Exhibit 99.1
WEST MARINE REPORTS FISCAL 2015 EARNINGS PER SHARE OF $0.18, MORE THAN DOUBLED PRIOR YEAR
WATSONVILLE, CA, February 25, 2016 - West Marine, Inc. (NASDAQ: WMAR) today reported financial results for the fourth quarter and fiscal year ended January 2, 2016 (“fiscal 2015”). Fiscal 2014 was a 53-week year for the company versus a 52-week year for fiscal 2015.
Full Year 2015 Results
| · | Net revenues for fiscal 2015 were $704.8 million, an increase of 4.3% compared to the 53-week period last year, and an increase of 5.4% compared to the first 52 weeks of 2014. |
| · | Excluding the impact of the 53rd week in fiscal 2014, comparable store sales increased by 6.0% in 2015. |
| · | GAAP pre-tax income was $7.3 million. The company incurred $1.2 million in non-recurring charges during the fourth quarter to reduce overhead employment expenses. Excluding these charges, pre-tax profit was $8.5 million, an increase of over 110% compared to fiscal 2014. |
| · | Adjusted earnings before interest, taxes, depreciation and amortization (“adjusted EBITDA”) increased to $29.5 million, compared to adjusted EBITDA of $22.6 million last year. |
| · | Net income and earnings per share were $4.5 million and $0.18, respectively, compared to net income and earnings per share of $1.9 million and $0.08, respectively, last year, a 132.0% increase in net income. |
| · | Remained debt-free at year-end, with $105.3 million available on our revolving credit line at the end of the period. |
Matt Hyde, West Marine’s CEO, commented: “Overall, our results reflect a strong performance for both the fourth quarter and the full year 2015. The West Marine team drove 6% comparable store sales growth with increases across each of our growth strategies. We achieved an impressive 9.4% lift in holiday sales, a contrast to a soft holiday season for the retail industry. I’m pleased with the progress we’ve made on positioning the company as a total waterlife outfitter.”
Further Progress on Growth Strategies
Progress on the company’s growth strategies for 2015 was as follows:
| · | Sales from the eCommerce website increased by 32.5% compared to last year and represented 9.5% of total sales, compared to 7.7% for the same period last year, showing progress towards our goal of 15% of total sales. |
| · | Sales through waterlife stores were 45.7% of total sales compared to 41% last year. This year-over-year increase further demonstrates the Company’s progress towards our goal to deliver 50% of total sales through these stores that have been optimized to offer a broader selection of merchandise than in our traditional stores that focus on core boating products. |
| · | For fiscal year 2015 compared to the first 52 weeks in 2014 sales in merchandise expansion product lines, which include footwear, apparel, clothing accessories, fishing products and paddlesports equipment, increased 16.4%, and core product sales were up 2.8%, compared to last year. |
Results for Fiscal Year 2015
Net revenues for the 52 weeks ended January 2, 2016 were $704.8 million, an increase of 4.3%, compared to net revenues of $675.8 million for the 53 weeks ended January 3, 2015. For the 52 weeks in fiscal year 2015, comparable store sales increased by 6.0% compared to the first 52 weeks in 2014.
Pre-tax profit margin improved by 0.4%, to 1.0% for fiscal year 2015 as compared to 0.6% last year. This change primarily was driven by a decrease in selling, general and administrative (“SG&A”) expense as a percentage of revenues of 0.3%.
Net income for fiscal year 2015 was $4.5 million, or $0.18 per diluted share, compared to net income of $1.9 million, or $0.08 per diluted share, last year.
Results for the Fourth Quarter of 2015
Net revenues for the 13 weeks ended January 2, 2016 increased by $0.8 million, or 0.6%, to $130.2 million compared to $129.4 million for the 14 weeks ended January 3, 2015. Despite negative pressure of 2% from the shift in the fiscal calendar following a 53-week fiscal year in 2014, comparable store sales increased 8.0% when comparing the 13 weeks of the fourth quarter 2015 with the first 13 weeks of the fourth quarter 2014.
Net loss for the fourth quarter was $11.1 million, or $0.45 per share, compared to net loss of $10.3 million, or $0.42 per share, for the fourth quarter of 2014. The increased fourth quarter loss primarily was driven by higher variable compensation expense and the non-recurring charges to reduce overhead employment expenses mentioned above.
