Sportsman's Warehouse
Annual Report 2016

Plain-text annual report

SPORTSMAN'S WAREHOUSE HOLDINGS, INC. FORM 10-K (Annual Report) Filed 03/24/17 for the Period Ending 01/28/17 Address Telephone CIK Symbol SIC Code Industry 7035 HIGH TECH DRIVE MIDVALE, UT 84047-3706 801-556-6681 0001132105 SPWH 5940 - Miscellaneous Shopping Goods Stores Apparel & Accessories Retailers Sector Consumer Cyclicals http://www.edgar-online.com © Copyright 2017, EDGAR Online, Inc. All Rights Reserved. Distribution and use of this document restricted under EDGAR Online, Inc. Terms of Use. Table of Contents UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549FORM 10-K(Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended January 28, 2017 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO Commission File Number 001-36401SPORTSMAN’S WAREHOUSE HOLDINGS, INC.(Exact name of Registrant as specified in its Charter) Delaware 39-1975614(State or other jurisdiction ofincorporation or organization) (I.R.S. Employer Identification No.) 7035 South High Tech DriveMidvale, Utah 84047(Address of principal executive offices) (Zip Code) Registrant’s telephone number, including area code: (801) 566-6681Securities registered pursuant to Section 12(b) of the Act: Common Stock, Par Value $0.01 Per Share; Common stock traded on the NASDAQ stock market Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES ☐ NO ☒ Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. YES ☐ NO ☒ 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 preceding12 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 past90 days. YES ☒ NO ☐ Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted andposted 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 submitand post such files). YES ☒ NO ☐ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405) is not contained herein, and will not be contained, to the best ofRegistrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☒ Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definition of“large accelerated filer”, “accelerated filer”, and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one): Large accelerated filer ☐ Accelerated filer ☒ Non-accelerated filer ☐ (Do not check if a smaller reporting company) Smaller reporting company ☐ 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 July 29, 2016, the last business day of the registrant’s most recently completed second quarter, the aggregate market value of the voting and non-voting common equityheld by non-affiliates of the Registrant, based on the closing price of the shares of common stock on The NASDAQ Stock Market on such date, was $325,173,327. Shares heldby each executive officer, director and by each person who owns 10% or more of the outstanding common stock have been excluded in that such persons may be deemed to beaffiliates. The determination of affiliate status is not necessarily a conclusive determination for other purposes. The number of shares of Registrant’s Common Stock outstanding as of March 24, 2017 was 42,269,940. Portions of the Registrant’s Definitive Proxy Statement relating to the 2017 Annual Meeting of Shareholders, which will be filed with the Securities and Exchange Commissionwithin 120 days after the end of the 2016 fiscal year, are incorporated by reference into Part III of this Report. Table of ContentsTable of Contents PagePART I Item 1. Business4 Item 1A. Risk Factors19 Item 1B. Unresolved Staff Comments33 Item 2. Properties33 Item 3. Legal Proceedings34 Item 4. Mine Safety Disclosures35 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of EquitySecurities35 Item 6. Selected Financial Data37 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations40 Item 7A. Quantitative and Qualitative Disclosures About Market Risk51 Item 8. Financial Statements and Supplementary Data52 Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure75 Item 9A. Controls and Procedures75 Item 9B. Other Information75 PART III Item 10. Directors, Executive Officers and Corporate Governance76 Item 11. Executive Compensation76 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters76 Item 13. Certain Relationships and Related Transactions, and Director Independence76 Item 14. Principal Accountant Fees and Services76 PART IV Item 15. Exhibits and Financial Statement Schedules77 Item 16. Form 10-K Summary80 ii Table of ContentsReferences throughout this document to “Sportsman’s Warehouse,” “we,” “us,” and “our” refer to Sportsman’sWarehouse Holdings, Inc. and its subsidiaries, and references to “Holdings” refer to Sportsman’s Warehouse Holdings,Inc. excluding its subsidiaries. STATEMENT REGARDING FORWARD-LOOKING STATEMENTS  This Annual Report on Form 10-K (this “10-K”) contains statements that constitute forward-looking statements as thatterm is defined by the Private Securities Litigation Reform Act of 1995. These statements concern our business, operations andfinancial performance and condition as well as our plans, objectives and expectations for our business operations and financialperformance and condition, which are subject to risks and uncertainties. All statements other than statements of historical factincluded in this 10-K are forward-looking statements. These statements may include words such as “aim,” “anticipate,”“assume,” “believe,” “can have,” “could,” “due,” “estimate,” “expect,” “goal,” “intend,” “likely,” “may,” “objective,”“plan,” “potential,” “positioned,” “predict,” “should,” “target,” “will,” “would” and other words and terms of similarmeaning in connection with any discussion of the timing or nature of future operating or financial performance or other events ortrends. For example, all statements we make relating to our plans and objectives for future operations, growth or initiatives andstrategies are forward-looking statements. These forward-looking statements are based on current expectations, estimates, forecasts and projections about ourbusiness and the industry in which we operate and our management’s beliefs and assumptions. We derive many of our forward-looking statements from our own operating budgets and forecasts, which are based upon many detailed assumptions. While webelieve that our assumptions are reasonable, we caution predicting the impact of known factors is very difficult, and we cannotanticipate all factors that could affect our actual results. All of our forward-looking statements are subject to risks and uncertainties that may cause our actual results to differmaterially from our expectations. Important factors that could cause actual results to differ materially from our expectationsinclude, but are not limited to: ·our retail-based business model is impacted by general economic conditions and economic and financial uncertaintiesmay cause a decline in consumer spending;·our concentration of stores in the Western United States makes us susceptible to adverse conditions in this region,which could affect our sales and cause our operating results to suffer;·we operate in a highly fragmented and competitive industry and may face increased competition;·we may not be able to anticipate, identify and respond to changes in consumer demands, including regionalpreferences, in a timely manner;·we may not be successful in operating our stores in any existing or new markets into which we expand; and·current and future government regulations, in particular regulations relating to the sale of firearms and ammunition,may impact the demand for our products and our ability to conduct our business.The above is not a complete list of factors or events that could cause actual results to differ from our expectations, and wecannot predict all of them. All written and oral forward-looking statements attributable to us, or persons acting on our behalf, areexpressly qualified in their entirety by the cautionary statements disclosed under “Risk Factors,” “Management’s Discussion andAnalysis of Financial Condition and Results of Operations” and elsewhere in this 10-K, as such disclosures may be amended,supplemented or superseded from time to time by other reports we file with the Securities and Exchange Commission (the“SEC”), including subsequent Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q, and public communications.You should evaluate all forward-looking statements made in this 10-K and otherwise in the context of these risks anduncertainties. Potential investors and other readers are urged to consider these factors carefully in evaluating the forward-lookingstatements and are cautioned not to place undue reliance on any forward-looking statements we make. These forward-lookingstatements speak only as of the date of this 10-K and are not guarantees of future performance or developments and involveknown and unknown risks, uncertainties and other factors that are in many cases beyond our control. Except as required by law,we undertake no obligation to update or revise any forward-looking statements publicly, whether as a result of new information,future developments or otherwise. iii Table of ContentsPART I Item 1. Business. Overview Sportsman’s Warehouse is a high-growth outdoor sporting goods retailer focused on meeting the everyday needs of theseasoned outdoor veteran, the first-time participant and every enthusiast in between. Our mission is to provide a one-stopshopping experience that equips our customers with the right hunting, shooting, fishing and camping gear to maximize theirenjoyment of the outdoors. We strive to accomplish this goal by tailoring our broad and deep merchandise assortment to meetlocal conditions and demand, offering everyday low prices, providing friendly support from our knowledgeable, highly trainedstaff and offering extensive in-store events and educational programming. These core strategies help position Sportsman’sWarehouse as the “local outdoor experts” and the preferred place to both shop and share outdoor-based experiences in thecommunities we serve. As a result, we are expanding our loyal customer base in existing markets and increasing our storefootprint in new markets, which we believe will further drive our growth and profitability. Sportsman’s Warehouse was founded in 1986 as a single retail store in Midvale, Utah and has grown to 75 stores across 20states. Today, we have the largest outdoor specialty store base in the Western United States and Alaska. Our stores range from15,000 to 65,000 gross square feet, with an average size of approximately 42,000 gross square feet. Our store layout is adaptableto both standalone locations and strip centers. Based on publicly available information, we believe it is less capital-intensive forus to open new stores compared to our principal competitors because our “no frills” store layout requires less initial cashinvestment to build out and our stores generally require less square footage than the stores of our competitors. Together, thesefeatures enable us to effectively serve markets of multiple sizes, from Metropolitan Statistical Areas, or MSAs, with populationsof less than 75,000 to major metropolitan areas with populations in excess of 1,000,000, while generating consistent four-wallAdjusted EBITDA margins and returns on invested capital across a range of store sales volumes. We may post information that isimportant to investors on our website from time to time. The information provided on our website is not part of this report and is,therefore, not incorporated herein by reference. Our Competitive Strengths We believe the following competitive strengths allow us to capitalize on the growth opportunity within the outdooractivities and sporting goods market: Differentiated Shopping Experience for the Seasoned Outdoor Veteran, the First-Time Participant and Every Enthusiastin Between. We place great emphasis on creating an inviting and engaging store experience for customers of all experiencelevels. For the seasoned outdoor veteran, we offer a one-stop, convenient store layout that promotes “easy-in, easy-out” access toreplenish supplies, learn about local conditions and test products. We also serve first-time participants and casual users who areinterested in enjoying the outdoors but enter our store without a clear sense for what equipment they need for their chosenactivity. Our highly trained employees, who often are outdoor enthusiasts themselves and users of the products we sell, engageand interact with our customers in order to educate them and equip them with the right gear. Our sales associates draw upon bothformal vendor sales training as well as first-hand experiences from using our products in local conditions. This selling approachallows us to offer a broad range of products and to deliver a shopping experience centered on the customer’s needs, which webelieve results in increased customer loyalty, repeat visits and frequent referrals to other potential customers. A customer’s shopping experience in our stores is further enhanced by a variety of helpful in-store offerings and features,including the issuance of hunting and fishing licenses, local fishing reports, availability of Sportsman’s News (our proprietary in-store newspaper), access to the Braggin’ Board (where customers can post photos of their outdoor adventures), indoor test rangesfor archery equipment and displays of customer-owned taxidermy. In addition, we host a variety of in-store programs (such as“ladies night”), contests (such as Bucks & Bulls, a free-to-enter, big-game trophy contest) and a wide range of instructionalseminars, from turkey frying to firearm operation and safety. These programs are all designed to help our customers connect withthe outdoors and build the skill sets necessary to maximize enjoyment of their chosen activities. As a result, we believe our storesoften serve as gathering spots where local enthusiasts can share stories, product knowledge and advice on outdoor recreationactivities, which both drives traffic and fosters customer loyalty.4 Table of ContentsLocally Relevant Merchandise Serving the Comprehensive Needs of Outdoor Enthusiasts at a Compelling Value . Weoffer our customers an extensive and carefully selected assortment of branded, high-quality outdoor products at competitiveprices. We accomplish this in three principal ways: ·Locally Relevant Merchandise: We carry over 72,000 SKUs on average in each store, out of a pool of approximately140,000 total SKUs. Each store’s merchandise is tailored to meet local conditions and consumer demand, taking intoaccount seasonal requirements, regional game and fishing species, geographic diversity, weather patterns and keydemographic factors, so that our customers have the right product, at the right time, for the right location. ·Breadth and Mix of Product Assortment: Our merchandise strategy is designed to serve a variety of purchasingoccasions, from big-ticket items to replenishment activity, as well as to meet the wide-ranging needs of customers fromfirst-time participants to seasoned outdoor veterans. We pride ourselves on carrying an extensive selection of branded,“good, better and best” hard goods at everyday low prices, including a broad array of in-stock consumable items.Approximately 36.0% of our unit sales and 20.0% of our dollar sales during fiscal year 2016 were consumable goods,such as ammunition, bait, cleaning supplies, food, lures, propane and reloading supplies. We believe this pairing ofproduct breadth and consumable goods appeals to a broad range of customers and drives both repeat traffic andincreased average ticket value. ·Strong Vendor Relationships: We believe our vendors find our “brand-centric”, high-service store concept to be uniqueamong national specialty outdoor retailers. Our attractive store locations, consistent presentation of merchandise andthorough product training present a compelling opportunity for our vendors to offer their brands to local markets thathistorically have been served primarily by “mom & pop” retailers. As a result, we believe we are able to negotiateterms with our vendors that are similar to those offered to our principal competitors that are larger in size. We share thebenefits of these strategic vendor relationships with our customers through better pricing and enhanced access tocertain products that are limited in production. Flexible and Adaptable Real Estate Strategy . We believe that our store model, combined with our rigorous site selectionprocess, is uniquely customizable to address the needs of the different markets we serve. Our stores can vary in size fromapproximately 15,000 to 65,000 gross square feet. We have had success with leasing existing sites as well as constructing newbuild-to-suit sites. Our flexible store model permits us to serve both large metropolitan areas, like Phoenix, Arizona, and smallerMSAs, like Soldotna, Alaska, while generating consistent four-wall Adjusted EBITDA margins and returns on invested capitalacross a range of store sales volumes. In small- to medium-sized markets, we are often able to establish ourselves as a standalonedestination for our customers; in larger markets, we have successfully leveraged existing infrastructure to open stores in shoppingplazas near complementary retailers, drawing upon existing foot traffic. We believe our low-cost, flexible model allows us toaccess both large and small markets more economically than many of our peers. We maintain a disciplined approach to new store development and perform comprehensive market research before selectinga new site, including partnering with specialized, third-party local real estate firms. We select sites based on criteria such as localdemographics, traffic patterns, density of hunting and fishing license holders in the area, abundance of hunting and fishing gameand outdoor recreation activities, store visibility and accessibility, purchase data from our existing customer database andavailability of attractive lease terms. We have established productive relationships with well-regarded commercial real estatefirms and believe that we are a sought-after tenant, given the strength of the Sportsman’s Warehouse brand, the high volume ofcustomers that visit our stores and our flexible approach to site locations. As a result, we continue to have access to desirableretail sites on attractive terms. Low Cost Operating Structure with Attractive and Replicable Store Economics . We strive to maintain a lower operatingcost structure than our principal competitors, which allows us to serve small- to medium-sized markets as well as larger MSAs.We achieve this by exercising tight control over store-level expenses, real estate costs and corporate overhead. In addition, ourgrowing store base, efficient, localized marketing spend and “no frills” warehouse store layout help us maintain comparativelylow operating costs and provide us with the opportunity to achieve four-wall Adjusted EBITDA margins of 10% or more forstores in most new markets. Our typical new store requires an average net investment of approximately $2.0 million, whichincludes store build-out (net of contributions from landlords) and pre-opening cash expenditures. In addition, we stock each newstore with initial inventory at an average cost of approximately $2.3 million. We target a pre-tax return on invested capital withinone year after opening of over 50% excluding initial inventory cost (or over 20% including initial inventory cost), although ourhistorical returns have often5 Table of Contentsexceeded these thresholds. As of the end of fiscal year 2016, all of our stores that had been open for more than twelve monthswere profitable and those stores had an average Adjusted EBITDA margin of 13.5%. We believe this low-cost, capital-efficientapproach also allows us to successfully serve markets that are not well-suited for the more capital-intensive store models of ourprincipal competitors. Approximately 62% of our markets currently lack another nationally recognized outdoor specialty retailer,which we believe is a result of these dynamics. Significant New Store Growth Opportunity within Existing and New Markets . We operate 75 stores across 20 states,primarily in the Western United States and Alaska, with a presence in these markets that is nearly three times that of the nextlargest outdoor retailer. We believe our leadership position in the Western United States, combined with our existing scalableinfrastructure, provides a strong foundation for continued expansion within our core markets. Over the longer term, we believeour distinct retail concept has the potential to expand to more than 300 locations   throughout the United States based on researchconducted for us by Buxton Company, an independent consumer research and analytics firm. Passionate and Experienced Management Team with Proven Track Record . We are focused on delivering anunsurpassed shopping experience to anyone who enjoys the excitement of the outdoors. This passion and commitment is sharedby team members throughout our entire organization, from senior management to the employees in our stores. Our seniormanagement team has an average of 20 years of retail experience, with extensive capabilities across a broad range of disciplines,including merchandising, real estate, finance, compliance, store operations, supply chain management and informationtechnology. We also pride ourselves on the long tenure of our more than 200 store managers and corporate employees, who havebeen with us for an average of approximately nine years. Our Growth Strategy We are pursuing a number of strategies designed to continue our growth and strong financial performance, including: Expanding Our Store Base . We believe that our compelling new store economics and our track record of openingsuccessful new stores provide a strong foundation for continued growth through new store openings in existing, adjacent and newmarkets. Over the last three fiscal years, we have opened an average of nine stores per year. We have opened two new stores todate in fiscal year 2017 and currently plan to open an additional ten new stores in the remainder of fiscal year 2017. For the nextseveral years thereafter, we intend to grow our square footage at a rate of greater than 10 percent annually and expect that most ofour near-term growth will occur within the Western United States with our growth also focusing on expansion to the easternUnited States. Our longer-term plans include expanding our store base to serve the outdoor needs of enthusiasts in markets acrossthe United States. We believe our existing infrastructure, including distribution, information technology, loss prevention andemployee training, is capable of sustaining 100 or more stores without significant additional capital investment. Increasing Same Store Sales Growth . We are committed to increasing same store sales through a number of ongoing andnew initiatives, including: addition of the ability to purchase firearms using our website and pick up the firearm in the store,expansion of our clothing offerings and private label program (such as our proprietary Rustic Ridge and Killik clothing lines),our loyalty program, the implementation of kiosks and mobile point-of-sale in our stores and expansion of our “store-within-a-store” programs with major brands such as Carhartt, Columbia Sportswear and Under Armour. Each of these initiatives isdesigned to foster additional shopping convenience, add deeper merchandise selection and provide more product information tothe customer. We believe these initiatives will drive additional traffic, improve conversion and increase average ticket value. Continuing to Enhance Our Operating Margins . We believe that our planned expansion of our store base and growth insame store sales will result in improved Adjusted EBITDA margins as we take advantage of economies of scale in productsourcing and leverage our existing infrastructure, supply chain, corporate overhead and other fixed costs. Furthermore, we expectto increase our gross profit margin by expanding product offerings in our private label program, including our proprietary RusticRidge and Killik clothing lines, and continuing marketing initiatives in our higher-margin clothing and footwear departments. Growing the Sportsman’s Warehouse Brand . We are committed to supporting our stores, product offerings and brandthrough a variety of marketing programs, private label offerings and corporate partnerships. Our marketing and promotionalstrategy includes coordinated print, digital and social media platforms. In-store, we offer a wide range of6 TM TM TM TM Table of Contentsoutdoor-themed activities and seminars, from turkey frying to firearm operation and safety. In addition, we sponsor communityoutreach and charity programs to more broadly connect with our local communities with the aim of promoting our brand andeducating consumers. Finally, we are committed to local chapters of national, regional and local wildlife federations and otheroutdoor-focused organizations, such as Ducks Unlimited and the Rocky Mountain Elk Foundation. Many of our store managersand employees serve in senior positions in these organizations, which further strengthens our place as leaders in the local outdoorcommunity. We believe all of these programs promote our mission of engaging with our customers and serving outdoorenthusiasts. Our Stores We operate 75 stores across 20 states as of January 28, 2017. Most of our stores are located in power, neighborhood andlifestyle centers. Power centers are large, unenclosed shopping centers that are usually anchored by three or more nationalsupercenters, such as Target, Wal-Mart and Costco. Neighborhood centers are shopping centers anchored by a supermarket ordrugstore that provide convenience goods and services to a neighborhood. Lifestyle centers are shopping centers that combine thetraditional functions of a shopping mall with leisure amenities such as pedestrian friendly areas, open air seating and invitingmeeting spaces. We also operate several single-unit, stand-alone locations. Our stores average approximately 42,000 gross squarefeet. The following table lists the location by state of our 77 stores open as of March 24, 2017: Number ofStores Number ofStoresUtah 9 Nevada 3Washington 9 New Mexico 3Oregon 8 Iowa 1Arizona 7 Kentucky 1California 7 Louisiana 1Idaho 6 Mississippi 1Alaska 5 North Dakota 1Colorado 5 South Carolina 1Wyoming 4 Tennessee 1Montana 3 Virginia 1 Store Design and Layout We present our broad and deep array of products in a convenient and engaging atmosphere to meet the everyday needs ofall outdoor enthusiasts, from the seasoned veteran to the first-time participant. We maintain a consistent floor layout across ourstore base that we believe promotes an “easy-in, easy-out” shopping experience. All of our stores feature wide aisles, highceilings, visible signage and central checkouts with multiple registers. Sportsman’s Warehouse stores, true to their name, aredesigned in a “no frills” warehouse format that welcomes customers directly from or on the way to an outdoor activity. All of ourstores also feature “store-within-a-store” concepts for certain popular brand partners, such as Carhartt, Columbia Sportswear andUnder Armour, through which we dedicate a portion of our floor7 Table of Contentsspace to these brands to help increase visibility and drive additional sales. The diagram below demonstrates our typical storelayout. Our stores include locally relevant features such as a large fishing board at the entrance that displays current fishingconditions in local lakes and rivers with coordinating gear in end-cap displays in the fishing aisles. We actively engage ourcustomers through in-store features such as the Braggin’ Board, various contests (such as Bucks & Bulls and Fish Alaska), andcustomer-owned taxidermy displays on the walls. We also host in-store programs such as “ladies night” and a wide range ofinstructional seminars, from Dutch oven cooking to choosing the right binocular. Annually, we organize approximately 3,000programs across our stores for the benefit of our customers. We believe these programs help us connect with the communities inwhich we operate and encourage first time participants to build the skills necessary to become outdoor enthusiasts and loyalcustomers. Expansion Opportunities and Site Selection We have developed a rigorous and flexible process for site selection. We select sites for new store openings based oncriteria such as local demographics, traffic patterns, density of hunting and fishing license holders in the area, abundance ofhunting and fishing game and outdoor recreation activities, store visibility and accessibility, purchase data from our existingcustomer database and availability of attractive lease terms. Our store model is adaptable to markets of multiple sizes, from MSAswith populations of less than 75,000 to major metropolitan areas with populations in excess of 1,000,000. We have beensuccessful both in remodeling existing buildings and in constructing new build-to-suit locations. Our store model is designed to be profitable in a variety of real estate venues, including power, neighborhood and lifestylecenters as well as single-unit, stand-alone locations. In small- to medium-sized markets, we generally seek anchor locationswithin high-traffic, easily accessible shopping centers. In larger metropolitan areas, we generally seek locations in retail areaswith major discount retailers (such as Wal-Mart), wholesale retailers (such as Costco), other specialty hardline retailers (such asThe Home Depot) or supermarkets. As we continue to expand our store base, we believe that small- to medium-sized marketsoffer a significant opportunity. In these markets, we believe our store size, which is smaller than many of our national competitorsbut larger than many independent retailers, enables us to find convenient, easily accessible store locations while still offering thebroad and deep selection of merchandise that our customers desire. In addition, our store format and size allow us to openmultiple stores in local areas within major MSAs, which gives our customers convenient, easy access to our products withouthaving to travel long distances. Members of our real estate team spend considerable time evaluating prospective sites before bringing a proposal to our realestate committee. Our real estate committee, which is comprised of senior management including our Chief Executive Officer,Chief Financial Officer, Vice President of Real Estate, and Senior Vice President of Stores, approves all prospective locationsbefore a lease is signed. 8 Table of ContentsWe believe there is a significant opportunity to expand our store base in the United States. Based on research conducted forus by Buxton Company, we believe that we can grow our store base from 77 locations to more than 300 locations   in the UnitedStates. We opened eleven new stores in fiscal year 2016. We have opened two new stores to date in fiscal year 2017 and currentlyplan to open an additional ten new stores in the remainder of fiscal year 2017. For the next several years thereafter, we intend togrow our square footage at a rate of greater than 10 percent annually. Our new store openings are planned in existing, adjacentand new markets. Our new store growth plan is supported by our target new unit economics, which we believe to be compelling. A typicalstore location ranges in size from 30,000 to 50,000 gross square feet. Our net investment to open a new store is approximately$2.0 million, consisting of pre-opening expenses and capital investments, net of tenant allowances. In addition, we stock eachnew store with initial inventory at an average cost of approximately $2.3 million. For the first twelve month period after openinga new store, we target net sales of $8.0 million to $11.0 million, a four-wall Adjusted EBITDA margin of more than 10% and apre-tax return on invested capital of over 50% excluding initial inventory cost (or over 20% including initial inventory cost). Ournew stores typically reach a mature sales growth rate within three to four years after opening, with net sales increasingapproximately 25% in the aggregate during this time period. For the 29 stores opened since 2010 that have been open for a fulltwelve months, we achieved an average four-wall Adjusted EBITDA margin of 13.5% and an average ROIC of 81.7% excludinginitial inventory cost (and 30.1% including initial inventory cost) during the first twelve months of operations. In addition, weachieved an average pre-tax payback period of less than one year (excluding initial inventory cost) and expect to achieve anaverage pre-tax payback period of approximately 2.5 years (including initial inventory cost). E-Commerce Platform and Digital Strategy We believe our website is an extension of our brand and our retail stores. Our website, www.sportsmanswarehouse.com ,serves as both a sales channel and a platform for marketing and product education, and allows us to engage more fully with thelocal outdoor community. Our website features a similar merchandise assortment as offered in our stores as well as certainproducts found exclusively online. Regulatory restrictions create certain structural barriers to the online sale of approximately33% of our revenue, such as firearms, ammunition, certain cutlery, propane and reloading powder. As a result, this portion of ourbusiness is currently more protected from online-only retailers, such as Amazon. We also provide our online customers with convenient multi-channel services. To ensure that our customers have access toour entire assortment of products available on the e-commerce website, our retail stores feature kiosks that allow customers toplace orders for items that are available only on our website or that are out of stock or not regularly stocked. We view our kioskoffering as an important complement to our larger format stores, as well as a key differentiator and extension of our smallerformat stores. Our in-store pickup offering allows customers to order products through our e-commerce website and pick up theproducts in our retail stores without incurring shipping costs. We believe our ship-to-store functionality is a valuable serviceoffering to customers, as well as a means to generate additional foot traffic to our retail stores. Our website also features an online version of our Braggin’ Board, which complements our retail store Braggin’ Boardforum. In addition, our website features local area content, including fishing reports and event schedules, as well as onlineeducational resources, including tips, advice and links to video demonstrations on our dedicated YouTube channel. In fiscal year2014, we launched enhanced department and product pages, detailed buyer’s guides, and additional instructional product videos.We have also rolled out our social media strategy through our Facebook page and Instagram feed. These platforms allow us toreach our customers more directly with targeted postings of advertisements and in-store events. We believe our online educationalresources and community outreach drive traffic to our website and retail stores, while improving user engagement as shoppersmove from single-purchase users to loyal customers. We provide online customer service support and fulfill all orders in-housethrough our distribution center. During fiscal year 2016, our e-commerce platform generated total sales of $9.3 million, or 1.2%of our total sales. Over the same period, our website received greater than 17.0 million visits, which we believe demonstrates ourposition as a leading resource for outdoor products and product education. 