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, 2019March 31, 2020
ORor
| |
☐ | 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
(Address of registrant’s principal executive offices) (Zip Code)
Telephone: (847) 808-3000
(Address, including zip code, andRegistrant’s telephone number, including area code, of registrant’s principal executive offices)code)
N/A
(Former Name, Former Addressname, former address and Former Fiscal Year,former fiscal year, if Changed Since Last Report)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,May 4, 2020, the registrant had 37,370,42637,539,786 shares of Class A common stock, 50,706,629 shares of Class B common stock and one1 share of Class C common stock outstanding.
Camping World Holdings, Inc.
Quarterly Report on Form 10-Q
For the Quarterly Period Ended June 30, 2019March 31, 2020
TABLE OF CONTENTS
| ||
| Page | |
| ||
| | |
| ||
| | |
| ||
| 3 | |
| 4 | |
| 5 | |
| 6 | |
|
| |
|
|
|
| Notes to Unaudited Condensed Consolidated Financial Statements |
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
| |
| ||
| ||
| | |
| ||
| | |
| ||
| ||
| ||
| ||
| ||
| ||
| ||
| | |
| ||
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,” “CWH,” 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, |
| ● | “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. |
| ● | “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. |
1
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,position; the impact of the novel coronavirus (“COVID-19”) pandemic on our business, results of operations and financial position; business strategy and plans and objectives of management for future operations, including, among others, statements regardingoperations; the timeline for and benefits of our 2019 Strategic Shift (as defined below); expected new retail location openings and closures, including greenfield locations and acquired locations; sufficiency of our sources of liquidity and capital and any potential need for additional financing; future capital expenditures and debt service
1
obligations;financing or refinancing, retirement or exchange of outstanding debt; future capital expenditures and debt service obligations; expectations regarding industry trendtrends 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;pending litigation, 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:
2
3
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. Becauseoperations, business strategy, short-term and long-term business operations and objectives, and financial needs. These forward-looking statements are inherently subject to a number of risks, uncertainties, 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 reflectedassumptions, including the important factors described 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.10-Q, and in our other filings with the SEC, that may cause our actual results, performance or achievements to differ materially and adversely from those expressed or implied by the forward-looking statements.
Any forward-looking statements made herein speak only as of the date of this Form 10-Q, and you should not rely on forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that the future effects, results, performance, or achievements reflected in the forward-looking statements will be achieved or occur. We undertake no obligation to update any of these forward-looking statements for any reason after the date of this Form 10-Q or to conform these statements to actual results or revised expectations.
42
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, | | March 31, | | December 31, | ||||
|
| 2019 |
| 2018 |
| 2020 |
| 2019 | ||||
Assets | | | | | | | | | | | | |
Current assets: | | | | | | | | | | | | |
Cash and cash equivalents | | $ | 101,260 | | $ | 138,557 | | $ | 109,406 | | $ | 147,521 |
Contracts in transit | | | 120,244 | | | 53,214 | | | 54,794 | | | 44,947 |
Accounts receivable, net | | | 98,125 | | | 85,711 | ||||||
Accounts receivable, less allowance for doubtful accounts of $3,451 and $3,537 in 2020 and 2019, respectively | | | 71,989 | | | 81,847 | ||||||
Inventories | | | 1,547,496 | | | 1,558,970 | | | 1,439,453 | | | 1,358,539 |
Prepaid expenses and other assets | | | 43,761 | | | 51,710 | | | 51,829 | | | 57,827 |
Total current assets | | | 1,910,886 | | | 1,888,162 | | | 1,727,471 | | | 1,690,681 |
Property and equipment, net | | | 376,172 | | | 359,855 | | | 304,234 | | | 314,374 |
Operating lease assets | | | 821,025 | | | — | | | 810,562 | | | 807,537 |
Deferred tax assets, net | | | 128,492 | | | 145,943 | | | 127,746 | | | 129,710 |
Intangible assets, net | | | 33,005 | | | 35,284 | | | 28,824 | | | 29,707 |
Goodwill | | | 383,676 | | | 359,117 | | | 386,945 | | | 386,941 |
Other assets | | | 19,257 | | | 18,326 | | | 16,779 | | | 17,290 |
Total assets | | $ | 3,672,513 | | $ | 2,806,687 | | $ | 3,402,561 | | $ | 3,376,240 |
Liabilities and stockholders' equity | | | | | | | ||||||
Liabilities and stockholders' deficit | | | | | | | ||||||
Current liabilities: | | | | | | | | | | | | |
Accounts payable | | $ | 223,510 | | $ | 144,808 | | $ | 159,189 | | $ | 106,959 |
Accrued liabilities | | | 163,180 | | | 124,619 | | | 133,611 | | | 130,316 |
Deferred revenues and gains | | | 84,247 | | | 88,054 | ||||||
Current portion of finance lease liabilities | | | — | | | 23 | ||||||
Deferred revenues | | | 82,187 | | | 87,093 | ||||||
Current portion of operating lease liabilities | | | 55,776 | | | — | | | 60,300 | | | 58,613 |
Current portion of Tax Receivable Agreement liability | | | 6,815 | | | 9,446 | | | 6,563 | | | 6,563 |
Current portion of long-term debt | | | 14,144 | | | 12,977 | | | 13,962 | | | 14,085 |
Notes payable – floor plan, net | | | 813,635 | | | 885,980 | | | 846,424 | | | 848,027 |
Other current liabilities | | | 50,660 | | | 39,211 | | | 46,833 | | | 44,298 |
Total current liabilities | | | 1,411,967 | | | 1,305,118 | | | 1,349,069 | | | 1,295,954 |
Right to use liability | | | — | | | 5,147 | ||||||
Operating lease liabilities, net of current portion | | | 822,020 | | | — | | | 845,106 | | | 843,312 |
Tax Receivable Agreement liability, net of current portion | | | 109,504 | | | 124,763 | | | 108,286 | | | 108,228 |
Revolving line of credit | | | 52,768 | | | 38,739 | | | 40,885 | | | 40,885 |
Long-term debt, net of current portion | | | 1,161,845 | | | 1,152,888 | | | 1,151,097 | | | 1,153,551 |
Deferred revenues and gains | | | 61,502 | | | 67,157 | ||||||
Deferred revenues | | | 57,915 | | | 58,079 | ||||||
Other long-term liabilities | | | 27,294 | | | 79,958 | | | 34,621 | | | 35,467 |
Total liabilities | | | 3,646,900 | | | 2,773,770 | | | 3,586,979 | | | 3,535,476 |
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 | | | — | | | — | ||||||
Stockholders' deficit: | | | | | | | ||||||
Preferred stock, par value $0.01 per share – 20,000,000 shares authorized; none issued and outstanding as of March 31, 2020 and December 31, 2019 | | | — | | | — | ||||||
Class A common stock, par value $0.01 per share – 250,000,000 shares authorized; 37,768,220 issued and 37,539,786 outstanding as of March 31, 2020 and 37,701,584 issued and 37,488,989 outstanding as of December 31, 2019 | | | 375 | | | 375 | ||||||
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 March 31, 2020 and December 31, 2019 | | | 5 | | | 5 | ||||||
Class C common stock, par value $0.0001 per share – 1 share authorized, issued and outstanding as of March 31, 2020 and December 31, 2019 | | | — | | | — | ||||||
Additional paid-in capital | | | 50,604 | | | 47,531 | | | 51,596 | | | 50,152 |
Retained deficit | | | (12,453) | | | (3,370) | | | (97,046) | | | (83,134) |
Total stockholders' equity attributable to Camping World Holdings, Inc. | | | 38,529 | | | 44,538 | ||||||
Total stockholders' deficit attributable to Camping World Holdings, Inc. | | | (45,070) | | | (32,602) | ||||||
Non-controlling interests | | | (12,916) | | | (11,621) | | | (139,348) | | | (126,634) |
Total stockholders' equity | | | 25,613 | | | 32,917 | ||||||
Total liabilities and stockholders' equity | | $ | 3,672,513 | | $ | 2,806,687 | ||||||
Total stockholders' deficit | | | (184,418) | | | (159,236) | ||||||
Total liabilities and stockholders' deficit | | $ | 3,402,561 | | $ | 3,376,240 | ||||||
See accompanying Notes to Unaudited Condensed Consolidated Financial Statements
53
Camping World Holdings, Inc. and Subsidiaries
Unaudited Condensed Consolidated Statements of Operations
(In Thousands Except Per Share Amounts)
| | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | Six Months Ended | | Three Months Ended | ||||||||||||
| | June 30, | | June 30, | | March 31, | ||||||||||||
| | 2019 |
| 2018 |
| 2019 |
| 2018 | | 2020 |
| 2019 | ||||||
Revenue: | | | | | | | | | | | | | | | | | | |
Good Sam Services and Plans | | $ | 44,694 | | $ | 42,338 | | $ | 91,660 | | $ | 87,163 | | $ | 47,208 | | $ | 46,966 |
RV and Outdoor Retail | | | | | | | | | | | | | | | | | | |
New vehicles | | | 778,870 | | | 807,519 | | | 1,308,447 | | | 1,387,029 | | | 497,317 | | | 529,577 |
Used vehicles | | | 245,749 | | | 210,646 | | | 425,757 | | | 382,737 | | | 206,665 | | | 180,008 |
Products, service and other | | | 264,426 | | | 250,359 | | | 469,302 | | | 414,511 | | | 172,623 | | | 204,876 |
Finance and insurance, net | | | 128,225 | | | 120,205 | | | 220,116 | | | 209,305 | | | 92,456 | | | 91,891 |
Good Sam Club | | | 12,383 | | | 10,410 | | | 23,834 | | | 19,393 | | | 11,004 | | | 11,451 |
Subtotal | | | 1,429,653 | | | 1,399,139 | | | 2,447,456 | | | 2,412,975 | | | 980,065 | | | 1,017,803 |
Total revenue | | | 1,474,347 | | | 1,441,477 | | | 2,539,116 | | | 2,500,138 | | | 1,027,273 | | | 1,064,769 |
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 | | | 21,859 | | | 20,731 |
RV and Outdoor Retail | | | | | | | | | | | | | | | | | | |
New vehicles | | | 681,399 | | | 697,694 | | | 1,144,443 | | | 1,201,578 | | | 426,442 | | | 463,044 |
Used vehicles | | | 192,681 | | | 162,506 | | | 335,527 | | | 296,799 | | | 163,793 | | | 142,846 |
Products, service and other | | | 168,607 | | | 148,066 | | | 304,711 | | | 243,868 | | | 110,269 | | | 136,104 |
Good Sam Club | | | 2,924 | | | 3,107 | | | 6,641 | | | 5,436 | | | 2,247 | | | 3,717 |
Subtotal | | | 1,045,611 | | | 1,011,373 | | | 1,791,322 | | | 1,747,681 | | | 702,751 | | | 745,711 |
Total costs applicable to revenue | | | 1,064,357 | | | 1,029,034 | | | 1,830,799 | | | 1,785,802 | | | 724,610 | | | 766,442 |
Operating expenses: | | | | | | | | | | | | | | | | | | |
Selling, general, and administrative | | | 303,366 | | | 283,095 | | | 571,431 | | | 529,408 | | | 267,656 | | | 268,065 |
Debt restructure expense | | | — | | | (44) | | | — | | | 380 | ||||||
Depreciation and amortization | | | 13,946 | | | 11,628 | | | 27,540 | | | 21,028 | | | 14,078 | | | 13,594 |
Loss on disposal of assets | | | 2,374 | | | 59 | | | 2,160 | | | 144 | ||||||
Long-lived asset impairment | | | 6,569 | | | — | ||||||||||||
Lease termination | | | 584 | | | — | ||||||||||||
Loss (gain) on disposal of assets | | | 511 | | | (214) | ||||||||||||
Total operating expenses | | | 319,686 | | | 294,738 | | | 601,131 | | | 550,960 | | | 289,398 | | | 281,445 |
Income from operations | | | 90,304 | | | 117,705 | | | 107,186 | | | 163,376 | | | 13,265 | | | 16,882 |
Other income (expense): | | | | | | | | | | | | | | | | | | |
Floor plan interest expense | | | (11,269) | | | (10,202) | | | (22,879) | | | (20,945) | | | (8,604) | | | (11,610) |
Other interest expense, net | | | (18,211) | | | (16,107) | | | (35,854) | | | (28,946) | | | (14,658) | | | (17,643) |
Loss on debt restructure | | | — | | | — | | | — | | | (1,676) | ||||||
Tax Receivable Agreement liability adjustment | | | — | | | — | | | 8,477 | | | — | | | — | | | 8,477 |
Other expense, net | | | — | | | (2) | | | — | | | (2) | ||||||
Total other income (expense) | | | (29,480) | | | (26,311) | | | (50,256) | | | (51,569) | | | (23,262) | | | (20,776) |
Income before income taxes | | | 60,824 | | | 91,394 | | | 56,930 | | | 111,807 | ||||||
Loss before income taxes | | | (9,997) | | | (3,894) | ||||||||||||
Income tax expense | | | (8,201) | | | (14,262) | | | (31,114) | | | (21,127) | | | (4,132) | | | (22,913) |
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 | ||||||
Net loss | | | (14,129) | | | (26,807) | ||||||||||||
Less: net loss attributable to non-controlling interests | | | 5,969 | | | 7,412 | ||||||||||||
Net loss attributable to Camping World Holdings, Inc. | | $ | (8,160) | | $ | (19,395) | ||||||||||||
| | | | | | | | | | | | | | | | | | |
Income (loss) earnings per share of Class A common stock: | | | | | | | | | | | | | ||||||
Loss per share of Class A common stock: | | | | | | | ||||||||||||
Basic | | $ | 0.48 | | $ | 0.67 | | $ | (0.04) | | $ | 0.72 | | $ | (0.22) | | $ | (0.52) |
Diluted | | $ | 0.46 | | $ | 0.67 | | $ | (0.04) | | $ | 0.72 | | $ | (0.22) | | $ | (0.52) |
Weighted average shares of Class A common stock outstanding: | | | | | | | | | | | | | | | | | | |
Basic | | | 37,239 | | | 36,964 | | | 37,217 | | | 36,890 | | | 37,534 | | | 37,195 |
Diluted | | | 88,925 | | | 37,047 | | | 37,217 | | | 37,183 | | | 37,534 | | | 37,195 |
See accompanying Notes to Unaudited Condensed Consolidated Financial Statements
64
Camping World Holdings, Inc. and Subsidiaries
Unaudited Condensed Consolidated Statements of Stockholders' Equity (Deficit)
(In Thousands)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | Additional | | Retained | | Non- | | | | | | | | | | | | | | | | | | | | Additional | | Retained | | Non- | | | | ||||||
| | Class A Common Stock | | Class B Common Stock | | Class C Common Stock | | Paid-In | | Earnings | | Controlling | | | | | 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 |
| 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 | |||||||||||||||||||||||||||
Balance at December 31, 2019 | | 37,489 | | $ | 375 | | 50,707 | | $ | 5 | | — | | $ | — | | $ | 50,152 | | $ | (83,134) | | $ | (126,634) | | $ | (159,236) | |||||||||||||||||||||||||||
Equity-based compensation | | — | | | — | | — | | | — | | — | | | — | | | 2,716 | | | — | | | — | | | 2,716 | | — | | | — | | — | | | — | | — | | | — | | | 3,312 | | | — | | | — | | | 3,312 |
Vesting of restricted stock units | | 1 | | | — | | — | | | — | | — | | | — | | | — | | | — | | | — | | | — | | 47 | | | — | | — | | | — | | — | | | — | | | 82 | | | — | | | (82) | | | — |
Repurchases of Class A common stock for withholding taxes on vested RSUs | | (16) | | | — | | — | | | — | | — | | | — | | | (212) | | | — | | | — | | | (212) | |||||||||||||||||||||||||||
Redemption of LLC common units for Class A common stock | | 6 | | | — | | — | | | — | | — | | | — | | | 12 | | | — | | | — | | | 12 | | 20 | | | — | | — | | | — | | — | | | — | | | 4 | | | — | | | 49 | | | 53 |
Distributions to holders of LLC common units | | — | | | — | | — | | | — | | — | | | — | | | — | | | — | | | (5,534) | | | (5,534) | | — | | | — | | — | | | — | | — | | | — | | | — | | | — | | | (8,410) | | | (8,410) |
Dividends(1) | | — | | | — | | — | | | — | | — | | | — | | | — | | | (5,699) | | | — | | | (5,699) | | — | | | — | | — | | | — | | — | | | — | | | — | | | (5,752) | | | — | | | (5,752) |
Establishment of liabilities under the Tax Receivable Agreement and related changes to deferred tax assets associated with that liability | | — | | | — | | — | | | — | | — | | | — | | | (8) | | | — | | | — | | | (8) | | — | | | — | | — | | | — | | — | | | — | | | (44) | | | — | | | — | | | (44) |
Non-controlling interest adjustment | | — | | | — | | — | | | — | | — | | | — | | | (1,678) | | | — | | | 1,678 | | | — | | — | | | — | | — | | | — | | — | | | — | | | (1,698) | | | — | | | 1,698 | | | — |
Net loss | | — | | | — | | — | | | — | | — | | | — | | | — | | | (19,395) | | | (7,412) | | | (26,807) | | — | | | — | | — | | | — | | — | | | — | | | — | | | (8,160) | | | (5,969) | | | (14,129) |
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 | |||||||||||||||||||||||||||
Balance at March 31, 2020 | | 37,540 | | $ | 375 | | 50,707 | | $ | 5 | | — | | $ | — | | $ | 51,596 | | $ | (97,046) | | $ | (139,348) | | $ | (184,418) | |||||||||||||||||||||||||||
| (1) | The Company declared dividends per share of Class A common stock of $0.15 for |
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 | | | | | | | | | | | | | | | | | | | | Additional | | Retained | | Non- | | | | |||||||||||||||
|
| Shares |
| Amounts |
| Shares |
| Amounts |
| Shares |
| Amounts |
| Capital |
| (Deficit) |
| Interest |
| Total | | Class A Common Stock | | Class B Common Stock | | Class C Common Stock | | Paid-In | | Earnings | | Controlling | | | | |||||||||||||||||||
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 | |||||||||||||||||||||||||||
|
| 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 ASC 842 accounting standard | | — | | | — | | — | | | — | | — | | | — | | | — | | | 3,705 | | | 6,332 | | | 10,037 | |||||||||||||||||||||||||||
Equity-based compensation | | — | | | — | | — | | | — | | — | | | — | | | 3,218 | | | — | | | — | | | 3,218 | | — | | | — | | — | | | — | | — | | | — | | | 2,716 | | | — | | | — | | | 2,716 |
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 | | | — | | — | | | — | | — | | | — | | | — | | | — | | | — | | | — | | 1 | | | — | | — | | | — | | — | | | — | | | — | | | — | | | — | | | — |
Redemption of LLC common units for Class A common stock | | 173 | | | 2 | | (130) | | | — | | — | | | — | | | 1,848 | | | — | | | (115) | | | 1,735 | | 6 | | | — | | — | | | — | | — | | | — | | | 12 | | | — | | | — | | | 12 |
Distributions to holders of LLC common units | | — | | | — | | — | | | — | | — | | | — | | | — | | | — | | | (19,938) | | | (19,938) | | — | | | — | | — | | | — | | — | | | — | | | — | | | — | | | (5,534) | | | (5,534) |
Dividends(2) | | — | | | — | | — | | | — | | — | | | — | | | — | | | (5,662) | | | — | | | (5,662) | | — | | | — | | — | | | — | | — | | | — | | | — | | | (5,699) | | | — | | | (5,699) |
Establishment of liabilities under the Tax Receivable Agreement and related changes to deferred tax assets associated with that liability | | — | | | — | | — | | | — | | — | | | — | | | (1,414) | | | — | | | — | | | (1,414) | | — | | | — | | — | | | — | | — | | | — | | | (8) | | | — | | | — | | | (8) |
Non-controlling interest adjustment | | — | | | — | | — | | | — | | — | | | — | | | (1,592) | | | — | | | 1,592 | | | — | | — | | | — | | — | | | — | | — | | | — | | | (1,678) | | | — | | | 1,678 | | | — |
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 | | | — | | | (30) | | | — | |||||||||||||||||||||||||||
Disgorgement of short-swing profits by Section 16 officer | | — | | | — | | — | | | — | | — | | | — | | | 557 | | | — | | | — | | | 557 | |||||||||||||||||||||||||||
Distributions to holders of LLC common units | | — | | | — | | — | | | — | | — | | | — | | | — | | | — | | | (41,573) | | | (41,573) | |||||||||||||||||||||||||||
Dividends(2) | | — | | | — | | — | | | — | | — | | | — | | | — | | | (5,664) | | | — | | | (5,664) | |||||||||||||||||||||||||||
Non-controlling interest adjustment | | — | | | — | | — | | | — | | — | | | — | | | (2,521) | | | — | | | 2,521 | | | — | |||||||||||||||||||||||||||
Net income | | — | | | — | | — | | | — | | — | | | — | | | — | | | 24,782 | | | 52,350 | | | 77,132 | |||||||||||||||||||||||||||
Balance at June 30, 2018 | | 37,007 | | $ | 370 | | 50,707 | | $ | 5 | | — | | $ | — | | $ | 45,834 | | $ | 24,206 | | $ | 30,344 | | $ | 100,759 | |||||||||||||||||||||||||||
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 | |||||||||||||||||||||||||||
| (2) | The Company declared dividends per share of Class A common stock of $0.15 for |
See accompanying Notes to Unaudited Condensed Consolidated Financial Statements
85
Camping World Holdings, Inc. and Subsidiaries
Unaudited Condensed Consolidated Statements of Cash Flows
(In Thousands)
| | | | | | |
| | Six Months Ended June 30, | ||||
|
| 2019 |
| 2018 | ||
Operating activities | | | | | | |
Net income | | $ | 25,816 | | $ | 90,680 |
| | | | | | |
Adjustments to reconcile net income to net cash provided by operating activities: | | | | | | |
Depreciation and amortization | | | 27,540 | | | 21,028 |
Equity-based compensation | | | 6,579 | | | 6,347 |
Loss on debt restructure | | | — | | | 1,676 |
Loss on disposal of assets | | | 2,160 | | | 144 |
Provision for losses on accounts receivable | | | 379 | | | 883 |
Non-cash lease expense | | | 27,182 | | | — |
Accretion of original debt issuance discount | | | 532 | | | 494 |
Non-cash interest | | | 2,348 | | | 2,628 |
Deferred income taxes | | | 16,615 | | | 4,765 |
Tax Receivable Agreement liability adjustment | | | (8,477) | | | — |
Change in assets and liabilities, net of acquisitions: | | | | | | |
Receivables and contracts in transit | | | (79,823) | | | (86,329) |
Inventories | | | 25,752 | | | (35,707) |
Prepaid expenses and other assets | | | 7,082 | | | (3,437) |
Accounts payable and other accrued expenses | | | 80,744 | | | 97,442 |
Payment pursuant to Tax Receivable Agreement | | | (9,425) | | | (8,100) |
Accrued rent for cease-use locations | | | 542 | | | (547) |
Deferred revenue and gains | | | 1,088 | | | 8,362 |
Operating lease liability | | | (27,174) | | | — |
Other, net | | | 719 | | | 8,791 |
Net cash provided by operating activities | | | 100,179 | | | 109,120 |
| | | | | | |
Investing activities | | | | | | |
Purchases of property and equipment | | | (27,848) | | | (83,685) |
Purchase of real property | | | (25,093) | | | (81,330) |
Proceeds from the sale of real property | | | 10,117 | | | — |
Purchases of businesses, net of cash acquired | | | (38,608) | | | (80,203) |
Proceeds from sale of property and equipment | | | 910 | | | 630 |
Net cash used in investing activities | | $ | (80,522) | | $ | (244,588) |
| | | | | | |
| | Three Months Ended March 31, | ||||
|
| 2020 |
| 2019 | ||
| | | | |||
Operating activities | | | | | | |
Net loss | | $ | (14,129) | | $ | (26,807) |
| | | | | | |
Adjustments to reconcile net loss to net cash used in operating activities: | | | | | | |
Depreciation and amortization | | | 14,078 | | | 13,594 |
Equity-based compensation | | | 3,312 | | | 2,716 |
Loss on lease termination | | | 584 | | | — |
Long-lived asset impairment | | | 6,569 | | | — |
Loss (gain) on disposal of assets | | | 511 | | | (214) |
Provision for losses on accounts receivable | | | 483 | | | 186 |
Non-cash lease expense | | | 14,208 | | | 13,495 |
Accretion of original debt issuance discount | | | 263 | | | 267 |
Non-cash interest | | | 1,014 | | | 1,162 |
Deferred income taxes | | | 2,031 | | | 16,412 |
Tax Receivable Agreement liability adjustment | | | — | | | (8,477) |
Change in assets and liabilities, net of acquisitions: | | | | | | |
Receivables and contracts in transit | | | (472) | | | (65,493) |
Inventories | | | (80,799) | | | (54,496) |
Prepaid expenses and other assets | | | 5,678 | | | 4,976 |
Accounts payable and other accrued expenses | | | 53,864 | | | 55,392 |
Accrued rent for cease-use locations | | | — | | | 542 |
Deferred revenue | | | (5,070) | | | (5,805) |
Operating lease liabilities | | | (18,415) | | | (13,941) |
Other, net | | | 1,101 | | | (7,529) |
Net cash used in operating activities | | | (15,189) | | | (74,020) |
| | | | | | |
Investing activities | | | | | | |
Purchases of property and equipment | | | (8,668) | | | (11,761) |
Purchase of real property | | | — | | | (665) |
Proceeds from the sale of real property | | | — | | | 10,226 |
Purchases of businesses, net of cash acquired | | | — | | | (21,169) |
Proceeds from sale of property and equipment | | | 212 | | | 453 |
Net cash used in investing activities | | $ | (8,456) | | $ | (22,916) |
96
Camping World Holdings, Inc. and Subsidiaries
Unaudited Condensed Consolidated Statements of Cash Flows
(In Thousands)
| | | | | | | | | | | | |
| | Six Months Ended June 30, | | Three Months Ended March 31, | ||||||||
|
| 2019 |
| 2018 |
| 2020 |
| 2019 | ||||
| | | | | | | ||||||
Financing activities | | | | | | | | | | | | |
Proceeds from long-term debt | | $ | 11,662 | | $ | 319,913 | ||||||
Payments on long-term debt | | | (3,409) | | | (76,709) | | $ | (3,534) | | $ | (3,232) |
Net payments on notes payable – floor plan, net | | | (29,426) | | | (68,049) | ||||||
Net borrowings on notes payable – floor plan, net | | | 3,438 | | | 38,972 | ||||||
Borrowings on revolving line of credit | | | 14,029 | | | 24,403 | | | — | | | 3,871 |
Payments of principal on finance lease obligations | | | (23) | | | (478) | | | — | | | (14) |
Payments of principal on right to use liability | | | — | | | (78) | ||||||
Payment of debt issuance costs | | | (47) | | | (3,120) | ||||||
Dividends on Class A common stock | | | (11,410) | | | (11,326) | | | (5,752) | | | (5,699) |
Proceeds from exercise of stock options | | | — | | | 146 | ||||||
Repurchases of Class A common stock for withholding taxes on vested RSUs | | | (273) | | | — | ||||||
Disgorgement of short-swing profits by Section 16 officer | | | — | | | 557 | ||||||
RSU shares withheld for tax | | | (212) | | | — | ||||||
Members' distributions | | | (38,057) | | | (61,511) | | | (8,410) | | | (5,534) |
Net cash (used in) provided by financing activities | | | (56,954) | | | 123,748 | | | (14,470) | | | 28,364 |
| | | | | | | | | | | | |
Decrease in cash and cash equivalents | | | (37,297) | | | (11,720) | | | (38,115) | | | (68,572) |
Cash and cash equivalents at beginning of the period | | | 138,557 | | | 224,163 | | | 147,521 | | | 138,557 |
Cash and cash equivalents at end of the period | | $ | 101,260 | | $ | 212,443 | | $ | 109,406 | | $ | 69,985 |
See accompanying Notes to Unaudited Condensed Consolidated Financial Statements
107
Camping World Holdings, Inc. and Subsidiaries
Notes to Unaudited Condensed Consolidated Financial Statements
June 30, 2019March 31, 2020
1. Summary of Significant Accounting Policies
Principles of Consolidation and Basis of Presentation
The condensed 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”).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 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, 2019March 31, 2020 are unaudited. The condensed consolidated balance sheet as of December 31, 20182019 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, 20182019 (the “Annual Report”) filed with the SEC on March 15, 2019.February 28, 2020. Operating results for 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”)IPO and other related transactions in order to carry on the business of CWGS, Enterprises, LLC (“CWGS, LLC”).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.LLC (see Note 14 — Stockholders’ Equity). Despite its position as sole managing member of CWGS, LLC, CWH has a minority economic interest in CWGS, LLC. As of June 30,March 31, 2020 and December 31, 2019, CWH owned 41.9%42.1% and 42.0%, respectively, of CWGS, LLC. Accordingly, the Company consolidates the financial results of CWGS, LLC and reports a non-controlling interest in its condensed consolidated financial statements.
The Company does not have any components of other comprehensive income recorded within its condensed consolidated financial statements, and, therefore, does not separately present a statement of comprehensive income in its condensed consolidated financial statements.
DescriptionCOVID-19
A novel strain of coronavirus was first identified in Wuhan, China in December 2019 and COVID-19 was subsequently declared a pandemic by the World Health Organization. To date, COVID-19 has surfaced in nearly all regions of the Business
CWGS, LLC isworld and resulted in travel restrictions and business slowdowns or shutdowns in affected areas. As a holding companyresult, COVID-19 has impacted the Company’s business, in particular its revenue, due to decreased retail and operates through its subsidiaries.online traffic. The Company realigned the structure ofhas implemented preparedness plans to keep its internal organization during the three months ended March 31, 2019. The Company previously had three reportable segments: (i) Consumer Servicesemployees and Plans; (ii) Dealership,customers healthy and (iii) Retail. Following the realignment, the Company now has the following two reportable segments: (i) Good Sam Servicessafe, which include social distancing, providing employees with face coverings and/or other protective clothing as required, implementing additional cleaning and Planssanitization routines, and (ii) RV and Outdoor Retail. In conjunction with the first quarter 2019 realignmentwork-from-home directives for a significant portion of our reporting structure,workforce. The majority of the Company combined our prior Dealership and Retail segments into theCompany’s RV and Outdoor Retail segment.locations have continued to operate as essential businesses and consequently have remained open to serve its customers through the pandemic, and the Company continues to operate its e-commerce business. The Company has also reclassified a portiontemporarily reduced salaries and hours throughout the business, including for its executive officers, and implemented headcount and other cost reductions in an attempt to better align expenses with reduced sales since the middle of March 2020 and early April 2020 resulting from the former Consumer Services and Plans segment, the Good Sam Club and co-branded credit card operations, to the RV and Outdoor Retail segment which reflects the synergiesimpact of those two programs with the RV and Outdoor Retail locations. The remaining portion of the former Consumer Services and Plans segment is now called the Good Sam Services and Plans segment. The Company’s reportable segment financial information has been recast to reflect the updated reportable segment structure for all periods presented. See Note 17 – Segments Information to theCOVID-19 on its business.
11
Condensed Consolidated Financial Statements for further information about the Company’s segments. The Company primarily provides Good Sam Services and Plans offerings under its Good Sam brand and provides RV and Outdoor Retail offerings primarily under its Camping World and Gander Outdoors brands. Within the Good Sam 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; vehicle financing and refinancing; shows and events; and publications and directories. Within the RV and Outdoor Retail segment, the Company primarily derives revenue from the sale of new and used recreational vehicles (“RVs”); the sale of RV products and services, including the sale of parts, accessories, supplies and services for RVs; equipment, gear and supplies for camping, hunting, fishing, skiing, snowboarding, bicycling, skateboarding, marine and watersport and other outdoor activities; commissions on the finance and insurance contracts related to the sale of RVs; and Good Sam Club memberships and co-branded credit cards. The Company primarily operates in various regions throughout the United States and markets its products and services to RV owners and outdoor enthusiasts.
Through retail acquisitions and retail expansions, we have expanded our number of retail locations to 227 on June 30, 2019 from 223 on June 30, 2018. From June 30, 2018 to June 30, 2019, we opened 25 stores, closed 21 stores, and converted 13 stand-alone stores to co-habited locations. The table below summarizes our store locations from June 30, 2018 to June 30, 2019:
| | | | | | | | | | | | |
| | Co-habited | | | | Stand-alone | | | | |||
| | RV and Outdoor | | Stand-alone | | Outdoor | | | | |||
| | Retail locations | | RV locations | | Retail locations | | Total | ||||
Store locations as of June 30, 2018 | | | 117 | | | 15 | | | 91 | | | 223 |
Opened | | | 11 | | | 5 | | | 9 | | | 25 |
Closed | | | (6) | | | (4) | | | (11) | | | (21) |
Converted | | | 13 | | | — | | | (13) | | | — |
Store locations as of June 30, 2019 | | | 135 | | | 16 | | | 76 | | | 227 |
Reclassifications of Prior Period Amounts
Certain prior-period amounts have been reclassified to conform to the current period presentation. Specifically, as discussed in Note 17 — Segment Information, the Company has made changes to its operating segments and transferred certain assets relating to the Good Sam Club and co-branded credit card from its Good Sam Services and Plans segment to its RV and Outdoor Retail segment. Additionally, as a result of these changes, the Company has updated its disaggregated revenue categories to the following:
Revisions for Correction of Immaterial Errors
In connection with the preparation of the financial statements for the year ended December 31, 2018, the Company identified errors in its Condensed Consolidated Financial Statements for the three and six months ended June 30, 2018 that related primarily to i) the cancellation reserve for certain of its finance and insurance offerings within the former Dealership segment in other current liabilities and other long-term liabilities, ii) the calculation of the Tax Receivable Agreement liability that arose from transactions in 2017, iii)
128
Description of the classification in the condensed consolidated statementBusiness
Camping World Holdings, Inc, together with its subsidiaries, is America’s largest retailer of cash flows of non-cash capital expenditures included in accounts payablerecreational vehicles (“RVs”) and non-cash leasehold improvements paid by lessor in other, net,related products and iv) the adoption of Accounting Standards Codification (“ASC”) No. 606, Revenue from Contracts with Customers (“ASC 606”) on January 1, 2018.services. As noted above, CWGS, LLC is a holding company and operates through its subsidiaries. The Company correctedhas the errors infollowing 2 reportable segments: (i) Good Sam Services and Plans and (ii) RV and Outdoor Retail. See Note 18 – Segments Information to the accompanying Condensed Consolidated Financial Statements for further information about the threeCompany’s segments. Within the Good Sam Services and six months ended June 30, 2018. ThePlans segment, the Company believesprimarily derives revenue from the correctionsale of the errors is immaterial tofollowing offerings: emergency roadside assistance plans; property and casualty insurance programs; travel assist programs; extended vehicle service contracts; vehicle financing and refinancing assistance; consumer shows and events; and consumer publications and directories. Within the previously issued Condensed Consolidated Financial Statements.
TheRV and Outdoor Retail segment, the Company revised stockholders’ equity as of January 1, 2018 to correct these errors as of the beginning of the earliest year presented in these Condensed Consolidated Financial Statements, resulting in a decrease of $19.1 millionprimarily derives revenue from the previously reported amountsale of $90.8 million tonew and used recreational vehicles; commissions on the correct amount of $71.8 million. The condensed consolidated statement of stockholders’ equity has been revised to reflect the correction of the distributions to holders of LLC common unitsfinance and non-controlling interest adjustment of $10.2 million for the three months ended June 30, 2018insurance contracts related to the errors described above.sale of RVs; the sale of RV services and maintenance work; the sale of RV parts, accessories, and supplies; the sale of outdoor products, equipment, gear and supplies and the sale of Good Sam Club memberships and co-branded credit cards. The Company operates a national network of RV dealerships and service centers as well as a comprehensive e-commerce platform primarily under the Camping World and Gander RV & Outdoors brands, and markets its products and services primarily to RV and outdoor enthusiasts.
The following table presentsIn 2019, the effectCompany made a strategic decision to refocus its business around its core RV competencies, and on September 3, 2019, the board of directors approved a strategic plan to shift the business away from locations that did not have the ability or where it was not feasible to sell and/or service RVs (the “2019 Strategic Shift”) (see Note 4 – Restructuring and Long-lived Asset Impairment). This resulted in the sale, closing or divestiture of 34 non-RV retail stores and the liquidation of approximately $108 million of non-RV related inventory in 2019.