Fiscal 2016 Outlook
The company expects total revenue to increase by 1% to 4% in fiscal 2016. This net revenue growth, combined with continued expense control, is expected to improve pre-tax profit by more than 50% in 2016.
Matt Hyde continued: “The financial results of 2015 represent progress toward our overall objectives as a company. Excluding the impact of higher variable compensation commensurate with target attainment, our core SG&A expenses reduced in 2015 as we continue to manage costs and leverage support functions. Going into 2016, we are planning for positive comparable store sales in the low single digits, offset partially by store closures in Canada and the United States, which will impact revenue by about 1%.”
Investor Conference Call
West Marine will hold a conference call and webcast on Thursday, February 25, 2016, at 4:30 p.m. Eastern Time to discuss its fourth quarter and fiscal year 2015 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 28627335.
An audio replay of the call will be available February 25, 2016 at 8:00 p.m. Eastern Time through March 3, 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 28627335.
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 260 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 our earnings and growth in profitability, expectations that our investments will continue to drive our growth strategies, while improving profit margins, expectations related to our ability to manage our assets, including inventory productivity, cost management and support expense leverage, and our expectations for our 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 we finalize our financial statements. Actual results for the fourth quarter and fiscal year 2015 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 and adjusted 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. We believe that adjusted EBITDA provides a clearer picture of operating performance of the business by also removing charges incurred for recent employee overhead reductions. EBITDA and adjusted EBITDA are not measures of financial performance under GAAP and may not be defined and calculated by other companies in the same manner. These non-GAAP measures 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 these non-GAAP financial measures 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.
Consolidated Balance Sheets
(Unaudited and in thousands, except share data)
| | | January 2, 2016 | | | January 3, 2015 | |
| ASSETS | | | | | | | | |
| Current assets: | | | | | | | | |
| Cash | | $ | 48,159 | | | $ | 45,675 | |
| Trade receivables, net | | | 7,141 | | | | 6,843 | |
| Merchandise inventories | | | 222,853 | | | | 214,298 | |
| Deferred income taxes | | | - | | | | 5,585 | |
| Other current assets | | | 23,571 | | | | 25,791 | |
| Total current assets | | | 301,724 | | | | 298,192 | |
| | | | | | | | | |
| Property and equipment, net | | | 81,561 | | | | 79,447 | |
| Long-term deferred income taxes | | | 4,321 | | | | 3,993 | |
| Other assets | | | 4,209 | | | | 3,869 | |
| TOTAL ASSETS | | $ | 391,815 | | | $ | 385,501 | |
| | | | | | | | | |
| LIABILITIES AND STOCKHOLDERS' EQUITY | | | | | | | | |
| Current liabilities: | | | | | | | | |
| Accounts payable | | $ | 26,275 | | | $ | 33,244 | |
| Accrued payroll | | | 21,506 | | | | 14,253 | |
| Accrued expenses and other | | | 27,245 | | | | 26,669 | |
| Total current liabilities | | | 75,026 | | | | 74,166 | |
| | | | | | | | | |
| Deferred rent and other | | | 17,330 | | | | 20,327 | |
| Total liabilities | | | 92,356 | | | | 94,493 | |
| | | | | | | | | |
| 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; 25,421,685 shares issued and 24,732,796 shares outstanding at January 2, 2016, and 25,092,550 shares issued and 24,403,661 shares outstanding at January 3, 2015. | | | 25 | | | | 25 | |
| Treasury stock | | | (9,285 | ) | | | (9,171 | ) |
| Additional paid-in capital | | | 211,663 | | | | 207,863 | |
| Accumulated other comprehensive loss | | | (319 | ) | | | (564 | ) |
| Retained earnings | | | 97,375 | | | | 92,855 | |
| Total stockholders' equity | | | 299,459 | | | | 291,008 | |
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | | $ | 391,815 | | | $ | 385,501 | |
West Marine, Inc.
