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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, 2009
 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
    
    04-3438294(State of other jurisdiction of
    
    (I.R.S. Employer Identification No.)incorporation or organization)
 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 a 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, 2009
 PART I. FINANCIAL INFORMATIONItem 1. Financial StatementsCondensed
Consolidated Financial Statements (unaudited)Consolidated Balance Sheets 
March 31, 2009 and December 31, 2008Consolidated Statements of Operations 
three months ended March 31, 2009 and 2008Consolidated Statements of Cash Flows 
three months ended March 31, 2009 and 2008Notes to Condensed Consolidated Financial StatementsItem 2. Managements Discussion and Analysis of Financial Condition and Results of OperationsItem 3. Quantitative and Qualitative Disclosures about Market RiskItem 4. Controls and ProceduresItem 4T. Controls and ProceduresPART II. OTHER INFORMATIONItem 1. Legal ProceedingsItem 1A. Risk FactorsItem 2. Unregistered Sales of Equity Securities and Use of ProceedsItem 3. Defaults Upon Senior SecuritiesItem 4. Submission of Matters to a Vote of Security HoldersItem 5. Other InformationItem 6. ExhibitsSIGNATURESEXHIBIT INDEXEX-17.1 Director departure correspondenceEX-31.1 Certification of Principal Executive Officer of Periodic Report Pursuant to Rule 13a-14(a) or Rule 15d-14(a)EX-31.2 Certification of Principal Financial Officer of Periodic Report Pursuant to Rule 13a-14(a) or Rule 15d-14(a)EX-32.1 Certification by Chief Executive Officer and Chief Financial Officer of Periodic Report Pursuant to 18 U.S.C. Section 1350




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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)
 March 31,
    
    
    December 31,2009
    
    
    2008(unaudited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    211
    
    
    $
    448Accounts receivable
    
    
    602
    
    
    
    833Inventory
    
    
    18,440
    
    
    
    17,330Prepaid catalog costs
    
    
    1,928
    
    
    
    1,673Prepaid expenses and other current assets
    
    
    2,000
    
    
    
    997Total current assets
    
    
    23,181
    
    
    
    21,281Net property and equipment
    
    
    3,628
    
    
    
    3,599Other assets:Deferred income taxes
    
    
    366
    
    
    
    583Intangibles and other assets, net
    
    
    978
    
    
    
    989Total other assets
    
    
    1,344
    
    
    
    1,572Total assets
    
    $
    28,153
    
    
    $
    26,452LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Current portion of capital lease obligation and outstanding checks
    
    $
    560
    
    
    $
    481Accounts payable
    
    
    2,389
    
    
    
    2,168Accrued expenses and other current liabilities
    
    
    3,145
    
    
    
    3,640Deferred income taxes
    
    
    336
    
    
    
    212Total current liabilities
    
    
    6,430
    
    
    
    6,501Long-term liabilities:Revolving line of credit
    
    
    10,600
    
    
    
    8,300Subordinated notes payable, net
    
    
    4,945
    
    
    
    4,906Capital lease obligation, net of current portion
    
    
    102
    
    
    
    125Total long-term liabilities
    
    
    15,647
    
    
    
    13,331Stockholders equity:Common Stock, par value $0.0001 per share;
15,000,000 shares authorized; issued 5,187,038 as of March 31,
2009 and December 31, 2008
    
    
    1
    
    
    
    1Additional paid in capital
    
    
    44,847
    
    
    
    44,801Treasury stock, 795,865 shares at cost
    
    
    (6,082
    )
    
    
    (6,082
    )Accumulated deficit
    
    
    (32,690
    )
    
    
    (32,100
    )Total stockholders equity
    
    
    6,076
    
    
    
    6,620Total liabilities and stockholders equity
    
    $
    28,153
    
    
    $
    26,452




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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 31,2009
    
    
    2008Revenues, net
    
    $
    16,401
    
    
    $
    17,655Cost of revenues
    
    
    10,715
    
    
    
    11,299Gross profit
    
    
    5,686
    
    
    
    6,356Selling, general and administrative expenses
    
    
    6,566
    
    
    
    6,587Loss from operations
    
    
    (880
    )
    
    
    (231
    )Interest expense, financing and other related costs, net
    
    
    312
    
    
    
    333Other investment loss, net
    
    
    7
    
    
    