In connection with the 2019 Strategic Shift, the Company has reduced its number of retail store locations to 168 as of March 31, 2020 from 226 as of March 31, 2019. A summary of the error corrections onretail store openings, closings, divestitures, conversions and locations from March 31, 2019 to March 31, 2020, are in the condensed consolidated statement of operations for the period indicated:table below:
| | | | | | | | | | | | | | | | | | |
| | Three Months Ended June 30, 2018 | | Six Months Ended June 30, 2018 | ||||||||||||||
($ in thousands except per share amounts) |
| As Reported |
| Adjustment |
| As Corrected |
| As Reported |
| Adjustment |
| As Corrected | ||||||
Revenue - Products, service and other | | $ | 250,203 | | $ | 156 | | $ | 250,359 | | $ | 414,511 | | $ | — | | $ | 414,511 |
Revenue - Finance and insurance, net | | | 124,060 | | | (3,855) | | | 120,205 | | | 215,909 | | | (6,604) | | | 209,305 |
Total revenue | | | 1,445,176 | | | (3,699) | | | 1,441,477 | | | 2,506,742 | | | (6,604) | | | 2,500,138 |
Costs applicable to revenue - Good Sam services and plans(1) | | | 17,641 | | | 20 | | | 17,661 | | | 38,064 | | | 57 | | | 38,121 |
Costs applicable to revenue - Products, service and other | | | 147,980 | | | 86 | | | 148,066 | | | 243,868 | | | — | | | 243,868 |
Costs applicable to revenue - Good Sam Club(1) | | | 3,191 | | | (84) | | | 3,107 | | | 5,493 | | | (57) | | | 5,436 |
Total costs applicable to revenue | | | 1,029,012 | | | 22 | | | 1,029,034 | | | 1,785,802 | | | — | | | 1,785,802 |
Selling, general and administrative expenses | | | 284,295 | | | (1,200) | | | 283,095 | | | 529,409 | | | (1) | | | 529,408 |
Total operating expenses | | | 295,938 | | | (1,200) | | | 294,738 | | | 550,961 | | | (1) | | | 550,960 |
Income from operations | | | 120,226 | | | (2,521) | | | 117,705 | | | 169,979 | | | (6,603) | | | 163,376 |
Other income (expense) | | | — | | | (2) | | | (2) | | | — | | | (2) | | | (2) |
Income before income taxes | | | 93,917 | | | (2,523) | | | 91,394 | | | 118,412 | | | (6,605) | | | 111,807 |
Income tax expense | | | (12,102) | | | (2,160) | | | (14,262) | | | (19,321) | | | (1,806) | | | (21,127) |
Net income | | | 81,815 | | | (4,683) | | | 77,132 | | | 99,091 | | | (8,411) | | | 90,680 |
Net income attributable to non-controlling interests | | | (53,784) | | | 1,434 | | | (52,350) | | | (67,879) | | | 3,802 | | | (64,077) |
Net income attributable to Camping World Holdings, Inc. | | | 28,031 | | | (3,249) | | | 24,782 | | | 31,212 | | | (4,609) | | | 26,603 |
Earnings per share of Class A common stock: | | | | | | | | | | | | | | | | | | |
Basic | | $ | 0.76 | | $ | (0.09) | | $ | 0.67 | | $ | 0.85 | | $ | (0.13) | | $ | 0.72 |
Diluted | | $ | 0.72 | | $ | (0.05) | | $ | 0.67 | | $ | 0.81 | | $ | (0.09) | | $ | 0.72 |
| | | | | | | | | | | | |
| | RV | | RV Service & | | Other | | | | |||
| | Dealerships | | Retail Centers | | Retail Stores | | Total | ||||
Store locations as of March 31, 2019 | | | 147 | | | 12 | | | 67 | | | 226 |
Opened | | | 10 | | | — | | | — | | | 10 |
Closed / divested | | | (6) | | | (2) | | | (56) | | | (64) |
Temporarily closed(1) | | | — | | | — | | | (4) | | | (4) |
Converted | | | 6 | | | — | | | (6) | | | — |
Store locations as of March 31, 2020 | | | 157 | | | 10 | | | 1 | | | 168 |
| | | | | | | | | | | | |
| (1) |
The following table presents the effect of the error corrections on the condensed consolidated statement of cash flows for the period indicated:
| | | | | | | | | |
| | Six Months Ended June 30, 2018 | |||||||
($ in thousands except per share amounts) |
| As Reported |
| Adjustment |
| As Corrected | |||
Net income | | $ | 99,091 | | $ | (8,411) | | $ | 90,680 |
Deferred income taxes | | | 2,959 | | | 1,806 | | | 4,765 |
Receivables and contracts in transit | | | (89,379) | | | 3,050 | | | (86,329) |
Inventories | | | (30,441) | | | (5,266) | | | (35,707) |
Prepaid expenses and other assets | | | (8,703) | | | 5,266 | | | (3,437) |
Accounts payable and other accrued expenses | | | 99,699 | | | (2,257) | | | 97,442 |
Deferred revenue and gains | | | 6,322 | | | 2,040 | | | 8,362 |
Other | | | 1,894 | | | 6,897 | | | 8,791 |
Net cash provided by operating activities | | | 105,995 | | | 3,125 | | | 109,120 |
Purchases of property and equipment | | | (80,574) | | | (3,111) | | | (83,685) |
Net cash used in investing activities | | | (241,477) | | | (3,111) | | | (244,588) |
13
Use of Estimates
The preparation of these unaudited condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results may differ from those estimates. In preparing these financial statements, management has made its best estimates and judgments of certain amounts included in the financial statements, giving due consideration to materiality. The Company bases its estimates and judgments on historical experience and other assumptions that management believes are reasonable. However, application of these accounting policies involves the exercise of judgment and use of assumptions as to future uncertainties, including those uncertainties arising from COVID-19, and, as a result, actual results could differ materially from these estimates. The Company periodically evaluates estimates and assumptions used in the preparation of the financial statements and makes changes on a prospective basis when adjustments are necessary. Significant estimates made in the accompanying unaudited condensed consolidated financial statements include certain assumptions related to accounts receivable, inventory, goodwill, intangible assets, long lived assets, long-lived asset impairments, program cancellation reserves, chargebacks, and accruals related to self-insurance programs, estimated tax liabilities, product return reserves, and other liabilities.
9
Contracts in Transit, Accounts Receivable and Current Expected Credit Losses
Contracts in transit consist of amounts due from non-affiliated financing institutions on retail finance contracts from vehicle sales for the portion of the vehicle sales price financed by the Company’s customers. These retail installment sales contracts are typically funded within ten days of the initial approval of the retail installment sales contract by the third-party lender.
Accounts receivable are stated at realizable value, net of an allowance for doubtful accounts, which includes a reserve for expected credit losses. Accounts receivable balances due in excess of one year was $8.6 million at each of March 31, 2020 and December 31, 2019 and included in other assets in the Condensed Consolidated Balance Sheets.
The allowance for doubtful accounts is based on management’s assessment of the collectability of its customer accounts. The Company regularly reviews the composition of the accounts receivable aging, historical bad debts, changes in payment patterns, customer creditworthiness, current economic trends, and reasonable and supportable forecasts about the future. Relevant risks characteristics include customer size and historical loss patterns. Management has evaluated the expected credit losses related to contracts in transit and determined that no allowance for doubtful accounts was required at either March 31, 2020 or December 31, 2019. Management additionally has evaluated the expected credit losses related to accounts receivable and determined that allowances of approximately $3.5 million for uncollectible accounts were required as of both March 31, 2020 and December 31, 2019.
The following table details the changes in the allowance for doubtful accounts (in thousands):
| | | | | | |
| | Three Months Ended | ||||
| | March 31, | | March 31, | ||
|
| 2020 |
| 2019 | ||
Allowance for doubtful accounts: | | | | | | |
Balance, beginning of period | | $ | 3,537 | | $ | 4,398 |
Charged to bad debt expense | | | 483 | | | 186 |
Deductions (1) | | | (569) | | | 29 |
Balance, end of period | | $ | 3,451 | | $ | 4,613 |
| (1) | These amounts primarily relate to the write off of uncollectable accounts after collection efforts have been exhausted. |
Recently Adopted Accounting Pronouncements
In February 2016, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2016-02, Leases (Topic 842) (“ASU 2016-02” or “ASC 842”). The FASB had subsequently issued several related ASUs that clarified the implementation guidance for certain aspects of ASU 2016-02, which were effective upon the adoption of ASU 2016-02. The amendments in this ASU related to the accounting for leasing transactions. ASC 842 requires lessees to recognize a right-of-use asset and a lease liability on the balance sheet for all leases (with the exception of short-term leases) at the lease commencement date and recognize expenses on the income statement in a similar manner to the previous guidance in Accounting Standards Codification (“ASC”) 840, Leases ("ASC 840"). The lease liability is measured as the present value of the unpaid lease payments and the right-of-use asset is derived from the calculation of the lease liability adjusted for initial direct costs, prepaid lease payments, and lease incentives. Lease payments include fixed and in-substance fixed payments, variable payments based on an index or rate, reasonably certain purchase options, termination penalties where the lease term reflects the election of a termination option, fees paid by the lessee to the owners of a special-purpose entity for restructuring the transaction, and probable amounts the lessee will owe under a residual value guarantee. Lease payments do not include variable lease payments other than those that depend on an index or rate, any guarantee by the lessee of the lessor’s debt, or any amount allocated to non-lease components. The discount rate used to derive the present value of unpaid lease payments is based on the rates implicit in the lease, or if not available, the incremental borrowing rate.
The most significant impact of ASC 842 on the Company’s accounting was the balance sheet impact of its real estate operating leases, which significantly increased assets and liabilities. In addition, ASC 842 eliminated the previous build-to-suit lease accounting guidance and resulted in derecognition of build-to-suit assets and liabilities that remained on the balance sheet after the end of the construction period, including any related deferred taxes. Also, ASC 842 made changes to sale-leaseback accounting to result in the recognition of the gain on the transaction at the time of the sale instead of recognizing over the leaseback period, when the transaction is deemed to be a sale instead of a financing arrangement. ASC 842 further changes the assessment of sale accounting from a transfer of risk and rewards assessment to a transfer of control assessment.
The Company elected the package of practical expedients available under the transition provisions of ASC 842, including (i) not reassessing whether expired or existing contracts contain leases, (ii) lease classification, and (iii) not revaluing initial direct costs for existing leases. Also, the Company elected the practical expedient which allows aggregation of non-lease components with the related lease components when evaluating accounting treatment for equipment and billboard leases. Lastly, the Company applied the modified retrospective adoption method, utilizing the simplified transition option available in ASC 842, which allows entities to continue to apply the legacy guidance in ASC 840, including its disclosure requirements, in
14
the comparative periods presented in the year of adoption. The Company adopted ASC 842 on January 1, 2019.
The impact of applying ASC 842 effective as of January 1, 2019, to the Company’s condensed consolidated statements of operations and cash flows was not significant. The major impacts to the balance sheet were 1) the addition of $809.7 million in operating lease assets, 2) the addition of $867.5 million of operating lease liabilities, 3) the removal of approximately $4.9 million, $10.6 million, $7.6 million, and $54.5 million of property and equipment, net; deferred revenues and gains; accrued liabilities; and other liabilities, respectively, and 4) a cumulative-effect adjustment for the adoption of ASC 842 of $3.7 million and $6.3 million was recorded to retained earnings and non-controlling interests, respectively. The adoption of ASC 842 did not impact any of its existing debt covenants.
Recently Issued Accounting Pronouncements
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326) (“ASU 2016-13”). This standard requires the use of a forward-looking expected loss impairment model for trade and other receivables, held-to-maturity debt securities, loans and other instruments. This standard also requires impairments and recoveries for available-for-sale debt securities to be recorded through an allowance account and revises certain disclosure requirements. In April 2019, the FASB issued ASU 2019-04, Codification Improvements, which provides guidance on accounting for credit losses on accrued interest receivable balances and guidance on including recoveries when estimating the allowance. In May 2019, the FASB issued ASU 2019-05, Targeted Transition Relief, which allows entities with an option to elect fair value for certain instruments upon adoption of Topic 326. The standard is effective for public companies for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The Company will adoptadopted ASU 2016-13 on January 1, 2020. The Company is currently evaluating the impact that2020 and the adoption of the provisions of the ASU will have ondid not materially impact its condensed consolidated financial statements.
In August 2018, the FASB issued ASU No. 2018-15, Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (“ASU 2018-15”). This standard aligns the accounting for implementation costs incurred in a cloud computing arrangement that is a service arrangement (i.e., hosting arrangement) with the guidance on capitalizing costs in ASC 350-40, Internal-Use Software. The ASU permits either a prospective or retrospective transition approach. The standard will be effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The
10
Company will adoptadopted ASU 2018-15 on January 1, 2020.2020 using the prospective transition approach and the adoption did not materially impact its condensed consolidated financial statements.
In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848) (“ASU 2020-04”). This standard, effective for reporting periods through December 31, 2022, provides accounting relief for contract modifications that replace an interest rate impacted by reference rate reform (e.g., London Interbank Offered Rate (“LIBOR”)) with a new alternative reference rate. The guidance is applicable to investment securities, receivables, loans, debt, leases, derivatives and hedge accounting elections and other contractual arrangements. The Company adopted ASU 2020-04 as of January 1, 2020 and the adoption did not materially impact its condensed consolidated financial statements.
Recently Issued Accounting Pronouncements
In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”). This standard reduces complexity by removing specific exceptions to general principles related to intraperiod tax allocations, ownership changes in foreign investments, and interim period income tax accounting for year-to-date losses that exceed anticipated losses. This standard also simplifies accounting for franchise taxes that are partially based on income, transactions with a government that result in a step up in the tax basis of goodwill, separate financial statements of legal entities that are not subject to tax, and enacted changes in tax laws in interim periods. The standard is effective for public companies for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020, with early adoption permitted. The ASU permits either a retrospective basis or a modified retrospective transition approach. The Company is currently evaluating the impact that the adoption of the provisions of thethis ASU will have on its consolidated financial statements.
2. Revenue
Contract Assets
As of June 30, 2019March 31, 2020 and December 31, 2018,2019, a contract asset of $5.7$5.0 million and $6.3$6.1 million, respectively, relating to RV service revenues was included in accounts receivable in the accompanying unaudited condensed consolidated balance sheet.
Deferred Revenues
As of June 30, 2019,March 31, 2020, the Company has unsatisfied performance obligations relating to multi-year plans for its Good Sam Club, roadside assistance, Coast to Coast memberships, and magazine publication revenue streams. The total unsatisfied performance obligation for these revenue streams at June 30, 2019March 31, 2020 for the periods during which the Company expects to recognize the amounts as revenue are presented as follows (in thousands):
| | | |
|
| As of | |
|
| March 31, 2020 | |
2020 |
| $ | 69,977 |
2021 | | | 34,535 |
2022 | | | 16,788 |
2023 | | | 8,467 |
2024 | | | 4,667 |
Thereafter | | | 5,668 |
Total | | $ | 140,102 |
| | | |
| | | |
|
| As of | |
|
| June 30, 2019 | |
2019 |
| $ | 55,320 |
2020 | | | 46,742 |
2021 | | | 20,302 |
2022 | | | 10,189 |
2023 | | | 5,263 |
Thereafter | | | 7,933 |
Total | | $ | 145,749 |
1511
3. Inventories and Floor Plan Payable
Inventories consisted of the following (in thousands):
| | | | | | | | | | | | |
| | June 30, | | December 31, | | March 31, | | December 31, | ||||
|
| 2019 |
| 2018 |
| 2020 |
| 2019 | ||||
Good Sam services and plans | | $ | 19 | | $ | 459 | | $ | 38 | | $ | 590 |
New RVs | | | 1,000,977 | | | 1,017,910 | | | 1,053,802 | | | 966,134 |
Used RVs | | | 121,744 | | | 124,527 | | | 151,058 | | | 165,927 |
Products, parts, accessories and miscellaneous | | | 424,756 | | | 416,074 | ||||||
Products, parts, accessories and other | | | 234,555 | | | 225,888 | ||||||
| | $ | 1,547,496 | | $ | 1,558,970 | | $ | 1,439,453 | | $ | 1,358,539 |
New and used RV inventory, included in the RV and Outdoor Retail segment, areis primarily financed by floor plan arrangements through a syndication of banks. The arrangements are collateralized by substantially all of the assets of FreedomRoads, LLC (“FR”), a wholly owned subsidiary of FreedomRoads, which operates the RV dealerships, and bear interest at one-month London Interbank Offered Rate (“LIBOR”)LIBOR plus 2.35%2.15% as of June 30, 2019March 31, 2020 and 2.15%December 31, 2019. LIBOR was 1.58% at March 31, 2020 and 1.71% as of December 31, 2018. LIBOR was 2.44% at June 30, 2019 and 2.35% as of December 31, 2018.2019. Borrowings are tied to specific vehicles and principal is due upon the sale of the related vehicle.vehicle or upon reaching certain aging criteria.
As of June 30, 2019March 31, 2020 and December 31, 2018,2019, FR maintained floor plan financing through the Seventh Amended and Restated Credit Agreement (“Floor Plan Facility”) with. On October 8, 2019, FR entered into a maturity date of December 12, 2020Second Amendment to the Seventh Amended and anRestated Credit Agreement (the “Amendment”). The applicable borrowing rate margin on LIBOR and base rate loans rangingranges from 2.05% to 2.50% and 0.55% and 1.00%, respectively, based on the consolidated current ratio at FR. The Floor Plan Facility allowsat March 31, 2020 allowed FR to borrow (a) up to $1.415$1.38 billion under a floor plan facility, (b) up to $15.0 million under a letter of credit facility and (c) up to a maximum amount outstanding of $60.0$57.0 million under the revolving line of credit, which maximum amount outstanding will decreasefurther decreases by $3.0 million on the last day of each fiscal quarter, commencing withquarter. The maturity date of the fiscal quarter endingFloor Plan Facility is March 31, 2020.15, 2023.
The Floor Plan Facility includes ana flooring line aggregate interest reduction (“Flair”) offset account that allows the Company to transfer cash as an offset to the payable under the Floor Plan Facility. These transfers reduce the amount of liability outstanding under the floor plan notes payable that would otherwise accrue interest, while retaining the ability to transfer amounts from the Flair offset account into the Company’s operating cash accounts. As a result of using the floor planFlair offset account, the Company experiences a reduction in floor plan interest expense in its consolidated statements of income.operations.
TheManagement has determined that the credit agreement governing the Floor Plan Facility includes subjective acceleration clauses which could impact debt classification. Management has determined that no events have occurred at March 31, 2020 that would trigger a subjective acceleration clause. Additionally, the credit agreement governing the Floor Plan Facility contains certain financial covenants. FR was in compliance with all debt covenants at June 30, 2019March 31, 2020 and December 31, 2018.2019.
The following table details the outstanding amounts and available borrowings under the Floor Plan Facility as of June 30, 2019March 31, 2020 and December 31, 20182019 (in thousands):
| | | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | June 30, | | December 31, | | March 31, | | December 31, | ||||
|
| 2019 |
| 2018 |
| 2020 |
| 2019 | ||||
Floor Plan Facility | | | | | | | | | | | | |
Notes payable - floor plan: | | | | | | | | | | | | |
Total commitment | | $ | 1,415,000 | | $ | 1,415,000 | | $ | 1,379,750 | | $ | 1,379,750 |
Less: borrowings, net | | | (813,635) | | | (885,980) | | | (846,424) | | | (848,027) |
Less: flooring line aggregate interest reduction account | | | (161,564) | | | (97,757) | | | (173,853) | | | (87,016) |
Additional borrowing capacity | | | 439,801 | | | 431,263 | | | 359,473 | | | 444,707 |
Less: accounts payable for sold inventory | | | (76,847) | | | (33,928) | | | (32,934) | | | (27,892) |
Less: purchase commitments | | | (19,574) | | | (22,530) | | | (10,133) | | | (8,006) |
Unencumbered borrowing capacity | | $ | 343,380 | | $ | 374,805 | | $ | 316,406 | | $ | 408,809 |
| | | | | | | | | | | | |
1612
| | | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | June 30, | | December 31, | | March 31, | | December 31, | ||||
|
| 2019 |
| 2018 |
| 2020 |
| 2019 | ||||
Revolving line of credit: | | $ | 60,000 | | $ | 60,000 | | $ | 57,000 | | $ | 60,000 |
Less borrowings | | | (52,768) | | | (38,739) | | | (40,885) | | | (40,885) |
Additional borrowing capacity | | $ | 7,232 | | $ | 21,261 | | $ | 16,115 | | $ | 19,115 |
| | | | | | | | | | | | |
Letters of credit: | | | | | | | | | | | | |
Total commitment | | $ | 15,000 | | $ | 15,000 | | $ | 15,000 | | $ | 15,000 |
Less: outstanding letters of credit | | | (10,330) | | | (10,380) | | | (11,175) | | | (11,175) |
Additional letters of credit capacity | | $ | 4,670 | | $ | 4,620 | | $ | 3,825 | | $ | 3,825 |
| | | | | | | | | | | | |
4. Restructuring and Long-lived Asset Impairment
Restructuring
On September 3, 2019, the board of directors of CWH approved a plan to strategically shift its business away from locations where the Company does not have the ability or where it is not feasible to sell and/or service RVs at a sufficient capacity (the “Outdoor Lifestyle Locations”). Of the Outdoor Lifestyle Locations in the RV and Outdoor Retail segment operating at September 3, 2019, the Company closed or divested 36 Outdoor Lifestyle Locations, 3 distribution centers, and 19 specialty retail locations through March 31, 2020. NaN Outdoor Lifestyle Locations were closed in April 2020 and the Company expects that the remaining limited number of store closures and/or divestitures will be completed by December 31, 2020. As part of the 2019 Strategic Shift, the Company evaluated the impact on its supporting infrastructure and operations, which included rationalizing inventory levels and composition, closing 3 of its distribution centers, and realigning other resources. The Company had a reduction of headcount and labor costs for those locations that were closed or divested and the Company incurred material charges associated with the activities contemplated under the 2019 Strategic Shift.
In connection with the 2019 Strategic Shift, the Company expects to incur, in the aggregate, costs relating to:
| ● | one-time employee termination benefits of $1.2 million to $1.5 million, of which $1.2 million has been incurred through March 31, 2020; |
| ● | lease termination costs of $15.0 million to $20.0 million, of which $5.5 million has been incurred through March 31, 2020; |
| ● | incremental inventory reserve charges of $42.4 million, of which $42.4 million has been incurred through March 31, 2020; and |
| ● | other associated costs of $20.0 million to $25.0 million, of which $9.9 million has been incurred through March 31, 2020. |
Through March 31, 2020, the Company has incurred $9.9 million of such other associated costs primarily representing labor, lease, and other operating expenses incurred during the post-close wind-down period for the locations related to the 2019 Strategic Shift. The additional amount of $10.1 million to $15.1 million represents similar costs that may be incurred during the last nine months of 2020 for locations that continue in a wind-down period, primarily comprised of lease costs accounted for under ASC 842 prior to lease termination. The Company intends to negotiate terminations of these leases where prudent and pursue sublease arrangements for the remaining leases. Lease costs may continue to be incurred after December 31, 2020 on these leases if the Company is unable to terminate the leases under acceptable terms or offset the lease costs through sublease arrangements. The foregoing lease termination cost estimate represents the expected cash payments to terminate certain leases, but does not include the gain or loss from derecognition of the related operating lease assets and liabilities, which is dependent on the particular leases that will be terminated.
13
The following table details the costs incurred during the three months ended March 31, 2020 associated with the 2019 Strategic Shift (in thousands):
| | | |
| | Three Months Ended | |
| | March 31, 2020 | |
Restructuring costs: | | | |
One-time termination benefits(1) | | $ | 180 |
Lease termination costs(2) | | | 589 |
Incremental inventory reserve charges(3) | | | 486 |
Other associated costs(4) | | | 5,616 |
Total restructuring costs | | $ | 6,871 |
| (1) | These costs were primarily in costs applicable to revenues – products, service and other, in the condensed consolidated statements of operations. |
| (2) | These costs were included in lease termination charges in the condensed consolidated statements of operations. This reflects termination fees paid, net of any gain from derecognition of the related operating lease assets and liabilities. |
| (3) | These costs were included in costs applicable to revenue – products, service and other in the condensed consolidated statements of operations. |
| (4) | Other associated costs primarily represent labor, lease, and other operating expenses incurred during the post-close wind-down period for the locations related to the 2019 Strategic Shift. For the three months ended March 31, 2020, costs of approximately $0.3 million were included in costs applicable to revenue – products, service and other, and $5.3 million were included in selling, general, and administrative expenses in the condensed consolidated statements of operations. |
The following table details changes in the restructuring accrual associated with the 2019 Strategic Shift (in thousands):
| | | | | | | | | | | | |
|
| One-time |
| Lease |
| Other |
| | ||||
|
| Termination |
| Termination |
| Associated |
| | ||||
|
| Benefits |
| Costs (1) |
| Costs |
| Total | ||||
Balance at June 30, 2019 | | $ | — | | $ | — | | $ | — | | $ | — |
Charged to expense | | | 1,008 | | | 1,350 | | | 4,321 | | | 6,679 |
Paid or otherwise settled | | | (286) | | | (1,350) | | | (4,036) | | | (5,672) |
Balance at December 31, 2019 | | | 722 | | | — | | | 285 | | | 1,007 |
Charged to expense | | | 180 | | | 4,170 | | | 5,616 | | | 9,966 |
Paid or otherwise settled | | | (617) | | | (4,170) | | | (4,819) | | | (9,606) |
Balance at March 31, 2020 | | $ | 285 | | $ | — | | $ | 1,082 | | $ | 1,367 |
| | | | | | | | | | | | |
| (1) | Lease termination costs exclude the $1.3 million and the $3.6 million of gains from the derecognition of the operating lease assets and liabilities relating to the terminated leases as part of the 2019 Strategic Shift for the six months ended December 31, 2019 and for the three months ended March 31, 2020, respectively. |
The Company evaluated the requirements of ASC No. 205-20, Presentation of Financial Statements – Discontinued Operations relative to the 2019 Strategic Shift and determined that discontinued operations treatment is not applicable. Accordingly, the results of operations of the locations impacted by the 2019 Strategic Shift are reported as part of continuing operations in the accompanying unaudited condensed consolidated financial statements.
Long-lived Asset Impairment
During the three months ended March 31, 2020, the Company had indicators of impairment of the long-lived assets for certain of its locations. For locations that failed the recoverability test based on an analysis of undiscounted cash flows, the Company estimated the fair value of the locations based on a discounted cash flow analysis. After performing the long-lived asset impairment test for these locations, the Company
14
determined that 10 locations within the RV and Outdoor Retail segment had long-lived assets that were impaired. The long-lived asset impairment charge, subject to limitations described below, was calculated as the amount that the carrying value of the locations exceeded the estimated fair value. The calculated long-lived asset impairment charge was allocated to each of the categories of long-lived assets at each location pro rata based on the long-lived assets’ carrying values, except that individual assets cannot be impaired below their individual fair values when that fair value can be determined without undue cost and effort. For most of these locations, the operating lease right-of-use assets and furniture and equipment were written down to their individual fair values and the remaining impairment charge was allocated to the remaining long-lived assets up to the fair value estimated on these assets based on liquidation value estimates.
During the three months ended March 31, 2020, the Company recorded long-lived asset impairment charges relating to leasehold improvements, furniture and equipment, and operating lease right-of-use assets of $2.4 million, $2.6 million, and $1.6 million, respectively. Of the $6.6 million long-lived asset impairment charge during the three months ended March 31, 2020, $6.5 million related to the 2019 Strategic Shift discussed above.
4.5. Goodwill and Intangible Assets
Goodwill
The following is a summary of changes in the Company’s goodwill by segment for the sixthree months ended June 30, 2019March 31, 2020 (in thousands):
| | | | | | | | | |
| | Good Sam | | | | | | ||
| | Services and | | RV and | | | | ||
|
| Plans |
| Outdoor Retail |
| Consolidated | |||
Balance as of December 31, 2018 | | $ | 50,320 | | $ | 308,797 | | $ | 359,117 |
Acquisitions (1) | | | — | | | 24,559 | | | 24,559 |
Transfers of assets between reporting units | | | (26,491) | | | 26,491 | | | — |
Balance as of June 30, 2019 | | $ | 23,829 | | $ | 359,847 | | $ | 383,676 |
| | | | | | | | | |
| | Good Sam | | | | | | ||
| | Services and | | RV and | | | | ||
|
| Plans |
| Outdoor Retail |
| Consolidated | |||
Balance as of December 31, 2019 (excluding impairment charges) | | $ | 70,713 | | $ | 558,065 | | $ | 628,778 |
Accumulated impairment charges | | | (46,884) | | | (194,953) | | | (241,837) |
Balance as of December 31, 2019 | | | 23,829 | | | 363,112 | | | 386,941 |
Acquisitions (1) | | | — | | | 4 | | | 4 |
Balance as of March 31, 2020 | | $ | 23,829 | | $ | 363,116 | | $ | 386,945 |
| | | | | | | | | |
| (1) |
The Company evaluates goodwill for impairment on an annual basis as of the beginning of the fourth quarter, or more frequently if events or changes in circumstances indicate that the Company’s goodwill or indefinite-lived intangible assets might be impaired. The Company assesses qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If the Company determines it is more likely than not that the fair value of a reporting unit is less than its carrying amount, then it is required to perform the first step of a two-step impairment test by calculating the fair value of the reporting unit and comparing the fair value with the carrying amount of the reporting unit. If the carrying amount of a reporting unit exceeds its fair value, then the Company records an impairment of goodwill equal to the amount that the carrying amount of a reporting unit exceeds its fair value.
As of January 1, 2019,During the three months ended March 31, 2020, the Company transferred certain assets related todetermined that a triggering event for an interim goodwill impairment test of its RV and Outdoor Retail reporting unit had occurred as a result of the Good Sam Clubdecline in the market price of the Company’s Class A common stock and co-branded credit card from GSS Enterprises, LLC (“GSS”) within the Good Sam Services and Plans segment to CWI, Inc. (“CWI”) withinpotential impact of COVID-19 on the Company’s business. As a result of the interim goodwill impairment test, the Company determined that the fair value of the RV and Outdoor Retail segment. This resulted in a transfer of $26.5 million of goodwill from the Good Sam Services and Plans segment to the RV and Outdoor Retail segment based on relative fair value as of January 1, 2019 of the portion of the reporting unit transferred.was substantially above its respective carrying amount, therefore, no goodwill impairment was recorded.
1715
Intangible Assets
Finite–livedFinite-lived intangible assets and related accumulated amortization consisted of the following at June 30, 2019March 31, 2020 and December 31, 20182019 (in thousands):
| | | | | | | | | | | | | | | | | | |
| | June 30, 2019 | | March 31, 2020 | ||||||||||||||
| | Cost or | | Accumulated | | | | | Cost or | | Accumulated | | | | ||||
|
| Fair Value |
| Amortization |
| Net |
| Fair Value |
| Amortization |
| Net | ||||||
Good Sam Services and Plans: | | | | | | | | | | | | | | | | | | |
Membership and customer lists | | $ | 9,140 | | $ | (7,574) | | $ | 1,566 | | $ | 9,140 | | $ | (8,153) | | $ | 987 |
RV and Outdoor Retail: | | | | | | | | | | | | | | | | | | |
Customer lists and domain names | | | 3,415 | | | (2,064) | | | 1,351 | | | 2,065 | | | (1,792) | | | 273 |
Trademarks and trade names | | | 29,304 | | | (3,831) | | | 25,473 | | | 28,955 | | | (5,343) | | | 23,612 |
Websites | | | 6,074 | | | (1,459) | | | 4,615 | | | 5,990 | | | (2,038) | | | 3,952 |
| | $ | 47,933 | | $ | (14,928) | | $ | 33,005 | | $ | 46,150 | | $ | (17,326) | | $ | 28,824 |
| | | | | | | | | | | | | | | | | | |
| | December 31, 2018 | | December 31, 2019 | ||||||||||||||
| | Cost or | | Accumulated | | | | | Cost or | | Accumulated | | | | ||||
|
| Fair Value |
| Amortization |
| Net |
| Fair Value |
| Amortization |
| Net | ||||||
Good Sam Services and Plans: | | | | | | | | | | | | | | | | | | |
Membership and customer lists | | $ | 9,140 | | $ | (7,174) | | $ | 1,966 | | $ | 9,140 | | $ | (7,972) | | $ | 1,168 |
RV and Outdoor Retail: | | | | | | | | | | | | | | | | | | |
Customer lists and domain names | | | 3,415 | | | (1,559) | | | 1,856 | | | 2,065 | | | (1,768) | | | 297 |
Trademarks and trade names | | | 29,304 | | | (2,853) | | | 26,451 | | | 28,955 | | | (4,862) | | | 24,093 |
Websites | | | 6,074 | | | (1,063) | | | 5,011 | | | 5,990 | | | (1,841) | | | 4,149 |
| | $ | 47,933 | | $ | (12,649) | | $ | 35,284 | | $ | 46,150 | | $ | (16,443) | | $ | 29,707 |
|
| | | | | | | | |
| | | | | | | | |
5.6. Long-Term Debt
Outstanding long-term debt consisted of the following (in thousands):
| | | | | | | | | | | | |
| | June 30, | | December 31, | | March 31, | | December 31, | ||||
|
| 2019 |
| 2018 |
| 2020 |
| 2019 | ||||
Term Loan Facility (1) | | $ | 1,155,241 | | $ | 1,156,345 | | $ | 1,146,062 | | $ | 1,148,115 |
Real Estate Facility (2) | | | 20,748 | | | 9,520 | | | 18,997 | | | 19,521 |
Subtotal | | | 1,175,989 | | | 1,165,865 | | | 1,165,059 | | | 1,167,636 |
Less: current portion | | | (14,144) | | | (12,977) | | | (13,962) | | | (14,085) |
Total | | $ | 1,161,845 | | $ | 1,152,888 | | $ | 1,151,097 | | $ | 1,153,551 |
| | | | | | | | | | | | |
| (1) | Net of |
| (2) | Net of $0.2 million and $0.2 million of finance costs at |
Senior Secured Credit Facilities
As of June 30, 2019March 31, 2020 and December 31, 2018,2019, CWGS Group, LLC (the “Borrower”), a wholly owned subsidiary of CWGS, LLC, was party to a credit agreement (as amended from time to time, the “Credit Agreement”) for a senior secured credit facility (the “Senior Secured Credit Facilities”). The Senior Secured Credit Facilities consist of a $1.19 billion term loan facility (the “Term Loan Facility”) and a $35.0 million revolving credit facility (the “Revolving Credit Facility”). The funds available under the Revolving Credit Facility may be utilized for borrowings or letters of credit; however, a maximum of $15.0 million may be allocated to such letters of credit. The Revolving Credit Facility matures on November 8, 2021, and the Term Loan Facility matures on November 8, 2023. The Term Loan Facility requires mandatory principal payments in equal quarterly installments of $3.0 million. The second quarter 2019 principal payment was paid on July 1, 2019.Additionally, the Company is required to prepay the term loan borrowings in an
1816
Additionally, the Company is required to prepay the term loan borrowings in an aggregate amount equal to 50% of excess cash flow, as defined in the Credit Agreement, for such fiscal year depending on the Total Leverage Ratio.
As of June 30, 2019,March 31, 2020, the average interest rate on the Term Loan Facility was 5.19%3.90%. As of June 30, 2019,The following table details the Company had $9.4 millionoutstanding amounts and available for borrowing and letters of credit in the aggregate amount of $3.7 million outstandingborrowings under the RevolvingSenior Secured Credit Facility,Facilities as a result of the 30% threshold described below. As of June 30, 2019, a principal balance of $1.2 billion was outstanding under the Term Loan Facility and no amounts were outstanding on the Revolving Credit Facility.(in thousands):
| | | | | | |
|---|---|---|---|---|---|---|
| | March 31, | | December 31, | ||
|
| 2020 |
| 2019 | ||
Senior Secured Credit Facilities: | | | | | | |
Term Loan Facility: | | | | | | |
Principal amount of borrowings | | $ | 1,195,000 | | $ | 1,195,000 |
Less: cumulative principal payments | | | (34,895) | | | (31,898) |
Less: unamortized original issue discount | | | (4,057) | | | (4,320) |
Less: finance costs | | | (9,986) | | | (10,667) |
| | | 1,146,062 | | | 1,148,115 |
Less: current portion | | | (11,991) | | | (11,991) |
Long-term debt, net of current portion | | $ | 1,134,071 | | $ | 1,136,124 |
Revolving Credit Facility: | | | | | | |
Total commitment | | $ | 35,000 | | $ | 35,000 |
Less: outstanding letters of credit | | | (3,622) | | | (4,112) |
Less: availability reduction due to Total Leverage Ratio | | | (21,965) | | | (21,622) |
Additional borrowing capacity | | $ | 9,413 | | $ | 9,266 |
The Senior Secured Credit Facilities are fully and unconditionally guaranteed, jointly and severally, on a senior secured basis by each of the Company’s existing and future domestic restricted subsidiaries with the exception of FreedomRoads Intermediate Holdco, LLC, the direct parent of FR, and FR and its subsidiaries. The Credit Agreement contains certain restrictive covenants pertaining to, but not limited to, mergers, changes in the nature of the business, acquisitions, additional indebtedness, sales of assets, investments, and the prepayment of dividends subject to certain limitations and minimum operating covenants. Additionally, management has determined that the Senior Secured Credit Facilities include subjective acceleration clauses which could impact debt classification. Management has determined that no events have occurred at June 30, 2019, including the internal control material weaknesses,March 31, 2020 that would trigger a subjective acceleration clause.
The Credit Agreement requires the Borrower and its subsidiaries to comply on a quarterly basis with a maximum Total Leverage Ratio (as defined in the Credit Agreement), which covenant is in effect only if, as of the end of each calendar quarter, the aggregate amount of borrowings under the revolving credit facility (including swingline loans), letters of credit and unreimbursed letter of credit disbursements outstanding at such time (minus the lesser of (a) $5.0 million and (b) letters of credit outstanding) is greater than 30% of the aggregate amount of the Revolving Lenders’ Revolving Commitments (minus the lesser of (a) $5.0 million and (b) letters of credit outstanding), as defined in the Credit Agreement. As of June 30, 2019,March 31, 2020, the Company was not subject to this covenant as borrowings under the Revolving Credit Facility did not exceed the 30% threshold. At June 30, 2019,March 31, 2020, the Company would not have met this covenant if the Company had exceeded the 30% threshold. As such, the Company’s borrowing capacity under the Revolving Credit Facility at June 30, 2019March 31, 2020 was limited to $9.4 million of additional borrowings. The Company was in compliance with all applicable debt covenants at June 30, 2019March 31, 2020 and December 31, 2018.2019.
Real Estate Facility
As of June 30, 2019March 31, 2020 and December 31, 2018,2019, Camping World Property, Inc. (the ‘‘Real Estate Borrower’’), an indirect wholly-owned subsidiary of CWGS, LLC, and CIBC Bank USA (“Lender”), were party to a loan and security agreement for a real estate credit facility with an aggregate maximum principal amountcapacity of $21.5 million (“Real Estate Facility”). Borrowings under the Real Estate Facility are guaranteed by CWGS Group, LLC, a wholly-owned subsidiary of CWGS, LLC. The Real Estate Facility may be used to finance the acquisition of real estate assets. The Real Estate Facility is secured by first priority security interest on the real
17
estate assets acquired with the proceeds of the Real Estate Facility (“Real Estate Facility Properties”). The Real Estate Facility matures on October 31, 2023.