9 Table of ContentsOur Products and Services Merchandise Strategy We offer a broad range of products at a variety of price points and carry a deep selection of branded merchandise fromwell-known manufacturers, such as Browning, Carhartt, Coleman, Columbia Sportswear, Federal Premium Ammunition, Honda,Johnson Outdoors, Remington, Shakespeare, Shimano, Smith & Wesson and Under Armour. To reinforce our convenientshopping experience, we offer our products at competitive, everyday low prices. We believe our competitive pricing strategysupports our strong value proposition, instills price confidence in both our customers and our sales associates and is a criticalelement of our competitive position. We believe we offer a wider selection of hard goods than many of our principal competitors. We employ a “good, better,and best” merchandise strategy, with an emphasis on “better” products that meet the needs of customers of all experience levels.We strive to keep our merchandise mix fresh and exciting by continuously searching for new, innovative products andintroducing them to our customers. Our hunting and shooting department, which is strategically located at the back of the store, isa key driver of store traffic and one of the reasons for our high frequency of customer visits. We carry a large array of consumablegoods, which includes ammunition, bait, cleaning supplies, food, lures, propane and reloading supplies. During fiscal year 2016,sales of consumable goods accounted for approximately 36.0% of our unit sales and 20.0% of our dollar sales. We believe thesale of consumables and replenishment items drives repeat traffic, with approximately 67% of our customers visiting our storesseven or more times per year (according to our internal surveys). During such visits, our customers frequently browse andpurchase other items, including additional gear and accessories. We also carry a variety of private label offerings under the Rustic Ridge , Killik , Vital Impact , Yukon Gold, LostRiver and Sportsman’s Warehouse brands. These products are designed and priced to complement our branded assortment, byoffering our customers a quality alternative at all price points. We believe the clothing, footwear and camping categories present acompelling near-term opportunity to expand our private label offering. In order to address these segments, we introduced ourproprietary Rustic Ridge and Killik clothing lines. During fiscal year 2016, private label offerings accounted forapproximately 4.0% of our total sales, compared to more than 20% for many of our sporting goods retail peers. We believe ourprivate label products are an important opportunity to drive sales and increase margins alongside our branded merchandise. In addition to outfitting our customers with the correct gear, we provide our customers with various in-store, value-added,technical support services. All of our stores offer full-service archery technician services, fishing-reel line winding, gun boresighting and scope mounting, among other services. We also help first-time participants enjoy the outdoors responsibly by issuinghunting and fishing licenses. We believe the support services provided by our highly trained staff technicians differentiate us fromour competitors and drive customer loyalty and repeat traffic to our stores. Products Our stores are organized into six departments. The table below summarizes the key product lines and brands by department: Department Product OfferingsCamping Backpacks, camp essentials, canoes and kayaks, coolers, outdoor cooking equipment, sleepingbags, tents and toolsClothing Camouflage, jackets, hats, outerwear, sportswear, technical gear and work wearFishing Bait, electronics, fishing rods, flotation items, fly fishing, lines, lures, reels, tackle and smallboatsFootwear Hiking boots, socks, sport sandals, technical footwear, trail shoes, casual shoes, waders andwork bootsHunting and Shooting Ammunition, archery items, ATV accessories, blinds and tree stands, decoys, firearms,reloading equipment and shooting gearOptics, Electronics andAccessories Gift items, GPS devices, knives, lighting, optics -e.g., binoculars and two-way radios Each department has buying and planning teams that are responsible for monitoring product availability from vendors andsales volume within the department and across all stores. We actively monitor the profitability of each10 TM TM TM TM TM Table of Contentsproduct category within each department and adjust our assortment and selling space accordingly. This flexibility enables us toprovide customers with more preferred product choices and to enhance the profit potential of each store. Hunting and shooting has historically been the largest contributor to our sales. Hunting and shooting department productsare generally sold at significantly higher price points than other merchandise but often have lower margins. Camping is oursecond largest department, and family-oriented camping equipment in particular continues to be a high growth product category.Although clothing sales decreased as a percentage of total sales during fiscal year 2016, overall clothing sales have grown as wehave introduced new brands and styles, including our selections for women and children. We view clothing sales as an importantopportunity, given this department’s high gross margins and appeal to a broad, growing demographic. The following table shows our sales during the past three fiscal years presented by department: Fiscal Year Ended January 28, January 30, January 31, Department 2017 2016 2015 Camping 14.6% 14.6% 13.9% Clothing 8.7% 8.9% 9.8% Fishing 10.0% 9.9% 9.8% Footwear 7.1% 7.3% 7.7% Hunting and Shooting 50.9% 50.2% 49.4% Optics, Electronics and Accessories (Giftbar) 9.0% 9.6% 9.8% Other (0.3%) (0.5%) (0.4%) Total 100.0% 100.0% 100.0% Camping . Camping represented approximately 14.6% of our net sales during fiscal year 2016. Our camping assortmentaddresses both the technical requirements of the heavy-use camper, including gear for long-duration or deep-woods excursions, aswell as the needs of the casual camper. We offer a broad selection of tents and shelters for both multi-day back country use andweekend outings, sleeping bags for the most extreme conditions as well as the summer overnight trip, backpacks and backpackinggear, including camouflaged styles for hunting, generators for home and camp use, cooking and food preparation equipment,including stoves and extended-use coolers, as well as dehydrated foods. Our camping department also includes canoes, kayaksand a selection of recreational family camping equipment, including basic automotive accessories, camp chairs and canopies. Ourcamping department includes brands such as Alps Mountaineering, Camp Chef, Coleman, Honda, Teton Sports, and Yeti Coolers. Clothing. Clothing represented approximately 8.7% of our net sales during fiscal year 2016 and includes camouflage,outerwear, sportswear, technical gear, work-wear, jackets and hats. We primarily offer well-known brands in our clothingdepartment, such as Carhartt, Columbia, Kings Mountain Shadow, Sitka, and Under Armour. We also intend to grow ourproprietary clothing lines, Rustic Ridge and Killik . Our clothing selection offers technical performance capabilities for avariety of hunting activities, including upland game, waterfowl, archery, big game hunting, turkey hunting and shooting sports.Performance attributes include waterproofing, temperature control, scent control features and visual capabilities, such as blazeorange and camouflage in a wide range of patterns. Outerwear, particularly performance rainwear, is an important productcategory for customers who are fishing, hiking, hunting or marine enthusiasts. We furthermore complement our technical clothingwith an assortment of casual clothing that fits our customers’ lifestyles, including a variety of branded graphic t-shirts, and privatelabel motto t-shirts. Fishing  . Fishing represented approximately 10.0% of our net sales during fiscal year 2016 and includes products forfresh-water fishing, salt-water fishing, fly-fishing, ice-fishing and boating. Our broad assortment appeals to the beginning andweekend angler, as well as avid and tournament anglers. In addition to lures, rods and reels, our fishing assortment features awide selection of products in tackle management and organization, electronics, fly-fishing, ice-fishing and marine accessoriessub-categories. We also provide fishing-reel line winding services in all of our stores and live bait in most of our stores. We offerproducts for boat care and maintenance, as well as safety equipment and aquatic products such as float tubes and pontoons. All ofour stores also sell fishing licenses. Our fishing department includes brands such as Johnson Outdoors, Normark, Plano, PureFishing, Rivers Wild Flies, and Shimano. Footwear  . Footwear represented approximately 7.1% of our net sales during fiscal year 2016 and includes work boots,technical footwear, hiking boots, trail shoes, socks, sport sandals and waders. As with clothing, our footwear selection offers avariety of technical performance capabilities, such as different levels of support and types of tread,11 TM TM Table of Contentswaterproofing, temperature control and visual attributes. Our footwear department includes brands such as Danner, Keen, Merrell,Red Wing, and Under Armour. Hunting and Shooting . Hunting and shooting is our largest merchandise department, representing approximately 50.9% ofour net sales during fiscal year 2016. Products such as ammunition, cleaning supplies, firearms and reloading selections aretypically key drivers of traffic in our stores. Our hunting and shooting merchandise assortment provides equipment, accessoriesand consumable supplies for virtually every type of hunting and shooting sport. A backroom shop staffed with technicians allowsus to support our hunting assortments for the benefit of the hunter, shooter, and archery enthusiast. Our merchandise selection includes a wide variety of firearms designed for hunting, shooting sports and home and personaldefense, including air guns, black powder muzzle loaders, handguns, rifles and shotguns. We carry a wide selection ofammunition, archery equipment, dog training products, hunting equipment, reloading equipment and shooting accessories. Ourhunting and shooting department includes brands such as Federal Premium Ammunition, Hornady, Remington Arms, Ruger,Smith & Wesson, and Winchester. Optics, Electronics and Accessories. Our optics, electronics and accessories department represented approximately 9.0% ofour net sales during fiscal year 2016. This department supplements our other equipment departments with complementaryproducts, such as optics (including binoculars, spotting scopes and rangefinders), GPS devices and other navigation gear, GoProvideo cameras, two-way radios, specialized and basic cutlery and tools, including hunting and other knives, lighting, bear sprayand other accessories. Our optics, electronics and accessories department includes brands such as Garmin, Leica, Nikon,Swarovski Optik and Vortex Optics. Other. Our other department represented approximately (0.3)% of our net sales during fiscal year 2016 and includeshunting and fishing licenses and background check revenue, net of revenue discounts. See Note 2 to our Consolidated FinancialStatements for a discussion how, in fiscal year 2016, we changed the way revenue from state fish and game licenses, duck stamps,and state government-mandated firearm backgroud checks is recorded (Gross vs. Net). Loyalty Programs We launched a loyalty program in the fall of 2013, through which our consumers are able to earn “points” towardsSportsman’s Warehouse gift cards on most of their purchases. The program is free to join and accepted through all channels forboth purchases and the use of redemption cards. As of January 28, 2017, we had approximately 1.2 million participants in ourloyalty program. Customers may obtain a loyalty program card when making a purchase in-store or online. After obtaining a card, thecustomer must register on our website in order to redeem loyalty rewards. Customers earn one point for each dollar spent, withthe exception of certain items, such as gift cards and fish and game licenses. For every 100 points accumulated, the customer isentitled to a $1.00 credit in loyalty rewards, which may be redeemed by logging into our website to request a redemption card forany whole dollar amount (subject to the customer’s available point balance). The redemption card is then mailed to the customerand operates as a gift card to be used for both in-store and online purchasing. The rewards points expire after 18 months ofdormancy. In addition, we offer our customers the multi-use Sportsman’s Warehouse Rewards VISA Platinum credit card issued byUS Bank. US Bank extends credit directly to cardholders and provides all servicing for the credit card accounts, funds the rewardsand bears all credit and fraud losses. This card allows customers to earn points whenever and wherever they use their card.Customers may redeem earned points for products and services just as they would redeem loyalty card points. Sourcing and Distribution Sourcing We maintain central purchasing, replenishment and distribution functions to manage inventory planning, allocatemerchandise to stores and oversee the replenishment of basic merchandise to the distribution center. We have no long-termpurchase commitments. During fiscal year 2016, we purchased merchandise from approximately 1,500 vendors12 Table of Contentswith no vendor accounting for more than approximately 6% of total merchandise purchased. We have established long-standing,continuous relationships with our largest vendors. Our sourcing organization is currently managed by our merchant team in our corporate headquarters. We also have fieldmerchants that coordinate certain merchandising functions at the store level to provide a more localized merchandising model. Toensure that our product offerings are tailored to local market conditions and demand, our merchant teams regularly meet one-on-one with our vendors, and attend trade shows, review trade periodicals and evaluate merchandise offered by other retail andonline merchants. We also frequently gather feedback and new product reviews from our store management and employees, aswell as from reviews submitted by our customers. We believe this feedback is valuable to our vendor-partners and improves ouraccess to new models and technologies. Distribution and Fulfillment We distribute all of our merchandise from our efficient 507,000 square foot distribution center in Salt Lake City, Utah. Weopened this facility in July 2013, more than doubling the available space from our prior facility, in order to accommodate ourgrowing store base and e-commerce platform. The distribution center supports replenishment for all 75 stores and manages thefulfillment of direct-to-consumer e-commerce orders. We use preferred carriers for replenishment of our retail stores. We shipmerchandise to our e-commerce customers via courier service. An experienced distribution management team leads a staff of 435employees at peak inventory levels heading into the fourth quarter. The distribution center has dynamic systems and processes that we believe can accommodate continued new store growthfor 100 or more stores. We use the HighJump warehouse management system, or WMS, to manage all activities. The system ishighly adaptable and can be easily changed to accommodate new business requirements. For example, our WMS enabled us tosupport full omni channel distribution under one roof by allowing us to comingle inventory to optimize space requirements andlabor. Additionally, we have developed customized Radio Frequency and Voice Directed processes to handle the specificrequirements of our operations. We have the capability to both case pick and item pick, which is designed to ensure that our storeshave sufficient quantities of product while also allowing us to maintain in inventory slow moving but necessary items. Thisbalance allows us to stock the right products at the necessary locations, all at the right time and in the correct quantity. Marketing and Advertising We believe, based on internal surveys, that the majority of our customers are male, between the ages of 35 and 65, and havean annual household income between $40,000 and $100,000. We also actively market to women and children and have expandedour product offerings of women’s and children’s outerwear, clothing and footwear to address rising participation rates in huntingand shooting sports, as well as overall outdoor activity. Our primary marketing efforts are focused on driving additional consumers to the stores and increasing the frequency andprofitability of visits by customers of all types. We employ a two-pronged marketing approach: ·regional advertising programs; and ·local grass roots efforts to build brand awareness and customer loyalty. Our regional advertising programs emphasize seasonal requirements for hunting, fishing and camping in our various storegeographies. Our advertising medium is typically newspaper inserts (primarily multi-page color inserts during key shoppingperiods such as the Christmas season and Father’s Day), supplemented with modest amounts of direct mail, seasonal use of localand national television ads and a variety of out-of-home media buys. We proactively modify the timing and content of ourmessage to match local and regional preferences, changing seasons, weather patterns and topography of a given region. Inaddition, the use of co-op funding with select vendors to supplement our out-of-pocket media expenses allows us to improvebrand exposure through various advertising vehicles, while partnering with national brands in relevant media channels. Thisprogram also reinforces the general consumer’s impression of Sportsman’s Warehouse as a preferred retailer for those brands.Finally, we sponsor regional and national television programming, including sponsoring the, Angler’s Channel, Fishful Thinking,Hooked on Utah and Eastman’s Hunting TV. Our total marketing expenses for fiscal year 2016 were approximately $9.4 million,excluding co-op reimbursement of $1.9 million. 13 Table of Contents The second prong of our marketing effort is the time and resources devoted to fostering grass roots relationships in the localcommunity. Each Sportsman’s Warehouse store employs a variety of outreach tools to build local awareness. One key componentto a successful store is hosting events throughout the year, targeting a variety of end user customer profiles (such as hunters,campers, anglers, women and children). In total, our store base hosts or facilitates approximately 3,000 in-store and offsiteseminars and events per year, such as “ladies night,” Eastman’s Deer Tour, Waterfowl Weekend, Conservation Days contest andBucks & Bulls. We are also active in supporting a variety of conservation groups, such as Ducks Unlimited, Rocky Mountain ElkFoundation, Mule Deer Foundation and the National Wild Turkey Federation, both at the corporate level and through storeemployee local memberships and participation. Company representatives attend more than 600 events annually in the aggregate,both to provide support for these organizations and to solidify ties between their members and the Sportsman’s brand.Furthermore, we believe that the Sportsman’s News newspaper, offered in-store, provides a unique point of contact with ourcustomers by offering outdoor stories, product reviews, how-to articles and new product introductions to keep all of ourcustomers up to date on the latest trends and technology. Finally, such grass roots campaigns enable us to reduce our initialmarketing spend in connection with new store openings. We believe that these initiatives are highly cost-effective tools to createbrand awareness and engender a loyal community of local customers, as well as a key differentiator versus other nationalretailers. Hiring, Training and Motivating our Employees We believe that the recruitment, training and knowledge of our employees and the consistency and quality of the servicethey deliver are central to our success. We emphasize deep product knowledge for store managers and sales associates at both thehiring and training stages. We hire most of our sales associates for a specific department or product category. As part of theinterview process, we test each prospective employee for knowledge specific to the department or category in which he or she isapplying to work. All of our managers and sales associates undergo focused sales training, consisting of both sales techniques andspecialized product instruction, both immediately upon hiring (approximately 20 hours) and continuing throughout their career(approximately 16 hours annually). In addition, our sales associates receive loss prevention instruction and departmental trainingupon hiring. For example, in our hunting department, all employees receive an additional nine hours of training on ATF andcompany policies initially upon hire, with continuing education throughout the year. Our store managers complete two to sixmonths of on-the-job training at another store with an existing district manager, as part of which they receive approximately 80hours of dedicated managerial training and instruction. Our department heads receive extensive online training as well as on-siteinstruction, totaling approximately 40 hours. As a result of these programs, our employees are highly trained to provide friendlyand non-intimidating education, guidance and support to address our customers’ needs. Our employees are often outdoor enthusiasts themselves, participating in outdoor activities alongside our customers in thelocal community. Our employees spend a portion of their gross wages in-store, underscoring their passion for both our companyand the outdoor lifestyle. We believe our level of employee store patronage is unique among our competitors in this industry andenhances our differentiated shopping experience. One of our unique assets is a specially designed training room located at our headquarters. Our training room is usedfrequently for firm-wide training programs and by vendors to stage training demonstrations for new products. Training roomsessions are broadcast real-time in high definition to each store location and are recorded for future viewing. Vendor training isespecially interactive, permitting vendor representatives to present a uniform message simultaneously to all employees, whileallowing managers and sales staff in individual stores to ask questions of the vendors and provide real-time feedback on products.This system decreases the vendor’s promotion and education costs and provides more meaningful training to our employees.Training room sessions are particularly important for technical products, especially those with numerous features and a high unitprice, because they enable our sales associates to better educate customers and provide additional assurance that a given productfits the customer’s needs. Given its utility as a cost-effective sales tool, our training room is reserved well in advance by vendors.Our training program has been a critical factor in increasing conversion, which has led to average ticket growth of approximately10% since the end of fiscal year 2010. Information Technology Business critical information technology, or IT, systems include our supply chain systems, merchandise system, point-of-sale (POS) system, warehouse management system, e-commerce system, loss prevention system and financial and payrollsystems. Our IT infrastructure is robustly designed to be able to access real-time data from any store or14 Table of Contentschannel. The network infrastructure allows us to quickly and cost effectively add new stores to the wide area network, or WAN.The private WAN is built on a CenturyLink (formerly Qwest) backbone with all of its resources and support. Additionally, wehave implemented a redundant wireless WAN on Verizon’s infrastructure. All key systems will continue to run in the event of apower or network outage. All data is backed up daily from one storage array to another storage array. We have implemented what we believe to be best-of-class software for all of our major business critical systems. Keyoperating systems include Oracle Applications for ERP, Oracle Commerce for our e-commerce channel, Salesforce’s (formallyTomax’s) Retail.net and JPOS for in-store functionality and HighJump for WMS. Our physical infrastructure is also built onproducts from best-in-class vendors Cisco, Dell, Oracle Sun and VMWare. Originally designed with the goal of being able to runa significantly larger retail business, our IT systems are scalable to support our growth. The retail stores and the distribution center have loss prevention employees who monitor an average of 60 cameras at eachstore and 200 at the distribution center. These cameras are connected to digital video recorders (DVR) that record at least 30 daysof video. Cameras are monitored locally during store hours. In addition, all cameras are monitored centrally at our headquarters inour dedicated surveillance room, which has capacity to monitor over 120 stores. This room is staffed continuously and providesoff-hours monitoring and backup for all stores. Digital recorded video can be searched by pixel movement, which can quicklyidentify any loss prevention issue. Our sophisticated systems are a key factor in our shrink rates of less than 1% and an importantcomponent of our comprehensive compliance program. We furthermore have incorporated enhanced reporting tools that have allowed for more comprehensive monitoring ofbusiness performance, which has been critical to management’s ability to drive strong store level performance. Management hasaccess to a reporting dashboard that shows key performance indicators, or KPIs, on a company, store, department and categorylevel. KPIs include sales, margin, budget, conversions, payroll, shrinkage and average order value all on a daily, weekly, monthlyand yearly basis. All KPIs are compared to comparable prior year periods. District, store and department managers have access tothe data relevant to their area of responsibility. Real-time, up to the second, sales data is available on demand. The system allowsfor custom-created reports as required. Intellectual Property Sportsman’s Warehouse , Sportsman’s Warehouse America’s Premier Outfitter , Lost Creek , LC Lost Creek FishingGear and Accessories , Rustic Ridge , Killik , K Killik & Design , LC & Design , and Vital Impact are among ourservice marks or trademarks registered with the United States Patent and Trademark Office. In addition, we own several otherregistered and unregistered trademarks and service marks involving advertising slogans and other names and phrases used in ourbusiness. We also own numerous domain names, including www.sportsmanswarehouse.com , among others. The information on,or that can be accessed through, our websites is not a part of this filing. We believe that our trademarks are valid and valuable and intend to maintain our trademarks and any related registrations.We do not know of any material pending claims of infringement or other challenges to our right to use our marks in the UnitedStates or elsewhere. We have no franchises or other concessions that are material to our operations. Our Market and Competition Our Market We compete in the large, growing and fragmented outdoor activities and sporting goods market, which we believe iscurrently underserved by full-line multi-activity retailers. We believe, based on reports by the National Sporting GoodsAssociation, or NSGA, and other industry sources, that U.S. outdoor activities and sporting goods retail sales totaled over $60billion in 2015. The U.S. outdoor activities and sporting goods sector is comprised of three primary categories—equipment,clothing and footwear—with each category containing distinct product sets to support a variety of activities, including hunting,fishing, camping and shooting, as well as other sporting goods activities. We believe growth in the U.S. outdoor activities and sporting goods market is driven by several key trends, including: anexpanding demographic focused on healthy and active lifestyles; successful new product introductions centered around enhancingperformance and enjoyment while participating in sporting and outdoor activities; and the resilience of consumer demand forpurchases in these categories versus other discretionary categories. We believe these factors will continue to foster growth in theoutdoor activities and sporting goods market in the future.15 ® ® ® ® TM TM TM TM TM Table of Contents Within the retail sporting goods sector, we operate primarily in the outdoor equipment, clothing and footwear segment,which includes hunting and shooting, fishing, camping and boating. This segment is growing at a faster rate than the sportinggoods industry at large. The 2011 U.S. Fish and Wildlife national survey, published once every five years, found that hunting andshooting and fishing participation increased 9% and 11%, respectively, for Americans aged 16 and older from 2006 to 2011. Thissurvey also found that fishing participation among women increased by 17% over the same time period. A 2015 NSGA report indicated that, from 2013 to 2015, there was a 4% increase in hunting with firearms participation, a4% increase in target shooting (live ammunition) participation, and a 5% increase in fishing (fresh water) participation. From2011 to 2015 the report indicated a 12% increase in female participation in target shooing (live ammo), and an 25% increase infemale participation in hunting with firearms in the United States. Furthermore, we believe that specialty retailers have generated additional sales volume by expanding their presence,especially in smaller communities, which has increased customers’ access to products that formerly were less available. Thenature of the outdoor activities to which we cater requires recurring purchases throughout the year, resulting in high rates ofconversion among customers. For example, active anglers typically purchase various fishing tackle throughout the year based onseasons and changing conditions. Hunting with firearms typically is accompanied by recurring purchases of ammunition andcleaning supplies throughout the year and multiple firearm styles for different hunted game. Competition We believe that the principal competitive factors in our industry are breadth and depth of product selection, includinglocally relevant offerings, value pricing, convenient locations, technical services and customer service. A few of our competitorshave a larger number of stores, and some of them have a greater market presence, name recognition and financial, distribution,marketing and other resources than we have. We believe that we compete effectively with our competitors with our distinctivebranded selection and superior customer service, as well as our commitment to understanding and providing merchandise that isrelevant to our targeted customer base. We cater to the outdoor enthusiast and believe that we have both an in-depth knowledge ofthe technical outdoor customer and a “grab and go” store environment that is uniquely conducive to their need for value andconvenience. We believe that our flexible box size, combined with our low-cost, high-service model, also allows us to enter intoand serve smaller markets that our larger competitors cannot penetrate as effectively. Finally, certain barriers, including legalrestrictions, exist on the sale of our product offerings that comprise approximately 33% of our revenue, such as firearms,ammunition, certain cutlery, propane and reloading powder, create a structural barrier to competition from many online retailers,such as Amazon. Our principal competitors include the following: ·independent, local specialty stores, often referred to as “mom & pops”; ·other specialty retailers that compete with us across a significant portion of our merchandising categories through retailstore, catalog or e-commerce businesses, such as Bass Pro Shops, Cabela’s and Gander Mountain; ·large-format sporting goods stores and chains, such as Academy Sports + Outdoors and Dick’s Sporting Goods; and ·mass merchandisers, warehouse clubs, discount stores, department stores and online retailers, such as Amazon, Targetand Wal-Mart. Independent, Local Specialty Stores . These stores generally range in size from approximately 2,000 to 10,000 square feet,and typically focus on one or two specific product categories, such as hunting, fishing or camping, and usually lack a broadselection of product. Other Specialty Retailers. Some of the other specialty retailers that compete with us across a significant portion of ourmerchandising categories are large-format retailers that generally range in size from 40,000 to 250,000 square feet. These retailersseek to offer a broad selection of merchandise focused on hunting, fishing, camping and other outdoor product categories. Someof these stores combine the characteristics of an outdoor retailer with outdoor entertainment16 Table of Contentsand theme attractions. We believe that the number of these stores that can be supported in any single market area is limitedbecause of their large size and significant per-store cost. Other specialty retailers are smaller chains that typically focus on offering a broad selection of merchandise in one or moreof the following product categories—hunting, fishing, camping or other outdoor product categories. We believe that these otheroutdoor-focused chains generally do not offer a similar depth and breadth of merchandise or specialized services in all of ourproduct categories. Large-Format Sporting Goods Stores And Chains . These stores generally range from 20,000 to 80,000 square feet andoffer a broad selection of sporting goods merchandise covering a variety of sporting goods categories, including baseball,basketball, football and home gyms, as well as hunting, fishing and camping. However, we believe that the amount of space atthese stores devoted to our outdoor product categories limits the extent of their offerings in these areas. Mass Merchandisers, Warehouse Clubs, Discount Stores, Department Stores and Online Retailers . With respect toretailers in this category with physical stores, these stores generally range in size from approximately 50,000 to over 200,000square feet and are primarily located in shopping centers, free-standing sites or regional malls. Hunting, fishing and campingmerchandise and clothing represent a small portion of the stores’ assortment, and of their total sales. We believe that less than10% of our product offering, and less than 5% of our hunting and shooting product offering, overlap with these stores. Over the past decade, specialty retailers, such as us, have gained market share of equipment sales at the expense of massmerchants, discount stores and independent retailers, or “mom & pop” shops, which we believe comprise approximately 65% ofthe market. In addition, while there are over 80,000 Type 01 Federal Firearms Licenses, or FFLs, in the United States today, only4,300 are currently held by national or regional specialty stores. Since FFLs are issued at the store level, these statistics imply thatthe remaining 95% of the market is fragmented among mom & pop stores. We believe this fragmentation within the totaladdressable market presents an attractive opportunity for us to continue to expand our market share, as customers increasinglyprefer a broad and appealing selection of merchandise, competitive prices, high levels of service and one-stop shoppingconvenience. Seasonality We experience moderate seasonal fluctuations in our net sales and operating results as a result of holiday spending and theopening of hunting seasons. While our sales are more level throughout the year than many retailers, our sales are still traditionallysomewhat higher in the third and fourth fiscal quarters than in the other quarterly periods. On average over the last three fiscalyears, we have generated 27.3% and 28.9% of our net sales in the third and fourth fiscal quarters, respectively, which includes theholiday selling season as well as the opening of the fall hunting season. However, Spring hunting, Father’s Day and theavailability of hunting and fishing throughout the year in many of our markets counterbalance this seasonality to a certain degree.For additional information, see Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results ofOperation." Regulation and Compliance Regulation and Legislation We operate in highly regulated industries. There are a number of federal, state and local laws and regulations that affect ourbusiness. In every state in which we operate, we must obtain various licenses or permits in order to operate our business. Because we sell firearms at all of our retail stores, we are subject to regulation by the Bureau of Alcohol, Tobacco, Firearmsand Explosives, or the “ATF”. Each store has a federal firearms license permitting the sale of firearms, and our distribution centerhas obtained a federal firearms license to store and distribute firearms. Certain states require a state license to sell firearms, andwe have obtained these licenses for the states in which we operate that have such a requirement. We must comply with federal, state and local laws and regulations, including the National Firearms Act of 1934, or NFA,the Gun Control Act of 1968, or GCA, the Arms Export Control Act of 1976 and Internal Revenue Code17 Table of Contentsprovisions applicable to the Firearms and Ammunition Excise Tax, all of which have been amended from time to time. The NFAand the GCA require our business to, among other things, maintain federal firearms licenses for our locations and perform a pre-transfer background check in connection with all firearms purchases. We perform this background check using either the FBI-managed National Instant Criminal Background Check System, or NICS, or a comparable state government-managed system thatrelies on NICS and any additional information collected by the state, a state point of contact. These background check systemseither confirm that a transfer can be made, deny the transfer or require that the transfer be delayed for further review, and provideus with a transaction number for the proposed transfer. We are required to record the transaction number on an ATF Form 4473and retain this form in our records for auditing purposes for 20 years for each approved transfer and five years for each denied ordelayed transaction. The federal categories of prohibited purchasers are the prevailing minimum for all states. States (and, in some cases, localgovernments) on occasion enact laws that further restrict permissible purchasers of firearms. We are also subject to numerousother federal, state and local laws and regulations regarding firearm sale procedures, record keeping, inspection and reporting,including adhering to minimum age restrictions regarding the purchase or possession of firearms or ammunition, residencyrequirements, applicable waiting periods, importation regulations and regulations pertaining to the shipment and transportation offirearms. Over the past several years, bills have been introduced in the United States Congress that would restrict or prohibit themanufacture, transfer, importation or sale of certain calibers of handgun ammunition, impose a tax and import controls on bulletsdesigned to penetrate bullet-proof vests, impose a special occupational tax and registration requirements on manufacturers ofhandgun ammunition and increase the tax on handgun ammunition in certain calibers. Recently, Congress has debated certain guncontrol measures that were supported by the prior administration. In September 2004, Congress declined to renew the Assault Weapons Ban of 1994, or AWB, which prohibited themanufacture of certain firearms defined as “assault weapons”; restricted the sale or possession of “assault weapons,” except thosethat were manufactured prior to the law’s enactment; and placed restrictions on the sale of new high capacity ammunition feedingdevices. Various states and local jurisdictions, including Colorado and California (states in which we operate stores), haveadopted their own versions of the AWB or high capacity ammunition feeding device restrictions, some of which restrictions applyto the products we sell in other states. If a statute similar to the AWB were to be enacted or re-enacted at the federal level, itwould impact our ability to sell certain products. Additionally, state and local governments have proposed laws and regulationsthat, if enacted, would place additional restrictions on the manufacture, transfer, sale, purchase, possession and use of firearms,ammunition and shooting-related products. For example, several states, such as Colorado, Connecticut, Maryland, New Jersey,New York, and Washington have enacted laws and regulations that are more restrictive than federal laws and regulations thatlimit access to and sale of certain firearms. For example, Connecticut and New York impose mandatory screening of ammunitionpurchases; California and the District of Columbia have requirements for microstamping (that is, engraving the handgun’s serialnumber on each cartridge) of new handguns; and some states prohibit the sale of guns without internal or external lockingmechanisms. Other state or local governmental entities may also explore similar legislative or regulatory initiatives that mayfurther restrict the manufacture, sale, purchase, possession or use of firearms, ammunition and shooting-related products. The Protection of Lawful Commerce in Arms Act, which became effective in October 2005, prohibits civil liability actionsfrom being brought or continued in any federal or state court against federally licensed manufacturers, distributors, dealers orimporters of firearms or ammunition for damages, punitive damages, injunctive or declaratory relief, abatement, restitution, fines,penalties or other relief resulting from the criminal or unlawful misuse of a qualified product by third parties. The legislation doesnot preclude traditional product liability actions. We are also subject to a variety of federal, state and local laws and regulations relating to, among other things, protection ofthe environment, human health and safety, advertising, pricing, weights and measures, product safety, and other matters. Some ofthese laws affect or restrict the manner in which we can sell certain items, such as handguns, smokeless powder, black powdersubstitutes, ammunition, bows, knives and other products. State and local laws and regulations governing hunting, fishing,boating, ATVs and other outdoor activities and equipment can also affect our business. We believe that we are in substantialcompliance with the terms of such laws and that we have no liabilities under such laws that we expect could have a materialadverse effect on our business, results of operations or financial condition. 