Boot Barn Holdings, Inc. Announces Third Quarter Fiscal Year 2016 Financial Results

IRVINE, Calif.–(BUSINESS WIRE)–Boot Barn Holdings, Inc. (NYSE:BOOT) today announced its financial
results for the fiscal quarter ended December 26, 2015.

Highlights for the quarter ended December 26, 2015, were as follows, and
were consistent with preliminary results announced on January 11, 2016:

• Net sales increased 49% to approximately $194 million;
• Opened five new stores and completed the rebranding of 19 Sheplers
  stores;
• Consolidated same store sales (which include e-commerce and Sheplers
  sales) declined 2.0%, with Boot Barn and Sheplers performing similarly;
• Pro forma adjusted net income per diluted share of $0.45 compared to
  $0.40 per diluted share in the prior-year period.

1) Pro forma adjusted net income is a non-GAAP measure. An explanation
of the computation of this measure and a reconciliation to GAAP net
income is included below. See also “Non-GAAP Financial Measures.”

Jim Conroy, Chief Executive Officer, commented, “While our same store
sales fell short of our original expectations, we maintained healthy
merchandise margins without making meaningful changes to our pricing
strategy in what was a very promotional holiday season. We also made
considerable progress on our other initiatives during the third quarter.
We completed the integration of the Sheplers business and further
increased our market share by opening five new stores and growing
e-commerce by double digits. We continued our initiative to expand
merchandise margins by increasing the penetration of our private brands.
We are pleased as both the Sheplers stores and e-commerce channels
experienced growth in sales for the first five weeks of the fourth
quarter, while the core Boot Barn business remained slightly positive.
Overall, we remain confident in our ability to continue to execute on
our long-term growth strategies, further expand our store footprint, and
improve merchandise margins, while further solidifying our position as
the largest omni-channel western and work wear retailer in the U.S.”

Operating Results for the Third Quarter Ended December 26, 2015

• Net sales increased 49% to $193.8 million in the third quarter of
  fiscal year 2016, from $130.5 million in the prior year period. Net
  sales increased due to contributions from recently acquired Sheplers
  and 22 new stores opened between the beginning of the fourth quarter
  of fiscal 2015 and the end of the third quarter of fiscal 2016,
  partially offset by a decrease of 2.0% in consolidated same store
  sales.
• Adjusted gross profit was $65.0 million or 33.5% of net sales (on a
  GAAP basis, gross profit was $64.2 million or 33.1%) in the third
  quarter of fiscal year 2016, an increase of $18.8 million or 40.7%
  from gross profit of $46.2 million, or 35.4% of net sales in the
  prior-year period. Adjusted gross profit excludes acquisition-related
  integration costs, including an adjustment to normalize the impact of
  sales of Sheplers’ discontinued inventory, contract termination costs
  and the amortization of inventory fair value adjustment. Adjusted
  gross profit increased as a result of the addition of the Sheplers
  business and the opening of 22 new stores. The merchandise margin rate
  at the Sheplers business improved; whereas, the core Boot Barn
  business was in line with the prior year. On a consolidated basis,
  given that Sheplers’ historical margin is lower than core Boot Barn,
  the composition of the businesses this year with Sheplers, as compared
  to last year when the Company did not own Sheplers, resulted in a
  decline in merchandise margin of 260 basis points due to mix. There
  was a slight decline in merchandise margin of 10 basis points at core
  Boot Barn comprised of higher freight costs, partially offset by
  better markup. Declines in consolidated merchandise margin rate were
  partially offset by the leveraging of occupancy expenses of 70 basis
  points.
• Adjusted income from operations was $23.5 million in the third quarter
  of fiscal year 2016, an increase of 32.5% compared to $17.7 million in
  the prior-year period. Adjusted income from operations excludes
  acquisition-related integration costs, SEC filing costs, loss on
  disposal of assets and contract termination costs, and the
  amortization of inventory fair value adjustment incurred in the third
  quarter of fiscal year 2016. On a GAAP basis, income from operations
  was $20.2 million in the third quarter of fiscal year 2016 compared to
  $17.9 million in the prior-year period.
• During the third quarter, the Company opened five Boot Barn stores,
  ending the quarter with 206 stores in 29 states.
• Pro forma adjusted net income was $12.0 million, or $0.45 per diluted
  share in the third quarter of fiscal year 2016, compared to $10.5
  million or $0.40 per diluted share in the prior-year period. On a GAAP
  basis, net income was $9.9 million, or $0.37 per diluted share in the
  third quarter of fiscal year 2016, compared to $8.8 million or $0.36
  per diluted share in the prior-year period.

