0001558370-19-007895.txt : 20190809 0001558370-19-007895.hdr.sgml : 20190809 20190809160338 ACCESSION NUMBER: 0001558370-19-007895 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 96 CONFORMED PERIOD OF REPORT: 20190630 FILED AS OF DATE: 20190809 DATE AS OF CHANGE: 20190809 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Camping World Holdings, Inc. CENTRAL INDEX KEY: 0001669779 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-AUTO DEALERS & GASOLINE STATIONS [5500] IRS NUMBER: 811737145 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-37908 FILM NUMBER: 191012963 BUSINESS ADDRESS: STREET 1: 250 PARKWAY DRIVE STREET 2: SUITE 270 CITY: LINCOLNSHIRE STATE: IL ZIP: 60048 BUSINESS PHONE: (847) 808-3000 MAIL ADDRESS: STREET 1: 250 PARKWAY DRIVE STREET 2: SUITE 270 CITY: LINCOLNSHIRE STATE: IL ZIP: 60048 FORMER COMPANY: FORMER CONFORMED NAME: CWGS, Inc. DATE OF NAME CHANGE: 20160317 10-Q 1 cwh-20190630x10q.htm 10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended June 30, 2019

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 incorporation or organization)

(I.R.S. Employer 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)

N/A

(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Class A Common Stock,

$0.01 par value per share

CWH

New York Stock Exchange

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 August 6, 2018, the registrant had 37,370,426 shares of Class A common stock, 50,706,629 shares of Class B common stock and one share of Class C common stock outstanding.

Camping World Holdings, Inc.

Quarterly Report on Form 10-Q

For the Quarterly Period Ended June 30, 2019

TABLE OF CONTENTS

Page

PART I. FINANCIAL INFORMATION

Item 1

Financial Statements (unaudited)

5

Unaudited Condensed Consolidated Balance Sheets – June 30, 2019 and December 31, 2018

5

Unaudited Condensed Consolidated Statements of Operations – Three and Six Months Ended June 30, 2019 and 2018

6

Unaudited Condensed Consolidated Statements of Stockholders’ Equity – Six Months Ended June 30, 2019 and 2018

7

Unaudited Condensed Consolidated Statements of Cash Flows – Six Months Ended June 30, 2019 and 2018

9

Notes to Unaudited Condensed Consolidated Financial Statements

11

Item 2

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

34

Item 3

Quantitative and Qualitative Disclosures About Market Risk

58

Item 4

Controls and Procedures

58

PART II. OTHER INFORMATION

Item 1

Legal Proceedings

60

Item 1A

Risk Factors

62

Item 2

Unregistered Sales of Equity Securities and Use of Proceeds

66

Item 3

Defaults Upon Senior Securities

66

Item 4

Mine Safety Disclosures

67

Item 5

Other Information

67

Item 6

Exhibits

67

Signatures

68

BASIS OF PRESENTATION

As used in this Quarterly Report on Form 10-Q (this “Form 10-Q”), 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, 2018 filed with the Securities and Exchange Commission (“SEC”) on March 15, 2019.
“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 initial public offering (“IPO”) of our stock 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) 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 Profit Unit Holders” refers collectively to our named executive officers (excluding Marcus A. 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 A. Lemonis.
“ML RV Group” refers to ML RV Group, LLC, a Delaware limited liability company, wholly owned by our Chairman and Chief Executive Officer, Marcus A. Lemonis.
“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.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Form 10-Q 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 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; sufficiency of our sources of liquidity and capital and potential need for additional financing; future capital expenditures and debt service

1

obligations; refinancing, retirement or exchange of outstanding debt; expectations regarding industry trend and consumer behavior and growth; our ability to capture positive industry trends and pursue growth; our plans to increase new products offered to our customers and grow our businesses to enhance our visibility with respect to revenue and cash flow, and to increase our overall profitability; volatility in sales and potential impact of miscalculating the demand for our products or our product mix; remediation of material weaknesses; expectations regarding increase of certain expenses in connection with our growth; and our plans related to dividend payments, 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;
current softness in the RV industry, which has increased our costs and reduced our margins;
uncertainty regarding how long the ongoing softness in the RV industry will last;
general economic conditions in our markets, and ongoing economic and financial uncertainties;
changes in consumer preferences or our failure to gauge those preferences;
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, businesses, or product lines or categories, 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;
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 imposed by our Senior Secured Credit Facilities and Floor Plan Facility;
our reliance on eight fulfillment and distribution centers for our retail, e-commerce and catalog businesses;

2

our pending securities class action lawsuits;
natural disasters, whether or not caused by climate change, unusual weather conditions, 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;
any delays, new or increased tariffs, increased cost or quality control deficiencies in the importation of our products manufactured abroad;
whether third party lending institutions and insurance companies will continue to provide financing for RV purchases;
our ability to retain senior executives and attract and retain other qualified employees;
our ability to meet our labor needs;
risks associated with leasing substantial amounts of space, including 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;
changes in government policies and firearms legislation;
potential impact of material weaknesses in our internal control over financial reporting;
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;
increases in the minimum wage;
increases in paper costs, postage costs and shipping costs;
risk of product liability claims if people or property are harmed by the products we sell and other litigation risks;
risks associated with our private brand offerings;
the effectiveness of our risk management policies and procedures;
potential asset impairment charges for goodwill, intangible assets or other long-lived assets;