18 Table of ContentsIn addition, many of our imported products are subject to existing or potential duties, tariffs or quotas that may limit thequantity of products that we may import into the United States and other countries or impact the cost of such products. To date,quotas in the operation of our business have not restricted us, and customs duties have not comprised a material portion of thetotal cost of our products. Our e-commerce business is subject to the Mail or Telephone Order Merchandise Rule and related regulations promulgatedby the FTC which affect our catalog mail order operations. FTC regulations, in general, govern the solicitation of orders, theinformation provided to prospective customers, and the timeliness of shipments and refunds. In addition, the FTC has establishedguidelines for advertising and labeling many of the products we sell. Compliance We are routinely inspected by the ATF and various state agencies to ensure compliance with federal and local regulations.While we view such inspections as a starting point, we employ more thorough internal compliance inspections to help ensure weare in compliance with all applicable laws. Our compliance department conducts at least one on-site inspection of each storelocation biennially. With the IT infrastructure systems we have in place, recall inspections can be done remotely. We dedicate significant resources to ensure compliance with applicable federal, state and local regulations. Since we beganoperations in 1986, none of our federal firearm licenses have been revoked, and none of our ATF compliance inspections withinthe last ten years have resulted in a major violation. We are also subject to a variety of state laws and regulations relating to, among other things, advertising and productrestrictions. Some of these laws prohibit or limit the sale, in certain states and locations, of certain items, such as black powderfirearms, ammunition, bows, knives, and similar products. Our compliance department administers various restriction codes andother software tools to prevent the sale of such jurisdictionally restricted items. We have particular expertise in the California market and have passed several California Department of Justice, or CADOJ, firearm audits with zero violations or only minor violations. The CA DOJ communicates with us for policy discussion,recognizing the strength of our compliance infrastructure. Employees As of January 28, 2017 we had approximately 4,800 total employees. Of our total employees, approximately 200 werebased at our corporate headquarters in Midvale, Utah, approximately 300 were located at our distribution center, andapproximately 4,300 were store employees. We had approximately 2,100 full-time employees and approximately 2,700 part-timeemployees, who are primarily store employees. None of our employees are represented by a labor union or are party to acollective bargaining agreement, and we have had no labor-related work stoppages. Our relationship with our employees is one ofthe keys to our success, and we believe that relationship is good. Available Information Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments toreports filed or furnished pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended, or theExchange Act are available on our web site at www.sportsmanswarehouse.com, free of charge, as soon as reasonably practicableafter the electronic filing of these reports with, or furnishing of these reports to, the SEC. Any materials we file with the SEC areavailable at the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549. Additional information about theoperation of the Public Reference Room can also be obtained by calling the SEC at 1-800-SEC-0330. In addition, the SECmaintains a web site at www.sec.gov that contains reports, proxy and information statements, and other information regardingissuers that file electronically with the SEC, including us. ITEM 1A. RISK FACTOR S Our business faces significant risks and uncertainties. Certain important factors may have a material adverse effect on ourbusiness prospects, financial condition and results of operations, and you should carefully consider them. Accordingly, inevaluating our business, we encourage you to consider the following discussion of risk factors, in its entirety, in addition to otherinformation contained in or incorporated by reference into this 10-K and our other public19 Table of Contentsfilings with the SEC. Other events that we do not currently anticipate or that we currently deem immaterial may also affect ourbusiness, prospects, financial condition and results of operations. Risks Related to Our Business Our retail-based business model is impacted by general economic conditions in our markets, and ongoing economic andfinancial uncertainties may cause a decline in consumer spending that may adversely affect our business, operations,liquidity, financial results and stock price. As a retail business that depends on consumer discretionary spending, we may be adversely affected if our customersreduce, delay or forego their purchases of our products as a result of continued job losses, bankruptcies, higher consumer debt andinterest rates, increases in inflation, higher energy and fuel costs, reduced access to credit, falling home prices and other adverseconditions in the mortgage and housing markets, lower consumer confidence, uncertainty or changes in tax policies and tax rates,uncertainty due to potential national or international security concerns and adverse or unseasonal weather conditions. Decreasesin same store sales, customer traffic or average ticket sales negatively affect our financial performance, and a prolonged period ofdepressed consumer spending could have a material adverse effect on our business. Promotional activities, vendor incentives, anddecreased demand for consumer products could affect profitability and margins. In addition, adverse economic conditions mayresult in an increase in our operating expenses due to, among other things, higher costs of labor, energy, equipment and facilities.Due to recent fluctuations in the U.S. economy, our sales, operating and financial results for a particular period are difficult topredict, making it difficult to forecast results to be expected in future periods. Any of the foregoing factors could have a materialadverse effect on our business, results of operations and financial condition and could adversely affect our stock price. Our concentration of stores in the Western United States makes us susceptible to adverse conditions in this region. The majority of our stores are currently located in the Western United States, comprising Alaska, Arizona, California,Colorado, Idaho, Montana, Nevada, New Mexico, Oregon, Utah, Washington and Wyoming. As a result, our operations are moresusceptible to regional factors than the operations of more geographically diversified competitors. These factors include regionaleconomic and weather conditions, natural disasters, demographic and population changes and governmental regulations in thestates in which we operate. Environmental changes and disease epidemics affecting fish or game populations in any concentratedregion may also affect our sales. If a region with a concentration of our stores were to suffer an economic downturn or otheradverse event, our operating results could suffer. Competition in the outdoor activities and sporting goods market could reduce our net sales and profitability. The outdoor activities and sporting goods market is highly fragmented and competitive. We compete directly or indirectlywith the following types of companies: ·independent, local specialty stores, often referred to as “mom & pops”; ·other specialty retailers that compete with us across a significant portion of our merchandising categories through retailstore, catalog or e-commerce businesses, such as Bass Pro Shops, Cabela’s and Gander Mountain; ·large-format sporting goods stores and chains, such as Academy Sports + Outdoors and Dick’s Sporting Goods; and ·mass merchandisers, warehouse clubs, discount stores, department stores and online retailers, such as Amazon, Targetand Wal-Mart. A few of our competitors have a larger number of stores, and some of them have a greater market presence, namerecognition and financial, distribution, marketing and other resources than we have. In addition, if our competitors reduce theirprices, we may have to reduce our prices in order to compete, which could harm our margins. Furthermore, some of ourcompetitors may build new stores in or near our existing locations or in locations with high concentrations of our e-commercebusiness customers. As a result of this competition, we may need to spend more on advertising and promotion. Some of our massmerchandising competitors, such as Wal-Mart, do not currently compete in many of the20 Table of Contentsproduct lines we offer. However, if these competitors were to begin offering a broader array of competing products, or if any ofthe other factors listed above occurred, our net sales could be reduced or our costs could be increased, resulting in reducedprofitability. If we fail to anticipate changes in consumer demands, including regional preferences, in a timely manner, our operatingresults could suffer. Our products appeal to consumers who regularly hunt, camp, fish and participate in various shooting sports. Thepreferences of these consumers cannot be predicted with certainty and are subject to change. In addition, due to different gameand fishing species and varied weather conditions found in different markets, it is critical that our stores stock productsappropriate for their markets. Our success depends on our ability to identify product trends in a variety of markets as well as toanticipate, gauge and quickly react to changing consumer demands in these markets. We usually must order merchandise well inadvance of the applicable selling season. The extended lead times for many of our purchases may make it difficult for us torespond rapidly to new or changing product trends or changes in prices. If we misjudge either the market for our products or ourcustomers’ purchasing habits, our net sales may decline significantly and we may not have sufficient quantities of merchandise tosatisfy customer demand or we may be required to mark down excess inventory, either of which would result in lower profitmargins and harm our operating results. Our expansion into new, unfamiliar markets presents increased risks that may prevent us from being profitable in thesenew markets. We intend to expand by opening stores in new markets, which may include small- to medium-sized markets and which maynot have existing national outdoor sports retailers. As a result, we may have less familiarity with local customer preferences andencounter difficulties in attracting customers due to a reduced level of customer familiarity with our brand. Other factors that mayimpact our ability to open stores in new markets and operate them profitably, many of which are beyond our control, include: ·our ability to identify suitable locations, including our ability to gather and assess demographic and marketing data todetermine consumer demand for our products in the locations we select; ·our ability to obtain financing on favorable terms or negotiate favorable lease agreements; ·our ability to properly assess the profitability of potential new retail store locations; ·our ability to secure required governmental permits and approvals; ·our ability to hire and train skilled store operating personnel, especially management personnel; ·the availability of construction materials and labor and the absence of significant construction delays or cost overruns; ·our ability to provide a satisfactory mix of merchandise that is responsive to the needs of our customers living in theareas where new retail stores are built; ·our ability to supply new retail stores with inventory in a timely manner; ·our competitors building or leasing stores near our retail stores or in locations we have identified as targets for a newretail store; ·consumer demand for our products, particularly firearms and ammunition, which drives traffic to our retail stores; ·regional economic and other factors in the geographies in which we expand; and ·general economic, political, and business conditions affecting consumer confidence and spending and the overallstrength of our business. 21 Table of ContentsOnce we decide on a new market and find a suitable location, any delays in opening new stores could impact our financialresults. It is possible that events, such as delays in the entitlements process or construction delays caused by permitting orlicensing issues, material shortages, labor issues, weather delays or other acts of god, discovery of contaminants, accidents, deathsor injunctions, could delay planned new store openings beyond their expected dates or force us to abandon planned openingsaltogether. In addition, new retail stores typically generate lower operating margins because pre-opening expenses are expensedas they are incurred and because fixed costs, as a percentage of net sales, are higher. Furthermore, the substantial managementtime and resources which our retail store expansion strategy requires may result in disruption to our existing business operations,which may decrease our profitability. As a result of the above factors, we cannot assure you that we will be successful in operating our stores in new markets on aprofitable basis. Our planned growth may strain our business infrastructure, which could adversely affect our operations and financialcondition. Over time, we expect to expand the size of our retail store network in new and existing markets. As we grow, we will facethe risk that our existing resources and systems, including management resources, accounting and finance personnel and operatingsystems, may be inadequate to support our growth. We cannot assure you that we will be able to retain the personnel or make thechanges in our systems that may be required to support our growth. Failure to secure these resources and implement these systemson a timely basis could have a material adverse effect on our operating results. In addition, hiring additional personnel andimplementing changes and enhancements to our systems will require capital expenditures and other increased costs that couldalso have a material adverse impact on our operating results. Our expansion in new markets may also create new distribution and merchandising challenges, including strain on ourdistribution facility, an increase in information to be processed by our management information systems and diversion ofmanagement attention from existing operations towards the opening of new stores and markets. To the extent that we are not ableto meet these additional challenges, our sales could decrease and our operating expenses could increase. Our ability to operate and expand our business and to respond to changing business and economic conditions will dependon the availability of adequate capital. The operation of our business, the rate of our expansion and our ability to respond to changing business and economicconditions depend on the availability of adequate capital, which in turn depends on cash flow generated by our business and, ifnecessary, the availability of equity or debt capital. We will also need sufficient cash flow to meet our obligations under ourexisting debt agreements. We paid total cash interest on our credit facilities of $12.0 million, $12.8 million, and $16.4 million infiscal years 2016, 2015 and 2014, respectively, and our term loans require us to make quarterly principal payments of $0.4million. We are required to make mandatory prepayments based on any excess cash flows as defined in the term loan agreement.We will not be required to make a mandatory prepayment in fiscal year 2017 for excess cash flows. The amount that we are able to borrow and have outstanding under our revolving credit facility at any given time is subjectto a borrowing base calculation, which is a contractual calculation equal to roughly (1) the lesser of (a) 90% of the net orderlyliquidation value of our eligible inventory, and (b) 75% of the lower of cost or market value of our eligible inventory, plus(2) 90% of the eligible accounts receivable, less certain reserves against outstanding gift cards, layaway deposits and amountsoutstanding under commercial letters of credit, each term as defined in the credit agreement for the revolving credit facility. As aresult, our ability to borrow is subject to certain risks and uncertainties, such as a deterioration in the quality of our inventory(which is the largest asset in our borrowing base), a decline in sales activity and the collection of our receivables, which couldreduce the funds available to us under our revolving credit facility. We cannot assure you that our cash flow from operations or cash available under our revolving credit facility will besufficient to meet our needs. If we are unable to generate sufficient cash flows from operations in the future, and if availabilityunder our revolving credit facility is not sufficient, we may have to obtain additional financing. If we obtain additional capital byissuing equity, the interests of our existing stockholders will be diluted. If we incur additional indebtedness, that indebtednessmay contain significant financial and other covenants that may significantly restrict our22 Table of Contentsoperations, and our ability to fund expansion or take advantage of future opportunities. We cannot assure you that we could obtainrefinancing or additional financing on favorable terms or at all. Our revolving credit facility and term loans contain restrictive covenants that may impair our ability to access sufficientcapital and operate our business. Our revolving credit facility and term loans contain various provisions that limit our ability to, among other things: ·incur, create or assume certain indebtedness; ·create, incur or assume certain liens; ·make certain investments; ·make sales, transfers and dispositions of certain property; ·undergo certain fundamental changes, including certain mergers, liquidations and consolidations; ·purchase, hold or acquire certain investments; and ·declare or make certain dividends and distributions. These covenants may affect our ability to operate and finance our business as we deem appropriate. If we are unable tomeet our obligations as they become due or to comply with various financial covenants contained in the instruments governingour current or future indebtedness, this could constitute an event of default under the instruments governing our indebtedness. If there were an event of default under the instruments governing our indebtedness, the holders of the affected indebtednesscould declare all of that indebtedness immediately due and payable, which, in turn, could cause the acceleration of the maturity ofall of our other indebtedness. We may not have sufficient funds available, or we may not have access to sufficient capital fromother sources, to repay any accelerated debt. Even if we could obtain additional financing, the terms of the financing may not befavorable to us. In addition, substantially all of our assets are subject to liens securing our revolving credit facility and term loans.If amounts outstanding under the revolving credit facility or term loans were accelerated, our lenders could foreclose on theseliens and we could lose substantially all of our assets. Any event of default under the instruments governing our indebtednesscould have a material adverse effect on our business, financial condition and results of operations. Our same store sales may fluctuate and may not be a meaningful indicator of future performance. Our same store sales may vary from quarter to quarter, and an unanticipated decline in net sales or same store sales maycause the price of our common stock to fluctuate significantly. A number of factors have historically affected, and will continue toaffect, our same store sales results, including: ·changes or anticipated changes to regulations related to some of the products we sell; ·consumer preferences, buying trends and overall economic trends; ·our ability to identify and respond effectively to local and regional trends and customer preferences; ·our ability to provide quality customer service that will increase our conversion of shoppers into paying customers; ·competition in the regional market of a store; ·atypical weather; 23 Table of Contents·new product introductions and changes in our product mix; and ·changes in pricing and average ticket sales. Our operating results are subject to seasonal fluctuations. We experience moderate seasonal fluctuations in our net sales and operating results. On average over the last three fiscalyears, we have generated 27.3% and 28.9% of our annual net sales in the third and fourth fiscal quarters, respectively, whichincludes the holiday selling season as well as the opening of the fall hunting season. We incur additional expenses in the third andfourth fiscal quarters due to higher purchase volumes and increased staffing in our stores. If, for any reason, we miscalculate thedemand for our products or our product mix during the third or fourth fiscal quarters, our sales in these quarters could decline,resulting in higher labor costs as a percentage of sales, lower margins and excess inventory, which could cause our annualoperating results to suffer and our stock price to decline. Due to our seasonality, the possible adverse impact from other risksassociated with our business, including atypical weather, consumer spending levels and general economic and businessconditions, is potentially greater if any such risks occur during our peak sales seasons. We rely on a single distribution center for our business, and if there is a natural disaster or other serious disruption atsuch facility, we may be unable to deliver merchandise effectively to our stores or customers. We rely on a single distribution center in Salt Lake City, Utah for our business. Any natural disaster or other seriousdisruption at such facility due to fire, tornado, earthquake, flood or any other cause could damage our on-site inventory or impairour ability to use such distribution center. While we maintain business interruption insurance, as well as general propertyinsurance, the amount of insurance coverage may not be sufficient to cover our losses in such an event. Any of these occurrencescould impair our ability to adequately stock our stores or fulfill customer orders and harm our operating results. Any disruption of the supply of products from our vendors could have an adverse impact on our net sales andprofitability. We cannot predict when, or the extent to which, we will experience any disruption in the supply of products from ourvendors. Any such disruption could negatively impact our ability to market and sell our products and serve our customers, whichcould adversely impact our net sales and profitability. We depend on merchandise purchased from our vendors to obtain products for our stores. We have no contractualarrangements providing for continued supply from our key vendors, and our vendors may discontinue selling to us at any time.Changes in commercial practices of our key vendors or manufacturers, such as changes in vendor support and incentives orchanges in credit or payment terms, could also negatively impact our results. If we lose one or more key vendors or are unable topromptly replace a vendor that is unwilling or unable to satisfy our requirements with a vendor providing equally appealingproducts at comparable prices, we may not be able to offer products that are important to our merchandise assortment. We also are subject to risks, such as the price and availability of raw materials and fabrics, labor disputes, union organizingactivity, strikes, inclement weather, natural disasters, war and terrorism and adverse general economic and political conditions,that might limit our vendors’ ability to provide us with quality merchandise on a timely and cost-efficient basis. We may not beable to develop relationships with new vendors, and products from alternative sources, if any, may be of a lesser quality and moreexpensive than those we currently purchase. Any delay or failure in offering products to our customers could have a materialadverse impact on our net sales and profitability. Political and economic uncertainty and unrest in foreign countries where our merchandise vendors are located and traderestrictions upon imports from these foreign countries could adversely affect our ability to source merchandise andoperating results. In fiscal year 2016, approximately 2.1% of our merchandise was imported directly from vendors located in foreigncountries, with a substantial portion of the imported merchandise being obtained directly from vendors in China and El24 Table of ContentsSalvador. In addition, we believe that a significant portion of our domestic vendors obtain their products from foreign countriesthat may also be subject to political and economic uncertainty. We are subject to risks and uncertainties associated with changingeconomic, political and other conditions in foreign countries where our vendors are located, such as: ·increased import duties, tariffs, border-adjusted taxes, trade restrictions and quotas; ·work stoppages; ·economic uncertainties; ·adverse foreign government regulations; ·wars, fears of war and terrorist attacks and organizing activities; ·adverse fluctuations of foreign currencies; ·natural disasters; and ·political unrest. We cannot predict when, or the extent to which, the countries in which our products are manufactured will experience anyof the above events. Any event causing a disruption or delay of imports from foreign locations would likely increase the cost orreduce the supply of merchandise available to us and would adversely affect our operating results. In addition, trade restrictions, including increased tariffs or quotas, embargoes, safeguards and customs restrictions againstclothing items, as well as U.S. or foreign labor strikes, work stoppages or boycotts could increase the cost or reduce the supply ofmerchandise available to us or may require us to modify our current business practices, any of which could hurt our profitability. Finally, potential changes in federal restrictions on the importation of firearms and ammunition products could affect ourability to acquire certain popular brands of firearms and ammunition products from importers and wholesalers, which couldnegatively impact our net sales until replacements in the United States can be obtained, if at all. A failure in our e-commerce operations, security breaches and cyber security risks could disrupt our business and lead toreduced sales and growth prospects and reputational damage. Our e-commerce business is an important element of our brand and relationship with our customers, and we expect it tocontinue to grow. In addition to changing consumer preferences and shifting traffic patterns and buying trends in e-commerce, weare vulnerable to additional risks and uncertainties associated with e-commerce sales, including rapid changes in technology,website downtime and other technical failures, security breaches, cyber-attacks, consumer privacy concerns, changes in state taxregimes and government regulation of internet activities. Our failure to successfully respond to these risks and uncertainties couldreduce our e-commerce sales, increase our costs, diminish our growth prospects and damage our brand, which could negativelyimpact our results of operations and stock price. In addition, there is no guarantee that we will be able to expand our e-commerce business. Many of our competitors alreadyhave e-commerce businesses that are substantially larger and more developed than ours, which places us at a competitivedisadvantage. In addition, there are regulatory restrictions on the sale of approximately 33% of our product offerings, such asammunition, certain cutlery, firearms, propane and reloading powder. If we are unable to expand our e-commerce business, ourgrowth plans will suffer and the price of our common stock could decline. We do not collect sales taxes in some jurisdictions, which could result in substantial tax liabilities and cause our future e-commerce sales to decrease. An increasing number of states have considered or adopted laws that attempt to impose tax collection obligations on out-of-state retailers. We believe that these initiatives are inconsistent with the United States Supreme Court’s25 Table of Contentsholding that states, absent congressional legislation, may not impose tax collection obligations on out-of-state e-commercebusinesses unless the out-of-state e-commerce business has nexus with the state. A successful assertion by one or more statesrequiring us to collect taxes where we do not do so could result in substantial tax liabilities, including for past sales, as well aspenalties and interest. The imposition by state governments of sales tax collection obligations on out-of-state e-commercebusinesses who participate in e-commerce could also create additional administrative burdens for us, put us at a competitivedisadvantage if they do not impose similar obligations on our competitors and decrease our future e-commerce sales, which couldhave a material adverse impact on our business and results of operations. Current and future government regulations, in particular regulations relating to the sale of firearms and ammunition,may negatively impact the demand for our products and our ability to conduct our business. We operate in a complex regulatory and legal environment that could negatively impact the demand for our products andexpose us to compliance and litigation risks, which could materially affect our operations and financial results. These laws maychange, sometimes significantly, as a result of political, economic or social events. Some of the federal, state or local laws andregulations that affect our business and demand for our products include: ·federal, state or local laws and regulations or executive orders that prohibit or limit the sale of certain items we offer,such as firearms, black powder firearms, ammunition, bows, knives and similar products; ·the ATF, regulations, audit and regulatory policies that impact the process by which we sell firearms and ammunitionand similar policies of state agencies that have concurrent jurisdiction, such as the CA DOJ; ·laws and regulations governing hunting and fishing; ·laws and regulations relating to the collecting and sharing of non-public customer information; ·laws and regulations relating to consumer products, product liability or consumer protection, including regulation bythe Consumer Product Safety Commission and similar state regulatory agencies; ·laws and regulations relating to the manner in which we advertise, market or sell our products; ·labor and employment laws, including wage and hour laws; ·U.S. customs laws and regulations pertaining to proper item classification, quotas and the payment of duties and tariffs;and ·FTC regulations governing the manner in which orders may be solicited and prescribing other obligations in fulfillingorders and consummating sales. Over the past several years, bills have been introduced in the United States Congress that would restrict or prohibit themanufacture, transfer, importation or sale of certain calibers of handgun ammunition, impose a tax and import controls on bulletsdesigned to penetrate bullet-proof vests, impose a special occupational tax and registration requirements on manufacturers ofhandgun ammunition and increase the tax on handgun ammunition in certain calibers. Because we carry these products, suchlegislation could, depending on its scope, materially harm our sales. Additionally, state and local governments have proposed laws and regulations that, if enacted, would place additionalrestrictions on the manufacture, transfer, sale, purchase, possession and use of firearms, ammunition and shooting-relatedproducts. For example, in response to the Sandy Hook Elementary shooting in Newtown, Connecticut and other incidents in theUnited States, several states, such as Colorado, Connecticut, Maryland, New Jersey, and New York, have enacted laws andregulations that limit access to and sale of certain firearms in ways more restrictive than federal laws. Other state or localgovernmental entities may continue to explore similar legislative or regulatory restrictions that could prohibit the manufacture,sale, purchase, possession or use of firearms and ammunition. In New York and Connecticut, mandatory screening of ammunitionpurchases is now required. In addition, California and the District of Columbia have adopted requirements for micro-stamping(that is, engraving the handgun’s serial number on the firing pin of new handguns), and at least seven other states and the UnitedStates Congress have introduced microstamping legislation for certain firearms. Lastly, some states prohibit the sale of firearmswithout internal or external locking mechanisms, and several states are considering mandating certain design features on safetygrounds,26 Table of Contentsmost of which would be applicable only to handguns. Other state or local governmental entities may also explore similarlegislative or regulatory initiatives that may further restrict the manufacture, sale, purchase, possession or use of firearms,ammunition and shooting-related products. The regulation of firearms, ammunition and shooting-related products may become more restrictive in the future. Changesin these laws and regulations or additional regulation, particularly new laws or increased regulations regarding sales andownership of firearms and ammunition, could cause the demand for and sales of our products to decrease and could materiallyadversely impact our net sales and profitability. Sales of firearms represent a significant percentage of our net sales and arecritical in drawing customers to our stores. A substantial reduction in our sales or margins on sales of firearms and firearm relatedproducts due to the establishment of new regulations could harm our operating results. Moreover, complying with increased orchanged