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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 Form 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the Fiscal Quarter Ended March 31, 2011
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
 Commission File Number 000-51624
 Dover Saddlery, Inc.
 (Exact name of registrant as specified in its charter)
 DELAWARE
(State of other jurisdiction of 
incorporation or organization)
    
    04-3438294
(I.R.S. Employer Identification No.)
 525 Great Road, Littleton, MA 01460
(Address of principal executive offices)
 (978) 952-8062 (Registrants telephone number, including area code)
  þ o
  o o
  Large accelerated filer o   
    Accelerated filer o
    Non-accelerated filer o
    Smaller reporting company þ(Do not check if smaller reporting company)
  o þ




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DOVER SADDLERY, INC. AND SUBSIDIARIES
 INDEX TO QUARTERLY REPORT ON FORM 10-Q
 FOR THE QUARTER ENDED MARCH 31, 2011
 PART I. FINANCIAL INFORMATIONItem 1. Condensed Consolidated Financial Statements (unaudited)

3Condensed Consolidated Balance Sheets  
March 31, 2011 and December 31, 2010

3Condensed Consolidated Statements of Operations  
three months ended March 31, 2011 and 2010

4Condensed Consolidated Statements of Cash Flows  
three months ended March 31, 2011 and 2010

5Notes to Unaudited Condensed Consolidated Financial Statements

6Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations

11Item 3. Quantitative and Qualitative Disclosures about Market Risk

16Item 4. Controls and Procedures

17PART II. OTHER INFORMATIONItem 1. Legal Proceedings

17Item 1A. Risk Factors

17Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

19Item 3. Defaults Upon Senior Securities

19Item 4. [Reserved]

19Item 5. Other Information

19Item 6. Exhibits

20SIGNATURES

21EXHIBIT INDEX

22Ex.-31.1 Certification of Principal Executive OfficerEx.-31.2 Certification of Principal Financial OfficerEx.-32.1 Certification by Chief Executive Officer and Chief Financial Officer
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PART I. FINANCIAL INFORMATION
 
 Item 1.
    
    Financial Statements.
 DOVER SADDLERY, INC. AND SUBSIDIARIES
 
 Condensed Consolidated Balance Sheets
 (In thousands, except share and per share data)
 (unaudited)
 March 31,
    
    
    December 31,2011
    
    
    2010ASSETSCurrent assets:Cash and cash equivalents
    
    $
    158
    
    
    $
    745Accounts receivable
    
    
    468
    
    
    
    533Inventory
    
    
    17,635
    
    
    
    15,869Prepaid catalog costs
    
    
    1,514
    
    
    
    930Prepaid expenses and other current assets
    
    
    741
    
    
    
    901Deferred income taxes
    
    
    86
    
    
    
    105Total current assets
    
    
    20,602
    
    
    
    19,084Net property and equipment
    
    
    2,965
    
    
    
    3,025Other assets:Deferred income taxes
    
    
    871
    
    
    
    848Intangibles and other assets, net
    
    
    543
    
    
    
    593Total other assets
    
    
    1,414
    
    
    
    1,441Total assets
    
    $
    24,981
    
    
    $
    23,549LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Current portion of capital lease obligation and outstanding checks
    
    $
    551
    
    
    $
    97Accounts payable
    
    
    1,790
    
    
    
    2,073Accrued expenses and other current liabilities
    
    
    3,885
    
    
    
    5,425Income taxes payable
    
    
    156
    
    
    
    414Total current liabilities
    
    
    6,382
    
    
    
    8,009Long-term liabilities:Revolving line of credit
    
    
    2,674
    
    
    
    Term notes
    
    
    5,500
    
    
    
    Subordinated notes payable, net
    
    
    
    
    
    
    5,293Capital lease obligation, net of current portion
    
    
    65
    
    
    
    89Total long-term liabilities
    
    
    8,239
    
    
    
    5,382Commitments and Contingencies (see note K.)Stockholders equity:Common Stock, par value $0.0001 per share; 15,000,000 shares
authorized; 5,288,027 and 5,277,161 issued and outstanding as of
March 31, 2011 and December 31, 2010, respectively
    
    
    1
    
    
    
    1Additional paid in capital
    
    
    45,468
    
    
    
    45,391Treasury stock, 795,865 shares at cost
    
    
    (6,082
    )
    
    
    (6,082
    )Accumulated deficit
    
    
    (29,027
    )
    
    
    (29,152
    )Total stockholders equity
    
    
    10,360
    
    
    