As of June 30, 2019,March 31, 2020, a principal balance of $19.2 million was outstanding under the Real Estate Facility, and the average interest rate on the Real Estate Facility was 5.26%4.65% with a commitment fee of 0.50% of the aggregate unused principal amount of the Real Estate Facility. As of June 30, 2019,March 31, 2020, the Company had no available capacity under the Real Estate Facility. As of June 30, 2019, a principal balance of $21.0 million was outstanding under
Management has determined that the credit agreement governing the Real Estate Facility.
TheFacility includes subjective acceleration clauses which could impact debt classification. Management has determined that no events have occurred at March 31, 2020 that would trigger a subjective acceleration clause. Additionally, the Real Estate Facility is subject to certain cross default provisions, a debt service coverage ratio, and other customary covenants. The Company was in compliance with all debt covenants at June 30, 2019March 31, 2020 and December 31, 2018.2019.
19
6. Leases
The Company leases property and equipment throughout the United States primarily under operating leases. For leases with terms greater than 12 months, the Company records the related asset and obligation at the present value of lease payments over the term. Many of the Company’s leases include rental escalation clauses, renewal options and/or termination options that are factored into the determination of lease payments when appropriate. The Company aggregates non-lease components with the related lease components when evaluating the accounting treatment for equipment and billboard leases.
Many of the Company’s lease agreements include fixed rental payments. Certain of its lease agreements include fixed rental payments that are adjusted periodically for changes in the Consumer Price Index (“CPI”). Payments based on a change in an index or a rate are not considered in the determination of lease payments for purposes of measuring the related lease liability. While lease liabilities are not remeasured as a result of changes to the CPI, changes to the CPI are treated as variable lease payments and recognized in the period in which the obligation for those payments are incurred.
Most of the Company’s real estate leases include one or more options to renew, with renewal terms that can extend the lease term from one to five years or more. The exercise of lease renewal options is at the Company’s sole discretion. If it is reasonably certain that the Company will exercise such options, the periods covered by such options are included in the lease term and are recognized as part of the operating lease assets and operating lease liabilities. The depreciable life of assets and leasehold improvements are limited by the expected lease term, unless there is a transfer of title or purchase option reasonably certain of exercise.
When available, the Company uses the rate implicit in the lease to discount lease payments to present value; however, most of its leases do not provide a readily determinable implicit rate. Therefore, the Company must estimate its incremental borrowing rate to discount the lease payments based on information available at lease commencement.
The Company leases most of the properties for its RV and outdoor retail locations through 284 operating leases. The Company also leases billboards and certain of its equipment primarily through operating leases. The related right-of-use (“ROU”) assets for these operating leases are included in operating lease assets. The Company has one finance lease for equipment, which is not material.
As of June 30, 2019, the weighted-average remaining lease term and weighted-average discount rate of operating leases was 13.0 years and 7.6%, respectively.
The following presents certain information related to the costs for operating leases during 2019:
| | | | | | |
| | Three Months Ended | | Six Months Ended | ||
| | June 30, 2019 |
| June 30, 2019 | ||
Operating lease cost | | $ | 30,616 | | $ | 60,818 |
Short-term lease cost | | | 873 | | | 1,586 |
Variable lease cost | | | 550 | | | 1,102 |
Sublease income | | | (211) | | | (516) |
Net lease costs | | $ | 31,828 | | $ | 62,990 |
The following presents supplemental cash flow information related to leases during 2019:
| | | |
| | Six Months Ended | |
| | June 30, 2019 | |
Cash paid for amounts included in the measurement of lease liability: | | | |
Operating cash flows for operating leases | | $ | 60,605 |
| | | |
ROU assets obtained in exchange for lease liabilities: | | | |
Operating leases | | $ | 43,027 |
20
7. Lease Obligations
The following reconciles the undiscounted cash flows for each of the first five years and total of the remaining yearspresents certain information related to the costs for operating lease liabilities on the balance sheet as of June 30, 2019:leases ($ in thousands):
| | | |
|
| Operating | |
|
| Leases | |
2019 |
| $ | 60,377 |
2020 | | | 120,591 |
2021 | | | 120,514 |
2022 | | | 115,490 |
2023 | | | 111,965 |
Thereafter | | | 894,626 |
Total lease payments | | | 1,423,563 |
Less: Imputed interest | | | (545,767) |
Total lease obligations | | | 877,796 |
Less: Current portion | | | (55,776) |
Noncurrent lease obligations | | $ | 822,020 |
| | | | | | |
| | Three Months Ended March 31, | ||||
| | 2020 |
| 2019 | ||
Operating lease cost | | $ | 31,000 | | $ | 30,202 |
Short-term lease cost | | | 489 | | | 713 |
Variable lease cost | | | 5,028 | | | 552 |
Sublease income | | | (412) | | | (305) |
Net lease costs | | $ | 36,105 | | $ | 31,162 |
DisclosuresThe following presents supplemental cash flow information related to periods prior to the adoption of ASC 842
The Company leases operating facilities throughout the United States. Prior to January 1, 2019, the Company analyzed all leases($ in accordance with ASC 840. The Company has included the right to use assets in property and equipment, net, as follows (in thousands):
| | | |
| | December 31, | |
|
| 2018 | |
Right to use assets | | $ | 5,400 |
Accumulated depreciation | | | (540) |
| | $ | 4,860 |
| | | |
The following is a schedule by year of the future changes in the right to use liabilities as of December 31, 2018 (in thousands):
| | | |
2019 |
| $ | 486 |
2020 | | | 486 |
2021 | | | 486 |
2022 | | | 486 |
2023 | | | 486 |
Thereafter | | | 7,889 |
Total minimum lease payments | | | 10,319 |
Amounts representing interest | | | (5,172) |
Present value of net minimum right to use liability payments | | $ | 5,147 |
| | | | | | |
| | Three Months Ended March 31, | ||||
| | 2020 |
| 2019 | ||
Cash paid for amounts included in the measurement of lease liability: | | | | | | |
Operating cash flows for leases | | $ | 30,737 | | $ | 30,044 |
| | | | | | |
Operating lease assets obtained in exchange for lease liabilities: | | | | | | |
New, remeasured, and terminated leases | | $ | 18,804 | | $ | 23,403 |
Future minimum annual fixed rentals under operating leases having an original term of more than one year as of December 31, 2018, were as follows (in thousands):
| | | | | | | | | |
|
| Third Party |
| Related Party |
| Total | |||
2019 |
| $ | 116,131 |
| $ | 2,248 |
| $ | 118,379 |
2020 | | | 111,008 | | | 2,248 | | | 113,256 |
2021 | | | 106,740 | | | 2,248 | | | 108,988 |
2022 | | | 102,496 | | | 2,145 | | | 104,641 |
2023 | | | 99,594 | | | 1,930 | | | 101,524 |
Thereafter | | | 811,228 | | | 18,951 | | | 830,179 |
Total | | $ | 1,347,197 | | $ | 29,770 | | $ | 1,376,967 |
| | | | | | | | | |
21
For the three and six months ended June 30, 2018, $29.4 million and $55.1 million of rent expense was charged to costs and expenses, respectively.
7.8. Fair Value Measurements
Accounting guidance for fair value measurements establishes a three tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include Level 1, defined as observable inputs such as quoted prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions.
There have been no transfers of assets or liabilities between the fair value measurement levels and there were no material re-measurements to fair value during 20192020 and 20182019 of assets and liabilities that are not measured at fair value on a recurring basis.
The following table presents the reported carrying value and fair value information for the Company’s debt instruments. The fair values shown below for the Term Loan Facility, as applicable, are based on quoted prices in the inactive market for identical assets (Level 2) and the fair values shown below for the Floor Plan
18
Facility Revolving Line of Credit and the Real Estate Facility are estimated by discounting the future contractual cash flows at the current market interest rate that is available based on similar financial instruments.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Fair Value | | June 30, 2019 | | December 31, 2018 | | Fair Value | | March 31, 2020 | | December 31, 2019 | ||||||||||||||||
($ in thousands) |
| Measurement |
| Carrying Value |
| Fair Value |
| Carrying Value |
| Fair Value |
| Measurement |
| Carrying Value |
| Fair Value |
| Carrying Value |
| Fair Value | ||||||||
Term Loan Facility | | Level 2 | | $ | 1,155,241 | | $ | 1,087,118 | | $ | 1,156,345 | | $ | 1,116,338 | | Level 2 | | $ | 1,146,062 | | $ | 783,071 | | $ | 1,148,115 | | $ | 1,104,947 |
Floor Plan Facility Revolving Line of Credit | | Level 2 | | | 52,768 | | | 54,432 | | | 38,739 | | | 40,139 | | Level 2 | | | 40,885 | | | 40,021 | | | 40,885 | | | 41,299 |
Real Estate Facility | | Level 2 | | | 20,748 | | | 22,778 | | | 9,520 | | | 10,850 | | Level 2 | | | 18,997 | | | 18,347 | | | 19,521 | | | 21,030 |
8.9. Commitments and Contingencies
Litigation
On October 19, 2018, a purported stockholder of the Company filed a putative class action lawsuit, captioned Ronge v. Camping World Holdings, Inc. et al., in the United States District Court for the Northern District of Illinois against the Company, certain of its officers and directors, and Crestview Partners II GP, L.P. and Crestview Advisors, L.L.C. (the “Ronge Complaint”). On October 25, 2018, a different purported stockholder of the Company filed a putative class action lawsuit, captioned Strougo v. Camping World Holdings, Inc. et al., in the United States District Court for the Northern District of Illinois against the Company, certain of its officers and directors, and Crestview Partners II GP, L.P. and Crestview Advisors, L.L.C. (the “Strougo Complaint”).
The Ronge and Strougo Complaints were consolidated and lead plaintiffs (the “Ronge Lead Plaintiffs”) appointed by the court. On February 27, 2019, the Ronge lead plaintiffs filed a consolidated complaint against the Company, certain of its officers, directors, Crestview Partners II GP, L.P. and Crestview Advisors, L.L.C., and the underwriters of the May and October 2017 secondary offerings of the Company’s Class A common stock.stock (the “Consolidated Complaint”). The consolidated complaintConsolidated Complaint alleges violations of Sections 11 and 12(a)(2) of the Securities Act of 1933, as well as Section 10(b) of the Securities Exchange Act of 1934, as amended, and ruleRule 10b-5 thereunder, based on allegedly materially misleading statements or omissions of material facts necessary to make certain statements not misleading related to the business, operations, and management of the Company. Additionally, it alleges that certain of the Company’s officers and directors, Crestview Partners II GP, L.P., and Crestview Advisors, L.L.C. violated Section 15 of the Securities Act of 1933 and Section 20(a) of the Securities Exchange Act of 1934, as amended, by allegedly acting as controlling persons of the Company. The lawsuit brings claims on behalf of a putative class of purchasers of the Company’s Class A common stock between March 8, 2017 and August 7, 2018, and seeks compensatory damages, rescission, attorneys’ fees and costs, and any equitable or
22
injunctive relief the court deems just and proper. On May 17, 2019, the Company, along with the other defendants, moved to dismiss the complaint.Consolidated Complaint. On March 12, 2020, Ronge Lead Plaintiffs filed an Amended Consolidated Complaint, adding those allegations contained in the Geis Complaint (defined below). On March 13, Ronge Lead Plaintiffs filed an unopposed motion for preliminary approval of class action settlement, which the Court granted on April 7, 2020. The Settlement Hearing is scheduled for August 5, 2020.
However, there can be no assurance that the proposed settlement will be approved by the Court. The parties have informed the court of the status of their negotiations, and on January 24, 2020, the court struck the pending motions to dismiss without prejudice. Any losses that the Company believes it has meritorious defensesare probable are expected to be covered directly by the claims of the plaintiffs and members of the putative class, and any liability for the alleged claimsCompany’s applicable insurance policies. The Company is not currently probableable to estimate a range of reasonably possible loss in excess of any amount that would be paid directly by the Company’s insurance carriers. Moreover, no assurance can be made that this matter either individually or reasonably estimable.together with the potential for similar suits, will not result in a material financial exposure in excess of insurance coverage, which could have a material adverse effect upon the Company's financial condition and results of operations.
On December 12, 2018, a putative class action complaint styled International Union of Operating Engineers Benefit Funds of Eastern Pennsylvania and Delaware v. Camping World Holdings Inc., et al. was filed in the Supreme Court of the State of New York, New York County, on behalf of all purchasers of Camping World Class A common stock issued pursuant and/or traceable to a secondary offering of such securities in
19
October 2017 (“IUOE Complaint”). The IUOE Complaint names as defendants the Company, and certain of its officers and directors, among others, and alleges violations of Sections 11, 12(a), and 15 of the Securities Act of 1933 based on allegedly materially misleading statements or omissions of material facts necessary to make certain statements not misleading and seeks compensatory damages, including prejudgment and post-judgement interest, attorneys’ fees and costs, and any equitable or injunctive relief the court deems just and proper, including rescission. On February 28, 2019, the Company, along with the other defendants, moved to dismiss this action. The parties are scheduled to argueargued the merits of defendants’ motion to dismiss before the Supreme Court of the State of New York, Commercial Division, on AugustSeptember 6, 2019. The Court granted in part and denied in part the motion to dismiss on April 22, 2019.2020. The Company believes it has meritorious defenses to the claims of the plaintiffs and members of the putative class, and any liability for the alleged claims is not currently probable or reasonably estimable.
On February 22, 2019, a putative class action complaint styled Daniel Geis v. Camping World Holdings, Inc., et al. was filed in the Circuit Court of Cook County, Illinois, Chancery Division, on behalf of all purchasers of Camping World Class A common stock in and/or traceable to the Company’s initial public offering on October 6, 2016 (“Geis Complaint”). The Geis Complaint names as defendants the Company, certain of ourits officers and directors, and the underwriters of the offering, and alleges violations of Sections 11, 12(a)(2), and 15 of the Securities Act of 1933 based on allegedly materially misleading statements or omissions of material facts necessary to make certain statements not misleading. The Geis Complaint seeks compensatory damages, prejudgment and post-judgment interest, attorneys’ fees and costs, and any other and further relief the court deems just and proper. On April 19, 2019, the Company, along with the other defendants, moved to dismiss this action. The parties are scheduled to argueargued the merits of defendants’ motion to dismiss before the Circuit Court of Cook County, Illinois, Chancery Division on August 20, 2019. On August 26, 2019, the Court stayed the Geis Complaint pending resolution of the motion to dismiss the Consolidated Complaint that is pending in the United States District Court for the Northern District of Illinois. The Company believes it has meritorious defenses to the claims of the plaintiff and members of the putative class, and any liability for the alleged claims is not currently probable or reasonably estimable.
On March 5, 2019, a shareholder derivative suit styled Hunnewell v. Camping World Holdings, Inc., et al., was filed in the Court of Chancery of the State of Delaware, alleging breaches of fiduciary duty for alleged failure to implement effective disclosure controls and internal controls over financial reporting and to properly oversee certain acquisitions and for alleged insider trading (the “Hunnewell Complaint”). The Hunnewell Complaint names the Company as nominal defendant, and names certain of the Company’s officers and directors, among others, as defendants and seeks restitutionary and/or compensatory damages, disgorgement of all management fees, advisory fees, expenses and other fees paid by Camping Worldthe Company during the period in question, disgorgement of profits pursuant to the alleged insider trading, attorneys’ fees and costs, and any other and further relief the court deems just and proper.
On April 17, 2019, a shareholder derivative suit styled Lincolnshire Police Pension Fund v. Camping World Holdings, Inc., et al., was filed in the Court of Chancery of the State of Delaware, alleging breaches of fiduciary duty for alleged failure to implement effective disclosure controls and internal controls over financial reporting and to properly oversee certain acquisitions and for alleged insider trading and unjust enrichment for compensation received during that time (the “LPPF Complaint”). The LPPF Complaint names the Company as nominal defendant, and names certain of the Company’s officers and directors, among others, as defendants and seeks compensatory damages, extraordinary equitable and/or injunctive relief, restitution and disgorgement, attorneys’ fees and costs, and any other and further relief the court deems just and proper. On May 30, 2019, the Court granted the parties’ joint motion to consolidate the Hunnewell and LPPF Complaints (as well as any future filed actions relating to the subject matter) and stay the newly consolidated action pending the resolution of defendants’ motion to dismiss the putative class action (Ronge)Consolidated Complaint pending in the United States District Court for the Northern District of Illinois. The Company believes it has meritorious
23
defenses to the claims of the plaintiffs, and any liability for the alleged claims is not currently probable or reasonably estimable.
On August 6, 2019, two2 shareholder derivative suits, styled Janssen v. Camping World Holdings, Inc., et al., and Sandler v. Camping World Holdings, Inc. et al., were filed in the U.S. District Court of Delaware. Both actions name the Company as a nominal defendant, and name certain of the Company’s officers and directors, Crestview Partners II GP, L.P. and Crestview Advisors, L.L.C. as defendants, and allege: (i) violations of Section 14(a) of the Securities Exchange Act for issuing proxy statements that allegedly omitted material
20
information and allegedly included materially false and misleading financial statements; (ii) violations of Section 10(b) and 20(a) of the Securities Exchange Act of 1934, seeking contribution for causing the Company to issue allegedly false and misleading statements and/or allegedly omit material information in public statements and/or Company filings concerning the Company’s financial performance, the effectiveness of internal controls to ensure accurate financial reporting, and the success and profitability of the integration and rollout of Gander Outdoors (now Gander RV) stores; (iii) breaches of fiduciary duty, unjust enrichment, abuse of control, and gross mismanagement for allegedly causing or allowing the Company to disseminate to Camping World shareholders materially misleading and inaccurate information through the Company’s SEC filings; and (iv) breach of fiduciary duties for alleged insider selling and misappropriation of information (together, the “Janssen and Sandler Complaints”). The Janssen and Sandler Complaints seek restitutionary and/or compensatory damages, injunctive relief, disgorgement of all profits, benefits, and other compensation obtained by the certain of the Company’s officers and directors, attorneys’ fees and costs, and any other and further relief the court deems just and proper. The Company isWe are only a nominal defendant in the Janssen and Sandler Complaints,Complaints. On September 25, 2019, the Court granted the parties’ joint motion to consolidate the action and any liabilitystay the action pending resolution of the motion to dismiss the Consolidated Complaint that is pending in the United States District Court for the alleged claims is not currently probable or reasonably estimable.Northern District of Illinois.
TheFrom time to time, the Company is also engagedinvolved in various other legal actions, claims and proceedingslitigation arising in the ordinarynormal course of business including claims related to employment-related matters, breach of contracts, products liabilities, consumer protection and intellectual property matters resulting from the Company’s business activities. The Company does not believe that the ultimate resolution of such matters will have a material adverse effect on its business, financial condition or results of operations. However, litigation is subject to many uncertainties, and the outcome of certain of such individual litigated matters may not be reasonably predictable and any related damages may not be estimable. Certain of these litigation matters could result in an adverse outcome to the Company, and any such adverse outcome could have a material adverse effect on the Company’s business, financial condition and results of operations.
910. Statement of Cash Flows
Supplemental disclosures of cash flow information for the following periods (in thousands) were as follows:
| | | | | | | | | | | | |
| | Six Months Ended | | Three Months Ended | ||||||||
| | June 30, | | June 30, | | March 31, | | March 31, | ||||
|
| 2019 |
| 2018 |
| 2020 |
| 2019 | ||||
Cash paid during the period for: | | | | | | | | | | | | |
Interest | | $ | 55,250 | | $ | 45,077 | | $ | 22,955 | | $ | 26,977 |
Income taxes | | | 1,620 | | | 16,942 | | | 53 | | | 119 |
Non-cash investing activities: | | | | | | | | | | | | |
Leasehold improvements paid by lessor | | | 10,353 | | | 25,617 | | | 24 | | | 1,540 |
Vehicles transferred to property and equipment from inventory | | | 383 | | | 104 | | | 119 | | | 402 |
Derecognition of non-tenant improvements | | | — | | | 6,476 | ||||||
Capital expenditures in accounts payable and accrued liabilities | | | 5,141 | | | 9,827 | | | 3,325 | | | 6,634 |
Non-cash financing activities: | | | | | | | | | | | | |
Par value of Class A common stock issued in exchange for common units in CWGS, LLC | | | — | | | 2 | ||||||
Par value of Class A common stock issued for vested restricted stock units | | | 1 | | | 1 | | | — | | | — |
Par value of Class A common stock repurchased for withholding taxes on vested RSUs | | | — | | | — | ||||||
24
10.11. Acquisitions
During the sixthree months ended June 30,March 31, 2019, and 2018, subsidiaries of the Company acquired the assets or stock of multiple2 RV dealerships that constituted businesses under accounting rules. The Company used a combination of cash and floor plan financing to complete the acquisitions. The Company considers acquisitions of independent dealerships to be a fast and capital efficient alternative to opening new retailRV and Outdoor Retail locations to expand its business and grow its customer base. Additionally, the Company believes that its experience and scale allow it to operate these acquired dealerships more efficiently. The acquired businesses were recorded at their estimated fair values under the acquisition method of accounting. The balance of the purchase prices in excess of the fair values of net assets acquired were recorded as goodwill.
On January 30, 2018During the three months ended March 31, 2019, the RV and April 19, 2018, indirect subsidiaries of the CompanyOutdoor Retail segment acquired substantially all of the assets of Earth Sports LLC, dba Erehwon Mountain Outfitters, and Rock Creek Outfitters, Inc., respectively,an RV dealership group comprised of 2 locations for $3.5an aggregate purchase price of approximately $21.2 million. The purchases were partially funded through $8.4 million and $5.2 million in cash, respectively. These businesses are specialty retailers of outdoor gear and apparel.
borrowings under the Floor Plan Facility. For the sixthree months ended June 30,March 31, 2019, and 2018, the Company purchased real property of $25.1$0.7 million and $81.3 million, respectively, of which $0.7 and $23.5 million, respectively, was from parties related to the sellers of the businesses.
21
The estimated fair values of the assets acquired and liabilities assumed for the acquisitions of dealerships, retail and consumer shows consist of the following:
| | | | | | | | | | | | | | | |
| | Six Months Ended June 30, | | Estimated | | Three Months Ended March 31, | |||||||||
($ in thousands) |
| 2019 |
| 2018 |
| Life |
| 2020 |
| 2019 | |||||
Tangible assets (liabilities) acquired (assumed): | | | | | | | | | | | | | | | |
Cash and cash equivalents | | $ | — | | $ | 2,648 | | | | ||||||
Contracts in transit | | | — | | | 102 | | | | ||||||
Accounts receivable, net | | | — | | | 102 | | | | ||||||
Inventory, net | | | 13,895 | | | 40,150 | | | | ||||||
Inventories, net | | $ | (4) | | $ | 9,096 | |||||||||
Prepaid expenses and other assets | | | 96 | | | 98 | | | | | | — | | | 87 |
Property and equipment, net | | | 158 | | | 709 | | | | | | — | | | 105 |
Other assets | | | — | | | 48 | | | | ||||||
Accounts payable and accrued liabilities | | | (62) | | | (1,070) | | | | ||||||
Other liabilities | | | (38) | | | (412) | | | | ||||||
Accrued liabilities | | | — | | | (100) | |||||||||
Total tangible net assets acquired | | | 14,049 | | | 42,375 | | | | | | (4) | | | 9,188 |
Intangible assets acquired: | | | | | | | | | | ||||||
Trademarks and trade names | | | — | | | 318 | | | 15 years | ||||||
Total intangible assets acquired | | | — | | | 318 | | | | ||||||
Goodwill | | | 24,559 | | | 40,158 | | | | | | 4 | | | 11,981 |
Purchase price | | | 38,608 | | | 82,851 | | | | | | — | | | 21,169 |
Cash and cash equivalents acquired | | | — | | | (2,648) | | | | | | — | | | — |
Cash paid for acquisitions, net of cash acquired | | | 38,608 | | | 80,203 | | | | | | — | | | 21,169 |
Inventory purchases financed via floor plan | | | (8,416) | | | (29,365) | | | | | | — | | | (8,416) |
Cash payment net of floor plan financing | | $ | 30,192 | | $ | 50,838 | | | | | $ | — | | $ | 12,753 |
| | | | | | | |||||||||
TheFor the three months ended March 31, 2020, the fair values above are preliminary relating to the six months ended June 30, 2019 as they are subject torepresent measurement period adjustments for up to one year from the datevaluation of acquisition as new information is obtained about facts and circumstances that existed as of the acquisition dateacquired inventories relating to dealership acquisitions during the valuation of the acquired assets.year ended December 31, 2019. The primary items that generated the goodwill are the value of the expected synergies between the acquired businesses and the Company and the acquired assembled workforce, neither of which qualify for recognition as a separately identified intangible asset. For the sixthree months ended June 30,March 31, 2020 and 2019, and 2018, $24.6acquired goodwill of $0 million and $23.8$12.0 million, respectively, of the acquired goodwill is expected to be deductible for tax purposes. Included in the sixthree months ended June 30,March 31, 2019 and 2018 consolidated financial results were $18.3 million and $28.9$4.8 million of revenue respectively, and $1.0 million and $2.0$0.3 million of pre-tax loss respectively, of the
25
acquired dealerships from the applicable acquisition dates. Pro forma information on these acquisitions has not been included, because the Company has deemed them to not be individually or cumulatively material.
11.12. Income Taxes
CWH is organized as a Subchapter C corporation and, as of June 30, 2019,March 31, 2020, is a 41.9%42.1% owner of CWGS, LLC (see Note 1314 — Stockholders’ Equity and Note 1415 — Non-Controlling Interests). CWGS, LLC is organized as a limited liability company and treated as a partnership for federal tax purposes. purposes, with the exception of Americas Road and Travel Club, Inc., Camping World, Inc. (“CW”), and FreedomRoads RV, Inc. and their wholly-owned subsidiaries, which are Subchapter C corporations.
On January 1, 2019, the Company transferred certain assets relating to its Good Sam Club and co-branded credit card from its indirect wholly-owned subsidiary, GSS aEnterprises LLC (“GSS”), to its indirect wholly-owned subsidiary, CWI,CW, a corporation. As a result of this transfer, the Company recorded $14.4an estimated $16.3 million of estimated deferrednet income tax expense during the sixthree months ended June 30,March 31, 2019 due to the revaluation of certain deferred tax assets and related changes in valuation allowance. Additionally, unrelatedAs a result of transferring certain assets relating to its Good Sam Club and co-branded credit card from GSS to CW, as described above, the Company also re-evaluated the impact on its Tax Receivable Agreement liability related to the reduction of future expected tax amortization. The reduction in future expected tax amortization reduced the Tax Receivable Agreement liability by an estimated $7.2 million. Unrelated to the transfer described above, the Company recordedTax Receivable Agreement liability was reduced by an additional $1.1 million of deferred income tax expense during the three months ended March 31, 2019 resulting from anfor changes in estimated decrease in its state income tax rates.rates applicable to CWH. As a result of these adjustments to the Tax Receivable Agreement liability, the Company recorded an estimated $8.5 million of other income in the Condensed Consolidated Statement of Operations for the three months ended March 31, 2019
As further described in Note 1 — Summary of Significant Accounting Policies — COVID-19, in response to the COVID-19 pandemic, many governments have enacted or are contemplating measures to provide aid and economic stimulus. These measures may include deferring the due dates of tax payments or other changes to their income and non-income-based tax laws. The Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), which was enacted on March 27, 2020 in the U.S., includes measures to assist companies,
22
including temporary changes to income and non-income-based tax laws. For the three months ended March 31, 2020, there were no material tax impacts to the Company’s condensed consolidated financial statements as it relates to COVID-19 measures. The Company will continue to monitor additional guidance issued by the U.S. Treasury Department, the Internal Revenue Service and others.
For the three months ended June 30, 2019 and 2018,March 31, 2020, the Company’s effective income tax rate was 13.5% and 15.6%, respectively. The effective(41.3)% as a result of incurring income tax rate decreased inexpense on a loss before income taxes. For the three months ended June 30, 2019 primarily due to a $1.8 million reduction in the deferredMarch 31, 2020, income tax expense relateddecreased $18.8 million to $4.1 million from $22.9 million for the transfer of assets described above. For the sixthree months ended June 30, 2019 and 2018, the Company’s effective income tax rate was 54.7% and 18.9%, respectively. The amount of income tax expense and the effective income tax rate increased in the six months ended June 30,March 31, 2019 primarily due to the $14.4 millionas a result of estimated deferredlower income tax expense related to the transfers of assets described above, operating losses recorded by CWI for which no tax benefit can be recognized, and an increased ownership percentage ofincurred at CWGS, LLC for which the Company is subject to U.S. federal and state taxes on its allocable share, partially offset by operating losses recorded by CW for which no tax benefit can be recognized and absent the transfer of certain assets between subsidiaries in the prior year which had resulted in $16.3 million of net income of CWGS, LLC.tax expense as described above. The Company's effective income tax rate for the sixthree months ended June 30, 2019March 31, 2020 was higher than(41.3)%, which differed from the federal statutory rate of 21.0% primarily due to the deferred income tax expense related to the transfer of assets described above, offset by a portion of the Company’s earnings being attributable to non-controlling interests in limited liability companies which are not subject to corporate level taxes.taxes and losses at certain subsidiaries for which an income tax benefit was not recorded, since there was a full valuation allowance against the related deferred tax assets of those subsidiaries. For the three months ended March 31, 2019, the Company’s effective income tax rate was (588.4)%, primarily as a result of the $16.3 million deferred income tax expense on the transfer of certain assets between subsidiaries described above and a portion of the Company’s earnings being attributable to non-controlling interests in limited liability companies which are not subject to corporate level taxes and losses at certain subsidiaries for which an income tax benefit was not recorded, since there was a full valuation allowance against the related deferred tax assets of those subsidiaries.
The Company evaluates its deferred tax assets on a quarterly basis to determine if they can be realized and establishes valuation allowances when it is more likely than not that all or a portion of the deferred tax assets may not be realized. At June 30, 2019March 31, 2020 and December 31, 2018,2019, the Company determined that all of its deferred tax assets except(except those pertaining to CWIof CW and the direct investment in CWGS, LLC,Outside Basis Deferred Tax Asset discussed below) are more likely than not to be realized. The Company maintains a full valuation allowance against the deferred tax assets of CWI,CW, since it was determined that it is more likely than not, based on available objective evidence, that CWICW would have insufficient taxable income in the current or carryforward periods under the tax laws to realize the future tax benefits of its deferred tax assets. The Company also maintains a partial valuation allowance against the Outside Basis Deferred Tax Asset pertaining to the portion that is not amortizable for tax purposes, since the Company would likely only realize the non-amortizable portion of the deferred tax asset pertaining to its directOutside Basis Deferred Tax Asset if the investment in CWGS, LLC.LLC was divested.
On October 6, 2016, theThe Company entered intois party to a tax receivable agreement (the “Tax Receivable Agreement”) that provides for the payment by the Company to the Continuing Equity Owners and Crestview Partners II GP, L.P. of 85% of the amount of tax benefits, if any, that the Company actually realizes, or in some circumstances is deemed to realize, as a result of (i) increases in the tax basis from the purchase of common units from Crestview Partners II GP, L.P. in exchange for Class A common stock in connection with the consummation of the IPO and the related transactions and any future redemptions that are funded by the Company and any future redemptions or exchanges of common units by Continuing Equity Owners as described above and (ii) certain other tax benefits attributable to payments made under the Tax Receivable Agreement. The above payments are predicated on CWGS, LLC making an election under Section 754 of the Internal Revenue Code effective for each tax year in which a redemption or exchange (including a deemed exchange) of common units for cash or stock occur. These tax benefit payments are not conditioned upon one or more of the Continuing Equity Owners or Crestview Partners II GP, L.P. maintaining a continued ownership interest in CWGS, LLC. In general, the Continuing Equity Owners’ or Crestview Partners II GP, L.P.’s rights under the Tax Receivable Agreement are assignable, including to transferees of its common units in CWGS, LLC (other than the Company as transferee pursuant to a redemption or exchange of common units in CWGS, LLC). The Company expects to benefit from the remaining 15% of the tax benefits, if
26
any, which may be realized. During the three months ended June 30,March 31, 2020 and 2019, 20,000 and 2018, no common units in CWGS, LLC were exchanged for Class A common stock subject to the provisions of the Tax Receivable Agreement. During the six months ended June 30, 2019 and 2018, 5,725 and 173,286 common units in CWGS, LLC, respectively, were exchanged for Class A common stock subject to the provisions of the Tax Receivable Agreement. The Company recognized a liability for the Tax Receivable Agreement payments due to those parties that redeemed common units, representing 85% of the aggregate tax benefits the Company expects to realize from the tax basis increases related to the exchange, after concluding it was probable that the Tax Receivable Agreement payments would be paid based on estimates of future taxable income. As of June 30, 2019March 31, 2020 and December 31, 2018,2019, the amount of Tax Receivable Agreement payments due under the Tax Receivable Agreement was $116.3$114.8 million and $134.2 million, respectively, of which $6.8$6.6 million and $9.4 million, respectively, was included in the current portion of the Tax Receivable Agreement liability in the Condensed Consolidated Balance Sheets.
As a result23
12.13. Related Party Transactions
Transactions with Directors, Equity Holders and Executive Officers
FreedomRoads leases various retailRV and Outdoor Retail locations from managers and officers. During the three months ended June 30,March 31, 2020 and 2019, and 2018, the related party lease expense for these locations was $0.5 million and $0.5 million, respectively. During the six months ended June 30, 2019 and 2018, the related party lease expense for these locations was $1.0 million and $0.9 million, respectively.
In January 2012, FreedomRoads entered into a lease (the “Original Lease”) with respect tofor the Company’soffices in Lincolnshire, Illinois, offices, which was amended inas of March 2013 in connection with the Company’s leasing of additional premises within the same office building (the “Expansion Lease”“First Amendment”). The Original Lease is payable in 132 monthly payments of base rent equalof $29,000 per month was increased to approximately $29,000, commencing April$31,500 per month in March 2013 by virtue of the First Amendment and is subject to annual increases. The ExpansionAs of November 1, 2019, by way of the Second Amendment to the Office Lease, is payable in 132(together with the Original Lease and the First Amendment, collectively, the “Office Lease”), the Company began leasing additional space for an additional monthly payments of base rent equal to approximately $2,500, commencing May 2013, subject to annual increases. Marcus A. Lemonis, theof $5,200. The Company’s Chairman and Chief Executive Officer has personally guaranteed both leases. During the three months ended June 30, 2019 and 2018, the Company made payments of approximately $0.2 million and $0.2 million, respectively, in connection with the Original Lease, which included approximately $0.1 million and $0.1 million, respectively, for common area maintenance charges on the Original Lease, and the Company made payments of approximately $9,000 and $8,000, respectively, in connection with the Expansion Lease. During the six months ended June 30, 2019 and 2018, the Company made payments of approximately $0.4 million and $0.3 million, respectively, in connection with the Original Lease, which included approximately $0.2 million and $0.2 million, respectively, for common area maintenance charges on the Original Lease, and the Company made payments of approximately $17,000 and $17,000, respectively, in connection with the ExpansionOffice Lease.
The Company paid Kaplan, Strangis and Kaplan, P.A., of which Andris A. Baltins is a member, $0.1 million and $0.1 million during the six months ended June 30, 2019 and 2018, respectively, for legal services.
Other Transactions
The Company does business with certain companies in which Mr. Lemonis has a direct or indirect material interest. The Company purchased fixtures for interior store sets at the Company’s retail locations from Precise Graphix, LLC (“Precise Graphix”).Graphix. Mr. Lemonis has a 67% economic interest in Precise Graphix
27
and the Company paid Precise Graphix $0.6$0.1 million and $2.1 million for the three months ended June 30, 2019 and 2018, respectively, and $0.8 million and $3.7 million for the six months ended June 30, 2019 and 2018, respectively. The Company purchased point of purchase and visual merchandise displays from JD Custom Design (“JD Custom”) for use in Camping World’s retail store operations. Mr. Lemonis is a holder of 52% of the combined voting power in JD Custom and the Company paid JD Custom $0 and $0.2 million for the three months ended June 30,March 31, 2020 and 2019, and 2018, respectively, and $0 and $0.3 million for the six months ended June 30, 2019 and 2018, respectively.
The Company does business with certain companies in which Stephen Adams, a member of the Company’s board of directors, has a direct or indirect material interest. The Company from time to time purchases advertising services from Adams Radio of Fort Wayne LLC (“Adams Radio”), in which Mr. Adams has an indirect 90% interest. The Company paid Adams Radio $0 and $0.1$0.2 million for the three months ended June 30,March 31, 2020 and 2019, and 2018, respectively, and $0.2 million and $0.2 million for the six months ended June 30, 2019 and 2018, respectively.
13.14. Stockholders’ Equity
CWH has authorized preferred stock and three3 classes of common stock. The Class A common stock entitles the holders to receive dividends; distributions upon the liquidation, dissolution, or winding up of the Company; and have voting rights. The Class B common stock and Class C common stock entitles the holders to voting rights, which in certain cases are disproportionate to the voting rights of the Class A common stock; however, the holders of Class B common stock and Class C common stock are not entitled to receive dividends or distributions upon the liquidation, dissolution, or winding up of the Company.
CWH is the sole managing member of CWGS, LLC and, although CWH has a minority economic interest in CWGS, LLC, CWH has the sole voting power in, and controls the management of, CWGS, LLC. Accordingly, the Company consolidated the financial results of CWGS, LLC and reported a non-controlling interest in its consolidated financial statements.
In accordance with the amended and restated limited liability company agreement of CWGS, LLC (the “LLC Agreement”), the holders of theContinuing Equity Owners with common units in CWGS, LLC may elect to exchange or redeem the common units for newly-issued shares of the Company’s Class A common stock or cash at the Company’s election, subject to certain restrictions. If the redeeming or exchanging party also holds Class B common stock, then simultaneously with the payment of cash or newly-issued shares of Class A common stock, as applicable, in connection with a redemption or exchange of common units, a number of shares of the Company’s Class B common stock will be cancelled for no consideration on a one-for-one basis with the number of common units so redeemed or exchanged. As required by the LLC Agreement, the Company must, at all times, maintain a one-to-one ratio between the number of outstanding shares of Class A common stock and the number of common units of CWGS, LLC owned by CWH (subject to certain exceptions for treasury shares and shares underlying certain convertible or exchangeable securities).