regulations could cause our operating expenses to increase. We may incur costs from litigation relating to products that we sell, particularly firearms and ammunition, which couldadversely affect our net sales and profitability. We may incur damages due to lawsuits relating to products we sell, including lawsuits relating to firearms, ammunition,tree stands and archery equipment. We may incur losses due to lawsuits, including potential class actions, relating to ourperformance of background checks on firearms purchases and compliance with other sales laws as mandated by state and federallaw. We may also incur losses from lawsuits relating to the improper use of firearms or ammunition sold by us, including lawsuitsby municipalities or other organizations attempting to recover costs from manufacturers and retailers of firearms and ammunition.Our insurance coverage and the insurance provided by our vendors for certain products they sell to us may be inadequate to coverclaims and liabilities related to products that we sell. In addition, claims or lawsuits related to products that we sell, or theunavailability of insurance for product liability claims, could result in the elimination of these products from our product line,thereby reducing net sales. If one or more successful claims against us are not covered by or exceed our insurance coverage, or ifinsurance coverage is no longer available, our available working capital may be impaired and our operating results could bematerially adversely affected. Even unsuccessful claims could result in the expenditure of funds and management time and couldhave a negative impact on our profitability and on future premiums we would be required to pay on our insurance policies. If we fail to maintain the strength and value of our brand, our net sales are likely to decline. Our success depends on the value and strength of the Sportsman’s Warehouse brand. The Sportsman’s Warehouse name isintegral to our business as well as to the implementation of our strategies for expanding our business. Maintaining, promoting andpositioning our brand will depend largely on the success of our marketing and merchandising efforts and our ability to providehigh quality merchandise and a consistent, high quality customer experience. Our brand could be adversely affected if we fail toachieve these objectives or if our public image or reputation were to be tarnished by negative publicity. Any of these events couldresult in decreases in net sales. Our inability or failure to protect our intellectual property could have a negative impact on our operating results. Our trademarks, service marks, copyrights, patents, trade secrets, domain names and other intellectual property are valuableassets that are critical to our success. The unauthorized reproduction or other misappropriation of our intellectual property coulddiminish the value of our brands or goodwill and cause a decline in our net sales. Any infringement or other intellectual propertyclaim made against us, whether or not it has merit, could be time-consuming, result in costly litigation, cause product delays orrequire us to enter into royalty or licensing agreements. As a result, any such claim could have a material adverse effect on ouroperating results. Unauthorized disclosure of sensitive or confidential customer information could harm our business and standing with ourcustomers. The protection of our customer, employee and company data is critical to us. We rely on commercially available systems,software, tools and monitoring to provide security for processing, transmission and storage of confidential customer information,such as payment card and personally identifiable information. Despite the security measures we have in place, our facilities andsystems, and those of our third-party service providers, may be vulnerable to security breaches, acts of vandalism, computerviruses, misplaced or lost data, programming or human errors or other similar events. Any security breach involving themisappropriation, loss or other unauthorized disclosure of confidential27 Table of Contentsinformation, whether by us or our vendors, could damage our reputation, expose us to risk of litigation and liability, disrupt ouroperations and harm our business. Our computer hardware and software systems are vulnerable to damage that could harm our business. Our success, in particular our ability to successfully manage inventory levels, largely depends upon the efficient operationof our computer hardware and software systems. We use management information systems to track inventory information at thestore level, communicate customer information and aggregate daily sales, margin and promotional information. These systems arevulnerable to damage or interruption from: ·fire, flood, tornado and other natural disasters; ·power loss, computer system failures, internet and telecommunications or data network failures, operator negligence,improper operation by or supervision of employees, physical and electronic loss of data or security breaches,misappropriation and similar events;·hacking by third parties and computer viruses; and ·upgrades, installations of major software releases and integration with new systems. Any failure that causes an interruption in our systems processing could disrupt our operations and result in reduced sales.We have centralized the majority of our computer systems in our corporate office. It is possible that an event or disaster at ourcorporate office could materially and adversely affect the performance of our company and the ability of each of our stores tooperate efficiently. Our private brand offerings expose us to various risks. We expect to continue to grow our exclusive private brand offerings through a combination of brands that we own andbrands that we license from third parties. We have invested in our development and procurement resources and marketing effortsrelating to these private brand offerings. Although we believe that our private brand products offer value to our customers at eachprice point and provide us with higher gross margins than comparable third-party branded products we sell, the expansion of ourprivate brand offerings also subjects us to certain specific risks in addition to those discussed elsewhere in this section, such as: ·potential mandatory or voluntary product recalls; ·our ability to successfully protect our proprietary rights (including defending against counterfeit, knock offs, grey-market, infringing or otherwise unauthorized goods); ·our ability to successfully navigate and avoid claims related to the proprietary rights of third parties; ·our ability to successfully administer and comply with obligations under license agreements that we have with thelicensors of brands, including, in some instances, certain minimum sales requirements that, if not met, could cause us tolose the licensing rights or pay damages; and ·other risks generally encountered by entities that source, sell and market exclusive branded offerings for retail. An increase in sales of our private brands may also adversely affect sales of our vendors’ products, which may, in turn,adversely affect our relationship with our vendors. Our failure to adequately address some or all of these risks could have amaterial adverse effect on our business, results of operations and financial condition. If we lose key management or are unable to attract and retain the talent required for our business, our operating resultsand financial condition could suffer. Our performance depends largely on the leadership efforts and abilities of our executive officers and other key employees.We have entered into employment agreements with John V. Schaefer, our President and Chief Executive Officer, and Kevan P.Talbot, our Chief Financial Officer and Secretary. None of our other employees have an employment agreement with us. If welose the services of one or more of our key employees, we may not be able to28 Table of Contentssuccessfully manage our business or achieve our growth objectives. As our business grows, we will need to attract and retainadditional qualified personnel in a timely manner. Our business depends on our ability to meet our labor needs. Our success depends in part upon our ability to attract, motivate and retain a sufficient number of qualified employees,including district managers, store managers, department managers and sales associates, who understand and appreciate ouroutdoor culture and are able to adequately represent this culture to our customers. Qualified individuals of the requisite caliberand number needed to fill these positions may be in short supply in some areas, and the turnover rate in the retail industry is high.If we are unable to hire and retain sales associates capable of consistently providing a high level of customer service, asdemonstrated by their enthusiasm for our culture and knowledge of our merchandise, our business could be materially adverselyaffected. Although none of our employees is currently covered by collective bargaining agreements, our employees may elect tobe represented by labor unions in the future, which could increase our labor costs. Additionally, competition for qualifiedemployees could require us to pay higher wages to attract a sufficient number of employees. An inability to recruit and retain asufficient number of qualified individuals in the future may delay the planned openings of new stores. Any such delays, anymaterial increases in employee turnover rates at existing stores or any increases in labor costs could have a material adverse effecton our business, financial condition or operating results. Increases in the minimum wage could adversely affect our financial results. From time to time, legislative proposals are made to increase the federal minimum wage in the United States, as well as theminimum wage in a number of individual states. Base wage rates for some of our employees are at or slightly above the minimumwage. As federal or state minimum wage rates increase, we may need to increase not only the wage rates of our minimum wageemployees, but also the wages paid to our other hourly employees as well. Any increase in the cost of our labor could have anadverse effect on our operating costs, financial condition and results of operations. We may pursue strategic acquisitions or investments, and the failure of an acquisition or investment to produce theanticipated results or the inability to fully integrate the acquired companies could have an adverse impact on our business. We may from time to time acquire or invest in complementary companies, businesses or assets. The success of suchacquisitions or investments will be based on our ability to make accurate assumptions regarding the valuation, operations, growthpotential, integration and other factors relating to the respective business or assets. Our acquisitions or investments may notproduce the results that we expect at the time we enter into or complete the transaction. For example, we may not be able tocapitalize on previously anticipated synergies. Furthermore, acquisitions may result in dilutive issuances of our equity securities,the incurrence of debt, contingent liabilities, amortization expenses or write-offs of goodwill or other intangibles, any of whichcould harm our financial condition or results of operations. We also may not be able to successfully integrate operations that weacquire, including their personnel, financial systems, supply chain and other operations, which could adversely affect ourbusiness. Acquisitions may also result in the diversion of our capital and our management’s attention from other business issuesand opportunities. A new standard for lease accounting may significantly impact the timing and amount in which we report our leaseexpense. In February 2016, the Financial Accounting Standards Board, or FASB, and the International Accounting Standards Board,or IASB, issued an accounting pronouncement with substantial changes to existing lease accounting that affects all leasearrangements. The new standard is effective beginning in the first quarter of 2019 and early adoption is permitted. Under the newaccounting model, lessees are required to record an asset representing the right-to-use the leased item for the lease term, or right-of-use asset, and a corresponding liability to make lease payments. The right-of-use asset and liability incorporate the rightsarising under the lease and are based on the lessee’s assessment of expected payments to be made over the lease term. The modelrequires measuring these amounts at the present value of the future expected payments. Once we adopt this new standard, we expect that, for the majority of our leases, the lease expense would include theamortization of the right-of-use asset and the recognition of interest expense based upon the lessee’s incremental borrowing rate(or the rate implicit in the lease, if known) on the repayment of the lease obligation. Currently,29 Table of Contentsmanagement is assessing the impact the adoption of the new final lease standard will have on our financial statements. Althoughwe believe the presentation of our financial statements will likely change, including the pattern of lease expense recognition, wedo not believe the accounting pronouncement will change the fundamental economic reasons for which we lease our stores. We may not achieve projected goals and objectives in the time periods that we anticipate or announce publicly, whichcould harm our business and cause the price of our common stock to decline. We set targets and timing to accomplish certain objectives regarding our business. We have included some of these targetsin this filing and may make similar future public statements. For example, we state in this filing that: ·we currently plan to open ten additional new stores in fiscal year 2017 and, for the next several years thereafter, intendto grow our store base at a rate greater than 10 percent annually; and ·we target a minimum 10% four-wall Adjusted EBITDA margin and a minimum return on invested capital of 50%excluding initial inventory cost (or 20% including initial inventory cost) in the first twelve months of operation for anew store. This filing also includes other forecasts and targets. These forecasts and targets are based on our current expectations. Wemay not achieve these forecasts and targets, and the actual achievement and timing of these events can vary due to a number offactors, including currently unforeseen matters and matters beyond our control. You should not unduly rely on these forecasts ortargets in deciding whether to invest in our common stock. Risks Related to Our Common Stock Our bylaws, our certificate of incorporation and Delaware law contain provisions that could discourage another companyfrom acquiring us and may prevent attempts by our stockholders to replace or remove our current management. Provisions of our bylaws, our certificate of incorporation and Delaware law may discourage, delay or prevent a merger oracquisition that stockholders may consider favorable, including transactions in which our stockholders might otherwise receive apremium for their shares. In addition, these provisions may frustrate or prevent any attempts by our stockholders to replace orremove our current management by making it more difficult for stockholders to replace or remove our board of directors. Theseprovisions include: ·establishing a classified board of directors; ·providing that directors may be removed only for cause; ·not providing for cumulative voting in the election of directors; ·requiring at least a supermajority vote of our stockholders to amend our bylaws or certain provisions of our certificateof incorporation; ·eliminating the ability of stockholders to call special meetings of stockholders; ·establishing advance notice requirements for nominations for election to the board of directors or for proposing mattersthat can be acted on by stockholders at stockholder meetings; ·prohibiting stockholder action by written consent once Seidler owns less than a majority of the outstanding shares ofour common stock; and ·authorizing the issuance of “blank check” preferred stock without any need for action by stockholders. 30 Table of ContentsIn addition, we are subject to Section 203 of the Delaware General Corporation Law. In general, subject to someexceptions, Section 203 prohibits a Delaware corporation from engaging in any “business combination” with any “interestedstockholder” (which is generally defined as an entity or person who, together with the person’s affiliates and associates,beneficially owns, or within three years prior to the time of determination of interested stockholder status did own, 15% or moreof the outstanding voting stock of the corporation), for a three-year period following the date that the stockholder became aninterested stockholder. Section 203 could have the effect of delaying, deferring or preventing a change in control that ourstockholders might consider to be in their best interests. Further, our certificate of incorporation provides that, subject to limited exceptions, the Court of Chancery of the State ofDelaware will be, to the fullest extent permitted by law, the exclusive forum for any derivative action or proceeding brought onour behalf; any action asserting a breach of fiduciary duty; any action asserting a claim against us arising pursuant to theDelaware General Corporation Law; or any action asserting a claim against us that is governed by the internal affairs doctrine.This exclusive forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable fordisputes with us or our directors, officers or other employees and agents, which may discourage such lawsuits against us and ourdirectors, officers, employees and agents. Together, these charter and statutory provisions could make the removal of management more difficult and may discouragetransactions that otherwise could involve payment of a premium over prevailing market prices for our common stock. Theexistence of the foregoing provisions and anti-takeover measures could limit the price that investors might be willing to pay in thefuture for shares of our common stock. They could also deter potential acquirers of our company, thereby potentially reducing thelikelihood that our stockholders could receive a premium for their common stock in an acquisition. We expect that the price of our common stock will fluctuate. The price of our common stock is volatile and may fluctuate significantly. During our fiscal year ended January 28, 2017,the closing price of our stock ranged from a high of $13.97 per share to a low of $7.77 per share. Volatility in the market price ofour common stock may prevent our stockholders from being able to sell their common stock at or above the prices they paid fortheir common stock. The market price for our common stock could fluctuate significantly for various reasons, including: ·our operating and financial performance and prospects, including seasonal fluctuations in our financial performance; ·conditions that impact demand for our products; ·the public’s reaction to our press releases, other public announcements and filings with the SEC; ·changes in earnings estimates or recommendations by securities analysts who track our common stock; ·market and industry perception of our success, or lack thereof, in pursuing our growth strategy; ·strategic actions by us or our competitors, such as acquisitions, store closures, or restructurings; ·changes in federal and state government regulation; ·changes in accounting standards, policies, guidance, interpretations or principles; ·arrival or departure of key personnel; ·sales of common stock by us or members of our management team; and ·changes in general market, economic and political conditions in the United States and global economies or financialmarkets, including those resulting from natural disasters, terrorist attacks, acts of war and responses to such events. 31 Table of ContentsIn addition, if the market for stocks in our industry, or the stock market in general, experiences a loss of investorconfidence, the trading price of our common stock could decline for reasons unrelated to our business, financial condition orresults of operations. If any of the foregoing occurs, it could cause our stock price to fall and may expose us to lawsuits that, evenif unsuccessful, could be costly to defend and distract our management. We are an emerging growth company (“EGC”) within the meaning of The Jumpstart our Business Startups Act (“JOBSAct”), and the reduced reporting requirements applicable to EGCs may make our common stock less attractive toinvestors. Because we qualify as an EGC under the JOBS Act, we have elected to comply with some of the reduced disclosure andother reporting requirements available to us as an EGC for a period of up to five years following our initial public offering if weremain an EGC. For example, for as long as we remain an EGC, we are not subject to certain governance requirements, such asholding a “say-on-pay” and “say-on-golden-parachute” advisory votes, we are not required to include a “CompensationDiscussion and Analysis” section in our proxy statements and reports filed under the Exchange Act, and we do not need to obtainan annual attestation report on our internal control over financial reporting from a registered public accounting firm pursuant toSection 404(b) of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”). We could be an EGC for a period up to the end ofthe fifth fiscal year after our initial public offering (the end of fiscal year 2019), although we will cease to be an EGC earlier thanthis five-year period if our total annual gross revenues equal or exceed $1 billion in a fiscal year, if we issue more than $1 billionin non-convertible debt over a three-year period or if we become a “large accelerated filer” (which requires, among other things,the market value of our common stock held by non-affiliates to be at least $700 million as of the last business day of our secondfiscal quarter of any fiscal year). Accordingly, for up to five fiscal years after our initial public offering, our stockholders may not receive the same level ofdisclosure that is afforded to stockholders of a non-EGC. It is possible that investors will find our common stock to be lessattractive because we have elected to comply with the reduced disclosure and other reporting requirements available to us as anEGC, which could adversely affect the trading market for our common stock and the prices at which stockholders may be able tosell their common stock. The requirements of being a public company may strain our resources and divert management’s attention. As a public company, we are subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 and other applicable securities rules and regulations. Compliancewith these rules and regulations have increased our legal and financial compliance costs, make some activities more difficult,time-consuming or costly and increase demand on our systems and resources. The Exchange Act requires, among other things,that we file annual, quarterly and current reports with respect to our business and results of operations and proxy or informationstatements in connection with matters upon which our stockholders may vote. As a result of our public disclosure of informationin filings required of a public company, our business and financial condition have become more visible, which could result inthreatened or actual litigation, or other adverse actions taken by competitors and other third parties. In addition, our managementteam has limited experience managing a public company or complying with the increasingly complex laws pertaining to publiccompanies, and a number of our directors have limited experience serving on the boards of public companies. The time andresources necessary to comply with the requirements of being a public company and contend with any action that might bebrought against us as a result of publicly available information could divert our resources and the attention of our managementand adversely affect our business, financial condition and results of operations. If we are unable to implement and maintain effective internal control over financial reporting, investors may loseconfidence in the accuracy and completeness of our financial reports, and the market price of our common stock may beadversely affected. As a public company, we are required to implement and maintain effective internal control over financial reporting and todisclose any material weaknesses identified in our internal controls. Our management is required to furnish an annual reportregarding the effectiveness of our internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act(“Section 404”). We have refined, implemented, and tested the internal controls required to comply with Section 404. If weidentify material weaknesses in our internal control over financial reporting, if we fail to comply with the requirements ofSection 404 in a timely manner or if we are unable to assert that our internal control over financial reporting is effective, investorsmay lose confidence in the accuracy and completeness of our financial reports32 Table of Contentsand the market price of our common stock could be adversely affected. We could also become subject to investigations by TheNASDAQ Stock Market, the SEC or other regulatory authorities, which could require additional financial and managementresources. We do not expect to pay any cash dividends for the foreseeable future. We currently expect to retain all available funds and future earnings, if any, for use in the operation and growth of ourbusiness and do not anticipate paying any cash dividends in the foreseeable future. Any future determination to pay dividends willbe at the discretion of our board of directors, subject to compliance with applicable law and any contractual provisions, includingunder the credit agreements governing our term loans and revolving credit facility and agreements governing any additionalindebtedness we may incur in the future, that restrict or limit our ability to pay dividends, and will depend upon, among otherfactors, our results of operations, financial condition, earnings, capital requirements and other factors that our board of directorsdeems relevant. Further, because we are a holding company, our ability to pay dividends depends on our receipt of cash dividendsfrom our operating subsidiaries, which may further restrict our ability to pay dividends as a result of the laws of their jurisdictionof organization, agreements of our subsidiaries or covenants under our existing or future indebtedness. All of our businessoperations are conducted through our wholly owned subsidiaries, Sportsman’s Warehouse, Inc. and Minnesota MerchandisingCorporation and their subsidiaries. The ability of Sportsman’s Warehouse, Inc. and Minnesota Merchandising Corporation to paydividends to us, and our ability to pay dividends on our capital stock, is limited by our term loans. Our revolving credit facilityalso limits our ability to pay dividends on our capital stock. Our ability to pay dividends may also be restricted by the terms ofany future credit agreement or any future debt or preferred equity securities of ours or of our subsidiaries. If securities or industry analysts publish inaccurate or unfavorable research about us, our stock price and trading volumecould decline. The trading market for our common stock will depend in part on the research reports that securities or industry analystspublish about us, our business and our industry. Assuming we obtain securities or industry analyst coverage, if one or more of theanalysts who cover us downgrade our stock or publish inaccurate or unfavorable research about us, our business or our industry,our stock price would likely decline. If one or more of these analysts cease coverage of our company or fail to publish reports onus regularly, demand for our stock could decrease, which might cause our stock price and trading volume to decline. ITEM 1B. UNRESOLVED STAFF COMMENTS None. ITEM 2. PROPERTIES We do not plan to own any material real property, but rather intend to lease all of our store locations. From time to time wewill self-develop one of our properties with the intention to enter into a sale-leaseback transaction with a third party. Dependingupon where we are in the process of completing the sale-leaseback transaction, we may legally own real property at any particularbalance sheet date. Our corporate headquarters is located in an approximately 60,000 square foot building in Midvale, Utah. Thebuilding is leased under an agreement expiring on December 31, 2018. Our distribution center is located in a 507,000 square foot facility in Salt Lake City, Utah. The building is leased under anagreement expiring on December 31, 2023, with three options that each allow us to extend for an additional five years. Webelieve that our distribution center is of sufficient scale to support a network of 100 or more stores. We operate 77 retail stores in 20 states. In total we have approximately 3.1 million gross square feet across all of our stores.All of our stores are leased from third parties with lease terms typically ranging from five to fifteen years, and many of our leaseagreements have additional five-year renewal options. All of our leases provide for additional payments associated with commonarea maintenance, real estate, taxes and insurance. In addition, many of our lease agreements have defined escalating rentprovisions over the initial term and extensions. 33 Table of ContentsITEM 3. LEGAL PROCEEDINGS On March 11, 2013, we acquired certain assets and assumed certain liabilities of Wholesale Sports Outdoor Outfitters, orWholesale Sports, relating to their retail business of hunting, fishing and camping goods and supplies. Concurrently with our assetpurchase, Alamo Group, LLC, an unrelated third party, purchased all of the stock of Wholesale Sports. On March 22, 2013, thelandlord of a store in Spokane, Washington that was formerly operated by Wholesale Sports, and which was one of the five storeswhose leases we did not assume in our purchase of assets from Wholesale Sports, filed a complaint against the seller ofWholesale Sports, Wholesale Sports and Alamo Group in the Superior Court for the State of Washington in the County ofSpokane captioned as North Town Mall v. United Farmers of Alberta Co-Operative Limited, et al., Case No. 13-2-01201-9. Thecomplaint, as amended, alleged claims for breach of lease, violation of Washington’s Fraudulent Transfer Act, tortiousinterference with contractual relations, piercing the corporate veil, assumption of the Spokane store lease and fraud and/ornegligent representation. We were named as a co-defendant in the amended complaint with respect to the fraudulent conveyance,tortious interference, and assumption of the lease claims. The complaint requested that the court order “avoidance” of an allegedtransfer of assets from Wholesale Sports to us and/or Alamo Group, damages based on future rent to be paid under the lease in theapproximate amount of $4.5 million, attachment of assets, attorneys’ fees and costs as provided for in contract, and such otherrelief that the court deems just and proper. In addition, the amended complaint alleged that we and Alamo Group were liable forexpenses that the landlord would incur as a result of default under the lease, including expenses related to returning the storepremises to the condition called for in the lease and the cost to locate a new tenant. This case was settled in June 2015, with a fullrelease by and between all parties. On March 12, 2014, we were added as a defendant to a pending consolidated action filed in the United States District Court,Western District of Washington, captioned as Lacey Market Place Associates II, LLC, et al. v. United Farmers of Alberta Co-Operative Limited, et al., Case No. 2:13-cv-00383-JLR against United Farmers of Alberta Co-Operative Limited, the seller ofWholesale Sports, Wholesale Sports, Alamo Group and Donald F. Gaube and spouse. The amended complaint was filed by thelandlords of two stores we did not assume in our purchase of assets from Wholesale Sports. Such stores were formerly operatedby Wholesale Sports in Skagit and Thurston Counties in Washington. The amended complaint alleged breach of lease, breach ofcollateral assignment, misrepresentation, intentional interference with contract, piercing the corporate veil and violation ofWashington’s Fraudulent Transfer Act. We were named as a co-defendant with respect to the intentional interference withcontract and fraudulent conveyance claims. The amended complaint sought against us and all defendants unspecified moneydamages, declaratory relief and attorneys’ fees and costs. On January 28, 2015, the court in the Lacey Marketplace action grantedin part and denied in part our motion for summary judgment and dismissed the intentional interference claim against us, butdeclined to dismiss the fraudulent transfer claim. Trial in the Lacey Marketplace action began March 2, 2015 and concluded March 6, 2015. On March 9, 2015, the jury inthe trial awarded $11.9 million against the defendants to the action, including us. We reviewed the decision and accrued $4.0million in our results for the fiscal year ended January 31, 2015 related to this matter. We strongly disagreed with the jury’sverdict and filed post-trial motions seeking to have the verdict set aside. On July 30, 2015, the court granted our motion forjudgment as a matter of law. Both United Farmers of Alberta Co-Operative Limited, a co-defendant, and the plaintiff haveappealed the court’s summary judgment ruling against the tortious interference claim, and the July 30, 2015 ruling to the appellatecourt and the appeal is currently in process. Based on the court’s most recent judgment in our favor, we determined that thelikelihood of loss in this case is not probable, and, as such, we reversed the previous accrual of $4.0 million in our results for thefiscal year ended January 30, 2016. The accrual and subsequent reversal of the $4.0 million is recorded in selling, general, andadministrative expenses in the accompanying statements of income. When we become aware of a claim or potential claim, we assess the likelihood of any loss or exposure. If a losscontingency is probable and the amount of the loss can be reasonably estimated, we record an accrual for the loss. In such cases,there may be an exposure to potential loss in excess of the amount accrued. Where a loss is not probable but is reasonablypossible or where a loss in excess of the amount accrued is reasonably possible, we disclose an estimate of the amount of the lossor range of possible losses for the claim if a reasonable estimate can be made, unless the amount of such reasonably possiblelosses is not material to our financial position, results of operations or cash flows. The ability to predict the ultimate outcome ofsuch matter involves judgments and inherent uncertainties. The actual outcome could differ. 34 Table of ContentsWe are subject to various legal proceedings and claims, including employment claims, wage and hour claims, intellectualproperty claims, contractual and commercial disputes and other matters that arise in the ordinary course of our business. Whilethe outcome of these and other claims cannot be predicted with certainty, we do not believe that the outcome of these mattersindividually or in the aggregate will have a material adverse effect on our business, results of operations or financial condition. ITEM 4. MINE SAFETY DISCLOSURE S Not Applicable. PART II ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUIT Y, RELATED STOCKHOLDER MATTERS ANDISSUER PURCHASES OF EQUITY SECURITIES Market for Registrant’s Common Equity The common stock of Sportsman’s Warehouse Holdings Incorporated is listed for trading on the NASDAQ under thesymbol “SPWH." As of February 7, 2017, there were 95 holders of record of our common stock. This number does not includepersons who hold our common stock in nominee or “street name” accounts through brokers or banks. The following table sets forth, for the fiscal quarters indicated, the high and low sales prices per share of our common stockas reported on the NASDAQ: 2016 High Low First Quarter 13.97 11.15 Second Quarter 11.50 7.77 Third Quarter 11.14 9.09 Fourth Quarter 9.83 7.89 2015 High Low First Quarter 9.73 6.81 Second Quarter 12.88 9.18 Third Quarter 14.91 9.92 Fourth Quarter 13.78 9.26 Dividend Policy We did not pay any dividends in fiscal year 2016 or fiscal year 2015. We currently expect to retain all available funds and future earnings, if any, for use in the operation and growth of ourbusiness and do not anticipate paying any cash dividends in the foreseeable future. Any future determination to pay dividends willbe at the discretion of our board of directors, subject to compliance with applicable law and any contractual provisions, includingunder the credit agreements governing our term loans and revolving credit facility and agreements governing any additionalindebtedness we may incur in the future, that restrict or limit our ability to pay dividends, and will depend upon, among otherfactors, our results of operations, financial condition, earnings, capital requirements and other factors that our board of directorsdeems relevant. Because we are a holding company, our ability to pay dividends depends on our receipt of cash dividends fromour operating subsidiaries, which may further restrict our ability to pay dividends as a result of the laws of their jurisdiction oforganization, agreements of our subsidiaries or covenants under our existing or future indebtedness. All of our businessoperations are conducted through our wholly owned subsidiaries, Sportsman’s Warehouse, Inc. and Minnesota MerchandisingCorporation and their subsidiaries. The ability of Sportsman’s Warehouse, Inc. and Minnesota Merchandising Corporation to paydividends to us, and our ability to pay dividends on our capital stock, is limited by our term loans. Our revolving credit facilityalso limits our ability to pay dividends on our capital stock. Our ability to pay dividends may also be restricted by the terms ofany future credit agreement or any future debt or preferred equity securities of ours or of our subsidiaries.35 Table of Contents Stock Performance Graph The stock price performance graph below shall not be deemed soliciting material or to be filed with the SEC or subject toRegulation 14A or 14C under the Exchange Act or to the liabilities of Section 18 of the Exchange Act, nor shall it be incorporatedby reference into any past or future filing under the Securities Act of 1933, as amended, or the Securities Act or the Exchange Act,except to the extent we specifically request that it be treated as soliciting material or specifically incorporate it by reference intoa filing under the Securities Act or the Exchange Act. The following graph shows the cumulative total stockholder return of an investment of $100 in cash at market close onApril 17, 2014 (the first day of trading of our Common Stock), through January 28, 2017 for (i) our Common Stock (“SPWH”),(ii) the S&P 500 Retailing Industry Group Index (“S&P Retail”) and (iii) the Russell 2000 Index (“Russell 2000”). Pursuant toapplicable SEC rules, all values assume reinvestment of the full amount of all dividends. The stockholder return shown on thegraph below is not necessarily indicative of future performance, and we do not make or endorse any predictions as to futurestockholder returns. 