3

risks associated with operating the Gander Outdoors and Overton’s retail brands;
benefits and cost savings related to integration of Gander Outdoors and Overton’s brands;
the impact of ongoing class action lawsuits against us and certain of our officers and directors, as well as any potential future class action litigation;
potential litigation relating to products we sell as a result of recent acquisitions, including firearms and ammunitions;
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 including matters requiring approval by our stockholders;
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;
other risks relating to our organizational structure and to ownership of shares of our Class A common stock; and
the other factors set forth under ‘‘Risk Factors’’ in Item 1A of Part I of our Annual Report and in Item 1A of Part II of this Form 10-Q.

We qualify all of our forward-looking statements by these cautionary statements. The forward-looking statements in this Form 10-Q 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 “Risk Factors” in Item 1A of Part I of our Annual Report, and in Item 1A of Part II of this Form 10-Q.

4

Part I – FINANCIAL INFORMATION

Item 1. Financial Statements

Camping World Holdings, Inc. and Subsidiaries

Unaudited Condensed Consolidated Balance Sheets

(In Thousands Except Share and Per Share Amounts)

June 30, 

December 31, 

  

2019

    

2018

Assets

Current assets:

Cash and cash equivalents

$

101,260

$

138,557

Contracts in transit

120,244

53,214

Accounts receivable, net

98,125

85,711

Inventories

1,547,496

1,558,970

Prepaid expenses and other assets

43,761

51,710

Total current assets

1,910,886

1,888,162

Property and equipment, net

376,172

359,855

Operating lease assets

821,025

Deferred tax assets, net

128,492

145,943

Intangible assets, net

33,005

35,284

Goodwill

383,676

359,117

Other assets

19,257

18,326

Total assets

$

3,672,513

$

2,806,687

Liabilities and stockholders' equity

Current liabilities:

Accounts payable

$

223,510

$

144,808

Accrued liabilities

163,180

124,619

Deferred revenues and gains

84,247

88,054

Current portion of finance lease liabilities

23

Current portion of operating lease liabilities

55,776

Current portion of Tax Receivable Agreement liability

6,815

9,446

Current portion of long-term debt

14,144

12,977

Notes payable – floor plan, net

813,635

885,980

Other current liabilities

50,660

39,211

Total current liabilities

1,411,967

1,305,118

Right to use liability

5,147

Operating lease liabilities, net of current portion

822,020

Tax Receivable Agreement liability, net of current portion

109,504

124,763

Revolving line of credit

52,768

38,739

Long-term debt, net of current portion

1,161,845

1,152,888

Deferred revenues and gains

61,502

67,157

Other long-term liabilities

27,294

79,958

Total liabilities

3,646,900

2,773,770

Commitments and contingencies

Stockholders' equity:

Preferred stock, par value $0.01 per share – 20,000,000 shares authorized; none issued and outstanding as of June 30, 2019 and December 31, 2018

Class A common stock, par value $0.01 per share – 250,000,000 shares authorized; 37,381,270 issued and 37,272,505 outstanding as of June 30, 2019 and 37,278,690 issued and 37,192,364 outstanding as of December 31, 2018

373

372

Class B common stock, par value $0.0001 per share – 75,000,000 shares authorized; 69,066,445 issued; and 50,706,629 outstanding as of June 30, 2019 and December 31, 2018

5

5

Class C common stock, par value $0.0001 per share – one share authorized, issued and outstanding as of June 30, 2019 and December 31, 2018

Additional paid-in capital

50,604

47,531

Retained deficit

(12,453)

(3,370)

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

38,529

44,538

Non-controlling interests

(12,916)

(11,621)

Total stockholders' equity

25,613

32,917

Total liabilities and stockholders' equity

$

3,672,513

$

2,806,687

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, 

2019

    

2018

    

2019

    

2018

Revenue:

Good Sam Services and Plans

$

44,694

$

42,338

$

91,660

$

87,163

RV and Outdoor Retail

New vehicles

778,870

807,519

1,308,447

1,387,029

Used vehicles

245,749

210,646

425,757

382,737

Products, service and other

264,426

250,359

469,302

414,511

Finance and insurance, net

128,225

120,205

220,116

209,305

Good Sam Club

12,383

10,410

23,834

19,393

Subtotal

1,429,653

1,399,139

2,447,456

2,412,975

Total revenue

1,474,347

1,441,477

2,539,116

2,500,138

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

Good Sam Services and Plans

18,746

17,661

39,477

38,121

RV and Outdoor Retail

New vehicles

681,399

697,694

1,144,443

1,201,578

Used vehicles

192,681

162,506

335,527

296,799

Products, service and other

168,607

148,066

304,711

243,868

Good Sam Club

2,924

3,107

6,641

5,436

Subtotal

1,045,611

1,011,373

1,791,322

1,747,681

Total costs applicable to revenue

1,064,357

1,029,034

1,830,799

1,785,802

Operating expenses:

