Market Overview

Camping World Holdings, Inc. Reports Fourth Quarter Results

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Camping World Holdings, Inc. (NYSE:CWH) ("Camping World," "Company,"
"we," "us" or "our") today reported results for the fourth quarter and
full year ended December 31, 2016.

Fourth Quarter 2016 Summary

  • Total revenue increased 3.5% to $670.0 million;
  • Gross profit increased 9.2% to $196.6 million and gross margin
    increased 154 basis points to 29.3%;
  • Income from operations increased 40.0% to $34.2 million and operating
    margin increased 133 basis points to 5.1%;
  • Net income increased 13.6% to $13.6 million, net income margin
    increased 18 basis points to 2.0%; and adjusted pro forma net income(1)
    increased 104.2% to $11.8 million;
  • Diluted earnings per share for the period of October 6, 2016 to
    December 31, 2016 was $0.09(2) and adjusted pro forma
    earnings per fully exchanged and diluted share(1) for the
    full quarter increased 105.9% to $0.14; and
  • Adjusted EBITDA(3) increased 27.1% to $39.2 million and
    adjusted EBITDA(3) margin increased 109 basis points to
    5.9%.

Fiscal 2016 Summary

  • Total revenue increased 7.3% to $3.53 billion;
  • Gross profit increased 10.6% to $998.6 million and gross margin
    increased 83 basis points to 28.3%;
  • Income from operations increased 15.1% to $281.4 million and operating
    margin increased 54 basis points to 8.0%;
  • Net income increased 13.8% to $203.2 million, net income margin
    increased 33 basis points to 5.8%, and adjusted pro forma net income(1)
    increased 23.8% to $133.1 million;
  • Diluted earnings per share for the period of October 6, 2016 to
    December 31, 2016 was $0.09(2) and adjusted pro forma
    earnings per fully exchanged and diluted share(1) for the
    full year increased 24.6% to $1.58; and
  • Adjusted EBITDA(3) increased 14.8% to $291.3 million and
    adjusted EBITDA(3) margin increased 54 basis points to 8.3%.
     

(1)

Adjusted pro forma net income and adjusted pro forma earnings per
fully exchanged and diluted share are non-GAAP measures. For
reconciliations of the adjusted pro forma net income and adjusted
pro forma earnings per fully exchanged and diluted share to GAAP
net income attributable to Camping World Holdings, Inc. and
diluted weighted-average shares of Class A common stock
outstanding, see the "Non-GAAP Financial Measures" section later
in this press release.

 

(2)

Basic and diluted earnings per Class A common stock is applicable
only for periods after the Company's IPO. For a discussion of
earnings per share see the "Earnings Per Share" section later in
this press release.

 

(3)

Adjusted EBITDA and adjusted EBITDA margin are non-GAAP measures.
For reconciliations of Adjusted EBITDA to GAAP net income and
adjusted EBITDA margin to GAAP net income margin, see the
"Non-GAAP Financial Measures" section later in this press release.

 

Marcus Lemonis, Chairman and Chief Executive Officer, stated, "Our
business in the fourth quarter and fiscal 2016 was very strong and we
are pleased with the results. The fourth quarter and full year benefited
from strong consumer demand for recreational vehicles and our ability to
sell our comprehensive portfolio of products and services across a
growing proprietary customer database. In particular, our focus on the
towable segment of the RV industry and higher-margin product and service
revenue is driving our operating margin growth and flowing through to
our bottom line. Being the only provider of a comprehensive portfolio of
services, protection plans, products and resources for RV enthusiasts,
and operating the largest national network of RV-centric retail
locations in the United States, we believe we are well positioned to
benefit from continued growth in the installed base of RV owners that is
being partially driven by higher levels of first-time buyers and new
younger consumers, as well as the aging of the baby boomer demographic."

Presentation

This press release presents historical results, for the periods
presented, of Camping World Holdings, Inc. ("CWH") and its subsidiaries
that are presented in accordance with accounting principles generally
accepted in the United States ("GAAP"), unless noted as a non-GAAP
financial measure. The Company's initial public offering ("IPO") and
related reorganization transactions ("Reorganization Transactions") that
occurred on October 6, 2016 resulted in CWH as the sole managing member
of CWGS Enterprises, LLC ("CWGS, LLC"), with sole voting power in and
control of the management of CWGS, LLC. Despite its position as sole
managing member of CWGS, LLC, CWH has a minority economic interest in
CWGS, LLC. As of December 31, 2016, CWH owned 22.6% of CWGS, LLC.
Accordingly, the Company consolidates the financial results of CWGS, LLC
and reports a non-controlling interest in its consolidated financial
statements. As the Reorganization Transactions are considered
transactions among entities under common control, the financial
statements for the periods prior to the IPO and related Reorganization
Transactions have been adjusted to combine the previously separate
entities for presentation purposes. Unless otherwise indicated, all
financial comparisons in this press release compare our financial
results from the 2016 fourth quarter and full year to our financial
results from the 2015 fourth quarter and full year, respectively.