4/17/2014 5/2/2014 8/1/2014 10/31/2014 1/30/2015 5/1/2015 7/31/2015 10/30/2015 1/29/2016 4/29/2016 7/29/2016 10/28/2016 1/27/2017 SPWH $100.00 $103.38 $59.38 $71.69 $73.13 $96.51 $119.90 $110.36 $134.46 $ 116.72 $ 104.41 $ 93.23 $ 80.92S&P Retail 100.00 99.81 101.23 109.99 118.76 130.94 141.46 148.43 137.24 147.81 157.60 151.98 160.97Russell 2000 100.00 99.20 97.98 103.13 102.42 107.93 108.86 102.11 90.99 99.38 107.21 104.37 120.46 36 $$$$$$$$$$$Table of ContentsITEM 6. SELECTED FINANCIAL DATA. Fiscal Year Ended January 28, January 30, January 31, February 1, February 2, 2017 2016 2015 2014 2013 (in thousands, except per share amounts)Consolidated Statements of Income Data: Net sales $779,956 $706,764 $639,869 624,848 514,850Cost of goods sold 516,726 468,234 424,662 417,618 352,234Gross profit 263,230 238,530 215,207 207,230 162,616Selling, general and administrative expenses 202,543 179,218 170,315 147,140 109,408Bankruptcy related expenses (benefit) (1) — — — 55 (263)Income from operations 60,687 59,312 44,892 60,035 53,471Interest expense (13,402) (14,156) (22,480) (25,447) (6,321)Income before income taxes 47,285 45,156 22,412 34,588 47,150Income tax expense 17,616 17,385 8,628 12,838 19,076Net income $29,669 $27,771 $13,784 21,750 28,074 Earnings per share: Basic 0.70 $0.66 $0.34 0.66 0.84Diluted 0.70 $0.66 $0.34 0.66 0.84 Weighted average shares outstanding: Basic shares 42,187 41,966 39,961 33,170 33,229Diluted shares 42,485 42,334 40,141 33,185 33,229 Fiscal Year Ended January 28, January 30, January 31, February 1, February 2, 2017 2016 2015 2014 2013 (in thousands, except number of stores and per share amounts)Consolidated Balance Sheet Data: Total current assets $255,924 $232,710 $203,339$175,627$143,512Total assets 346,248 301,328 268,784 220,708 163,779Long-term debt (including current portion), net of discount 134,704 155,016 156,107 227,611 119,266Total liabilities 316,247 303,387 300,116 341,804 205,621Total stockholders’ equity/(deficit) 30,001 (2,059) (31,332) (121,096) (41,843)Total liabilities and stockholders’ equity 346,248 301,328 268,784 220,708 163,778 Other Data: Adjusted EBITDA (2) $82,254 $73,024 $66,252 70,716 59,039Adjusted EBITDA margin (2) 11.0% 10.0% 10.0% 10.9% 11.2%Number of stores open at end of period 75 64 55 47 33Same store sales growth/(decline) for period (3) (0.8)% 1.1% (8.4)% (3.7)% 25.4%(1)On March 21, 2009, Sportsman’s Warehouse Holdings, Inc. and its subsidiaries filed voluntary petitions for relief underChapter 11 of the United States Bankruptcy Code, seeking to reorganize the business under the provisions of the BankruptcyCode. The plan of reorganization under the Bankruptcy Code was confirmed by the United States Bankruptcy Court for theDistrict of Delaware on July 30, 2009 and became effective when all material conditions of the plan of reorganization weresatisfied on August 14, 2009. We incurred certain costs related to our restructuring and emergence from Chapter 11bankruptcy and included a liability as part of the reorganization value at August 14, 2009, the date of emergence frombankruptcy. Bankruptcy-related expenses are those amounts that are greater than the initial estimated restructuring costs,whereas bankruptcy-related benefits are those amounts that are less than the initial estimated costs. They are expensed asincurred.37 $$$$Table of Contents(2)Adjusted EBITDA has been presented in this filing as a supplemental measure of financial performance that is not requiredby, or presented in accordance with, generally accepted accounting principles, or GAAP. We define Adjusted EBITDA asnet income plus interest expense, income tax expense, depreciation and amortization, stock-based compensation expense,pre-opening expenses, and other gains, losses, and expenses that we do not believe are indicative of our ongoing expenses. Inaddition, Adjusted EBITDA excludes pre-opening expenses because we do not believe these expenses are indicative of theunderlying operating performance of our stores. The amount and timing of pre-opening expenses are dependent on, amoungother things, the size of the new stores opened and the number of new stores opened during any given period. AdjustedEBITDA margin means, for any period, the Adjusted EBITDA for that period divided by the net sales for that period. Adjusted EBITDA and Adjusted EBITDA margin are included in this filing because they are key metrics used bymanagement and our board of directors to assess our financial performance. Adjusted EBITDA and Adjusted EBITDAmargin are frequently used by analysts, investors and other interested parties in the evaluation of companies in our industry.In addition to assessing our financial performance, we use Adjusted EBITDA and Adjusted EBITDA margin as additionalmeasurement tools for purposes of business decision-making, including evaluating store performance, developing budgetsand managing expenditures. Adjusted EBITDA is not a GAAP measure of our financial performance or liquidity and should not be considered as analternative to net income as a measure of financial performance or cash flows from operations as a measure of liquidity, orany other performance measure derived in accordance with GAAP, and it should not be construed as an inference that ourfuture results will be unaffected by unusual or non-recurring items. Additionally, Adjusted EBITDA is not intended to be ameasure of free cash flow for management’s discretionary use, as it does not reflect certain cash requirements such as taxpayments, debt service requirements, capital expenditures, store openings and certain other cash costs that may recur in thefuture. Adjusted EBITDA contains certain other limitations, including the failure to reflect our cash expenditures or futurerequirements for capital expenditures or contractual commitments. In evaluating Adjusted EBITDA, you should be awarethat, in the future, we will incur expenses that are the same as or similar to some of the adjustments reflected in thispresentation, such as income tax expense (benefit), interest expense, depreciation and amortization and pre-openingexpenses. Our presentation of Adjusted EBITDA should not be construed to imply that our future results will be unaffectedby any such adjustments. Management compensates for these limitations by relying on our GAAP results in addition to usingAdjusted EBITDA supplementally. Our measures of Adjusted EBITDA are not necessarily comparable to other similarlytitled captions of other companies due to different methods of calculation. See below for a reconciliation of net income toAdjusted EBITDA. A reconciliation of net income to Adjusted EBITDA is set forth below: Fiscal Year Ended January 28, January 30, January 31, February 1, February 2, 2017 2016 2015 2014 2013 (in thousands) Net income $29,669 $27,771 $13,784 21,750 28,074Plus: Interest expense 13,402 14,156 22,480 25,447 6,321Income tax expense 17,616 17,385 8,628 12,838 19,076Depreciation and amortization 13,974 11,569 9,150 6,277 3,431Stock-based compensation expense (a) 3,186 2,257 3,293 365 —Pre-opening expenses (b) 4,264 3,159 2,717 1,653 1,441IPO bonus (c) — — 2,200 — —Litigation accrual (reversal) (d) — (4,000) 4,000 — —Secondary offering expenses (e) 143 727 — — —Bankruptcy related expenses (f) — — — 55 (263)Acquisition expenses (g) — — — 2,331 959Adjusted EBITDA $82,254 $73,024 $66,252 70,716 59,039(a)Stock-based compensation expense represents non-cash expenses related to equity instruments granted to employees underour 2013 Performance Incentive Plan and Employee Stock Purchase Plan.38 Table of Contents (b)Pre-opening expenses include expenses incurred in the preparation and opening of a new store location, such as payroll,travel and supplies, but do not include the cost of the initial inventory or capital expenditures required to open a location. (c)As a result of the completion of our initial public offering and pursuant to the terms of the employment agreements with ourexecutive officers, we paid $2.2 million in bonuses to our executive officers. (d)Based on the court’s most recent judgment in our favor regarding the Lacey Marketplace litigation, we determined that thelikelihood of loss in this case is not probable, and, as such, we reversed the previous accrual of $4.0 million in our results forthe fiscal year ended January 30, 2016. See Item 3. Legal Proceedings. (e)We incurred certain costs related to secondary offerings of our common stock by affiliates of Seidler Equiy Partners III, L.Pon September 15, 2015 and April 18, 2016. These costs were expensed as incurred. (f)We incurred certain costs related to our restructuring and emergence from Chapter 11 bankruptcy and included a liability aspart of the reorganization value at August 14, 2009, the date of emergence from bankruptcy. Bankruptcy-related expensesare those amounts that are greater than the initial estimated restructuring costs, whereas bankruptcy-related benefits are thoseamounts that are less than the initial estimated costs. They are expensed as incurred. (g)Acquisition expenses for fiscal year 2013 relate to the costs associated with the acquisition of our 10 previously operatedstores in Montana, Oregon and Washington. Acquisition expenses for fiscal year 2012 relate to legal and consulting expensesrelated to potential merger and acquisition activity. (3) Net sales from a store are included in same store sales on the first day of the 13 full month following the store’s opening oracquisition by us. We exclude net sales from e-commerce from our calculation of same store sales, and for fiscal yearsconsisting of 53 weeks, we exclude net sales during the 53 week from our calculation of same store sales. The figuresshown represent growth over the corresponding period in the prior fiscal year. We have historically presented our sales and costs of state fish and game licenses, duck stamps, and state government-mandated firearm background checks in net sales and cost of goods sold under the gross method. Subsequent to filing ourAnnual Report on Form 10-K for fiscal year 2015, our management determined that the revenue from these transactionsshould have been presented under the net method, thereby recognizing only the commission received in net sales for acting asthe agent under the principal versus agent model. This revision does not have any impact upon gross profit, net income orearnings per share. The following table provides a reconciliation of the revision for the years ended February 2, 2013 and February 1, 2014 asreported on form 10-K. For a reconciliation of the years ended January 31, 2015 and January 30, 2016 see Note 2 to ourConsolidated Financial Statements included within this 10-K: As Previously For the fiscal year ended February 1, 2014 Reported Revision As Revised Net sales $643,163 $(18,315) $624,848 Cost of goods sold 435,933 (18,315) 417,618 Gross profit 207,230 — 207,230 As Previously For the fiscal year ended February 2, 2013 Reported Revision As Revised Net sales $526,942 $(12,092) $514,850 Cost of goods sold 364,326 (12,092) 352,234 Gross profit 162,616 — 162,616 39 th rd Table of ContentsITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OFOPERATIONS The discussion below contains forward-looking statements that involve risks and uncertainties. Our actual results coulddiffer materially from those anticipated in these forward-looking statements as a result of various factors, including those whichare discussed in the “Risk Factors” section in Part I, Item 1A of this 10-K. Also see “Statement Regarding Forward-LookingStatements” preceding Part I. The following discussion and analysis should be read in conjunction with the consolidated financial statements and thenotes thereto included in this 10-K. Overview We are a high-growth outdoor sporting goods retailer focused on meeting the everyday needs of the seasoned outdoorveteran, the first-time participant and every enthusiast in between. Our mission is to provide a one-stop shopping experience thatequips our customers with the right quality, brand name hunting, shooting, fishing and camping gear to maximize their enjoymentof the outdoors. Our business was founded in 1986 as a single retail store in Midvale, Utah. Today, we operate 77 stores in 20 states,totaling approximately 3.1 million gross square feet. During fiscal year 2016, we increased our gross square footage by 11.6%through the opening of eleven stores in the following locations: ·Slidell, Lousiana on February 27, 2016·South Jordan, Utah on March 19, 2016·Rohnery Park, California on April 2, 2016·Juneau, Alaska on June 18, 2016·Prescott, Arizona on July 16, 2016·Roseburg, Oregon on July 23, 2016·Las Cruces, New Mexico on August 6, 2016·Gillette, Wyoming on August 13, 2016·Rock Springs, Wyoming on August 27, 2016·Fairfield, California on September 15, 2016·Avondale, Arizona on September 15, 2016 During fiscal year 2017, we have opened stores in the following locations: ·Cedar City, Utah on February 16, 2017·Moses Lake, Washington on February 23, 2017 Individual stores are aggregated into one operating and reportable segment. 40 Table of ContentsHow We Assess the Performance of Our Business In assessing the performance of our business, we consider a variety of performance and financial measures. The keymeasures for determining how our business is performing are net sales, same store sales, gross margin, selling, general andadministrative expenses, income from operations and Adjusted EBITDA. Fiscal Year We operate using a 52/53 week fiscal year ending on the Saturday closest to January 31. Fiscal years 2016, 2015 and 2014ended on January 28, 2017, January 30, 2016, and January 31, 2015, respectively. Fiscal years 2016, 2015, and 2014 eachcontained 52 weeks of operations. Net Sales and Same Store Sales Our net sales are primarily received from revenue generated in our stores and also include sales generated through our e-commerce platform. When measuring revenue generated from our stores, we review our same store sales as well as theperformance of our stores that have not operated for a sufficient amount of time to be included in same store sales. We include netsales from a store in same store sales on the first day of the 13th full fiscal month following the store’s opening or acquisition byus. We exclude net sales from e-commerce from our calculation of same store sales. Our net sales for fiscal years 2015 and 2014 have been revised to reflect a revision of revenue presentation for sales of statefish and game licenses, duck stamps, and state government-mandated firearm background checks. See Note 2 to the notes to ourconsolidated financial statements included elsewhere in this 10-K for a description of these items and a reconciliation of therevision for fiscal years 2015 and 2014 as reported in the consolidated statement of operations included in our Annual Report onForm 10-K for the fiscal year ended January 30, 2016, which was filed with the SEC on March 24, 2016. Measuring the change in year-over-year same store sales allows us to evaluate how our retail store base is performing.Various factors affect same store sales, including: ·changes or anticipated changes to regulations related to some of the products we sell; ·consumer preferences, buying trends and overall economic trends; ·our ability to identify and respond effectively to local and regional trends and customer preferences; ·our ability to provide quality customer service that will increase our conversion of shoppers into paying customers; ·competition in the regional market of a store; ·atypical weather; ·changes in our product mix; and ·changes in pricing and average ticket sales. Opening new stores is also an important part of our growth strategy. Since the beginning of fiscal year 2010, we haveopened 42 stores, including the eleven new stores we have opened in fiscal year 2016 and the two new stores we have opened infiscal year 2017. For the next several years, we intend to grow our store base at a rate of greater than 10 percent annually. As partof our growth strategy, we also re-acquired 10 stores in fiscal year 2013 that were previously operated under the Sportsman’sWarehouse Banner. For our new locations, we measure our investment by reviewing the new store’s four-wall Adjusted EBITDA margin andpre-tax return on invested capital (“ROIC”). We target a minimum 10% four-wall Adjusted EBITDA margin and a minimumROIC of 50% excluding initial inventory costs (or 20% including initial inventory cost) for the first full twelve months ofoperation for a new store. The 29 new stores that we have opened since 2010 and that have been open for a full41 Table of Contentstwelve months (excluding the 10 acquired stores) have achieved an average four-wall Adjusted EBITDA margin of 13.5% and anaverage ROIC of 81.7% excluding initial inventory cost (and 30.1% including initial inventory cost) during their first full twelvemonths of operations. Four-wall Adjusted EBITDA means, for any period, a particular store’s Adjusted EBITDA, excluding anyallocations of corporate selling, general and administrative expenses allocated to that store. Four-wall Adjusted EBITDA marginmeans, for any period, a store’s four-wall Adjusted EBITDA divided by that store’s net sales. For a definition of AdjustedEBITDA and Adjusted EBITDA margin and a reconciliation of net income to Adjusted EBITDA, see “—Non-GAAP Measures.”ROIC means a store’s four-wall Adjusted EBITDA for a given period divided by our initial cash investment in the store. Wecalculate ROIC both including and excluding the initial inventory cost. We also have been scaling our e-commerce platform and increasing sales through our website,www.sportsmanswarehouse.com . We believe the key drivers to increasing our total net sales will be: ·increasing our total gross square footage by opening new stores; ·continuing to increase and improve same store sales in our existing markets; ·increasing customer visits to our stores and improving our conversion rate through focused marketing efforts andcontinually high standards of customer service; ·increasing the average ticket sale per customer; and ·expanding our e-commerce platform. Gross Profit Gross profit is our net sales less cost of goods sold. Gross margin measures our gross profit as a percentage of net sales. Ourcost of goods sold primarily consists of merchandise acquisition costs, including freight-in costs, shipping costs, payment termdiscounts received from the vendor and vendor allowances and rebates associated directly with merchandise and shipping costsrelated to e-commerce sales. Prior period amounts of net sales and cost of goods sold have been revised to reflect a revision ofrevenue presentation for sales of state fish and game licenses, duck stamps, and state government-mandated firearm backgroundchecks. See “-How We Assess the Performance of Our Business-Net Sales and Same Store Sales” and Note 2 to the notes to ourconsolidated financial statements included elsewhere in this 10-K for a description of these items and the impact of the revisionson our financial statements for the prior periods. We believe the key drivers to improving our gross margin are increasing the product mix to higher margin products,particularly clothing and footwear, improving buying opportunities with our vendor partners and coordinating pricing strategiesamong our stores and buying group. Our ability to properly manage our inventory can also impact our gross profit. Successfulinventory management ensures we have sufficient high margin products in stock at all times to meet customer demand, whileoverstocking of items could lead to markdowns in order to help a product sell. We believe that the overall growth of our businesswill allow us to generally maintain or increase our gross margins, because increased merchandise volumes will enable us tomaintain our strong relationships with our vendors. Selling, General and Administrative Expenses We closely manage our selling, general and administrative expenses. Our selling, general and administrative expenses arecomprised of payroll, rent and occupancy, depreciation and amortization, acquisition expenses, pre-opening expenses and otheroperating expenses, including share-based compensation expense and litigation accrual. Pre-opening expenses include expensesincurred in the preparation and opening of a new store location, such as payroll, travel and supplies, but do not include the cost ofthe initial inventory or capital expenditures required to open a location. Our selling, general and administrative expenses are primarily influenced by the volume of net sales of our locations, exceptfor our corporate payroll, rent and occupancy and depreciation and amortization, which are generally fixed in nature. We controlour selling, general and administrative expenses through a budgeting and reporting process that allows our personnel to adjust ourexpenses as trends in net sales activity are identified. 42 Table of ContentsWe expect that our selling, general and administrative expenses will increase in future periods due to our continuing growthand in part to additional legal, accounting, insurance and other expenses we expect to incur as a result of being a public company. Income from Operations Income from operations is gross profit less selling, general and administrative expenses. We use income from operations asan indicator of the productivity of our business and our ability to manage selling, general and administrative expenses. Adjusted EBITDA We define Adjusted EBITDA as net income plus interest expense, income tax expense, depreciation and amortization,stock-based compensation expense, pre-opening expenses, and other gains, losses, and expenses that we do not believe areindicative of our ongoing expenses. In evaluating our business, we use Adjusted EBITDA and Adjusted EBITDA margin as anadditional measurement tool for purposes of business decision-making, including evaluating store performance, developingbudgets and managing expenditures. See “—Non-GAAP Measures.” Results of Operations All financial results and other information set forth below reflect revisions made to net sales and cost of goods sold toreflect a revision of revenue presentation for sales of state fish and game licenses, duck stamps, and state government-mandatedfirearm background checks. We historically presented our sales of state fish and game licenses, duck stamps, and stategovernment-mandated firearm background checks in net sales and cost of goods sold under the gross method. The revenue fromthese transactions have been revised to be presented under the net method, thereby recognizing only the commission received innet sales for acting as the agent under the principal versus agent model. This revision had no impact on gross profit, net income orearnings per share. See Note 2 to the notes to our consolidated financial statements included elsewhere in this 10-K for theimpact of the revisions on our financial statements for the prior periods. The following table summarizes key components of our results of operations as a percentage of net sales for the periodsindicated (prior year numbers have been revised):   Fiscal Year Ended  January 28, January 30, January 31,  2017 2016 2015Percentage of net sales:    Net sales 100.0% 100.0% 100.0%Cost of goods sold 66.3 66.3 66.4Gross profit 33.7 33.7 33.6Selling, general and administrative expenses 26.0 25.4 26.6Income from operations 7.7 8.3 7.0Interest expense 1.7 2.0 3.5Income before income taxes 6.0 6.3 3.5Income tax expense 2.3 2.5 1.3Net income 3.7% 3.8% 2.2%Adjusted EBITDA 11.0% 10.0% 10.0% 43 Table of ContentsThe following table shows our sales during the periods presented by department: Fiscal Year Ended January 28, January 30, January 31, Department 2017 2016 2015 Camping 14.6% 14.6% 13.9% Clothing 8.7% 8.9% 9.8% Fishing 10.0% 9.9% 9.8% Footwear 7.1% 7.3% 7.7% Hunting and Shooting 50.9% 50.2% 49.4% Optics, Electronics and Accessories (Giftbar) 9.0% 9.6% 9.8% Other (0.3%) (0.5%) (0.4%) Total 100.0% 100.0% 100.0% Fiscal Year 2016 Compared to Fiscal Year 2015 Net Sales . Net sales increased by $73.2 million, or 10.4%, to $780.0 million in fiscal year 2016 compared to $706.8million in fiscal year 2015. Net sales increased due to net sales generated from our eleven new store openings during fiscal year2016 and a full year of the nine stores opened during fiscal year 2015 for the period of time prior to inclusion in our same storesales. These new stores generated $84.2 million in additional net sales in the fiscal year 2016 compared to fiscal year 2015. Thisincrease in sales from our new store openings was partially offset by a decrease in our same stores sales for the period of 0.8%. With respect to same store sales, our fishing department realized an increase in same store sales of 1.1%. Our other 5departments (camping, clothing, hunting, footwear, and giftbar) incurred decreases in same store sales. In particular, we sawdecreases of 1.2%, 1.9%, 4.9%, 0.4% and 6.9%, respectively in these departments. The main contributing factor to the decrease inthese departments was a decrease in foot traffic in our stores, which was a result of a decreased demand in firearms andammunition. As of January 28, 2017, we had 64 stores included in our same store sales calculation. During fiscal year 2016, we opened eleven new stores. These eleven stores generated net sales of $54.5 million during thisperiod. Existing stores that were not included in same store sales generated $29.7 million in additional net sales in fiscal year2016 over fiscal year 2015. Net sales from our e-commerce business increased by $1.6 million, or 20.8%, to $9.3 million in fiscal year 2016 comparedto $7.7 million in fiscal year 2015. Gross Profit. Gross profit increased by $24.7 million, or 10.4%, to $263.2 million for fiscal year 2016 from $238.5 millionfor fiscal year 2015. As a percentage of net sales, gross profit remained flat at 33.7% when compared to gross profit of 33.7% inthe prior year. Selling, General and Administrative Expenses. Selling, general and administrative expenses increased by $23.3 million, or13%, to $203.0 million for fiscal year 2016 from $179.2 million for fiscal year 2015. Selling, general and administrative expenseswere 26.0% of net sales in fiscal year 2016 compared to 25.4% of net sales in fiscal year 2015. Specificially, we incurredadditional payroll, rent, depreciation and amortization and other operating expenses of $10.0 million, $3.8 million, $2.4 millionand $6.0 million, respectively, during fiscal year 2016 compared to fiscal year 2015, which were caused by the increase in thenumber of stores open during the year as compared to the prior year. Overall these expenses were lower on a per-store basis whencompared to 2015. In fiscal year 2016 we incurred $0.1 million in costs related to a secondary offering. Also, in fiscal year 2015,we reversed the $4.0 million accrual taken in fiscal year 2014 related to the Lacey Marketplace litigation matter because the courtgranted our motion for judgment as a matter of law. The increase in selling, general and administrative expenses were partiallyoffset by a $0.5 million decrease in costs related to secondary offerings. Interest Expense. Interest expense decreased by $0.8 million, or 5.3%, to $13.4 million in fiscal year 2016 from $14.2million for fiscal year 2015. Interest expense decreased primarily as a result of the shift in debt balance from our term loan to ourrevolving line of credit, which carries a lower interest rate. 44 Table of ContentsIncome Taxes. We recorded an income tax expense of $17.6 million for fiscal year 2016 compared to income tax expenseof $17.4 million for fiscal year 2015. Our effective tax rate changed from fiscal year 2015 of 38.5% to 37.3% in 2016 due tochanges in various state rates as well as discrete items recognized in 2016 relating to prior year tax credits and stock basedcompensation deductions. Fiscal Year 2015 Compared to Fiscal Year 2014 Net Sales . Net sales increased by $66.9 million, or 10.5%, to $706.8 million in the fiscal year 2015 compared to $640.0million in fiscal year 2014. Net sales increased due to net sales generated from our nine new stores openings during fiscal year2015 and a full year of the eight stores opened during fiscal year 2014 for the period of time prior to inclusion in our same storesales. These new stores generated $62.5 million in additional net sales in the fiscal year 2015 compared to fiscal year 2014. Thisincrease from our new store openings was supplemented by an increase in our same stores sales for the period of 1.1%. With respect to same store sales, three of our six departments (camping, hunting and shooting, and fishing) realized anincrease in same store sales. Our hunting and shooting department experienced a same store sales increase of 2.2% during fiscalyear 2015 when compared to fiscal year 2014. Our camping and fishing departments experienced same store sales increases of6.5% and 2.6%, respectively. Sales in our camping department were positively impacted by increased product innovations withinvarious categories. The increases in camping, hunting and shooting, and fishing were partially offset by the clothing, footwear,and optics, electronics and accessories departments, which had same store sales decreases of 7.7%, 2.3%, and 1.0%, respectively,during the same period. Our clothing and footwear departments were negatively impacted by unseasonably warm weather in themajority of our markets. As of January 30, 2016, we had 55 stores included in our same store sales calculation. During fiscal year 2015, we opened nine new stores. These nine new locations generated net sales of $47.1 million duringthis period. Existing stores that were not included in same store sales generated $15.4 million in additional net sales in fiscal year2015 over fiscal year 2014. Net sales from our e-commerce business increased by $0.2 million, or 2.7%, to $7.7 million in fiscal year 2015 compared to$7.5 million in fiscal year 2014. Gross Profit. Gross profit increased by $23.3 million, or 10.8%, to $238.5 million for fiscal year 2015 from $215.2 millionfor fiscal year 2014. As a percentage of net sales, gross profit increased by 0.1% to 33.7% for fiscal year 2015 from 33.6% infiscal year 2014. The increase in gross profit from the prior fiscal year was due to an increase in vendor incentives receivedduring the year. Selling, General and Administrative Expenses. Selling, general and administrative expenses increased by $8.9 million, or5.2%, to $179.2 million for fiscal year 2015 from $170.3 million for fiscal year 2014. Selling, general and administrativeexpenses were 25.4% of net sales in fiscal year 2015 compared to 26.6% of net sales in fiscal year 2014. In fiscal year 2015, weincurred $0.7 million in costs related to a secondary offering. Also, in fiscal year 2015, we reversed the $4.0 million accrual takenin fiscal year 2014 related to the Lacey Marketplace litigation matter because the court granted our motion for judgment as amatter of law. In fiscal year 2014, we paid a one-time discretionary bonus of $2.2 million in conjunction with the successfulcompletion of our initial public offering. We did not incur this expense in fiscal year 2015. Excluding the secondary offeringcosts, the litigation accrual and subsequent reversal, and the one-time bonus, selling, general and administrative expensesincreased by $18.4 million and selling, general and administrative expenses were 25.0% of net sales in fiscal year 2015 comparedto 24.9% of net sales in fiscal year 2014. Specifically, we incurred additional payroll, rent, and depreciation and amortization of$7.1 million, $3.2 million, and $2.4 million, respectively, during fiscal year 2015 compared to fiscal year 2014, but theseincreases were lower on a per-store percentage basis. We also incurred additional operating expenses of $5.2 million in fiscal year2015 related to an increase in professional fees and other fees related to the Lacey Marketplace litigation matter as well as feesincurred as part of the additional stores that opened during the year. Interest Expense. Interest expense decreased by $8.3 million, or 37.0%, to $14.2 million in fiscal year 2015 from $22.5million for fiscal year 2014. Interest expense decreased primarily as a result of our lower debt balance and lower interest rate onthe debt during fiscal year 2015 compared to fiscal year 2014 as a result of the refinance on our term loan in December 2014 andthe amendment on our line of credit facility in August 2015. 45 Table of ContentsIncome Taxes. We recorded an income tax expense of $17.4 million for fiscal year 2015 compared to income tax expenseof $8.6 million for fiscal year 2014. Our effective tax rate remained unchanged in fiscal year 2015 from fiscal year 2014 at 38.5%.The effective tax rate did not change as there were no material legislative changes impacted the state tax rate or stateapportionment methods in certain states where we operate. Seasonality Due to holiday buying patterns and the openings of hunting season across the country, net sales are typically higher in thethird and fourth fiscal quarters than in the first and second fiscal quarters. We also incur additional expenses in the third andfourth fiscal quarters due to higher volume and increased staffing in our stores. We anticipate our net sales will continue to reflectthis seasonal pattern. The timing of our new retail store openings also may have an impact on our quarterly results. First, we incur certain one-time expenses related to opening each new retail store, all of which are expensed as they are incurred. Second, most storeexpenses generally vary proportionately with net sales, but there is also a fixed cost component, which includes occupancy costs.These fixed costs typically result in lower store profitability during the initial period after a new retail store opens. Due to both ofthese factors, new retail store openings may result in a temporary decline in operating profit, in dollars and/or as a percentage ofnet sales. Weather conditions affect outdoor activities and the demand for related clothing and equipment. Customers’ demand forour products, and, therefore, our net sales, can be significantly impacted by weather patterns on a local, regional and nationalbasis. Quarterly Results of Operations The following table sets forth unaudited financial and operating data for each fiscal quarter of fiscal years 2016 and 2015.This quarterly information has been prepared on a basis consistent with our audited financial statements and includes all normalrecurring adjustments that we consider necessary for a fair presentation of the information shown. This information should beread in conjunction with “Part II, Item 6. Selected Financial Data” and “Part II, Item 8. Financial Statements and SupplementaryData” of this 10-K. Our quarterly operating results may fluctuate significantly as a result of the factors described above and avariety of other factors, and operating results for any fiscal quarter are not necessarily indicative of results for a full fiscal year. Fiscal Year 2016 Fiscal Year 2015 Fourth Quarter Third Quarter Second Quarter First Quarter Fourth Quarter Third Quarter Second Quarter First Quarter (unaudited) (in thousands, except per share data, percentages and number of stores) Net sales $221,376 $217,161 $189,804 $151,615 $208,548 $192,122 $166,935 $139,158 Gross profit 74,308 74,265 66,185 48,472 70,812 66,565 58,002 43,151 Income from operations (1) 21,114 20,546 16,671 2,356 22,109 19,169 16,786 1,248 Net income (loss) (1) 10,540 10,514 8,304 311 11,390 9,541 8,200 (1,360) Diluted earnings (loss) per share 0.25 0.25 0.20 0.01 0.27 0.23 0.19 (0.03) As a percentage of full yearresults: Net sales 28.4% 27.8% 24.3% 19.4% 29.5% 27.2% 23.6% 19.7% Gross profit 28.2 28.2 25.1 18.4 29.7 27.9 24.3 18.1 Income (loss) from operations 34.8 33.9 27.5 3.9 37.3 32.3 28.3 2.1 Net income (loss) 35.5 35.4 28.0 1.0 41.0 34.4 29.5 (4.9) Operating data: Number of stores open at end ofperiod 75 75 70 67 64 64 61 57 (1)This line includes, for the third quarter of 2015 and first quarter of 2016, $0.7 million and $0.1 million, respectively, in expenses paid by us inconnection with a secondary offering of our common stock by affiliates of Seidler Equity Partners III, L.P. and one of our executive officers; forsecond quarter of fiscal year 2015, the reversal of the $4.0 million accrual, with respect to the litigation matter discussed in the “Legal Matters”subsection of Note 17 to our consolidated financial statements. 