Form 8-K WEST MARINE INC For: Apr 28

 

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): April 28, 2016

 

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 April 28, 2016, West Marine, Inc. issued a press release announcing its condensed consolidated financial results for the 13-week period (first quarter) ended April 2, 2016. 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.

 

 

Item 9.01.

Financial Statements and Exhibits.

 

(a)

Not Applicable.

 

(b)

Not Applicable.

 

(c)

Not Applicable.

 

(d)

Exhibit:

 

99.1

Press Release dated April 28, 2016 (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:  April 28, 2016	By:	/s/ Matthew L. Hyde
		Matthew L. Hyde
		President and
		Chief Executive Officer

  

 

Exhibit 99.1

[West Marine Logo]

  

WEST MARINE REPORTS FIRST QUARTER 2016 RESULTS

 

WATSONVILLE, CA, April 28, 2016 - West Marine, Inc. (NASDAQ: WMAR) today reported financial results for the first quarter ended April 2, 2016. The company reported net revenues of $130.4 million in the quarter, an increase of 2.6% compared to the same period last year. Comparable store sales increased 2.7%. Pre-tax loss was $15.2 million compared to a pre-tax loss of $18.1 million last year.

 

Matt Hyde, CEO of West Marine, commented “We are pleased with the first quarter comparable store sales, including a 32% increase in eCommerce revenue. The team continues to succeed in positioning product and services to meet the changing needs of our customers, while at the same time improving profitability. This resulted in our gross margin expanding by 400 basis points compared to the same period last year.”

 

Further Progress on Growth Strategies:

·

Sales from eCommerce increased by 32.3% compared to the first quarter of 2015 and represented 11.9% of total sales, compared to 9.3% for the same period last year, showing progress towards the goal of 15% of total sales.

·

Sales through waterlife stores were 52.8% of total sales compared to 49.4% last year. This year-over-year increase in seasonally stronger results demonstrates the company’s progress towards the goal to deliver 50% of total sales through stores that have been optimized to offer a broader selection of merchandise than traditional stores that focus on core boating products.

·

Sales in merchandise expansion product lines, which include footwear, apparel, clothing accessories, fishing products and paddlesports equipment, increased 6.9%, and core product sales were up 0.9%, compared to the same period last year.

 

Results for the First Quarter of 2016

 

Net revenues for the 13 weeks ended April 2, 2016 increased by $3.3 million, or 2.6%, to $130.4 million compared to $127.1 million for the 13 weeks ended April 4, 2015.

 

Gross margin expanded to 25.2% of revenue compared to 21.2% during the same period in 2015, as higher revenue leveraged building and supply chain expenses as well as favorable improvements in vendor costs. Selling, general and administrative expense increased year-over-year as a result of higher expenses in the quarter from the company’s biennial training meeting and higher benefit expenses.

 

Net loss for the first quarter was $9.1 million, or $0.37 per share, compared to net loss of $10.3 million, or $0.42 per share, for the first quarter of 2015.

 

Guidance

 

The company reiterated guidance of total revenue growth in the 1% to 4% range and pre-tax profit growth of 50% over 2015 full-year results.

 

Investor Conference Call

 

West Marine will hold a conference call and webcast on Thursday, April 28, 2016, at 4:30 p.m. Eastern Time to discuss its first quarter 2016 results. The live call will be webcast and available in real time on the internet at westmarine.com under “Investor Relations.” Participants also may 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 94007666.

 

An audio replay of the call will be available April 28, 2016 at 8:00 p.m. Eastern Time through May 5, 2016 at 11:59 p.m. Eastern Time. The replay number is (855) 859-2056 in the United States and Canada and (404) 537-3406 for international calls. The access code is 94007666.

 

About West Marine

 

Each person has a unique connection to the water. At West Marine (westmarine.com, NASDAQ: WMAR), our knowledge, enthusiasm and products prepare waterlife adventurers to foster that connection and explore their passions. With more than 250 stores located in 38 states and Puerto Rico, an eCommerce website reaching domestic, international and professional customers, West Marine is recognized as a leading Waterlife Outfitter for cruisers, sailors, anglers and paddlesports enthusiasts. Since first opening our doors in 1968, West Marine associates continue to share the same love for the water as our customers and provide helpful advice on the gear and gadgets they need to be safe and have fun.

 

 

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 earnings and growth in profitability, expectations that investments will continue to drive growth strategies, while improving profit margins, expectations related to cost management and expectations for the outlook for 2016, 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 the company finalizes financial statements. Actual results for the first quarter 2016 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 2, 2016, as well as the discussion of critical accounting policies in our Form 10-K for the year ended January 2, 2016. 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 measures in the table set forth below.

 

Contact: West Marine, Inc.

Jeffrey Lasher, Executive Vice President and Chief Financial Officer

(831) 761-4229

 

 

West Marine, Inc.

