WMAR West Marine, Inc.

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):  July 30, 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 July 30, 2015, West Marine, Inc. issued a press release announcing its condensed consolidated financial results for the 13-week period (second quarter) ended July 4, 2015 and for the 26-week period ended July, 4, 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, revenues and gross profit, 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 filed as Exhibit 99.1 to this report. 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.

 

The information required to be 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.

 

 

Item 9.01.

Financial Statements and Exhibits.

 

(a)

Not Applicable.

 

(b)

Not Applicable.

 

(c)

Not Applicable.

 

(d)

Exhibit:

 

99.1

Press Release dated July 30, 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: July 30, 2015	By:	/s/ Matthew L. Hyde
		Matthew L. Hyde
		President and
		Chief Executive Officer

 

 

 

 

 

 

 Exhibit 99.1

[West Marine Logo]

 

WEST MARINE REPORTS DOUBLE-DIGIT EARNINGS GROWTH FOR THE SECOND QUARTER 2015

 

WATSONVILLE, CA, July 30, 2015 - West Marine, Inc. (Nasdaq: WMAR) today reported improved financial results for the second quarter ended July 4, 2015.

 

·

Net revenues were $253.2 million, an increase of 7.1% compared to last year.

·

Comparable store sales increased by 7.0%. The retail calendar shift impact on comparable store sales was approximately 4%.

·

Pre-tax income was $37.1 million, compared to pre-tax income of $32.4 million last year.

·

Earnings before interest, taxes, depreciation and amortization (“EBITDA”) for the second quarter was $42.3 million, compared to EBITDA of $37.1 million for the same period last year.

·

Net income and earnings per share were $20.9 million and $0.85, respectively, compared to net income of $18.3 million and $0.75 per share last year, a 14.4% increase.

·

Fiscal 2015 pre-tax guidance is reaffirmed.

·

Remained debt-free at quarter-end with $115.5 million available on our revolving credit line at the end of the period.

 

Matt Hyde, West Marine’s CEO, commented: “We’ve strengthened our business and delivered double-digit earnings growth and solid comparable store sales increases. Our investments are driving growth in retail, wholesale, and online, with positive results in all of our regions and across both core and merchandise expansion categories. I thank our associates for their continued hard work, commitment, and excellent results.”

 

Progress on our growth strategies year-to-date was as follows:

·

eCommerce: Sales from our eCommerce website increased by 27.0% compared to last year and represented 8.4% towards our end of 2019 goal of 15% of total sales, compared to 7.2% for the same period last year.

·

Store optimization: Sales through our optimized stores increased to 41.7% of total sales compared to 41.5% 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 by 20.2%, with core product sales up 6.3%, compared to last year.

 

YTD Results

 

Net revenues for the 26 weeks ended July 4, 2015 were $380.2 million, an increase of 8.7%, compared to net revenues of $349.8 million for the 26 weeks ended June 28, 2014. Comparable store sales increased by 9.0% for the first six months of 2015 versus the 1.1% decrease reported for the same period last year. Approximately 4% of this was attributable to the retail calendar shift in fiscal 2014 from a 53-week fiscal year to a 52-week fiscal year in fiscal 2015, which had a meaningful impact on the company’s seasonal business.

 

Pre-tax profit margin improved by 1.2% of revenues to 5.0% for the first six months compared to 3.8% for the first six months last year. This change primarily was driven by a decrease in selling, general and administrative expense of 0.9% of revenues, as well as a 0.4% increase in gross profit margin resulting from leverage of fixed costs, including occupancy.

 

Net income for the first six months was $10.7 million, or $0.43 per diluted share, compared to net income of $7.3 million, or $0.30 per diluted share, for the first six months last year.

 

Q2 Results

 

Net revenues for the second quarter increased by $16.7 million, or 7.1%, to $253.2 million compared to $236.5 million for the second quarter of 2014.

 

Pre-tax profit margin improved by 1.0% of revenues to 14.7% for the second quarter compared to 13.7% for the second quarter last year. This change was driven by a 1.0% increase in gross profit margin resulting from leverage of fixed costs, including occupancy, offset by a 0.1% increase in selling, general and administrative expense.

 

 

Net income for the second quarter was $20.9 million, or $0.85 per diluted share, compared to net income of $18.3 million, or $0.75 per diluted share, for the second quarter of 2014.

 

Total inventory at the end of the second quarter was $258.1 million, a $14.5 million, or 6.0% increase versus the balance at June 28, 2014, and a 6.7% increase on an inventory per square foot basis. Inventory turns for 2015 increased to 2.7% versus the first six months of last year.

 

2015 Guidance

 

We are reaffirming our previously announced full year guidance:

·

Pre-tax income in a range of approximately $6.0 million to $11.0 million;

·

EBITDA in the range of approximately $26.0 million to $31.0 million;

·

GAAP diluted earnings per share in the range of approximately $0.14 to $0.27;

·

Comparable store sales in the range from 1.0% to 4.0%; and

·

Capital expenditures for fiscal 2015 to be in the range of approximately $22 million to $25 million.

 

Investor Conference Call

 

West Marine will hold a conference call and webcast on Thursday, July 30, 2015, at 1:00 p.m. Eastern Time (EDT) to discuss its second 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 61323540.

 

An audio replay of the call will be available July 30, 2015 at 4:00 p.m. EDT through August 6, 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 61323540.

 

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 270 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 second 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 and Principal Financial Officer

(831) 761-4229

 

 

 

 

West Marine, Inc.