46 Table of ContentsLiquidity and Capital Resources Our primary capital requirements are for seasonal working capital needs and capital expenditures related to opening newstores. Our sources of liquidity to meet these needs have primarily been borrowings under our revolving credit facility, operatingcash flows and short and long-term debt financings from banks and financial institutions. We believe that our cash on hand, cashgenerated by operating activities and funds available under our revolving credit facility will be sufficient to finance our operatingactivities for at least the next twelve months. For fiscal year 2016, we incurred approximately $39.4 million in gross capital expenditures. We also received $11.9 millionfrom sale-leaseback transactions. We expect gross capital expenditures between $35.0 million and $40.0 million for fiscal year2017. We intend to fund these initiatives with our operating cash flows and funds available under our revolving credit facility.Other investment opportunities, such as potential strategic acquisitions or store expansion rates in excess of those presentlyplanned, may require additional funding. Cash flows from operating, investing and financing activities are shown in the following table: Fiscal Year Ended January 28, January 30, 2017 2016 (in thousands) Cash flows from operating activities $15,482 $35,423 Cash flows from investing activities (27,494) (14,951) Cash flows from financing activities 11,814 (20,114) Cash and cash equivalents at end of period 1,911 2,109 Net cash provided by operating activities was $15.5 million for fiscal year 2016, compared to $35.4 million for fiscal year2015. Our net cash provided by operating activities decreased primarily due to unfavorable changes in merchandise inventories,accounts payable, income taxes, and merchandise inventories. Net cash used in investing activities was $27.5 million for fiscal year 2016 compared to $15.0 million for fiscal year 2015.The increase in cash used in investing activities was primarily a result of decreased proceeds from sale leasback transactions of$11.9 million in fiscal year 2016 compared to $19.0 million in fiscal year 2015. Capital expenditures increased to $39.4 millionfor fiscal year 2016 compared to $34.0 million for fiscal year 2015. Net cash provided by financing activities was $11.8 million for fiscal year 2016 compared to net cash used in financingactivities of $20.1 million for fiscal year 2015. In fiscal year 2015, net cash used in financing activities was primarily for $18.2million in repayments on our revolving line of credit and term loan. In contrast, in fiscal year 2016, we received net borrowingsof $35.7 million from our line of credit, partially offset by payments of $21.2 million on our term loan. Our outstanding debtconsists of our senior secured revolving line of credit and our senior secured term loans. Senior Secured Revolving Credit Facility. We have a senior secured revolving credit facility with Wells Fargo Bank,National Association, or Wells Fargo, that provides for borrowings in the aggregate amount of up to $135.0 million, subject to aborrowing base calculation. As of January 28, 2017, $52.8 million was available for borrowing and $61.0 million wasoutstanding under the revolving credit facility. All borrowings under the revolving credit facility are limited to a borrowing baseequal to roughly (1) the lesser of (a) 90% of the net orderly liquidation value of our eligible inventory and (b) 75% of the lower ofcost or market value of our eligible inventory, plus (2) 90% of the eligible accounts receivable, less certain reserves againstoutstanding gift cards, layaway deposits and amounts outstanding under commercial letters of credit, each term as defined in thecredit agreement. The revolving credit facility matures on December 3, 2019. Each of the subsidiaries of Sportsman’s Warehouse Holdings, Inc., or Holdings, is a borrower under the revolving creditfacility, and all obligations under the revolving credit facility are guaranteed by Holdings. All of our obligations under therevolving credit facility are secured by a lien on substantially all of Holdings’ tangible and intangible assets and the tangible andintangible assets of all of our subsidiaries, including a pledge of all capital stock of each of our subsidiaries. The lien securing theobligations under the revolving credit facility is a first priority lien as to certain liquid assets, including cash, accounts receivable,deposit accounts and inventory. In addition, the credit agreement contains provisions that enable Wells Fargo to require us tomaintain a lock-box for the collection of all receipts. 47 Table of ContentsBorrowings under the revolving credit facility bear interest based on either, at our option, the base rate or LIBOR, in eachcase plus an applicable margin. The base rate is the higher of (1) Wells Fargo’s prime rate, (2) the federal funds rate (as defined inthe credit agreement) plus 0.50% and (3) the one-month LIBOR (as defined in the credit agreement) plus 1.00%. The applicablemargin for loans under the revolving credit facility, which varies based on the average daily availability, ranges from 0.50% to1.00% per year for base rate loans and from 1.50% to 2.00% per year for LIBOR loans. The weighted average interest rate on theamount outstanding under the revolving credit facility as of January 28, 2017 was 2.63%. Interest on base rate loans is payable monthly in arrears and interest on LIBOR loans is payable based on the LIBORinterest period selected by us, which can be 30, 60 or 90 days. All amounts that are not paid when due under our revolving creditfacility will accrue interest at the rate otherwise applicable plus 2.00% until such amounts are paid in full. We may be required to make mandatory prepayments under the revolving credit facility in the event of a disposition ofcertain property or assets, in the event of receipt of certain insurance or condemnation proceeds, upon the issuance of certain debtor equity securities, upon the incurrence of certain indebtedness for borrowed money or upon the receipt of certain payments notreceived in the ordinary course of business. The revolving credit facility contains customary affirmative and negative covenants, including covenants that limit ourability to incur, create or assume certain indebtedness, to create, incur or assume certain liens, to make certain investments, tomake sales, transfers and dispositions of certain property and to undergo certain fundamental changes, including certain mergers,liquidations and consolidations. The revolving credit facility also requires us to maintain a minimum availability at all times ofnot less than 10% of the gross borrowing base, and in any event, not less than $5.0 million. The revolving credit facility alsocontains customary events of default. As of January 28, 2017, we were in compliance with all covenants under the revolvingcredit facility. Senior Secured Term Loan . We have a $160.0 million senior secured term loan facility with a financial institution. Theterm loan was issued at a price of 99% of the aggregate principal amount and has a maturity date of December 3, 2020. The termloan requires quarterly principal payments of $0.4 million payable on the last business day of each fiscal quarter continuing up toand including October 30, 2020. A final installment payment consisting of the remaining unpaid balance is due on December 3,2020. As of January 28, 2017, there was $136.7 million outstanding under the term loan. All of Sportsman’s Warehouse, Inc.’s obligations under the term loan are guaranteed by Holdings, MinnesotaMerchandising Corporation, a wholly owned subsidiary of Holdings, and each of Sportsman’s Warehouse, Inc.’s subsidiaries. The term loan is secured by a lien on substantially all of the tangible and intangible assets of Sportsman’s Warehouse, Inc.The lien securing the obligations under the term loan is a first priority lien as to certain non-liquid assets, including equipment,intellectual property, proceeds of assets sales and other personal property. Sportsman’s Warehouse, Inc. may be required to make mandatory prepayments on the term loan in the event of, amongother things, certain asset sales, the receipt of payment in respect of certain insurance claims or upon the issuance or incurrence ofcertain indebtedness. Sportsman’s Warehouse, Inc. may also be required to make mandatory prepayments based on any excesscash flows as defined in the term loan agreement. We will not be required to make a mandatory prepayment in fiscal year 2017for excess cash flows. The term loan bears interest at a rate per annum equal to the one-, two-, three-, or six-month LIBOR (or, the nine- or 12-month LIBOR), as defined in the term loan agreement, at our election, which cannot be less than 1.25%, plus an applicablemargin of 6.00%. The term loan contains customary affirmative and negative covenants, including covenants that limit our ability to incur,create or assume certain indebtedness, to incur or assume certain liens, to purchase, hold or acquire certain investments, to declareor make certain dividends and distributions and to engage in certain mergers, consolidations and asset sales. The term loan alsorequires us to comply with specified financial covenants, including a minimum interest coverage ratio and a maximum total netleverage ratio. The term loan also contains customary events of default. As of January 28, 2017, we were in compliance with allcovenants under the term loan.48 Table of Contents Critical Accounting Policies Our financial statements are prepared in accordance with GAAP. In connection with the preparation of the financialstatements, we are required to make assumptions, make estimates and apply judgment that affect the reported amounts of assets,liabilities, revenue, expenses and the related disclosures. We base our assumptions, estimates and judgments on historicalexperience, current trends and other factors that we believe to be relevant at the time the consolidated financial statements areprepared. On a regular basis, we review the accounting policies, assumptions, estimates and judgments to ensure that our financialstatements are presented fairly and in accordance with GAAP. However, because future events and their effects cannot bedetermined with certainty, actual results could differ from our assumptions and estimates, and such differences could be material. Our significant accounting policies are discussed in Note 2 of the Notes to our consolidated financial statements. Webelieve that the following accounting policies are the most critical to aid in fully understanding and evaluating our reportedfinancial results. Revenue Recognition We recognize revenue on our retail sales at the time of the sale in the store. We record a reserve for estimated productreturns in each reporting period based on our historical experience. Had our estimate of product returns been lower or higher by10% as of January 28, 2017, our operating income would have been correspondingly higher or lower by approximately $0.1million. Our policy regarding gift cards sold is to record revenue as the gift cards are redeemed for merchandise. Prior to theirredemption, the gift cards are recorded as a liability. Gift card breakage income is recognized based upon historical redemptionpatterns and represents the balance of gift cards for which we believe the likelihood of redemption by the customer is remote.During the fiscal years ended January 28, 2017 and January 30, 2016, we recognized $0.4 million and $0.8 million, respectively,in gift card breakage income. We include gift card breakage income as a reduction in selling, general and administrative expenses,if applicable. Had our estimate of breakage on our recorded liability for gift cards been lower or higher by 10% of the recordedliability as of January 28, 2017, our selling, general and administrative expenses would have been correspondingly higher orlower by approximately $1.1 million. Loyalty breakage income is recognized based upon the balance of loyalty points that have expired after a dormancy periodof 18 months. During the fiscal year ended January 28, 2017 and January 30, 2016, we recognized $0.6 and $0.2 million ofloyalty breakage income, respectively. This income is included in the accompanying consolidated statements of income as anincrease in net sales. Had our estimate of breakage for loyalty been lower or higher by 10% of the recorded liability as of January28, 2017, the amount recognized in revenue relating to this breakage would have been higher or lower by approximately $0.1million. Inventory Valuation We value our inventory at the lower of cost or market. Cost is determined using the weighted average cost method. Weestimate a provision for inventory shrinkage based on our historical inventory accuracy rates as determined by periodic cyclecounts. The allowance for damaged goods from returns is based upon our historical experience. We also adjust inventory forobsolete or slow moving inventory based on inventory productivity reports and by specific identification of obsolete or slowmoving inventory. Had our estimated inventory reserves been lower or higher by 10% as of January 28, 2017, our cost of saleswould have been correspondingly lower or higher by approximately $0.6 million. Valuation of Long-Lived Assets We review our long-lived assets with definite lives for impairment whenever events or changes in circumstances mayindicate that the carrying value of an asset may not be recoverable. We use an estimate of the future undiscounted net cash flowsof the related asset or group of assets over their remaining useful lives in measuring whether the assets are recoverable. If thecarrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized for the amount by whichthe carrying amount exceeds the estimated fair value of the asset. Impairment of long-lived assets is assessed at the lowest levelsfor which there are identifiable cash flows that are independent of other49 Table of Contentsgroups of assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value, less the estimated costs tosell. No impairment charge to long-lived assets was recorded during the fiscal year ended January 28, 2017 or January 30, 2016. Off Balance Sheet Arrangements We are not party to any off balance sheet arrangements. Contractual Obligations The following table summarizes our contractual obligations as of January 28, 2017 and the effect such obligations areexpected to have on our liquidity and cash flows in future periods. \ Payments Due by Period Total Less than 1year 1-3 years 3-5 years More than 5years (in thousands) Long-term debt obligations (1) $174,545 $11,579 $22,992 $139,974 $ — Operating lease obligations (2) 330,569 42,585 86,505 78,412 123,067 Standby letters of credit 1,600 1,600 — — — Purchase obligations (3) 13,069 12,696 205 168 — (1)Long-term debt obligations do not reflect the amounts outstanding under our revolving credit facility, because those amountsare considered current liabilities, and do not reflect any mandatory prepayments of our term loans that may be required uponthe occurrence of certain events, which are described above under “—Liquidity and Capital Resources.” Long-termobligations include interest to be paid until maturity. For loans that have variable rate interest, we have calculated futureinterest obligations based on the interest rate for that loan as of January 28, 2017. (2)Operating lease obligations in the table above do not include additional payments associated with common areamaintenance, real estate, taxes and insurance. Such payments were $7.6 million, $7.3 million, and $6.3 million in fiscal years2016, 2015, and 2014, respectively. (3)In the ordinary course of business, we enter into arrangements with vendors to purchase merchandise in advance of expecteddelivery. Because these purchase orders do not contain any termination payments or other penalties if cancelled, they are notincluded in this table of contractual obligations. In accordance with GAAP, these obligations are not recorded in ourfinancial statements. Non-GAAP Measures In evaluating our business, we use Adjusted EBITDA and Adjusted EBITDA margin as supplemental measures of ouroperating performance. We define Adjusted EBITDA as net income plus interest expense, income tax expense, depreciation andamortization, stock-based compensation expense, pre-opening expenses, and other gains/losses, and expenses that we do notbelieve are indicative of our ongoing expenses. Adjusted EBITDA excludes pre-opening expenses because we do not believethese expenses are indicative of the underlying operating performance of our stores. The amount and timing of pre-openingexpenses are dependent on, among other things, the size of new stores opened and the number of new stores opened during anygiven period. Adjusted EBITDA margin means, for any period, the Adjusted EBITDA for that period divided by the net sales forthat period. We consider Adjusted EBITDA and Adjusted EBITDA margin important supplemental measures of our operatingperformance and believe they are frequently used by analysts, investors and other interested parties in the evaluation ofcompanies in our industry. Other companies in our industry, however, may calculate Adjusted EBITDA and Adjusted EBITDAmargin differently than we do. Management also uses Adjusted EBITDA and Adjusted EBITDA margin as additionalmeasurement tools for purposes of business decision-making, including evaluating store performance, developing budgets andmanaging expenditures. Adjusted EBITDA is not defined under GAAP and is not a measure of operating income, operating performance orliquidity presented in accordance with GAAP. Adjusted EBITDA has limitations as an analytical tool, and when assessing ouroperating performance, you should not consider Adjusted EBITDA in isolation or as a substitute for net50 Table of Contentsincome or other consolidated income statement data prepared in accordance with GAAP. Some of these limitations include, butare not limited to: ·Adjusted EBITDA does not reflect our cash expenditures or future requirements for capital expenditures or contractualcommitments; ·Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs; ·Adjusted EBITDA may be defined differently by other companies, and, therefore, it may not be directly comparable tothe results of other companies in our industry; ·Adjusted EBITDA does not reflect the interest expense, or the cash requirements necessary to service interest orprincipal payments, on our debt; and ·Adjusted EBITDA does not reflect income taxes or the cash requirements for any tax payments. For a reconciliation of net income, the most directly comparable financial measure presented in accordance with GAAP, toAdjusted EBITDA, see “Item 6. Selected Financial Data” included elsewhere in this 10-K. Recent Accounting Pronouncements For a description of recent accounting pronouncements, see the notes to our consolidated financial statements. Under theJumpstart Our Business Startup Act, “emerging growth companies” (“EGCs”) can delay adopting new or revised accountingstandards until such time as those standards apply to private companies. We have irrevocably elected not to avail ourselves of thisexemption from new or revised accounting standards, and, therefore, we will be subject to the same new or revised accountingstandards as other public companies that are not EGCs. We will continue to be an EGC for a period up to the end of the fifth fiscal year after our initial public offering. We couldcease to be an EGC earlier than this five-year period if our total annual gross revenues equal or exceed $1 billion in a fiscal year,if we issue more than $1 billion in non-convertible debt over a three-year period or if we become a “large accelerated filer”(which requires, among other things, the market value of our common stock held by non-affiliates to be at least $700 million as ofthe last business day of our second fiscal quarter of any fiscal year). For further information, see Part I, Item 1A. “Risk Factors—We are an EGC within the meaning of the JOBS Act and we cannot be certain if the reduced reporting requirements applicable toEGCs will make our common stock less attractive to investors.” ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Our principal exposure to market risk relates to changes in interest rates. Our revolving credit facility and term loans carryfloating interest rates that are tied to LIBOR, the federal funds rate and the prime rate, and, therefore, our income and cash flowswill be exposed to changes in interest rates to the extent that we do not have effective hedging arrangements in place. Wehistorically have not used interest rate swap agreements to hedge the variable cash flows associated with the interest on our creditfacilities. At January 28, 2017, the weighted average interest rate on our borrowings under our revolving credit facility was2.63%. Based on a sensitivity analysis at January 28, 2017, assuming the amount outstanding under our revolving credit facilitywould be outstanding for a full year, a 100 basis point increase in interest rates would increase our annual interest expense byapproximately $0.5 million. As long as LIBOR is less than 1.25%, the interest rate on our $160.0 million term loan will be fixedat 7.25%. Since we entered into the term loan facility on December 3, 2014, LIBOR has not exceeded 1.25%. We do not usederivative financial instruments for speculative or trading purposes. However, this does not preclude our adoption of specifichedging strategies in the future.51 Table of ContentsITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DAT A TABLE OF CONTENTS PageREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 53 CONSOLIDATED FINANCIAL STATEMENTS: Consolidated Balance Sheets 54 Consolidated Statements of Income 55 Consolidated Statements of Stockholders’ Equity (Deficit )56 Consolidated Statements of Cash Flows 57 Notes to Consolidated Financial Statements 58 52 Table of ContentsReport of Independent Registered Public Accounting Firm The Board of Directors and StockholdersSportsman’s Warehouse Holdings, Inc.: We have audited the accompanying consolidated balance sheets of Sportsman’s Warehouse Holdings, Inc. and subsidiariesas of January 28, 2017 and January 30, 2016, and the related consolidated statements of income, stockholders’ equity(deficit), andcash flows for each of the fiscal years in the three-year period ended January 28, 2017. These consolidated financial statementsare the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financialstatements based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (UnitedStates). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financialstatements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts anddisclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimatesmade by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide areasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financialposition of Sportsman’s Warehouse Holdings, Inc. and subsidiaries as of January 28, 2017 and January 30, 2016, and the resultsof their operations and their cash flows for each of the fiscal years in the three-year period ended January 28, 2017, in conformitywith U.S. generally accepted accounting principles. /s/ KPMG LLP Salt Lake City, UtahMarch 24, 201753 Table of ContentsSPORTSMAN’S WAREHOUSE HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS Amounts in Thousands, Except Per Share Data January 28, January 30, 2017 2016 Assets Current assets: Cash and cash equivalents $1,911 $2,109 Accounts receivable, net 411 469 Merchandise inventories 246,289 217,794 Deferred income taxes — 3,001 Prepaid expenses and other 7,313 9,337 Total current assets 255,924 232,710 Property and equipment, net 83,109 62,432 Deferred income taxes 5,097 2,263 Definite lived intangibles, net 2,118 3,923 Total assets $346,248 $301,328 Liabilities and Stockholders' Equity (Deficit) Current liabilities: Accounts payable $31,549 $46,698 Accrued expenses 49,586 42,480 Income taxes payable 979 1,779 Revolving line of credit 60,972 25,263 Current portion of long-term debt, net of discount and debt issuance costs 983 8,683 Current portion of deferred rent 3,150 3,018 Total current liabilities 147,219 127,921 Long-term liabilities: Long-term debt, net of discount, debt issuance costs, and current portion 133,721 146,333 Deferred rent, noncurrent 35,307 29,133 Total long-term liabilities 169,028 175,466 Total liabilities 316,247 303,387 Commitments and contingencies Stockholders' equity (deficit): Preferred stock, $.01 par value; 20,000 shares authorized; 0 shares issued andoutstanding — — Common stock, $.01 par value; 100,000 shares authorized; 42,269 and 42,004shares issued and outstanding, respectively 422 420 Additional paid-in capital 80,146 77,757 Accumulated deficit (50,567) (80,236) Total stockholders' equity (deficit) 30,001 (2,059) Total liabilities and stockholders' equity (deficit) $346,248 $301,328 See accompanying notes to the consolidated financial statements54 Table of ContentsSPORTSMAN’S WAREHOUSE HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOMEAmounts in Thousands, Except Per Share Data Fiscal Year Ended January 28, January 30, January 31, 2017 2016 2015Net sales $779,956 $706,764 $639,869 Cost of goods sold 516,726  468,234  424,662 Gross profit 263,230  238,530  215,207       Selling, general, and administrative expenses 202,543  179,218  170,315 Income from operations 60,687  59,312  44,892 Interest expense (13,402)  (14,156)  (22,480) Income before income taxes 47,285  45,156  22,412 Income tax expense 17,616  17,385  8,628 Net income $29,669 $27,771 $13,784 Earnings per share:      Basic $0.70 $0.66 $0.34 Diluted $0.70 $0.66 $0.34 Weighted average shares outstanding:      Basic 42,187  41,966  39,961 Diluted 42,485  42,334  40,141  See accompanying notes to the consolidated financial statements 55 Table of ContentsSPORTSMAN’S WAREHOUSE HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICI T)Amounts in Thousands Common Stock Restricted nonvoting common stock Additional paid-in- capital Accumulateddeficit Total stockholders' (deficit)equity Shares Amount Shares Amount Amount Amount Amount Balance at February 1, 2014 27,265 $273 5,677 $57 $365 $(121,791) $(121,096) Issuance of common shares 8,683 86 — — 73,305 — 73,391 Conversion of nonvoting common stock tocommon stock 5,677 57 (5,677) (57) — — — Vesting of restricted stock units 193 2 — — — — 2 Payment of withholdings on restricted stock units — — — — (993) — (993) Excess tax benefit from restricted stock units — — — — 287 — 287 Stock based compensation — — — — 3,293 — 3,293 Net income — — — — — 13,784 13,784 Balance at January 31, 2015 41,818 $418 — $ — $76,257 $(108,007) $(31,332) Vesting of restricted stock units 186 2 — — (2) — — Payment of withholdings on restricted stock units — — — — (1,041) — (1,041) Excess tax benefit from restricted stock units — — — — 286 — 286 Stock based compensation — — — — 2,257 — 2,257 Net income — — — — — 27,771 27,771 Balance at January 30, 2016 42,004 $420 — $ — $77,757 $(80,236) $(2,059) Vesting of restricted stock units 207 2 — — (2) — — Payment of withholdings on restricted stock units — — — — (1,228) — (1,228) Issuance of common stock for cash per employeestock purchase plan 58 — — — 433 — 433 Stock based compensation — — — — 3,186 — 3,186 Net income — — — — — 29,669 29,669 Balance at January 28, 2017 42,269 $422 — $ — $80,146 $(50,567) $30,001 See accompanying notes to the consolidated financial statements 56 Table of ContentsSPORTSMAN’S WAREHOUSE HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWSAmounts in Thousands Fiscal Year Ended January 28, January 30, January 31, 2017 2016 2015 Cash flows from operating activities: Net income $29,669 $27,771 $13,784 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation of property and equipment 12,169 9,763 7,344 Amortization of discount on debt and deferred financing fees 1,122 817 6,497 Amortization of definite lived intangible 1,805 1,806 1,806 Change in deferred rent 6,307 1,161 5,397 Deferred income taxes 167 3,062 (46) Excess tax benefits from stock-based compensation arrangements (449) (286) (287) Stock-based compensation 3,186 2,257 3,293 Change in operating assets and liabilities: Accounts receivable, net 58 (44) (12) Merchandise inventories (28,495) (31,885) (24,575) Prepaid expenses and other (1,064) (5,435) (21) Accounts payable (15,530) 18,198 836 Accrued expenses 6,888 983 8,127 Income taxes payable (351) 7,255 (1,670) Net cash provided by operating activities 15,482 35,423 20,473 Cash flows from investing activities: Purchase of property and equipment (39,417) (33,957) (30,167) Proceeds from sale-leaseback transactions 11,923 19,006 — Net cash used in investing activities (27,494) (14,951) (30,167) Cash flows from financing activities: Net borrowings on line of credit 35,709 (16,636) 12,847 Increase (decrease) in book overdraft (1,827) (1,123) 2,609 Issuance of common stock per employee stock purchase plan 433 — — Excess tax benefits from stock-based compensation arrangements — 286 287 Payment of withholdings on restricted stock units (1,228) (1,041) (993) Borrowings on term loan — — 160,000 Issuance of common stock, net — — 73,393 Payment of deferred financing costs — — (2,227) Discount on term loan — — (1,600) Principal payments on long-term debt (21,273) (1,600) (234,225) Net cash provided by (used in) financing activities 11,814 (20,114) 10,091 Net change in cash and cash equivalents (198) 358 397 Cash and cash equivalents at beginning of period 2,109 1,751 1,354 Cash and cash equivalents at end of period $1,911 $2,109 $1,751 Supplemental disclosures of cash flow information: Cash paid during the period for: Interest $11,965 12,799 $16,408 Income taxes 18,444 7,032 10,328 Supplemental schedule of noncash investing activities: Purchases of property and equipment included in accrued expenses $5,972 1,094 $1,263 See accompanying notes to the consolidated financial statements 57 Table of ContentsSPORTSMAN’S WAREHOUSE HOLDINGS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements Amounts in Thousands (1) Nature of Business Description of Business Sportsman’s Warehouse Holdings, Inc. (“Holdings”), a Delaware Corporation, and subsidiaries (collectively, the“Company”) operate retail sporting goods stores. As of January 28, 2017, the Company operated 75 stores in 20 states. Voluntary Reorganization under Chapter 11 On March 21, 2009, the Company and all of its subsidiaries filed a voluntary bankruptcy petition for reorganization underChapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware (the“Bankruptcy Court”). On July 30, 2009, the Bankruptcy Court entered an order approving and confirming the Plan ofReorganization (the “Reorganization Plan”). On May 22, 2013, the Company’s bankruptcy case was closed after a final decreewas entered by the bankruptcy court. Bankruptcy-Related Expenses The adoption of fresh start reporting upon emergence from bankruptcy required the Company to allocate the reorganizationvalue to its assets and liabilities in a manner similar to that which is required under Financial Accounting Standards Board(“FASB”) Accounting Standards Codification (“ASC”) Topic 805, Business Combinations, including estimated costs required torestructure and emerge from Chapter 11 bankruptcy. The Company incurred certain costs related to restructuring and emergencefrom Chapter 11 bankruptcy and included a liability as part of the reorganization value at August 14, 2009, the date of emergencefrom bankruptcy. Amounts greater than the estimated restructuring costs are expensed as incurred and included as a separatecomponent of the consolidated statements of income to arrive at income from operations. (2) Summary of Significant Accounting Policies Revision to Consolidated Statements of Income The Company has historically presented its sales and costs of state fish and game licenses, duck stamps, and state government-mandated firearm background checks in net sales and cost of goods sold under the gross method. Subsequent to filing its AnnualReport on Form 10-K for fiscal year 2015, the Company’s management determined that the revenue from these transactionsshould have been presented under the net method, thereby recognizing only the commission received in net sales for acting as theagent under the principal versus agent model. This revision does not have any impact upon gross profit, net income or earningsper share. The following table provides a reconciliation of the revision for the year ended January 30, 2016 as reported in the consolidatedstatement of income included in the Company’s Annual Report on Form 10-K for fiscal year 2015, which was filed with the SECon March 24, 2016: As Previously For the thirteen weeks ended January 30, 2016 Reported Revision As RevisedNet sales $212,730 $(4,181) $208,549Cost of goods sold 141,918 (4,181) 137,737Gross profit 70,812 — 70,812 58 Table of Contents As Previously For the fiscal year ended January 30, 2016 Reported Revision As Revised Net sales $729,912 $(23,148) $706,764 Cost of goods sold 491,382 (23,148) 468,234 Gross profit 238,530 — 238,530 As Previously For the fiscal year ended January 31, 2015 Reported Revision As Revised Net sales $660,003 $(20,134) $639,869 Cost of goods sold 444,796 (20,134) 424,662 Gross profit 215,207 — 215,207 Principles of Consolidation The consolidated financial statements of the Company have been prepared in accordance with U.S. generally acceptedaccounting principles (“GAAP”) and include the accounts of its four wholly owned subsidiaries, Sportsman’s Warehouse, Inc.(“Sportsman’s Warehouse”), Pacific Flyway Wholesale, LLC (“Pacific Flyway”), Sportsman’s Warehouse Southwest, Inc., andMinnesota Merchandising Corporation. All intercompany transactions and accounts have been eliminated in consolidation. Fiscal Year The Company operates using a 52/53 week fiscal year ending on the Saturday closest to January 31. Fiscal years 2016,2015 and 2014 ended on January 28, 2017, January 30, 2016, and January 31, 2015, respectively and each contain 52 weeks ofoperations. Seasonality The Company’s business is generally seasonal, with a significant portion of total sales occurring during the third and fourthquarters of the fiscal year. Use of Estimates in the Preparation of Consolidated Financial Statements The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates andassumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dateof the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actualresults could differ from those estimates. Segment Reporting The Company operates solely as a sporting goods retailer whose Chief Operating Decision Maker (“CODM”) is the ChiefExecutive Officer. The CODM reviews financial information presented on a consolidated and individual store and cost centerbasis, for purposes of allocating resources and evaluating financial performance. The Company’s stores typically have similarsquare footage and offer essentially the same general product mix. The Company’s core customer demographic remains similarchainwide, as does the Company’s process for the procurement and marketing of its product mix. Furthermore, the Companydistributes its product mix chainwide from a single distribution center. Given that the stores have the same economiccharacteristics, the individual stores are aggregated into one single operating and reportable segment. Cash and Cash Equivalents The Company considers cash on hand in stores and highly liquid investments with an initial maturity of three months or lessas cash and cash equivalents. Checks issued pending bank clearance that result in overdraft balances for accounting purposes areclassified as accrued expenses in the accompanying consolidated balance sheets. 