##### Table of Contents



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 June 30, 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
(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(Do not check if a smaller reporting company)Smaller reporting company þ
  o þ




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##### 



DOVER SADDLERY, INC. AND SUBSIDIARIES
 INDEX TO QUARTERLY REPORT ON FORM 10-Q
 FOR THE QUARTER ENDED JUNE 30, 2009
 PART I.
    
    FINANCIAL INFORMATIONItem 1.
    
    Condensed Consolidated Financial Statements (unaudited)Consolidated Balance Sheets 
June 30, 2009 and December 31, 2008Consolidated Statements of Operations 
three and six months ended June 30, 2009 and 2008Consolidated Statements of Cash Flows 
six months ended June 30, 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-31.1 SECTION 302 CERTIFICATION OF PEOEX-31.2 SECTION 302 CERTIFICATION OF PFOEX-32.1 SECTION 906 CERTIFICATION OF PEO AND PFO




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##### Table of Contents



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)
 June 30,
    
    
    December 31,2009
    
    
    2008ASSETSCurrent assets:Cash and cash equivalents
    
    $
    356
    
    
    $
    448Accounts receivable
    
    
    604
    
    
    
    833Inventory
    
    
    17,196
    
    
    
    17,330Prepaid catalog costs
    
    
    1,288
    
    
    
    1,673Prepaid expenses and other current assets
    
    
    1,272
    
    
    
    997Total current assets
    
    
    20,716
    
    
    
    21,281Net property and equipment
    
    
    3,480
    
    
    
    3,599Other assets:Deferred income taxes
    
    
    593
    
    
    
    583Intangibles and other assets, net
    
    
    992
    
    
    
    989Total other assets
    
    
    1,585
    
    
    
    1,572Total assets
    
    $
    25,781
    
    
    $
    26,452LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Current portion of capital lease obligation and outstanding checks
    
    $
    698
    
    
    $
    481Accounts payable
    
    
    1,231
    
    
    
    2,168Accrued expenses and other current liabilities
    
    
    3,269
    
    
    
    3,640Deferred income taxes
    
    
    258
    
    
    
    212Total current liabilities
    
    
    5,456
    
    
    
    6,501Long-term liabilities:Revolving line of credit
    
    
    8,800
    
    
    
    8,300Subordinated notes payable, net
    
    
    4,984
    
    
    
    4,906Capital lease obligation, net of current portion
    
    
    81
    
    
    
    125Total long-term liabilities
    
    
    13,865
    
    
    
    13,331Stockholders equity:Common Stock, par value $0.0001 per share; 15,000,000 shares
authorized; issued 5,187,038 as of June 30, 2009 and December 31,
2008
    
    
    1
    
    
    
    1Additional paid in capital
    
    
    44,891
    
    
    
    44,801Treasury stock, 795,865 shares at cost
    
    
    (6,082
    )
    
    
    (6,082
    )Accumulated deficit
    
    
    (32,350
    )
    
    
    (32,100
    )Total stockholders equity
    
    
    6,460
    
    
    
    6,620Total liabilities and stockholders equity
    
    $
    25,781
    
    
    $
    26,452




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##### Table of Contents



DOVER SADDLERY, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(In thousands, except share and per share data)
(unaudited)
 Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,
    
    
    June 30,
    
    
    June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Revenues, net
    
    $
    19,110
    
    
    $
    19,941
    
    
    $
    35,511
    
    
    $
    37,595Cost of revenues
    
    
    12,049
    
    
    
    12,967
    
    
    
    22,764
    
    
    
    24,266Gross profit
    
    
    7,061
    
    
    
    6,974
    
    
    
    12,747
    
    
    
    13,329Selling, general and administrative expenses
    
    
    5,934
    
    
    
    6,284
    
    
    
    12,500
    
    
    
    12,870Income from operations
    
    
    1,127
    
    
    
    690
    
    
    
    247
    
    
    
    459Interest expense, financing and other related costs, net
    
    
    338
    
    
    
    315
    
    
    
    650
    
    
    
    648Other investment income, net
    
    
    (26
    )
    
    
    (2
    )
    
    
    (19
    )
    
    
    (2
    )Income (loss) before income tax provision (benefit)
    
