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Share Name | Share Symbol | Market | Type |
---|---|---|---|
West Marine, Inc. | NASDAQ:WMAR | NASDAQ | Common Stock |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 12.965 | 0.01 | 199,999.99 | 0 | 01:00:00 |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 29, 2015
West Marine, Inc.
(Exact name of registrant as specified in its charter)
Delaware | 0-22512 | 77-0355502 | ||
(State or other jurisdiction of incorporation) | (Commission File Number) | (I.R.S. Employer Identification No.) |
500 Westridge Drive Watsonville, California 95076
(Address of Principal Executive Offices, Including Zip Code)
(831) 728-2700
(Registrant’s Telephone Number, Including Area Code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 2.02. | Results of Operations and Financial Condition. |
On October 29, 2015, West Marine, Inc. issued a press release announcing its condensed consolidated financial results for the 13-week period (third quarter) ended October 3, 2015 and for the 39-week period ended October 3, 2015. A copy of this press release is attached hereto as Exhibit 99.1.
In addition to disclosing financial results that are determined in accordance with accounting principles, generally accepted in the United States (“GAAP”), the press release discloses EBITDA, which is a non-GAAP financial measure, as a supplemental measure to help investors evaluate our fundamental operational performance. EBITDA is defined as net income (loss) plus interest expense, depreciation and amortization, and income tax expense. EBITDA is not a presentation made in accordance with GAAP, is not a measure of financial performance or condition, liquidity or profitability, and should not be considered as alternatives to (1) net income, operating income or any other performance measures determined in accordance with GAAP or (2) operating cash flows determined in accordance with GAAP. Additionally, EBITDA is not intended to be a measure of free cash flow for management’s discretionary use, as it does not consider certain cash requirements such as interest payments, tax payments and debt service requirements and replacements of fixed assets. By eliminating interest, income taxes, depreciation and amortization, we believe the result is a useful measure across time in evaluating our fundamental core operating performance.
Our presentation of EBITDA has limitations as an analytical tool, and should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP. Because not all companies use identical calculations, the presentation of EBITDA may not be comparable to other similarly titled measures of other companies. Management believes that the presentation of EBITDA is useful to investors because these measures are frequently used by securities analysts, investors and other interested parties in the evaluation of the operating performance of companies in industries similar to ours. Management also uses EBITDA to evaluate our operations. However, as indicated, EBITDA does not include interest expense on borrowed money, the payment of income taxes, amortization of our definite-lived intangible assets, or depreciation expense on our capital assets, which are necessary elements of our operations. Since EBITDA does not account for these and other expenses, its utility as a measure of our operating performance has limitations. Due to these limitations, management does not view EBITDA in isolation, but also uses other measurements, such as net income and revenues to measure operating performance.
Management has reconciled this non-GAAP financial measure to the most directly comparable GAAP financial measures in the tables included in the press release furnished as Exhibit 99.1 to this report. EBITDA should be considered as a supplement to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP.
The information furnished pursuant to Item 2.02 and Exhibit 99.1 of this report shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liability of that section, except if we specifically incorporate it by reference into a filing under the Securities Act of 1933, as amended, or the Exchange Act.
Item9.01. | Financial Statements and Exhibits. |
(a) | Not Applicable. |
(b) | Not Applicable. |
(c) | Not Applicable. |
(d) | Exhibit: |
99.1 | Press Release dated October 29, 2015 (furnished pursuant to Item 2.02). |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
WEST MARINE, INC. | ||
Date: October 29, 2015 | By: | /s/ Matthew L. Hyde |
Matthew L. Hyde | ||
President and | ||
Chief Executive Officer |
Exhibit 99.1
WEST MARINE REPORTS DOUBLE-DIGIT EARNINGS GROWTH YEAR-TO-DATE AND UPDATES FISCAL YEAR EARNINGS GUIDANCE
WATSONVILLE, CA, October 29, 2015 - West Marine, Inc. (Nasdaq: WMAR) today reported financial results for the first nine months of fiscal 2015 and for the third quarter ended October 3, 2015.