24
Short-Swing Profit Disgorgement
In May 2018, the Company received an aggregate of $557,000 from short-swing profit disgorgement remitted by ML Acquisition Company, LLC, of which Marcus A. Lemonis, Chairman and Chief Executive Officer of the Company, is the sole director, which is included as an increase to additional paid-in capital in the consolidated statement of stockholders’ equity and as a financing activity in the consolidated statement of cash flows.
14.15. Non-Controlling Interests
As described in Note 1314 — Stockholders’ Equity, CWH is the sole managing member of CWGS, LLC and, as a result, consolidates the financial results of CWGS, LLC. The Company reports a non-controlling interest representing the common units of CWGS, LLC held by Continuing Equity Owners. Changes in CWH’s ownership interest in CWGS, LLC while CWH retains its controlling interest in CWGS, LLC will be accounted for as equity transactions. As such, future redemptions or direct exchanges of common units of CWGS, LLC
28
by the Continuing Equity Owners will result in a change in ownership and reduce or increase the amount recorded as non-controlling interest and increase or decrease additional paid-in capital.capital when CWGS, LLC has positive or negative net assets, respectively. At March 31, 2020 and December 31, 2019, CWGS, LLC had negative net assets, which resulted in negative non-controlling interest amounts on the Condensed Consolidated Balance Sheets. At the end of each period, the Company will record a non-controlling interest adjustment to additional paid-in capital such that the non-controlling interest on the Condensed Consolidated Balance Sheet is equal to the non-controlling interest’s ownership share of the underlying CWGS, LLC net assets (see the Condensed Consolidated Statement of Stockholders’ Equity (Deficit)).
As of June 30, 2019March 31, 2020 and December 31, 2018,2019, there were 88,941,78989,189,070 and 88,867,37389,158,273 common units of CWGS, LLC outstanding, respectively, of which CWH owned 37,272,50537,539,786 and 37,192,36437,488,989 common units of CWGS, LLC, respectively, representing 41.9%42.1% and 42.0% ownership interests in CWGS, LLC, respectively, and the Continuing Equity Owners owned 51,669,28451,649,284 and 51,675,00951,669,284 common units of CWGS, LLC, respectively, representing 58.1%57.9% and 58.0% ownership interests in CWGS, LLC.LLC, respectively.
The following table summarizes the effects of changes in ownership in CWGS, LLC on the Company’s equity:
| | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | Six Months Ended | | Three Months Ended | ||||||||||||
| | June 30, | | June 30, | | March 31, | ||||||||||||
($ in thousands) |
| 2019 |
| 2018 |
| 2019 |
| 2018 |
| 2020 |
| 2019 | ||||||
Net income (loss) attributable to Camping World Holdings, Inc. | | $ | 18,017 | | $ | 24,782 | | $ | (1,378) | | $ | 26,603 | ||||||
Net loss attributable to Camping World Holdings, Inc. | | $ | (8,160) | | $ | (19,395) | ||||||||||||
Transfers to non-controlling interests: | | | | | | | | | | | | | | | | | | |
Decrease in additional paid-in capital as a result of the purchase of common units from CWGS, LLC with proceeds from the exercise of stock options | | | — | | | (5) | | | — | | | (82) | ||||||
Increase in additional paid-in capital as a result of the vesting of restricted stock units | | | 143 | | | 29 | | | 143 | | | 29 | | | 82 | | | — |
Decrease in additional paid-in capital as a result of repurchases of Class A common stock for withholding taxes on vested RSUs | | | (273) | | | — | | | (273) | | | — | | | (212) | | | — |
Increase in additional paid-in capital as a result of the redemption of common units of CWGS, LLC | | | — | | | — | | | 12 | | | 1,848 | | | 4 | | | 12 |
Change from net income attributable to Camping World Holdings, Inc. and transfers to non-controlling interests | | $ | 17,887 | | $ | 24,806 | | $ | (1,496) | | $ | 28,398 | ||||||
Change from net loss attributable to Camping World Holdings, Inc. and transfers to non-controlling interests | | $ | (8,286) | | $ | (19,383) | ||||||||||||
| | | | | | | | | | | | | | | | | | |
15.16. Equity-based Compensation Plans
The following table summarizes the equity-based compensation that has been included in the following line items within the consolidated statements of operations during:
| | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | Six Months Ended | | Three Months Ended | ||||||||||||
| | June 30, | | June 30, | | June 30, | | June 30, | | March 31, | | March 31, | ||||||
($ in thousands) |
| 2019 |
| 2018 |
| 2019 |
| 2018 |
| 2020 |
| 2019 | ||||||
Equity-based compensation expense: | | | | | | | | | | | | | | | | | | |
Costs applicable to revenue | | $ | 208 | | $ | 172 | | $ | 415 | | $ | 347 | | $ | 156 | | $ | 207 |
Selling, general, and administrative | | | 3,655 | | | 2,957 | | | 6,164 | | | 6,000 | | | 3,156 | | | 2,509 |
Total equity-based compensation expense | | $ | 3,863 | | $ | 3,129 | | $ | 6,579 | | $ | 6,347 | | $ | 3,312 | | $ | 2,716 |
2925
The following table summarizes stock option activity for the sixthree months ended June 30, 2019:March 31, 2020:
| | | |
| |
| |
|
|
| |
|
| Stock Options | |
|
| (in thousands) | |
Outstanding at December 31, | | |
|
Forfeited | | |
|
Outstanding at | | |
|
Options exercisable at | | |
|
The following table summarizes restricted stock unit activity for the sixthree months ended June 30, 2019:March 31, 2020:
| | | |
| | Restricted | |
| | Stock Units | |
|
| (in thousands) | |
Outstanding at December 31, | | |
|
|
|
|
|
Vested | | |
|
Forfeited | | |
|
Outstanding at | | |
|
The weighted-average grant date fair value of restricted stock units granted during the six months ended June 30, 2019 was $13.63.
16.17. Earnings Per Share
Basic earnings per share of Class A common stock is computed by dividing net income available to Camping World Holdings, Inc. by the weighted-average number of shares of Class A common stock outstanding during the period. Diluted earnings per share of Class A common stock is computed by dividing net income available to Camping World Holdings, Inc. by the weighted-average number of shares of Class A common stock outstanding adjusted to give effect to potentially dilutive securities.
30
The following table sets forth reconciliations of the numerators and denominators used to compute basic and diluted earnings per share of Class A common stock:
| | | | | | | | | | | | |
| | Three Months Ended | | Six Months Ended | ||||||||
| | June 30, | | June 30, | ||||||||
(In thousands except per share amounts) | | 2019 |
| 2018 |
| 2019 |
| 2018 | ||||
Numerator: | | | | | | | | | | | | |
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. — basic | | | 18,017 | | | 24,782 | | | (1,378) | | | 26,603 |
Add: reallocation of net income attributable to non-controlling interests from the assumed dilutive effect of stock options and RSUs | | | — | | | 33 | | | — | | | 48 |
Add: Reallocation of net income attributable to non-controlling interests from the assumed exchange of common units of CWGS, LLC for Class A common stock | | | 22,565 | | | — | | | — | | | — |
Net income (loss) attributable to Camping World Holdings, Inc. — diluted | | $ | 40,582 | | $ | 24,815 | | $ | (1,378) | | $ | 26,651 |
Denominator: | | | | | | | | | | | | |
Weighted-average shares of Class A common stock outstanding — basic | | | 37,239 | | | 36,964 | | | 37,217 | | | 36,890 |
Dilutive options to purchase Class A common stock | | | — | | | — | | | — | | | 157 |
Dilutive restricted stock units | | | 17 | | | 83 | | | — | | | 136 |
Dilutive common units of CWGS, LLC that are convertible into Class A common stock | | | 51,669 | | | — | | | — | | | — |
Weighted-average shares of Class A common stock outstanding — diluted | | | 88,925 | | | 37,047 | | | 37,217 | | | 37,183 |
| | | | | | �� | | | | | | |
Earnings (loss) per share of Class A common stock — basic | | $ | 0.48 | | $ | 0.67 | | $ | (0.04) | | $ | 0.72 |
Earnings (loss) per share of Class A common stock — diluted | | $ | 0.46 | | $ | 0.67 | | $ | (0.04) | | $ | 0.72 |
| | | | | | | | | | | | |
Weighted-average anti-dilutive securities excluded from the computation of diluted earnings per share of Class A common stock: | | | | | | | | | | | | |
Stock options to purchase Class A common stock | | | 804 | | | 920 | | | 831 | | | 462 |
Restricted stock units | | | 1,351 | | | 896 | | | 1,427 | | | 451 |
Common units of CWGS, LLC that are convertible into Class A common stock | | | — | | | 51,717 | | | 51,671 | | | 51,773 |
| | | | | | |
| | Three Months Ended | ||||
| | March 31, | ||||
(In thousands except per share amounts) | | 2020 |
| 2019 | ||
Numerator: | | | | | | |
Net loss | | $ | (14,129) | | $ | (26,807) |
Less: net loss attributable to non-controlling interests | | | 5,969 | | | 7,412 |
Net loss attributable to Camping World Holdings, Inc. — basic and diluted | | $ | (8,160) | | $ | (19,395) |
Denominator: | | | | | | |
Weighted-average shares of Class A common stock outstanding — basic and diluted | | | 37,534 | | | 37,195 |
| | | | | | |
Loss per share of Class A common stock — basic | | $ | (0.22) | | $ | (0.52) |
Loss per share of Class A common stock — diluted | | $ | (0.22) | | $ | (0.52) |
| | | | | | |
Weighted-average anti-dilutive securities excluded from the computation of diluted earnings per share of Class A common stock: | | | | | | |
Stock options to purchase Class A common stock | | | 738 | | | 859 |
Restricted stock units | | | 1,732 | | | 1,444 |
Common units of CWGS, LLC that are convertible into Class A common stock | | | 51,649 | | | 51,673 |
Shares of the Company’s Class B common stock and Class C common stock do not share in the earnings or losses of the Company and are therefore not participating securities. As such, separate presentation of basic and diluted earnings per share of Class B common stock or Class C common stock under the two-class method has not been presented.
26
17.18. Segments Information
Following the resignation of Roger Nuttall from his position as President of Camping World on December 21, 2018, theThe Company took steps during the quarter ended March 31, 2019 to realign the reporting structure of the Company including management and internal reporting. As a result of these changes, the Company determined that its reportable segments had changed. The Company’s reportable segments have been identified based on various commonalities amongst the Company’s individual product lines, which is consistent with the Company’s operating structure and associated management structure and management evaluates the performance of and allocates resources to these segments based on segment revenues and segment profit. The segment reporting for prior comparative periods have been recasted to conform to the current period presentation.
As previously discussed, the Company previously had three reportable segments: (i) Consumer Services and Plans; (ii) Dealership and, (iii) Retail. Following the realignment, the Company now has the following two2 reportable segments: (i) Good Sam Services and Plans, and (ii) RV and Outdoor Retail. In conjunction with the first quarter 2019 realignment of its reporting structure, the Company combined its prior Dealership and Retail segments into the RV and Outdoor Retail segment. The Company has also reclassified a portion of the former Consumer Services and Plans segment, the Good Sam Club and co-branded credit card operations, to the RV and Outdoor Retail segment, which reflects the synergies of those two programs with the RV and Outdoor Retail locations. Within the Good Sam Services and Plans segment, the Company primarily derives revenue from the sale of the following offerings: emergency roadside assistance;assistance plans; property and casualty insurance programs; travel assist programs; extended vehicle service contracts; vehicle financing and refinancing;refinancing assistance; consumer shows and events; and consumer publications and directories. Within the RV and Outdoor Retail segment, the Company primarily derives revenue from the sale of new and used RVs; commissions on the finance and insurance contracts related to the sale of RVs; the sale of RV productsservice and services, includingmaintenance work; the sale of RV parts, accessories, and supplies; the sale of outdoor products, equipment, gear and supplies and servicesthe sale of Good Sam Club memberships and co-branded credit cards.
The reportable segments identified above are the business activities of the Company for RVs,which discrete financial information is available and for which operating results are regularly reviewed by the Company’s chief operating decision maker to allocate resources and assess performance. The Company’s chief operating decision maker is a group comprised of the Chief Executive Officer and the President. Segment revenue includes intersegment revenue. Segment income includes intersegment allocations for subsidiaries and shared resources.
Reportable segment revenue; segment income; floor plan interest expense; depreciation and amortization; other interest expense, net; and total assets are as follows:
| | | | | | | | | | | | |
| | Three Months Ended March 31, 2020 | ||||||||||
| | Good Sam | | RV and | | | | | | |||
| | Services | | Outdoor | | Intersegment | | | | |||
($ in thousands) |
| and Plans |
| Retail |
| Eliminations |
| Total | ||||
Revenue: | | | | | | | | | | | | |
Good Sam services and plans | | $ | 48,692 | | $ | — | | $ | (1,484) | | $ | 47,208 |
New vehicles | | | — | | | 498,396 | | | (1,079) | | | 497,317 |
Used vehicles | | | — | | | 207,233 | | | (568) | | | 206,665 |
Products, service and other | | | — | | | 173,012 | | | (389) | | | 172,623 |
Finance and insurance, net | | | — | | | 94,448 | | | (1,992) | | | 92,456 |
Good Sam Club | | | — | | | 11,004 | | | — | | | 11,004 |
Total consolidated revenue | | $ | 48,692 | | $ | 984,093 | | $ | (5,512) | | $ | 1,027,273 |
| | | | | | | | | | | | |
| | Three Months Ended March 31, 2019 | ||||||||||
| | Good Sam | | RV and | | | | | | |||
| | Services | | Outdoor | | Intersegment | | | | |||
($ in thousands) |
| and Plans |
| Retail |
| Eliminations |
| Total | ||||
Revenue: | | | | | | | | | | | | |
Good Sam services and plans | | $ | 48,298 | | $ | — | | $ | (1,332) | | $ | 46,966 |
New vehicles | | | — | | | 530,749 | | | (1,172) | | | 529,577 |
Used vehicles | | | — | | | 180,605 | | | (597) | | | 180,008 |
Products, service and other | | | — | | | 210,198 | | | (5,322) | | | 204,876 |
Finance and insurance, net | | | — | | | 94,280 | | | (2,389) | | | 91,891 |
Good Sam Club | | | — | | | 11,451 | | | — | | | 11,451 |
Total consolidated revenue | | $ | 48,298 | | $ | 1,027,283 | | $ | (10,812) | | $ | 1,064,769 |
| | | | | | | | | | | | |
3127
equipment, gear and supplies for camping, hunting, fishing, skiing, snowboarding, bicycling, skateboarding, marine and watersport and other outdoor activities; commissions on the finance and insurance contracts related to the sale of RVs; and Good Sam Club memberships and co-branded credit cards.
The reportable segments identified above are the business activities of the Company for which discrete financial information is available and for which operating results are regularly reviewed by the Company’s chief operating decision maker to allocate resources and assess performance. The Company’s chief operating decision maker is a group comprised of the Chief Executive Officer and the President.
Reportable segment revenue, segment income, floor plan interest expense, depreciation and amortization, other interest expense, total assets, and capital expenditures are as follows:
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended June 30, 2019 | | Three Months Ended June 30, 2018 | ||||||||||||||||||||
| | Good Sam | | RV and | | | | | | | Good Sam | | RV and | | | | | | ||||||
| | Services | | Outdoor | | Intersegment | | | | | Services and | | Outdoor | | Intersegment | | | | ||||||
($ in thousands) |
| and Plans(1) |
| Retail(1) |
| Eliminations |
| Total |
| Plans(1)(2) |
| Retail(1)(2) |
| Eliminations |
| Total | ||||||||
Revenue: | | | | | | | | | | | | | | | | | | | | | | | | |
Good Sam services and plans | | $ | 44,991 | | $ | — | | $ | (297) | | $ | 44,694 | | $ | 42,712 | | $ | — | | $ | (374) | | $ | 42,338 |
New vehicles | | | — | | | 780,696 | | | (1,826) | | | 778,870 | | | — | | | 809,266 | | | (1,747) | | | 807,519 |
Used vehicles | | | — | | | 246,531 | | | (782) | | | 245,749 | | | — | | | 211,244 | | | (598) | | | 210,646 |
Products, service and other | | | — | | | 271,471 | | | (7,045) | | | 264,426 | | | — | | | 258,434 | | | (8,075) | | | 250,359 |
Finance and insurance, net | | | — | | | 131,498 | | | (3,273) | | | 128,225 | | | — | | | 123,588 | | | (3,383) | | | 120,205 |
Good Sam Club | | | — | | | 12,383 | | | — | | | 12,383 | | | — | | | 10,410 | | | — | | | 10,410 |
Total consolidated revenue | | $ | 44,991 | | $ | 1,442,579 | | $ | (13,223) | | $ | 1,474,347 | | $ | 42,712 | | $ | 1,412,942 | | $ | (14,177) | | $ | 1,441,477 |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Six Months Ended June 30, 2019 | | Six Months Ended June 30, 2018 | ||||||||||||||||||||
| | Good Sam | | RV and | | | | | | | Consumer | | RV and | | | | | | ||||||
| | Services | | Outdoor | | Intersegment | | | | | Services and | | Outdoor | | Intersegment | | | | ||||||
($ in thousands) |
| and Plans(1) |
| Retail(1) |
| Eliminations |
| Total |
| Plans(1)(2) |
| Retail(1)(2) |
| Eliminations |
| Total | ||||||||
Revenue: | | | | | | | | | | | | | | | | | | | | | | | | |
Good Sam services and plans | | $ | 93,289 | | $ | — | | $ | (1,629) | | $ | 91,660 | | $ | 88,890 | | $ | — | | $ | (1,727) | | $ | 87,163 |
New vehicles | | | — | | | 1,311,445 | | | (2,998) | | | 1,308,447 | | | — | | | 1,389,940 | | | (2,911) | | | 1,387,029 |
Used vehicles | | | — | | | 427,136 | | | (1,379) | | | 425,757 | | | — | | | 383,827 | | | (1,090) | | | 382,737 |
Products, service and other | | | — | | | 481,669 | | | (12,367) | | | 469,302 | | | — | | | 427,402 | | | (12,891) | | | 414,511 |
Finance and insurance, net | | | — | | | 225,778 | | | (5,662) | | | 220,116 | | | — | | | 215,207 | | | (5,902) | | | 209,305 |
Good Sam Club | | | — | | | 23,834 | | | — | | | 23,834 | | | — | | | 19,393 | | | — | | | 19,393 |
Total consolidated revenue | | $ | 93,289 | | $ | 2,469,862 | | $ | (24,035) | | $ | 2,539,116 | | $ | 88,890 | | $ | 2,435,769 | | $ | (24,521) | | $ | 2,500,138 |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | Six Months Ended | | Three Months Ended | ||||||||||||
| | June 30, | | June 30, | | June 30, | | June 30, | | March 31, | | March 31, | ||||||
($ in thousands) |
| 2019 |
| 2018 |
| 2019 |
| 2018 |
| 2020 |
| 2019 | ||||||
Segment income:(1) | | | | | | | | | | | | | ||||||
Segment income (loss):(1) | | | | | | | ||||||||||||
Good Sam Services and Plans | | $ | 21,208 | | $ | 20,721 | | $ | 43,622 | | $ | 42,438 | | $ | 21,340 | | $ | 22,414 |
RV and Outdoor Retail | | | 75,687 | | | 99,845 | | | 75,312 | | | 124,364 | | | 128 | | | (375) |
Total segment income | | | 96,895 | | | 120,566 | | | 118,934 | | | 166,802 | | | 21,468 | | | 22,039 |
Corporate & other | | | (3,914) | | | (1,479) | | | (7,087) | | | (2,963) | | | (2,729) | | | (3,173) |
Depreciation and amortization | | | (13,946) | | | (11,628) | | | (27,540) | | | (21,028) | | | (14,078) | | | (13,594) |
Other interest expense, net | | | (18,211) | | | (16,107) | | | (35,854) | | | (28,946) | | | (14,658) | | | (17,643) |
Tax Receivable Agreement liability adjustment | | | — | | | — | | | 8,477 | | | — | | | — | | | 8,477 |
Loss and expense on debt restructure | | | — | | | 44 | | | — | | | (2,056) | ||||||
Other expense, net | | | — | | | (2) | | | — | | | (2) | ||||||
Income before income taxes | | $ | 60,824 | | $ | 91,394 | | $ | 56,930 | | $ | 111,807 | ||||||
Segment loss before income taxes | | $ | (9,997) | | $ | (3,894) | ||||||||||||
| (1) | Segment income (loss) is defined as income (loss) from operations before depreciation and amortization plus floor plan interest expense. |
32
| | | | | | | | | | | | | | | | | |
| Three Months Ended | | Six Months Ended | | Three Months Ended | ||||||||||||
| June 30, | | June 30, | | June 30, | | June 30, | | March 31, | | March 31, | ||||||
($ in thousands) | 2019 |
| 2018 |
| 2019 |
| 2018 |
| 2020 |
| 2019 | ||||||
Depreciation and amortization: | | | | | | | | | | | | | | | | | |
Good Sam Services and Plans | $ | 836 | | $ | 774 | | $ | 1,688 | | | 1,505 | | $ | 756 | | $ | 852 |
RV and Outdoor Retail | | 13,110 | | | 10,854 | | | 25,852 | | | 19,523 | | | 13,322 | | | 12,742 |
Subtotal | | 13,946 | | | 11,628 | | | 27,540 | | | 21,028 | ||||||
Corporate & other | | — | | | — | | | — | | | — | ||||||
Total depreciation and amortization | $ | 13,946 | | $ | 11,628 | | $ | 27,540 | | $ | 21,028 | | $ | 14,078 | | $ | 13,594 |
| | | | | | | | | | | | | | | | | |
| Three Months Ended | | Six Months Ended | | Three Months Ended | ||||||||||||
| June 30, | | June 30, | | June 30, | | June 30, | | March 31, | | March 31, | ||||||
($ in thousands) | 2019 |
| 2018 |
| 2019 |
| 2018 |
| 2020 |
| 2019 | ||||||
Other interest expense, net: | | | | | | | | | | | | | | | | | |
Good Sam Services and Plans | $ | (1) | | $ | (1) | | $ | (1) | | $ | (2) | | $ | — | | $ | — |
RV and Outdoor Retail | | 2,265 | | | 1,004 | | | 4,413 | | | 2,823 | | | 1,892 | | | 2,148 |
Subtotal | | 2,264 | | | 1,003 | | | 4,412 | | | 2,821 | | | 1,892 | | | 2,148 |
Corporate & other | | 15,947 | | | 15,104 | | | 31,442 | | | 26,125 | | | 12,766 | | | 15,495 |
Total interest expense | $ | 18,211 | | $ | 16,107 | | $ | 35,854 | | $ | 28,946 | ||||||
| | | | | | | | | | | | ||||||
Total other interest expense, net | | | 14,658 | | | 17,643 | |||||||||||
| | | | | | | | | | | | |
| | June 30, | | December 31, | | March 31, | | December 31, | ||||
($ in thousands) |
| 2019 |
| 2018 |
| 2020 |
| 2019 | ||||
Assets: | | | | | | | | | | | | |
Good Sam Services and Plans | | $ | 89,553 | | $ | 174,623 | | $ | 102,087 | | $ | 138,360 |
RV and Outdoor Retail | | | 3,396,682 | | | 2,438,908 | | | 3,113,225 | | | 3,047,652 |
Subtotal | | | 3,486,235 | | | 2,613,531 | | | 3,215,312 | | | 3,186,012 |
Corporate & other | | | 186,278 | | | 193,156 | | | 187,249 | | | 190,228 |
Total assets | | $ | 3,672,513 | | $ | 2,806,687 | | $ | 3,402,561 | | $ | 3,376,240 |
3328
Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of operations should be read together with our financial statements and related notes included in Part I, Item 1 of this Form 10-Q, as well as our Annual Report and reflects the effects of the immaterial correction of errors discussed in Note 1 – Summary of Significant Accounting Policies – Revisions for Correction of Immaterial Errors in of this Form 10-Q.Report. This discussion contains forward-looking statements based upon current plans, expectations and beliefs involving risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various important factors, including those set forth under “Risk Factors” included in Part I, Item 1A of our Annual Report, Part II, Item 1A of this Form 10-Q, the “Cautionary Note Regarding Forward-Looking Statements” in this Form 10-Q and in other parts of this Form 10-Q. Except to the extent that differences among reportable segments are material to an understanding of our business taken as a whole, we present the discussion in Management’s Discussion and Analysis of Financial Condition and Results of Operations on a consolidated basis.
For purposes of this Form 10-Q, we define an "Active Customer" as a customer who has transacted with us in any of the eight most recently completed fiscal quarters prior to the date of measurement. Unless otherwise indicated, the date of measurement is June 30, 2019,March 31, 2020, our most recently completed fiscal quarter. Additionally, references herein to the approximately 1011 million U.S. households that own a recreational vehicle ("RV") are based on data from the RV Industry Association.
Overview
Camping World Holdings, Inc. (together with its subsidiaries) is America’s largest retailer of recreational RVs and related products and services. Our vision is to build a long-term legacy business that makes RVing fun and easy, and our Camping World and Good Sam brands have been serving RV consumers since 1966. We arestrive to build long-term value for our customers, employees, and shareholders by combining a leading outdoorunique and camping retailer, offering an extensivecomprehensive assortment of recreational vehicles for sale, RV and camping gear, RV maintenance and repair, other outdoor and active sports products and the industry’s broadest and deepest range of services protection plans, products and resources.
To best serve the estimated 10 million U.S. households that own an RV and our base of 5.3 million Active Customers, we offerwith a comprehensive portfolio of services, protection plans, products and resources for RV and outdoor enthusiasts through our national network of RV dealerships, service centers and customer support centers along with the industry’s most extensive online presence and a highly-trained and knowledgeable team of associates serving our customers, the RV lifestyle, and the communities in which we operate. We also believe that our Good Sam organization and family of programs and services uniquely enables us to connect with our customers as stewards of the RV lifestyle. On March 31, 2020, we operated a total of 168 retail locations, andwith 167 of these selling and/or servicing RVs. See Note 1 – Summary of Significant Accounting Policies to our direct marketing business. The table below summarizes our store location activity for the twelve months ended June 30, 2019:
| | | | | | | | | | | | |
| | Co-habited | | | | Stand-alone | | | | |||
| | RV and Outdoor | | Stand-alone | | Outdoor | | | | |||
| | Retail locations | | RV locations | | Retail locations | | Total | ||||
Store locations as of June 30, 2018 | | | 117 | | | 15 | | | 91 | | | 223 |
Opened | | | 11 | | | 5 | | | 9 | | | 25 |
Closed | | | (6) | | | (4) | | | (11) | | | (21) |
Converted | | | 13 | | | — | | | (13) | | | — |
Store locations as of June 30, 2019 | | | 135 | | | 16 | | | 76 | | | 227 |
unaudited condensed consolidated financial statements included in Part I, Item 1 of this Form 10-Q.
After several years of strong growth, the overall RV industry experienced decelerating demand for new vehicles in 2018 and 2019. Along with the decelerating demand trends, wholesale shipments of new RV vehicles declined 4.1%16.0% in 2019 according to the RV Industry Association’s survey of manufacturers. In late 2019, the demand for new RVs across the full yearoverall RV industry began increasing again, and through the three months ended March 31, 2020, wholesale shipments of 2018 and 20.3% fornew RV vehicles increased 0.4% over the first halfthree months of 2019, on a period-over-period comparable period basis. As a result,according to the most recent survey of manufacturers. In an effort to sell through existing RV units and lower new RV inventory levels, we believe many dealers have faced increased competition from other businesses with similar product and service offerings during recent periods. For example, our competitors have listed RVslowered the pricing of new RV units to levels at or below cost in some instances. The result has been increased competition across the industry from lower RV pricing. In an effort to remain competitive and maintain our market share, we have had little visibility into our competitors or manufacturers’ inventories. As a result, we have responded by establishingpursued pricing, marketing and other programs to remain competitive in the marketplace and attempt to maintain our market share that have adversely impacted our gross margin, operating margin and selling, general and administrative expenses.expenses and operating margin. We expect these trends to continue through at least the end of the calendar year ending December 31, 2019.
34
Table2020 and may be exacerbated as a result of Contentsthe COVID-19 pandemic described below.
Segments
As discussed in Note 17 – Segments Information to our consolidated financial statements included in Part I, Item 1 of this Form 10-Q, our reportable segments changed during the three months ended March 31, 2019. The segment reporting for prior periods has been reclassified to conform to the current period presentation.
We identify our reporting segments based on the organizational units used by management to monitor performance and make operating decisions The Company previously had three reportable segments: (i) Consumer Services and Plans; (ii) Dealership, and (iii) Retail. Following the realignment, the Company now has the following two reportable segments: (i) Good Sam Services and Plans, and (ii) RV and Outdoor Retail. In conjunction with the first quarter 2019 realignment of our reporting structure, the Company combined our prior Dealership and Retail segments into the RV and Outdoor Retail segment. The Company has also reclassified a portion of the former Consumer Services and Plans segment, the Good Sam Club and co-branded credit card operations, to the RV and Outdoor Retail segment, which reflects the synergies of those two programs with the RV and Outdoor Retail locations. Within the Good Sam 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; vehicle financing and refinancing; shows and events; and publications and directories. Within the RV and Outdoor Retail segment, the Company primarily derives revenue from the sale of new and used RVs; sale of RV products and services, including the sale of parts, accessories, supplies and service for RVs, and equipment, gear and supplies for camping, hunting, fishing, skiing, snowboarding, bicycling, skateboarding, marine and watersport and other outdoor activities; commissions on the finance and insurance contracts related to the sale of RVs; and Good Sam Club memberships and co-branded credit cards. See Note 1718 — Segment Information to our unaudited condensed consolidated financial statements included in Part I, Item 1 of this Form 10-Q.
29
Balance SheetCOVID-19
As discussed in Note 1 –— Summary of Significant Accounting Policies – Recently Adopted Accounting Pronouncements and Note 6 – Leases— COVID-19 to our unaudited condensed consolidated financial statements included in Part I, Item 1 of this Form 10-Q, COVID-19 has impacted our business, in particular our revenue, due to decreased retail and online traffic. We have implemented preparedness plans to keep our employees and customers healthy and safe, which include social distancing, providing employees with face coverings and/or other protective clothing as required, implementing additional cleaning and sanitization routines, and work-from-home orders for a significant portion of our workforce. The majority of our RV and Outdoor Retail locations have continued to operate as essential businesses and consequently have remained open to serve our customers through the pandemic, and we continue to operate our e-commerce business. As of March 31, 2020, we have adopted Accounting Standards Update (“ASU”) No. 2016-02 Leases (Topic 842) (“ASU 2016-02” or “ASC 842”)temporarily closed four of our specialty retail locations as a result of January 1, 2019. AsCOVID-19. Subsequent to March 31, 2020, we temporarily closed three additional dealerships as a result of June 30, 2019,COVID-19. We have temporarily reduced salaries and hours throughout the Company, including for our executive officers and implemented headcount and other cost reductions since the middle of March 2020 and early April 2020 in an attempt to better align expenses with reduced sales resulting from the impact of COVID-19 on our business.
Additionally, we had $821.0 million, $55.8 million,believe that when stay-at-home restrictions around the U.S. begin to ease, the demand for safe travel away from the home will increase. We believe that the RV industry is poised to recover more quickly than certain other sectors of the economy and $822.0 millionmay benefit from an anticipated slow recovery of operating lease assets, current portionthe cruise line and air travel industries. We are implementing the appropriate marketing and operational plans to be best prepared to optimize our leadership position through the recovery, regardless of operating lease liabilities,the ultimate timing and noncurrent portionslope of operating lease liabilities, respectively,the recovery curve.
Although we have recently incurred significant disruptions in certain of our markets due to the outbreak, and expect the impact of the pandemic and the related restrictions on our operations to adversely affect traffic and sales for at least the remainder of 2020, we are unable to accurately quantify the impact that COVID-19 will have on business, results of operations and liquidity due to numerous uncertainties, including the severity of the disease, the duration of the outbreak, the economic impact of the pandemic, actions that may be taken by governmental authorities and other as yet unanticipated consequences. In addition, there could be weakening demand for items that are not basic goods, and our supply chain could be further disrupted as a result of the adoptionoutbreak, such as due to Thor Industries, Inc.’s announced temporary closure of ASC 842.its North American production facilities from late March to early May 2020, either of which could have a materially adverse impact on our operating results. Please refer to “Risk Factors” in Item 1A of Part II of this Form 10-Q for updated risk factors related to the COVID-19 outbreak.
Strategic Shift
In 2019, we made a strategic decision to refocus our business around our core RV competencies. See Note 4 — Restructuring and Long-lived Asset Impairment to our unaudited condensed consolidated financial statements included in Part I, Item 1 of this Form 10-Q.
