,599,914

Commitments and contingencies

 

 

 

 

 

 

Stockholders' equity (deficit):

 

 

 

 

 

 

Preferred stock, par value $0.01 per share – 20,000,000 shares authorized; none issued and outstanding as of June 30, 2017 and December 31, 2016

 

 

 —

 

 

 —

Class A common stock, par value $0.01 per share – 250,000,000 shares authorized; 29,061,464 issued and 29,061,420 outstanding as of June 30, 2017 and 18,935,916 issued and outstanding as of December 31, 2016

 

 

291

 

 

189

Class B common stock, par value $0.0001 per share – 75,000,000 shares authorized; 69,066,445 issued; and 57,031,184 outstanding as of June 30, 2017 and 62,002,729 outstanding as of December 31, 2016

 

 

 6

 

 

 6

Class C common stock, par value $0.0001 per share – one share authorized, issued and outstanding as of June 30, 2017 and December 31, 2016

 

 

 —

 

 

 —

Additional paid-in capital

 

 

12,015

 

 

(30,006)

Retained earnings

 

 

19,603

 

 

71

Total stockholders' equity (deficit) attributable to Camping World Holdings, Inc.

 

 

31,915

 

 

(29,740)

Non-controlling interests

 

 

38,954

 

 

(114,397)

Total stockholders' equity (deficit)

 

 

70,869

 

 

(144,137)

Total liabilities and stockholders' equity (deficit)

 

$

2,123,968

 

$

1,455,777

 

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements

 

 

 

5


 

Camping World Holdings, Inc. and Subsidiaries

Unaudited Condensed Consolidated Statements of Operations

(In Thousands Except Per Share Amounts)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Six Months Ended

 

 

June 30, 

 

June 30, 

 

 

2017

    

2016

    

2017

    

2016

 

 

 

(Restated)

 

 

(Restated)

 

 

(Restated)

 

 

(Restated)

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

Consumer services and plans

 

$

48,103

 

$

45,428

 

$

98,349

 

$

90,426

Retail

 

 

 

 

 

 

 

 

 

 

 

 

New vehicles

 

 

760,806

 

 

576,976

 

 

1,264,110

 

 

985,584

Used vehicles

 

 

195,615

 

 

215,727

 

 

341,434

 

 

393,894

Parts, services and other

 

 

174,196

 

 

157,742

 

 

290,419

 

 

271,226

Finance and insurance, net

 

 

100,306

 

 

69,386

 

 

166,349

 

 

120,160

Subtotal

 

 

1,230,923

 

 

1,019,831

 

 

2,062,312

 

 

1,770,864

Total revenue

 

 

1,279,026

 

 

1,065,259

 

 

2,160,661

 

 

1,861,290

Costs applicable to revenue (exclusive of depreciation and amortization shown separately below):

 

 

 

 

 

 

 

 

 

 

 

 

Consumer services and plans

 

 

20,560

 

 

19,237

 

 

41,707

 

 

39,118

Retail

 

 

 

 

 

 

 

 

 

 

 

 

New vehicles

 

 

646,009

 

 

491,103

 

 

1,081,071

 

 

840,414

Used vehicles

 

 

144,926

 

 

171,692

 

 

256,828

 

 

317,204

Parts, services and other

 

 

94,951

 

 

83,041

 

 

156,546

 

 

142,676

Subtotal

 

 

885,886

 

 

745,836

 

 

1,494,445

 

 

1,300,294

Total costs applicable to revenue

 

 

906,446

 

 

765,073

 

 

1,536,152

 

 

1,339,412

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general, and administrative

 

 

228,444

 

 

190,323

 

 

403,934

 

 

350,711

Depreciation and amortization

 

 

7,584

 

 

6,034

 

 

14,437

 

 

11,925

Loss (gain) on sale of assets

 

 

31

 

 

(224)

 

 

(287)

 

 

(248)

Total operating expenses

 

 

236,059

 

 

196,133

 

 

418,084

 

 

362,388

Income from operations

 

 

136,521

 

 

104,053

 

 

206,425

 

 

159,490

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

Floor plan interest expense

 

 

(6,587)

 

 

(5,387)

 

 