2015 Year-to-Date Results
· | Net revenues for the first nine months of fiscal 2015 were $574.6 million, an increase of 5.2% compared to last year. |
· | Adjusted comparable store sales increased by 4.9%. |
· | Pre-tax income was $27.6 million, an increase of 20.1% compared to pre-tax income of $23.0 million last year. |
· | Earnings before interest, taxes, depreciation and amortization (“EBITDA”) year-to-date were $43.1 million, compared to EBITDA of $36.5 million last year. |
· | Net income and earnings per share were $15.6 million and $0.63, respectively, compared to net income and earnings per share of $12.2 million and $0.50, respectively, per share last year, a 27.4% increase. |
· | Fiscal 2015 comparable store sales are expected to range from 3.5% to 5.5% and pre-tax profit is expected to range between $6.0 million and $8.0 million. |
· | Remained debt-free at quarter-end with $115.8 million available on our revolving credit line at the end of the period. |
Matt Hyde, West Marine’s CEO, commented: “The West Marine team is delivering strong results, with good top line sales from our strategies flowing through to double-digit earnings growth year-over-year. As we wrap up the core boating season, our associates are now focusing on expanding our holiday presence, with new gift items and compelling offers for our customers recreating on or around the water.”
Progress on the company’s growth strategies year-to-date was as follows:
· | Sales from our eCommerce website increased by 25.1% compared to last year and represented 8.3% of total sales, compared to 7.0% for the same period last year, showing progress towards our end of 2019 goal of 15%. |
· | Sales through our optimized stores were 40.8% of total sales compared to 36.1% last year. This year-over-year increase supports our end of 2019 goal to deliver 50% of our total sales through optimized stores. |
· | Merchandise expansion: Sales in these product lines, which include footwear, apparel, clothing accessories, fishing products and paddle sports equipment, increased 15.2%, and core product sales were up 2.8%, compared to last year. |
Results for the Third Quarter of 2015
Due to the impact from the calendar shift compared to 2014, our net revenues for the third quarter decreased by $2.1 million, or 1.1%, to $194.4 million compared to $196.5 million for the third quarter of 2014. Comparable store sales decreased by 0.7% for the third quarter. Sales comparisons were negatively impacted this year from a shift in the fiscal calendar following a 53-week fiscal year and decreased sales by approximately 6%. This calendar shift affected our key selling season, moving the selling period leading up to July 4th to the second quarter this year, as compared to July 4th being part of the third quarter last year.
Pre-tax profit margin declined by 0.6% of revenues to 4.4% for the third quarter compared to 5.0% for the third quarter last year. This change primarily was driven by a 0.8% decrease in gross profit margin resulting from deleveraging of raw product cost of goods, as well as, a 0.3% decrease in selling, general and administrative expense.
Net income for the third quarter was $4.9 million, or $0.20 per diluted share, compared to net income of $4.9 million, or $0.20 per diluted share, for the third quarter of 2014.
Results for the first Nine Months of 2015
Net revenues for the 39 weeks ended October 3, 2015 were $574.6 million, an increase of 5.2%, compared to net revenues of $546.3 million for the 39 weeks ended September 27, 2014. Comparable store sales increased by 5.5% for the first nine months of 2015. Adjusted comparable store sales increased 4.9% as sales comparisons benefitted this year from a shift in the fiscal calendar following a 53-week year and increased sales by approximately 0.6% as compared to the first nine months last year.
Pre-tax profit margin improved by 0.6% at 4.8% for the first nine months of 2015 as compared to 4.2% for the first nine months last year. This change primarily was driven by a decrease in selling, general and administrative expense as a percentage of revenues of 0.6%.
Net income for the first nine months was $15.6 million, or $0.63 per diluted share, compared to net income of $12.2 million, or $0.50 per diluted share, for the first nine months last year.
Total inventory at the end of the third quarter was $237.0 million, a $21.8 million, or 10.1%, increase versus the balance at September 27, 2014, and a 13.4% increase on an inventory per square foot basis, primarily to support Q4 holiday sales. Inventory turns for 2015 decreased by 1.2% versus the first nine months of last year.
2015 Guidance
We are updating our previously announced full year guidance:
· | Comparable store sales are expected to be in the range of 3.5% to 5.5%, up from our previously issued range of 1.0% to 4.0%, |
· | Pre-tax income is expected to range from approximately $6.0 million to $8.0 million, compared to our previously issued range of $6.0 million to $11.0 million, |
· | EBITDA is now expected to be in the range of approximately $27.0 million to $29.0 million, compared to our previous range of $26.0 million to $31.0 million, |
· | GAAP diluted earnings per share is expected to be in the range of approximately $0.14 to $0.20, compared to the previously issued range of $0.14 to $0.27 earnings per share, |
· | Capital expenditures for fiscal 2015 are expected to be approximately $25 million, compared to our previously issued range of $22 million to $25 million. |
Our comparable store sales are trending to the high end of our original guidance, however, we are experiencing lower than anticipated gross profits. The lower gross profits have been driven by increased inventory shrinkage and a charge for a product quality issue. Additionally, we had higher than expected clearance sales resulting from the successful launch of our ship from store program and the liquidation of inventory associated with the closure of our stores in Canada.
