Attached files
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| 8-K - FORM 8-K - WEST MARINE INC | v451141_8k.htm |
Exhibit 99.1
[West Marine Logo]
WEST MARINE REPORTS THIRD QUARTER 2016 RESULTS
WATSONVILLE, CA, October 25, 2016 - West Marine, Inc. (NASDAQ: WMAR) today reported financial results for the third quarter ended October 1, 2016. The company reported net revenues of $191.9 million in the quarter, a decrease of 1.3% compared to the same period last year. Comparable store sales increased 0.2% year-over-year. Pre-tax income was $7.4 million, compared to pre-tax income of $8.6 million last year in the same period. Earnings per diluted share decreased 5 cents to 15 cents per share.
Matt Hyde, CEO of West Marine, commented: “We are pleased that our growth strategies are resulting in a 24% increase in eCommerce sales and solid top-line gains in our Waterlife stores. At the same time, we continue to make changes to our professional services business to improve its long-term profitability. Despite the challenging retail environment, we’ve increased comparable store sales and product margins and remain on track to achieve a double digit increase in pre-tax income for 2016.”
Further Progress on Growth Strategies
| · | Sales from eCommerce increased by 23.7% compared to the third quarter of 2015 and represented 10.2% of total sales, compared to 8.2% for the same period last year, showing continued progress towards the goal of 15% of total sales. |
| · | Sales through Waterlife stores were 48.0% of total sales compared to 44.0% last year. This year-over-year increase demonstrates the company’s progress towards the goal to deliver 50% of total sales. Waterlife stores have been optimized or revitalized 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 2.9%, while core product sales were down 2.2% compared to the same period last year. |
Results for the Third Quarter of 2016
Net revenues for the quarter ended October 1, 2016 decreased by $2.5 million, or 1.3%, to $191.9 million compared to $194.4 million for the quarter ended October 3, 2015.
Gross margin was steady at 28.9% of revenues, compared to the same period in 2015. Selling, general and administrative (“SG&A”) expense increased by $0.3 million, or 0.6%, compared to the same period in 2015, as higher variable selling and store depreciation expenses, were partially offset by lower variable compensation.
Pre-tax income for the third quarter was $7.4 million, compared to pre-tax income of $8.6 million, for the third quarter of 2015.
Net income for the third quarter was $3.9 million, or $0.15 per share, compared to net income of $4.9 million, or $0.20 per share, for the third quarter of 2015.
Inventory at the end of the third quarter was down $5.3 million compared to the same point in 2015, while accounts payable increased $17.1 million. As of October 1, 2016, the company had cash and cash equivalents totaling $93.9 million compared to $60.5 million at the same point in 2015.
Results for the First Nine Months of 2016
Net revenues for the nine months ended October 1, 2016 decreased by $0.7 million, or 0.1%, to $573.9 million compared to $574.6 million for the nine months ended October 3, 2015. Comparable store sales for the period increased 1.2% compared to the first nine months of 2015.
Gross margin expanded to 30.9% of net revenues, compared to 30.3% during the same period in 2015. SG&A expense increased year-over-year by $2.6 million, primarily as a result of the company’s biennial training meeting and higher benefit expenses. These increases were partially offset by lower payroll expense and a partial settlement received from the Deepwater Horizon Settlement program.
Pre-tax income for the first nine months ended October 1, 2016 was $28.5 million, compared to $27.6 million, for the quarter ended October 3, 2015.
Net income for the first nine months was $16.3 million, or $0.65 per share, compared to net income of $15.6 million, or $0.63 per share, for the first nine months of 2015.
Guidance
Based on information available as of today, the company reiterated full-year 2016 pre-tax income guidance of $9 to $11 million on consistent revenue levels to last year.
Investor Conference Call
West Marine will hold a conference call and webcast on October 25, 2016, at 4:30 p.m. Eastern Time, to discuss its third 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 87936226.
An audio replay of the call will be available October 25, 2016 at 8:00 p.m. Eastern Time through November 1, 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 87936226.
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 and 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 forward-looking statements may include, among other things, expectations related to net income, pre-tax income and profitability, the portion of sales attributable to eCommerce and our Waterlife stores, expectations that investments will continue to drive growth strategies, while improving profit margins, expectations related to cost management and expectations for the outlook for full-year 2016, as well as facts and assumptions underlying these expectations and projections. These statements involve risks and uncertainties that could cause actual results to differ materially from those reflected in such statements. Risks, uncertainties and other factors that may cause actual results to differ materially include those described in the risk factors set forth in West Marine’s annual report on Form 10-K for the fiscal year ended January 2, 2016 and quarterly report on Form 10-Q for the fiscal quarter ended April 2, 2016, as well as the discussion of critical accounting policies in our Form 10-K for the fiscal year ended January 2, 2016. In addition, the financial results presented in this release are preliminary and unaudited, and may change as the company finalizes its financial statements. Actual results for the third quarter of 2016 may differ materially from the preliminary expectations expressed or implied in this release. 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 includes certain financial information not calculated in accordance with accounting principles generally accepted in the United States (“GAAP”), specifically EBITDA, which we define as net income (loss) before interest, depreciation, amortization and tax expenses. 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. EBITDA is set forth in the table below, and management has reconciled this non-GAAP financial measure to net income, the most directly comparable GAAP financial measure in that table. For more information, see our Current Report on Form 8-K, dated and filed on October 25, 2016.