Fourth Quarter 2016 Results Compared to Fourth
Quarter 2015 Results

Units and Average Selling Prices

New vehicle units sold increased 24.5% to 7,986 and the average selling
price of a new vehicle decreased 8.5% to $41,731 in the fourth quarter
fiscal 2016. The increase in new vehicle units sold was primarily driven
by strong consumer demand for both new and used vehicles and a shortage
of supply of used vehicles. The decrease in the average selling price of
a new vehicle was driven by a higher mix of lower-priced towable units,
which was partially driven by an increase in the number of first-time
vehicle buyers.

Used vehicle units sold decreased 19.1% to 5,330 and the average selling
price of a used vehicle decreased 0.8% to $24,189 in the fourth quarter
fiscal 2016. The decrease in used vehicle units sold was primarily
driven by a shortage of supply of used vehicles, which was partially
driven by an increase in the number of first-time vehicle buyers over
the past several quarters.

Revenue

Total revenue increased 3.5% to $670.0 million from $647.3 million in
the fourth quarter of fiscal 2015.

Consumer Services and Plans revenue increased 4.4% to $48.9 million from
$46.9 million in the fourth quarter of fiscal 2015. The increase was
primarily driven by increases in: club memberships, roadside assistance
contracts, and vehicle insurance written premiums.

Retail revenue increased 3.4% to $621.1 million from $600.5 million in
the fourth quarter of fiscal 2015. Within the Retail segment, new
vehicle revenue increased 13.8% to $333.3 million, used vehicle revenue
decreased 19.7% to $128.9 million, parts, services and other revenue
increased 3.2% to $117.7 million and finance and insurance revenue
increased 24.9% to $41.2 million. Strong consumer demand for
recreational vehicles combined with a shortage of supply of used
vehicles benefited new vehicle sales and finance and insurance sales,
and hindered used vehicle sales. Finance and insurance net revenue as a
percentage of total new and used vehicle revenue increased to 8.9% from
7.3% in the fourth quarter of fiscal 2015, and benefited from a sales
mix shift toward lower-priced towable units and continued employee
training on the sale of finance and insurance related programs.

Same store sales of the 107 retail locations that were open both at the
beginning of the preceding fiscal year and at the end of the preceding
fiscal year increased 5.4% to $534.0 million. The increase in same store
sales at retail locations was primarily driven by a 10.6% increase in
new vehicle same store sales, a 23.7% increase in finance and insurance
same store sales, and a 2.9% increase in parts, services and other same
store sales, partially offset by an 8.3% decrease in used vehicle same
store sales.

The Company operated a total of 122 retail locations as of December 31,
2016 compared to 115 retail locations at December 31, 2015.

Gross Profit

Gross profit increased 9.2% to $196.6 million and gross margin increased
154 basis points to 29.3% from the fourth quarter of fiscal 2015.
Consumer Services and Plans gross profit increased 13.5% to $28.7
million and gross margin increased 469 basis points to 58.7% of segment
revenue from the fourth quarter of fiscal 2015. The increase in Consumer
Services and Plans gross margin was primarily driven by an increase in
roadside assistance contracts in force with a reduction in claim costs,
increased membership in the Good Sam Club with reduced wage-related
expenses and administrative costs, and increased vehicle insurance
written premiums. Retail gross profit increased 8.6% to $167.9 million
and gross margin increased 127 basis points to 27.0% of segment revenue
from the fourth quarter of fiscal 2015. The increase in Retail gross
margin was driven primarily by an increase in the finance and insurance
penetration rate to 8.9% of vehicle sales from 7.3% of vehicle sales in
the fourth quarter of fiscal 2015.

Operating Expenses

Total operating expenses increased 4.4% to $162.4 million from the
fourth quarter of fiscal 2015, and included $1.2 million of
non-recurring debt restructuring expense related to the refinancing of
the Company's senior secured credit facility on November 8, 2016.
Selling, general and administrative ("SG&A") expenses increased 4.0% to
$154.9 million from $149.0 million in the fourth quarter of fiscal 2015.
The increase in SG&A expenses was driven by a $6.3 million increase in
wage-related expenses, primarily related to increased vehicle unit sales
and seven additional retail locations opened in 2016, partially offset
by a $0.4 million decrease in store and corporate overhead expenses. As
a percentage of total gross profit, SG&A expenses declined 399 basis
points to 78.8% primarily from the level of fixed costs within SG&A.
Depreciation and amortization expense increased 3.7% to $6.6 million.

Interest & Other Expenses

Floor plan interest expense increased to $4.0 million from $1.9 million
in the fourth quarter of 2015. The increase was primarily attributable
to higher inventory from the seven new dealerships added in 2016 and an
81 basis point increase in the average floor plan borrowing rate. Other
interest expense decreased to $10.3 million from $12.6 million in the
fourth quarter last year. The decrease was primarily attributable to a
lower interest rate and amount of borrowings under our term loan
facility that was refinanced on November 8, 2016.