3530
Results of Operations
Three Months Ended June 30, 2019March 31, 2020 Compared to Three Months Ended June 30, 2018March 31, 2019
The following table sets forth information comparing the components of net income for the three months ended June 30,March 31, 2020 and 2019 and 2018::
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | | | | | | Three Months Ended | | | | | | ||||||||||||||||
| | June 30, 2019 | | June 30, 2018 | | | | March 31, 2020 | | March 31, 2019 | | | ||||||||||||||||||
| | | | | Percent of | | | | | Percent of | | Favorable/ (Unfavorable) | | | | | Percent of | | | | | Percent of | | Favorable/ (Unfavorable) | ||||||
($ in thousands) |
| Amount |
| Revenue |
| Amount |
| Revenue |
| $ |
| % |
| Amount |
| Revenue |
| Amount |
| Revenue |
| $ |
| % | ||||||
Revenue: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Good Sam Services and Plans | | $ | 44,694 | | 3.0% | | $ | 42,338 | | 2.9% | | $ | 2,356 | | 5.6% | | $ | 47,208 | | 4.6% | | $ | 46,966 | | 4.4% | | $ | 242 | | 0.5% |
RV and Outdoor Retail: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
New vehicles | | | 778,870 | | 52.8% | | | 807,519 | | 56.0% | | | (28,649) | | (3.5%) | | | 497,317 | | 48.4% | | | 529,577 | | 49.7% | | | (32,260) | | (6.1%) |
Used vehicles | | | 245,749 | | 16.7% | | | 210,646 | | 14.6% | | | 35,103 | | 16.7% | | | 206,665 | | 20.1% | | | 180,008 | | 16.9% | | | 26,657 | | 14.8% |
Products, service and other | | | 264,426 | | 17.9% | | | 250,359 | | 17.4% | | | 14,067 | | 5.6% | | | 172,623 | | 16.8% | | | 204,876 | | 19.2% | | | (32,253) | | (15.7%) |
Finance and insurance, net | | | 128,225 | | 8.7% | | | 120,205 | | 8.3% | | | 8,020 | | 6.7% | | | 92,456 | | 9.0% | | | 91,891 | | 8.6% | | | 565 | | 0.6% |
Good Sam Club | | | 12,383 | | 0.8% | | | 10,410 | | 0.7% | | | 1,973 | | 19.0% | | | 11,004 | | 1.1% | | | 11,451 | | 1.1% | | | (447) | | (3.9%) |
Subtotal | | | 1,429,653 | | 97.0% | | | 1,399,139 | | 97.1% | | | 30,514 | | 2.2% | | | 980,065 | | 95.4% | | | 1,017,803 | | 95.6% | | | (37,738) | | (3.7%) |
Total revenue | | | 1,474,347 | | 100.0% | | | 1,441,477 | | 100.0% | | | 32,870 | | 2.3% | | | 1,027,273 | | 100.0% | | | 1,064,769 | | 100.0% | | | (37,496) | | (3.5%) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Gross profit (exclusive of depreciation and amortization shown separately below): | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Good Sam Services and Plans | | | 25,948 | | 1.8% | | | 24,677 | | 1.7% | | | 1,271 | | 5.2% | | | 25,349 | | 2.5% | | | 26,235 | | 2.5% | | | (886) | | (3.4%) |
RV and Outdoor Retail: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
New vehicles | | | 97,471 | | 6.6% | | | 109,825 | | 7.6% | | | (12,354) | | (11.2%) | | | 70,875 | | 6.9% | | | 66,533 | | 6.2% | | | 4,342 | | 6.5% |
Used vehicles | | | 53,068 | | 3.6% | | | 48,140 | | 3.3% | | | 4,928 | | 10.2% | | | 42,872 | | 4.2% | | | 37,162 | | 3.5% | | | 5,710 | | 15.4% |
Products, service and other | | | 95,819 | | 6.5% | | | 102,293 | | 7.1% | | | (6,474) | | (6.3%) | | | 62,354 | | 6.1% | | | 68,772 | | 6.5% | | | (6,418) | | (9.3%) |
Finance and insurance, net | | | 128,225 | | 8.7% | | | 120,205 | | 8.3% | | | 8,020 | | 6.7% | | | 92,456 | | 9.0% | | | 91,891 | | 8.6% | | | 565 | | 0.6% |
Good Sam Club | | | 9,459 | | 0.6% | | | 7,303 | | 0.5% | | | 2,156 | | 29.5% | | | 8,757 | | 0.9% | | | 7,734 | | 0.7% | | | 1,023 | | 13.2% |
Subtotal | | | 384,042 | | 26.0% | | | 387,766 | | 26.9% | | | (3,724) | | (1.0%) | | | 277,314 | | 27.0% | | | 272,092 | | 25.6% | | | 5,222 | | 1.9% |
Total gross profit | | | 409,990 | | 27.8% | | | 412,443 | | 28.6% | | | (2,453) | | (0.6%) | | | 302,663 | | 29.5% | | | 298,327 | | 28.0% | | | 4,336 | | 1.5% |
Operating expenses: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Selling, general and administrative expenses | | | 303,366 | | 20.6% | | | 283,095 | | 19.6% | | | (20,271) | | (7.2%) | | | 267,656 | | 26.1% | | | 268,065 | | 25.2% | | | 409 | | 0.2% |
Debt restructure expense | | | — | | 0.0% | | | (44) | | 0.0% | | | (44) | | (100.0%) | |||||||||||||||
Depreciation and amortization | | | 13,946 | | 0.9% | | | 11,628 | | 0.8% | | | (2,318) | | (19.9%) | | | 14,078 | | 1.4% | | | 13,594 | | 1.3% | | | (484) | | (3.6%) |
Long-lived asset impairment | | | 6,569 | | 0.6% | | | — | | — | | | (6,569) | | (100.0%) | |||||||||||||||
Lease termination | | | 584 | | 0.1% | | | — | | — | | | (584) | | (100.0%) | |||||||||||||||
Loss on disposal of assets | | | 2,374 | | 0.2% | | | 59 | | 0.0% | | | (2,315) | | (3,923.7%) | | | 511 | | 0.0% | | | (214) | | (0.0%) | | | (725) | | 338.8% |
Total operating expenses | | | 289,398 | | 28.2% | | | 281,445 | | 26.4% | | | (7,953) | | (2.8%) | |||||||||||||||
Income from operations | | | 90,304 | | 6.1% | | | 117,705 | | 8.2% | | | (27,401) | | (23.3%) | | | 13,265 | | 1.3% | | | 16,882 | | 1.6% | | | (3,617) | | (21.4%) |
Other income (expense): | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Floor plan interest expense | | | (11,269) | | -0.8% | | | (10,202) | | -0.7% | | | (1,067) | | (10.5%) | | | (8,604) | | (0.8%) | | | (11,610) | | (1.1%) | | | 3,006 | | 25.9% |
Other interest expense, net | | | (18,211) | | -1.2% | | | (16,107) | | -1.1% | | | (2,104) | | (13.1%) | | | (14,658) | | (1.4%) | | | (17,643) | | (1.7%) | | | 2,985 | | 16.9% |
Other expense, net | | | — | | 0.0% | | | (2) | | 0.0% | | | 2 | | 100.0% | |||||||||||||||
Tax Receivable Agreement liability adjustment | | | — | | — | | | 8,477 | | 0.8% | | | (8,477) | | (100.0%) | |||||||||||||||
Total other income (expense) | | | (29,480) | | -2.0% | | | (26,311) | | -1.8% | | | (3,169) | | (12.0%) | | | (23,262) | | (2.3%) | | | (20,776) | | (2.0%) | | | (2,486) | | (12.0%) |
Income before income taxes | | | 60,824 | | 4.1% | | | 91,394 | | 6.3% | | | (30,570) | | (33.4%) | |||||||||||||||
Loss before income taxes | | | (9,997) | | (1.0%) | | | (3,894) | | (0.4%) | | | (6,103) | | (156.7%) | |||||||||||||||
Income tax expense | | | (8,201) | | -0.6% | | | (14,262) | | -1.0% | | | 6,061 | | 42.5% | | | (4,132) | | (0.4%) | | | (22,913) | | (2.2%) | | | 18,781 | | 82.0% |
Net income | | | 52,623 | | 3.6% | | | 77,132 | | 5.4% | | | (24,509) | | (31.8%) | |||||||||||||||
Less: net income attributable to non-controlling interests | | | (34,606) | | -2.3% | | | (52,350) | | -3.6% | | | 17,744 | | (33.9%) | |||||||||||||||
Net income attributable to Camping World Holdings, Inc. | | $ | 18,017 | | 1.2% | | $ | 24,782 | | 1.7% | | $ | (6,765) | | (27.3%) | |||||||||||||||
Net loss | | | (14,129) | | (1.4%) | | | (26,807) | | (2.5%) | | | 12,678 | | 47.3% | |||||||||||||||
Less: net loss attributable to non-controlling interests | | | 5,969 | | 0.6% | | | 7,412 | | 0.7% | | | (1,443) | | (19.5%) | |||||||||||||||
Net loss attributable to Camping World Holdings, Inc. | | $ | (8,160) | | (0.8%) | | $ | (19,395) | | (1.8%) | | $ | 11,235 | | 57.9% | |||||||||||||||
31
Supplemental Data
| | | | | | | | | | | | | |
| | Three Months Ended March 31, | | Increase | | | Percent | ||||||
| | 2020 |
| 2019 |
| (decrease) | |
| Change | ||||
Unit sales |
| | |
| | |
| | | |
| | |
New vehicles | | | 14,208 | | | 15,016 | | | (808) | | | | (5.4%) |
Used vehicles | | | 8,682 | | | 8,177 | | | 505 | | | | 6.2% |
Total | | | 22,890 | | | 23,193 | | $ | (303) | | | | (1.3%) |
| | | | | | | | | | | | | |
Average selling price | | | | | | | | | | | | | |
New vehicles | | $ | 35,003 | | $ | 35,268 | | $ | (265) | | | $ | (0.8%) |
Used vehicles | | | 23,804 | | | 22,014 | | | 1,790 | | | | 8.1% |
| | | | | | | | | | | | | |
Same store unit sales | | | | | | | | | | | | | |
New vehicles | | | 12,955 | | | 14,490 | | | (1,535) | | | | (10.6%) |
Used vehicles | | | 8,010 | | | 8,005 | | | 5 | | | | 0.1% |
Total | | | 20,965 | | | 22,495 | | | (1,530) | | | | (6.8%) |
| | | | | | | | | | | | | |
Same store revenue ($ in 000's) | | | | | | | | | | | | | |
New vehicles | | $ | 456,327 | | $ | 515,097 | | $ | (58,770) | | | $ | (11.4%) |
Used vehicles | | | 194,606 | | | 177,283 | | | 17,323 | | | | 9.8% |
Products, service and other | | | 118,792 | | | 118,581 | | | 211 | | | | 0.2% |
Finance and insurance | | | 85,399 | | | 89,742 | | | (4,343) | | | | (4.8%) |
Total | | | 855,124 | | | 900,703 | | | (45,579) | | | | (5.1%) |
| | | | | | | | | | | | | |
Average gross profit per unit | | | | | | | | | | | | | |
New vehicles | | $ | 4,988 | | $ | 4,431 | | $ | 558 | | | | 12.6% |
Used vehicles | | | 4,938 | | | 4,545 | | | 393 | | | | 8.7% |
Finance and insurance, net per vehicle unit | | | 4,039 | | | 3,962 | | | 77 | | | | 1.9% |
Total vehicle front-end yield(1) | | | 9,008 | | | 8,433 | | | 575 | | | | 6.8% |
| | | | | | | | | | | | | |
Gross margin | | | | | | | | | | | | | |
Good Sam Services and Plans | | | 53.7% | | | 55.9% | | | (216) | bps | | | |
| | | | | | | | | | | | | |
New vehicles | | | 14.3% | | | 12.6% | | | 169 | bps | | | |
Used vehicles | | | 20.7% | | | 20.6% | | | 10 | bps | | | |
Products, service and other | | | 36.1% | | | 33.6% | | | 255 | bps | | | |
Finance and insurance, net | | | 100.0% | | | 100.0% | | | unch. | bps | | | |
Good Sam Club | | | 79.6% | | | 67.5% | | | 1,204 | bps | | | |
Subtotal RV and Outdoor Retail | | | 28.3% | | | 26.7% | | | 156 | bps | | | |
Total gross margin | | | 29.5% | | | 28.0% | | | 144 | bps | | | |
| | | | | | | | | | | | | |
Inventories ($ in 000's) | | | | | | | | | | | | | |
New vehicles | | $ | 1,053,802 | | $ | 1,062,448 | | $ | (8,646) | | | | (0.8%) |
Used vehicles | | | 151,058 | | | 120,418 | | | 30,640 | | | | 25.4% |
Products, parts, accessories and misc. | | | 234,555 | | | 439,697 | | | (205,142) | | | | (46.7%) |
Total RV and Outdoor inventories | | $ | 1,439,415 | | $ | 1,622,563 | | $ | (183,148) | | | | (11.3%) |
| | | | | | | | | | | | | |
Vehicle inventory per location ($ in 000's) | | | | | | | | | | | | | |
New vehicle inventory per dealer location | | $ | 6,712 | | $ | 7,228 | | $ | (515) | | | $ | (7.1%) |
Used vehicle inventory per dealer location | | | 962 | | | 819 | | | 143 | | | | 17.5% |
| | | | | | | | | | | | | |
Vehicle inventory turnover(2) | | | | | | | | | | | | | |
New vehicle inventory turnover | | | 2.1 | | | 2.2 | | | (0.1) | | | | (3.4%) |
Used vehicle inventory turnover | | | 4.6 | | | 4.9 | | | (0.2) | | | | (5.0%) |
| | | | | | | | | | | | | |
Retail locations | | | | | | | | | | | | | |
RV dealerships | | | 157 | | | 147 | | | 10 | | | | 6.8% |
RV service & retail centers | | | 10 | | | 12 | | | (2) | | | | (16.7%) |
Subtotal | | | 167 | | | 159 | | | 8 | | | | 5.0% |
Other retail stores | | | 1 | | | 67 | | | (66) | | | | (98.5%) |
Total | | | 168 | | | 226 | | | (58) | | | | (25.7%) |
| | | | | | | | | | | | | |
Other data | | | | | | | | | | | | | |
Active Customers(3) | | | 4,921,246 | | | 5,123,032 | | | (201,786) | | | | (3.9%) |
Good Sam Club members | | | 2,094,134 | | | 2,149,627 | | | (55,493) | | | | (2.6%) |
Finance and insurance gross profit as a % of total vehicle revenue | | | 13.1% | | | 12.9% | | | 18 | bps | | | n/a |
Same store locations | | | 146 | | | n/a | | | n/a | | | | n/a |
Total Revenue(1) Front end yield is calculated as gross profit from new vehicles, used vehicles and finance and insurance (net), divided by combined new and used retail unit revenue.
(2) Inventory turnover calculated as vehicle costs applicable to revenue divided by the average of beginning and ending vehicle inventory.
(3) An Active Customer is a customer who has transacted with us in any of the eight most recently completed fiscal quarters prior to the date of measurement.
32
Total revenue increased 2.3%, or $32.9 million, to $1.5was $1.0 billion infor the three months ended June 30, 2019March 31, 2020, a decrease of $37.5 million, or 3.5%, from $1.4$1.1 billion infor the three months ended June 30, 2018.March 31, 2019. The increasedecrease in total revenue was driven by a 16.7% increase$37.7 million, or 3.7%, decrease in used vehiclesRV and Outdoor Retail revenue, to $245.7partially offset by a $0.2 million, a 5.6% increase in products, service and other revenue to $264.4 million, a 6.7% increase in finance and insurance revenue to $128.2 million, a 5.6%or 0.5%, increase in Good Sam Services and Plans revenue to $44.7revenue.
Total gross profit was $302.7 million and a 19.0% increase in Good Sam Club revenue to $12.4 million, partially offset by a 3.5% decrease in new vehicles revenue to $778.9 million. Aggregate same store revenue in the RV and Outdoor Retail segment decreased 6.3% to $1.2 billion for the three months ended June 30, 2019 as compared toMarch 31, 2020, an increase of $4.3 million, or 1.5%, from $298.3 million for the three months ended June 30, 2018. Aggregate same store revenue measures the performance ofMarch 31, 2019. The increase in total gross profit was driven by a $5.2 million, or 1.9%, increase in RV and Outdoor Retail locations duringgross profit, partially offset by a $0.9 million, or 3.4%, decrease in Good Sam Services and Plans gross profit.
Income from operations was $13.3 million for the current reporting period againstthree months ended March 31, 2020, a decrease of $3.6 million, or 21.4%, from $16.9 million for the performancethree months ended March 31, 2019. The decrease in income from operations was primarily driven by a $6.6 million increase in long-lived asset impairment, a $0.7 million increase in loss on disposal of assets, a $0.6 million increase in lease termination expense, and a $0.5 million increase in depreciation and amortization, partially offset by a $4.3 million increase in gross profit, and a $0.4 million decrease in selling, general and administrative expenses.
Total other expenses were $23.3 million for the three months ended March 31, 2020, an increase of $2.5 million, or 12.0%, from $20.8 million for the three months ended March 31, 2019. The increase in other expenses was driven by an $8.5 million favorable adjustment in Tax Receivable Agreement Liability in 2019 which did not reoccur in 2020, partially offset by a $3.0 million decrease in floor plan interest expense and a $3.0 million decrease in other interest expense.
As a result of the same locationsabove factors, loss before income taxes was $10.0 million for the three months ended March 31, 2020 compared to loss before income taxes of $3.9 million for the three months ended March 31, 2019. Income tax expense was $4.1 million for the three months ended March 31, 2020, a decrease of $18.8 million from $22.9 million for the three months ended March 31, 2019. As a result, net loss was $14.1 million for the three months ended March 31, 2020 compared to net loss of $26.8 million for the three months ended March 31, 2019.
Good Sam Services and Plans
Good Sam Services and Plans revenue increased 0.5%, or $0.2 million, to $47.2 million in the corresponding periodthree months ended March 31, 2020, from $47.0 million in the three months ended March 31, 2019. The increase was primarily attributable to a $0.5 million increase in our roadside assistance programs primarily resulting from upsells to higher-priced product offerings, a $0.6 million increase in our vehicle insurance products, and a $0.3 million increase in our extended vehicle warranty programs, partially offset by a $1.1 million decrease in consumer shows revenue, and a $0.1 million decrease in other programs.
Good Sam Services and Plans gross profit decreased 3.4%, or $0.9 million, to $25.3 million in the three months ended March 31, 2020, from $26.2 million in the three months ended March 31, 2019 and gross margin decreased to 53.7% from 55.9% in the same respective periods. The decrease in gross profit was primarily attributable to $0.9 million of increased accrual for program costs, a $0.5 million reduction from the previous year. Sameconsumer shows, and a $0.4 million reduction from the annual directory publication, partially offset by a $0.5 million increase from our vehicle insurance programs, and a $0.4 million increase from our roadside assistance programs.
RV and Outdoor Retail
New Vehicles
New vehicle revenue decreased 6.1%, or $32.3 million, to $497.3 million in the three months ended March 31, 2020 from $529.6 million in the three months ended March 31, 2019. The decrease was primarily due to a 5.4% reduction in vehicles sold and 0.8% reduction in average price per vehicle sold. On a same store sales calculations forbasis, new vehicle revenue decreased 11.4% to $456.3 million in the three months ended March 31, 2020 from $515.1 million in the three months ended March 31, 2019. The decrease was primarily driven by a given period include only those stores that were open both at the end of the corresponding period and at the beginning of the preceding fiscal year.10.6%
3633
decrease in same store vehicles sold to 12,955 vehicles and a 0.8% decrease in average selling price per vehicle sold to $35,003.
New vehicle gross profit increased 6.5%, or $4.3 million, to $70.9 million in the three months ended March 31, 2020 from $66.5 million in the three months ended March 31, 2019. The increase was primarily due to a 12.6% increase in average gross profit per vehicle sold, partially offset by a 5.4% decrease in vehicles sold. Gross margin increased to 14.3% in the three months ended March 31, 2020 from 12.6% in the three months ended March 31, 2019. The increase was primarily due to a mix shift towards the higher margined towable units.
Used Vehicles
Used vehicle revenue increased 14.8%, or $26.7 million, to $206.7 million in the three months ended March 31, 2020 from $180.0 million in the three months ended March 31, 2019. The increase was primarily due to a 6.2% increase in vehicles sold and an 8.1% increase in average selling price per vehicle sold. On a same store basis, used vehicle revenue increased 9.8% to $194.6 million in the three months ended March 31, 2020 from $177.3 million in the three months ended March 31, 2019. The increase was primarily driven by a 9.7% increase in average same store price per vehicle.
Used vehicle gross profit increased 15.4%, or $5.7 million, to $42.9 million in the three months ended March 31, 2020 from $37.2 million in the three months ended March 31, 2019. The increase was primarily from a 6.2% increase in vehicles sold and an 8.7% increase in average gross profit per vehicle sold. The increase in average gross profit per vehicle sold was primarily driven by higher selling and purchase prices for used vehicles as a result of strength in the used market. Used vehicle gross margin of 20.7% in the three months ended March 31, 2020 was essentially flat to the 20.6% in the three months ended March 31, 2019.
Products, service and other
Products, service and other revenue decreased 15.7%, or $32.3 million, to $172.6 million in the three months ended March 31, 2020, from $204.9 million in the three months ended March 31, 2019. The decrease was primarily attributable to store closures related to the 2019 Strategic Shift. On a same store basis, products, service and other revenue increased 0.2% to $118.8 million for the three months ended March 31, 2020 from $118.6 million in the three months ended March 31 2019.
Products, service and other gross profit decreased 9.3%, or $6.4 million, to $62.4 million in the three months ended March 31, 2020 from $68.8 million in the three months ended March 31, 2019. The decrease was primarily due to the 2019 Strategic Shift. Products, service and other gross margin increased to 36.1% in the three months ended March 31, 2020 from 33.6% in the three months ended March 31, 2019. The increase was primarily due to a mix shift toward higher margin legacy RV products.
Finance and Insurance, net
Finance and insurance revenue and gross profit is recorded net, since the Company is acting as an agent in the transaction, and commission is recognized when a finance and insurance product contract payment has been received or financing has been arranged. Finance and insurance, net revenue and gross profit each increased 0.6%, or $0.6 million, to $92.5 million in the three months ended March 31, 2020 from $91.9 million in the three months ended March 31, 2019. Finance and insurance, net revenue as a percentage of new and used vehicles financed increased to 13.1% for the three months ended March 31, 2020 from 12.9% for the three months ended March 31, 2019. On a same store basis, finance and insurance, net revenue and gross profit decreased 4.8%, or $4.3 million, to $85.4 million versus the three months ended March 31, 2019, as the unit volume decrease more than offset the increase in average gross profit per finance transaction.
Good Sam Club
Good Sam Club revenue decreased 3.9%, or $0.4 million, to $11.0 million in the three months ended March 31, 2020 from $11.5 million in the three months ended March 31, 2019. The decrease primarily resulted from reduced royalty fees from the Good Sam branded credit card related to fewer retail locations.
34
Good Sam Services and Plans
Good Sam Services and Plans revenueClub gross profit increased 5.6%13.2%, or $2.4$1.0 million, to $44.7$8.8 million in the three months ended June 30, 2019,March 31, 2020 from $42.3$7.7 million in the three months ended June 30, 2018. The increase was primarily attributable to a $1.4 million increase in our roadside assistance programs primarily resulting from price increases, a $0.3 million increase in our vehicle insurance products, a $0.2 million increase in our extended vehicle programs, and a $0.5 million increase in various policies and programs.
Good Sam Services and Plans gross profit increased 5.2%, or $1.3 million, to $25.9 million in the three months ended June 30, 2019, from $24.7 million in the three months ended June 30, 2018 and gross margin decreased to 58.1% from 58.3% in the same respective periods. The increase in gross profit was primarily attributable to a $2.0 million increase from price increases and lower program costs in our roadside assistance programs, and an $0.8 million increase from our vehicle insurance programs, partially offset by $0.8 million of additional marketing support expenses, and a $0.7 million decrease in our extended vehicle warranty programs.
New Vehicles
| | | | | | | | | | | | | | | |
| | Three Months Ended | | | |||||||||||
| | June 30, 2019 | | June 30, 2018 | | Favorable/ | |||||||||
($ in thousands, | | | | Percent of | | | | Percent of | | (Unfavorable) | |||||
except per vehicle data) |
| Amount |
| Revenue |
| Amount |
| Revenue |
| $ |
| % | |||
Revenue | | $ | 778,870 | | 100.0% | | $ | 807,519 | | 100.0% | | $ | (28,649) | | (3.5%) |
Gross profit | | $ | 97,471 | | 12.5% | | $ | 109,825 | | 13.6% | | $ | (12,354) | | (11.2%) |
Vehicles sold | | | 22,906 | | | | | 24,442 | | | | | (1,536) | | (6.3%) |
Average selling price per vehicle sold | | $ | 34,003 | | | | $ | 33,038 | | | | $ | 965 | | 2.9% |
Average gross profit per vehicle sold | | $ | 4,255 | | | | $ | 4,493 | | | | $ | (238) | | (5.3%) |
| | | | | | | | | | | | | | | |
Same store data: | | | | | | | | | | | | | | | |
Revenue | | $ | 683,466 | | | | $ | 770,541 | | | | $ | (87,075) | | (11.3%) |
Vehicles sold | | | 19,753 | | | | | 23,237 | | | | | (3,484) | | (15.0%) |
Average selling price per vehicle sold | | $ | 34,601 | | | | $ | 33,160 | | | | $ | 1,441 | | 4.3% |
New vehicle revenue decreased 3.5%, or $28.6 million, to $778.9 million in the three months ended June 30, 2019 from $807.5 million in the three months ended June 30, 2018. The decrease was primarily due to a 6.3% reduction in vehicles sold, partially offset by a 2.9% increase in average selling price. On a same store basis, new vehicle revenue decreased 11.3% to $683.5 million, primarily driven by a 15.0% decrease in vehicles sold to 19,753 vehicles in the three months ended June 30,March 31, 2019.
New vehicle gross profit decreased 11.2%, or $12.4 million, to $97.5 million in the three months ended June 30, 2019 from $109.8 million in the three months ended June 30, 2018 and gross margin decreased to 12.5% from 13.6% in the same respective periods. The decrease in gross profit was primarily due to reduced vehicle sales and a 5.3% decrease in average gross profit per vehicle sold resulting from our inventory reduction and optimization programs, and from a product mix shift towards towable vehicles.
Used Vehicles
| | | | | | | | | | | | | | | |
| | Three Months Ended | | | |||||||||||
| | June 30, 2019 | | June 30, 2018 | | Favorable/ | |||||||||
($ in thousands, | | | | Percent of | | | | Percent of | | (Unfavorable) | |||||
except per vehicle data) |
| Amount |
| Revenue |
| Amount |
| Revenue |
| $ |
| % | |||
Revenue | | $ | 245,749 | | 100.0% | | $ | 210,646 | | 100.0% | | $ | 35,103 | | 16.7% |
Gross profit | | $ | 53,068 | | 21.6% | | $ | 48,140 | | 22.9% | | $ | 4,928 | | 10.2% |
Vehicles sold | | | 10,809 | | | | | 9,195 | | | | | 1,614 | | 17.6% |
Average selling price per vehicle sold | | $ | 22,736 | | | | $ | 22,909 | | | | $ | (173) | | (0.8%) |
Average gross profit per vehicle sold | | $ | 4,910 | | | | $ | 5,235 | | | | $ | (326) | | (6.2%) |
| | | | | | | | | | | | | | | |
Same store data: | | | | | | | | | | | | | | | |
Revenue | | $ | 226,197 | | | | $ | 200,185 | | | | $ | 26,012 | | 13.0% |
Vehicles sold | | | 9,673 | | | | | 8,666 | | | | | 1,007 | | 11.6% |
Average selling price per vehicle sold | | $ | 23,384 | | | | $ | 23,100 | | | | $ | 284 | | 1.2% |
37
Used vehicle revenue increased 16.7%, or $35.1 million, to $245.7 million in the three months ended June 30, 2019 from $210.6 million in the three months ended June 30, 2018. The increase was primarily due to reduced marketing expenses from the decreased number of stores as a 17.6% increase in vehicles sold. On a same store basis, used vehicle revenueresult of the 2019 Strategic Shift. Gross margin increased 13.0% to $226.2 million, primarily driven by a 11.6% increase in vehicles sold79.6% in the three months ended June 30, 2019 in addition to a 1.2% increase in average price per vehicle.
Used vehicle gross profit increased 10.2%, or $4.9 million, to $53.1 millionMarch 31, 2020 from 67.5% in the three months ended June 30,March 31, 2019 from $48.1 million in the three months ended June 30, 2018. The increase was primarily from a 17.6% increase in vehicles sold, partially offset by a 6.2% decrease in average gross profit per vehicle resulting from a shift in the product mix towards travel trailers and higher vehicle acquisition and refurbishment costs. Used vehicle gross margin decreased to 21.6% in the three months ended June 30, 2019 from 22.9% in the three months ended June 30, 2018.
Products, service and other
| | | | | | | | | | | | | | | |
| | Three Months Ended | | | |||||||||||
| | June 30, 2019 | | June 30, 2018 | | Favorable/ | |||||||||
| | | | Percent of | | | | Percent of | | (Unfavorable) | |||||
($ in thousands) |
| Amount |
| Revenue |
| Amount |
| Revenue |
| $ |
| % | |||
| | | | | | | | | | | | | | | |
Revenue | | $ | 264,426 | | 100.0% | | $ | 250,359 | | 100.0% | | $ | 14,067 | | 5.6% |
| | | | | | | | | | | | | | | |
Gross profit | | | 95,819 | | 36.2% | | | 102,293 | | 40.9% | | | (6,474) | | (6.3%) |
| | | | | | | | | | | | | | | |
Same store revenue | | | 144,932 | | | | | 162,432 | | | | | (17,500) | | (10.8%) |
Products, service and other revenue increased 5.6%, or $14.1 million, to $264.4 million in the three months ended June 30, 2019 from $250.4 million in the three months ended June 30, 2018. The increase was primarily attributable to an increase in product revenue related to the new stores opened in 2018. On a same store basis, products, service and other revenue decreased 10.8% to $144.9 million for the three months ended June 30, 2019 from $162.4 million in the three months ended June 30, 2018 primarily due to a decrease in warranty-related service and an increase in service fee installation promotions.
Products, service and other gross profit decreased 6.3%, or $6.5 million, to $95.8 million in the three months ended June 30, 2019 from $102.3 million in the three months ended June 30, 2018. The decrease was primarily due to lower service revenue and lower gross margins on promotional sales of outdoor retail and service products. Products, service and other gross margin decreased to 36.2% in the three months ended June 30, 2019 from 40.9% in the three months ended June 30, 2018 primarily due to promotional sales and to a greater mix of revenue from outdoor-related products, which typically carry a lower gross margin than services-related revenue.
Finance and Insurance, net
| | | | | | | | | | | | | | | |
| | Three Months Ended | | | |||||||||||
| | June 30, 2019 | | June 30, 2018 | | Favorable/ | |||||||||
| | | | Percent of | | | | Percent of | | (Unfavorable) | |||||
($ in thousands) |
| Amount |
| Revenue |
| Amount |
| Revenue |
| $ |
| % | |||
| | | | | | | | | | | | | | | |
Revenue | | $ | 128,225 | | 100.0% | | $ | 120,205 | | 100.0% | | $ | 8,020 | | 6.7% |
| | | | | | | | | | | | | | | |
Gross profit | | | 128,225 | | 100.0% | | | 120,205 | | 100.0% | | | 8,020 | | 6.7% |
| | | | | | | | | | | | | | | |
Same store revenue | | | 114,015 | | | | | 114,023 | | | | | (8) | | (0.0%) |
Finance and insurance, net revenue and gross profit each increased 6.7%, or $8.0 million, to $128.2 million in the three months ended June 30, 2019 from $120.2 million in the three months ended June 30, 2018. The increase was primarily due to an increase in our finance and insurance sales penetration rate to 12.5% of total new and used vehicle revenue in the three months ended June 30, 2019 from 11.8% in the
38
three months ended June 30, 2018. On a same store basis, finance and insurance, net revenue and gross profit were unchanged versus the three months ended June 30, 2018.
Good Sam Club
| | | | | | | | | | | | | | | |
| | Three months ended | | | |||||||||||
| | June 30, 2019 | | June 30, 2018 | | Favorable/ | |||||||||
| | | | Percent of | | | | Percent of | | (Unfavorable) | |||||
($ in thousands) |
| Amount |
| Revenue |
| Amount |
| Revenue |
| $ |
| % | |||
| | | | | | | | | | | | | | | |
Revenue | | $ | 12,383 | | 100.0% | | $ | 10,410 | | 100.0% | | $ | 1,973 | | 19.0% |
| | | | | | | | | | | | | | | |
Gross profit | | | 9,459 | | 76.4% | | | 7,303 | | 70.2% | | | 2,156 | | 29.5% |
| | | | | | | | | | | | | | | |
Memberships | | | 2,177,743 | | | | | 1,920,348 | | | | | 257,395 | | 13.4% |
Good Sam Club revenue increased 19.0%, or $2.0 million, to $12.4 million in the three months ended June 30, 2019 from $10.4 million in the three months ended June 30, 2018. The increase primarily resulted from a 13.4% increase inreduced club memberships.
Good Sam Club gross profit increased 29.5%, or $2.2 million, to $9.5 million in the three months ended June 30, 2019 from $7.3 million in the three months ended June 30, 2018. The increase was primarily due to the increase in club memberships driven by an increase in retail locations. Good Sam Club gross margin increased to 76.4% in the three months ended June 30, 2019 from 70.2% in the three months ended June 30, 2018 primarily due to increased average revenue per club member.marketing expenses.
Selling, general and administrative expenses
Selling, general and administrative expenses increased 7.2%decreased 0.2%, or $20.3$0.4 million, to $303.4$267.7 million in the three months ended June 30, 2019March 31, 2020 from $283.1$268.1 million in the three months ended June 30, 2018.March 31, 2019. The increase$0.4 million decrease was primarily due to increasesdecreases of $11.4$0.9 million of variablepersonal property expense, and $0.7 million of professional fees, partially offset by an increase of $0.7 million in wage-related expenses, $0.4 million of selling expense related to increased revenue and inventory reduction programs, $3.9 million of real property expenses related to new stores, $1.7 million of additional occupancy expenses, $1.2 million of additional personal property expenses, and $2.1$0.1 million of other store and corporate overhead expenses. Selling, general and administrative expenses as a percentage of total gross profit increaseddecreased to 74.0%88.4% in the three months ended June 30, 2019,March 31, 2020, from 68.6%89.9% in the three months ended June 30, 2018.March 31, 2019 primarily due to cost reduction programs implemented related to the 2019 Strategic Shift.
Depreciation and amortization
Depreciation and amortization increased 19.9%3.6%, or $2.3$0.5 million, to $13.9$14.1 million in the three months ended June 30, 2019March 31, 2020 from $11.6$13.6 million in the three months ended June 30, 2018 primarilyMarch 31, 2019 due to the new RVimpact of capital expenditures from 2019.
Long-lived asset impairment
As discussed in Note 4 – Restructuring and outdoor retail store locations.Long-lived Asset Impairment to our condensed consolidated financial statements included in Part I, Item 1 of this Form 10-Q, we recognized $6.6 million of long-lived asset impairments during the three months ended March 31, 2020, of which $6.5 million related to the 2019 Strategic Shift discussed above.
Lease termination
Lease termination expense of $0.6 million in the three months ended March 31, 2020 related to the 2019 Strategic Shift discussed above.
Floor plan interest expense
Floor plan interest expense increased 10.5%decreased 25.9%, or $1.1$3.0 million, to $11.3$8.6 million in the three months ended June 30, 2019March 31, 2020 from $10.2$11.6 million in the three months ended June 30, 2018.March 31, 2019. The increasedecrease was primarily due to a 6791 basis point increasedecrease in the average floor plan borrowing rate, partially offset by a 4.6%and an 8.3% decrease in average floor plan borrowings primarily from lower average inventory levels.
Other interest expense, net
Other interest expense increased 13.1%decreased 16.9%, or $2.1$3.0 million, to $18.2$14.7 million in the three months ended June 30, 2019March 31, 2020 from $16.1$17.6 million in the three months ended June 30, 2018.March 31, 2019. The increasedecrease was primarily due to a 6494 basis point increasedecrease in the average interest rate.
Income tax expense
Income tax expense decreased $18.8 million to $4.1 million in the three months ended March 31, 2020 compared to the three months ended March 31, 2019. The decrease was primarily due to lower income incurred at CWGS, LLC for which the Company is subject to U.S. federal and state taxes on its allocable share, partially offset by operating losses recorded by Camping World, Inc. (“CW”) for which no tax benefit can be recognized
3935
and the transfer of assets to CW that was recorded in the prior year as discussed in Note 12 - Income tax expenseTaxes to our condensed consolidated financial statements included in Part I, Item 1 of this Form 10-Q.
Income tax expenseNet loss
Net loss decreased 42.5%47.3%, or $6.1$12.7 million, to $8.2a net loss of $14.1 million for the three months ended March 31, 2020 from a net loss of $26.8 million in the three months ended June 30,March 31, 2019 from $14.3 million in the three months ended June 30, 2018. The decrease was primarily due to the revaluation of certain deferred tax assets and related changes in valuation allowance pertaining to a transfer of assets to a wholly-owned subsidiary, partially offset by operating losses recorded by our RV and Outdoor Retail segment for which no tax benefit can be recognized, and an increased ownership percentage of CWGS, LLC for which we are subject to U.S. federal and state taxes on our allocable share of income of CWGS, LLC.
Net income
Net income decreased 31.8%, or $24.5 million, to $52.6 million for the three months ended June 30, 2019 from $77.1 million in the three months ended June 30, 2018 primarily due to the items mentioned above.
Segment results
The following tables sets forth a reconciliation of total segment income to consolidated income before income taxes for each of our segments for the periods presented:
| | | | | | | | | | | | | | | | | | | | | | | | | | |||||
| | Three Months Ended | | | | Three Months Ended | | | ||||||||||||||||||||||
| | June 30, 2019 | | June 30, 2018 | | Favorable/ | | March 31, 2020 | | March 31, 2019 | | Favorable/ | ||||||||||||||||||
| | | | Percent of | | | | Percent of | | (Unfavorable) | | | | Percent of | | | | Percent of | | (Unfavorable) | ||||||||||
($ in thousands) |
| Amount |
| Revenue |
| Amount |
| Revenue |
| $ |
| % |
| Amount |
| Revenue |
| Amount |
| Revenue |
| $ |
| % | ||||||
Revenue: | | | | | | | | | | | | | | | | | | | | | | | | | | |||||
Good Sam Services and Plans | | $ | 44,991 | | 3.1% | | $ | 42,712 | | 3.0% | | $ | 2,279 | | 5.3% | | $ | 48,692 | | 4.7% | | $ | 48,298 | | 4.5% | | $ | 394 | | 0.8% |
RV and Outdoor Retail | | 1,442,579 | | 97.8% | | 1,412,942 | | 98.0% | | 29,637 | | 2.1% | | | 984,093 | | 95.8% | | 1,027,283 | | 96.5% | | (43,190) | | (4.2%) | |||||
Elimination of intersegment revenue | | | (13,223) | | -0.9% | | | (14,177) | | -1.0% | | 954 | | 6.7% | | | (5,512) | | (0.5%) | | | (10,812) | | (1.0%) | | | 5,300 | | 49.0% | |
Total consolidated revenue | | 1,474,347 | | 100.0% | | 1,441,477 | | 100.0% | | 32,870 | | 2.3% | | | 1,027,273 | | 100.0% | | 1,064,769 | | 100.0% | | (37,496) | | (3.5%) | |||||
Segment income:(1) | | | | | | | | | | | | | ||||||||||||||||||
Segment income:(1) | | | | | | | | | | | | | | |||||||||||||||||
Good Sam Services and Plans | | 21,208 | | 1.4% | | 20,721 | | 1.4% | | 487 | | 2.4% | | | 21,340 | | 2.1% | | 22,414 | | 2.1% | | (1,074) | | (4.8%) | |||||
RV and Outdoor Retail | | | 75,687 | | 5.1% | | | 99,845 | | 6.9% | | (24,158) | | (24.2%) | | | 128 | | 0.0% | | | (375) | | (0.0%) | | | 503 | | 134.1% | |
Total segment income | | 96,895 | | 6.6% | | | 120,566 | | 8.4% | | (23,671) | | (19.6%) | | | 21,468 | | 2.1% | | | 22,039 | | 2.1% | | (571) | | (2.6%) | |||
Corporate & other | | (3,914) | | -0.3% | | (1,479) | | -0.1% | | (2,435) | | (164.6%) | | | (2,729) | | (0.3%) | | (3,173) | | (0.3%) | | 444 | | 14.0% | |||||
Depreciation and amortization | | (13,946) | | -0.9% | | (11,628) | | -0.8% | | (2,318) | | (19.9%) | | | (14,078) | | (1.4%) | | (13,594) | | (1.3%) | | (484) | | (3.6%) | |||||
Other interest expense, net | | (18,211) | | -1.2% | | (16,107) | | -1.1% | | (2,104) | | (13.1%) | | | (14,658) | | (1.4%) | | (17,643) | | (1.7%) | | 2,985 | | 16.9% | |||||
Loss and expense on debt restructure | | — | | 0.0% | | 44 | | 0.0% | | (44) | | (100.0%) | ||||||||||||||||||
Other non-operating expense, net | | | — | | 0.0% | | | (2) | | 0.0% | | | 2 | | 100.0% | |||||||||||||||
Income before income taxes | | $ | 60,824 | | 4.1% | | $ | 91,394 | | 6.3% | | $ | (30,570) | | (33.4%) | |||||||||||||||
Tax Receivable Agreement liability adjustment | | | — | | — | | | 8,477 | | 0.8% | | | (8,477) | | (100.0%) | |||||||||||||||
Loss before income taxes | | $ | (9,997) | | (1.0%) | | $ | (3,894) | | (0.4%) | | $ | (6,103) | | (156.7%) | |||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | |||||
Same store sales- RV and Outdoor Retail(2) | | $ | 1,168,610 | | | | $ | 1,247,180 | | | | $ | (78,570) | | (6.3%) | |||||||||||||||
Same store revenue- RV and Outdoor Retail(2) | | $ | 855,124 | | | | $ | 900,703 | | | | $ | (45,579) | | (5.1%) | |||||||||||||||
| (1) | Segment income represents income for each of our reportable segments and is defined as income from operations before depreciation and amortization, plus floor plan interest expense. |
| (2) | Same store |
Good Sam Services and Plans
Good Sam Services and Plans segment revenue increased 5.3%0.8%, or $2.3$0.4 million, to $45.0$48.7 million in the three months ended June 30, 2019,March 31, 2020, from $42.7$48.3 million in the three months ended June 30, 2018.March 31, 2019. The increase was primarily attributable to increased revenue of $1.4a $0.5 million fromincrease in our roadside assistance programs primarily resulting from price increases, $0.3upsells to higher-priced product offerings, a $0.6 million from additional policiesincrease in force from our vehicle insurance products $0.2and a $0.3 million from theincrease in our extended vehicle warranty programs, and $0.4partially offset by a $1.0 million of various other increases.decrease in consumer shows revenue.