    Loss before income tax benefit
    
    
    (1,199
    )
    
    
    (564
    )Benefit for income taxes
    
    
    (609
    )
    
    
    (205
    )Net loss
    
    $
    (590
    )
    
    $
    (359
    )Net loss per shareBasic
    
    $
    (0.11
    )
    
    $
    (0.07
    )Diluted
    
    $
    (0.11
    )
    
    $
    (0.07
    )Number of shares used in per share calculationBasic
    
    
    5,187,000
    
    
    
    5,105,000Diluted
    
    
    5,187,000
    
    
    
    5,105,000




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DOVER SADDLERY, INC. AND SUBSIDIARIES
 
 Condensed Consolidated Statement of Cash Flows
 (In thousands)

(unaudited)
 Three Months EndedMarch 31,
    
    
    March 31,2009
    
    
    2008Operating activities:Net loss
    
    $
    (590
    )
    
    $
    (359
    )Adjustments to reconcile net loss to net cash used in operating activitiesDepreciation and amortization
    
    
    213
    
    
    
    212Deferred income taxes
    
    
    341
    
    
    
    59Loss from investment in affiliate, net
    
    
    7
    
    
    
    Stock-based compensation
    
    
    46
    
    
    
    38Non-cash interest expense
    
    
    85
    
    
    
    69Changes in current assets and liabilities:Accounts receivable
    
    
    231
    
    
    
    536Inventory
    
    
    (1,110
    )
    
    
    (822
    )Prepaid catalog costs and other current assets
    
    
    (1,258
    )
    
    
    (1,195
    )Accounts payable
    
    
    221
    
    
    
    719Accrued expenses, other current liabilities and income taxes payable
    
    
    (494
    )
    
    
    (1,515
    )Net cash used in operating activities
    
    
    (2,308
    )
    
    
    (2,258
    )Investing activities:Purchases of property and equipment
    
    
    (241
    )
    
    
    (230
    )Change in other assets
    
    
    (4
    )
    
    
    (26
    )Net cash used in investing activities
    
    
    (245
    )
    
    
    (256
    )Financing activities:Borrowings under revolving line of credit, net
    
    
    2,300
    
    
    
    1,700Change in outstanding checks
    
    
    93
    
    
    
    876Payment of financing costs
    
    
    (40
    )
    
    
    Payments on capital leases
    
    
    (37
    )
    
    
    (48
    )Net cash provided by financing activities
    
    
    2,316
    
    
    
    2,528Net (decrease) increase in cash and cash equivalents
    
    
    (237
    )
    
    
    14Cash and cash equivalents at beginning of period
    
    
    448
    
    
    
    309Cash and cash equivalents at end of period
    
    $
    211
    
    
    $
    323Supplemental disclosure of cash flow informationCash paid during the period for:Interest
    
    $
    226
    
    
    $
    265Income taxes
    
    $
    203
    
    
    $
    721Supplemental disclosure of non-cash financing activitiesEquipment acquired under capital leases
    
    $
    
    
    
    $
    19




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DOVER SADDLERY, INC. AND SUBSIDIARIES
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 A. Nature of Business and Basis of Preparation
      Three Months EndedMarch 31, 2009
    
    
    March 31, 2008Revenues, net  direct
    
    $
    11,722
    
    
    $
    13,497Revenues, net  retail stores
    
    
    4,679
    
    
    
    4,158Revenues, net  total
    
    $
    16,401
    
    
    $
    17,655
   B. Accounting for Stock-Based Compensation




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C. Inventory
  D. Advertising
 Reporting on
Advertising Costs.
 E. Comprehensive Income (Loss)
 Reporting Comprehensive Income
 F. Net Loss Per Share
  Three Months EndedMarch 31,
    
    
    March 31,2009
    
    
    2008Basic weighted average common shares outstanding
    
    
    5,187
    
    
    
    5,105Add: Dilutive effect of assumed stock option and
warrant exercises less potential incremental
shares purchased under the treasury method
    
    
    
    
    
    
    Diluted weighted average common shares outstanding
    
    
    5,187
    
    
    
    5,105
  G. Financing Agreements
 Revolving Credit Facility




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Senior Subordinated Notes Payable and Warrants
     Cash and Cash Equivalents
  H. Investment in Affiliate




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I. Income Taxes
    J. Related Party Transactions