Net Income, Adjusted Pro Forma Net Income(1)
and Adjusted Pro Forma Earnings Per Fully Exchanged and Diluted Share
(1)

Net income increased 13.6% to $13.6 million and adjusted pro forma net
income(1) increased 104.2% to $11.8 million from $5.8 million
in the fourth quarter of fiscal 2015. Adjusted pro forma earnings per
fully exchanged and diluted share(1) increased 105.9% to
$0.14 from $0.07 in the fourth quarter of fiscal 2015.

Adjusted EBITDA(3)

Adjusted EBITDA(3) increased 27.1% to $39.2 million from
$30.8 million and adjusted EBITDA(3) margin increased 109
basis points to 5.9% from 4.8% in the fourth quarter of fiscal 2015.

Select Balance Sheet and Cash Flow Items

The Company's working capital and cash and cash equivalents balance at
December 31, 2016 were $266.8 million and $114.2 million, respectively,
compared to $187.9 million and $92.0 million, respectively, at December
31, 2015. At the end of the fourth quarter of 2016, the Company had no
borrowings under its $35 million revolving credit facility, $645.0
million of term loan principal outstanding under its senior secured
credit facilities and $625.2 million of floor plan notes payable
outstanding under its floor plan financing facility. Inventory at the
end of the fourth quarter of fiscal 2016 increased 5.5% to $909.3
million compared to $861.8 million at the end of the fourth quarter of
fiscal 2015.

Reclassifications and Revisions to Prior Periods

Certain prior-period amounts have been reclassified to conform to the
current period presentation.

Certain revisions have been recorded in prior periods to correct for
immaterial errors on previously-reported consolidated financial
statements. In connection with the preparation of the financial
statements for the year ended December 31, 2016, errors were identified
within the elimination of intercompany revenue, costs, and profit in
ending inventory relating to a portion of parts, supplies, freight and
labor used in upgrades and repairs to new and used RVs. To quantify this
error management performed an analysis of internal work orders within
the parts and service departments. The Company evaluated the materiality
of this error both qualitatively and quantitatively in accordance with
Staff Accounting Bulletin No. 99, Materiality, and concluded that the
impact of this error on the Company's previously-issued consolidated
financial statements was not material. However, while not material, in
order to enhance comparability and transparency, the Company has
determined to revise its previously-reported consolidated financial
statements for the years ended and as of December 31, 2015 and 2014, to
correct for this immaterial error. As a result of this and another
immaterial error, revenue, costs applicable to revenue, and selling,
general and administrative expenses, and floor plan interest expense
within the retail segment were each corrected as presented in the table
below. There was no effect on any per share amounts as the periods
corrected were before the Company's IPO:

  Three Months Ended December 31, 2015   Year Ended December 31, 2015
($ in thousands)   As Reported   Adjustment   As Corrected As Reported   Adjustment   As Corrected
Revenue:        
New vehicles $ 293,048 $ (227 ) $ 292,821 $ 1,607,790 $ (1,325 ) $ 1,606,465
Used vehicles 160,621 (62 ) 160,559 806,759 (360 ) 806,399
Parts, service and other 122,993 (8,929 ) 114,064 553,834 (46,024 ) 507,810
Finance and insurance, net 32,893 121 33,014 190,278 542 190,820
Retail segment revenues 609,555 (9,097 ) 600,458 3,158,661 (47,167 ) 3,111,494
Total revenue 656,408 (9,097 ) 647,311 3,333,261 (47,167 ) 3,286,094
Costs applicable to revenue:
New vehicles 252,284 (473 ) 251,811 1,387,358 (8,202 ) 1,379,156
Used vehicles 130,120 3 130,123 652,235 (5,299 ) 646,936
Parts, service and other 67,912 (4,042 ) 63,870 297,957 (22,968 ) 274,989
Retail segment costs applicable to revenues 450,316 (4,512 ) 445,804 2,337,550 (36,469 ) 2,301,081
Total costs applicable to revenue 471,869 (4,512 ) 467,357 2,419,299 (36,469 ) 2,382,830
Selling, general and administrative expenses 152,064 (3,070 ) 148,994 644,409 (9,519 ) 634,890
Income from operations 25,972 (1,515 ) 24,457 245,689 (1,179 ) 244,510
Floor plan interest expense (3,033 ) 1,179 (1,854 ) (12,427 ) 1,179 (11,248 )
Net income 12,335 (336 ) 11,999 178,530 - 178,530
Net income attributable to Camping World Holdings, Inc. 12,335 (336 ) 11,999 178,530 - 178,530
 