Good Sam Services and Plans segment income increased 2.4%decreased 4.8%, or $0.5$1.1 million, to $21.2$21.3 million in the three months ended June 30, 2019,March 31, 2020, from $20.7$22.4 million in the three months ended June 30, 2018.March 31, 2019. The increasedecrease was primarily attributable to $0.9 million of increased gross profit of $1.3accrual for program costs, a $0.6 million consisting mostly of price increasesreduction from the consumer shows, a $0.4 million reduction from the annual directory publication, and lower claims costs from our roadside assistance programs, partially offset by an $0.8a $0.2 million increase in selling, general and administrative expenses.expenses, partially offset by a $0.5 million increase from our vehicle insurance programs, a $0.4 million increase from our roadside assistance programs and a $0.1 million increase from other services and plans. Good Sam Services and Plans segment income
40
margin decreased 149258 basis points to 47.5%43.8% in the three months ended June 30, 2019March 31, 2020 from 48.9%46.4% in the three months ended June 30, 2018.March 31, 2019.
RV and Outdoor Retail
RV and Outdoor Retail segment revenue increased 2.1%decreased 4.2%, or $29.6$43.2 million, to $1.4$1.0 billion in the three months ended June 30, 2019March 31, 2020 from $1.4$1.0 billion in the three months ended June 30, 2018. The increase was primarily driven by a $35.3 million, or 16.7%, increase in used vehicle revenue, a $13.0 million, or 5.0%, increase in products, service and other revenue, a $7.9 million, or 6.4%, increase in finance and insurance revenue, and a $2.0 million, or 19.0%, increase in Good Sam Club revenue, partially offset by a $28.6 million, or 3.5%, decrease in new vehicle revenue.
RV and Outdoor Retail segment income decreased 24.2%, or $24.2 million, to $75.7 million in the three months ended June 30, 2019 from $99.8 million of segment income in the three months ended June 30, 2018.March 31, 2019. The decrease was primarily related to reduced gross profit of $3.7 million primarily due to fewer new vehicles sold, partially offset by increased finance and insurance, net gross profit; $17.1 million of additional selling, general and administrative expenses; $2.3 million of increased loss on asset disposal; and $1.1 million of increased floor plan interest expense. RV and Outdoor Retail segment income margin decreased 184 basis points to 5.3% from 7.1% in the comparable prior year period.
Corporate and other expenses
Corporate and other expenses increased 164.6%, or $2.4 million, to $3.9 million in the three months ended June 30, 2019 from $1.5 million in the three months ended June 30, 2018 primarily from increased professional fees.
41
Six Months Ended June 30, 2019 Compared to Six Months Ended June 30, 2018
The following table sets forth information comparing the components of net income for the six months ended June 30, 2019 and 2018:
| | | | | | | | | | | | | | | |
| | Six Months Ended | | | | | | ||||||||
| | June 30, 2019 | | June 30, 2018 | | | |||||||||
| | | | | Percent of | | | | | Percent of | | Favorable/ (Unfavorable) | |||
($ in thousands) |
| Amount |
| Revenue |
| Amount |
| Revenue |
| $ |
| % | |||
| | | | | | | | | | | | | | | |
Revenue: | | | | | | | | | | | | | | | |
Good Sam Services and Plans | | $ | 91,660 | | 3.6% | | $ | 87,163 | | 3.5% | | $ | 4,497 | | 5.2% |
RV and Outdoor Retail: | | | | | | | | | | | | | | | |
New vehicles | | | 1,308,447 | | 51.5% | | | 1,387,029 | | 55.5% | | | (78,582) | | (5.7%) |
Used vehicles | | | 425,757 | | 16.8% | | | 382,737 | | 15.3% | | | 43,020 | | 11.2% |
Products, service and other | | | 469,302 | | 18.5% | | | 414,511 | | 16.6% | | | 54,791 | | 13.2% |
Finance and insurance, net | | | 220,116 | | 8.7% | | | 209,305 | | 8.4% | | | 10,811 | | 5.2% |
Good Sam Club | | | 23,834 | | 0.9% | | | 19,393 | | 0.8% | | | 4,441 | | 22.9% |
Subtotal | | | 2,447,456 | | 96.4% | | | 2,412,975 | | 96.5% | | | 34,481 | | 1.4% |
Total revenue | | | 2,539,116 | | 100.0% | | | 2,500,138 | | 100.0% | | | 38,978 | | 1.6% |
| | | | | | | | | | | | | | | |
Gross profit (exclusive of depreciation and amortization shown separately below): | | | | | | | | | | | | | | | |
Good Sam Services and Plans | | | 52,183 | | 2.1% | | | 49,042 | | 2.0% | | | 3,141 | | 6.4% |
RV and Outdoor Retail: | | | | | | | | | | | | | | | |
New vehicles | | | 164,004 | | 6.5% | | | 185,451 | | 7.4% | | | (21,447) | | (11.6%) |
Used vehicles | | | 90,230 | | 3.6% | | | 85,938 | | 3.4% | | | 4,292 | | 5.0% |
Products, service and other | | | 164,591 | | 6.5% | | | 170,643 | | 6.8% | | | (6,052) | | (3.5%) |
Finance and insurance, net | | | 220,116 | | 8.7% | | | 209,305 | | 8.4% | | | 10,811 | | 5.2% |
Good Sam Club | | | 17,193 | | 0.7% | | | 13,957 | | 0.6% | | | 3,236 | | 23.2% |
Subtotal | | | 656,134 | | 25.8% | | | 665,294 | | 26.6% | | | (9,160) | | (1.4%) |
Total gross profit | | | 708,317 | | 27.9% | | | 714,336 | | 28.6% | | | (6,019) | | (0.8%) |
| | | | | | | | | | | | | | | |
Operating expenses: | | | | | | | | | | | | | | | |
Selling, general and administrative expenses | | | 571,431 | | 22.5% | | | 529,408 | | 21.2% | | | (42,023) | | (7.9%) |
Debt restructure expense | | | — | | 0.0% | | | 380 | | 0.0% | | | 380 | | 100.0% |
Depreciation and amortization | | | 27,540 | | 1.1% | | | 21,028 | | 0.8% | | | (6,512) | | (31.0%) |
Loss on disposal of assets | | | 2,160 | | 0.1% | | | 144 | | 0.0% | | | (2,016) | | (1,400.0%) |
Income from operations | | | 107,186 | | 4.2% | | | 163,376 | | 6.5% | | | (56,190) | | (34.4%) |
Other income (expense): | | | | | | | | | | | | | | | |
Floor plan interest expense | | | (22,879) | | -0.9% | | | (20,945) | | -0.8% | | | (1,934) | | (9.2%) |
Other interest expense, net | | | (35,854) | | -1.4% | | | (28,946) | | -1.2% | | | (6,908) | | (23.9%) |
Loss on debt restructure | | | — | | 0.0% | | | (1,676) | | -0.1% | | | 1,676 | | 100.0% |
Tax Receivable Agreement liability adjustment | | | 8,477 | | 0.3% | | | — | | 0.0% | | | 8,477 | | 100.0% |
Other expense, net | | | — | | 0.0% | | | (2) | | 0.0% | | | 2 | | 100.0% |
Total other income (expense) | | | (50,256) | | -2.0% | | | (51,569) | | -2.1% | | | 1,313 | | 2.5% |
Income before income taxes | | | 56,930 | | 2.2% | | | 111,807 | | 4.5% | | | (54,877) | | (49.1%) |
Income tax expense | | | (31,114) | | -1.2% | | | (21,127) | | -0.8% | | | (9,987) | | (47.3%) |
Net income | | | 25,816 | | 1.0% | | | 90,680 | | 3.6% | | | (64,864) | | (71.5%) |
Less: net income attributable to non-controlling interests | | | (27,194) | | -1.1% | | | (64,077) | | -2.6% | | | 36,883 | | 57.6% |
Net income attributable to Camping World Holdings, Inc. | | $ | (1,378) | | -0.1% | | $ | 26,603 | | 1.1% | | $ | (27,981) | | (105.2%) |
Total Revenue
Total revenue increased 1.6%, or $39.0 million, to $2.5 billion in the six months ended June 30, 2019 from $2.5 billion in the six months ended June 30, 2018. The increase was driven by a 13.2% increase in products, service and other revenue to $469.3 million, an 11.2% increase in used vehicles revenue to $425.8 million, a 5.2% increase in finance and insurance revenue to $220.1 million, a 5.2% increase in Good Sam Services and Plans revenue to $91.7 million, and a 22.9% increase in Good Sam Club revenue to $23.8 million, partially offset by a 5.7% decrease in new vehicles revenue to $1.3 billion. Aggregate same store sales decreased 8.3% to $2.0 billion for the six months ended June 30, 2019 as compared to the six months ended June 30, 2018.
Good Sam Services and Plans
Good Sam Services and Plans revenue increased 5.2%, or $4.5 million, to $91.7 million in the six months ended June 30, 2019, from $87.2 million in the six months ended June 30, 2018. The increase was
4236
primarily attributable to a $3.1 million increase in our roadside assistance programs primarily resulting from price increases, $0.6 million from additional policies in force for our vehicle insurance products and $0.8 million of various other increases.
Good Sam Services and Plans gross profit increased 6.4%, or $3.1 million, to $52.2 million in the six months ended June 30, 2019, from $49.0 million in the six months ended June 30, 2018 and gross margin increased to 56.9% from 56.3% in the same respective periods. The increased gross profit was primarily attributable to $3.9 million from price increases and lower claims costs in our roadside assistance programs, $1.6 million from increased policies in force from our vehicle insurance programs, and $0.2 million of other increases, partially offset by $1.6 million of increased marketing support expense and $1.0 million of reduced gross profit from the extended vehicle warranty programs.
New Vehicles
| | | | | | | | | | | | | | | |
| | Six Months Ended | | | |||||||||||
| | June 30, 2019 | | June 30, 2018 | | Favorable/ | |||||||||
($ in thousands, | | | | Percent of | | | | Percent of | | (Unfavorable) | |||||
except per vehicle data) |
| Amount |
| Revenue |
| Amount |
| Revenue |
| $ |
| % | |||
| | | | | | | | | | | | | | | |
Revenue | | $ | 1,308,447 | | 100.0% | | $ | 1,387,029 | | 100.0% | | $ | (78,582) | | (5.7%) |
Gross profit | | $ | 164,004 | | 12.5% | | $ | 185,451 | | 13.4% | | $ | (21,447) | | (11.6%) |
Vehicles sold | | | 37,922 | | | | | 40,738 | | | | | (2,816) | | (6.9%) |
Average selling price per vehicle sold | | $ | 34,504 | | | | $ | 34,048 | | | | $ | 456 | | 1.3% |
Average gross profit per vehicle sold | | $ | 4,325 | | | | $ | 4,552 | | | | $ | (228) | | (5.0%) |
| | | | | | | | | | | | | | | |
Same store data: | | | | | | | | | | | | | | | |
Revenue | | $ | 1,162,279 | | | | $ | 1,336,121 | | | | $ | (173,842) | | (13.0%) |
Vehicles sold | | | 33,149 | | | | | 39,056 | | | | | (5,907) | | (15.1%) |
Average selling price per vehicle sold | | $ | 35,062 | | | | $ | 34,210 | | | | $ | 852 | | 2.5% |
New vehicle revenue decreased 5.7%, or $78.6 million, to $1.3 billion in the six months ended June 30, 2019 from $1.4 billion in the six months ended June 30, 2018. The decrease was primarily due to a 6.9% reduction in vehicles sold resulting from reduced demand across nearly all product types. On a same store basis, new vehicle revenue decreased 13.0% to $1.2 billion, driven by a 15.1% decrease in vehicles sold to 33,149 vehicles in the six months ended June 30, 2018.
New vehicle gross profit decreased 11.6%, or $21.4 million, to $164.0 million in the six months ended June 30, 2019 from $185.5 million in the six months ended June 30, 2018 and gross margin decreased to 12.5% from 13.4% in the same respective periods. The decrease in gross profit was primarily due to reduced vehicle sales and a decrease in the average gross profit per vehicle sold resulting from our inventory reduction and optimization programs, and from a shift in the vehicle mix towards towable vehicles.
Used Vehicles
| | | | | | | | | | | | | | | |
| | Six Months Ended | | | |||||||||||
| | June 30, 2019 | | June 30, 2018 | | Favorable/ | |||||||||
($ in thousands, | | | | Percent of | | | | Percent of | | (Unfavorable) | |||||
except per vehicle data) |
| Amount |
| Revenue |
| Amount |
| Revenue |
| $ |
| % | |||
| | | | | | | | | | | | | | | |
Revenue | | $ | 425,757 | | 100.0% | | $ | 382,737 | | 100.0% | | $ | 43,020 | | 11.2% |
Gross profit | | $ | 90,230 | | 21.2% | | $ | 85,938 | | 22.5% | | $ | 4,292 | | 5.0% |
Vehicles sold | | | 18,986 | | | | | 17,446 | | | | | 1,540 | | 8.8% |
Average selling price per vehicle sold | | $ | 22,425 | | | | $ | 21,938 | | | | $ | 486 | | 2.2% |
Average gross profit per vehicle sold | | $ | 4,752 | | | | $ | 4,926 | | | | $ | (173) | | (3.5%) |
| | | | | | | | | | | | | | | |
Same store data: | | | | | | | | | | | | | | | |
Revenue | | $ | 393,583 | | | | $ | 368,756 | | | | $ | 24,827 | | 6.7% |
Vehicles sold | | | 17,227 | | | | | 16,651 | | | | | 576 | | 3.5% |
Average selling price per vehicle sold | | $ | 22,847 | | | | $ | 22,146 | | | | $ | 701 | | 3.2% |
Used vehicle revenue increased 11.2%, or $43.0 million, to $425.8 million in the six months ended June 30, 2019 from $382.7 million in the six months ended June 30, 2018. The increase was primarily due to
43
an 8.8% increase in used vehicles sold. On a same store basis, used vehicle revenue increased 6.7% to $393.6 million, driven by a 3.5% increase in vehicles sold to 17,227 compared to vehicles sold of 16,651 vehicles sold in the six months ended June 30, 2018, and a 3.2% increase in the average selling price per vehicle.
Used vehicle gross profit increased 5.0%, or $4.3 million, to $90.2 million in the six months ended June 30, 2019 from $85.9 million in the six months ended June 30, 2018. The increase was primarily from an 8.8% increase in vehicles sold resulting from a shift in the product mix towards travel trailers, and higher vehicle acquisition and refurbishment costs, partially offset by a 3.5% reduction in average gross profit per vehicle sold. Used vehicle gross margin decreased to 21.2% in the six months ended June 30, 2019 from 22.5% in the six months ended June 30, 2018.
Products, service and other
| | | | | | | | | | | | | | | |
| | Six Months Ended | | | |||||||||||
| | June 30, 2019 | | June 30, 2018 | | Favorable/ | |||||||||
| | | | Percent of | | | | Percent of | | (Unfavorable) | |||||
($ in thousands) |
| Amount |
| Revenue |
| Amount |
| Revenue |
| $ |
| % | |||
| | | | | | | | | | | | | | | |
Revenue | | $ | 469,302 | | 100.0% | | $ | 414,511 | | 100.0% | | $ | 54,791 | | 13.2% |
| | | | | | | | | | | | | | | |
Gross profit | | | 164,591 | | 35.1% | | | 170,643 | | 41.2% | | | (6,052) | | (3.5%) |
| | | | | | | | | | | | | | | |
Same store sales | | | 256,779 | | | | | 286,068 | | | | | (29,289) | | (10.2%) |
Products, service and other revenue increased 13.2%, or $54.8 million, to $469.3 million in the six months ended June 30, 2019 from $414.5 million in the six months ended June 30, 2018. The increase was primarily attributable to an increase in product revenue related to the new stores opened over the last eighteen months. On a same store basis, products, service and other revenue decreased 10.2% to $256.8 million for the six months ended June 30, 2019 from $286.1 million in the six months ended June 30, 2018 primarily due to a decrease in warranty-related service and service fee installation promotions.
Products, service and other gross profit decreased 3.5%, or $6.1 million, to $164.6 million in the six months ended June 30, 2019 from $170.6 million in the six months ended June 30, 2018. The decrease was primarily due to lower service revenue and lower promotional outdoor retail and service gross margins. Products, service and other gross margin decreased to 35.1% in the six months ended June 30, 2019 from 41.2% in the six months ended June 30, 2018 primarily due to promotional sales and to a higher mix of revenue from outdoor-related products, which typically carry a lower gross margin than services-related revenue.
Finance and Insurance, net
| | | | | | | | | | | | | | | |
| | Six Months Ended | | | |||||||||||
| | June 30, 2019 | | June 30, 2018 | | Favorable/ | |||||||||
| | | | Percent of | | | | Percent of | | (Unfavorable) | |||||
($ in thousands) |
| Amount |
| Revenue |
| Amount |
| Revenue |
| $ |
| % | |||
| | | | | | | | | | | | | | | |
Revenue | | $ | 220,116 | | 100.0% | | $ | 209,305 | | 100.0% | | $ | 10,811 | | 5.2% |
| | | | | | | | | | | | | | | |
Gross profit | | | 220,116 | | 100.0% | | | 209,305 | | 100.0% | | | 10,811 | | 5.2% |
| | | | | | | | | | | | | | | |
Same store sales | | | 197,994 | | | | | 200,900 | | | | | (2,906) | | (1.4%) |
Finance and insurance, net revenue and gross profit each increased 5.2%, or $10.8 million, to $220.1 million in the six months ended June 30, 2019 from $209.3 million in the six months ended June 30, 2018. The increase was due to an increase in our finance and insurance gross profit per contract, which overcame the net decrease in total new and used vehicles sold. On a same store basis, finance and insurance net revenue decreased 1.4% to $198.0 million in the six months ended June 30, 2019 from $200.9 million in the
44
comparable period in 2018. This decrease was due to lower total new and used vehicle sales, which was partially offset by higher gross profit per finance and insurance contract.
Good Sam Club
| | | | | | | | | | | | | | | |
| | Six Months Ended | | | |||||||||||
| | June 30, 2019 | | June 30, 2018 | | Favorable/ | |||||||||
| | | | Percent of | | | | Percent of | | (Unfavorable) | |||||
($ in thousands) |
| Amount |
| Revenue |
| Amount |
| Revenue |
| $ |
| % | |||
| | | | | | | | | | | | | | | |
Revenue | | $ | 23,834 | | 100.0% | | $ | 19,393 | | 100.0% | | $ | 4,441 | | 22.9% |
| | | | | | | | | | | | | | | |
Gross profit | | | 17,193 | | 72.1% | | | 13,957 | | 72.0% | | | 3,236 | | 23.2% |
| | | | | | | | | | | | | | | |
Memberships | | | 2,177,743 | | | | | 1,920,348 | | | | | 257,395 | | 13.4% |
Good Sam Club revenue increased 22.9%, or $4.4 million, to $23.8 million in the six months ended June 30, 2019 from $19.4 million in the six months ended June 30, 2018. The increase primarily resulted from a 13.4% increase in club memberships driven by an increase in retail locations, and to a lesser extent, an increase in membership price.
Good Sam Club gross profit increased 23.2%, or $3.2 million, to $17.2 million in the six months ended June 30, 2019 from $14.0 million in the six months ended June 30, 2018. The increase was primarily due to the increase in club memberships. Good Sam Club gross margin increased to 72.1% in the six months ended June 30, 2019 from 72.0% in the six months ended June 30, 2018 primarily due to increased primarily due to increased membership prices.
Selling, general and administrative expenses
Selling, general and administrative expenses increased 7.9%, or $42.0 million, to $571.4 million in the six months ended June 30, 2019 from $529.4 million in the six months ended June 30, 2018. The increase was primarily due to increases of $19.9 million of variable selling expense, $11.3 million of real property expenses related to new stores, $4.0 million of occupancy expenses, $4.0 million of services expenses, and $1.9 million of other store and corporate overhead expenses. Selling, general and administrative expenses as a percentage of total gross profit increased to 80.7% in the six months ended June 30, 2019, from 74.1% in the six months ended June 30, 2018.
Debt restructure expense
Debt restructure expense was $0.4 million in the six months ended June 30, 2018 and was related to the Third Amendment to the Credit Agreement entered into on March 28, 2018. There was no debt restructure expense during the six months ended June 30, 2019.
Depreciation and amortization
Depreciation and amortization increased 31.0%, or $6.5 million, to $27.5 million in the six months ended June 30, 2019 from $21.0 million in the six months ended June 30, 2018 primarily due to the new RV and outdoor retail store locations.
Floor plan interest expense
Floor plan interest expense increased 9.2%, or $1.9 million, to $22.9 million in the six months ended June 30, 2019 from $20.9 million in the six months ended June 30, 2018. The increase was primarily due to a 79 basis point increase in the average floor plan borrowing rate, partially offset by an 8.5% decrease in average floor plan borrowings primarily from lower average inventory levels.
45
Other interest expense, net
Other interest expense increased 23.9%, or $6.9 million, to $35.9 million in the six months ended June 30, 2019 from $28.9 million in the six months ended June 30, 2018. The increase was primarily due to increased average debt outstanding primarily due to financing the rollout of RV and Outdoor Retail store openings in 2018 and a 62 basis point increase in the average interest rate.
Income tax expense
Income tax expense increased 47.3%, or $10.0 million to $31.1 million in the six months ended June 30, 2019 from $21.1 million in the six months ended June 30, 2018. The increase was primarily due to the revaluation of certain deferred tax assets and related changes in valuation allowance pertaining to a transfer of assets to a wholly owned corporate subsidiary, operating losses recorded by our RV and Outdoor Retail segment for which no tax benefit can be recognized, and an increased ownership percentage of CWGS, LLC for which we are subject to U.S. federal and state taxes on our allocable share of income of CWGS, LLC.
Net income
Net income decreased 71.5%, or $64.9 million, to $25.8 million for the six months ended June 30, 2019 from a net income of $90.7 million in the six months ended June 30, 2018 primarily due to the items mentioned above.
Segment results
The following tables sets forth a reconciliation of total segment income to consolidated income before income taxes for each of our segments for the periods presented:
| | | | | | | | | | | | | | | |
| | Six Months Ended | | | |||||||||||
| | June 30, 2019 | | June 30, 2018 | | Favorable/ | |||||||||
| | | | Percent of | | | | Percent of | | (Unfavorable) | |||||
($ in thousands) |
| Amount |
| Revenue |
| Amount |
| Revenue |
| $ |
| % | |||
Revenue: | | | | | | | | | | | | | | | |
Good Sam Services and Plans | | $ | 93,289 | | 3.7% | | $ | 88,890 | | 3.6% | | $ | 4,399 | | 4.9% |
RV and Outdoor Retail | | | 2,469,862 | | 97.3% | | | 2,435,769 | | 97.4% | | | 34,093 | | 1.4% |
Elimination of intersegment revenue | | | (24,035) | | -0.9% | | | (24,521) | | -1.0% | | | 486 | | -2.0% |
Total consolidated revenue | | | 2,539,116 | | 100.0% | | | 2,500,138 | | 100.0% | | | 38,978 | | 1.6% |
Segment income:(1) | | | | | | | | | | | | | | | |
Good Sam Services and Plans | | | 43,622 | | 1.7% | | | 42,438 | | 1.7% | | | 1,184 | | 2.8% |
RV and Outdoor Retail | | | 75,312 | | 3.0% | | | 124,364 | | 5.0% | | | (49,052) | | -39.4% |
Total segment income | | | 118,934 | | 4.7% | | | 166,802 | | 6.7% | | | (47,868) | | -28.7% |
Corporate & other | | | (7,087) | | -0.3% | | | (2,963) | | -0.1% | | | (4,124) | | -139.2% |
Depreciation and amortization | | | (27,540) | | -1.1% | | | (21,028) | | -0.8% | | | (6,512) | | -31.0% |
Tax Receivable Agreement liability adjustment | | | 8,477 | | 0.3% | | | — | | 0.0% | | | 8,477 | | 100.0% |
Other interest expense, net | | | (35,854) | | -1.4% | | | (28,946) | | -1.2% | | | (6,908) | | -23.9% |
Loss and expense on debt restructure | | | — | | 0.0% | | | (2,056) | | -0.1% | | | 2,056 | | 100.0% |
Other income (expense) | | | — | | 0.0% | | | (2) | | 0.0% | | | 2 | | 100.0% |
Income before income taxes | | $ | 56,930 | | 2.2% | | $ | 111,807 | | 4.5% | | $ | (54,877) | | -49.1% |
| | | | | | | | | | | | | | | |
Same store sales- RV and Outdoor Retail(2) | | $ | 2,010,634 | | | | $ | 2,191,845 | | | | $ | (181,211) | | -8.3% |
Good Sam Services and Plans
Good Sam Services and Plans segment revenue increased 4.9%, or $4.4 million, to $93.3 million in the six months ended June 30, 2019, from $88.9 million in the six months ended June 30, 2018. The increase was primarily attributable to a $3.1 million increase in our roadside assistance programs primarily resulting from price increases, $0.6 million from additional policies in force for our vehicle insurance products and $0.7 million of various other increases.
46
Good Sam Services and Plans segment income increased 2.8%, or $1.2 million, to $43.6 million in the six months ended June 30, 2019, from $42.4 million in the six months ended June 30, 2018. The increase was primarily attributable to increased gross profit of $3.1 million, primarily attributable to price increases and lower claims costs from our roadside assistance programs and additional gross profit from the vehicle insurance products, partially offset by reduced gross profit from the extended vehicle warranty programs and additional marketing support expense; partially offset by a $1.9 million increase in selling, general and administrative expenses. Good Sam Services and Plans segment income margin decreased 110 basis points to 47.6% in the six months ended June 30, 2019 from 48.7% in the six months ended June 30, 2018.
RV and Outdoor Retail
RV and Outdoor Retail segment revenue increased 1.4%, or $34.1 million, to $2.5 billion in the six months ended June 30, 2019 from $2.4 billion in the six months ended June 30, 2018. The increase was primarily driven by a $54.3$37.2 million, or 12.7%17.7%, increasedecrease in products, service and other revenue primarily due to the 2019 Strategic Shift, a $43.3$32.4 million, or 11.3%, increase6.1% decrease in usednew vehicle revenue, a $10.6 million, or 4.9%, increase in finance and insurance revenue, and a $4.4$0.4 million, or 22.9% increase3.9%, decrease in Good Sam Club revenue, partially offset by a $78.5$26.6 million, or 5.6%14.7%, decreaseincrease in newused vehicle revenue, and a $0.2 million,or 0.2%, increase in finance and insurance revenue.
RV and Outdoor Retail segment income decreased 39.4%increased 134.1%, or $49.1$0.5 million, to $75.3a segment income of $0.1 million in the sixthree months ended June 30, 2019March 31, 2020 from $124.4a segment loss of $0.4 million of segment income in the sixthree months ended June 30, 2018.March 31, 2019. The decreaseincrease was primarily related to aincreased segment gross profit reduction of $9.2$5.2 million primarily due to reduceda mix shift to higher margined vehicles and increased volume of new vehicles sold, reduced floor plan interest expense of $3.0 million primarily due to a lower borrowing rate and increased financelower average borrowings, and insurance, net gross profit; $36.0 million of additionalreduced selling, general and administrative expenses $2.0of $0.2 million, partially offset by $6.6 million of additionallong-lived asset impairment, $0.7 million of increased loss on asset disposal, of assets, and $1.9$0.6 million of additional floor plan interest.lease termination losses. RV and Outdoor Retail segment income margin decreased 208increased 5 basis points to 3.1% from 5.2% in the comparable prior year period.0%.
Corporate and other expenses
Corporate and other expenses increased 139.2%decreased 14.0%, or $4.1$0.4 million, to $7.1$2.7 million in the sixthree months ended June 30, 2019March 31, 2020 from $3.0$3.2 million in the sixthree months ended June 30, 2018March 31, 2019 primarily from increasedreduced professional fees.fees.
Non-GAAP Financial Measures
To supplement our condensed consolidated financial statements, which are prepared and presented in accordance with accounting principles generally accepted in the United States (“GAAP”), we use the following non-GAAP financial measures: EBITDA, Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Net Income Attributable to Camping World Holdings, Inc. – Basic, Adjusted Net Income Attributable to Camping World Holdings, Inc. – Diluted, Adjusted Earnings Per Share – Basic, and Adjusted Earnings Per Share – Diluted (collectively the "Non-GAAP Financial Measures"). We believe that these Non-GAAP Financial Measures, when used in conjunction with GAAP financial measures, provide useful information about operating results, enhance the overall understanding of past financial performance and future prospects, and allow for greater transparency with respect to the key metrics we use in our financial and operational decision making. These Non-GAAP Financial Measures are also frequently used by analysts, investors and other interested parties to evaluate companies in the Company’s industry. The presentation of this financial information is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP, and they should not be construed as an inference that the Company’s future results will be unaffected by any items adjusted for in these non-GAAP measures. In evaluating these non-GAAP measures, you should be aware that in the future the Company may incur expenses that are the same as or similar to some of those adjusted in this presentation. The Non-GAAP Financial Measures that we use are not necessarily comparable to similarly titled measures used by other companies due to different methods of calculation.
EBITDA, Adjusted EBITDA, and Adjusted EBITDA Margin
We define “EBITDA” as net income before other interest expense, net (excluding floor plan interest expense), provision for income tax expense and depreciation and amortization. We define “Adjusted EBITDA”
47
as EBITDA further adjusted for the impact of certain non-cash and other items that we do not consider in our evaluation of ongoing operating performance. These items include, among other things, long-lived asset impairment, lease termination loss, and expense on debt restructure, loss on disposal of assets, equity-based compensation, Tax Receivable Agreement liability adjustment, Gander Outdoors pre-openingrestructuring costs related to the 2019 Strategic Shift, and other unusual or one-time items. We define “Adjusted EBITDA Margin” as Adjusted EBITDA as a percentage of total revenue. We caution investors that amounts presented in accordance with our definitions of EBITDA, Adjusted EBITDA, and Adjusted EBITDA Margin may not be comparable to similar measures disclosed by our competitors, because not all companies and analysts calculate EBITDA, Adjusted EBITDA, and Adjusted EBITDA Margin in the same manner. We present EBITDA, Adjusted EBITDA, and Adjusted EBITDA Margin because we consider them to be important supplemental measures of our performance and believe they are frequently used by securities
37
analysts, investors and other interested parties in the evaluation of companies in our industry. Management believes that investors’ understanding of our performance is enhanced by including these Non-GAAP Financial Measures as a reasonable basis for comparing our ongoing results of operations.
The following table reconciles EBITDA, Adjusted EBITDA, and Adjusted EBITDA Margin to the most directly comparable GAAP financial performance measures, which are net income, net(loss) income and net (loss) income margin, respectively:
| | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | Six Months Ended | | Three Months Ended | ||||||||||||
| | June 30, | | June 30, | | June 30, | | June 30, | | March 31, | | March 31, | ||||||
($ in thousands) |
| 2019 |
| 2018 |
| 2019 |
| 2018 |
| 2020 |
| 2019 | ||||||
EBITDA: | | | | | | | | | | | | | | | | | | |
Net income | | $ | 52,623 | | $ | 77,132 | | $ | 25,816 | | $ | 90,680 | ||||||
Net loss | | $ | (14,129) | | $ | (26,807) | ||||||||||||
Other interest expense, net | | | 18,211 | | | 16,107 | | | 35,854 | | | 28,946 | | | 14,658 | | | 17,643 |
Depreciation and amortization | | | 13,946 | | | 11,628 | | | 27,540 | | | 21,028 | | | 14,078 | | | 13,594 |
Income tax expense | | | 8,201 | | | 14,262 | | | 31,114 | | | 21,127 | | | 4,132 | | | 22,913 |
Subtotal EBITDA | | | 92,981 | | | 119,129 | | | 120,324 | | | 161,781 | | | 18,739 | | | 27,343 |
Loss and expense on debt restructure (a) | | | — | | | (44) | | | — | | | 2,056 | ||||||
Loss on disposal of assets and other expense, net (b) | | | 2,374 | | | 61 | | | 2,160 | | | 146 | ||||||
Equity-based compensation (c) | | | 3,863 | | | 3,129 | | | 6,579 | | | 6,347 | ||||||
Tax Receivable Agreement liability adjustment (d) | | | — | | | — | | | (8,477) | | | — | ||||||
Gander Outdoors pre-opening costs (e) | | | — | | | 15,355 | | | — | | | 35,006 | ||||||
Long-lived asset impairment (a) | | | 6,569 | | | — | ||||||||||||
Lease termination (b) | | | 584 | | | — | ||||||||||||
Loss (gain) on disposal of assets, net (c) | | | 511 | | | (214) | ||||||||||||
Equity-based compensation (d) | | | 3,312 | | | 2,716 | ||||||||||||
Tax Receivable Agreement liability adjustment (e) | | | — | | | (8,477) | ||||||||||||
Restructuring costs (f) | | | 6,282 | | | — | ||||||||||||
Adjusted EBITDA | | $ | 99,218 | | $ | 137,630 | | $ | 120,586 | | $ | 205,336 | | $ | 35,997 | | $ | 21,368 |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | Six Months Ended | | Three Months Ended | ||||||||||||
| | June 30, | | June 30, | | June 30, | | June 30, | | March 31, | | March 31, | ||||||
(as percentage of total revenue) |
| 2019 |
| 2018 |
| 2019 |
| 2018 |
| 2020 |
| 2019 | ||||||
EBITDA margin: | | | | | | | | | | | | | | | | | | |
Net income margin | | | 3.6% | | | 5.4% | | | 1.0% | | | 3.6% | ||||||
Net loss margin | | | (1.4%) | | | (2.5%) | ||||||||||||
Other interest expense, net | | | 1.2% | | | 1.1% | | | 1.4% | | | 1.2% | | | 1.4% | | | 1.7% |
Depreciation and amortization | | | 0.9% | | | 0.8% | | | 1.1% | | | 0.8% | | | 1.4% | | | 1.3% |
Income tax expense | | | 0.6% | | | 1.0% | | | 1.2% | | | 0.8% | | | 0.4% | | | 2.2% |
Subtotal EBITDA margin | | | 6.3% | | | 8.3% | | | 4.7% | | | 6.5% | | | 1.8% | | | 2.6% |
Loss and expense on debt restructure (a) | | | — | | | (0.0%) | | | — | | | 0.1% | ||||||
Loss on disposal of assets and other expense, net (b) | | | 0.2% | | | 0.0% | | | 0.1% | | | 0.0% | ||||||
Equity-based compensation (c) | | | 0.3% | | | 0.2% | | | 0.3% | | | 0.3% | ||||||
Tax Receivable Agreement liability adjustment (d) | | | — | | | — | | | (0.3%) | | | — | ||||||
Gander Outdoors pre-opening costs (e) | | | — | | | 1.1% | | | — | | | 1.4% | ||||||
Long-lived asset impairment (a) | | | 0.6% | | | — | ||||||||||||
Lease termination (b) | | | 0.1% | | | — | ||||||||||||
Loss (gain) on disposal of assets, net (c) | | | 0.0% | | | (0.0%) | ||||||||||||
Equity-based compensation (d) | | | 0.3% | | | 0.3% | ||||||||||||
Tax Receivable Agreement liability adjustment (e) | | | — | | | (0.8%) | ||||||||||||
Restructuring costs (f) | | | 0.6% | | | — | ||||||||||||
Adjusted EBITDA margin | | | 6.7% | | | 9.5% | | | 4.7% | | | 8.2% | | | 3.5% | | | 2.0% |
| (a) | Represents |
| (b) | Represents the loss on the termination of operating leases relating primarily to the 2019 Strategic Shift, net of lease termination fees (See Note 4– Restructuring and Long-lived Asset Impairment to our condensed consolidated financial statements included in Part I, Item 1 of this Form 10-Q for additional information |
| (c) | Represents an adjustment to eliminate the losses and gains on disposal and sales of various |
| Represents non-cash equity-based compensation expense relating to employees and directors of the Company. |
| Represents an adjustment to eliminate the loss on remeasurement of the Tax Receivable Agreement primarily due to changes in our effective income tax rate and the transfer of certain assets from GSS to |
| Represents |
4838
Adjusted Net Income Attributable to Camping World Holdings, Inc. and Adjusted Earnings Per Share
We define “Adjusted Net Income Attributable to Camping World Holdings, Inc. – Basic” as net income attributable to Camping World Holdings, Inc. adjusted for the impact of certain non-cash and other items that we do not consider in our evaluation of ongoing operating performance. These items include, among other things, loss and expense on debt restructure,long-lived asset impairment, lease termination costs, loss on disposal of assets, equity-based compensation, Tax Receivable Agreement liability adjustment, Gander Outdoors pre-openingrestructuring costs related to the 2019 Strategic Shift, other unusual or one-time items, the income tax expense effect of these adjustments, and the effect of net income attributable to non-controlling interests from these adjustments.
We define “Adjusted Net Income Attributable to Camping World Holdings, Inc. – Diluted” as Adjusted Net Income Attributable to Camping World Holdings, Inc. – Basic adjusted for the reallocation of net income attributable to non-controlling interests from stock options and restricted stock units, if dilutive, or the assumed exchange, if dilutive, of all outstanding common units in CWGS, LLC for shares of newly-issued Class A common stock of Camping World Holdings, Inc.