Investor Conference Call
West Marine will hold a conference call and webcast on Thursday, October 29, 2015, at 1:00 p.m. Eastern Time to discuss its third quarter 2015 results. The live call will be webcast and available in real time on the Internet at westmarine.com under "Investor Relations." Participants may also dial (888) 756-1546 in the United States and Canada and (706) 634-1041 for international calls. Please be prepared to give the conference ID number 52141444.
An audio replay of the call will be available October 29, 2015 at 4:00 p.m. EDT through November 5, 2015 at 11:59 p.m. EDT. The replay number is (855) 859-2056 in the United States and Canada and (404) 537-3406 for international calls. The access code is 52141444.
About West Marine
Founded in 1968 by a sailor, West Marine, Inc. is the largest omni-channel specialty retailer exclusively offering boating gear, apparel and footwear and other waterlife-related products to anyone who enjoys recreational time on or around the water. With over 260 stores located in 38 states, Puerto Rico and Canada and an eCommerce website reaching domestic and international customers, West Marine is the leading waterlife outfitter for cruisers, sailors, anglers, paddle sports enthusiasts and industry service providers. West Marine has everything you need for your life on the water. For more information on West Marine, its products and store locations, visit westmarine.com or call 1-800-BOATING (1-800-262-8464). West Marine’s stock is traded on NASDAQ under the symbol WMAR.
Special Note Regarding Forward-Looking Statements
This press release includes “forward-looking” information (as defined in the Private Securities Litigation Reform Act of 1995), including statements that are predictive or express expectations that depend on future events or conditions that involve risks and uncertainties. These risks and uncertainties include, among other things, expectations related to our earnings and growth in profitability, expectations that our investments will continue to drive our growth strategies, expectations related to our ability to manage our assets, including inventory productivity, and our expectations for full-year 2015 results, as well as facts and assumptions underlying these expectations and projections. In addition, the results presented in this release are preliminary and unaudited, and may change as we finalize our financial statements. Actual results for the third quarter of 2015 and the current fiscal year may differ materially from the preliminary expectations expressed or implied in this release due to various risks, uncertainties or other factors, including the risk factors set forth in West Marine’s annual report on Form 10-K for the fiscal year ended January 3, 2015, as well as the discussion of critical accounting policies in our Form 10-K for the year ended January 3, 2015. Except as required by applicable law, West Marine assumes no responsibility to update any forward-looking statements as a result of new information, future events or otherwise.
Non-GAAP Financial Information
This release references certain financial information not calculated in accordance with accounting principles generally accepted in the United States (“GAAP”), specifically EBITDA. We believe that EBITDA provides a clearer picture of operating performance of the business, given the significant investments we are making in the growth of the business, by eliminating the effects of depreciation and interest expense. EBITDA is not a measure of financial performance under GAAP and may not be defined and calculated by other companies in the same manner. This non-GAAP measure should be considered as a supplement to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP. Management has reconciled this non-GAAP financial measure to the most directly comparable GAAP financial measure in the table set forth below.
Contact: West Marine, Inc.
Deborah Ajeska, Controller
(831) 761-4229
West Marine, Inc.