    
    815
    
    
    
    377
    
    
    
    (384
    )
    
    
    (187
    )Provision (benefit) for income taxes
    
    
    475
    
    
    
    127
    
    
    
    (134
    )
    
    
    (78
    )Net income (loss)
    
    $
    340
    
    
    $
    250
    
    
    $
    (250
    )
    
    $
    (109
    )Net income (loss) per shareBasic
    
    $
    0.07
    
    
    $
    0.05
    
    
    $
    (0.05
    )
    
    $
    (0.02
    )Diluted
    
    $
    0.06
    
    
    $
    0.05
    
    
    $
    (0.05
    )
    
    $
    (0.02
    )Number of shares used in per share calculationBasic
    
    
    5,187,000
    
    
    
    5,177,000
    
    
    
    5,187,000
    
    
    
    5,141,000Diluted
    
    
    5,259,000
    
    
    
    5,290,000
    
    
    
    5,187,000
    
    
    
    5,141,000




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DOVER SADDLERY, INC. AND SUBSIDIARIES
Condensed Consolidated Statement of Cash Flows
(In thousands)
(unaudited)
 Six Months EndedJune 30,
    
    
    June 30,2009
    
    
    2008Operating activities:Net loss
    
    $
    (250
    )
    
    $
    (109
    )Adjustments to reconcile net loss to net cash used in operating activitiesDepreciation and amortization
    
    
    403
    
    
    
    406Deferred income taxes
    
    
    36
    
    
    
    (1
    )Income from investment in affiliate, net
    
    
    (19
    )
    
    
    (2
    )Stock-based compensation
    
    
    90
    
    
    
    76Non-cash interest expense
    
    
    155
    
    
    
    131Changes in current assets and liabilities:Accounts receivable
    
    
    230
    
    
    
    401Inventory
    
    
    133
    
    
    
    (713
    )Prepaid catalog costs and other current assets
    
    
    110
    
    
    
    (465
    )Accounts payable
    
    
    (937
    )
    
    
    (904
    )Accrued expenses, other current liabilities and income taxes payable
    
    
    (371
    )
    
    
    (475
    )Net cash used in operating activities
    
    
    (420
    )
    
    
    (1,655
    )Investing activities:Purchases of property and equipment
    
    
    (281
    )
    
    
    (497
    )Investment in affiliate
    
    
    
    
    
    
    (9
    )Change in other assets
    
    
    (25
    )
    
    
    (43
    )Net cash used in investing activities
    
    
    (306
    )
    
    
    (549
    )Financing activities:Borrowings under revolving line of credit, net
    
    
    500
    
    
    
    1,700Change in outstanding checks
    
    
    242
    
    
    
    741Payment of financing costs
    
    
    (40
    )
    
    
    Payments on capital leases
    
    
    (68
    )
    
    
    (82
    )Net cash provided by financing activities
    
    
    634
    
    
    
    2,359Net (decrease) increase in cash and cash equivalents
    
    
    (92
    )
    
    
    155Cash and cash equivalents at beginning of period
    
    
    448
    
    
    
    309Cash and cash equivalents at end of period
    
    $
    356
    
    
    $
    464Supplemental disclosure of cash flow informationCash paid during the period for:Interest
    
    $
    496
    
    
    $
    518Income taxes
    
    $
    238
    
    
    $
    818Supplemental disclosure of non-cash financing activitiesIssuance of common stock in connection with investment in affiliate
    
    $
    
    
    
    $
    380Equipment acquired under capital leases
    
    $
    
    
    
    $
    19




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##### Table of Contents



DOVER SADDLERY, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
 A. Nature of Business and Basis of Preparation
      Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,
    
    
    June 30,
    
    
    June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Revenues, net  direct
    
    $
    12,456
    
    
    $
    14,087
    
    
    $
    24,178
    
    
    $
    27,583Revenues, net  retail stores
    
    
    6,654
    
    
    
    5,854
    
    
    
    11,333
    
    
    