Condensed Consolidated Balance Sheets

(Unaudited and in thousands, except share data)

 

		July 4, 2015				June 28, 2014
ASSETS
Current assets:
Cash		$	44,159			$	38,934
Trade receivables, net			10,690				10,970
Merchandise inventories			258,130				243,588
Deferred income taxes			5,252				4,276
Other current assets			22,388				22,149
Total current assets			340,619				319,917
Property and equipment, net			81,365				79,595
Long-term deferred income taxes			3,439				4,829
Other assets			3,861				3,595
TOTAL ASSETS		$	429,284			$	407,936
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable		$	53,157			$	50,242
Accrued expenses and other			51,658				46,988
Total current liabilities			104,815				97,230
Deferred rent and other			20,605				16,020
Total liabilities			125,420				113,250
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; 25,375,312 shares issued and 24,686,423
shares outstanding at July 4, 2015, and  25,004,808 shares issued and 24,315,919 shares outstanding
at June 28, 2014.			25				25
Treasury stock			(9,241	)			(9,128	)
Additional paid-in capital			210,097				206,149
Accumulated other comprehensive loss			(558	)			(556	)
Retained earnings			103,541				98,196
Total stockholders' equity			303,864				294,686
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY		$	429,284			$	407,936

 

 

 

West Marine, Inc.

Condensed Consolidated Statements of Income

(Unaudited and in thousands, except per share data)

 

		13 Weeks Ended
		July 4, 2015								June 28, 2014
Net revenues		$	253,177				100.0	%		$	236,483				100.0	%
Cost of goods sold			162,417				64.2	%			154,205				65.2	%
Gross profit			90,760				35.8	%			82,278				34.8	%
Selling, general and administrative expense			53,492				21.1	%			49,715				21.0	%
Income from operations			37,268				14.7	%			32,563				13.8	%
Interest expense			120				0.0	%			115				0.1	%
Income before income taxes			37,148				14.7	%			32,448				13.7	%
Provision for income taxes			16,203				6.4	%			14,144				6.0	%
Net income		$	20,945				8.3	%		$	18,304				7.7	%
Net income per common and common equivalent share:
Basic		$	0.85							$	0.76
Diluted		$	0.85							$	0.75
Weighted average common and common equivalent
shares outstanding:
Basic			24,617								24,142
Diluted			24,684								24,314

 

 

		26 Weeks Ended
		July 4, 2015								June 28, 2014
Net revenues		$	380,244				100.0	%		$	349,821				100.0	%
Cost of goods sold			262,502				69.0	%			242,620				69.4	%
Gross profit			117,742				31.0	%			107,201				30.6	%
Selling, general and administrative expense			98,467				25.9	%			93,756				26.8	%
Income from operations			19,275				5.1	%			13,445				3.8	%
Interest expense			232				0.1	%			223				0.0	%
Income before income taxes			19,043				5.0	%			13,222				3.8	%
Provision for income taxes			8,357				2.2	%			5,933				1.7	%
Net income		$	10,686				2.8	%		$	7,289				2.1	%
Net income per common and common equivalent share:
Basic		$	0.44							$	0.30
Diluted		$	0.43							$	0.30
Weighted average common and common equivalent
shares outstanding:
Basic			24,551								24,141
Diluted			24,705								24,418

 

 

 

West Marine, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited and in thousands)

 

		26 Weeks Ended
		July 4, 2015				June 28, 2014
OPERATING ACTIVITIES:
Net income		$	10,686			$	7,289
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization			10,159				8,683
Share-based compensation			1,491				1,803
Excess tax benefit from share-based compensation			-				(225	)
Deferred income taxes			1,295				479
Provision for doubtful accounts			7				71
Lower of cost or market inventory adjustments			1,291				1,263
Loss on asset disposals			716				220
Changes in assets and liabilities:
Trade receivables			(3,854	)			(4,600	)
Merchandise inventories			(45,123	)			(41,815	)
Other current assets			3,403				(2,789	)
Other assets			(123	)			(228	)
Accounts payable			20,508				28,717
Accrued expenses and other			10,043				9,795
Deferred items and other non-current liabilities			(130	)			750
Net cash provided by operating activities			10,369				9,413
INVESTING ACTIVITIES:
Proceeds from sale of property and equipment			24				20
Purchases of property and equipment			(13,321	)			(16,032	)
Net cash used in investing activities			(13,297	)			(16,012	)
FINANCING ACTIVITIES:
Borrowings on line of credit			455				1,165
Repayments on line of credit			(455	)			(1,165	)
Proceeds from exercise of stock options			1,141				1,308
Proceeds from sale of common stock pursuant to Associates Stock Buying Plan			296				318
Excess tax benefit from share-based compensation			-				225
Treasury shares acquired			(70	)			(4,723	)
Net cash provided by (used in) financing activities			1,367				(2,872	)
Effect of exchange rate changes on cash			45				(3	)
NET DECREASE IN CASH			(1,516	)			(9,474	)
CASH AT BEGINNING OF PERIOD			45,675				48,408
CASH AT END OF PERIOD		$	44,159			$	38,934
Other cash flow information:
Cash paid for interest		$	145			$	148
Cash paid (received) for income taxes, net of refunds of $80 and $1,391			36				(528	)
Non-cash investing activities:
Property and equipment additions in accounts payable			1,320				1,657

 

 

 

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				26 Weeks Ended				26 Weeks Ended
		July 4, 2015				June 28, 2014				July 4, 2015				June 28, 2014
GAAP Net Income		$	20.9			$	18.3			$	10.7			$	7.3
Add Back:
Interest Expense			0.1				0.1				0.2				0.2
Depreciation and Amortization			5.1				4.6				10.2				8.7
Income Tax Expense			16.2				14.1				8.4				5.9
			21.4				18.8				18.8				14.8
EBITDA		$	42.3			$	37.1			$	29.5			$	22.1

 

 

		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