59 Table of ContentsIn accordance with the terms of a financing agreement (Note 9), the Company maintains depository accounts with twobanks in a lock-box arrangement. Deposits into these accounts are used to reduce the outstanding balance on the line of credit assoon as the respective bank allows the funds to be transferred to the financing company. At January 28, 2017 and January 30,2016, the combined balance in these accounts were $6,138 and $5,939, respectively. Accordingly, these amounts have beenclassified as a reduction in the line of credit as if the transfers had occurred on January 28, 2017 and January 30, 2016,respectively. Accounts Receivable The Company offers credit terms on the sale of products to certain government and corporate retail customers and requiresno collateral from these customers. The Company performs ongoing credit evaluations of its customers’ financial condition andmaintains an allowance for doubtful accounts receivable based upon historical experience and a specific review of accountsreceivable at the end of each period. Actual bad debts may differ from these estimates and the difference could be significant. AtJanuary 28, 2017 and January 30, 2016, the Company had no allowance for doubtful accounts receivable. Merchandise Inventories Merchandise inventories are stated at the lower of cost or market. Cost is determined using the weighted average costmethod. The Company estimates a provision for inventory shrinkage based on its historical inventory accuracy rates asdetermined by periodic cycle counts. The allowance for damaged goods from returns is based upon historical experience. TheCompany also adjusts inventory for obsolete or slow moving inventory based on inventory productivity reports and by specificidentification of slow moving or obsolete inventory. The inventory reserves for shrinkage, damaged, or obsolescence totaled$6,539 and $4,306 at January 28, 2017 and January 30, 2016, respectively. Property and Equipment Property and equipment are recorded at cost. Leasehold improvements primarily include the cost of improvements fundedby landlord incentives or allowances. Maintenance, repairs, minor renewals, and betterments are expensed as incurred. Majorrenewals and betterments are capitalized. Upon retirement or disposal of assets, the cost and accumulated depreciation andamortization are eliminated from the respective accounts and the related gains or losses are credited or charged to earnings. Depreciation and amortization of property and equipment is computed using the straight-line method over the estimateduseful lives of the related assets. Leasehold improvements are amortized over the shorter of the useful lives of the improvementsor the term of the lease. Furniture, fixtures, and equipment, are depreciated over useful lives ranging from 3 to 10 years. Impairment of Long-Lived Assets The Company reviews its long-lived assets with definite lives for impairment whenever events or changes in circumstancesmay indicate that the carrying value of an asset may not be recoverable. The Company uses an estimate of the future undiscountednet cash flows of the related asset or group of assets over their remaining useful lives in measuring whether the assets arerecoverable. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized for theamount by which the carrying amount exceeds the estimated fair value of the asset. Impairment of long-lived assets is assessed atthe lowest levels for which there are identifiable cash flows that are independent of other groups of assets. Assets to be disposedof are reported at the lower of the carrying amount or fair value, less the estimated costs to sell. No impairment charge to long-lived assets was recorded during the fiscal years ended January 28, 2017, January 30, 2016 or January 31, 2015. Prepaid Expenses and Other Prepaid expenses and other primarily consists of prepaid expenses, vendor rebates receivable, vendor advertisingreceivables and miscellaneous deposits. 60 Table of ContentsRevenue Recognition Revenue is recognized for retail sales at the time of the sale in the store. The Company records a reserve for estimatedproduct returns in each reporting period, based on its historical experience. The Company’s sales returns reserve was $964 and$799 at January 28, 2017, and January 30, 2016, respectively. Revenue for gift cards sold is deferred and recognized as the gift cards are redeemed for merchandise. Gift card breakageincome is recognized based upon historical redemption patterns and represents the balance of gift cards for which the Companybelieves the likelihood of redemption by the customer is remote. During the fiscal years ended January 28, 2017, January 30,2016 and January 31, 2015, the Company recognized $347, $846, and $833 of gift card breakage income, respectively. Thisincome is included in the accompanying consolidated statements of income as a reduction in selling, general, and administrativeexpenses (“SG&A”). In November of 2013, the Company launched a customer loyalty program. Under this program, the Company issues creditsin the form of points to loyalty program members. The value of points earned by loyalty program members is included in accruedliabilities and recorded as a reduction of net sales at the time the points are earned. Loyalty breakage income is recognized basedupon the balance of loyalty points that have expired after a dormancy period of 18 months. During the fiscal year ended January28, 2017 and January 30, 2016, the Company recognized $611 and $232, respectively of loyalty breakage income. This income isincluded in the accompanying consolidated statements of income as an increase in net sales. Customer deposits on items placed in layaway are recorded as a liability. Revenue is recognized on layaway transactions atthe point where the customer takes possession of the merchandise. These liabilities are recorded as unearned revenue in accruedexpenses in the consolidated balance sheets. Sales taxes collected from customers and remitted to governmental authorities are accounted for on a net basis and,therefore, are excluded from net sales in the consolidated statements of income. Cost of Goods Sold   Cost of goods sold primarily consists of merchandise acquisition costs, including freight-in costs, shipping costs, termsdiscounts received from the vendor and vendor allowances and rebates associated directly with merchandise. Vendor allowancesinclude allowances and rebates received from vendors. The Company records an estimate of earned allowances based on purchasevolumes. These funds are determined for each fiscal year, and the majority is based on various quantitative contract terms.Amounts expected to be received from vendors relating to purchase of merchandise inventories are recognized as a reduction ofcost of goods sold as the merchandise is sold. Historical program results and current purchase volumes are reviewed whenestablishing the estimate for earned allowances. Shipping and Handling Fees and Costs All shipping and handling fees billed to customers are recorded as a component of net sales. All costs incurred related to theshipping and handling of products are recorded in cost of sales. Vendor Allowances Vendor allowances include price allowances, volume rebates, store opening costs reimbursements, marketing participationand advertising reimbursements received from vendors under the terms of specific arrangements with certain vendors. Vendorallowances related to merchandise are recognized as a reduction of the costs of merchandise as sold. Vendor reimbursements ofcosts are recorded as a reduction to expense in the period the related cost is incurred based on actual costs incurred. Any costreimbursements exceeding expenses incurred are recognized as a reduction of the cost of merchandise sold. Volume allowancesmay be estimated based on historical purchases and estimates of projected purchases. Operating Leases and Deferred Rent The Company has various operating lease commitments on its store locations. Certain leases contain rent escalation clausesthat require higher rental payments in later years. Leases may also contain rent holidays, or free rents,61 Table of Contentsduring the lease term. Rent expense is recognized on a straight-line basis over the lease term. Rent expense in excess of rentalpayments is recorded as deferred rent on the accompanying consolidated balance sheets. Tenant Allowances The Company enters into various types of lease agreements in the operation of its stores, including remodel and build-to-suit arrangements. Under any type of lease agreement, the Company may receive reimbursement from a landlord for some of thecosts related to occupancy or tenant improvements per lease provisions. These reimbursements may be referred to as tenantallowances or landlord reimbursements. Reimbursement from a landlord for occupancy or tenant improvements is treateddifferently depending on the type of arrangement. Under most of the Company’s lease agreements, tenant allowances are includedwithin deferred rent on the accompanying consolidated balance sheets. The deferred rent credit is amortized as rent expense on astraight-line basis over the term of the lease. Landlord reimbursements from these transactions are included in cash flows fromoperating activities as a change in deferred rent. In lease agreements where the Company is the deemed owner of the building during the construction period, a deemed sale-leaseback of the building occurs when construction is complete and the lease term begins. Under these lease agreements, as thetenant allowances are received, the value of the Company’s construction-in-progress or leasehold improvements is reducedaccordingly. The deemed sale-leaseback transactions are included in cash flows from investing activities. Health Insurance The Company maintains for its employees a partially self-funded health insurance plan. The Company maintains stop-lossinsurance through an insurance company with a $100 per person deductible and aggregate claims limit above a predeterminedthreshold. The Company intends to maintain this plan indefinitely. However, the plan may be terminated, modified, suspended, ordiscontinued at any time for any reason specified by the Company. The Company has established reserve amounts based upon claims history and estimates of claims that have been incurredbut not reported (“IBNR”). As of January 28, 2017 and January 30, 2016, the Company estimated the IBNR to be $1,001 and$980, respectively. Actual claims may differ from the estimate and such difference could be significant. These reserves areincluded in accrued expenses in the accompanying consolidated balance sheets. Workers Compensation Insurance Effective November 1, 2014, the Company maintains for its employees a high-deductible workers compensation plan. TheCompany maintains stop-loss insurance through an insurance company with a $150 per claim deductible and aggregate claimslimit above a predetermined threshold. The Company intends to maintain this plan indefinitely. However, the plan may beterminated, modified, suspended, or discontinued at any time for any reason specified by the Company. Prior to November 1,2014, the Company operated under a guaranteed cost insurance program. The Company has established reserve amounts based upon claims history and estimates of IBNR. As of January 28, 2017and January 30, 2016, the Company estimated the IBNR to be $650 and $527, respectively, related to the workers compensationplan. Actual claims may differ from the estimate and such difference could be significant. These reserves are included in accruedexpenses in the accompanying consolidated balance sheets. Advertising Costs for newspaper, television, radio, and other advertising are expensed in the period in which the advertising occurs. TheCompany participates in various advertising and marketing cooperative programs with its vendors, who, under these programs,reimburse the Company for certain costs incurred. Payments received under these cooperative programs are recorded as adecrease to expense in the period that the advertising occurred. For the fiscal years ended January 28, 2017, January 30, 2016 andJanuary 31, 2015, net advertising expenses totaled $7,513, $6,634, and $4,629, respectively. These amounts are included inselling, general and administrative expenses in the accompanying consolidated statements of income. 62 Table of ContentsStock-Based Compensation Compensation expense is estimated based on grant date fair value on a straight-line basis over the requisite service oroffering period. Costs associated with awards are included in compensation expense as a component of selling, general, andadministrative expenses. In March 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-09, “Improvements to Employee Share-Based Payment Accounting” (“ASU 2016-09”). This standard is intended to simplify several aspects of the accounting for share-based payment award transactions, including the income tax consequences, classification of awards as equity or liabilities, anoption to recognize gross stock compensation expense with actual forfeitures recognized as they occur, and classifications in thestatement of cash flows. ASU 2016-09 is effective for interim and annual periods beginning after December 15, 2016. Earlyadoption is permitted. Management has evaluated this statement and early adopted the provision in the fiscal quarter ended April30, 2016. The adoption of ASU 2016-09 had an effect on the presentation of the Company’s results of operations. In connectionwith the vesting of restricted stock units in the 52 weeks ended January 28, 2017, under the transition guidance the Company hasprospectively recorded $470 in income tax benefits as a reduction of income taxes payable and as a reduction in income taxexpense with no significant impact on earnings per share. In prior periods presented, the income tax benefits were recorded toadditional paid-in-capital instead of income tax expense as specified in the new standard. The Company is no longer required topresent excess tax benefits as a financing activity in the statement of cash flows and has elected to adopt this change on aprospective basis. ASU 2016-09 allows for the election to either record forfeitures as they occur or to continue estimating thelevel of forfeitures consistent with current accounting standards. The Company has elected to record forfeitures as they occurwhich change did not have a significant impact on the condensed consolidated financial statements. Income Taxes The Company recognizes a deferred income tax liability or deferred income tax asset for the future tax consequencesattributable to differences between the financial statement basis of existing assets and liabilities and their respective tax basis.Deferred income tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years inwhich those temporary differences are expected to be recovered or settled. A valuation allowance is provided against deferredincome tax assets when it is more likely than not that all or some portion of the deferred income tax assets will not be realized.During the year the Company adopted ASU 2015-17, Balance Sheet Classification of Deferred Taxes , and has elected aprospective adoption and as such prior period were not retrospectively adjusted on our financial statements. The Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not that the tax positionwill be sustained on examination by the relevant tax authorities, based on the technical merits of the position. Interest andpotential penalties are accrued related to unrecognized tax benefits in the provision for income taxes. Fair Value of Financial Instruments The carrying amounts of financial instruments except for long-term debt approximate fair value because of the generalshort-term nature of these instruments. The carrying amounts of long-term variable rate debt approximate fair value as the termsare consistent with market terms for similar debt instruments. The carrying amount of the Company’s financial instrumentsapproximates fair value as of January 28, 2017 and January 30, 2016. Earnings Per Share Basic earnings per share is calculated by dividing net income by the weighted-average shares of common stock outstanding,reduced by shares repurchased and held in treasury, during the period. Diluted earnings per share represents basic earnings pershare adjusted to include the potentially dilutive effect of outstanding share option awards, nonvested share awards and nonvestedshare unit awards. Comprehensive Income The Company has no components of income that would require classification as other comprehensive income for the fiscalyears ended January 28, 2017, January 30, 2016 or January 31, 2015.63 Table of Contents Recent Accounting Pronouncements Revenue from Contracts with Customers In May 2014, the Financial Accounting Standards Board (“FASB”) issued ASU 2014-09 “Revenue from Contracts withCustomers” (Topic 606) (“ASU 2014-09”). ASU 2014-09 is a comprehensive new revenue recognition model requiring acompany to recognize revenue to depict the transfer of goods or services to a customer at an amount reflecting the consideration itexpects to receive in exchange for those goods or services. In August 2015, the FASB issued ASU 2015-14, “Deferral of theEffective Date” (“ASU 2015-14”). ASU 2015-14 simply formalized a one year deferral of the effective date of ASU 2014-09. InMarch 2016, the FASB issued ASU 2016-08 “Principal versus Agent Considerations – Reporting Revenue Gross versus Net”,amending the principal-versus-agent implementation guidance set forth in ASU 2014-09. In April 2016, the FASB issued ASU2016-10 “Identifying Performance Obligations and Licensing”, which amends certain aspects of the guidance set forth in theFASB’s new revenue standard related to identifying performance obligations and licensing implementation. As a result of thesefour standards updates, the Company expects that it will apply the new revenue standard to annual and interim reporting periodsbeginning after December 15, 2017. In adopting these standard updates, companies may use either a full retrospective or amodified retrospective approach. Management is evaluating the provisions of these standard updates and has determined that theCompany will adopt this standard prospectively. Management has not yet determined what impact the adoption of these standardupdates will have on the Company's financial position or results of operations. Simplifying the Measurement of Inventory In July 2015, the FASB issued ASU 2015-11, “Simplifying the Measurement of Inventory” (“ASU 2015-11”). UnderASU 2015-11, inventory will be measured at the “lower of cost and net realizable value” and options that currently exist for“market value” will be eliminated. ASU 2015-11 defines net realizable value as the “estimated selling prices in the ordinarycourse of business , less reasonably predictable costs of completion, disposal, and transportation.” No other changes were made tothe current guidance on inventory measurement. ASU 2015-11 is effective for interim and annual periods beginning afterDecember 15, 2016. Early application is permitted and should be applied prospectively. Management has determined that theadoption of ASU 2015-11 will not have a material impact on the Company's financial position or results of operations. TheCompany will adopt ASU 2015-11 in the first quarter in fiscal year 2017. Lease Accounting In February 2016, the FASB issued ASU 2016-02, “Leases” (“ASU 2016-02”). The standard amends the existingaccounting standards for lease accounting, including requiring lessees to recognize most leases on their balance sheets andmaking targeted changes to lessor accounting. ASU 2016-02 will be effective beginning in the first quarter of 2019. Earlyadoption of ASU 2016-02 is permitted. The new leases standard requires a modified retrospective transition approach for allleases existing at, or entered into after, the date of initial application, with an option to use certain transition relief. Management iscurrently evaluating the impact of adopting ASU 2016-02 on the Company’s consolidated financial statements, including whetherto elect the practical expedients outlined in the new standard. The Company does expect the new standard to have a materialimpact on its consolidated financial statements once adopted. Recognition of Breakage for Certain Prepaid Stored-Value Products In March 2016, the FASB issued ASU 2016-04, “Recognition of Breakage for Certain Prepaid Stored-Value Products”(“ASU 2016-04”). ASU 2016-04 entitles a company to derecognize amounts related to expected breakage in proportion to thepattern of rights expected to be exercised by the product holder to the extent that it is probable a significant reversal of therecognized breakage amount will not subsequently occur. ASU 2016-04 is effective for reporting periods beginning afterDecember 15, 2017 and is to be applied retrospectively. Early adoption is permitted. Management believes ASU 2016-02 willhave no impact on the Company’s consolidated financial statements. Classification of Certain Cash Receipts and Cash Payments In August 2016, the FASB issued ASU 2016-15, “Classification of Certain Cash Receipts and Cash Payments” (“ASU2016-15”). The update amends the guidance in ASC 230, Statement of Cash Flows , and clarifies how entities64 Table of Contentsshould classify certain cash receipts and cash payments on the statement of cash flows with the objective of reducing the existingdiversity in practices related to eight specific cash flow issues. The amendments in this update are effective for annual periodsbeginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted. Management hasdetermined this will have no impact on the Company’s consolidated financial statements. Simplifying the Presentation of Debt Issuance Costs In April 2015, the “Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)2015-03, “Simplifying the Presentation of Debt Issuance Costs” (“ASU 2015-03”). ASU 2015-03 requires that debt issuance costsrelated to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debtliability, consistent with debt discounts. The Company adopted the provisions of ASU 2015-03 retrospectively in the fiscalquarter ended April 30, 2016. For the fiscal year ended January 30, 2016, the Company reclassified deferred financing fees of$350 from prepaid expenses to the current portion of long-term debt, net of discount and debt issuance costs. The Company alsoreclassified $1,347 of deferred financing fees from other long-term assets, net to long-term debt, net of discount, debt issuancecosts, and current portion. (3) Initial Public Offering On April 23, 2014, the Company completed its initial public offering, pursuant to which it issued and sold 8,333 sharesof common stock at a price to the public of $9.50 per share; included in this offering was the sale of 4,167 shares by affiliates ofSeidler Equity Partners III, L.P. The total net proceeds raised by the Company were $70,299 after deducting underwritingdiscounts and commissions of $5,542 and other offering expenses of $3,326. Total net proceeds were used to make anunscheduled early payment on the term loan (Note 9). In connection with the initial public offering, all of the then-outstandingshares of restricted nonvoting common stock automatically converted into shares of common stock. On May 16, 2014, the underwriters of the Company’s initial public offering of common stock partially exercised theover-allotment option granted at the time of the initial public offering to purchase an additional 1,400 shares of common stock atthe public offering price of $9.50 per share, less underwriting discounts and commissions, which consists of 350 shares sold bythe Company and 1,050 shares sold by affiliates of Seidler Equity Partners III, L.P. The Company received, after deductingunderwriting discounts and commissions and estimated offering expenses, approximately $3,100 of net proceeds. Substantially allof the net proceeds were used for the repayment of an additional amount outstanding under the Company’s term loans. (4) Secondary Offering On April 18, 2016, 6,000 shares of common stock were sold in a secondary offering by Seidler Equity Partners III, L.P.On April 22, 2016, the underwriters of the secondary offering fully exercised the option granted at the time of the secondaryoffering to purchase an additional 900 shares of common stock at the secondary offering price of $11.25 per share, lessunderwriting discounts and commissions, which consisted solely of shares sold by affiliates of Seidler Equity Partners III, L.P.The Company received no proceeds from the secondary offering or full exercise of the option. Total expenses incurred related tothe secondary offering and the exercise of the option were $143 and are recorded in selling, general, and administrative expensesin the accompanying Statements of Income. On September 30, 2015, 6,250 shares of common stock were sold in a secondary offering by certain existingshareholders, including affiliates of Seidler Equity Partners III, L.P. On October 26, 2015, the underwriters of the secondaryoffering partially exercised the option granted at the time of the secondary offering to purchase an additional 649 shares ofcommon stock at the secondary offering price of $12.25 per share, less underwriting discounts and commissions, which consistssolely of shares sold by affiliates of Seidler Equity Partners III, L.P. The Company received no proceeds from the secondaryoffering or partial exercise of the option. Total expenses incurred related to the secondary offering and the exercise of the optionwere $727 and are recorded in selling, general, and administrative expenses in the accompanying statements of income. 65 Table of Contents(5) Property and Equipment Property and equipment as of January 28, 2017 and January 30, 2016 are as follows: January 28, January 30, 2017 2016 Furniture, fixtures, and equipment $52,719 $41,833 Leasehold improvements 61,986 45,179 Construction in progress 10,746 5,593 Total property and equipment, gross 125,451 92,605 Less accumulated depreciation and amortization (42,342) (30,173) Total property and equipment, net $83,109 $62,432 Depreciation expense was $12,169, $9,763, and $7,344 for the fiscal years ended January 28, 2017, January 30, 2016 andJanuary 31, 2015, respectively. (6) Definite Lived Intangible Asset The following table summarizes the definite lived intangible assets: January 28, 2017 Amortizationperiod Gross carryingamount Accumulatedamortization Net carryingamount Amortizing intangible assets: Non-compete agreement 5 years $9,063 (6,945) 2,118 Total $9,063 (6,945) 2,118 January 30, 2016 Amortizationperiod Gross carryingamount Accumulatedamortization Net carryingamount Amortizing intangible assets: Non-compete agreement 5 years $9,063 (5,140) 3,923 Total $9,063 (5,140) 3,923 Amortization expense for definite lived intangible asset was $1,805 for the fiscal year ended January 28, 2017.Amortization expense for the next two years is $1,805 in fiscal year 2017, and $311 in fiscal year 2018. (7) Accrued Expenses and Other Liabilities Accrued expenses and other liabilities consist of the following at January 28, 2017 and January 30, 2016: January 28, January 30, 2017 2016 Book overdraft $5,355 $7,182 Unearned revenue 18,019 14,787 Accrued payroll and related expenses 9,430 8,573 Sales and use tax payable 4,802 2,998 Accrued construction costs 3,138 1,094 Other 8,842 7,846 $49,586 $42,480 (8) Revolving Line of Credit The Company has a senior secured revolving credit facility (“Revolving Line of Credit”) with Wells Fargo Bank, NationalAssociation (“Wells Fargo”) that provides for borrowings in the aggregate amount of up to $135,000, subject to a borrowing basecalculation. All borrowings under the revolving credit facility are limited to a borrowing base equal to66 Table of Contentsroughly (1) the lesser of (a) 90% of the net orderly liquidation value of our eligible inventory and (b) 75% of the lower of cost ormarket value of our eligible inventory, plus (2) 90% of the eligible accounts receivable, less certain reserves against outstandinggift cards, layaway deposits and amounts outstanding under commercial letters of credit, each term as defined in the creditagreement. Each of the subsidiaries of the Company is a borrower under the revolving credit facility, and all obligations under therevolving credit facility are guaranteed by the Company. All of the Company’s obligations under the revolving credit facility aresecured by a lien on substantially all of the Company’s tangible and intangible assets and the tangible and intangible assets of allof the Company’s subsidiaries, including a pledge of all capital stock of each of the Company’s subsidiaries. The lien securing theobligations under the revolving credit facility is a first priority lien as to certain liquid assets, including cash, accounts receivable,deposit accounts and inventory. In addition, the credit agreement contains provisions that enable Wells Fargo to require theCompany to maintain a lock-box for the collection of all receipts. As of January 28, 2017 and January 30, 2016, the Company had $67,110 and $31,202, respectively, in outstandingrevolving loans under the Revolving Line of Credit. Amounts outstanding are offset on the consolidated balance sheets byamounts in depository accounts under lock-box arrangements, which were $6,138 and $5,939 as of January 28, 2017 and January30, 2016, respectively. As of January 28, 2017, the Company had stand-by commercial letters of credit of $1,600 under the termsof the Revolving Line of Credit. Borrowings under the revolving credit facility bear interest based on either, at the Company’s option, the base rate orLIBOR, in each case plus an applicable margin. The base rate is the higher of (1) Wells Fargo’s prime rate, (2) the federal fundsrate (as defined in the credit agreement) plus 0.50% and (3) the one-month LIBOR (as defined in the credit agreement) plus1.00%. The applicable margin for loans under the revolving credit facility, which varies based on the average daily availability,ranges from 0.50% to 1.0% per year for base rate loans and from 1.50% to 2.00% per year for LIBOR loans. The weightedaverage interest rate on the amount outstanding under the revolving credit facility as of January 28, 2017 was 2.63%. The Company may be required to make mandatory prepayments under the revolving credit facility in the event of adisposition of certain property or assets, in the event of receipt of certain insurance or condemnation proceeds, upon the issuanceof certain debt or equity securities, upon the incurrence of certain indebtedness for borrowed money or upon the receipt of certainpayments not received in the ordinary course of business. The Revolving Line of Credit contains customary affirmative and negative covenants, including covenants that limit theCompany’s ability to incur, create or assume certain indebtedness, to create, incur or assume certain liens, to make certaininvestments, to make sales, transfers and dispositions of certain property and to undergo certain fundamental changes, includingcertain mergers, liquidations and consolidations. The Revolving Line of Credit also requires us to maintain a minimumavailability at all times of not less than 10% of the gross borrowing base, and in any event, not less than $5,000. The revolvingcredit facility also contains customary events of default. The Revolving Line of Credit matures on December 3, 2019. (9) Long-Term Debt Long-term debt consisted of the following as of January 28, 2017 and January 30, 2016: January 28, January 30, 2017 2016 Term loan $136,727 $158,000 Less discount (877) (1,288) Less debt issuance costs (1,146) (1,696) 134,704 155,016 Less current portion, net of discount and debt issuance costs (983) (8,683) Long-term portion $133,721 $146,333 Term Loan The Company has a $160,000 senior secured term loan facility (“Term Loan”) with a financial institution. The Term Loanwas issued at a price of 99% of the aggregate principal amount and has a maturity date of December 3, 2020. 67 Table of ContentsAll of Sportsman’s Warehouse, Inc.’s obligations under the Term Loan are guaranteed by Holdings, MinnesotaMerchandising Corporation, a wholly owned subsidiary of Holdings, and each of Sportsman’s Warehouse, Inc.’s subsidiaries. The Term Loan is secured by a lien on substantially all of the Company’s tangible and intangible assets. The lien securingthe obligations under the Term Loan is a first priority lien as to certain non-liquid assets, including equipment, intellectualproperty, proceeds of assets sales and other personal property. The Term Loan requires quarterly principal payments of $400 payable on the last business day of each fiscal quarter up toand including October 30, 2020. A final installment payment consisting of the remaining unpaid balance is due on December 3,2020. Sportsman’s Warehouse, Inc. may be required to make mandatory prepayments on the Term Loan in the event of, amongother things, certain asset sales, the receipt of payment in respect of certain insurance claims or the issuance or incurrence ofcertain indebtedness. Sportsman’s Warehouse, Inc. may also be required to make mandatory prepayments based on any excesscash flows as defined in the agreement for the Term Loan. Due to the Company not having excess cash flow as of January 28,2017, no mandatory prepayment will be required to be made during the fiscal year 2017. The Term Loan bears interest at a rate per annum equal to the one-, two-, three-, or six-month LIBOR (or, the nine- or 12-month LIBOR), as defined in the term loan agreement, at the Company’s election, which cannot be less than 1.25%, plus anapplicable margin of 6.00%. The Term Loan contains customary affirmative and negative covenants, including covenants that limit the Company’sability to incur, create or assume certain indebtedness, to incur or assume certain liens, to purchase, hold or acquire certaininvestments, to declare or make certain dividends and distributions and to engage in certain mergers, consolidations and assetsales. The Term Loan also requires the Company to comply with specified financial covenants, including a minimum interestcoverage ratio on a trailing twelve month basis and a maximum total net leverage ratio. The Term Loan also contains customaryevents of default. As of January 28, 2017, the Term Loan had $134,704 outstanding, net of an unamortized discount of $877 and debtissuance costs of $1,146. During fiscal year 2016, Company recognized $411 of non-cash interest expense with respect to theamortization of this discount. During fiscal year 2015, the Company recognized $266 of non-cash interest expense with respect tothe amortization of the discount on the term loan. Restricted Net Assets The provisions of the Term Loan and the Revolving Line of Credit restrict all of the net assets of the Company’sconsolidated subsidiaries, which constitute all of the net assets on the Company’s consolidated balance sheet as of January 28,2017, from being used to pay any dividends without prior written consent from the financial institutions party to the Company’sTerm Loan and Revolving Line of Credit. (10) Sale Leaseback Transactions During the fiscal year ended January 28, 2017, the Company completed a deemed sale-leaseback of the land andbuildings for 4 store locations. In each of the related lease agreements for these store locations, the Company was required to payall construction costs directly with the right of reimbursement up to a pre-determined tenant allowance. Also, the Companyindemnified the landlords with respect to costs arising from third-party damage arising from the acts or omission of employees,sub-lessees, assignees, agent, and/or contractors arising during construction. As a result, and, based on appropriate accountingguidance, the Company was deemed the owner of the land and building during the construction period. The deemed sale occurredwhen the construction of the assets were complete and the lease terms began. At the time of sale, any assets, up to the value ofeach pre-determined tenant allowance, were written off the Company’s books, and any remaining amounts were consideredleasehold improvements. The total value of tenant allowances received under these transactions during fiscal year 2016 was$11,923. 68 $$$$$$$$$Table of Contents(11) Common Stock Holders of common stock are entitled to one vote per share, and to receive dividends and, upon liquidation or dissolution,are entitled to receive all assets available for distribution to stockholders on a proportional basis with the restricted nonvotingcommon stockholders. The holders have no preemptive or other subscription rights, and there are no redemption or sinking fundprovisions with respect to such shares. (12) Earnings Per Share Basic earnings per share is calculated by dividing net income by the weighted-average number of shares of common stockoutstanding, reduced by the number of shares repurchased and held in treasury, during the period. Diluted earnings per sharerepresents basic earnings per share adjusted to include the potentially dilutive effect of outstanding share option awards,nonvested share awards and nonvested share unit awards. The following table sets forth the computation of basic and diluted earnings per common share: Fiscal Year Ended January 28, January 30, January 31, 2017 2016 2015 Net income 29,669 27,771 13,784 Weighted-average shares of common stock outstanding: - - - Basic 42,187 41,966 39,961 Dilutive effect of common stock equivalents 298 368 180 Diluted 42,485 42,334 40,141 Basic earnings per share 0.70 0.66 0.34 Diluted earnings per share 0.70 0.66 0.34 (13) Stock-Based Compensation Stock-Based Compensation T he Company recognized total stock-based compensation expense, including expense relating to theemployee stock purchase plan, of $3,186, $2,257, and $3,293, during fiscal years 2016, 2015, and 2014,respectively. Compensation expense related to the Company's stock-based payment awards is recognized inselling, general, and administrative expenses in the consolidated statements of income. Employee Stock Plans As of January 28, 2017, the number of shares available for awards under the 2013 Performance Incentive Plan (the“2013 Plan”) was 1,577,440. As of January 28, 2017, there were 622,339 awards outstanding under the 2013 Plan. All sharesgranted during the current year were newly issued shares. All subsequent awards were, and all future awards are expected to be,granted under the 2013 Plan. Nonvested Restricted Stock AwardsDuring the fiscal year 2016, the Company issued 162 nonvested restricted stock awards to employees at a weightedaverage grant date fair value of $11.25 per share. The nonvested stock awards issued to employees vest over three years, with onethird vesting on each grant date anniversary. 