    10,012Revenues, net  total
    
    $
    19,110
    
    
    $
    19,941
    
    
    $
    35,511
    
    
    $
    37,595




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##### Table of Contents



B. Accounting for Stock-Based Compensation
    C. Inventory
  D. Advertising
 Reporting on
Advertising Costs.
 E. Comprehensive Income (Loss)
 Reporting Comprehensive Income
 F. Net Income (Loss) Per Share
  Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,
    
    June 30,
    
    June 30,2009
    
    2008
    
    2009
    
    2008Basic weighted average common shares outstanding
    
    
    5,187
    
    
    
    5,177
    
    
    
    5,187
    
    
    
    5,141Add: Dilutive effect of assumed stock option and
warrant exercises less potential incremental
shares purchased under the treasury method
    
    
    72
    
    
    
    113
    
    
    
    
    
    
    
    Diluted weighted average common shares outstanding
    
    
    5,259
    
    
    
    5,290
    
    
    
    5,187
    
    
    
    5,141




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##### Table of Contents



G. Financing Agreements
 Revolving Credit Facility
     Senior Subordinated Notes Payable and Warrants




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##### Table of Contents



Cash and Cash Equivalents
  H. Investment in Affiliate
     I. Income Taxes
 Accounting for Uncertainty in Income
Taxes
   J. Related Party Transactions




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##### Table of Contents



K. Commitments and Contingencies
 Lease Commitments
  Accounting for Leases.
 Contingencies
    Recent Accounting Pronouncements
 Business Combinations Non-controlling Interests in Consolidated Financial Statements
 Noncontrolling Interests in Consolidated
Financial Statements




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Disclosures about Derivative Instruments and
Hedging Activities
 Determining Whether an Instrument (or Embedded Feature) Is Indexed to an Entitys
Own Stock
 Recognition and Presentation
of Other-Than-Temporary Impairments
 Interim Disclosures
About Fair Value of Financial Instruments
 The FASB Accounting Standards Codification and
the Hierarchy of Generally Accepted Accounting Principles
 
 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




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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
    Single Reporting Segment
  Results of Operations
  Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,
    
    June 30,
    
    June 30,2009
    
    2008
    
    2009
    
    2008Revenues, net
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Cost of revenues
    
    
    63.0
    
    
    
    65.0
    
    
    
    64.1
    
    
    
    64.5Gross profit
    
    
    37.0
    
    
    
    35.0
    
    
    
    35.9
    
    
    
    35.5Selling, general and administrative expenses
    
    
    31.1
    
    
    
    31.5
    
    
    
    35.2
    
    
    
    34.2Income from operations
    
    
    5.9
    
    
    
    3.5
    
    
    
    0.7
    
    
    
    1.2Interest expense, financing and other related costs, net
    
    
    1.8
    
    
    
    1.6
    
    
    
    1.8
    
    
    
    1.7Other investment income, net
    
    
    (0.1
    )
    
    
    (0.0
    )
    
    
    (0.1
    )
    
    
    (0.0
    )Income (loss) before income tax provision (benefit)
    
    
    4.3
    
    
    
    1.9
    
    
    
    (1.1
    )
    
    
    (0.5
    )Provision (benefit) for income taxes
    
    
    2.5
    
    
    
    0.6
    
    
    
    (0.4
    )
    
    
    (0.2
    )Net income (loss)
    
    
    1.8
    
    
    
    1.3
    
    
    
    (0.7
    )
    
    
    (0.3
    )
 
 (1)
    
    Certain of these amounts may not properly sum due to rounding




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Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,
    
    
    June 30,
    
    
    June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Revenues, net  direct
    
    $
    12,456
    
    
    $
    14,087
    
    
    $
    24,178
    
    
    $
    27,583Revenues, net  retail stores
    
    
    6,654
    
    
    
    5,854
    
    
    
    11,333
    
    
    
    10,012Revenues, net  total
    
    $
    19,110
    
    
    $
    19,941
    
    
    $
    35,511
    
    
    $
    37,595Other operating data:Number of retail stores (1)
    
    
    13
    
    
    
    11
    
    
    
    13
    
    
    
    11Capital expenditures
    
    
    41
    
    
    
    267
    
    
    
    281
    
    
    
    497Gross profit margin
    
    
    37.0
    %
    
    
    35.0
    %
    
    
    35.9
    %
    
    
    35.5
    %Adjusted EBITDA(2)
    