Additionally, as a result of these immaterial errors, the cumulative
effect of the change on members' deficit as of January 1, 2014, the
earliest date presented in these consolidated financial statements, was
$5.9 million. Prior year inventories, other assets, and members' deficit
on the consolidated balance sheets were each corrected as follows:

  At December 31, 2015
($ in thousands)   As Reported   Adjustment   As Corrected
Inventories, net $ 868,939   $ (7,092 )   $ 861,847
Other assets 15,394 1,179 16,573
Total assets 1,344,018 (5,913 ) 1,338,105
Members' deficit (288,947 ) (5,913 ) (294,860 )

Total liabilities and stockholders' /

members' equity (deficit) 1,344,018 (5,913 ) 1,338,105
 

Conference Call Information

A conference call to discuss the fiscal 2016 fourth quarter and full
year financial results is scheduled for today, March 8, 2017, at 4:30
p.m. Eastern Time. Investors and analysts can participate on the
conference call by dialing 888-259-8724 (international callers please
dial 1-913-312-1453). Interested parties can also listen to a live
webcast of the conference call by logging on to the Investor Relations
section on the Company's website at http://investor.campingworld.com.
A taped replay of the conference call will be available within two hours
of the conclusion of the call and can be accessed by dialing
844-512-2921 (international callers please dial 412-317-6671) and using
access code 8414951 before March 15, 2017 or on the Company's website.

About Camping World

Camping World Holdings, Inc., is the only provider of a comprehensive
portfolio of services, protection plans, products and resources for
recreational vehicle ("RV") enthusiasts. Through its two iconic brands,
Camping World and Good Sam, the company offers new and used RVs for
sale, vehicle service and maintenance along with more than 10,000
products and services through our retail locations and membership clubs.
Good Sam branded offerings provide the industry's broadest and deepest
range of services, protection plans, products and resources while the
Camping World brand operates the largest national network of RV-centric
retail locations in the United States through 124 retail locations in 36
states and an e-commerce platform. With both brands founded in 1966,
product and service offerings are based on 50 years of experience and
customer feedback from RV enthusiasts.

Forward Looking Statements

This press release contains forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. All
statements contained in this press release that do not relate to matters
of historical fact should be considered forward-looking statements,
including, without limitation, statements about expectations and trends
regarding consumer behavior and growth; our anticipated financial
performance; our comparative advantages and our plans and ability to
expand consumer base and capture growth. These forward-looking
statements are based on management's current expectations.

These statements are neither promises nor guarantees, but 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, including, but not limited
to, the following: the availability of financing to us and our
customers; fuel shortages, or high prices for fuel; the well-being, as
well as the continued popularity and reputation for quality, of our
manufacturers; general economic conditions in our markets, and ongoing
economic and financial uncertainties; our ability to attract and retain
customers; competition in the market for services, protection plans,
products and resources targeting the RV lifestyle or RV enthusiast; our
expansion into new, unfamiliar markets presents as well as delays in
opening or acquiring new retail locations; unforeseen expenses,
difficulties, and delays frequently encountered in connection with
expansion through acquisitions; our failure to maintain the strength and
value of our brands; our ability to successfully order and manage our
inventory to reflect consumer demand in a volatile market and anticipate
changing consumer preferences and buying trends; fluctuations in our
same store sales and whether they will be a meaningful indicator of
future performance; the cyclical and seasonal nature of our business;
our ability to operate and expand our business and to respond to
changing business and economic conditions, which depends on the
availability of adequate capital; the restrictive covenants in our New
Senior Secured Credit Facilities and our floorplan financial facility;
our reliance on three fulfillment and distribution centers for our
retail, e-commerce and catalog businesses; natural disasters, whether or
not caused by climate change, unusual weather condition, epidemic
outbreaks, terrorist acts and political events; our dependence on our
relationships with third party providers of services, protection plans,
products and resources and a disruption of these relationships or of
these providers' operations; whether third party lending institutions
and insurance companies will continue to provide financing for RV
purchases; our inability to retain senior executives and attract and
retain other qualified employees; our ability to meet our labor needs;
our inability to maintain the leases for our retail locations or locate
alternative sites for our stores in our target markets and on terms that
are acceptable to us; our business being subject to numerous federal,
state and local regulations; regulations applicable to the sale of
extended service contracts; our dealerships' susceptibility to
termination, non-renewal or renegotiation of dealer agreements if state
dealer laws are repealed or weakened; our failure to comply with certain
environmental regulations; climate change legislation or regulations
restricting emission of "greenhouse gases;" a failure in our e-commerce
operations, security breaches and cybersecurity risks; our inability to
enforce our intellectual property rights and accusations of our
infringement on the intellectual property rights of third parties; our
inability to maintain or upgrade our information technology systems or
our inability to convert to alternate systems in an efficient and timely
manner; disruptions to our information technology systems or breaches of
our network security; Marcus Lemonis, through his beneficial ownership
of our shares directly or indirectly held by ML Acquisition Company, LLC
and ML RV Group, LLC, will have substantial control over us and may
approve or disapprove substantially all transactions and other matters
requiring approval by our stockholders, including, but not limited to,
the election of directors; the exemptions from certain corporate
governance requirements that we will qualify for, and intend to rely on,
due to the fact that we are a "controlled company" within the meaning of
the New York Stock Exchange, or NYSE, listing requirements; and whether
we are able to realize any tax benefits that may arise from our
organizational structure and any redemptions or exchanges of CWGS, LLC
common units for cash or stock.

