West Marine, Inc. (NASDAQ:WMAR) today reported financial results
for the fourth quarter and fiscal year ended December 31, 2016
(“fiscal 2016”).
Full Year 2016 Results
- Net income and earnings per diluted share were $6.5 million and
$0.26, respectively, compared to net income and earnings per
diluted share of $4.5 million and $0.18, respectively, last year,
representing a 44.6% increase in net income.
- Net revenues for fiscal 2016 were $703.4 million, a decrease of
0.2% compared to fiscal 2015.
- Comparable store sales increased by 0.8% in fiscal 2016.
- Income before income taxes was $11.6 million, an increase of
59.1% compared to fiscal 2015.
- Earnings before interest expense, income tax expense,
depreciation and amortization (“EBITDA”) increased to $34.0
million, compared to EBITDA of $28.3 million last year.
- Cash and cash equivalents totaled $76.1 million at the end of
the year.
Matt Hyde, West Marine’s CEO, commented: “I’m pleased with
how the team has continued to execute on our strategies while
driving higher profitability. Of note, our overall pre-tax profits
increased 59% on flat sales. These results reflect our vigilance in
improving the customer experience, increasing our margins by
closing under-performing stores, implementing targeted expense
structure improvements, focusing on waterlife store expansion and
improving our omni-channel business.”
Further Progress on Growth Strategies
Progress on the company’s growth strategies for fiscal 2016 was
as follows:
- Sales from our eCommerce websites increased by 19.7% compared
to last year and represented 11.4% of total sales, compared to 9.5%
for the same period last year, showing progress towards our goal of
15% of total sales.
- Sales through waterlife stores were 50.1% of total sales
compared to 46.0% last year. This year-over-year increase resulted
in the company achieving its goal to deliver 50% of total sales
through these stores that have been optimized to offer a broader
selection of merchandise than our traditional stores that focus on
core boating products.
- For fiscal 2016 compared to fiscal 2015, sales in merchandise
expansion product lines, which include footwear, apparel, clothing
accessories, fishing products and paddlesports equipment, increased
2.0%, while core product sales declined by 1.0%.
Results for Fiscal Year 2016
Net revenues for the 52 weeks ended December 31, 2016 were
$703.4 million, a decrease of 0.2%, compared to net revenues of
$704.8 million for the 52 weeks ended January 2, 2016. For fiscal
2016, comparable store sales increased by 0.8%, which was offset by
store closures during the year.
Gross profit for fiscal 2016 increased 1.8% from $202.0 million
in fiscal 2015 to $205.7 million in fiscal 2016, while SG&A
expenses decreased 0.3% from $194.3 million to $193.6 million.
Pre-tax profit margin improved by 0.6%, to 1.6% for fiscal 2016,
as compared to 1.0% last year. This change primarily was driven by
a 0.5% increase in gross profit margin.
Net income for fiscal 2016 was $6.5 million, or $0.26 per
diluted share, compared to net income of $4.5 million, or $0.18 per
diluted share, last year.
Results for the Fourth Quarter of 2016
Net revenues for the 13 weeks ended December 31, 2016 decreased
by $0.7 million, or 0.5%, to $129.5 million compared to $130.2
million for the 13 weeks ended January 2, 2016. Comparable store
sales decreased 1.0% when comparing the fourth quarter 2016 with
the fourth quarter 2015.
Gross profit for the fourth quarter 2016 increased 0.5% from
$28.0 million in the fourth quarter 2015 to $28.2 million in the
fourth quarter 2016, while SG&A expenses decreased 6.8% from
$48.3 million to $45.0 million.
Net loss for the fourth quarter was $9.8 million, or $0.39 per
basic share, compared to net loss of $11.1 million, or $0.45 per
basic share, for the fourth quarter of 2015.
Fiscal 2017 Outlook
The company expects net revenue to increase by 1% to 2% in
fiscal 2017. This revenue growth, combined with continued
expense control, is expected to improve profitability, and the
company expects pre-tax profits to be up from $11.6 million in 2016
to a range of $13.0 to $16.0 million in 2017.
Matt Hyde continued: “We are looking forward to 2017 as a number
of our initiatives continue to produce results for the company
overall. We project an increase in profitability driven by cost
controls, incremental revenue gains and improvements in margin
management.”
Investor Conference Call
West Marine will hold a conference call and webcast on Thursday,
February 23, 2017, at 4:30 p.m. Eastern Time to discuss its fourth
quarter and fiscal year 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
66546939.