Operating Results for the Nine Months Ended December 26, 2015

• Net sales increased 40.1% to $419.6 million in the first nine months
  of fiscal year 2016, from $299.4 million in the prior-year period. Net
  sales increased due to contributions from recently acquired Sheplers,
  22 new stores opened between the beginning of the fourth quarter of
  fiscal 2015 and the end of the third quarter of fiscal 2016, and an
  increase of 0.3% in consolidated same store sales.
• Adjusted gross profit was $134.1 million or 32.0% of net sales (on a
  GAAP basis, gross profit was $130.8 million or 31.2%) in the first
  nine months of fiscal year 2016, an increase of $33.3 million, or
  33.0% from gross profit of $100.8 million, or 33.7% of net sales in
  the prior-year period. Adjusted gross profit increased as a result of
  the addition of the Sheplers business and the opening of 22 new
  stores. The decline in adjusted gross profit rate was primarily driven
  by a 170 basis point decrease from the composition of the lower margin
  Sheplers business that was not part of Boot Barn in the prior year.
  Core Boot Barn’s merchandise margin was flat.
• Adjusted income from operations was $35.0 million in the first nine
  months of fiscal year 2016, an increase of 29.3% compared to $27.1
  million in the prior-year period. On a GAAP basis, income from
  operations was $24.6 million in the first nine months of fiscal year
  2016 compared to $27.6 million in the prior-year period.
• The Company acquired 25 Sheplers stores, opened 18 Boot Barn stores,
  closed five Sheplers and one Boot Barn store, and ended the period
  with 206 stores in 29 states.
• Pro forma adjusted net income was $16.2 million, or $0.60 per diluted
  share in the first nine months of fiscal year 2016, compared to $13.8
  million or $0.53 per diluted share in the prior-year period. On a GAAP
  basis, net income was $8.9 million, or $0.33 per diluted share in the
  first nine months of fiscal year 2016, compared to net income of $11.1
  million or $0.45 per diluted share in the prior-year period.

A reconciliation of adjusted gross profit, adjusted income from
operations, pro forma adjusted net income and pro forma adjusted net
income per diluted share, each a non-GAAP financial measure, to their
most directly comparable GAAP financial measures is included in the
accompanying financial data. See also “Non-GAAP Financial Measures.”

Balance Sheet Highlights as of December 26, 2015

• Cash: $17.8 million
• Total net borrowings: $223.9 million
• Total liquidity (cash plus availability on $125 million revolving
  credit facility): $112.8 million

Fiscal Year 2016 Outlook

For the fiscal fourth quarter ending March 26, 2016, including Sheplers,
the Company now expects:

• To open four new stores in the fourth quarter.
• Consolidated same store sales growth to be flat to slightly positive.
• Pro forma adjusted income from operations between $8.5 million and
  $9.4 million.
• Pro forma adjusted net income of $2.9 million to $3.5 million,
• Pro forma adjusted net income per diluted share of $0.11 to $0.13
  based on 26.6 million weighted average diluted shares outstanding.

For the fiscal year ending March 26, 2016, including Sheplers, the
Company now expects:

• To open 22 new stores.
• Pro forma adjusted income from operations between $43.5 million and
  $44.4 million.
• Pro forma adjusted net income of $19.1 million to $19.7 million.
• Pro forma adjusted net income per diluted share of $0.71 to $0.73
  based on 26.9 million weighted average diluted shares outstanding.

Our Fiscal 2016 outlook for pro forma adjusted income from operations
and net income excludes merger and integration costs and other
non-recurring expenses, including losses on the disposal of assets and
contract termination costs, acquisition-related expenses,
acquisition-related integration costs, amortization of inventory fair
value adjustment, markdown of discontinued Sheplers inventory, and the
write off of debt discount as part of the June 29, 2015 refinancing. See
the table at the end of this press release that reconciles forecasted
GAAP net income to forecasted pro forma adjusted net income.

Conference Call Information

A conference call to discuss the financial results for the third quarter
of fiscal 2016 is scheduled for today, February 2, 2016, at 4:30 p.m. ET
(1:30 p.m. PT). Investors and analysts interested in participating in
the call are invited to dial (877) 407-4018. The conference call will
also be available to interested parties through a live webcast at investor.bootbarn.com.
Please visit the website and select the “Events and Presentations” link
at least 15 minutes prior to the start of the call to register and
download any necessary software. A telephone replay of the call will be
available until February 16, 2016, by dialing (877) 870-5176 (domestic)
or (858) 384-5517 (international) and entering the conference
identification number: 13629183. Please note participants must enter the
conference identification number in order to access the replay.