Condensed Consolidated Balance Sheets
(Unaudited and in thousands, except share data)
October 3, 2015 | September 27, 2014 | |||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash | $ | 60,486 | $ | 63,603 | ||||
Trade receivables, net | 8,565 | 8,460 | ||||||
Merchandise inventories | 236,984 | 215,232 | ||||||
Deferred income taxes | 18,167 | 16,370 | ||||||
Other current assets | 5,597 | 5,666 | ||||||
Total current assets | 329,799 | 309,331 | ||||||
Property and equipment, net | 78,980 | 79,950 | ||||||
Long-term deferred income taxes | 3,580 | 4,055 | ||||||
Other assets | 3,348 | 3,577 | ||||||
TOTAL ASSETS | $ | 415,707 | $ | 396,913 | ||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 38,203 | $ | 34,451 | ||||
Accrued expenses and other | 47,302 | 46,325 | ||||||
Total current liabilities | 85,505 | 80,776 | ||||||
Deferred rent and other | 20,852 | 15,984 | ||||||
Total liabilities | 106,357 | 96,760 | ||||||
Stockholders' equity: | ||||||||
Preferred stock, $.001 par value: 1,000,000 shares authorized; no shares outstanding | - | - | ||||||
Common stock, $.001 par value: 50,000,000 shares authorized; 25,384,450 shares issued and 24,695,561 shares outstanding at October 3, 2015, and 25,014,180 shares issued and 24,325,291 shares outstanding at September 27, 2014. | 25 | 25 | ||||||
Treasury stock | (9,285 | ) | (9,171 | ) | ||||
Additional paid-in capital | 210,743 | 206,700 | ||||||
Accumulated other comprehensive loss | (567 | ) | (534 | ) | ||||
Retained earnings | 108,434 | 103,133 | ||||||
Total stockholders' equity | 309,350 | 300,153 | ||||||
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | 415,707 | $ | 396,913 |
West Marine, Inc.
Condensed Consolidated Statements of Income
(Unaudited and in thousands, except per share data)
13 Weeks Ended | ||||||||||||||||
October 3, 2015 | September 27, 2014 | |||||||||||||||
Net revenues | $ | 194,375 | 100.0 | % | $ | 196,510 | 100.0 | % | ||||||||
Cost of goods sold | 138,115 | 71.1 | % | 138,123 | 70.3 | % | ||||||||||
Gross profit | 56,260 | 28.9 | % | 58,387 | 29.7 | % | ||||||||||
Selling, general and administrative expense | 47,576 | 24.4 | % | 48,512 | 24.7 | % | ||||||||||
Income from operations | 8,684 | 4.5 | % | 9,875 | 5.0 | % | ||||||||||
Interest expense | 107 | 0.1 | % | 99 | 0.0 | % | ||||||||||
Income before income taxes | 8,577 | 4.4 | % | 9,776 | 5.0 | % | ||||||||||
Provision for income taxes | 3,685 | 1.9 | % | 4,839 | 2.5 | % | ||||||||||
Net income | $ | 4,892 | 2.5 | % | $ | 4,937 | 2.5 | % | ||||||||
Net income per common and common equivalent share: | ||||||||||||||||
Basic | $ | 0.20 | $ | 0.20 | ||||||||||||
Diluted | $ | 0.20 | $ | 0.20 | ||||||||||||
Weighted average common and common equivalent | ||||||||||||||||
shares outstanding: | ||||||||||||||||
Basic | 24,694 | 24,323 | ||||||||||||||
Diluted | 24,718 | 24,341 |
39 Weeks Ended | ||||||||||||||||
October 3, 2015 | September 27, 2014 | |||||||||||||||
Net revenues | $ | 574,620 | 100.0 | % | $ | 546,332 | 100.0 | % | ||||||||
Cost of goods sold | 400,618 | 69.7 | % | 380,744 | 69.7 | % | ||||||||||
Gross profit | 174,002 | 30.3 | % | 165,588 | 30.3 | % | ||||||||||
Selling, general and administrative expense | 146,044 | 25.4 | % | 142,268 | 26.0 | % | ||||||||||
Income from operations | 27,958 | 4.9 | % | 23,320 | 4.3 | % | ||||||||||
Interest expense | 338 | 0.1 | % | 322 | 0.1 | % | ||||||||||
Income before income taxes | 27,620 | 4.8 | % | 22,998 | 4.2 | % | ||||||||||
Provision for income taxes | 12,041 | 2.1 | % | 10,772 | 2.0 | % | ||||||||||
Net income | $ | 15,579 | 2.7 | % | $ | 12,226 | 2.2 | % | ||||||||
Net income per common and common equivalent share: | ||||||||||||||||
Basic | $ | 0.63 | $ | 0.51 | ||||||||||||
Diluted | $ | 0.63 | $ | 0.50 | ||||||||||||