These and other important factors discussed under the caption "Risk
Factors" in our Quarterly Report on Form 10-Q filed with the Securities
and Exchange Commission, or SEC, on November 11, 2016, and our other
reports filed with the SEC could cause actual results to differ
materially from those indicated by the forward-looking statements made
in this press release. Any such forward-looking statements represent
management's estimates as of the date of this press release. While we
may elect to update such forward-looking statements at some point in the
future, we disclaim any obligation to do so, even if subsequent events
cause our views to change, except as required under applicable law.
These forward-looking statements should not be relied upon as
representing our views as of any date subsequent to the date of this
press release.

Results of Operations for the Three Months Ended December 31, 2016

Camping World Holdings, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(In thousands except per share amounts)
 
  Three Months Ended   Year Ended
December 31, December 31,
2016   2015 2016   2015
(unaudited) (unaudited)
Revenue:
Consumer services and plans $ 48,905 $ 46,853 $ 184,773 $ 174,600
Retail
New vehicles 333,263 292,821 1,866,182 1,606,465
Used vehicles 128,929 160,559 705,893 806,399
Parts, services and other 117,703 114,064 540,019 507,810
Finance and insurance, net   41,232     33,014     229,839     190,820  
Subtotal 621,127 600,458 3,341,933 3,111,494
 
Total revenue 670,032 647,311 3,526,706 3,286,094
 

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

Consumer services and plans 20,201 21,553 79,272 81,749
Retail
New vehicles 287,387 251,811 1,604,534 1,379,156
Used vehicles 100,454 130,123 555,113 646,936
Parts, services and other   65,405     63,870     289,186     274,989  
Subtotal 453,246 445,804 2,448,833 2,301,081
 
Total costs applicable to revenue 473,447 467,357 2,528,105 2,382,830
 
Gross profit:
Consumer services and plans 28,704 25,300 105,501 92,851
Retail
New vehicles 45,876 41,010 261,648 227,309
Used vehicles 28,475 30,436 150,780 159,463
Parts, services and other 52,298 50,194 250,833 232,821
Finance and insurance, net   41,232     33,014     229,839     190,820  
Subtotal 167,881 154,654 893,100 810,413
 
Total gross profit 196,585 179,954 998,601 903,264
 
Operating expenses:
Selling, general, and administrative 154,918 148,994 691,884 634,890
Debt restructure expense 1,218 1,218
Depreciation and amortization 6,551 6,316 24,695 24,101
(Gain) loss on sale of assets   (337 )   187     (564 )   (237 )
Total operating expenses   162,350     155,497     717,233     658,754  
 
Income from operations 34,235 24,457 281,368 244,510
 
Other income (expense):
Floor plan interest expense (4,003 ) (1,854 ) (18,854 ) (11,248 )
Other interest expense, net (10,278 ) (12,601 ) (48,318 ) (53,377 )
Loss on debt restructure (5,052 ) (5,052 )
Other income, net   2             1  
  (19,331 )   (14,455 )   (72,224 )   (64,624 )
 
Income before income taxes 14,904 10,002 209,144 179,886
Income tax benefit (expense)   (1,269 )   1,997     (5,907 )   (1,356 )
Net income 13,635 11,999 203,237 178,530
Net income attributable to non-controlling interests   (11,576 )       (11,576 )    
Net income attributable to Camping World Holdings, Inc. $ 2,059   $ 11,999   $ 191,661   $ 178,530  
 
Earnings per share of Class A common stock:
Basic (2) $ 0.11 $ 0.11
Diluted (2) $ 0.09 $ 0.09
Weighted average shares of Class A common stock outstanding:
Basic 18,766 18,766
Diluted 83,602 83,602
Adjusted pro forma earnings per fully exchanged and diluted share (1) $ 0.14 $ 0.07 $ 1.58 $ 1.27
 

Camping World Holdings, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(In Thousands)
 
  As of December 31
2016   2015
Assets
Current assets:
Cash and cash equivalents $ 114,196 $ 92,025
Contracts in transit 29,012 21,892

Accounts receivable, less allowance for doubtful accounts of
$2,920 and $2,929 in 2016 and 2015, respectively

58,488 56,356
Inventories, net 909,254 861,847
Prepaid expenses and other assets   21,755     18,861  
Total current assets 1,132,705 1,050,981
 