About Boot Barn

Boot Barn is the nation’s leading lifestyle retailer of western and
work-related footwear, apparel and accessories for men, women and
children. The Company offers its loyal customer base a wide selection of
more than 200 work and lifestyle brands. Boot Barn now operates 205
stores in 29 states, in addition to an e-commerce channel, including
both www.bootbarn.com
and www.sheplers.com.
For more information, call 888-Boot-Barn or visit www.bootbarn.com.

Non-GAAP Financial Measures

The Company presents adjusted gross profit, adjusted income from
operations, pro forma adjusted net income and pro forma adjusted net
income per share to help the Company describe its operating and
financial performance. These financial measures are non-GAAP financial
measures and should not be construed in isolation or as an alternative
to actual gross profit, actual income from operations, actual net income
and actual diluted earnings per share and other income or cash flow
statement data (as presented in the Company’s consolidated financial
statements in accordance with generally accepted accounting principles
in the United States, or GAAP), or as a better indicator of operating
performance or as a measure of liquidity. These non-GAAP financial
measures, as defined by the Company, may not be comparable to similar
non-GAAP financial measures presented by other companies. The Company’s
management believes that these non-GAAP financial measures provide
investors with transparency and help illustrate financial results by
excluding items that may not be indicative of, or are unrelated to, the
Company’s core operating results, thereby providing a better baseline
for analyzing trends in the underlying business. See the table at the
end of this press release for a reconciliation of adjusted gross profit
to gross profit, adjusted income from operations to income from
operations, pro forma adjusted net income to net income, and pro forma
adjusted net income per share to net income per share.

Forward Looking Statements

This press release contains forward-looking statements that are subject
to risks and uncertainties. All statements other than statements of
historical fact included in this press release are forward-looking
statements. You can identify forward-looking statements by the fact that
they generally include words such as “anticipate,” “estimate,” “expect,”
“project,” “plan,“ “intend,” “believe,” “outlook” 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
but not all forward-looking statements contain these identifying words.
These forward-looking statements are based on assumptions that the
Company’s management has made in light of their industry experience and
on their perceptions of historical trends, current conditions, expected
future developments and other factors they believe are appropriate under
the circumstances. As you consider this press release, you should
understand that these statements are not guarantees of performance or
results. They involve risks, uncertainties (some of which are beyond the
Company’s control) and assumptions. These risks, uncertainties and
assumptions include, but are not limited to, the following: the failure
to realize the anticipated synergies from the Sheplers acquisition and
other risks of integration, declines in consumer spending or changes in
consumer preferences and the Company’s ability to effectively execute on
its growth strategy; to maintain and enhance its strong brand image; to
compete effectively; to maintain good relationships with its key
suppliers; and to improve and expand its exclusive product offerings.
The Company discusses the foregoing risks and other risks in greater
detail under the heading “Risk factors” in the periodic reports filed by
the Company with the Securities and Exchange Commission. Although the
Company believes that these forward-looking statements are based on
reasonable assumptions, you should be aware that many factors could
affect the Company’s actual financial results and cause them to differ
materially from those anticipated in the forward-looking statements.
Because of these factors, the Company cautions that you should not place
undue reliance on any of these forward-looking statements. New risks and
uncertainties arise from time to time, and it is impossible for the
Company to predict those events or how they may affect the Company.
Further, any forward-looking statement speaks only as of the date on
which it is made. Except as required by law, the Company does not intend
to update or revise the forward-looking statements in this press release
after the date of this press release.

Boot Barn Holdings, Inc.
Consolidated Balance Sheets
(In thousands, except per share data)
(Unaudited)
		December 26,			March 28,
		2015			2015
Assets
Current assets:
Cash and cash equivalents		$	17,840		$	1,448
Accounts receivable			5,732			3,863
Inventories			174,060			129,312
Prepaid expenses and other current assets			9,091			10,656
Total current assets			206,723			145,279
Property and equipment, net			72,562			30,054
Goodwill			191,915			93,097
Intangible assets, net			65,561			57,131
Other assets			896			567
Total assets		$	537,657		$	326,128
Liabilities and stockholders’ equity
Current liabilities:
Line of credit		$	30,007		$	16,200
Accounts payable			81,292			44,636
Accrued expenses and other current liabilities			47,896			24,061
Current portion of notes payable, net of unamortized debt issuance costs			1,050			1,596
Total current liabilities			160,245			86,493
Deferred taxes			3,957			21,102
Long-term portion of notes payable, net of unamortized debt issuance costs			192,826			72,030
Capital lease obligation			8,334			15
Other liabilities			12,475			4,066
Total liabilities		$	377,837		$	183,706
Stockholders’ equity:
Common stock, $0.0001 par value; December 26, 2015 – 100,000 shares authorized, 26,353 shares issued; March 28, 2015 – 100,000 shares authorized, 25,824 shares issued			3			3
Preferred stock, $0.0001 par value; 10,000 shares authorized, no shares issued or outstanding			–			–
Additional paid-in capital			137,235			128,693
Retained earnings			22,582			13,726
Less: Common stock held in treasury, at cost, 3 and 0 shares at December 26, 2015 and March 28, 2015, respectively			–			–
Total stockholders’ equity			159,820			142,422
Total liabilities and stockholders’ equity		$	537,657		$	326,128