69 Table of ContentsThe following table sets forth the rollforward of outstanding nonvested stock awards (per share amounts are not inthousands):  Weighted  average  grant-date Shares    fair value Balance at January 30, 2016 — $ — Grants 162  11.25 Forfeitures —   — Vested —   — Balance at January 28, 2017 162 $11.25 Nonvested Performance-Based Stock AwardsDuring fiscal year 2016, the Company issued 159 nonvested performance-based stock awards to employees at aweighted average grant date fair value of $11.25 per share. The nonvested performance-based stock awards issued to employeesvest over three years with one third vesting on each grant date anniversary. The number of shares issued is contingent onmanagement achieving a fiscal year 2016 performance target for same store sales and return on invested capital for new stores.Based on the performance conditions met for 2016, the finalized granted awards was 73 as presented in the table below. The following table sets forth the rollforward of outstanding nonvested performance-based stock awards (per share amounts arenot in thousands):  Weighted  average  grant-date     Shares    fair value Balance at January 30, 2016 — $ — Grants 73  11.25 Forfeitures —  — Vested —  — Balance at January 28, 2017 73 $11.25 Nonvested Stock Unit Awards During fiscal year 2016, the Company issued 29 nonvested stock units to independent members of the Board ofDirectors at a weighted average grant date fair value of $9.81 per share. These nonvested stock units vest over 12 months withone twelfth vesting each month from the grant date. During fiscal year 2015, the Company issued 28 nonvested stock units to employees or independent members of theBoard of Directors at a weighted average grant date fair value of $11.28 per share. The nonvested stock units issued to employeesvest evenly over four years on the grant date anniversary. The nonvested stock units issued to independent members of the Boardof Directors vest evenly over 12 months on the grant date anniversary. The Company had no net share settlements in fiscal year 2016 or 2015. 70 Table of ContentsThe following table sets forth the rollforward of outstanding restricted stock units:  Weighted  average  grant-date Shares    fair value Balance at January 30, 2016 599 $7.15 Grants 29 9.81 Forfeitures 6 7.05 Vested 321 7.37 Balance at January 28, 2017 301 $7.17     Weighted  average  grant-date Shares    fair value Balance at January 31, 2015 888 $7.06 Grants 28 11.28 Forfeitures 8 7.06 Vested 309 7.27 Balance at January 30, 2016 599 $7.15 As of January 28, 2017 and January 30, 2016, respectively, the Company had $2,158 and $4,279 remaining inunrecognized compensation costs related to nonvested restricted stock units. The weighted average grant date fair value of theoutstanding shares were $7.17 and $7.15, respectively. The expected net tax benefit related to the unrecognized compensationcosts were $833 and $1,647, respectively. (14) Employee Stock Purchase Plan In June 2015, the Company’s stockholders approved the Sportsman’s Warehouse Holdings, Inc. Employee Stock PurchasePlan (“ESPP”), which provides for the granting of up to 800 shares of the Company’s common stock to eligible employees. TheESPP period is semi-annual and allows participants to purchase the Company’s stock at 85% of the lower of (i) the market valueper share of the common stock on the first day of the offering period or (ii) the market value per share of the common stock on thepurchase date. The first plan period began on January 1, 2016. Stock-based compensation expense related to the ESPP in fiscalyear 2016 was $165 and 2015 was $15. The Company uses the Black-Scholes model to estimate the fair value of shares to be issued as of the grant date using thefollowing weighted average assumptions:   Fiscal Year Ended Fiscal Year Ended  January 28, 2017 January 30, 2016Risk-free interest rate 0.66% 0.49%Expected life (in years) 0.5 0.5Expected volatility 25.6% 36.1%Dividend yield — — 71 Table of Contents(15) Income Taxes For the fiscal years ended January 28, 2017, January 30, 2016 and January 31, 2015, the income tax provision consisted ofthe following: January 28, January 30, January 31, 2017 2016 2015 Current: Federal $14,919 $12,341 $7,482 State 2,530 1,982 1,192 Total current 17,449 14,323 8,674 Deferred: Federal 164 2,746 (103) State 3 316 57 Total deferred 167 3,062 (46) Total income tax provision $17,616 $17,385 $8,628 The provision for income taxes differs from the amounts computed by applying the federal statutory rate as follows for thefollowing periods: January 28, January 30, January 31, 2017 2016 2015 Federal statutory rate 35% 35% 35%State tax, net of federal benefit 3.6 3.5 3.5 Permanent items (0.4) 0.2 0.2 Other items (0.9) (0.2) (0.2) Effective income tax rate 37.3% 38.5% 38.5% The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred taxliabilities at January 28, 2017 and January 30, 2016, respectively, are presented below: January 28, January 30, 2017 2016Deferred tax assets: Accrued liabilities $517 $468Deferred rent 14,833 12,377Intangible asset 1,756 1,293Inventories 2,757 2,335Sales return reserve 372 308Capital Loss Carryforward 63 —Stock-based compensation 939 634Total gross deferred tax assets $21,237 $17,415Deferred tax liabilities: Depreciation $(15,468) $(11,407)Prepaid expenses (672) (744)Total gross deferred tax liabilities $(16,140) $(12,151)Net deferred tax asset $5,097 $5,264 As of January 28, 2017 the Company classified all of its tax assets as long term in accordance with adoption of ASU 2015-17. Deferred tax assets have resulted primarily from the Company’s future deductible temporary differences. In assessing therealizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of thedeferred tax asset will not be realized. The Company’s ability to realize its deferred tax assets depends upon the generation ofsufficient future taxable income to allow for the utilization of its deductible temporary differences. 72 Table of ContentsManagement evaluates the realizability of the deferred tax assets and the need for additional valuation allowances quarterly.At January 28, 2017, based on current facts and circumstances, management believes that it is more likely than not that theCompany will realize benefit for its gross deferred tax assets. As of January 28, 2017, the Company had no unrecognized tax benefits. The Company does not anticipate thatunrecognized tax benefits will significantly increase or decrease within 12 months of the reporting date. The Company iscurrently under audit on its 2015 and 2014 Federal returns. Federal and state tax years that remain subject to examination areperiods ended January 28, 2012 through January 30, 2016. The Company’s policy is to accrue interest expense, and penalties as appropriate, on estimated unrecognized tax benefits asa charge to interest expense in the consolidated statements of income. During fiscal year 2014, the Company accrued interest andpenalties of $14. No interest or penalties were accrued for fiscal year 2016 or fiscal year 2015. (16) Commitments and Contingencies Operating Leases The Company leases its retail store, office space, and warehouse locations under non-cancelable operating leases. Certain ofthese leases include tenant allowances that are amortized over the life of the lease. In 2016, 2015 and 2014, the Company receivedtenant allowances of $16,718, $5,652, and $5,129, respectively. The Company expects to receive $20,306 in tenant allowancesunder leases during fiscal year 2017. Certain leases require the Company to pay contingent rental amounts based on a percentageof sales, in addition to real estate taxes, insurance, maintenance and other operating expenses associated with the leased premises.These agreements expire at various dates through July 2030 and generally contain three, five-year renewal options. Rent expenseunder these leases totaled $37,132, $33,209, and $30,520 for the fiscal years ended January 28, 2017, January 30, 2016 andJanuary 31, 2015, respectively. Future minimum lease payments for non-cancelable operating leases by fiscal year, as of January 28, 2017 are as follows: Fiscal Year:    2017    42,585 2018 44,387 2019 42,118 2020 41,085 2021 37,327 Thereafter 123,067  $330,569  Legal Matters The Company is involved in various legal matters generally incidental to its business. After discussion with legal counsel,the Company believes that the disposition of these matters will not have a material impact on its consolidated financial condition,liquidity, or results of operations. On March 11, 2013, we acquired certain assets and assumed certain liabilities of Wholesale Sports Outdoor Outfitters, orWholesale Sports, relating to their retail business of hunting, fishing and camping goods and supplies. Concurrently with our assetpurchase, Alamo Group, LLC, an unrelated third party, purchased all of the stock of Wholesale Sports. On March 22, 2013, thelandlord of a store in Spokane, Washington that was formerly operated by Wholesale Sports, and which was one of the five storeswhose leases we did not assume in our purchase of assets from Wholesale Sports, filed a complaint against the seller ofWholesale Sports, Wholesale Sports and Alamo Group in the Superior Court for the State of Washington in the County ofSpokane captioned as North Town Mall v. United Farmers of Alberta Co-Operative Limited, et al., Case No. 13-2-01201-9. Thecomplaint, as amended, alleged claims for breach of lease, violation of Washington’s Fraudulent Transfer Act, tortiousinterference with contractual relations, piercing the corporate veil, assumption of the Spokane store lease and fraud and/ornegligent representation. We were named as a co-defendant in the amended complaint with respect to the fraudulent conveyance,tortious interference, and assumption of the lease claims. The complaint requested that the court order “avoidance” of an allegedtransfer of assets from73 Table of ContentsWholesale Sports to us and/or Alamo Group, damages based on future rent to be paid under the lease in the approximate amountof $4.5 million, attachment of assets, attorneys’ fees and costs as provided for in contract, and such other relief that the courtdeems just and proper. In addition, the amended complaint alleged that we and Alamo Group were liable for expenses that thelandlord would incur as a result of default under the lease, including expenses related to returning the store premises to thecondition called for in the lease and the cost to locate a new tenant. This case was settled in June 2015, with a full release by andbetween all parties On March 12, 2014, the Company was added as a defendant to a pending consolidated action filed in the United StatesDistrict Court, Western District of Washington, captioned as Lacey Market Place Associates II, LLC, et al. v. United Farmers ofAlberta Co-Operative Limited, et al., Case No. 2:13-cv-00383-JLR against United Farmers of Alberta Co-Operative Limited, theseller of Wholesale Sports, Wholesale Sports, Alamo Group and Donald F. Gaube and spouse. The amended complaint was filedby the landlords of two stores the Company did not assume its purchase of assets from Wholesale Sports. Such stores wereformerly operated by Wholesale Sports in Skagit and Thurston Counties in Washington. The amended complaint alleged breachof lease, breach of collateral assignment, misrepresentation, intentional interference with contract, piercing the corporate veil andviolation of Washington’s Fraudulent Transfer Act. The Company was named as a co-defendant with respect to the intentionalinterference with contract and fraudulent conveyance claims. The amended complaint sought against us and all defendantsunspecified money damages, declaratory relief and attorneys’ fees and costs. On January 28, 2015, the court in the LaceyMarketplace action granted in part and denied in part the Company’s motion for summary judgment and dismissed the intentionalinterference claim against the Company, but declined to dismiss the fraudulent transfer claim. Trial in the Lacey Marketplace action began March 2, 2015 and concluded March 6, 2015. On March 9, 2015, the jury inthe trial awarded $11.9 million against the defendants to the action, including the Company. The Company reviewed the decisionand accrued $4.0 million in the Company’s results for the fiscal year ended January 31, 2015 related to this matter. The Companystrongly disagreed with the jury’s verdict and filed post-trial motions seeking to have the verdict set aside. On July 30, 2015, thecourt granted the Company’s motion for judgment as a matter of law. Both United Farmers of Alberta Co-Operative Limited, aco-defendant, and the plaintiff have appealed the court’s summary judgment ruling against the tortious interference claim, and theJuly 30, 2015 ruling to the appellate court and the appeal is currently in process. Based on the court’s most recent judgment in theCompany’s favor, the Company determined that the likelihood of loss in this case is not probable, and, as such, it reversed theprevious accrual of $4.0 million in the Company’s results for the fiscal year ended January 30, 2016. The accrual and subsequentreversal of the $4.0 million is recorded in selling, general, and administrative expenses in the accompanying statements ofincome. (17) Related-Party Transactions On August 14, 2009, the Company entered into a reimbursement agreement with Seidler Equity Partners III, L.P. Under theterms of this agreement, the Company agreed to reimburse Seidler Equity Partners III, L.P. for various out-of-pocket costs andexpenses related to the Company up to a maximum of $150 annually. During the fiscal years ended January 28, 2017, January 30,2016, and January 31, 2015, the Company made payments of $2, $12, and $35, respectively, under this agreement. At January28, 2017 and January 30, 2016, there were no amounts payable under the terms of this agreement. (18) Retirement Plan The Company sponsors a profit sharing plan (the “Plan”) for which Company contributions are based upon wages paid. Asapproved by the Board of Directors, the Company makes discretionary contributions to the Plan at rates determined bymanagement. The Company made contributions of $351, $282, and $276 for the fiscal years ended January 28, 2017, January 30,2016, and January 31, 2015, respectively. 74 Table of ContentsITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIALDISCLOSURE None. ITEM 9A. CONTROLS AND PROCEDURES Disclosure Controls and Procedures As of the end of the period covered by this report, management, including our chief executive officer and chief financialofficer, evaluated the effectiveness of our disclosure controls and procedures pursuant to Rules 13a-15(e) and 15d-15(e) under theSecurities Exchange Act of 1934, as amended (the “Exchange Act”). Based upon the evaluation, our chief executive officer andchief financial officer concluded that our disclosure controls and procedures were effective as of January 28, 2017 to ensure thatinformation required to be disclosed in the reports we file or submit under the Exchange Act of 1934 is recorded, processed,summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and proceduresinclude, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in thereports we file or submit under the Exchange Act is accumulated and communicated to our management, including our chiefexecutive officer and our chief financial officer, as appropriate to allow timely decisions regarding required disclosure. Management’s Report on Internal Control Over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting asdefined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act for us. Internal control over financial reporting is a process toprovide reasonable assurance regarding the reliability of our financial reporting for external purposes in accordance withaccounting principles generally accepted in the United States of America. With the participation of our Chief Executive Officer and our Chief Financial Officer, management evaluated theeffectiveness of our internal control over financial reporting as of January 28, 2017, based on the criteria established in InternalControl – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.Based on this evaluation, management concluded that our internal control over financial reporting was effective as of January 28,2017. Exemption from Attestation Report of Independent Registered Public Accounting Firm This 10-K does not include an attestation report from our registered public accounting firm regarding internal control overfinancial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to rulesof the SEC that permit emerging growth companies, which we are, to provide only management’s report in this 10-K. Changes in Internal Control Over Financial Reporting There were no changes in our internal control over financial reporting during the 13 weeks ended January 28, 2017 thathave materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. ITEM 9B. OTHER INFORMATION None.75 Table of ContentsPART III ITEM 10. DIRECTORS, EXECUTIVE OFFICER S AND CORPORATE GOVERNANCE The Company has adopted a Code of Conduct and Ethics applicable to our employees, directors, and officers. This Code ofConduct and Ethics is applicable to our principal executive officer, principal financial officer, principal accounting officer andcontroller, or persons performing similar functions. The code is available on the Company’s website atinvestors.sportsmanswarehouse.com. To the extent required by rules adopted by the SEC and NASDAQ, we intend to promptlydisclose future amendments to certain provisions of the code, or waivers of such provisions granted to executive officers anddirectors on our website at investors.sportsmanswarehouse.com. The remaining information required by this Item 10 will be included in our Proxy Statement and is incorporated herein byreference. ITEM 11. EXECUTIVE COMPENSATION The information required by this Item 11 will be included in our Proxy Statement and is incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT RELATEDSTOCKHOLDER MATTERS The information required by this Item 12 will be included in our Proxy Statement and is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTION S, AND DIRECTOR INDEPENDENCE The information required by this Item 13 will be included in our Proxy Statement and is incorporated herein by reference. ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES The information required by this Item 14 will be included in our Proxy Statement and is incorporated herein by reference. 76 Table of ContentsPART I V ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES (a)The following documents are filed as part of this report: 1.Financial Statements: ·Report of Independent Registered Public Accounting Firm·Consolidated Balance Sheets – January 28, 2017 and January 30, 2016·Consolidated Statements of Income – Years ended January 28, 2017, January 30, 2016, and January 31, 2015·Consolidated Statements of Stockholders’ Equity (Deficit) – Years ended January 28, 2017, January 30, 2016and January 31, 2015·Consolidated Statements of Cash Flows – Years ended January 28, 2017, January 30, 2016 and January 31,2015·Notes to Consolidated Financial Statements 2.Exhibits: See Item 15(b) below. (b)Exhibits Exhibit Number Description 3.1 Amended and Restated Certificate of Incorporation of Sportsman’s Warehouse Holdings, Inc. (incorporated byreference to Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q filed on June 11, 2014). 3.2 Amended and Restated Bylaws of Sportsman’s Warehouse Holdings, Inc. (incorporated by reference to Exhibit3.2 to the Company’s Quarterly Report on Form 10-Q filed on June 11, 2014). 4.1 Form of Specimen Common Stock of Sportsman’s Warehouse Holdings, Inc. (incorporated by reference toExhibit 4.1 to Amendment No. 1 to the Company’s Registration Statement on Form S-1 (Registration No.333.1944421) filed on March 24, 2014). 4.2 Registration Rights Agreement, dated April 15, 2014, among Sportsman’s Warehouse Holdings, Inc., SEP SWHHoldings, L.P. and New SEP SWH Holdings, L.P. (incorporated by reference to Exhibit 4.2 to the Company'sRegistration Statement on Form S-1 (Registration No. 333-1944421) filed on March 7, 2014). 10.3.1† Second Amendment to Credit Agreement (amended and restated Credit Agreement to reflect first amendment),dated as of November 13, 2012, among Sportsman’s Warehouse, Inc., as Lead Borrower, the other Borrowersparty thereto, Sportsman’s Warehouse Holdings, Inc., as a Guarantor, the Lenders party thereto, and Wells FargoBank, National Association, as Administrative Agent, Collateral Agent, and Swing Line Lender (incorporated byreference to Exhibit 10.3.2 to the Company’s Registration Statement on Form S-1 (Registration No. 333-1944421)filed on March 7, 2014). 10.3.2† Third Amendment to Credit Agreement, dated as of August 20, 2013, among Sportsman’s Warehouse, Inc., asLead Borrower, the other Borrowers party thereto, Sportsman’s Warehouse Holdings, Inc., as a Guarantor, theLenders party thereto, and Wells Fargo Bank, National Association, as Administrative Agent, Collateral Agent,and Swing Line Lender (incorporated by reference to Exhibit 10.3.4 to the Company’s Registration Statement onForm S-1 (Registration No. 333-1944421) filed on March 7, 2014). 10.3.3 Side Letter, dated as of July 8, 2013, from Wells Fargo Bank, National Association to Sportsman’s Warehouse,Inc. (incorporated by reference to Exhibit 10.3.3 to the Company’s Registration Statement on Form S-1(Registration No. 333-1944421) filed on March 7, 2014). 77 Table of Contents Exhibit Number Description 10.3.4 Side Letter, dated as of October 21, 2013, from Wells Fargo Bank, National Association to Sportsman’sWarehouse, Inc. (incorporated by reference to Exhibit 10.3.5 to the Company’s Registration Statement on Form S-1 (Registration No. 333-1944421) filed on March 7, 2014). 10.3.5 Fourth Amendment to Credit Agreement, dated as of March 20, 2014, among Sportsman’s Warehouse, Inc., asLead Borrower, the other Borrowers party thereto, Sportsman’s Warehouse Holdings, Inc., as a Guarantor, theLenders party thereto, and Wells Fargo Bank, National Association, as Administrative Agent, Collateral Agent,and Swing Line Lender (incorporated by reference to Exhibit 10.3.6 to Amendment No. 1 to the Company’sRegistration Statement on Form S-1 (Registration No. 333-1944421) filed on March 24, 2014). 10.3.6 Fifth Amendment to Credit Agreement and Third Amendment to Security Agreement, effective as of December 3,2014, by and among Wells Fargo Retail Finance, LLC, a global investment company, as Lender, and Sportsman’sWarehouse, Inc., as Borrower (incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report onForm 10-Q filed on December 5, 2014). 10.4 Guaranty, dated as of May 28, 2010, by Sportsman’s Warehouse Holdings, Inc., as Guarantor, in favor of WellsFargo Retail Finance, LLC, as Administrative Agent and Collateral Agent, and the Credit Parties (incorporated byreference to Exhibit 10.4 to the Company’s Registration Statement on Form S-1 (Registration No. 333-1944421)filed on March 7, 2014). 10.5 Security Agreement, dated as of May 28, 2010, by Sportsman’s Warehouse, Inc., Minnesota Merchandising Corp.,Sportsman’s Warehouse Southwest, Inc. and Pacific Flyway, LLC, as Borrowers, and Sportsman’s WarehouseHoldings, Inc., as Guarantor, in favor of Wells Fargo Retail Finance, LLC, as Collateral Agent (incorporated byreference to Exhibit 10.5 to the Company’s Registration Statement on Form S-1 (Registration No. 333-1944421)filed on March 7, 2014). 10.6 Form of Agreement between holders of restricted nonvoting common stock and Sportsman’s WarehouseHoldings, Inc. (incorporated by reference to Exhibit 10.6 to the Company’s Registration Statement on Form S-1(Registration No. 333-1944421) filed on March 7, 2014). 10.7* Sportsman’s Warehouse Holdings, Inc. 2013 Performance Incentive Plan. (incorporated by reference to Exhibit10.7 to the Company’s Registration Statement on Form S-1 (Registration No. 333-1944421) filed on March 7,2014). 10.8* Form of Restricted Stock Unit Award Agreement (incorporated by reference to Exhibit 10.8 to the Company’sRegistration Statement on Form S-1 (Registration No. 333-1944421) filed on March 7, 2014). 10.9* Form of Indemnification Agreement for Directors and Executive Officers (incorporated by reference to Exhibit10.9 to the Company’s Registration Statement on Form S-1 (Registration No. 333-1944421) filed on March 7,2014). 10.10* Employment Agreement, dated December 10, 2013, between Sportsman’s Warehouse Holdings, Inc. and John V.Schaefer (incorporated by reference to Exhibit 10.10 to the Company’s Registration Statement on Form S-1(Registration No. 333-1944421) filed on March 7, 2014). 10.11* Employment Agreement, dated January 21, 2014, between Sportsman’s Warehouse Holdings, Inc. and Kevan P.Talbot (incorporated by reference to Exhibit 10.11 to the Company’s Registration Statement on Form S-1(Registration No. 333-1944421) filed on March 7, 2014). 10.12† Letter Agreement, dated December 6, 2016, between Sporstman’s Warehouse Holdings, Inc. and Kevan P. Talbot(incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K (Registration No. 333-1944421) filed on December 7, 2016. 78 †Table of Contents Exhibit Number Description 10.13† Term Loan Agreement, effective as of December 3, 2014, by and among Cortland Capital Market Services LLC,a global investment company, as Lender, and Sportsman’s Warehouse, Inc., as Borrower (incorporated byreference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed on December 5, 2014). 10.14† Guarantee and Collateral Agreement, effective as of December 3, 2014, by and among Cortland Capital MarketServices LLC, a global investment company, as Lender, and Sportsman’s Warehouse, Inc., as Borrower(incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q filed on December5, 2014). 10.15 Sportsman's Warehouse Holdings, Inc. Employee Stock Purchase Plan (incorporated by reference to Exhibit 10.1to the Company’s Quarterly Report on Form 10-Q filed on August 28, 2015). 10.16 Sixth Amendment to Credit Agreement, effective as of August 26, 2015, by and among Wells Fargo Bank,National Association (as successor by merger to Wells Fargo Retail Finance, LLC), as Lender, and Sportsman’sWarehouse, Inc., as Borrower (incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report onForm 10-Q filed on August 28, 2015). 10.17* Employment Agreement, March 22, 2017, between Sportsman’s Warehouse Holdings, Inc. and Jon Barker(incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on March 23,2017). 21.1** Subsidiaries of Sportsman’s Warehouse Holdings, Inc. 23.1** Consent of KPMG LLP. 23.2** Consent of Buxton Company. 31.1** Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 31.2** Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 32.1*** Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. 1350, as created bySection 906 of the Sarbanes-Oxley Act of 2002. 101.INS** XBRL Instance Document. 101.SCH** XBRL Taxonomy Extension Schema Document. 101.CAL** XBRL Taxonomy Extension Calculation Linkbase Document. 101.DEF** XBRL Taxonomy Extension Definition Linkbase Document. 101.LAB** XBRL Taxonomy Extension Label Linkbase Document. 101.PRE** XBRL Taxonomy Extension Presentation Linkbase Document. *Management contract or compensatory plan or arrangement**Filed herewith***Furnished herewith†Indicates that certain information contained herein has been omitted and confidentially submitted separately with theSecurities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions. 79 Table of ContentsITEM 16. Form 10-K Summary Not Applicable 80 Table of ContentsSIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant hasduly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized . SPORTSMAN’S WAREHOUSE HOLDINGS, INC. Date: March 24, 2017By:/s/ John V. Schaefer John V. Schaefer President and Chief Executive Officer (Principal Executive Officer) Date: March 24, 2017By:/s/ Kevan P. Talbot Kevan P. Talbot Chief Financial Officer and Secretary (Principal Financial and Accounting Officer) Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following personson behalf of the registrant and in the capacities and on the dates indicated: Signature Title Date /s/ John V. Schaefer President, Chief Executive March 24, 2017John V. Schaefer Officer and Director (Principal Executive Officer) /s/ Kevan P. Talbot Chief Financial Officer and Secretary March 24, 2017Kevan P. Talbot (Principal Financial and Accounting Officer) /s/ Christopher Eastland Director March 24, 2017Christopher Eastland /s/ Kent V. Graham Director March 24, 2017Kent V. Graham /s/ Gregory P. Hickey Director March 24, 2017Gregory P. Hickey /s/ Joseph P. Schneider Director March 24, 2017Joseph P. Schneider /s/ Kay L. Toolson Director March 24, 2017Kay L. Toolson 81Exhibit 21.1Exhibit 21.1Subsidiaries Jurisdiction of IncorporationSportsman’s Warehouse Holdings, Inc. Delaware Sportsman’s Warehouse, Inc. Utah Sportsman’s Warehouse Southwest, Inc. California Pacific Flyway Wholesale, LLC Delaware Exhibit 23.1Consent of Independent Registered Public Accounting FirmThe Board of Directors Sportsman’s Warehouse Holdings, Inc.:We consent to the incorporation by reference in the registration statement (No. 333‑206632 and 333‑195338) onForm S‑8 and (No. 333‑204517) on Form S‑3 of Sportsman’s Warehouse Holdings, Inc. of our report datedMarch 24, 2017, with respect to the consolidated balance sheets of Sportsman’s Warehouse Holdings, Inc. as ofJanuary 28, 2017 and January 30, 2016, and the related consolidated statements of income, stockholders’ equity(deficit), and cash flows for each of the fiscal years in the three-year period ended January 28, 2017, whichreport appears in the January 28, 2017 annual report on Form 10‑K of Sportsman’s Warehouse Holdings, Inc..(signed) KPMG LLPSalt Lake City, Utah March 24, 2017 Exhibit 23.2Exhibit 23.2 CONSENT OF EXPERT March 24, 2017 Sportsman’s Warehouse Holdings, Inc.7035 South High Tech DriveMidvale, Utah 84047 Re: Report on Sportsman’s Warehouse’s Growth Potential Ladies and Gentlemen: This letter confirms that Buxton Company (“Buxton”) hereby consents to the incorporation by reference in theRegistration Statements on Form S-8 (No. 333-206632 and 333-195338) and the Registration Statement on Form S-3 (No. 333-204517) of Sportsman’s Warehouse Holdings Inc. (the “Company”) to the Company naming Buxton as a source of informationand data relating to the growth potential of the Company included in the Company’s Annual Report on Form 10-K for the yearended January 28, 2017. Sincerely, Buxton Company /s/ David Glover By: David Glover Title: Chief Financial Officer Exhibit 31.1Exhibit 31.1Certification of Chief Executive Officer pursuant toSection 302 of the Sarbanes-Oxley Act of 2002I, John V. Schaefer, certify that:1.I have reviewed this annual report on Form 10-K of Sportsman’s Warehouse Holdings, Inc.;2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state amaterial fact necessary to make the statements made, in light of the circumstances under which such statements weremade, not misleading with respect to the period covered by this report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairlypresent in all material respects the financial condition, results of operations and cash flows of the registrant as of, andfor, the periods presented in this report;4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls andprocedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting(as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to bedesigned under our supervision, to ensure that material information relating to the registrant, including itsconsolidated subsidiaries, is made known to us by others within those entities, particularly during the periodin which this report is being prepared;b.Designed such internal control over financial reporting, or caused such internal control over financialreporting to be designed under our supervision, to provide reasonable assurance regarding the reliability offinancial reporting and the preparation of financial statements for external purposes in accordance withgenerally accepted accounting principles;c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this reportour conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the periodcovered by this report based on such evaluation; andd.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurredduring the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annualreport) that has materially affected, or is reasonably likely to materially affect, the registrant’s internalcontrol over financial reporting; and5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal controlover financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (orpersons performing the equivalent functions):a.All significant deficiencies and material weaknesses in the design or operation of internal control overfinancial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process,summarize and report financial information; andb.Any fraud, whether or not material, that involves management or other employees who have a significantrole in the registrant’s internal control over financial reporting.Date: March 24, 2017/s/ John V. Schaefer John V. Schaefer President and Chief Executive Officer Exhibit 31.2Exhibit 31.2Certification of Chief Financial Officer pursuant toSection 302 of the Sarbanes-Oxley Act of 2002I, Kevan P. Talbot, certify that:1.I have reviewed this annual report on Form 10-K of Sportsman’s Warehouse Holdings, Inc.;2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state amaterial fact necessary to make the statements made, in light of the circumstances under which such statements weremade, not misleading with respect to the period covered by this report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairlypresent in all material respects the financial condition, results of operations and cash flows of the registrant as of, andfor, the periods presented in this report;4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls andprocedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting(as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to bedesigned under our supervision, to ensure that material information relating to the registrant, including itsconsolidated subsidiaries, is made known to us by others within those entities, particularly during the periodin which this report is being prepared;b.Designed such internal control over financial reporting, or caused such internal control over financialreporting to be designed under our supervision, to provide reasonable assurance regarding the reliability offinancial reporting and the preparation of financial statements for external purposes in accordance withgenerally accepted accounting principles;c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this reportour conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the periodcovered by this report based on such evaluation; andd.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurredduring the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annualreport) that has materially affected, or is reasonably likely to materially affect, the registrant’s internalcontrol over financial reporting; and5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal controlover financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (orpersons performing the equivalent functions):a.All significant deficiencies and material weaknesses in the design or operation of internal control overfinancial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process,summarize and report financial information; andb.Any fraud, whether or not material, that involves management or other employees who have a significantrole in the registrant’s internal control over financial reporting.Date: March 24, 2017/s/ Kevan P. Talbot Kevan P. Talbot Chief Financial Officer and Secretary Exhibit 32.1Exhibit 32.1Certification pursuant to 18 U.S.C. Section 1350,as adopted pursuant to Section 906 of theSarbanes-Oxley Act of 2002In connection with the Annual Report on Form 10-K of Sportsman’s Warehouse Holdings, Inc. (the “Registrant”) for thefiscal year ended January 28, 2017, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), JohnV. Schaefer, as President and Chief Executive Officer of the Registrant, and Kevan P. Talbot, the Chief Financial Officer andSecretary of the Registrant, hereby certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Actof 2002, that, to the best of their knowledge:1.The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934;and2.The information contained in the Report fairly presents, in all material respects, the financial condition and results ofoperations of the Registrant.Date: March 24, 2017 /s/ John V. Schaefer John V. Schaefer President and Chief Executive Officer Date: March 24, 2017 /s/ Kevan P. Talbot Kevan P. Talbot Chief Financial Officer and Secretary The foregoing certification is being furnished pursuant to 18 U.S.C. Section 1350. It is not being filed for purposes of Section 18of the Securities Exchange Act of 1934, as amended, and it is not to be incorporated by reference into any filing of the Company,regardless of any general incorporation language in such filing.

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