    
    1,361
    
    
    
    923
    
    
    
    740
    
    
    
    941Adjusted EBITDA margin(2)
    
    
    7.1
    %
    
    
    4.6
    %
    
    
    2.1
    %
    
    
    2.5
    %
 
 (1)
    
    Includes twelve Dover-branded stores and one Smith Brothers store; the June 30, 2009
store count includes 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, 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;
    
    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;




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
    
    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 Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,
    
    
    June 30,
    
    
    June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Net income (loss)
    
    $
    340
    
    
    $
    250
    
    
    $
    (250
    )
    
    $
    (109
    )Depreciation
    
    
    188
    
    
    
    189
    
    
    
    400
    
    
    
    385Amortization of intangible assets
    
    
    2
    
    
    
    6
    
    
    
    3
    
    
    
    21Stock-based compensation
    
    
    44
    
    
    
    38
    
    
    
    90
    
    
    
    76Interest expense, financing and other related costs, net
    
    
    338
    
    
    
    315
    
    
    
    650
    
    
    
    648Other investment income, net
    
    
    (26
    )
    
    
    (2
    )
    
    
    (19
    )
    
    
    (2
    )Provision (benefit) for income taxes
    
    
    475
    
    
    
    127
    
    
    
    (134
    )
    
    
    (78
    )Adjusted EBITDA
    
    $
    1,361
    
    
    $
    923
    
    
    $
    740
    
    
    $
    941
 Three Months Ended June 30, 2009 Compared to the Three Months Ended June 30, 2008
 Revenues
  Gross Profit
  Selling, General and Administrative
  Interest Expense




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Income Tax Provision
  Net Income
  Six Months Ended June 30, 2009 Compared to the Six Months Ended June 30, 2008
 Revenues
  Gross Profit
  Selling, General and Administrative
  Interest Expense
  Income Tax Benefit




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Net Loss
  Seasonality and Quarterly Fluctuations
  Liquidity and Capital Resources
  Operating Activities
  Investing Activities
  Financing Activities




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Revolving Credit Facility
  Senior Subordinated Notes Payable and Warrants
   Working Capital and Capital Expenditure Needs
  Critical Accounting Policies and Estimates




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Item 3. Quantitative and Qualitative Disclosures about Market Risk.
   Foreign Currency Risk
  Interest Rate Sensitivity
   
 Item 4. Controls and Procedures.
  
 Item 4T. Controls and Procedures.




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##### Table of Contents



PART II. OTHER INFORMATION
 
 Item 1. Legal Proceedings.
   
 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.




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##### Table of Contents



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.
  
 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.
  (1)
    
    The stockholders elected both Class I nominees to the Board of Directors for respective
three-year terms expiring in 2012:
 BROKERNON-DIRECTOR
    
    FOR
    
    WITHHELD
    
    ABSTAIN
    
    VOTES*William F. Meagher, Jr.
    
    
    5,002,251
    
    
    
    
    
    
    
    14,088
    
    
    
    Gregory F. Mulligan
    
    
    5,002,251
    
    
    
    
    
    
    
    14,088
    
    
    
    
 
 *
    
    NASDAQ rules do not permit broker voting without specific instructions from beneficial
owners but permit brokers that are members of a national securities exchange, such as brokers
who are members of the New York Stock Exchange, to follow any alternative rules of that
exchange. The Company has not been able to determine how many broker votes cast for Class III
Directors were cast pursuant to specific instructions from beneficial owners versus how many
were cast by brokers pursuant to the alternative rules of a national securities exchange such
as NYSE.




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##### Table of Contents



(2)
    
    The stockholders ratified the appointment of Caturano & Company as the Independent Registered
Public Accounting Firm for the Company:
 For
    
    
    5,005,162Against
    
    
    11,177Abstain
    
    
    Total
    
    
    5,016,339
 
 Item 5. Other Information.




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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.




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##### Table of Contents



SIGNATURES
  DOVER SADDLERY, INC.Dated: August 13, 2009
    By:
    /s/   Michael W. BrunsMichael W. Bruns, Chief Financial Officer(Principal Financial Officer)




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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.