(11,889)

 

 

(10,529)

Other interest expense, net

 

 

(10,557)

 

 

(12,577)

 

 

(19,961)

 

 

(25,325)

Tax Receivable Agreement liability adjustment

 

 

 —

 

 

 —

 

 

17

 

 

 —

Other income

 

 

 —

 

 

(2)

 

 

 —

 

 

(2)

 

 

 

(17,144)

 

 

(17,966)

 

 

(31,833)

 

 

(35,856)

Income before income taxes

 

 

119,377

 

 

86,087

 

 

174,592

 

 

123,634

Income tax expense

 

 

(14,284)

 

 

(1,979)

 

 

(19,876)

 

 

(2,350)

Net income

 

 

105,093

 

 

84,108

 

 

154,716

 

 

121,284

Less: net income attributable to non-controlling interests

 

 

(85,749)

 

 

 —

 

 

(127,850)

 

 

 —

Net income attributable to Camping World Holdings, Inc.

 

$

19,344

 

$

84,108

 

$

26,866

 

$

121,284

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share of Class A common stock (1):

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.84

 

 

 

 

$

1.28

 

 

 

Diluted

 

$

0.84

 

 

 

 

$

1.24

 

 

 

Weighted average shares of Class A common stock outstanding (1):

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

22,977

 

 

 

 

 

20,973

 

 

 

Diluted

 

 

22,977

 

 

 

 

 

84,673

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends declared per share

 

$

0.1532

 

 

 

 

$

0.3064

 

 

 


(1)

Basic and diluted earnings per Class A common stock is applicable only for periods after the Company’s IPO. See Note 16 — Earnings Per Share.

 

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements

 

 

 

6


 

Camping World Holdings, Inc. and Subsidiaries

Unaudited Condensed Consolidated Statement of Stockholders' Equity (Deficit)

(In Thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

Non-

 

 

 

 

 

Class A Common Stock

 

Class B Common Stock

 

Class C Common Stock

 

Paid-In

 

Retained

 

Controlling

 

 

 

 

  

Shares

  

Amounts

  

Shares

  

Amounts

  

Shares

  

Amounts

  

Capital

  

Earnings

  

Interest

  

Total

Balance at January 1, 2017 (Restated)

 

18,936

 

 

189

 

62,003

 

 

 6

 

 —

 

 

 —

 

 

(30,006)

 

 

71

 

 

(114,397)

 

 

(144,137)

Issuance of Class A common stock sold in a public offering, net of underwriting discounts, commissions and offering costs

 

4,600

 

 

46

 

 —

 

 

 —

 

 —

 

 

 —

 

 

121,425

 

 

 —

 

 

 —

 

 

121,471

Non-controlling interest adjustment for purchase of common units from CWGS, LLC with proceeds from a public offering

 

 —

 

 

 —

 

 —

 

 

 —

 

 —

 

 

 —

 

 

(87,203)

 

 

 —

 

 

87,203

 

 

 —

Equity-based compensation

 

 —

 

 

 —

 

 —

 

 

 —

 

 —

 

 

 —

 

 

1,588

 

 

 —

 

 

 —

 

 

1,588

Vesting of restricted stock units

 

 —

 

 

 —

 

 —

 

 

 —

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

Repurchases of Class A common stock

 

 —

 

 

 —

 

 —

 

 

 —

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

Redemption of LLC common units for Class A common stock

 

5,525

 

 

56

 

(4,972)

 

 

 —

 

 —

 

 

 —

 

 

53,580

 

 

 —

 

 

6,014

 

 

59,650

Distributions to holders of LLC common units

 

 —

 

 

 —

 

 —

 

 

 —

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

(69,335)

 

 

(69,335)

Dividends

 

 —

 

 

 —

 

 —

 

 

 —

 

 —

 

 

 —

 

 

 —

 

 

(7,334)

 

 

 —

 

 

(7,334)

Establishment of liabilities under the Tax Receivable Agreement and related changes to deferred tax assets associated with that liability

 

 —

 

 

 —

 

 —

 

 

 —

 

 —

 

 

 —

 

 

(45,750)

 

 

 —

 

 

 —

 

 

(45,750)