Property and equipment, net 130,760 149,725
Deferred tax asset 125,878 6,234
Intangibles assets, net 3,386 1,652
Goodwill 153,105 112,940
Other assets   17,931     16,573  
Total assets $ 1,563,765   $ 1,338,105  
 
Liabilities and stockholders' / members' equity (deficit)
Current liabilities:
Accounts payable $ 68,655 $ 56,789
Accrued liabilities 78,044 77,552
Deferred revenues and gains 68,643 63,616
Current portion of capital lease obligation 1,224 771
Current portion of tax receivable agreement 991
Current portion of long-term debt 6,450 52,089
Notes payable – floor plan 625,185 598,420
Other current liabilities   16,745     13,861  
Total current liabilities 865,937 863,098
 
Capital lease obligations 841 751
Right to use liabilities 10,343 30,599
Tax receivable agreement liability, net of current portion 18,190
Long-term debt, net of current portion 620,303 673,304
Deferred revenues and gains 52,210 52,151
Other long-term liabilities   24,156     13,062  
Total liabilities 1,591,980 1,632,965
 
Commitments and contingencies
 
Stockholders' / members' equity (deficit):
Members' deficit (294,860 )
Preferred stock, par value $0.01 per share – 20,000,000 shares
authorized; none issued and outstanding as of December 31, 2016
Class A common stock, par value $0.01 per share – 250,000,000 shares
authorized; 18,935,916 issued and outstanding as of December 31, 2016
189
Class B common stock, par value $0.0001 per share – 75,000,000
shares authorized; 62,002,729 issued and outstanding as of December
31, 2016
6
Class C common stock, par value $0.0001 per share – one shares
authorized; one issued and outstanding as of December 31, 2016
Additional paid-in capital 74,239
Retained earnings   544      
Total stockholders' equity attributable to Camping World Holdings,
Inc. / members' deficit
74,978 (294,860 )
Non-controlling interest   (103,193 )    
Total stockholders' / members' equity (deficit)   (28,215 )   (294,860 )
Total liabilities and stockholders' / members' equity (deficit) $ 1,563,765   $ 1,338,105  
 

Earnings Per Share

On October 6, 2016, the limited liability company agreement of CWGS, LLC
was amended and restated to, among other things, (i) provide for a new
single class of common membership interests, the common units of CWGS,
LLC, and (ii) exchange all of the then-existing membership interests in
CWGS, LLC for common units of CWGS, LLC (collectively, the
"Recapitalization"). This Recapitalization changed the relative
membership rights of the owners of membership interests in CWGS, LLC
such that retroactive application of the Recapitalization to periods
prior to the IPO for the purposes of calculating earnings per share
would not be appropriate.

Prior to the IPO, the CWGS, LLC membership structure included membership
units, preferred units, and profits units. The Company analyzed the
calculation of earnings per unit for periods prior to the IPO using the
two-class method and determined that it resulted in a value that would
not be meaningful to the users of the consolidated financial statements.
Therefore, earnings per share information has not been presented for
periods prior to the IPO on October 6, 2016. The basic and diluted
earnings per share period for the quarter and year ended December 31,
2016 represents only the period of October 6, 2016 to December 31, 2016.

  Three Months  
Ended Year Ended
December 31, December 31,
(In thousands except per share amounts) 2016 2016
Numerator:
Net income $ 13,635 $ 13,635
Less: net income attributable to non-controlling interests   (11,576 )   (11,576 )
Net income attributable to Camping World Holdings, Inc. — basic 2,059 2,059
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
  5,629     5,629  
Net income attributable to Camping World Holdings, Inc. — diluted $ 7,688   $ 7,688  
Denominator:
Weighted-average shares of Class A common stock outstanding — basic 18,766 18,766
Dilutive common units of CWGS, LLC that are convertible into Class A
common stock
  64,836     64,836  
Weighted-average shares of Class A common stock outstanding — diluted   83,602     83,602  
 
Earnings per share of Class A common stock — basic $ 0.11 $ 0.11
Earnings per share of Class A common stock — diluted $ 0.09 $ 0.09
 

Non-GAAP Financial Measures

To supplement our consolidated financial statements, which are prepared
and presented in accordance with accounting principles generally
accepted in the U.S. ("GAAP"), we use the following non-GAAP financial
measures: EBITDA, adjusted EBITDA, adjusted pro forma net income and
adjusted pro forma earnings per fully exchanged and diluted share
(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 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 and Adjusted EBITDA