Boot Barn Holdings, Inc.
Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)
		Thirteen Weeks Ended							Thirty-Nine Weeks Ended
		December 26,				December 27,			December 26,				December 27,
		2015				2014			2015				2014
Net sales		$	193,842			$	130,523		$	419,554			$	299,404
Cost of goods sold			129,891				84,367			289,176				198,605
Amortization of inventory fair value adjustment			(228	)			–			(453	)			–
Total cost of goods sold			129,663				84,367			288,723				198,605
Gross profit			64,179				46,156			130,831				100,799
Operating expenses:
Selling, general and administrative expenses			43,986				28,299			105,323				73,167
Acquisition-related expenses			–				–			891				–
Total operating expenses			43,986				28,299			106,214				73,167
Income from operations			20,193				17,857			24,617				27,632
Interest expense, net			3,553				4,177			9,347				9,755
Other income, net			–				12			–				37
Income before income taxes			16,640				13,692			15,270				17,914
Income tax expense			6,712				4,929			6,414				6,794
Net income			9,928				8,763			8,856				11,120
Net income attributed to non-controlling interest			–				–			–				4
Net income attributed to Boot Barn Holdings, Inc.		$	9,928			$	8,763		$	8,856			$	11,116
Earnings per share:
Basic shares		$	0.38			$	0.37		$	0.34			$	0.46
Diluted shares		$	0.37			$	0.36		$	0.33			$	0.45
Weighted average shares outstanding:
Basic shares			26,326				23,704			26,116				20,928
Diluted shares			26,871				24,556			27,003				21,599

Boot Barn Holdings, Inc.
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
		Thirty-Nine Weeks Ended
		December 26,				December 27,
		2015				2014
Cash flows from operating activities
Net income		$	8,856			$	11,120
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation			7,670				4,481
Stock-based compensation			2,143				1,459
Excess tax benefit			(3,701	)			–
Amortization of intangible assets			1,852				1,962
Amortization and write-off of debt issuance fees and debt discount			1,991				2,218
Loss on disposal of property and equipment			237				113
Accretion of above market leases			54				(126	)
Deferred taxes			(1,060	)			604
Amortization of inventory fair value adjustment			(453	)			–
Changes in operating assets and liabilities:
Accounts receivable			(77	)			(2,321	)
Inventories			(13,859	)			(19,153	)
Prepaid expenses and other current assets			9,057				1,176
Other assets			(1,550	)			(166	)
Accounts payable			23,053				5,647
Accrued expenses and other current liabilities			17,068				12,423
Other liabilities			4,387				1,148
Net cash provided by operating activities		$	55,668			$	20,585
Cash flows from investing activities
Purchases of property and equipment		$	(30,094	)		$	(9,562	)
Acquisition of business, net of cash acquired			(146,541	)			–
Net cash used in investing activities		$	(176,635	)		$	(9,562	)
Cash flows from financing activities
Line of credit – net		$	13,807			$	3,419
Proceeds from loan borrowings			200,938				30,750
Repayments on debt and capital lease obligations			(77,298	)			(82,860	)
Debt issuance fees			(6,487	)			(776	)
Net proceeds from initial public offering			–				82,224
Excess tax benefits from stock options			3,701				–
Proceeds from exercise of stock options			2,698				–
Dividends paid			–				(41,300	)
Net cash provided by/(used in) financing activities		$	137,359			$	(8,543	)
Net increase in cash and cash equivalents			16,392				2,480
Cash and cash equivalents, beginning of period			1,448				1,118
Cash and cash equivalents, end of period		$	17,840			$	3,598
Supplemental disclosures of cash flow information:
Cash paid for income taxes		$	2,901			$	3,347
Cash paid for interest		$	7,044			$	7,818
Supplemental disclosure of non-cash activities:
Unpaid purchases of property and equipment		$	2,416			$	702
Equipment acquired through capital lease		$	–			$	36

Boot Barn Holdings, Inc.