    10,158Total liabilities and stockholders equity
    
    $
    24,981
    
    
    $
    23,549
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DOVER SADDLERY, INC. AND SUBSIDIARIES
 
 Condensed Consolidated Statements of Operations
 (In thousands, except share and per share data)
 (unaudited)
 Three Months EndedMarch 31,
    
    
    March 31,2011
    
    
    2010Revenues, net
    
    $
    17,285
    
    
    $
    16,226Cost of revenues
    
    
    10,717
    
    
    
    10,380Gross profit
    
    
    6,568
    
    
    
    5,846Selling, general and administrative expenses
    
    
    5,920
    
    
    
    5,893Income (loss) from operations
    
    
    648
    
    
    
    (47
    )Interest expense, financing and other related costs, net
    
    
    374
    
    
    
    251Other investment loss, net
    
    
    21
    
    
    
    3Income (loss) before income tax benefit
    
    
    253
    
    
    
    (301
    )Provision (benefit) for income taxes
    
    
    128
    
    
    
    (108
    )Net income (loss)
    
    $
    125
    
    
    $
    (193
    )Net income (loss) per shareBasic
    
    $
    0.02
    
    
    $
    (0.04
    )Diluted
    
    $
    0.02
    
    
    $
    (0.04
    )Number of shares used in per share calculationBasic
    
    
    5,287,000
    
    
    
    5,264,000Diluted
    
    
    5,422,000
    
    
    
    5,264,000
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DOVER SADDLERY, INC. AND SUBSIDIARIES
 
 Condensed Consolidated Statement of Cash Flows
 (In thousands)
 (unaudited)
 Three Months EndedMarch 31,
    
    
    March 31,2011
    
    
    2010Operating activities:Net income (loss)
    
    $
    125
    
    
    $
    (193
    )Adjustments to reconcile net income (loss) to net cash used in
operating activitiesDepreciation and amortization
    
    
    183
    
    
    
    188Deferred income taxes
    
    
    (3
    )
    
    
    24Loss from investment in affiliate, net
    
    
    21
    
    
    
    3Stock-based compensation
    
    
    62
    
    
    
    45Non-cash interest expense
    
    
    210
    
    
    
    68Payment of deferred interest
    
    
    (423
    )
    
    
    Changes in current assets and liabilities:Accounts receivable
    
    
    65
    
    
    
    256Inventory
    
    
    (1,766
    )
    
    
    (397
    )Prepaid catalog costs and other current assets
    
    
    (424
    )
    
    
    (647
    )Accounts payable
    
    
    (282
    )
    
    
    415Accrued expenses, other current liabilities and income taxes payable
    
    
    (1,799
    )
    
    
    (1,050
    )Net cash used in operating activities
    
    
    (4,031
    )
    
    
    (1,288
    )Investing activities:Purchases of property and equipment
    
    
    (121
    )
    
    
    (31
    )Change in other assets
    
    
    
    
    
    
    50Net cash provided by (used in) investing activities
    
    
    (121
    )
    
    
    19Financing activities:Borrowings under revolving line of credit, net
    
    
    2,674
    
    
    
    1,300Repayment of subordinated notes
    
    
    (5,000
    )
    
    
    Borrowing under term note
    
    
    5,500
    
    
    
    Change in outstanding checks
    
    
    453
    
    
    
    (194
    )Payments on capital leases
    
    
    (24
    )
    
    
    (29
    )Payment of debt commitment fees
    
    
    (54
    )
    
    
    Proceeds from exercise of stock options
    
    
    16
    
    
    
    Net cash provided by financing activities
    
    
    3,565
    
    
    
    1,077Net decrease in cash and cash equivalents
    
    
    (587
    )
    
    
    (192
    )Cash and cash equivalents at beginning of period
    
    
    745
    
    
    
    732Cash and cash equivalents at end of period
    
    $
    158
    
    
    $
    540Supplemental disclosure of cash flow informationCash paid during the period for:Interest
    
    $
    587
    
    
    $
    185Income taxes
    
    $
    390
    
    
    $
    503Supplemental disclosure of non-cash financing activitiesEquipment acquired under capital leases
    
    $
    
    
    
    $
    85
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DOVER SADDLERY, INC. AND SUBSIDIARIES
 
 NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 A. Nature of Business and Basis of Preparation
      Three Months EndedMarch 31, 2011
    
    
    March 31, 2010Revenues, net  direct
    
    $
    12,067
    
    
    $
    11,701Revenues, net  retail stores
    
    
    5,218
    
    
    