Non-controlling interest adjustment

 

 —

 

 

 —

 

 —

 

 

 —

 

 —

 

 

 —

 

 

(1,619)

 

 

 —

 

 

1,619

 

 

 —

Net income

 

 —

 

 

 —

 

 —

 

 

 —

 

 —

 

 

 —

 

 

 —

 

 

26,866

 

 

127,850

 

 

154,716

Balance at June 30, 2017 (Restated)

 

29,061

 

$

291

 

57,031

 

$

 6

 

 —

 

$

 —

 

$

12,015

 

$

19,603

 

$

38,954

 

$

70,869

 

 

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements

 

7


 

Camping World Holdings, Inc. and Subsidiaries

Unaudited Condensed Consolidated Statements of Cash Flows

(In Thousands)

 

 

 

 

 

 

 

 

 

 

Six Months Ended June 30, 

 

    

2017

    

2016

 

 

 

(Restated)

 

 

(Restated)

Operating activities

 

 

 

 

 

 

Net income

 

$

154,716

 

$

121,284

 

 

 

 

 

 

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

Depreciation and amortization

 

 

14,437

 

 

11,925

Equity-based compensation

 

 

1,588

 

 

60

Gain on sale of assets

 

 

(287)

 

 

(248)

Provision for losses on accounts receivable

 

 

(45)

 

 

506

Accretion of original issue discount

 

 

481

 

 

606

Non-cash interest

 

 

2,188

 

 

2,498

Deferred income taxes

 

 

6,246

 

 

1,472

Tax Receivable Agreement liability adjustment

 

 

(17)

 

 

 —

Change in assets and liabilities, net of acquisitions:

 

 

 

 

 

 

Receivables and contracts in transit

 

 

(70,211)

 

 

(47,874)

Inventories

 

 

(104,734)

 

 

(42,799)

Prepaid expenses and other assets

 

 

(3,695)

 

 

(8,164)

Checks in excess of bank balance

 

 

 —

 

 

(7,478)

Accounts payable and other accrued expenses

 

 

77,009

 

 

44,956

Payment pursuant to Tax Receivable Agreement

 

 

(203)

 

 

 —

Accrued rent for cease-use locations

 

 

72

 

 

(148)

Deferred revenue and gains

 

 

6,278

 

 

4,364

Other, net

 

 

6,753

 

 

943

Net cash provided by operating activities

 

 

90,576

 

 

81,903

 

 

 

 

 

 

 

Investing activities

 

 

 

 

 

 

Purchases of property and equipment

 

 

(23,164)

 

 

(17,217)

Purchase of real property

 

 

(11,113)

 

 

(10,350)

Proceeds from the sale of real property

 

 

6,000

 

 

2,844

Purchases of businesses, net of cash acquired

 

 

(252,092)

 

 

(60,251)

Proceeds from sale of property and equipment

 

 

414

 

 

2,852

Net cash used in investing activities

 

$

(279,955)

 

$

(82,122)

 

8


 

Camping World Holdings, Inc. and Subsidiaries

Unaudited Condensed Consolidated Statements of Cash Flows

(In Thousands)

 

 

 

 

 

 

 

 

 

 

Six Months Ended June 30, 

 

    

2017

    

2016

 

 

 

(Restated)

 

 

(Restated)

Financing activities

 

 

 

 

 

 

Proceeds from long-term debt

 

$

94,762

 

$

 —

Payments on long-term debt

 

 

(3,700)

 

 

(31,885)

Net borrowings on notes payable – floor plan, net

 

 

192,347

 

 

57,673

Borrowings on revolver

 

 

 —

 

 

12,000

Payments on revolver

 

 

 —

 

 

(12,000)

Payments of principal on capital lease obligations

 

 

(691)

 

 

(762)

Payments of principal on right to use liability

 

 

(73)

 

 

(113)

Payment of debt issuance costs

 

 

(1,176)

 

 

 —

Proceeds from issuance of Class A common stock sold in a public offering net of underwriter discounts and commissions

 

 

122,544

 

 

 —

Dividends on Class A common stock

 

 

(7,334)

 

 

 —

Members' distributions

 

 

(69,335)

 

 

(77,653)