Condensed Consolidated Balance Sheets

(Unaudited and in thousands, except share data)      

 

		April 2, 2016				April 4, 2015
ASSETS
Current assets:
Cash and cash equivalents		$	22,351			$	6,637
Trade receivables, net			9,076				9,639
Merchandise inventories			268,594				256,633
Deferred income taxes			-				5,487
Other current assets			27,141				33,052
Total current assets			327,162				311,448
Property and equipment, net			81,967				81,937
Long-term deferred income taxes			4,127				3,887
Other assets			4,256				3,898
TOTAL ASSETS		$	417,512			$	401,170
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable		$	66,905			$	53,525
Accrued payroll			13,627				13,948
Accrued expenses and other			28,595				31,262
Total current liabilities			109,127				98,735
Deferred rent and other			17,854				19,920
Total liabilities			126,981				118,655
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; 25,520,555 shares issued and 24,831,666
shares outstanding at April 2, 2016, and  25,239,559 shares issued and 24,550,670 shares outstanding
at April 4, 2015.			26				25
Treasury stock			(9,375	)			(9,205	)
Additional paid-in capital			212,167				209,545
Accumulated other comprehensive loss			(549	)			(446	)
Retained earnings			88,262				82,596
Total stockholders' equity			290,531				282,515
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY		$	417,512			$	401,170

 

 

West Marine, Inc.

Condensed Consolidated Statements of Operations

(Unaudited and in thousands, except per share data)            

 

		13 Weeks Ended
		April 2, 2016								April 4, 2015
Net revenues		$	130,405				100.0	%		$	127,067				100.0	%
Cost of goods sold			97,500				74.8	%			100,085				78.8	%
Gross profit			32,905				25.2	%			26,982				21.2	%
Selling, general and administrative expense			48,043				36.8	%			44,975				35.4	%
Loss from operations			(15,138	)			(11.6	)%			(17,993	)			(14.2	)%
Interest expense			105				0.1	%			112				0.0	%
Loss before income taxes			(15,243	)			(11.7	)%			(18,105	)			(14.2	)%
Income tax benefit			(6,130	)			(4.7	)%			(7,846	)			(6.1	)%
Net loss		$	(9,113	)			(7.0	)%		$	(10,259	)			(8.1	)%
Net loss per common and common equivalent share:
Basic		$	(0.37	)						$	(0.42	)
Diluted		$	(0.37	)						$	(0.42	)
Weighted average common and common equivalent
shares outstanding:
Basic			24,766								24,486
Diluted			24,766								24,486

 

 

West Marine, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited and in thousands)      

 

		13 Weeks Ended
		April 2, 2016				April 4, 2015
OPERATING ACTIVITIES:
Net loss		$	(9,113	)		$	(10,259	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization			5,452				5,025
Share-based compensation			680				685
Deferred income taxes			456				(175	)
Provision for doubtful accounts			3				55
Lower of cost or market inventory adjustments			737				1,423
Loss on asset disposals			22				144
Changes in assets and liabilities:
Trade receivables			(1,938	)			(2,851	)
Merchandise inventories			(46,478	)			(43,759	)
Other current assets			(3,796	)			(7,261	)
Other assets			(97	)			3
Accounts payable			41,137				20,152
Accrued expenses and other			(6,705	)			4,150
Deferred items and other non-current liabilities			262				(28	)
Net cash used in operating activities			(19,378	)			(32,696	)
INVESTING ACTIVITIES:
Proceeds from sale of property and equipment			11				17
Purchases of property and equipment			(6,348	)			(7,507	)
Net cash used in investing activities			(6,337	)			(7,490	)
FINANCING ACTIVITIES:
Borrowings on line of credit			438				366
Repayments on line of credit			(438	)			(366	)
Proceeds from exercise of stock options			-				1,136
Treasury shares acquired			(89	)			(34	)
Net cash provided by (used in) financing activities			(89	)			1,102
Effect of exchange rate changes on cash			(4	)			46
NET DECREASE IN CASH			(25,808	)			(39,038	)
CASH AT BEGINNING OF PERIOD			48,159				45,675
CASH AT END OF PERIOD		$	22,351			$	6,637
Other cash flow information:
Cash paid for interest		$	82			$	69
Cash (refunded) paid for income taxes, net of refunds of $2,937 and $80			(2,807	)			7
Non-cash investing activities:
Property and equipment additions in accounts payable			1,150				596

 

 

West Marine

Reconciliations of Non-GAAP Information

Net Loss to Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA")

(Unaudited and in millions)

 

		13 Weeks Ended
		April 2, 2016				April 4, 2015
GAAP Net Income		$	(9.1	)		$	(10.3	)
Add Back:
Interest Expense			0.1				0.1
Depreciation and Amortization			5.4				5.0
Income Tax Expense			(6.1	)			(7.8	)
			(0.6	)			(2.7	)
EBITDA		$	(9.7	)		$	(13.0	)

 

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