    4,525Revenues, net  total
    
    $
    17,285
    
    
    $
    16,226
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B. Accounting for Stock-Based Compensation
    C. Inventory
  D. Advertising
  E. Comprehensive Income (Loss)
  F. Net Income (Loss) per Share
  Three Months EndedMarch 31,
    
    
    March 31,2011
    
    
    2010Basic weighted average common shares outstanding
    
    
    5,287
    
    
    
    5,264Add: Dilutive effect of assumed stock option and
warrant exercises less potential incremental shares
purchased under the treasury method
    
    
    135
    
    
    
    Diluted weighted average common shares outstanding
    
    
    5,422
    
    
    
    5,264
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G. Financing Agreements
 Revolving Credit Facility
    Term Notes, Senior Subordinated Notes Payable and Warrants
     Cash and Cash Equivalents
   8




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Financial Instruments
  H. Investment in Affiliate
      I. Income Taxes
    9




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J. Related Party Transactions
     K. Commitments and Contingencies
 Lease Commitments
  .
 Contingencies
  L. Subsequent Events
    10




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Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations.
 This Quarterly Report on Form 10-Q , including the following discussion, contains
forward-looking statements within the meaning of the Private Securities Litigation Reform Act of
1995 that involve substantial risks and uncertainties. For this purpose, any statements contained
herein that are not statements of historical fact may be deemed to be forward-looking statements.
Without limiting the generality of the foregoing, the words projected, anticipated, planned,
expected, and similar expressions are intended to identify forward-looking statements. In
particular, statements regarding future financial targets or trends are forward-looking statements.
Forward-looking statements are not guarantees of our future financial performance, and undue
reliance should not be placed on them. Our actual results, performance or achievements may differ
significantly from the results, performance or achievements discussed in or implied by the
forward-looking statements. Factors that could cause such a difference are detailed in Item 1A.
Risk Factors in our Annual Report on Form 10-K for the fiscal year ended December 31, 2010
(fiscal 2010) and in our subsequent periodic reports on Form 10-Q . We disclaim any intent or
obligation to update any forward-looking statement.
 Overview
   Consolidated Performance and Trends
    Single Reporting Segment
   11




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Results of Operations
  Three Months EndedMarch 31, 2011
    
    
    March 31, 2010Revenues, net
    
    
    100.0
    %
    
    
    100.0
    %Cost of revenues
    
    
    62.0
    
    
    
    64.0Gross profit
    
    
    38.0
    
    
    
    36.0Selling, general and administrative expenses
    
    
    34.2
    
    
    
    36.3Income (loss) from operations
    
    
    3.8
    
    
    
    (0.3
    )Interest expense, financing and other related costs, net
    
    
    2.2
    
    
    
    1.5Other investment (income) loss
    
    
    (0.1
    )
    
    
    Income (loss) before income tax provision (benefit)
    
    
    1.5
    
    
    
    (1.9
    )Provision (benefit) for income taxes
    
    
    0.7
    
    
    
    (0.7
    )Net income (loss)
    
    
    0.7
    
    
    
    (1.2
    )
 (1)
    
    Certain of these amounts may not properly sum due to rounding  Three Months EndedMarch 31, 2011
    
    
    March 31, 2010Revenues, net  direct
    
    $
    12,067
    
    
    $
    11,701Revenues, net  retail stores
    
    
    5,218
    
    
    
    4,525Revenues, net  total
    
    $
    17,285
    
    
    $
    16,226Other operating data:Number of retail stores (1)
    
    
    13
    
    
    
    13Capital expenditures
    
    
    121
    
    
    
    31Gross profit margin
    
    
    38.0
    %
    
    
    36.0
    %Adjusted EBITDA (2)
    
    
    893
    
    
    
    186Adjusted EBITDA margin (2)
    
    
    5.2
    %
    
    
    1.1
    %
 (1)
    
    Includes twelve Dover-branded stores and one Smith Brothers store.(2)
    
    When we use the term Adjusted EBITDA, we are referring to net income minus interest
income and other income plus interest expense, income taxes, non-cash stock-based
compensation, depreciation, amortization and other investment income, net. We present
Adjusted EBITDA because we consider it an important supplemental measure of our performance
and believe it is frequently used by securities analysts, investors and other interested
parties in the evaluation of companies in our industry.  
    