We define “Adjusted Earnings Per Share – Basic” as Adjusted Net Income Attributable to Camping World Holdings, Inc. - Basic divided by the weighted-average shares of Class A common stock outstanding. We define “Adjusted Earnings Per Share – Diluted” as Adjusted Net Income Attributable to Camping World Holdings, Inc. – Diluted divided by the weighted-average shares of Class A common stock outstanding, assuming (i) the exchange of all outstanding common units in CWGS, LLC for newly-issued shares of Class A common stock of Camping World Holdings, Inc., if dilutive, and (ii) the dilutive effect of stock options and restricted stock units, if any. We present Adjusted Net Income Attributable to Camping World Holdings, Inc. – Basic, Adjusted Net Income Attributable to Camping World Holdings, Inc. – Diluted, Adjusted Earnings Per Share – Basic, and Adjusted Earnings Per Share – Diluted because we consider them to be important supplemental measures of our performance and we believe that investors’ understanding of our performance is enhanced by including these Non GAAP financial measures as a reasonable basis for comparing our ongoing results of operations.
4939
The following table reconciles Adjusted Net Income Attributable to Camping World Holdings, Inc. – Basic, Adjusted Net Income Attributable to Camping World Holdings, Inc. – Diluted, Adjusted Earnings Per Share – Basic, and Adjusted Earnings Per Share – Diluted to the most directly comparable GAAP financial performance measure, which is net income attributable to Camping World Holdings, Inc., in the case of the Adjusted Net Income non-GAAP financial measures, and weighted-average shares of Class A common stock outstanding – basic, in the case of the Adjusted Earnings Per Share non-GAAP financial measures:
| | | | | | | | | | | | |
| | Three Months Ended | | Six Months Ended | ||||||||
| | June 30, | | June 30, | | June 30, | | June 30, | ||||
(In thousands except per share amounts) |
| 2019 |
| 2018 |
| 2019 |
| 2018 | ||||
Numerator: | | | | | | | | | | | | |
Net income (loss) attributable to Camping World Holdings, Inc. | | $ | 18,017 | | $ | 24,782 | | $ | (1,378) | | $ | 26,603 |
Adjustments related to basic calculation: | | | | | | | | | | | | |
Loss and expense on debt restructure (a): | | | | | | | | | | | | |
Gross adjustment | | | — | | | (44) | | | — | | | 2,056 |
Income tax (expense) benefit for above adjustment (b) | | | — | | | 5 | | | — | | | (217) |
Loss on disposal of assets and other expense, net (c): | | | | | | | | | | | | |
Gross adjustment | | | 2,374 | | | 61 | | | 2,160 | | | 146 |
Income tax (expense) benefit for above adjustment (b) | | | (3) | | | (1) | | | 6 | | | (1) |
Equity-based compensation (d): | | | | | | | | | | | | |
Gross adjustment | | | 3,863 | | | 3,129 | | | 6,579 | | | 6,347 |
Income tax expense for above adjustment (b) | | | (348) | | | (283) | | | (569) | | | (549) |
Tax Receivable Agreement liability adjustment (e): | | | | | | | | | | | | |
Gross adjustment | | | — | | | — | | | (8,477) | | | — |
Income tax benefit for above adjustment (b) | | | — | | | — | | | 2,143 | | | — |
Gander Outdoors pre-opening costs (f): | | | | | | | | | | | | |
Gross adjustment | | | — | | | 15,355 | | | — | | | 35,006 |
Income tax benefit for above adjustment (b) | | | — | | | — | | | — | | | — |
Adjustment to net (loss) income attributable to non-controlling interests resulting from the above adjustments (g) | | | (3,624) | | | (10,772) | | | (5,077) | | | (25,438) |
Adjusted net (loss) income attributable to Camping World Holdings, Inc. – basic | | | 20,279 | | | 32,232 | | | (4,613) | | | 43,953 |
Adjustments related to diluted calculation: | | | | | | | | | | | | |
Reallocation of net income attributable to non-controlling interests from the dilutive effect of stock options and restricted stock units (h) | | | 7 | | | 59 | | | — | | | 209 |
Income tax on reallocation of net income attributable to non-controlling interests from the dilutive effect of stock options and restricted stock units (i) | | | (2) | | | (16) | | | — | | | (73) |
Adjusted net (loss) income attributable to Camping World Holdings, Inc. – diluted | | $ | 20,284 | | $ | 32,275 | | $ | (4,613) | | $ | 44,089 |
Denominator: | | | | | | | | | | | | |
Weighted-average Class A common shares outstanding – basic | | | 37,239 | | | 36,964 | | | 37,217 | | | 36,890 |
Adjustments related to diluted calculation: | | | | | | | | | | | | |
Dilutive options to purchase Class A common stock (j) | | | — | | | — | | | — | | | 157 |
Dilutive restricted stock units (j) | | | 17 | | | 83 | | | — | | | 136 |
Adjusted weighted average Class A common shares outstanding – diluted | | | 37,256 | | | 37,047 | | | 37,217 | | | 37,183 |
| | | | | | | | | | | | |
Adjusted earnings (loss) per share - basic | | $ | 0.54 | | $ | 0.87 | | $ | (0.12) | | $ | 1.19 |
Adjusted earnings (loss) per share - diluted | | $ | 0.54 | | $ | 0.87 | | $ | (0.12) | | $ | 1.19 |
| | | | | | | | | | | | |
Anti-dilutive amounts (k): | | | | | | | | | | | | |
Numerator: | | | | | | | | | | | | |
Reallocation of net income attributable to non-controlling interests from the anti-dilutive exchange of common units in CWGS, LLC (h) | | $ | 38,223 | | $ | 63,063 | | $ | 32,271 | | $ | 89,305 |
Income tax on reallocation of net income attributable to non-controlling interests from the anti-dilutive exchange of common units in CWGS, LLC (i) | | $ | (12,524) | | $ | (17,654) | | $ | (17,089) | | $ | (27,445) |
Assumed income tax benefit of combining C-corporations with full valuation allowances with the income of other consolidated entities after the anti-dilutive exchange of common units in CWGS, LLC (l) | | $ | 5,457 | | $ | 3,605 | | $ | 16,024 | | $ | 9,130 |
Denominator: | | | | | | | | | | | | |
Anti-dilutive exchange of common units in CWGS, LLC for shares of Class A common stock (j) | | | 51,669 | | | 51,717 | | | 51,671 | | | 51,773 |
Anti-dilutive restricted stock units (j) | | | — | | | — | | | 12 | | | — |
| | | | | | |
| | Three Months Ended | ||||
| | March 31, | | March 31, | ||
(In thousands except per share amounts) |
| 2020 |
| 2019 | ||
Numerator: | | | | | | |
Net loss attributable to Camping World Holdings, Inc. | | $ | (8,160) | | $ | (19,395) |
Adjustments related to basic calculation: | | | | | | |
Long-lived asset impairment (a): | | | | | | |
Gross adjustment | | | 6,569 | | | — |
Income tax expense for above adjustment (b) | | | (13) | | | — |
Lease termination (c): | | | | | | |
Gross adjustment | | | 584 | | | — |
Income tax benefit for above adjustment (b) | | | — | | | — |
Loss on disposal of assets and other expense, net (d): | | | | | | |
Gross adjustment | | | 511 | | | (214) |
Income tax (expense) benefit for above adjustment (b) | | | (1) | | | 9 |
Equity-based compensation (e): | | | | | | |
Gross adjustment | | | 3,312 | | | 2,716 |
Income tax expense for above adjustment (b) | | | (302) | | | (221) |
Tax Receivable Agreement liability adjustment (f): | | | | | | |
Gross adjustment | | | — | | | (8,477) |
Income tax benefit for above adjustment (b) | | | — | | | 2,143 |
Restructuring costs (g): | | | | | | |
Gross adjustment | | | 6,282 | | | — |
Income tax expense for above adjustment (b) | | | (35) | | | — |
Adjustment to net loss attributable to non-controlling interests resulting from the above adjustments (h) | | | (9,994) | | | (1,453) |
Adjusted net income (loss) attributable to Camping World Holdings, Inc. – basic and diluted | | $ | (1,247) | | $ | (24,892) |
Denominator: | | | | | | |
Weighted-average Class A common shares outstanding – basic | | | 37,534 | | | 37,195 |
Adjusted weighted average Class A common shares outstanding – diluted | | | 37,534 | | | 37,195 |
| | | | | | |
Adjusted earnings (loss) per share - basic | | $ | (0.03) | | $ | (0.67) |
Adjusted earnings (loss) per share - diluted | | $ | (0.03) | | $ | (0.67) |
| | | | | | |
Anti-dilutive amounts (i): | | | | | | |
Numerator: | | | | | | |
Reallocation of net loss attributable to non-controlling interests from the anti-dilutive exchange of common units in CWGS, LLC (j) | | $ | 4,025 | | $ | (5,959) |
Income tax on reallocation of net loss attributable to non-controlling interests from the anti-dilutive exchange of common units in CWGS, LLC (k) | | $ | (5,734) | | $ | (4,563) |
Assumed income tax benefit of combining C-corporations with full valuation allowances with the income of other consolidated entities after the anti-dilutive exchange of common units in CWGS, LLC (l) | | $ | 8,143 | | $ | 10,567 |
Denominator: | | | | | | |
Anti-dilutive exchange of common units in CWGS, LLC for shares of Class A common stock (m) | | | 51,649 | | | 51,673 |
Anti-dilutive restricted stock units (m) | | | 284 | | | 7 |
| (a) | Represents |
| (b) | Represents the current and deferred income tax expense or benefit effect of the above adjustments, many of which are related to entities with full valuation allowances for which no tax benefit can be currently recognized. This assumption uses an effective tax rate of 25.0% and 25.3% for the adjustments for the three month ended March 31, 2020 and 2019, |
50
| (c) | Represents the termination of operating leases relating primarily to the 2019 Strategic Shift, net of lease termination costs (See Note 4 – Restructuring and Long-lived Asset Impairment to our condensed consolidated financial statements included in Part I, Item 1 of this Form 10-Q for additional information. |
| (d) | Represents an adjustment to eliminate the gains and losses |
| Represents non-cash equity-based compensation expense relating to employees and directors of the Company. |
40
| Represents an adjustment to eliminate the loss on remeasurement of the Tax Receivable Agreement primarily due to changes in our effective income tax rate and the transfer of certain assets from GSS to |
| Represents |
| Represents the adjustment to net income attributable to non-controlling interests resulting from the above adjustments that impact the net income of CWGS, LLC. This adjustment uses the non-controlling interest’s weighted average ownership of CWGS, LLC of |
| The below amounts have not been considered in our adjusted earnings per share – diluted amounts as the effect of these items are anti-dilutive. |
| (j) | Represents the reallocation of net income attributable to non-controlling interests from the impact of the assumed change in ownership of CWGS, LLC from stock options, restricted stock units, and/or common units of CWGS, LLC. |
| Represents the income tax expense effect of the above adjustment for reallocation of net income attributable to non-controlling interests. This assumption uses an effective tax rate of 25.0% and 25.3% for the adjustments for the three months ended March 31, 2020 and 2019, |
| (l) | Represents adjustments to reflect the income tax benefit of losses of consolidated C-corporations that under the Company’s current equity structure cannot be used against the income of other consolidated subsidiaries of CWGS, LLC. Subsequent to the exchange of all common units in CWGS, LLC, the Company believes certain actions could be taken such that the C-corporations’ losses could offset income of other consolidated subsidiaries. The adjustment reflects the income tax benefit assuming effective tax rate of 25.0% and 25.3% during the three months ended March 31, 2020 and 2019, |
| (m) | Represents the impact to the denominator for stock options, restricted stock units, and/or common units of CWGS, LLC. |
Uses and Limitations of Non-GAAP Financial Measures
Management and our board of directors use the Non-GAAP Financial Measures:
| ● | as a measurement of operating performance because they assist us in comparing the operating performance of our business on a consistent basis, as they remove the impact of items not directly resulting from our core operations; |
| ● | for planning purposes, including the preparation of our internal annual operating budget and financial projections; |
| ● | to evaluate the performance and effectiveness of our operational strategies; and |
| ● | to evaluate our capacity to fund capital expenditures and expand our business. |
By providing these Non-GAAP Financial Measures, together with reconciliations, we believe we are enhancing investors’ understanding of our business and our results of operations, as well as assisting investors in evaluating how well we are executing our strategic initiatives. In addition, our Senior Secured Credit Facilities use EBITDA to measure our compliance with covenants such as the consolidated leverage ratio. The Non-GAAP Financial Measures have limitations as analytical tools, and should not be considered in isolation, or as an alternative to, or a substitute for net income or other financial statement data presented in our consolidated financial statements included elsewhere in this Form 10-Q as indicators of financial performance. Some of the limitations are:
| ● | such measures do not reflect our cash expenditures, or future requirements for capital expenditures or contractual commitments; |
51
| ● | such measures do not reflect changes in, or cash requirements for, our working capital needs; |
41
| ● | some of such measures do not reflect the interest expense, or the cash requirements necessary to service interest or principal payments on our debt; |
| ● | some of such measures do not reflect our tax expense or the cash requirements to pay our taxes; |
| ● | although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future and such measures do not reflect any cash requirements for such replacements; and |
| ● | other companies in our industry may calculate such measures differently than we do, limiting their usefulness as comparative measures. |
Due to these limitations, the Non-GAAP Financial Measures should not be considered as measures of discretionary cash available to us to invest in the growth of our business. We compensate for these limitations by relying primarily on our GAAP results and using these Non-GAAP Financial Measures only supplementally. As noted in the tables above, certain of the Non-GAAP Financial Measures include adjustments for loss and expense on debt restructure,long-lived asset impairment, lease termination costs, loss on disposal of assets, equity-based compensation, Tax Receivable Agreement liability, an adjustmentrestructuring costs related to rent on right to use assets, Gander Outdoors pre-opening costs,the 2019 Strategic Shift, other unusual or one-time items, and the income tax expense effect described above, as applicable. It is reasonable to expect that certain of these items will occur in future periods. However, we believe these adjustments are appropriate because the amounts recognized can vary significantly from period to period, do not directly relate to the ongoing operations of our business and complicate comparisons of our internal operating results and operating results of other companies over time. Each of the normal recurring adjustments and other adjustments described in this paragraph and in the reconciliation tables above help management with a measure of our core operating performance over time by removing items that are not related to day-to-day operations.
Liquidity and Capital Resources
General
Our primary requirements for liquidity and capital have been working capital, inventory management, acquiring and building new retail locations, the improvement and expansion of existing retail locations, debt service, distributions to holders of equity interests in CWGS, LLC and our Class A common stock, and general corporate needs. These cash requirements have been met through cash provided by operating activities, cash and cash equivalents, proceeds from our IPO, May 2017 public equity offering and October 2017 public equity offering, borrowings under our Senior Secured Credit Facilities (as defined below) or our previous senior secured credit facilities, borrowings under our Floor Plan Facility (as defined below) and borrowings under our Real Estate Facility (as defined below).
As a public company, our additional liquidity needs include public company costs, payment of regular and special cash dividends, any exercise of the redemption right by the Continuing Equity Owners from time to time (should we elect to exchange common units for a cash payment), payments under the Tax Receivable Agreement, and state and federal taxes to the extent not reduced as a result of the Tax Receivable Agreement. The Continuing Equity Owners may exercise such redemption right for as long as their common units remain outstanding. Although the actual timing and amount of any payments that may be made under the Tax Receivable Agreement will vary, we expect that the payments that we will be required to make to the Continuing Equity Owners, Former Profits Unit Holders and Crestview Partners II GP, L.P. will be significant. Any payments made by us to Continuing Equity Owners, Former Profit Unit Holders and Crestview Partners II GP, L.P. under the Tax Receivable Agreement will generally reduce the amount of overall cash flow that might have otherwise been available to us or to CWGS, LLC and, to the extent that we are unable to make payments under the Tax Receivable Agreement for any reason, the unpaid amounts generally will be deferred and will accrue interest until paid by us; provided, however, that nonpayment for a specified period may constitute a material breach of a material obligation under the Tax Receivable Agreement and therefore may accelerate payments due under the Tax Receivable
52
Agreement. For a discussion of the Tax Receivable Agreement, see Note 1112 — Income Taxes to our unaudited condensed consolidated financial statements included in Part I, Item 1 of this Form 10-Q.
42
CWGS, LLC intends to make a regular quarterly cash distribution to its common unit holders, including us, of approximately $0.08 per common unit and we intend to use all of the proceeds from such distribution on our common units to pay a regular quarterly cash dividend of approximately $0.08 per share on our Class A common stock, subject to our discretion as the sole managing member of CWGS, LLC and the discretion of our board of directors. During the three months ended June 30, 2019,March 31, 2020, we paid one regular quarterly cash dividend of $0.08 per share of our Class A common stock. CWGS, LLC is required to make cash distributions in accordance with the CWGS LLC Agreement in an amount sufficient for us to pay any expenses incurred by us in connection with the regular quarterly cash dividend, along with any of our other operating expenses and other obligations. In addition, we currently intend to pay a special cash dividend of all or a portion of the Excess Tax Distribution (as defined under “Dividend Policy” included in Part II, Item 5 of our Annual Report) to the holders of our Class A common stock from time to time subject to the discretion of our board of directors as described under “Dividend Policy” in our Annual Report. During the three months ended June 30, 2019,March 31, 2020, we paid one special cash dividend of $0.0732 per share of our Class A common stock. Our dividend policy has certain risks and limitations, particularly with respect to liquidity, and we may not pay dividends according to our policy, or at all.
During the three months ended March 31, 2020, we incurred long-lived asset impairment charges of $6.6 million, including $6.5 million in connection with the 2019 Strategic Shift. We expect that none of the foregoing charges will result in future cash expenditures. Additionally, in connection with the 2019 Strategic Shift, we have incurred or expect to incur costs relating to one-time employee termination benefits of between $1.2 million and $1.5 million, lease termination costs of between $15.0 million and $20.0 million, incremental inventory reserve charges of $42.4 million, and other associated costs of $20.0 million to $25.0 million. We expect that approximately $20.0 million to $30.0 million of these costs will result in future cash expenditures. For a discussion of the 2019 Strategic Shift, see Note 4 — Restructuring and Long-lived Asset Impairment to our unaudited condensed consolidated financial statements included in Part I, Item 1 of this Form 10-Q.
There is significant uncertainty surrounding the impact of the COVID-19 pandemic on our results of operations and cash flows. As a result, we are proactively taking steps to increase cash available on-hand, including, but not limited to, reducing cash expenditures, including wage reductions through a combination of temporary salary reductions, layoffs, and furloughs; negotiating payment deferrals with lessors; reducing marketing and promotional expenses; and delaying strategic capital expenditures. The Company has negotiated lease payment deferrals of approximately $14.0 million from 2020 into 2021.
Notwithstanding our obligations under the Tax Receivable Agreement, we believe that our sources of liquidity and capital, including cash provided by operating activities and potentially incurring additional borrowings under our Floor Plan Facility, and borrowings under our Real EstateRevolving Credit Facility and proceeds from real estate sale leaseback transactions in the fourth quarter of 2018, will be sufficient to finance our continued operations, growth strategy, including the anticipated opening of additional RV and outdoor retail locations, regular quarterly cash dividends (as described above) and additional expenses we expect to incur for at least the next twelve months. However, we cannot assure you that our cash provided by operating activities, cash and cash equivalents or cash available under our Revolving Credit Facility or our Floor Plan Facility, including the potential additional borrowings noted above, will be sufficient to meet our future needs. If we are unable to generate sufficient cash flows from operations in the future, including as a result of the impact of the COVID-19 pandemic on our business and if availability under our Revolving Credit Facility or our Floor Plan Facility is not sufficient, we may have to obtain additional financing. If we obtain additional capital by issuing equity, the interests of our existing stockholders will be diluted. If we incur additional indebtedness, that indebtedness may impose significant financial and other covenants that may significantly restrict our operations. We cannot assure you that we could obtain refinancing or additional financing on favorable terms or at all, including the expected additional borrowings noted above.above and particularly in light of the economic uncertainty due to the COVID-19 pandemic. See “Risk Factors — Risks Related to our Business — Our ability to operate and expand our business and to respond to changing business and economic conditions will depend on the availability of adequate capital” included in Part I, Item 1A of our Annual Report.
As of June 30, 2019March 31, 2020 and December 31, 2018,2019, we had working capital of $498.9$378.4 million and $583.0$394.7 million, respectively, including $101.3$109.4 million and $138.6$147.5 million, respectively, of cash and cash equivalents. Our working capital reflects the cash provided by deferred revenue and gains reported under current liabilities of $84.2$82.2 million and $88.1$87.1 million as of June 30, 2019March 31, 2020 and December 31, 2018,2019, respectively, which reduces working capital. Deferred revenue primarily consists of cash collected for club memberships in advance of
43
services to be provided, which is deferred and recognized as revenue over the life of the membership. We use net proceeds from this deferred membership revenue to lower our long-term borrowings and finance our working capital needs.
Seasonality
We have experienced, and expect to continue to experience, variability in revenue, net income, and cash flows as a result of annual seasonality in our business. Because RVs are used primarily by vacationers and campers, demand for services, protection plans, products, and resources generally declines during the winter season, while sales and profits are generally highest during the spring and summer months. In addition, unusually severe weather conditions in some geographic areas may impact demand.
We generate a disproportionately higher amount of our annual revenue in our second and third fiscal quarters, which include the spring and summer months. We incur additional expenses in the second and third fiscal quarters due to higher purchase volumes, increased staffing in our retail locations and program costs. If, for any reason, we miscalculate the demand for our products or our product mix during the second and third fiscal quarters, our sales in these quarters could decline, resulting in higher labor costs as a percentage of
53
sales, lower margins and excess inventory, which could cause our annual results of operations to suffer and our stock price to decline.
Additionally, SG&A expenses as a percentage of gross profit tend to be higher in the first and fourth quarters due to the timing of acquisitions and the seasonality of our business. We prefer to acquire new retail locations in the first and fourth quarters of each year in order to provide time for the location to be re-modeled and to ramp up operations ahead of the spring and summer months. The timing of our acquisitions in the first and fourth quarters, coupled with generally lower revenue in these quarters has historically resulted in SG&A expenses as a percentage of gross profit being higher in these quarters.
Cash Flow
The following table shows summary cash flows information for the sixthree months ended June 30, 2019March 31, 2020 and 2018:2019:
| | | | | | | | | | | | |
| | Six Months Ended | | Three Months Ended | ||||||||
| | June 30, | | March 31, | ||||||||
(In thousands) |
| 2019 |
| 2018 |
| 2020 |
| 2019 | ||||
Net cash provided by operating activities | | $ | 100,179 | | $ | 109,120 | ||||||
Net cash used in operating activities | | $ | (15,189) | | $ | (74,020) | ||||||
Net cash used in investing activities | | | (80,522) | | | (244,588) | | | (8,456) | | | (22,916) |
Net cash (used in) provided by financing activities | | | (56,954) | | | 123,748 | | | (14,470) | | | 28,364 |
Net decrease in cash and cash equivalents | | $ | (37,297) | | $ | (11,720) | | $ | (38,115) | | $ | (68,572) |
Operating activities. Our cash flows from operating activities are primarily collections from contracts in transit and customers following the sale of new and used vehicles, as well as from the sale of retail products and services and Good Sam services and plans. Contracts in transit represent amounts due from third-party lenders from whom pre-arranged agreements have been determined, and to whom the retail installment sales contracts have been assigned. Our primary uses of cash from operating activities, are repayments of vehicle floor plan payables, payments to retail product suppliers, personnel-related expenditures, payments related to leased property, advertising, and various services and program costs as well as pre-opening costs for Gander Outdoors (now Gander RV) locations during the sixthree months ended June 30, 2018.March 31, 2019.
Net cash provided byused in operating activities was $100.2$15.2 million in the sixthree months ended June 30, 2019,March 31, 2020, a decrease of $8.9$58.8 million from $109.1$74.0 million of net cash provided byused in operating activities in the sixthree months ended June 30, 2018.March 31, 2019. The decrease was primarily due to $65.0 million of reduced receivables and contracts in transit, a $64.9$12.7 million decreaseincrease in net income and $5.5$7.4 million of other decreases, partially offset by reduced$26.3 of increased inventory purchases of $61.5 million.purchases.
Investing activities. Our investment in business activities primarily consists of expanding our operations through organic growth and the acquisition of retail locations. Substantially all of our new retail locations and capital expenditures have been financed using cash provided by operating activities and borrowings under our Senior Secured Credit Facilities.
44
The table below summarizes our capital expenditures for the sixthree months ended June 30, 2019March 31, 2020 and 2018:2019:
| | | | | | | | | | | |
| Six Months Ended | | Three Months Ended | ||||||||
| June 30, | | March 31, | ||||||||
(In thousands) | 2019 |
| 2018 |
| 2020 |
| 2019 | ||||
IT hardware and software | $ | 4,372 | | $ | 6,100 | | $ | 2,645 | | $ | 1,677 |
Greenfield and acquired retail locations | | 18,103 | | | 65,980 | | | 1,831 | | | 8,278 |
Existing retail locations | | 4,472 | | | 9,639 | | | 4,022 | | | 1,777 |
Corporate and other | | 901 | | | 1,966 | | | 170 | | | 29 |
Total capital expenditures | $ | 27,848 | | $ | 83,685 | | $ | 8,668 | | $ | 11,761 |
| | | | | | | | | | | |
Our capital expenditures consist primarily of investing in acquired and greenfield retail and RV dealership locations, existing retail locations, information technology, hardware, and software. There were no material commitments for capital expenditures as of June 30, 2019.March 31, 2020.
54
Net cash used in investing activities was $80.5$8.5 million for the sixthree months ended June 30, 2019.March 31, 2020. The $80.5$8.5 million of cash used in investing activities was comprised of $38.6approximately $8.7 million of capital expenditures primarily related to retail locations, partially offset by proceeds of $0.2 million from the sale of property and equipment.
Net cash used in investing activities was $22.9 million for the three months ended March 31, 2019. The $22.9 million of cash used in investing activities was comprised of $21.2 million for the acquisition of RV dealerships, $27.8$11.8 million of capital expenditures related to retail locations,primarily for acquired businesses, and $25.1$0.6 million for the purchase of real property, partially offset by proceeds of $10.1$10.2 million from the sale of real property and $0.9$0.5 million of proceeds from the sale of property and equipment. See Note 1011 – Acquisitions to our unaudited condensed consolidated financial statements included in Part 1, Item 1 of this Form 10-Q.
Net cash used in investing activities was $244.6 million for the six months ended June 30, 2018. The $244.6 million of cash used in investing activities included $83.7 million of capital expenditures primarily for the build-out of Gander Outdoors locations, $81.3 million for the purchase of real property, and $80.2 million for the acquisition of eight RV dealership locations and four Erehwon Mountain Outfitters locations (see Note 10 – Acquisitions to our unaudited condensed consolidated financial statements include in Part 1, Item 1 of this Form 10-Q), partially offset by proceeds of $0.6 million from the sale of property and equipment.
Financing activities. Our financing activities primarily consist of proceeds from the issuance of debt and the repayment of principal and debt issuance costs.
Our net cash used in financing activities was $57.0$14.5 million for the sixthree months ended June 30, 2019.March 31, 2020. The $57.0$14.5 million of cash used in financing activities was primarily due to $38.1$8.4 million of non-controlling member distributions, $29.4 million of net payments under the Floor Plan Facility, $11.4$5.8 million of dividends paid on Class A common stock, and $3.8$3.5 million of other financing uses,payments on our long-term debt, and $0.2 million of payments related to RSU shares withheld for taxes, partially offset by $14.0$3.4 million of net proceedsborrowings under the Revolving Credit Facility, and $11.7 million of proceeds received from the Real EstateFloor Plan Facility.
Our net cash provided by financing activities was $123.7$28.4 million for the sixthree months ended June 30, 2018.March 31, 2019. The $123.7$28.4 million of cash provided byused in financing activities was primarily due to $243.2$39.0 million of net proceeds from long-term debt,under the Floor Plan Facility and $24.4$3.9 million of net proceeds from ourunder the Revolving Credit Facility, partially offset by $68.0 million of payments under the Floor Plan Facility, $61.5 million of non-controlling interest member distributions, $11.3$5.7 million of dividends paid on Class A common stock, other financing uses$5.5 million of $3.1non-controlling interest member distributions, and $3.3 million during the six months ended June 30, 2018.of payments on long-term debt.
Description of Senior Secured Credit Facilities, Floor Plan Facility and Real Estate Facility
As of June 30, 2019March 31, 2020 and December 31, 2018,2019, we had outstanding debt in the form of our Senior Secured Credit Facilities, our Floor Plan Facility, and our Real Estate Facility. We may from time to time seek to refinance, retire or exchange our outstanding debt. Such refinancings, repayments or exchanges, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. The amounts involved may be material. In the past, we have used interest rate swap derivatives to diversify our debt portfolio between fixed and variable rate instruments. For additional information regarding our interest rate risk and interest rate hedging instruments, see “Quantitative and Qualitative Disclosures About Market Risk” in Part I, Item 3 of this Form 10-Q.
45
Senior Secured Credit Facilities
As of June 30, 2019March 31, 2020 and December 31, 2018,2019, CWGS Group, LLC (the “Borrower”), an indirect subsidiary of the Company, was party to a credit agreement (as amended from time to time, the “Credit Agreement”) for a senior secured credit facility (the “Senior Secured Credit Facilities”). The Senior Secured Credit Facilities consist of a term loan facility (the “Term Loan Facility”) and a $35.0 million revolving credit facility (the “Revolving Credit Facility”).
55
Table The Term Loan Facility requires mandatory principal payments in equal quarterly installments of Contents$3.0 million, which was paid on March 31, 2020. The Revolving Credit Facility matures on November 8, 2021, and the Term Loan Facility matures on November 8, 2023.
The Credit Agreement for our Senior Secured Credit Facilities requires the CWGS Group, LLC (the “Borrower”), an indirect subsidiary of the Company, and its subsidiaries to comply on a quarterly basis with a maximum Total Leverage Ratio (as defined in the Credit Agreement), which covenant is in effect only if, as of the end of each calendar quarter, the aggregate amount of borrowings under the revolving credit facility (including swingline loans), letters of credit and unreimbursed letter of credit disbursements outstanding at such time (minus the lesser of (a) $5.0 million and (b) letters of credit outstanding) is greater than 30% of the aggregate amount of the Revolving Lenders’ Revolving Commitments (minus the lesser of (a) $5.0 million and (b) letters of credit outstanding), as defined in the Credit Agreement. As of June 30, 2019,March 31, 2020, we were not subject to this covenant as borrowings under the Revolving Credit Facility did not exceed the 30% threshold. At June 30, 2019,March 31, 2020, we would not have met this covenant if we had exceeded the 30% threshold. As such, our borrowing capacity under the Revolving Credit Facility at June 30, 2019March 31, 2020 was limited to $9.4 million of additional borrowings. We were in compliance with all applicable debt covenants at June 30, 2019March 31, 2020 and December 31, 2018.2019.
The following table details the outstanding amounts and available borrowings under our Senior Secured Credit Facilities as of June 30, 2019March 31, 2020 and December 31, 20182019 (in thousands):
| | | | | | | | | | | | |
| | June 30, | | December 31, | | March 31, | | December 31, | ||||
|
| 2019 |
| 2018 |
| 2020 |
| 2019 | ||||
Senior Secured Credit Facilities: | | | | | | | | | | | | |
Term Loan Facility: | | | | | | | | | | | | |
Principal amount of borrowings | | $ | 1,195,000 | | $ | 1,195,000 | | $ | 1,195,000 | | $ | 1,195,000 |
Less: cumulative principal payments | | | (22,905) | | | (19,907) | | | (34,895) | | | (31,898) |
Less: unamortized original issue discount | | | (4,826) | | | (5,358) | | | (4,057) | | | (4,320) |
Less: finance costs | | | (12,028) | | | (13,390) | | | (9,986) | | | (10,667) |
| | | 1,155,241 | | | 1,156,345 | | | 1,146,062 | | | 1,148,115 |
Less: current portion | | | (11,991) | | | (11,991) | | | (11,991) | | | (11,991) |
Long-term debt, net of current portion | | $ | 1,143,250 | | $ | 1,144,354 | | $ | 1,134,071 | | $ | 1,136,124 |
Revolving Credit Facility: | | | | | | | | | | | | |
Total commitment | | $ | 35,000 | | $ | 35,000 | | $ | 35,000 | | $ | 35,000 |
Less: outstanding letters of credit | | | (3,689) | | | (3,689) | | | (3,622) | | | (4,112) |
Less: availability reduction due to Total Leverage Ratio | | | (21,918) | | | — | | | (21,965) | | | (21,622) |
Additional borrowing capacity | | $ | 9,393 | | $ | 31,311 | | $ | 9,413 | | $ | 9,266 |
See our Annual Report and Note 56 – Long-term Debt to our condensed consolidated financial statements included in Part I, Item 1 of this Form 10-Q for a further discussion of the terms of the Senior Secured Credit Facilities.
Floor Plan Facility
As of June 30, 2019March 31, 2020 and December 31, 2018, one2019, FreedomRoads, LLC (“FR”), an indirect subsidiary of our indirect subsidiariesthe Company, maintained floor plan financing through the Seventh Amended and Restated Credit Agreement (“Floor Plan Facility”) with. On October 8, 2019, FR entered into a maturity date of December 12, 2020Second Amendment to the Seventh Amended and anRestated Credit Agreement, (the “Amendment’). The applicable borrowing rate margin on LIBOR and base rate loans rangingranges from 2.05% to 2.50% and 0.55% and 1.00%, respectively, based on the consolidated current ratio at FR. TheAt March 31, 2020, the Floor Plan Facility allowsallowed FR to borrow (a) up to $1.415$1.38 billion under a floor plan facility, (b) up to $15.0 million under a letter of credit facility and (c) up to a maximum amount outstanding
46
of $57.0 million under the revolving line of credit, which maximum amount outstanding will decreasedecreases by $3.0 million on the last day of each fiscal quarter, commencing withquarter. The maturity date of the fiscal quarter endingFloor Plan Facility is March 31, 2020.15, 2023.
The credit agreement governing the Floor Plan Facility contains certain financial covenants which we were in compliance with at June 30, 2019March 31, 2020 and December 31, 2018.2019.
56
The following table details the outstanding amounts and available borrowings under our Floor Plan Facility as of June 30, 2019March 31, 2020 and December 31, 20182019 (in thousands):
| | | | | | | | | | | | |
| | June 30, | | December 31, | | March 31, | | December 31, | ||||
|
| 2019 |
| 2018 |
| 2020 |
| 2019 | ||||
Floor Plan Facility: | | | | | | | | | | | | |
Notes payable — floor plan: | | | | | | | | | | | | |
Total commitment | | $ | 1,415,000 | | $ | 1,415,000 | | $ | 1,379,750 | | $ | 1,379,750 |
Less: borrowings, net | | | (813,635) | | | (885,980) | | | (846,424) | | | (848,027) |
Less: flooring line aggregate interest reduction account | | | (161,564) | | | (97,757) | | | (173,853) | | | (87,016) |
Additional borrowing capacity | | | 439,801 | | | 431,263 | | | 359,473 | | | 444,707 |
Less: accounts payable for sold inventory | | | (76,847) | | | (33,928) | | | (32,934) | | | (27,892) |
Less: purchase commitments | | | (19,574) | | | (22,530) | | | (10,133) | | | (8,006) |
Unencumbered borrowing capacity | | $ | 343,380 | | $ | 374,805 | | $ | 316,406 | | $ | 408,809 |
| | | | | | | | | | | | |
Revolving line of credit | | $ | 60,000 | | $ | 60,000 | | $ | 57,000 | | $ | 60,000 |
Less borrowings | | | (52,768) | | | (38,739) | | | (40,885) | | | (40,885) |
Additional borrowing capacity | | $ | 7,232 | | $ | 21,261 | | $ | 16,115 | | $ | 19,115 |
| | | | | | | | | | | | |
Letters of credit: | | | | | | | | | | | | |
Total commitment | | $ | 15,000 | | $ | 15,000 | | $ | 15,000 | | $ | 15,000 |
Less: outstanding letters of credit | | | (10,330) | | | (10,380) | | | (11,175) | | | (11,175) |
Additional letters of credit capacity | | $ | 4,670 | | $ | 4,620 | | $ | 3,825 | | $ | 3,825 |
See our Annual Report and Note 3 – Inventories and Floor Plan Payable to our condensed consolidated financial statements included in Part I, Item 1 of this Form 10-Q for a further discussion of the terms of the Floor Plan Facility.
Real Estate Facility
As of June 30, 2019March 31, 2020 and December 31, 2018,2019, Camping World Property, Inc. (the ‘‘Real Estate Borrower’’), an indirect wholly-owned subsidiary of CWGS, LLC, and CIBC Bank USA (“Lender”), was party to a loan and security agreement for a real estate credit facility with an aggregate maximum principal amount of $21.5 million (“Real Estate Facility”).
The Real Estate Facility is subject to certain cross default provisions, a debt service coverage ratio, and other customary covenants which we were in compliance with at June 30, 2019March 31, 2020 and December 31, 2018.2019.
The outstanding principal of the Real Estate Facility was $20.9$19.2 million and $9.7$19.7 million as of June 30, 2019March 31, 2020 and December 31, 2018.2019.
See our Annual Report and Note 56 – Long-term Debt to our condensed consolidated financial statements included in Part I, Item 1 of this Form 10-Q for a further discussion of the terms of the Real Estate Facility.
Sale/Leaseback Arrangements
We have in the past and may in the future enter into sale-leaseback transactions to finance certain property acquisitions and capital expenditures, pursuant to which we sell property and/or leasehold
47
improvements to third parties and agree to lease those assets back for a certain period of time. Such sales generate proceeds which vary from period to period.
Deferred Revenue
Deferred revenue consists of our sales for products not yet recognized as revenue at the end of a given period. Our deferred revenue as of June 30, 2019March 31, 2020 was $145.7$140.1 million.
57
Off-Balance Sheet Arrangements
As of June 30, 2019,March 31, 2020, we did not have any off-balance sheet arrangements except for operatingother than short-term leases entered intonot included in our lease obligation.
Contractual Obligations
There were no material changes in our commitments during the normalthree months ended March 31, 2020 under contractual obligations from those disclosed in our Annual Report outside the course of normal business.