Supplemental Information – Consolidated Statements of Operations
Reconciliation
of GAAP to Non-GAAP Financial Measures
(In thousands, except
per share amounts)
(Unaudited)

The tables below reconcile the non-GAAP financial measures of adjusted
gross profit, adjusted income from operations, pro forma adjusted net
income, and pro forma adjusted diluted earnings per share, to the most
directly comparable GAAP financial measures of gross profit, income from
operations, net income, and diluted income per share. Pro forma adjusted
net income and pro forma adjusted diluted income per share give effect
to the reduction in our interest rate under our credit facility as a
result of, and the repayment of a portion of our term loan with the
proceeds of, our November 2014 initial public offering (the “IPO”), as
if it had occurred on March 31, 2013, the first day of our fiscal year
2014.

		Thirteen Weeks Ended								Thirty-Nine Weeks Ended
		December 26,				December 27,				December 26,				December 27,
		2015				2014				2015				2014
Reconciliation of GAAP gross profit to adjusted gross profit
Gross profit, as reported		$	64,179			$	46,156			$	130,831			$	100,799
Amortization of inventory fair value adjustment (a)			(228	)			–				(453	)			–
Acquisition-related integration costs (b)			999				–				3,330				–
Contract termination costs (c)			–				–				403				–
Adjusted gross profit		$	64,950			$	46,156			$	134,111			$	100,799
Reconciliation of GAAP income from operations to adjusted income from operations
Income from operations, as reported		$	20,193			$	17,857			$	24,617			$	27,632
Amortization of inventory fair value adjustment (a)			(228	)			–				(453	)			–
Acquisition-related expenses (d)			–				–				891				–
Acquisition-related integration costs (b)			3,153				–				8,521				–
Loss on disposal of assets and contract termination costs (c)			53				27				1,107				113
SEC filing costs (e)			317				–				317				–
Estimated public company costs (f)			–				(153	)			–				(1,540	)
Other due diligence expenses (g)			–				–				–				864
Adjusted income from operations		$	23,488			$	17,731			$	35,000			$	27,069
Reconciliation of GAAP net income attributed to Boot Barn Holdings, Inc. to pro forma adjusted net income attributed to Boot Barn Holdings, Inc.
Net income attributed to Boot Barn Holdings, Inc., as reported		$	9,928			$	8,763			$	8,856			$	11,116
Amortization of inventory fair value adjustment (a)			(228	)			–				(453	)			–
Acquisition-related expenses (d)			–				–				891				–
Acquisition-related integration costs (b)			3,153				–				8,521				–
Loss on disposal of assets and contract termination costs (c)			53				27				1,107				113
SEC filing costs (e)			317				–				317				–
Estimated public company costs (f)			–				(153	)			–				(1,540	)
Other due diligence expenses (g)			–				–				–				864
Write-off of debt discount (h)			–				–				1,355				–
Interest expense, as reported			–				4,177				–				9,755
Pro forma interest expense (i)			–				(1,210	)			–				(3,630	)
Provision for income taxes, as reported			6,712				4,929				6,414				6,794
Pro forma adjusted provision for income taxes (j)			(7,937	)			(6,007	)			(10,809	)			(9,685	)
Pro forma adjusted net income attributed to Boot Barn Holdings, Inc.		$	11,998			$	10,526			$	16,199			$	13,787
Reconciliation of proforma adjusted net income per diluted share to net income per diluted share
Net income per share, diluted:
Net income per share, as reported		$	0.37			$	0.36			$	0.33			$	0.45
Adjustments			0.08				0.04				0.27				0.08
Net income per share paid to vested option holders (k)			–				–				–				0.06
Pro forma adjusted net income per share, diluted		$	0.45			$	0.40			$	0.60			$	0.53
Weighted average diluted shares outstanding, as reported			26,871				24,556				27,003				21,599
Pro forma effect of shares issuances in IPO (l)			–				1,975				–				4,492
Pro forma adjusted diluted weighted average shares			26,871				26,531				27,003				26,091

(a) Represents the amortization of purchase-accounting adjustments that
decreased the value of inventory acquired to its fair value.
(b)
Represents certain store integration, remerchandising, inventory
obsolescence and corporate consolidation costs incurred in connection
with the integration of Sheplers.

Contacts

Investors:
ICR, Inc.
Anne Rakunas / Brendon
Frey, 310-954-1113
BootBarnIR@icrinc.com
or
Media:
Boot
Barn Media Relations
Jayme Maxwell, 949-453-4400 ext. 428
BootBarnIRMedia@bootbarn.com

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