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)
| October 1, 2016 | October 3, 2015 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 93,921 | $ | 60,486 | ||||
| Trade receivables, net | 8,877 | 8,565 | ||||||
| Merchandise inventories, net | 231,679 | 236,984 | ||||||
| Deferred income taxes | - | 5,597 | ||||||
| Other current assets | 16,572 | 18,167 | ||||||
| Total current assets | 351,049 | 329,799 | ||||||
| Property and equipment, net | 80,007 | 78,980 | ||||||
| Long-term deferred income taxes | 4,064 | 3,580 | ||||||
| Other assets | 4,586 | 3,348 | ||||||
| TOTAL ASSETS | $ | 439,706 | $ | 415,707 | ||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 55,312 | $ | 38,203 | ||||
| Accrued payroll | 14,135 | 17,115 | ||||||
| Accrued expenses and other | 34,631 | 30,187 | ||||||
| Total current liabilities | 104,078 | 85,505 | ||||||
| Deferred rent and other | 18,129 | 20,852 | ||||||
| Total liabilities | 122,207 | 106,357 | ||||||
| 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; 25,634,402 shares issued and 24,945,513 shares outstanding at October 1, 2016, and 25,384,450 shares issued and 24,695,561 shares outstanding at October 3, 2015. | 26 | 25 | ||||||
| Treasury stock | (9,434 | ) | (9,285 | ) | ||||
| Additional paid-in capital | 213,753 | 210,743 | ||||||
| Accumulated other comprehensive loss | (545 | ) | (567 | ) | ||||
| Retained earnings | 113,699 | 108,434 | ||||||
| Total stockholders' equity | 317,499 | 309,350 | ||||||
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | 439,706 | $ | 415,707 | ||||
West Marine, Inc.
Condensed Consolidated Statements of Income
(Unaudited and in thousands, except per share data)
| 13 Weeks Ended | ||||||||||||||||
| October 1, 2016 | October 3, 2015 | |||||||||||||||
| Net revenues | $ | 191,852 | 100.0 | % | $ | 194,375 | 100.0 | % | ||||||||
| Cost of goods sold | 136,502 | 71.1 | % | 138,115 | 71.1 | % | ||||||||||
| Gross profit | 55,350 | 28.9 | % | 56,260 | 28.9 | % | ||||||||||
| Selling, general and administrative expense | 47,871 | 25.0 | % | 47,576 | 24.4 | % | ||||||||||
| Income from operations | 7,479 | 3.9 | % | 8,684 | 4.5 | % | ||||||||||
| Interest expense | 104 | 0.1 | % | 107 | 0.1 | % | ||||||||||
| Income before income taxes | 7,375 | 3.8 | % | 8,577 | 4.4 | % | ||||||||||
| Provision for income taxes | 3,522 | 1.8 | % | 3,685 | 1.9 | % | ||||||||||
| Net income | $ | 3,853 | 2.0 | % | $ | 4,892 | 2.5 | % | ||||||||
| Net income per common and common equivalent share: | ||||||||||||||||
| Basic | $ | 0.15 | $ | 0.20 | ||||||||||||
| Diluted | $ | 0.15 | $ | 0.20 | ||||||||||||
| Weighted average common and common equivalent shares outstanding: | ||||||||||||||||
| Basic | 24,941 | 24,694 | ||||||||||||||
| Diluted | 25,021 | 24,718 | ||||||||||||||
| 39 Weeks Ended | ||||||||||||||||
| October 1, 2016 | October 3, 2015 | |||||||||||||||
| Net revenues | $ | 573,856 | 100.0 | % | $ | 574,620 | 100.0 | % | ||||||||
| Cost of goods sold | 396,370 | 69.1 | % | 400,618 | 69.7 | % | ||||||||||
| Gross profit | 177,486 | 30.9 | % | 174,002 | 30.3 | % | ||||||||||
| Selling, general and administrative expense | 148,634 | 25.9 | % | 146,044 | 25.4 | % | ||||||||||
| Income from operations | 28,852 | 5.0 | % | 27,958 | 4.9 | % | ||||||||||
| Interest expense | 325 | 0.0 | % | 338 | 0.1 | % | ||||||||||
| Income before income taxes | 28,527 | 5.0 | % | 27,620 | 4.8 | % | ||||||||||
| Provision for income taxes | 12,203 | 2.2 | % | 12,041 | 2.1 | % | ||||||||||