We define "EBITDA" as net income before other interest expense
(excluding floor plan interest expense), provision for income taxes and
depreciation and amortization. We define "Adjusted EBITDA" 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, loss (gain) on debt
restructure, loss (gain) on sale of assets and disposition of stores,
gain on derivative instruments, monitoring fees, equity-based
compensation, an adjustment to rent on right to use assets, and other
unusual or one-time items. We caution investors that amounts presented
in accordance with our definitions of EBITDA and Adjusted EBITDA may not
be comparable to similar measures disclosed by our competitors, because
not all companies and analysts calculate EBITDA and Adjusted EBITDA in
the same manner. We present EBITDA and Adjusted EBITDA because we
consider them to be important supplemental measures of our performance
and believe they are frequently used by securities 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 tables reconcile EBITDA, and Adjusted EBITDA, and Adjusted
EBITDA Margin to the most directly comparable GAAP financial performance
measure, which is net income:

  Three Months Ended   Year Ended
December 31, December 31,
($ in thousands) 2016   2015 2016   2015
 
Net Income $ 13,635 $ 11,999 $ 203,237 $ 178,530
Other interest expense, net 10,278 12,601 48,318 53,377
Depreciation and amortization 6,551 6,316 24,695 24,101
Income tax (benefit) expense   1,269     (1,997 )   5,907     1,356  
EBITDA 31,733 28,919 282,157 257,364
 
Adjustments:
Loss (gain) on sale of assets and disposition of stores (a) (339 ) 1,301 (564 ) 1,452
Loss and expense on debt restructure (b) 6,270 6,270
Monitoring fee (c) 625 1,875 2,500
Stock-based compensation (d) 1,537 1,597
Adjustment to rent on right to use assets (e)               (7,598 )
Adjusted EBITDA $ 39,201   $ 30,845   $ 291,335   $ 253,718  
 
 
Three Months Ended Year Ended
December 31, December 31,
(as percentage of total revenue) 2016 2015 2016 2015
 
Net income margin 2.0 % 1.9 % 5.8 % 5.4 %
Other interest expense, net 1.5 % 1.9 % 1.4 % 1.6 %
Depreciation and amortization 1.0 % 1.0 % 0.7 % 0.7 %
Income tax (benefit) expense   0.2 %   -0.3 %   0.2 %   0.0 %
Subtotal EBITDA margin 4.7 % 4.5 % 8.0 % 7.8 %
 
Adjustments:
Loss (gain) on sale of assets and disposition of stores (a) -0.1 % 0.2 % 0.0 % 0.0 %
Loss and expense on debt restructure (b) 0.9 % 0.0 % 0.2 % 0.0 %
Monitoring fee (c) 0.0 % 0.1 % 0.1 % 0.1 %
Stock-based compensation (d) 0.2 % 0.0 % 0.0 % 0.0 %
Adjustment to rent on right to use assets (e)   0.0 %   0.0 %   0.0 %   -0.2 %
Adjusted EBITDA margin   5.9 %   4.8 %   8.3 %   7.7 %

________________

    (a)   Represents an adjustment to eliminate the gains and losses on sales
of various assets and aggregate non-recurring losses from two
non-performing locations that were sold in 2015.
 
(b) Represents the loss incurred on debt restructure resulting from the
write-off of a portion of the original issue discount, capitalized
finance costs from the Previous Term Loan Facilities upon the
paydown from the IPO proceeds, and rating agency fees and legal
expenses related to the New Term Loan Facilities in November 2016.
 
(c) Represents monitoring fees paid pursuant to a monitoring agreement
to Crestview and Stephen Adams. The monitoring agreement was
terminated on October 6, 2016 in connection with the IPO.
 
(d) Represents non-cash equity-based compensation expense relating to
employees and directors of the Company.
 
(e) Represents an adjustment to rent expense for the periods presented
for certain right to use assets that were derecognized in the fourth
quarter of 2015 due to lease modifications that resulted in the
leases meeting the requirements to be reported as operating leases.
The adjustments represent additional rent expense that would have
been incurred for the periods presented had the leases previously
been classified as operating leases.
 

Adjusted Pro Forma Net Income and Adjusted Pro Forma Earnings Per Fully
Exchanged and Diluted Share

We define "Adjusted Pro Forma Net Income" as net income attributable to
CWH adjusted for the reallocation of income attributable to
non-controlling interests from the assumed exchange of all outstanding
common units in CWGS, LLC (or the common unit equivalent of membership
interests in CWGS, LLC for periods prior to the IPO) for shares of Class
A common stock of CWH and 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,
loss (gain) on debt restructure, loss (gain) on sale of assets and
disposition of stores, gain on derivative instruments, monitoring fees,
equity-based compensation, an adjustment to rent on right to use assets,
other unusual or one-time items, and the income tax expense effect of
(i) these adjustments and (ii) the pass-through entity taxable income as
if the parent company was a subchapter C corporation in periods prior to
the IPO. We define "Adjusted Pro Forma Earnings Per Fully Exchanged and
Diluted Share" as Adjusted Pro Forma Net Income divided by the
weighted-average shares of Class A common stock outstanding, assuming
(i) the full exchange of all outstanding common units in CWGS, LLC (or
the common unit equivalent of membership interests in CWGS, LLC for
periods prior to the IPO for shares of Class A common stock of CWH),
(ii) the Class A common stock issued in connection with the IPO was
outstanding as of January 1 of each year presented, and (iii) the
dilutive effect of stock options and restricted stock units, if any. We
present Adjusted Pro Forma Net Income and Adjusted Pro Forma Earnings
Per Fully Exchanged and Diluted Share 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.