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K. Commitments and Contingencies
 Lease Commitments
  Accounting for Leases.
 Contingencies
    Recent Accounting Pronouncements




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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 detailed in Item 1A. Risk
Factors in our Annual Report on Form 10-K for the fiscal year ended December 31, 2008 (fiscal
2008) 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




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Single Reporting Segment
  Results of Operations
  Three Months EndedMarch 31, 2009
    
    March 31, 2008Revenues, net
    
    
    100.0
    %
    
    
    100.0
    %Cost of revenues
    
    
    65.3
    
    
    
    64.0Gross profit
    
    
    34.7
    
    
    
    36.0Selling, general and administrative expenses
    
    
    40.0
    
    
    
    37.3Loss from operations
    
    
    (5.4
    )
    
    
    (1.3
    )Interest expense, financing and other related costs, net
    
    
    1.9
    
    
    
    1.9Other investment loss, net
    
    
    
    
    
    
    Loss before income tax benefit
    
    
    (7.3
    )
    
    
    (3.2
    )Benefit for income taxes
    
    
    (3.7
    )
    
    
    (1.2
    )Net loss
    
    
    (3.6
    )
    
    
    (2.0
    )
 
 (1)
    
    Certain of these amounts may not properly sum due to rounding  Three Months EndedMarch 31, 2009
    
    
    March 31, 2008Revenues, net  direct
    
    $
    11,722
    
    
    $
    13,497Revenues, net  retail stores
    
    
    4,679
    
    
    
    4,158Revenues, net  total
    
    $
    16,401
    
    
    $
    17,655Other operating data:Number of retail stores (1)
    
    
    13
    
    
    
    10Capital expenditures
    
    
    241
    
    
    
    230Gross profit margin
    
    
    34.7
    %
    
    
    36.0
    %Adjusted EBITDA(2)
    
    
    (621
    )
    
    
    19Adjusted EBITDA margin(2)
    
    
    (3.8
    )%
    
    
    0.1
    %
 
 (1)
    
    Includes twelve Dover-branded stores and one Smith Brothers store; the March 31, 2009
store count includes the Branchburg, NJ Dover-branded store opened in Q2 2008, the
Alpharetta, GA Dover-branded store opened in Q4 2008, and the North Kingstown, RI
Dover-branded store opened in Q1 2009.(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, non-cash goodwill impairment charge, depreciation,




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amortization and other
investment loss, 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;
    
    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 EPS; 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 31,2009
    
    
    2008Net loss
    
    $
    (590
    )
    
    $
    (359
    )Depreciation
    
    
    211
    
    
    
    196Amortization of intangible assets
    
    
    2
    
    
    
    16Stock-based compensation
    
    
    46
    
    
    
    38Interest expense, financing and other related costs, net
    
    
    312
    
    
    
    333Other investment loss, net
    
    
    7
    
    
    
    Benefit for income taxes
    
    
    (609
    )
    
    
    (205
    )Adjusted EBITDA
    
    $
    (621
    )
    
    $
    19
 Three Months Ended March 31, 2009 Compared to the Three Months Ended March 31, 2008
 Revenues




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Gross Profit
  Selling, General and Administrative
  Interest Expense
  Income Tax Benefit
  Net Loss
  Seasonality and Quarterly Fluctuations
  Liquidity and Capital Resources




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Operating Activities
  Investing Activities
  Financing Activities
  Revolving Credit Facility
  Senior Subordinated Notes Payable and Warrants




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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




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Interest Rate Sensitivity
   
 Item 4. Controls and Procedures.
  
 Item 4T. Controls and Procedures.
    
 PART II. OTHER INFORMATION
 
 Item 1. Legal Proceedings.




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Item 1A. Risk Factors.
   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.
  A decline in discretionary consumer spending and related externalities could reduce our revenues.
  Material changes in cash flow and debt levels may adversely affect our growth and credit
facilities, require the immediate repayment of all our loans, and limit the ability to open new
stores.




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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.




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Item 6. Exhibits.
 Number
    
    Description*17.1
    
    Director departure correspondence*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.




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SIGNATURES
  DOVER SADDLERY, INC.Dated: May 15, 2009
    By:
    /s/   Michael W. BrunsMichael W. Bruns, Chief Financial Officer(Principal Financial Officer)




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EXHIBIT INDEX
 Number
    
    Description*17.1
    
    Director departure correspondence*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.