Selling, general, and administrative

303,366

283,095

571,431

529,408

Debt restructure expense

(44)

380

Depreciation and amortization

13,946

11,628

27,540

21,028

Loss on disposal of assets

2,374

59

2,160

144

Total operating expenses

319,686

294,738

601,131

550,960

Income from operations

90,304

117,705

107,186

163,376

Other income (expense):

Floor plan interest expense

(11,269)

(10,202)

(22,879)

(20,945)

Other interest expense, net

(18,211)

(16,107)

(35,854)

(28,946)

Loss on debt restructure

(1,676)

Tax Receivable Agreement liability adjustment

8,477

Other expense, net

(2)

(2)

Total other income (expense)

(29,480)

(26,311)

(50,256)

(51,569)

Income before income taxes

60,824

91,394

56,930

111,807

Income tax expense

(8,201)

(14,262)

(31,114)

(21,127)

Net income

52,623

77,132

25,816

90,680

Less: net income attributable to non-controlling interests

(34,606)

(52,350)

(27,194)

(64,077)

Net income (loss) attributable to Camping World Holdings, Inc.

$

18,017

$

24,782

$

(1,378)

$

26,603

Income (loss) earnings per share of Class A common stock:

Basic

$

0.48

$

0.67

$

(0.04)

$

0.72

Diluted

$

0.46

$

0.67

$

(0.04)

$

0.72

Weighted average shares of Class A common stock outstanding:

Basic

37,239

36,964

37,217

36,890

Diluted

88,925

37,047

37,217

37,183

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements

6

Camping World Holdings, Inc. and Subsidiaries

Unaudited Condensed Consolidated Statements of Stockholders' Equity

(In Thousands)

Additional

Retained

Non-

Class A Common Stock

Class B Common Stock

Class C Common Stock

Paid-In

Earnings

Controlling

  

Shares

  

Amounts

  

Shares

  

Amounts

  

Shares

  

Amounts

  

Capital

  

(Deficit)

  

Interest

  

Total

Balance at December 31, 2018

37,192

$

372

50,707

$

5

$

$

47,531

$

(3,370)

$

(11,621)

$

32,917

Adoption of accounting standard (see Note 1 Summary of Significant Accounting Policies)

3,705

6,332

10,037

Equity-based compensation

2,716

2,716

Vesting of restricted stock units

1

Redemption of LLC common units for Class A common stock

6

12

12

Distributions to holders of LLC common units

(5,534)

(5,534)

Dividends(1)

(5,699)

(5,699)

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

(8)

(8)

Non-controlling interest adjustment

(1,678)

1,678

Net loss

(19,395)

(7,412)

(26,807)

Balance at March 31, 2019

37,199

372

50,707

5

48,573

(24,759)

(16,557)

7,634

Equity-based compensation

3,863

3,863

Vesting of restricted stock units

96

1

143

(144)

Repurchases of Class A common stock for withholding taxes on vested RSUs

(22)

(273)

(273)

Distributions to holders of LLC common units

(32,523)

(32,523)

Dividends(1)

(5,711)

(5,711)

Non-controlling interest adjustment

(1,702)

1,702

Net income

18,017

34,606

52,623

Balance at June 30, 2019

37,273

$

373

50,707

$

5

$

$

50,604

$

(12,453)

$

(12,916)

$

25,613

(1)The Company declared dividends per share of Class A common stock of $0.15 for each of the three months ended March 31 and June 30, 2019.

7

Camping World Holdings, Inc. and Subsidiaries

Unaudited Condensed Consolidated Statements of Stockholders' Equity

(In Thousands)

Class A Common Stock

Class B Common Stock

Class C Common Stock

Paid-In

Earnings

Controlling

  

Shares

  

Amounts

  

Shares

  

Amounts

  

Shares

  

Amounts

  

Capital

  

(Deficit)

  

Interest

  

Total

Balance at December 31, 2017

36,749

367

50,837

5

42,520

7,619

21,252

71,763

Adoption of accounting standard (ASC No. 606, Revenue from Contracts with Customers)

1,310

2,476

3,786

Equity-based compensation

3,218

3,218

Exercise of stock options

6

137

137

Non-controlling interest adjustment for capital contribution of proceeds from the exercise of stock options

(77)

77

Vesting of restricted stock units

2

Redemption of LLC common units for Class A common stock

173

2

(130)

1,848

(115)

1,735

Distributions to holders of LLC common units

(19,938)

(19,938)

Dividends(2)

(5,662)

(5,662)

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

(1,414)

(1,414)

Non-controlling interest adjustment

(1,592)

1,592

Net income

1,821

11,727

13,548

Balance at March 31, 2018

36,930

369

50,707

5

44,640

5,088

17,071

67,173

Equity-based compensation

3,129

3,129

Exercise of stock options

5

5

Non-controlling interest adjustment for capital contribution of proceeds from the exercise of stock options

(5)

5

Vesting of restricted stock units

77

1

29