An audio replay of the call will be available February 23, 2017
at 8:00 p.m. Eastern Time through March 2, 2017 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 66546939.
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 and
international customers, and a wholesale business for our
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 growth in net revenues and
profitability, expectations that our investments will continue to
drive our growth strategies, while improving profit margins,
expectations related to our ability to manage costs, 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 fourth quarter and
fiscal year 2016 results and for 2017 may differ materially from
the preliminary 2016 and current 2017 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 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 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 helpful picture of the 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 net income (loss), the most directly
comparable GAAP financial measure in the table set forth below. For
more information, see our Current Report on Form 8-K filed February
23, 2017.
West Marine, Inc. |
|
|
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|
Consolidated Balance Sheets |
|
|
|
|
(Unaudited
and in thousands, except share data) |
|
|
|
|
|
|
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|
|
|
|
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|
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|
December 31, 2016 |
|
January 2, 2016 |
|
ASSETS |
|
|
|
|
|
|
Current
assets: |
|
|
|
|
|
|
|
Cash and
cash equivalents |
|
$ |
76,141 |
|
|
$ |
48,159 |
|
|
|
Trade receivables, net |
|
|
6,413 |
|
|
|
7,141 |
|
|
|
Merchandise inventories, net |
|
212,106 |
|
|
|
222,853 |
|
|
|
Other current assets |
|
|
20,568 |
|
|
|
23,571 |
|
|
|
|
Total
current assets |
|
|
315,228 |
|
|
|
301,724 |
|
|
|
|
|
|
|
|
|
|
|
|
Property
and equipment, net |
|
82,517 |
|
|
|
81,561 |
|
|
|
Long-term
deferred income taxes |
|
3,862 |
|
|
|
4,321 |
|
|
|
Other
assets |
|
|
|
4,495 |
|
|
|
4,209 |
|
|
TOTAL ASSETS |
|
|
$ |
406,102 |
|
|
$ |
391,815 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY |
|
|
|
|
|
Current
liabilities: |
|
|
|
|
|
|
Accounts
payable |
|
$ |
32,999 |
|
|
$ |
26,275 |
|
|
|
Accrued
payroll |
|
|
15,609 |
|
|
|
21,506 |
|
|
|
Accrued
expenses and other |
|
29,510 |
|
|
|
27,245 |
|
|
|
|
Total
current liabilities |
|
|
78,118 |
|
|
|
75,026 |
|
|
|
|
|
|
|
|
|
|
|
|
Deferred
rent and other |
|
|
19,253 |
|
|
|
17,330 |
|
|
|
|
Total
liabilities |
|
|
97,371 |
|
|
|
92,356 |
|
|
|
|
|
|
|
|
|
|
|
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; 25,690,484
shares issued and 25,001,595 |
|
|
|
|
|
shares outstanding at December 31, 2016, and 25,421,685 shares
issued and 24,732,796 shares outstanding |
|
|
|
|
at
January 2, 2016 |
|
|
26 |
|
|
|
25 |
|
|
|
Treasury
stock |
|
|
(9,461 |
) |
|
|
(9,285 |
) |
|
|
Additional
paid-in capital |
|
|
214,790 |
|
|
|
211,663 |
|
|
|
Accumulated
other comprehensive loss |
|
(534 |
) |
|
|
(319 |
) |
|
|
Retained
earnings |
|
|
103,910 |
|
|
|
97,375 |
|
|
|
|
Total stockholders' equity |
|
308,731 |
|
|
|
299,459 |
|
|
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY |
$ |
406,102 |
|
|