The following table reconciles Adjusted Pro Forma Net Income and
Adjusted Pro Forma Earnings Per Fully Exchanged and Diluted Share to the
most directly comparable GAAP financial performance measure, which is
net income attributable to Camping World Holdings, Inc. and
weighted-average shares of Class A common shares outstanding — diluted:

  Three Months Ended   Year Ended
December 31, December 31,
($ in thousands except per share amounts)   2016   2015 2016   2015
Numerator:
Net income attributable to Camping World Holdings, Inc. $ 2,059 $ 11,999 $ 191,661 $ 178,530
Adjustments:
Reallocation of net income attributable to non-controlling interests
from the assumed exchange of common units of CWGS, LLC (a)
11,576 11,576
Loss /expense on debt restructure (b) 6,270 6,270
Loss (gain) on sale of assets and disposition of stores (c) (339 ) 1,301 (564 ) 1,452
Monitoring fee (d) 625 1,875 2,500
Equity-based compensation expense (e) 1,537 1,597
Adjustment to rent on right to use assets (f) (7,598 )
Income tax expense (g)   (9,282 )   (8,135 )   (79,360 )   (67,400 )
Adjusted pro forma net income $ 11,821   $ 5,790   $ 133,055   $ 107,484  
Denominator:
Weighted-average Class A common shares outstanding - diluted 83,602,000 83,602,000
Adjustments:
Assumed exchange of pre-IPO common unit equivalent of membership
interests in CWGS, LLC (h)
72,651,000 193,000 72,651,000
Assumed issuance of Class A common stock in connection with IPO (i) 170,000 11,872,000 172,000 11,872,000
Dilutive restricted stock units   24,000              
Adjusted pro forma fully exchanged weighted average Class A common
shares outstanding - diluted
  83,796,000     84,523,000     83,967,000     84,523,000  
Adjusted pro forma earnings per fully exchanged and diluted share $ 0.14 $ 0.07 $ 1.58 $ 1.27

__________________

   

(a)

 

Represents the reallocation of net income attributable to
non-controlling interests from the assumed exchange of common
units of CWGS, LLC in periods were income was attributable to
non-controlling interests.

 

(b)

Represents the loss incurred on debt restructure resulting from
write-off of a portion of the original issue discount and
capitalized finance costs from the Previous Term Loan Facilities,
rating agency fees and legal expenses related to the New Term Loan
Facilities in 2016

 

(c)

Represents an adjustment to eliminate the gains and losses on
sales of various assets, including (i) aggregate non-recurring
losses from two non-performing locations that were sold in 2015;
and (ii) a loss equal to the present value of the remaining net
obligation under the non-cancellable operating leases in locations
with no operating business, which represented $0.8 million for the
year ended December 31, 2015.

 

(d)

Represents monitoring fees paid pursuant to a monitoring agreement
to Crestview and Stephen Adams. The monitoring agreement was
terminated on October 6, 2016 in connection with our IPO.

 

(e)

Represents non-cash equity-based compensation expense relating to
employees and directors of the Company.

 

(f)

Represents an adjustment to rent expense for the periods presented
for certain right to use assets that were derecognized in the
fourth quarter of 2015 due to lease modifications that resulted in
the leases meeting the requirements to be reported as operating
leases. The adjustments represent additional rent expense that
would have been incurred for the periods presented had the leases
previously been classified as operating leases.

 

(g)

Represents the income tax expense effect of (i) the above
adjustments and (ii) the pass-through entity taxable income as if
the parent company was a subchapter C corporation in periods prior
to the IPO. This assumption uses an effective tax rate of 38.5%
for the adjustments and the pass-through entity taxable income.

 

(h)

Represents the assumed exchange of pre-IPO membership interests in
CWGS, LLC at their common unit equivalent amount.

 

(i)

Represents the assumption that the shares of Class A common stock
issued in connection with the IPO were outstanding as of January 1
of each period

 

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 new senior secured credit facilities use
EBITDA to measure our compliance with covenants such as 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 condensed consolidated statements of
income and our condensed consolidated balance sheets included in this
press release 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;
  • such measures do not reflect changes in, or cash requirements for, our
    working capital needs;
  • 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 (gain) on
debt repayment, loss (gain) on sale of assets and disposition of stores,
gain on derivative instruments, equity-based compensation, an adjustment
to rent on right to use assets, and other unusual or one-time items. It
is reasonable to expect that 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. In addition, these certain non-GAAP financial
measures adjust for other items that we do not expect to regularly
record in periods after the IPO, including monitoring fees. 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.

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