Net cash provided by (used in) financing activities

 

 

327,344

 

 

(52,740)

 

 

 

 

 

 

 

Increase (decrease) in cash

 

 

137,965

 

 

(52,959)

Cash at beginning of the period

 

 

114,196

 

 

92,025

Cash at end of the period

 

$

252,161

 

$

39,066

 

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements

 

9


 

Camping World Holdings, Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

 

June 30, 2017

 

1. Summary of Significant Accounting Policies

Principles of Consolidation and Basis of Presentation

The consolidated financial statements include the accounts of Camping World Holdings, Inc. (“CWH”) and its subsidiaries (collectively, the “Company”), and are presented in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Accordingly, these interim financial statements do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) necessary for fair presentation of the results of operations, financial position and cash flows for the periods presented have been reflected. All significant intercompany accounts and transactions of the Company and its subsidiaries have been eliminated in consolidation.

The condensed consolidated financial statements as of and for the three and six months ended June 30, 2017 are unaudited. The condensed consolidated balance sheet as of December 31, 2016 has been derived from the audited financial statements at that date but does not include all of the disclosures required by GAAP. These interim condensed consolidated financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2016 (the “Annual Report”) filed with the SEC on March 13, 2017. Operating results for the interim periods are not necessarily indicative of the results that may be expected for the full year.

CWH was formed on March 8, 2016 as a Delaware corporation for the purpose of facilitating an initial public offering (the “IPO”) and other related transactions in order to carry on the business of CWGS Enterprises, LLC (“CWGS, LLC”). CWGS, LLC was formed in March 2011 when it received, through contribution from its then parent company, all of the membership interests of Affinity Group Holding, LLC and FreedomRoads Holding Company, LLC (“FreedomRoads”). The IPO and related reorganization transactions (the “Reorganization Transactions”) that occurred on October 6, 2016 resulted in CWH as the sole managing member of CWGS, LLC, with CWH having sole voting power in and control of the management of CWGS, LLC. Despite its position as sole managing member of CWGS, LLC, CWH has a minority economic interest in CWGS, LLC. As of June 30, 2017, CWH owned 32.9% of CWGS, LLC. Accordingly, the Company consolidates the financial results of CWGS, LLC and reports a non-controlling interest in its consolidated financial statements. As the Reorganization Transactions are considered transactions between entities under common control, the financial statements for the periods prior to the IPO and related Reorganization Transactions have been adjusted to combine the previously separate entities for presentation purposes.

The Company does not have any components of other comprehensive income recorded within its consolidated financial statements, and, therefore, does not separately present a statement of comprehensive income in its consolidated financial statements.

Description of the Business

CWGS, LLC is a holding company and operates through its subsidiaries. The operations of the Company consist of two primary businesses: (i) Consumer Services and Plans, and (ii) Retail. The Company provides consumer services and plans offerings through its Good Sam brand and the Company primarily provides its retail offerings through its Camping World brand. Within the Consumer Services and Plans segment, the Company primarily derives revenue from the sale of the following offerings: emergency roadside assistance; property and casualty insurance programs; travel assist programs; extended vehicle service contracts; co-branded credit cards; vehicle financing and refinancing; club memberships; and publications and directories. Within the Retail segment, the Company primarily derives revenues from the sale of the following products: new vehicles; used vehicles; parts and service, including recreational vehicle (“RV”) accessories and supplies; camping, hunting, fishing, marine and watersport equipment and supplies; and

10


 

finance and insurance. The Company primarily operates in various regions throughout the United States and markets its products and services to RV owners and outdoor enthusiasts. At June 30, 2017, the Company operated 137 Camping World retail locations, of which 120 locations sell new and used RVs, and offer financing, ancillary services, protection plans, and other products for the RV purchasers and outdoor enthusiasts, and two Overton’s locations offering marine and watersports products.