$ |
391,815 |
|
|
|
|
|
|
|
|
|
|
|
West Marine, Inc. |
|
|
|
|
|
Consolidated Statements of Operations |
|
|
|
|
|
(Unaudited and in thousands, except per share data) |
|
|
|
|
|
|
|
|
|
|
|
|
|
13 Weeks Ended |
|
|
December 31, 2016 |
|
January 2, 2016 |
Net
revenues |
$ |
129,515 |
|
100.0 |
% |
|
$ |
130,205 |
|
100.0 |
% |
Cost of
goods sold |
|
101,341 |
|
78.2 |
% |
|
|
102,162 |
|
78.5 |
% |
|
Gross profit |
|
28,174 |
|
21.8 |
% |
|
|
28,043 |
|
21.5 |
% |
Selling,
general and administrative expense |
|
44,990 |
|
34.8 |
% |
|
|
48,256 |
|
37.0 |
% |
|
Loss
from operations |
|
(16,816 |
) |
(13.0 |
)% |
|
|
(20,213 |
) |
(15.5 |
)% |
Interest
expense |
|
108 |
|
0.1 |
% |
|
|
113 |
|
0.1 |
% |
|
Loss
before income taxes |
|
(16,924 |
) |
(13.1 |
)% |
|
|
(20,326 |
) |
(15.6 |
)% |
Benefits from income taxes |
|
(7,135 |
) |
(5.5 |
)% |
|
|
(9,268 |
) |
(7.1 |
)% |
|
Net loss |
$ |
(9,789 |
) |
(7.6 |
)% |
|
$ |
(11,058 |
) |
(8.5 |
)% |
|
|
|
|
|
|
|
Net loss per common and common equivalent share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
$ |
(0.39 |
) |
|
|
$ |
(0.45 |
) |
|
|
Diluted |
$ |
(0.39 |
) |
|
|
$ |
(0.45 |
) |
|
|
|
|
|
|
|
|
Weighted
average common and common equivalent |
|
|
|
|
|
shares outstanding: |
|
|
|
|
|
|
Basic |
|
24,980 |
|
|
|
|
24,721 |
|
|
|
Diluted |
|
24,980 |
|
|
|
|
24,721 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
52 Weeks Ended |
|
|
December 31, 2016 |
|
January 2, 2016 |
Net
revenues |
$ |
703,371 |
|
100.0 |
% |
|
$ |
704,825 |
|
100.0 |
% |
Cost of
goods sold |
|
497,711 |
|
70.8 |
% |
|
|
502,780 |
|
71.3 |
% |
|
Gross profit |
|
205,660 |
|
29.2 |
% |
|
|
202,045 |
|
28.7 |
% |
Selling,
general and administrative expense |
|
193,624 |
|
27.5 |
% |
|
|
194,299 |
|
27.6 |
% |
|
Income
from operations |
|
12,036 |
|
1.7 |
% |
|
|
7,746 |
|
1.1 |
% |
Interest
expense |
|
432 |
|
0.1 |
% |
|
|
452 |
|
0.1 |
% |
|
Income
before income taxes |
|
11,604 |
|
1.6 |
% |
|
|
7,294 |
|
1.0 |
% |
Provision for income taxes |
|
5,069 |
|
0.7 |
% |
|
|
2,774 |
|
0.4 |
% |
|
Net income |
$ |
6,535 |
|
0.9 |
% |
|
$ |
4,520 |
|
0.6 |
% |
|
|
|
|
|
|
|
Net income per common and common equivalent share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
$ |
0.26 |
|
|
|
$ |
0.18 |
|
|
|
Diluted |
$ |
0.26 |
|
|
|
$ |
0.18 |
|
|
|
|
|
|
|
|
|
Weighted
average common and common equivalent |
|
|
|
|
|
shares outstanding: |
|
|
|
|
|
|
Basic |
|
24,893 |
|
|
|
|
24,629 |
|
|
|
Diluted |
|
24,988 |
|
|
|
|
24,734 |
|
|
|
|
|
|
|
|
|
West Marine, Inc. |
|
|
|
|
|
Consolidated Statements of Cash Flows |
|
|
|
|
(Unaudited
and in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
52 Weeks Ended |
|
|
|
|
|
|
December 31, 2016 |
|
January 2, 2016 |
|
|
|
|
|
|
|
|
|
|
OPERATING ACTIVITIES: |
|
|
|
|
|
|
Net income |
|
|
$ |
6,535 |
|
|
$ |
4,520 |
|
|
|
Adjustments
to reconcile net income to net cash provided by operating
activities: |
|
|
|
|
|
|
Depreciation and amortization |
|
22,166 |
|
|
|
20,687 |
|
|
|
|
Share-based
compensation |
|
2,779 |
|
|
|
2,787 |
|
|
|
|
Deferred
income taxes |
|
|
2,453 |
|
|
|
1,780 |
|
|
|
|
Provision
for doubtful accounts |
|
128 |
|
|
|
208 |
|
|
|
|
Lower of cost or market inventory adjustments |
|
2,223 |
|
|
|
1,832 |
|
|
|
|
(Gain)/loss