Critical Accounting Policies and Estimates
We prepare our condensed consolidated financial statements in accordance with GAAP, and in doing so, we have to make estimates, assumptions and judgments affecting the reported amounts of assets, liabilities, revenues and expenses, as well as the related disclosure of contingent assets and liabilities. We base our estimates, assumptions and judgments on historical experience and on various other factors we believe to be reasonable under the circumstances. Different assumptions and judgments would change estimates used in the preparation of our condensed consolidated financial statements, which, in turn, could change our results from those reported. We evaluate our critical accounting estimates, assumptions and judgments on an ongoing basis.
There has been no material change in our critical accounting policies from those previously reported and disclosed in our Annual Report.
Recent Accounting Pronouncements
See Note 1 – Summary of Significant Accounting Policies to our unaudited condensed consolidated financial statements in Item 1, Part I of this Form 10-Q.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
For a discussion of the Company’s quantitative and qualitative disclosures about market risks, see Item 7A. Quantitative and Qualitative Disclosures About Market Risks, in our Annual Report on Form 10-K for the year ended December 31, 2018.Report. As of June 30, 2019,March 31, 2020, there have been no material changes in this information.
Item 4. Controls and Procedures
Limitations on Effectiveness of Controls and Procedures
In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must
48
reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer (“CEO”) and Chief Financial Officer, (“CFO”), evaluated, as of the end of the period covered by this Quarterly Report on Form 10-Q, the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) as of June 30, 2019.amended (the “Exchange Act”)). Based on thisthat evaluation, our CEOChief Executive Officer and CFOChief Financial Officer concluded that our disclosure controls and procedures were not effective at the reasonable assurance level as of June 30, 2019 as a result of the material weaknesses described in our Annual Report on Form 10-K and below.
In connection with the preparation of our consolidated financial statements for the year ended DecemberMarch 31, 2018, we identified the following material weaknesses in internal control over financial reporting:2020.
58
Management’s Remediation Efforts
We have identified and begun to implement several steps, as further described below, designed to remediate the material weaknesses described in this Item 4 and to enhance our overall control environment. We will not consider the material weaknesses remediated until our enhanced controls are operational for a sufficient period of time and tested, enabling management to conclude that the enhanced controls are operating effectively.
Our remediation activity has included, but is not limited to, the following measures:
While the foregoing measures are intended to effectively remediate the material weaknesses described in this Item 4, it is possible that additional remediation steps will be necessary. As such, as we continue to evaluate and implement our plan to remediate the material weaknesses, our management may decide to take additional measures to address the material weaknesses or modify the remediation steps described above. Until these material weaknesses are remediated, we plan to continue to perform additional analyses and other procedures to help ensure that our consolidated financial statements are prepared in accordance with GAAP.
59
Changes in Internal Control over Financial Reporting
We are taking actionsIn response to remediateCOVID-19 and the material weaknesses relatingrelated stay-at-home policy for a significant portion of our administrative workforce, we have modified certain controls to allow them to be performed remotely. These changes did not materially affect our internal controlscontrol over financial reporting, as described above. Except as discussed above,reporting. Other than these control modifications, there have beenwas no changeschange in our internal control over financial reporting (as defined in Rules 13a-15(e)13a-15(f) and 15d-15(e)15d-15(f) under the Securities Exchange ActAct) identified in connection with the evaluation of 1934, as amended) that occurredour internal control performed during the three monthsfiscal quarter ended June 30, 2019March 31, 2020, that havehas materially affected, or areis reasonably likely to materially affect, our internal control over financial reporting.
Part II. Other Information
Item 1. Legal Proceedings
On October 19, 2018, a purported stockholder of the Company filed a putative class action lawsuit, captioned Ronge v. Camping World Holdings, Inc. et al., in the United States District Court for the Northern District of Illinois against us, certain of our officersSee Note 9 – Commitments and directors, and Crestview Partners II GP, L.P. and Crestview Advisors, L.L.C. (the “Ronge Complaint”). On October 25, 2018, a different purported stockholder of the Company filed a putative class action lawsuit, captioned Strougo v. Camping World Holdings, Inc. et al., in the United States District Court for the Northern District of Illinois against us, certain of our officers and directors, and Crestview Partners II GP, L.P. and Crestview Advisors, L.L.C. (the “Strougo Complaint”).
The Ronge and Strougo Complaints were consolidated and lead plaintiffs appointed by the court. On February 27, 2019, lead plaintiffs filed a consolidated complaint against us, certain of our officers and directors, Crestview Partners II GP, L.P. and Crestview Advisors, L.L.C., and the underwriters of the May and October 2017 secondary offerings of our Class A common stock. The consolidated complaint alleges violations of Sections 11 and 12(a)(2) of the Securities Act of 1933, as well as Section 10(b) of the Securities Exchange Act of 1934, as amended, and rule 10b-5 thereunder, based on allegedly materially misleading statements or omissions of material facts necessary to make certain statements not misleading related to the business, operations, and management of the Company. Additionally, it alleges that certain of our officers and directors, Crestview Partners II GP, L.P., and Crestview Advisors, L.L.C. violated Section 15 of the Securities Act of 1933 and Section 20(a) of the Securities Exchange Act of 1934, as amended, by allegedly acting as controlling persons of the Company. The lawsuit brings claims on behalf of a putative class of purchasers of our Class A common stock between March 8, 2017 and August 7, 2018, and seeks compensatory damages, rescission, attorneys’ fees and costs, and any equitable or injunctive relief the court deems just and proper. On May 17, 2019, the Company, along with the other defendants, moved to dismiss the complaint.
On December 12, 2018, a putative class action complaint styled International Union of Operating Engineers Benefit Funds of Eastern Pennsylvania and Delaware v. Camping World Holdings Inc., et al. was filed in the Supreme Court of the State of New York, New York County, on behalf of all purchasers of Camping World Class A common stock issued pursuant and/or traceable to a secondary offering of such securities in October 2017 (“IUOE Complaint”). The IUOE Complaint names as defendants the Company, and certain of its officers and directors, among others, and alleges violations of Sections 11, 12(a), and 15 of the Securities Act of 1933 based on allegedly materially misleading statements or omissions of material facts necessary to make certain statements not misleading and seeks compensatory damages, including prejudgment and post-judgment interest, attorneys’ fees and costs, and any equitable or injunctive relief the court deems just and proper, including rescission. On February 28, 2019, we, along with the other defendants, moved to dismiss this action. The parties are scheduled to argue the merits of defendants’ motion to dismiss before the Supreme Court of the State of New York, Commercial Division, on August 22, 2019.
On February 22, 2019, a putative class action complaint styled Daniel Geis v. Camping World Holdings, Inc., et al. was filed in the Circuit Court of Cook County, Illinois, Chancery Division, on behalf of all purchasers of Camping World Class A common stock in and/or traceable to the Company’s initial public offering on October 6, 2016 (“Geis Complaint”). The Geis Complaint names as defendants the Company, certain of its officers and directors, and the underwriters of the offering, and alleges violations of Sections 11, 12(a)(2), and 15 of the Securities Act of 1933 based on allegedly materially misleading statements or omissions of material facts necessary to make certain statements not misleading. The Geis Complaint seeks compensatory damages, prejudgment and post-judgment interest, attorneys’ fees and costs, and any other
60
and further relief the court deems just and proper. On April 19, 2019, we, along with the other defendants, moved to dismiss this action. The parties are scheduled to argue the merits of defendants’ motion to dismiss before the Circuit Court of Cook County, Illinois, Chancery Division on August 20, 2019.
On March 5, 2019, a shareholder derivative suit captioned Hunnewell v. Camping World Holdings, Inc., et al., was filed in the Court of Chancery of the State of Delaware, alleging breaches of fiduciary duty for alleged failure to implement effective disclosure controls and internal controls over financial reporting and to properly oversee certain acquisitions and for alleged insider trading (the “Hunnewell Complaint”). The Hunnewell Complaint names the Company as nominal defendant, and names certain of its officers and directors, among others, as defendants and seeks restitutionary and/or compensatory damages, disgorgement of all management fees, advisory fees, expenses and other fees paid by us during the period in question, disgorgement of profits pursuant to the alleged insider trading, attorneys’ fees and costs, and any other and further relief the court deems just and proper.
On April 17, 2019, a shareholder derivative suit captioned Lincolnshire Police Pension Fund v. Camping World Holdings, Inc., et al., was filed in the Court of Chancery of the State of Delaware, alleging breaches of fiduciary duty for alleged failure to implement effective disclosure controls and internal controls over financial reporting and to properly oversee certain acquisitions and for alleged insider trading and unjust enrichment for compensation received during that time (the “LPPF Complaint”). The LPPF Complaint names us as nominal defendant, and names certain of our officers and directors, among others, as defendants and seeks compensatory damages, extraordinary equitable and/or injunctive relief, restitution and disgorgement, attorneys’ fees and costs, and any other and further relief the court deems just and proper. On May 30, 2019, the Court granted the parties’ joint motion to consolidate the Hunnewell and LPPF Complaints (as well as any future filed actions relating to the subject matter) and stay the newly consolidated action pending the resolution of defendants’ motion to dismiss the putative class action (Ronge) pending in the United States District Court for the Northern District of Illinois.
On August 6, 2019, two shareholder derivative suits, styled Janssen v. Camping World Holdings, Inc., et al., and Sandler v. Camping World Holdings, Inc. et al., were filed in the U.S. District Court of Delaware. Both actions name us as a nominal defendant, and name certain of our officers and directors, Crestview Partners II GP, L.P. and Crestview Advisors, L.L.C. as defendants, and allege: (i) violations of Section 14(a) of the Securities Exchange Act for issuing proxy statements that allegedly omitted material information and allegedly included materially false and misleading financial statements; (ii) violations of Section 10(b) and 20(a) of the Securities Exchange Act of 1934, seeking contribution for causing us to issue allegedly false and misleading statements and/or allegedly omit material information in public statements and/or filings concerning our financial performance, the effectiveness of internal controls to ensure accurate financial reporting, and the success and profitability of the integration and rollout of Gander Outdoors stores; (iii) breaches of fiduciary duty, unjust enrichment, abuse of control, and gross mismanagement for allegedly causing or allowing us to disseminateContingencies to our shareholders materially misleading and inaccurate information through our SEC filings; and (iv) breachunaudited condensed consolidated financial statements in Item 1, Part I of fiduciary duties for alleged insider selling and misappropriation of information (together, the “Janssen and Sandler Complaints”). The Janssen and Sandler Complaints seek restitutionary and/or compensatory damages, injunctive relief, disgorgement of all profits, benefits, and other compensation obtained by the certain of our officers and directors, attorneys’ fees and costs, and any other and further relief the court deems just and proper. We are only a nominal defendant in the Janssen and Sandler Complaints.
We are also engaged in various other legal actions, claims and proceedings arising in the ordinary course of business, including claims related to employment-related matters, breach of contracts, products liabilities, consumer protection and intellectual property matters resulting from our business activities. We do not believe that the ultimate resolution of such matters will have a material adverse effect on our business, financial condition or results of operations. However, litigation is subject to many uncertainties, and the outcome of certain of such individual litigated matters may not be reasonably predictable and any related damages may not be estimable. Certain of these litigation matters could result in an adverse outcome to us, and any such adverse outcome could have a material adverse effect on our business, financial condition and results of operations.
this Form 10-Q.
61
Item 1A. Risk Factors
Other than as described below, thereThere have been no material changes to our risk factors as previously disclosed in Item 1A of Part I of our Annual Report on Form 10-K for the year ended December 31, 20182019 filed with the Securities and Exchange Commission on March 15, 2019.February 28, 2020, other than with respect to the risk factors described below.
Our business model is impacted by general economic conditions in our markets,The COVID-19 pandemic has had, and ongoing economic and financial uncertainties has caused a decline in consumer spending that has adversely affectedwe expect will continue to have, certain negative impacts on our business, financial condition and results of operations.
As a business that relies on consumer discretionary spending, we have in the past andsuch impacts may in the future be adversely affected if our customers reduce, delay or forego their purchases of our services, protection plans, products and resources as a result of:
We also rely on our retail locations to attract and retain customers and to build our customer database. If we close retail locations, are unable to open or acquire new retail locations due to general economic conditions or otherwise, or experience declines in customer transactions in our existing retail locations due to general economic conditions or otherwise, our ability to maintain and grow our customer database and our Active Customers will be limited, which could have a material adverse effect on our business,results of operations, financial condition and results of operation.cash flows.
Decreases in Active Customers, average spend per customer, or retentionThe public health crisis caused by the COVID-19 pandemic and renewal rates forthe measures being taken by governments, businesses, including us and our consumer servicesvendors, and plans would negatively affect our financial performance,the public at large to limit COVID-19's spread have had, and a prolonged period of depressed consumer spending couldwe expect will continue to have, a material adverse effect on our business. Promotional activities and decreased demand for consumer products have also affected our profitability and margins, particularly in recent quarters, and thiscertain negative impact could continue or worsen in future periods. In addition, adverse economic conditions may result in an increase in our operating expenses due to, among other things, higher costs of labor, energy, equipment and facilities, as well as higher tariffs. Due to fluctuations in the U.S. economy, our sales, operating and financial results for a particular period are difficult to predict, making it difficult to forecast results for future periods. Additionally, we are subject to economic fluctuations in local markets that may not reflect the economic conditions of the U.S. economy. Any of the foregoing factors could have a material adverse effectimpacts on our business financial condition and results of operations.
In addition,including, without limitation, the success of our recurring Good Sam consumer services and plans depends, in part, on our customers’ use of certain RV sites and/or the purchase of services, protection plans, products andfollowing:
| ● | As consumers have followed governmentally mandated or voluntary stay-at-home guidelines, we have experienced a decrease in traffic at our RV and Outdoor Retail locations, which has resulted in a decrease in the sales of certain of our products and services at our RV and Outdoor Retail locations. We have implemented preparedness plans to keep our employees and customers healthy and safe, which include social distancing, providing employees with face coverings and/or other protective clothing as required, and implementing additional cleaning and sanitization routines. This negative trend is likely to continue, with the most significant impact expected to occur in the second quarter of fiscal year 2020. If the COVID-19 pandemic intensifies, its negative impacts on our sales could be more prolonged and may become more severe. Therefore, the historical information in this quarterly report does not fully reflect the adverse impacts of COVID-19 on our business. Accordingly, investors are cautioned not to unduly rely on such historical information regarding our business, results of operations, financial condition or liquidity, as that data does not fully reflect the adverse |
6249
resources through participating merchants, as well as the health of the RV industry generally. If general economic conditions worsen, our customers may perceive that they have less disposable income for leisure activities or they may not be able to obtain credit for discretionary purchases. As a result, they may travel less frequently, spend less when they travel and purchase and utilize our services, protection plans, products and resources less often, if at all, which could have a material adverse effect on our business, financial condition and results of operations.
In addition, we have faced increased competition from other businesses with similar product and service offerings during recent periods. For example, our competitors have listed RVs at or below cost and we have had little visibility into our competitors or manufacturers’ inventories. As a result, we have responded and may need to further respond by establishing pricing, marketing and other programs or by seeking out additional strategic alliances or acquisitions that may be less favorable to us than we could otherwise establish or obtain in more favorable economic environments. Such programs have adversely impacted our gross margin, operating margin and selling, general and administrative expenses. In addition, declines in the national economy could cause merchants who participate in our programs to go out of business. It is likely that, should the number of merchants entering bankruptcy rise, the number of uncollectible accounts would also rise. These factors could have a material adverse effect on our business, financial condition and results of operations.
Changes in consumer preferences for our products or our failure to gauge those preferences could lead to reduced sales and have increased our cost of sales and selling, general and administrative expenses.
We cannot be certain that historical consumer preferences for RVs in general, and any related products, will remain unchanged. RVs are generally used for recreational purposes, and demand for our products may be adversely affected by competition from other activities that occupy consumers’ leisure time and by changes in consumer lifestyle, usage pattern, or taste. Similarly, an overall decrease in consumer leisure time may reduce consumers’ willingness to purchase our products. Over the past several years, we have seen a shift in our overall sales mix towards new travel trailer vehicles, which has led to declines in our average selling price of a new vehicle unit. From 2015 to 2018, new vehicle travel trailer units increased from 62% of total new vehicle unit sales to more than 68% of total new vehicle unit sales and the average selling price of a new vehicle unit has declined from $39,853 to $35,221. The increased popularity of new travel trailer vehicles and the lower price points of these units compared to other new vehicle classes, such as motorhomes and fifth wheels, could continue to lower our average selling price of a new vehicle unit and impact our ability to grow same store sales. However, after several years of strong growth, the overall RV industry experienced decelerating demand for new vehicles in 2018 and wholesale shipments of new RV vehicles declined 4.1% for the full year of 2018 and 20.3% for the first half of 2019 on a period-over-period comparable period basis. Decelerating industry trends in 2018 and 2019 have also negatively impacted our same store sales trends during those periods. These factors have negatively impacted our results of operations and may continue to negatively impact our results of operations in the future, which could have a material adverse effect on our business, financial condition and results of operations.
Our failure to successfully order and manage our inventory to reflect consumer demand in a volatile market and anticipate changing consumer preferences and buying trends has and may continue to have an adverse effect on our business, financial condition and results of operations.
Our success depends upon our ability to successfully manage our inventory and to anticipate and respond to merchandise trends and consumer demands in a timely manner. Our products appeal to consumers who are, or could become, RV owners and/or outdoor and active sports enthusiasts across North America. The preferences of these consumers cannot be predicted with certainty and are subject to change. Further, the retail consumer industry, by its nature, is volatile and sensitive to numerous economic factors, including consumer preferences, competition, market conditions, general economic conditions and other factors outside of our control. We cannot predict consumer preferences with certainty, and consumer preferences often change over time. We typically order merchandise well in advance of the following selling season. The extended lead times for many of our purchases may make it difficult for us to respond rapidly to new or changing product trends, increases or decreases in consumer demand or changes in prices. If we misjudge either the market for our merchandise or our consumers’ purchasing habits in the future, our
| impact of COVID-19 and therefore does not purport to be representative of the future results of operations, financial condition, liquidity or other financial or operating results of us. |
| ● | As many national parks and RV parks have temporarily closed in response to the COVID-19 pandemic, consumers may use their RVs less frequently and be less inclined to need or renew certain of our services or purchase products through our e-commerce websites. We have experienced decreases in new memberships and renewals of certain of our services and decreased online traffic. |
| ● | As of March 31, 2020, we have temporarily closed four of our specialty retail locations as a result of COVID-19. Subsequent to March 31, 2020, we have temporarily closed three dealerships as a result of COVID-19. To the extent the COVID-19 pandemic intensifies or governmental orders change, we may be forced to close more locations in the future. |
| ● | Deteriorating economic conditions as a result of the COVID-19 pandemic, such as increased unemployment, decreases in disposable income, declines in consumer confidence, or economic slowdowns or recessions, could cause a further decrease in demand for our products and services. |
| ● | We have made temporary changes to our operating procedures at our RV and Outdoor Retail locations and offices. We are taking measures to protect our customers, employees and facilities, which include, but are not limited to, social distancing, providing employees with face coverings and/or other protective clothing as required, and implementing additional cleaning and sanitization routines. These measures may not be sufficient to prevent the spread of COVID-19 among our employees and, therefore, we may face labor shortages including key positions. Additionally, our employees may not be as efficient while operating under these temporary procedures, which could result in additional labor costs. |
| ● | We have faced, and may continue to face, increasing delays in the delivery of certain products from our vendors as a result of shipping delays due to, among other things, additional safety requirements imposed by governmental authorities and capacity constraints experienced by our transportation contractors. |
| ● | Some of our vendors have experienced, and may experience in the future, temporary facility closures, production slowdowns and disruptions in distribution operations as a result of the impact of the COVID-19 pandemic on their respective businesses, such as Thor Industries, Inc.’s announced temporary closure of its North American production facilities from late March to early May 2020. |
| ● | Disruptions in supply chains may place constraints on our ability to source product, which may increase our product costs or lead to shortages. |
| ● | Our ability to increase our borrowing capacity may be limited as a result of the COVID-19 pandemic and, if the conditions in the credit markets worsen, our ability to refinance credit arrangements as they mature may also be limited. As a result, there is no guarantee that we will be able to access additional capital on commercially reasonable terms or at all. |
| ● | The current uncertain market conditions and their actual or perceived effects on our results of operations and financial condition, along with the current unfavorable economic environment in the United States, may increase the likelihood that one or more of the major independent credit agencies will further downgrade our credit ratings, which could have a negative effect on our borrowing costs. |
| ● | Governmental authorities in the United States may increase or impose new income taxes or indirect taxes, or revise interpretations of existing tax rules and regulations, as a means of financing the costs of stimulus and other measures enacted or taken, or that may be enacted or taken in the future, to protect populations and economies from the impact of the COVID-19 pandemic. Such actions could have an adverse effect on our results of operations and cash flows. |
6350
| ● | We rely on third-party service providers and business partners, such as cloud data storage and other information technology service providers, suppliers, distributors, contractors, and other external business partners, for certain functions or for services in support of key portions of our operations. These third-party service providers and business partners are subject to risks and uncertainties related to the COVID-19 pandemic, which may interfere with their ability to fulfill their respective commitments and responsibilities to us in a timely manner and in accordance with the agreed-upon terms. |
| ● | The financial impact of the COVID-19 pandemic may cause one or more of our counterparty financial institutions to fail or default on their obligations to us, which could cause us to incur significant losses. |
| ● | Deteriorations in our financial results and financial condition as a result of the COVID-19 pandemic could cause us to default on one or multiple of our credit agreements, including any of the subjective acceleration clauses in such agreements. If this occurs, our obligations under the relevant agreement may be accelerated which would have a material adverse impact on our business, liquidity position and financial position. |
| ● | We may be required to record significant impairment charges with respect to noncurrent assets, including goodwill, other intangible assets, and other long-lived assets whose fair values may be negatively affected by the effects of the COVID-19 pandemic on our operations. Also, we may be required to write off excess or obsolete inventory as a result of the COVID-19 pandemic’s damaging impacts on our business. |
| ● | As a result of the COVID-19 pandemic, including related governmental guidance or directives, we have required most office-based employees to work remotely. We may experience reductions in productivity and disruptions to our business routines and heightened cybersecurity risks while our remote work policy remains in place. |
| ● | Actions we have taken or may take, or decisions we have made or may make, as a consequence of the COVID-19 pandemic may result in legal claims or litigation against us. |
revenues may decline significantly, and we may not have sufficient quantitiesThe resumption of merchandise to satisfy consumer demand or sales orders, or wenormal business operations after the disruptions caused by the COVID-19 pandemic may be required to discount excess inventory, eitherdelayed or constrained by its lingering effects on our consumers, vendors or third-party service providers.
Any of which couldthe negative impacts of the COVID-19 pandemic, including those described above, alone or in combination with others, may have a material adverse effect on our business,results of operations, financial condition and resultscash flows. Any of operations. For example,these negative impacts, alone or in recent periods we have implemented discounting programs to reduce our excess RV inventory. In addition, we have exited or are exiting certain non-RV retail categories because we felt those categories did not have sufficient demand or sales margins to justify our inventory levels. These activities have negatively impacted our gross margin, operating margin and selling, general and administrative expenses.
Because certaincombination with others, could exacerbate many of the products that we sell are manufactured abroad, we may face delays, new or increased tariffs, increased cost or quality control deficienciesrisk factors discussed in the importation“Risk Factors” in Item 1A of these products, which could reduce our net sales and profitability.
Like many other outdoor and active sports-oriented retailers, a portion of the products that we purchase for resale, including those purchased from domestic suppliers, is manufactured abroad in China and other countries. In addition, we believe mostPart I of our private label merchandise is manufactured abroad. Trade tensions between the U.S. and China, as well as those between the U.S. and Canada, Mexico and other countries have been escalating in recent months. Most notably, three rounds of U.S. tariffs were placed on Chinese goods being exportedAnnual Report. The full extent to the U.S., with such tariffs taking effect in July, August and September 2018. Each of these U.S. tariff impositions against Chinese exports were followed by a round of retaliatory Chinese tariffs on U.S. exports to China. The competing tariff regimes imposed by the U.S. and Chinese administrations have continued to escalate in recent months, including new tariffs by the U.S. administration set to go into effect in September 2019 and threats of retaliation by the Chinese administration.
As a result, our foreign imports, in particular imports from China, subject us to the risks of changes in, or the imposition of new import tariffs, duties or quotas, new restrictions on imports, loss of “most favored nation” status with the United States for a particular foreign country, antidumping or countervailing duty orders, retaliatory actions in response to illegal trade practices, work stoppages, delays in shipment, freight expense increases, product cost increases due to foreign currency fluctuations or revaluations and economic uncertainties. If any of these or other factors were to cause a disruption of trade from the countries in which the suppliers of our vendors are located or impose additional costs in connection with the purchase of our products, we may be unable to obtain sufficient quantities of products to satisfy our requirements and our results of operations could be adversely affected.
To the extent that any foreign manufacturers which supply products to us directly or indirectly utilize quality control standards, labor practices or other practices that vary from those legally mandated or commonly accepted in the United States, we could be hurt by any resulting negative publicity or, in some cases, face potential liability.
In addition, instability in the political and economic environments of the countries in which our vendors or we obtain our products, or general international instability, could have an adverse effect on our operations. In the event of disruptions or delays in supply due to economic or political conditions in foreign countries, such disruptions or delays could adverselyCOVID-19 pandemic will negatively affect our results of operations, unlessfinancial condition and until alternative supply arrangements could be made. In addition, merchandise purchased from alternative sources may be of lesser quality or more expensive than the merchandise we currently purchase abroad.
We have been named in litigation, which has resulted in substantial costscash flows will depend on future developments that are highly uncertain and may result in reputational harm and divert management’s attention and resources.
We face legal risks in our business, including claims from disputes with our employees and our former employees and claims associated with general commercial disputes, product liability and other matters. Risks associated with legal liability often are difficult to assess or quantify and their existence and magnitude can remain unknown for significant periods of time.
We have been named in the past, are currently named and may be named in the future as defendants of class action lawsuits. For example, we were named as a defendant in a class action lawsuit by Camp Coast to Coast club members, which alleged certain violations of California’s Unfair Competition Law at Business and Professions Code and other laws, relating to our sale of trip points and certain advertising
64
and marketing materials. In addition, we were also named as a defendant in a putative class action lawsuit filed by former employees in the State of California, which alleged various wage and hour claims under the California Labor Code. We have since settled both actions.
We are currently subject to securities class action litigation and may be subject to similar or other litigation in the future. For example, on October 19, 2018, a purported stockholder of the Company filed a putative class action lawsuit, captioned Ronge v. Camping World Holdings, Inc. et al., in the United States District Court for the Northern District of Illinois against us, certain of our officers and directors, and Crestview Partners II GP, L.P. and Crestview Advisors, L.L.C. (the “Ronge Complaint”). On October 25, 2018, a different purported stockholder of the Company filed a putative class action lawsuit, captioned Strougo v. Camping World Holdings, Inc. et al., in the United States District Court for the Northern District of Illinois against us, certain of our officers and directors, and Crestview Partners II GP, L.P. and Crestview Advisors, L.L.C. (the “Strougo Complaint”).
The Ronge and Strougo Complaints were consolidated and lead plaintiffs appointed by the court. On February 27, 2019, lead plaintiffs filed a consolidated complaint against us, certain of our officers and directors, Crestview Partners II GP, L.P. and Crestview Advisors, L.L.C., and the underwriters of the May and October 2017 secondary offerings of our Class A common stock. The consolidated complaint alleges violations of Sections 11 and 12(a)(2) of the Securities Act of 1933, as well as Section 10(b) of the Securities Exchange Act of 1934, as amended, and rule 10b-5 thereunder, based on allegedly materially misleading statements or omissions of material facts necessary to make certain statements not misleading related to the business, operations, and management of the Company. Additionally, it alleges that certain of our officers and directors, Crestview Partners II GP, L.P., and Crestview Advisors, L.L.C. violated Section 15 of the Securities Act of 1933 and Section 20(a) of the Securities Exchange Act of 1934, as amended, by allegedly acting as controlling persons of the Company. The lawsuit brings claims on behalf of a putative class of purchasers of our Class A common stock between March 8, 2017 and August 7, 2018, and seeks compensatory damages, rescission, attorneys’ fees and costs, and any equitable or injunctive relief the court deems just and proper. On May 17, 2019, the Company, along with the other defendants, moved to dismiss the complaint.
On December 12, 2018, a putative class action complaint styled International Union of Operating Engineers Benefit Funds of Eastern Pennsylvania and Delaware v. Camping World Holdings Inc., et al. was filed in the Supreme Court of the State of New York, New York County, on behalf of all purchasers of Camping World Class A common stock issued pursuant and/or traceable to a secondary offering of such securities in October 2017 (“IUOE Complaint”). The IUOE Complaint names as defendants Camping World, and certain of our officers and directors, among others, and alleges violations of Sections 11, 12(a), and 15 of the Securities Act of 1933 based on allegedly materially misleading statements or omissions of material facts necessary to make certain statements not misleading and seeks compensatory damages, including prejudgment and post-judgment interest, attorneys’ fees and costs, and any equitable or injunctive relief the court deems just and proper, including rescission. On February 28, 2019, we, along with the other defendants, moved to dismiss this action. The parties are scheduled to argue the merits of defendants’ motion to dismiss before the Supreme Court of the State of New York, Commercial Division, on August 22, 2019.
On February 22, 2019, a putative class action complaint styled Daniel Geis v. Camping World Holdings, Inc., et al. was filed in the Circuit Court of Cook County, Illinois, Chancery Division, on behalf of all purchasers of Camping World Class A common stock in and/or traceable to our initial public offering on October 6, 2016 (“Geis Complaint”). The Geis Complaint names as defendants Camping World, certain of our officers and directors, and the underwriters of the offering, and alleges violations of Sections 11, 12(a)(2), and 15 of the Securities Act of 1933 based on allegedly materially misleading statements or omissions of material facts necessary to make certain statements not misleading. The Geis Complaint seeks compensatory damages, prejudgment and post-judgment interest, attorneys’ fees and costs, and any other and further relief the court deems just and proper. On April 19, 2019, we, along with the other defendants, moved to dismiss this action. The parties are scheduled to argue the merits of defendants’ motion to dismiss before the Circuit Court of Cook County, Illinois, Chancery Division on August 20, 2019.
On March 5, 2019, a shareholder derivative suit captioned Hunnewell v. Camping World Holdings, Inc., et al., was filed in the Court of Chancery of the State of Delaware, alleging breaches of fiduciary duty for
65
alleged failure to implement effective disclosure controls and internal controls over financial reporting and to properly oversee certain acquisitions and for alleged insider trading (the “Hunnewell Complaint”). The Hunnewell Complaint names us as nominal defendant, and names certain of its officers and directors, among others, as defendants and seeks restitutionary and/or compensatory damages, disgorgement of all management fees, advisory fees, expenses and other fees paid by us during the period in question, disgorgement of profits pursuant to the alleged insider trading, attorneys’ fees and costs, and any other and further relief the court deems just and proper.
On April 17, 2019, a shareholder derivative suit captioned Lincolnshire Police Pension Fund v. Camping World Holdings, Inc., et al., was filed in the Court of Chancery of the State of Delaware, alleging breaches of fiduciary duty for alleged failure to implement effective disclosure controls and internal controls over financial reporting and to properly oversee certain acquisitions and for alleged insider trading and unjust enrichment for compensation received during that time (the “LPPF Complaint”). The LPPF Complaint names us as nominal defendant, and names certain of our officers and directors, among others, as defendants and seeks compensatory damages, extraordinary equitable and/or injunctive relief, restitution and disgorgement, attorneys’ fees and costs, and any other and further relief the court deems just and proper. On May 30, 2019, the Court granted the parties’ joint motion to consolidate the Hunnewell and LPPF Complaints (as well as any future filed actions relating to the subject matter) and stay the newly consolidated action pending the resolution of defendants’ motion to dismiss the putative class action (Ronge) pending in the United States District Court for the Northern District of Illinois.
On August 6, 2019, two shareholder derivative suits, styled Janssen v. Camping World Holdings, Inc., et al., and Sandler v. Camping World Holdings, Inc. et al., were filed in the U.S. District Court of Delaware. Both actions name us as a nominal defendant, and name certain of our officers and directors, Crestview Partners II GP, L.P. and Crestview Advisors, L.L.C. as defendants, and allege: (i) violations of Section 14(a) of the Securities Exchange Act for issuing proxy statements that allegedly omitted material information and allegedly included materially false and misleading financial statements; (ii) violations of Section 10(b) and 20(a) of the Securities Exchange Act, seeking contribution for causing us to issue allegedly false and misleading statements and/or allegedly omit material information in public statements and/or filings concerning our financial performance, the effectiveness of internal controls to ensure accurate financial reporting, and the success and profitability of the integration and rollout of Gander Outdoors stores; (iii) breaches of fiduciary duty, unjust enrichment, abuse of control, and gross mismanagement for allegedly causing or allowing us to disseminate to our shareholders materially misleading and inaccurate information through our SEC filings; and (iv) breach of fiduciary duties for alleged insider selling and misappropriation of information (together, the “Janssen and Sandler Complaints”). The Janssen and Sandler Complaints seek restitutionary and/or compensatory damages, injunctive relief, disgorgement of all profits, benefits, and other compensation obtained by the certain of our officers and directors, attorneys’ fees and costs, and any other and further relief the court deems just and proper.
The results of the securities class action lawsuits, shareholder derivative lawsuit, and any other future legal proceedings cannot be predicted, with certainty. Regardlessincluding the scope and duration of their subject matter or merits, such legal proceedings have resultedthe pandemic and actions taken by governmental authorities and other third parties in and are likelyresponse to continue to result in significant cost to us, which may not be covered by insurance, may divert the attention of management or may otherwise have an adverse effect on our business, financial condition and results of operations. Negative publicity from litigation, whether or not resulting in a substantial cost, could materially damage our reputation and could have a material adverse effect on our business, financial condition, results of operations, and the price of our Class A common stock. In addition, such legal proceedings may make it more difficult to finance our operations.pandemic.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
None.
6651
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
None.
Item 6. Exhibits
Exhibits Index
| | | | | | |||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | | Incorporated by Reference | | | | | | Incorporated by Reference | | | ||||||||||||
Exhibit |
| Exhibit Description |
| Form |
| File No. |
| Exhibit |
| Filing |
| Filed/ |
| Exhibit Description |
| Form |
| File No. |
| Exhibit |
| Filing |
| Filed/ |
3.1 | | Amended and Restated Certificate of Incorporation of Camping World Holdings, Inc. | | 10-Q | | 001-37908 | | 3.1 | | 11/10/16 | | | Amended and Restated Certificate of Incorporation of Camping World Holdings, Inc. | | 10-Q | | 001-37908 | | 3.1 | | 11/10/16 | | ||
| | | | | | | | | | | | | | | | | | | | | | | | |
3.2 | | | 10-Q | | 001-37908 | | 3.2 | | 11/10/16 | | | | 10-Q | | 001-37908 | | 3.2 | | 11/10/16 | | ||||
| | | | | | | | | | | | | | | | | | | | | | | | |
4.1 | | Specimen Stock Certificate evidencing the shares of Class A common stock | | S-1/A | | 333-211977 | | 4.1 | | 9/13/16 | | | | Specimen Stock Certificate evidencing the shares of Class A common stock | | S-1/A | | 333-211977 | | 4.1 | | 9/13/16 | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
10.1 | | Consulting Agreement, by and between the Company and Thomas F. Wolfe, dated July 2, 2019 | | | | | | | | | | * | | | 8-K | | 001-37908 | | 10.1 | | 3/25/20 | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
31.1 | | Rule 13a-14(a) / 15d-14(a) Certification of Chief Executive Officer | | | | | | | | | | * | | Rule 13a-14(a) / 15d-14(a) Certification of Chief Executive Officer | | | | | | | | | | * |
| | | | | | | | | | | | | | | | | | | | | | | | |
31.2 | | Rule 13a-14(a) / 15d-14(a) Certification of Chief Financial Officer | | | | | | | | | | * | | Rule 13a-14(a) / 15d-14(a) Certification of Chief Financial Officer | | | | | | | | | | * |
| | | | | | | | | | | | | | | | | | | | | | | | |
32.1 | | | | | | | | | | | ** | | | | | | | | | | | ** | ||
| | | | | | | | | | | | | | | | | | | | | | | | |
32.2 | | | | | | | | | | | ** | | | | | | | | | | | ** | ||
| | | | | | | | | | | | | | | | | | | | | | | | |
101.INS | | Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. | | | | | | | | | | *** | | Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. | | | | | | | | | | *** |
| | | | | | | | | | | | | | | | | | | | | | | | |
101.SCH | | Inline XBRL Taxonomy Extension Schema Document | | | | | | | | | | *** | | Inline XBRL Taxonomy Extension Schema Document | | | | | | | | | | *** |
| | | | | | | | | | | | | | | | | | | | | | | | |
6752
| | | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | | Incorporated by Reference | | | ||||||
Exhibit |
| Exhibit Description |
| Form |
| File No. |
| Exhibit |
| Filing |
| Filed/ |
101.CAL | | Inline XBRL Taxonomy Extension Calculation Linkbase Document | | | | | | | | | | *** |
| | | | | | | | | | | | |
101.DEF | | Inline XBRL Extension Definition Linkbase Document | | | | | | | | | | *** |
| | | | | | | | | | | | |
101.LAB | | Inline XBRL Taxonomy Label Linkbase Document | | | | | | | | | | *** |
| | | | | | | | | | | | |
101.PRE | | Inline XBRL Taxonomy Extension Presentation Linkbase Document | | | | | | | | | | *** |
| | | | | | | | | | | | |
104 | | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) | | | | | | | | | | *** |
* Filed herewith
** Furnished herewith
*** Submitted electronically herewith
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Camping World Holdings, Inc. | |||
Date: | By: | /s/ Melvin L. Flanigan | |
Melvin L. Flanigan | |||
| | | Chief Financial Officer and Secretary |
(Authorized Officer and Principal Financial Officer) | |||
6853