Restatement of Previously Issued Financial Statements

Following the purchase of newly-issued common units from CWGS, LLC in connection with the IPO, the Company’s deferred tax balances have reflected the differences in the book and tax basis of its investment in CWGS, LLC (i.e., outside basis) (the “Outside Basis Deferred Tax Asset”). In connection with preparing its financial statements for the 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 interest in CWGS, LLC through newly issued LLC units is not expected to be realized unless the Company were to dispose of its investment in CWGS, LLC, which the Company has no current plan to do. Accordingly, the Company has determined that is should have established a valuation allowance of $102.7 million against this portion of its Outside Basis Deferred Tax Asset that was recorded through equity as of December 31, 2016. 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, in accordance with generally accepted accounting principles, and at June 30, 2017 the valuation allowance was $138.6 million.

Because the Company’s consolidated financial statements as of and for the year ended December 31, 2016 included the Outside Basis Deferred Tax Asset, the Company has 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. Accordingly, the Company has restated its condensed consolidated financial statements and related notes (including Notes 11 and 17) as of and for the three and six months ended June 30, 2017 to reflect the effect of this 2016 adjustment on the subsequent periods (the ”Restatement”). There was no impact on net income or cash flows for the related periods affected by the Restatement.

The Company also corrected for errors that were immaterial to previously-reported consolidated financial statements. These errors were also identified in connection with the preparation of the financial statements for the year ended December 31, 2017, and related to i) the lack of deferral of a portion of Good Sam roadside assistance policies sold through the finance and insurance process with the sale of new and used vehicles, ii) the application of a portion of certain vendor rebates against the related inventory balances, iii) the elimination of intercompany allocation of certain revenue from new and used vehicles to consumer services and plans, and iv) the allocation of the intercompany markup between costs applicable to new and used vehicles. To quantify these errors, management performed an analysis of deferred roadside assistance policies and vendor rebates applicable to ending inventory for the years ended December 31, 2016, 2015, 2014, and 2013 and the interim periods in 2017 and 2016. The Company evaluated the materiality of these errors both qualitatively and quantitatively in accordance with Staff Accounting Bulletin (“SAB”) No. 99, Materiality, and SAB No. 108 and, determined the effect of these corrections was not material to the previously issued financial statements as of and for the years ended December 31, 2016 and 2015. As a result of also correcting these errors, new vehicles revenue, used vehicles revenue, finance and insurance, net revenue, costs applicable to revenue – new vehicles, costs applicable to revenue – used vehicles, all within the retail segment, and net income attributable to non-controlling interests. earnings per share, basic and diluted were revised (the Immaterial Adjustments”). There was no effect on any per share amounts prior to the quarter ended December 31, 2016, as the periods were before the Company’s IPO, see Note 16 — Earnings Per Share. There was no effect on per share amounts for the quarter ended June 30, 2017, or the six months ended June 30, 2017. 

The following table presents the effect of the Restatement and the Immaterial Adjustments on the Company’s condensed balance sheets for the periods indicated.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of June 30, 2017

 

As of December 31, 2016

($ in thousands)

    

As Reported

    

Adjustment

    

As Corrected

    

As Reported

    

Adjustment

    

As Corrected

Inventories

 

$

1,106,098

 

$

(5,715)

 

$

1,100,383

 

$

909,254

 

$

(6,543)

 

$

902,711

Total current assets

 

 

1,541,726

 

 

(5,715)

 

 

1,536,011

 

 

1,132,705

 

 

(6,543)

 

 

1,126,162

11


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of June 30, 2017

 

As of December 31, 2016

($ in thousands)

    

As Reported

    

Adjustment

    

As Corrected

    

As Reported

    

Adjustment

    

As Corrected

Deferred tax asset

 

 

243,185

 

 

(136,733)

 

 

106,452

 

 

125,878

 

 

(101,445)

 

 

24,433

Total assets

 

 

2,266,416

 

 

(142,448)

 

 

2,123,968

 

 

1,563,765

 

 

(107,988)

 

 

1,455,777

Deferred revenues and gains, current portion

 

 

69,920

 

 

2,672

 

 

72,592

 

 

68,643

 

 

2,485

 

 

71,128

Total current liabilities

 

 

1,148,101

 

 

2,672

 

 

1,150,773

 

 

865,937

 

 

2,485

 

 

868,422

Deferred revenues and gains, long-term portion

 

 

56,301

 

 

6,172

 

 

62,473

 

 

52,210

 

 

5,449

 

 

57,659