on asset disposals |
|
(336 |
) |
|
|
855 |
|
|
|
Changes in
assets and liabilities: |
|
|
|
|
|
|
Trade receivables |
|
|
600 |
|
|
|
(507 |
) |
|
|
|
Merchandise inventories |
|
8,524 |
|
|
|
(10,387 |
) |
|
|
|
Other
current assets |
|
|
2,789 |
|
|
|
2,220 |
|
|
|
|
Other
assets |
|
|
(481 |
) |
|
|
(379 |
) |
|
|
|
Accounts
payable |
|
|
5,929 |
|
|
|
(7,901 |
) |
|
|
|
Accrued
payroll |
|
|
(5,897 |
) |
|
|
7,252 |
|
|
|
|
Accrued
expenses and other |
|
2,003 |
|
|
|
(141 |
) |
|
|
|
Deferred
items and other non-current liabilities |
|
(70 |
) |
|
|
480 |
|
|
|
Net cash
provided by operating activities |
|
49,345 |
|
|
|
23,306 |
|
|
|
|
|
|
|
|
|
|
|
INVESTING ACTIVITIES: |
|
|
|
|
|
|
|
Proceeds
from sale of property and equipment |
|
884 |
|
|
|
67 |
|
|
|
|
Purchases
of property and equipment |
|
(22,679 |
) |
|
|
(22,613 |
) |
|
|
Net cash
used in investing activities |
|
(21,795 |
) |
|
|
(22,546 |
) |
|
|
|
|
|
|
|
|
|
|
FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
Borrowings
on line of credit |
|
1,051 |
|
|
|
875 |
|
|
|
|
Repayments on line of credit |
|
(1,051 |
) |
|
|
(875 |
) |
|
|
|
Proceeds from exercise of stock options |
|
1 |
|
|
|
1,141 |
|
|
|
|
Proceeds from sale of common stock pursuant to Associates Stock
Buying Plan |
|
609 |
|
|
|
590 |
|
|
|
|
Treasury shares acquired |
|
(176 |
) |
|
|
(114 |
) |
|
|
Net cash
provided by financing activities |
|
434 |
|
|
|
1,617 |
|
|
|
|
|
|
|
|
|
|
|
|
Effect of
exchange rate changes on cash |
|
(2 |
) |
|
|
107 |
|
|
|
|
|
|
|
|
|
|
|
NET
INCREASE IN CASH |
|
|
27,982 |
|
|
|
2,484 |
|
|
|
|
|
|
|
|
|
|
|
CASH AT BEGINNING OF PERIOD |
|
48,159 |
|
|
|
45,675 |
|
|
CASH AT END OF PERIOD |
|
$ |
76,141 |
|
|
$ |
48,159 |
|
|
Other cash flow information: |
|
|
|
|
|
|
Cash paid
for interest |
|
$ |
275 |
|
|
$ |
287 |
|
|
|
Cash paid
for income taxes, net of refunds of $2,990 and $151 |
|
(339 |
) |
|
|
(27 |
) |
|
Non-cash investing activities: |
|
|
|
|
|
|
|
Property
and equipment additions in accounts payable |
|
2,452 |
|
|
|
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 |
|
52 Weeks Ended |
|
|
|
|
December 31, 2016 |
|
January 2, 2016 |
|
December 31, 2016 |
|
January 2, 2016 |
|
|
|
|
|
|
|
|
|
|
|
|
GAAP Net
Income |
|
|
$ |
(9.8 |
) |
|
$ |
(11.1 |
) |
|
$ |
6.5 |
|
$ |
4.5 |
|
|
|
|
|
|
|
|
|
|
|
|
Add
Back: |
|
|
|
|
|
|
|
|
|
|
Interest
Expense |
|
|
|
0.1 |
|
|
|
0.1 |
|
|
|
0.4 |
|
|
0.5 |
|
Depreciation and Amortization * |
|
|
|
5.7 |
|
|
|
5.3 |
|
|
|
22.0 |
|
|
20.5 |
|
Income Tax (Benefit)/Expense |
|
|
|
(7.1 |
) |
|
|
(9.3 |
) |
|
|
5.1 |
|
|
2.8 |
|
|
|
|
|
(1.3 |
) |
|
|
(3.9 |
) |
|
|
27.5 |
|
|
23.8 |
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA |
|
|
$ |
(11.1 |
) |
|
$ |
(15.0 |
) |
|
$ |
34.0 |
|
$ |
28.3 |
|
|
|
|
|
|
|
|
|
|
|
|
___________________ |
|
|
|
|
|
|
|
|
|
|
* Included
in Cost of goods sold and SG&A. Amortization of deferred
financing costs related to our revolving credit facility are
included in interest expense. |
|
Contact: West Marine, Inc.
Jeffrey Lasher, Executive Vice President and Chief Financial Officer
(831) 761-4229
West Marine (NASDAQ:WMAR)
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West Marine (NASDAQ:WMAR)
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