| Net income | $ | 16,324 | 2.8 | % | $ | 15,579 | 2.7 | % | ||||||||
| Net income per common and common equivalent share: | ||||||||||||||||
| Basic | $ | 0.66 | $ | 0.63 | ||||||||||||
| Diluted | $ | 0.65 | $ | 0.63 | ||||||||||||
| Weighted average common and common equivalent shares outstanding: | ||||||||||||||||
| Basic | 24,864 | 24,599 | ||||||||||||||
| Diluted | 24,947 | 24,709 | ||||||||||||||
West Marine, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited and in thousands)
| 39 Weeks Ended | ||||||||
| October 1, 2016 | October 3, 2015 | |||||||
| OPERATING ACTIVITIES: | ||||||||
| Net income | $ | 16,324 | $ | 15,579 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
| Depreciation and amortization | 16,466 | 15,385 | ||||||
| Share-based compensation | 2,065 | 2,154 | ||||||
| Deferred income taxes | 799 | 878 | ||||||
| Provision for doubtful accounts | 115 | 62 | ||||||
| Lower of cost or market inventory adjustments | 1,962 | 2,128 | ||||||
| Loss on asset disposals | 193 | 716 | ||||||
| Changes in assets and liabilities: | ||||||||
| Trade receivables | (1,850 | ) | (1,784 | ) | ||||
| Merchandise inventories | (10,788 | ) | (24,814 | ) | ||||
| Other current assets | 6,776 | 7,624 | ||||||
| Other assets | (525 | ) | 308 | |||||
| Accounts payable | 28,853 | 5,070 | ||||||
| Accrued payroll | (7,371 | ) | 2,861 | |||||
| Accrued expenses and other | 7,101 | 2,761 | ||||||
| Deferred items and other non-current liabilities | 257 | 95 | ||||||
| Net cash provided by operating activities | 60,377 | 29,023 | ||||||
| INVESTING ACTIVITIES: | ||||||||
| Proceeds from sale of property and equipment | 27 | 29 | ||||||
| Purchases of property and equipment | (14,800 | ) | (15,640 | ) | ||||
| Net cash used in investing activities | (14,773 | ) | (15,611 | ) | ||||
| FINANCING ACTIVITIES: | ||||||||
| Borrowings on line of credit | 951 | 816 | ||||||
| Repayments on line of credit | (927 | ) | (816 | ) | ||||
| Proceeds from sale of common stock pursuant to Associates Stock Buying Plan | 287 | 296 | ||||||
| Proceeds from exercise of stock options | - | 1,141 | ||||||
| Treasury shares acquired | (149 | ) | (114 | ) | ||||
| Net cash provided by financing activities | 162 | 1,323 | ||||||
| Effect of exchange rate changes on cash | (4 | ) | 76 | |||||
| NET INCREASE IN CASH | 45,762 | 14,811 | ||||||
| CASH AT BEGINNING OF PERIOD | 48,159 | 45,675 | ||||||
| CASH AT END OF PERIOD | $ | 93,921 | $ | 60,486 | ||||
| Other cash flow information: | ||||||||
| Cash paid for interest | $ | 225 | $ | 220 | ||||
| Cash paid for income taxes, net of refunds of $2,947 and $80 | (1,587 | ) | 44 | |||||
| Non-cash investing activities: | ||||||||
| Property and equipment additions in accounts payable | 1,842 | 836 | ||||||
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 | 39 Weeks Ended | |||||||||||||||
| October 1, 2016 | October 3, 2015 | October 1, 2016 | October 3, 2015 | |||||||||||||
| GAAP Net Income | $3.9 | $4.9 | $16.3 | $15.6 | ||||||||||||
| Add Back: | ||||||||||||||||
| Interest Expense | 0.1 | 0.1 | 0.3 | 0.3 | ||||||||||||
| Depreciation and Amortization * | 5.4 | 5.2 | 16.3 | 15.2 | ||||||||||||
| Income Tax Expense | 3.5 | 3.7 | 12.2 | 12.0 | ||||||||||||
| 9.0 | 9.0 | 28.8 | 27.5 | |||||||||||||
| EBITDA | $ | 12.9 | $ | 13.9 | $ | 45.1 | $ | 43.1 | ||||||||
* Included in cost of goods sold and SG&A. Amortization of deferred financing costs related to our revolving credit facility are in interest expense.