    Adjusted EBITDA does not reflect our cash expenditures or future requirements for capital
expenditures or capital commitments;
    
    Adjusted EBITDA does not reflect changes in, or cash requirements for, our working
capital needs;
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
    
    Adjusted EBITDA does not reflect the impact of an impairment charge that might be taken,
when future results are not achieved as planned, in respect of goodwill resulting from any
premium the Company might pay in the future in connection with potential acquisitions;
    
    Adjusted EBITDA does not reflect the interest expense or cash requirements necessary to
service interest or principal payments on our debt;
    
    Although depreciation and amortization are non-cash charges, the assets being depreciated
and amortized will often have to be replaced in the future, and Adjusted EBITDA does not
reflect any cash requirements for such replacements;
    
    Although stock-based compensation is a non-cash charge, additional stock options might be
granted in the future, which might have a future dilutive effect on earnings and earnings
per share; and
    
    Other companies in our industry may calculate Adjusted EBITDA differently than we do,
limiting its usefulness as a comparative measure.
  Three Months EndedMarch 31,
    
    
    March 31,2011
    
    
    2010Net income (loss)
    
    $
    125
    
    
    $
    (193
    )Depreciation
    
    
    181
    
    
    
    186Amortization of intangible assets
    
    
    2
    
    
    
    2Stock-based compensation
    
    
    62
    
    
    
    45Interest expense, financing and other related costs, net
    
    
    374
    
    
    
    251Other investment loss
    
    
    21
    
    
    
    3Provision (benefit) for income taxes
    
    
    128
    
    
    
    (108
    )Adjusted EBITDA
    
    $
    893
    
    
    $
    186
 Three Months Ended March 31, 2011 Compared to the Three Months Ended March 31, 2010
 Revenues
  Gross Profit
  Selling, General and Administrative
   13




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Interest Expense
  Income Tax Provision (Benefit)
  Net Income (Loss)
  Seasonality and Quarterly Fluctuations
  Liquidity and Capital Resources
   Operating Activities
   14




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Investing Activities
  Financing Activities
  Revolving Credit Facility
    Term Notes, Senior Subordinated Notes Payable and Warrants
    15




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Working Capital and Capital Expenditure Needs
  Critical Accounting Policies and Estimates
  
 Item 3.
    
    Quantitative and Qualitative Disclosures about Market Risk.
   Foreign Currency Risk
  Interest Rate Sensitivity
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Item 4.
    
    Controls and Procedures.
    
 PART II. OTHER INFORMATION
 
 Item 1.
    
    Legal Proceedings.
  
 Item 1A.
    
    Risk Factors.
   17




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The Companys business may be adversely affected by pricing pressures from fluctuations in energy
and/or commodity costs.
  Current economic conditions and the global financial crisis may have an impact on our business and
financial condition in ways that we currently cannot predict.
  The Companys cost savings initiatives may have a negative impact on our market share in the short
run.
  A decline in discretionary consumer spending and related externalities could reduce the Companys
revenues.
    18




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Material changes in cash flow and debt levels may adversely affect the Companys growth and credit
facilities, require the immediate repayment of all our loans, and limit the ability to open new
stores.
    
 Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds.
  
 Item 3.
    
    Defaults Upon Senior Securities.
  
 Item 4.
    
    Submission of Matters to a Vote of Security Holders.
  
 Item 5.
    
    Other Information.
   19




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Item 6.
    
    Exhibits.
 Exhibit List
 Number
    
    Description*31.1
    
    Certification of Principal Executive Officer of Periodic Report Pursuant to Rule 13a-14(a) or Rule 15d-14(a)*31.2
    
    Certification of Principal Financial Officer of Periodic Report Pursuant to Rule 13a-14(a) or Rule 15d-14(a)32.1
    
    Certification by Chief Executive Officer and Chief Financial Officer of Periodic Report Pursuant to 18
U.S.C. Section 1350
 *
    
    Filed herewith.
    
    Furnished herewith.
    
    Indicates a management contract or compensatory plan or arrangement  20




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SIGNATURES
  DOVER SADDLERY, INC.Dated: May 13, 2011
    By:
    /s/   David R. PearceDavid R. Pearce, Chief Financial Officer(Principal Financial Officer)  21




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EXHIBIT INDEX
 Number
    
    Description*31.1
    
    Certification of Principal Executive Officer of Periodic Report Pursuant to Rule 13a-14(a) or Rule 15d-14(a)*31.2
    
    Certification of Principal Financial Officer of Periodic Report Pursuant to Rule 13a-14(a) or Rule 15d-14(a)32.1
    
    Certification by Chief Executive Officer and Chief Financial Officer of Periodic Report Pursuant to 18
U.S.C. Section 1350
 *
    
    Filed herewith.
    
    Furnished herewith.
    
    Indicates a management contract or compensatory plan or arrangement  22