Weighted average common and common equivalent | ||||||||||||||||
shares outstanding: | ||||||||||||||||
Basic | 24,599 | 24,202 | ||||||||||||||
Diluted | 24,709 | 24,393 |
West Marine, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited and in thousands)
39 Weeks Ended | ||||||||
October 3, 2015 | September 27, 2014 | |||||||
OPERATING ACTIVITIES: | ||||||||
Net income | $ | 15,579 | $ | 12,226 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 15,385 | 13,378 | ||||||
Share-based compensation | 2,154 | 2,376 | ||||||
Excess tax benefit from share-based compensation | - | (223 | ) | |||||
Deferred income taxes | 878 | (603 | ) | |||||
Provision for doubtful accounts | 62 | 82 | ||||||
Lower of cost or market inventory adjustments | 2,128 | 1,112 | ||||||
Loss on asset disposals | 716 | 325 | ||||||
Changes in assets and liabilities: | ||||||||
Trade receivables | (1,784 | ) | (2,101 | ) | ||||
Merchandise inventories | (24,814 | ) | (13,308 | ) | ||||
Other current assets | 7,624 | 2,990 | ||||||
Other assets | 308 | (261 | ) | |||||
Accounts payable | 5,070 | 12,594 | ||||||
Accrued expenses and other | 5,622 | 9,104 | ||||||
Deferred items and other non-current liabilities | 95 | 1,180 | ||||||
Net cash provided by operating activities | 29,023 | 38,871 | ||||||
INVESTING ACTIVITIES: | ||||||||
Proceeds from sale of property and equipment | 29 | 36 | ||||||
Purchases of property and equipment | (15,640 | ) | (20,832 | ) | ||||
Net cash used in investing activities | (15,611 | ) | (20,796 | ) | ||||
FINANCING ACTIVITIES: | ||||||||
Borrowings on line of credit | 816 | 2,087 | ||||||
Repayments on line of credit | (816 | ) | (2,087 | ) | ||||
Proceeds from exercise of stock options | 1,141 | 1,314 | ||||||
Proceeds from sale of common stock pursuant to Associates Stock Buying Plan | 296 | 318 | ||||||
Excess tax benefit from share-based compensation | - | 223 | ||||||
Treasury shares acquired | (114 | ) | (4,766 | ) | ||||
Net cash provided by (used in) financing activities | 1,323 | (2,911 | ) | |||||
Effect of exchange rate changes on cash | 76 | 31 | ||||||
NET INCREASE IN CASH | 14,811 | 15,195 | ||||||
CASH AT BEGINNING OF PERIOD | 45,675 | 48,408 | ||||||
CASH AT END OF PERIOD | $ | 60,486 | $ | 63,603 | ||||
Other cash flow information: | ||||||||
Cash paid for interest | $ | 220 | $ | 227 | ||||
Cash paid for income taxes, net of refunds of $80 and $1,391 | 44 | 2,067 | ||||||
Non-cash investing activities: | ||||||||
Property and equipment additions in accounts payable | 836 | 1,326 |
West Marine
Reconciliations of Non-GAAP Information
Net Income to Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA")
(Unaudited and in millions)
13 Weeks Ended | 13 Weeks Ended | 39 Weeks Ended | 39 Weeks Ended | |||||||||||||
October 3, 2015 | September 27, 2014 | October 3, 2015 | September 27, 2014 | |||||||||||||
GAAP Net Income | $ | 4.9 | $ | 4.9 | $ | 15.6 | $ | 12.2 | ||||||||
Add Back: | ||||||||||||||||
Interest Expense | 0.1 | 0.1 | 0.3 | 0.3 | ||||||||||||
Depreciation and Amortization | 5.2 | 4.6 | 15.2 | 13.2 | ||||||||||||
Income Tax Expense | 3.7 | 4.8 | 12.0 | 10.8 | ||||||||||||
9.0 | 9.5 | 27.5 | 24.3 | |||||||||||||
EBITDA | $ | 13.9 | $ | 14.4 | $ | 43.1 | $ | 36.5 |
Estimated | 53 Weeks Ended | |||||||||||
Fiscal Year 2015 | January 3, 2015 | |||||||||||
Low | High | |||||||||||
Estimated/Reported GAAP Net Income | $ | 3.6 | $ | 6.5 | $ | 1.9 | ||||||
Add Back Estimated/Reported: | ||||||||||||
Interest Expense | 0.4 | 0.4 | 0.4 | |||||||||
Depreciation and Amortization | 19.6 | 19.6 | 18.2 | |||||||||
Income Tax Expense | 2.4 | 4.5 | 2.1 | |||||||||
22.4 | 24.5 | 20.7 | ||||||||||
Estimated/Reported EBITDA | $ | 26.0 | $ | 31.0 | $ | 22.6 |
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