Consolidated Statements of Operations
(Unaudited and in thousands, except per share data)
| | | 13 Weeks Ended | | | 14 Weeks Ended | |
| | | January 2, 2016 | | | January 3, 2015 | |
| Net revenues | | $ | 130,205 | | | | 100.0 | % | | $ | 129,420 | | | | 100.0 | % |
| Cost of goods sold | | | 102,162 | | | | 78.5 | % | | | 101,820 | | | | 78.7 | % |
| Gross profit | | | 28,043 | | | | 21.5 | % | | | 27,600 | | | | 21.3 | % |
| Selling, general and administrative expense | | | 48,256 | | | | 37.0 | % | | | 46,487 | | | | 35.9 | % |
| Loss from operations | | | (20,213 | ) | | | (15.5 | )% | | | (18,887 | ) | | | (14.6 | )% |
| Interest expense | | | 113 | | | | 0.1 | % | | | 106 | | | | 0.1 | % |
| Loss before income taxes | | | (20,326 | ) | | | (15.6 | )% | | | (18,993 | ) | | | (14.7 | )% |
| Benefits from income taxes | | | (9,268 | ) | | | (7.1 | )% | | | (8,716 | ) | | | (6.8 | )% |
| Net loss | | $ | (11,058 | ) | | | (8.5 | )% | | $ | (10,277 | ) | | | (7.9 | )% |
| | | | | | | | | | | | | | | | | |
| Net loss per common and common equivalent share: | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| Basic | | $ | (0.45 | ) | | | | | | $ | (0.42 | ) | | | | |
| Diluted | | $ | (0.45 | ) | | | | | | $ | (0.42 | ) | | | | |
| | | | | | | | | | | | | | | | | |
| Weighted average common and common equivalent shares outstanding: | | | | | | | | | | | | | | | | |
| Basic | | | 24,721 | | | | | | | | 24,362 | | | | | |
| Diluted | | | 24,721 | | | | | | | | 24,362 | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | 52 Weeks Ended | | | 53 Weeks Ended | |
| | | January 2, 2016 | | | January 3, 2015 | |
| Net revenues | | $ | 704,825 | | | | 100.0 | % | | $ | 675,751 | | | | 100.0 | % |
| Cost of goods sold | | | 502,780 | | | | 71.3 | % | | | 482,564 | | | | 71.4 | % |
| Gross profit | | | 202,045 | | | | 28.7 | % | | | 193,187 | | | | 28.6 | % |
| Selling, general and administrative expense | | | 194,299 | | | | 27.6 | % | | | 188,755 | | | | 27.9 | % |
| Income from operations | | | 7,746 | | | | 1.1 | % | | | 4,432 | | | | 0.7 | % |
| Interest expense | | | 452 | | | | 0.1 | % | | | 428 | | | | 0.1 | % |
| Income before income taxes | | | 7,294 | | | | 1.0 | % | | | 4,004 | | | | 0.6 | % |
| Provision for income taxes | | | 2,774 | | | | 0.4 | % | | | 2,056 | | | | 0.3 | % |
| Net income | | $ | 4,520 | | | | 0.6 | % | | $ | 1,948 | | | | 0.3 | % |
| | | | | | | | | | | | | | | | | |
| Net income per common and common equivalent share: | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| Basic | | $ | 0.18 | | | | | | | $ | 0.08 | | | | | |
| Diluted | | $ | 0.18 | | | | | | | $ | 0.08 | | | | | |
| | | | | | | | | | | | | | | | | |
| Weighted average common and common equivalent shares outstanding: | | | | | | | | | | | | | | | | |
| Basic | | | 24,629 | | | | | | | | 24,244 | | | | | |
| Diluted | | | 24,734 | | | | | | | | 24,408 | | | | | |
West Marine, Inc.
Consolidated Statements of Cash Flows
(Unaudited and in thousands)
| | | 52 Weeks Ended | | | 53 Weeks Ended | |
| | | January 2, 2016 | | | January 3, 2015 | |
| | | | | | | | | |
| OPERATING ACTIVITIES: | | | | | | | | |
| Net income | | $ | 4,520 | | | $ | 1,948 | |
| Adjustments to reconcile net income to net cash provided by operating activities: | | | | | | | | |
| Depreciation and amortization | | | 20,687 | | | | 18,234 | |
| Share-based compensation | | | 2,787 | | | | 3,109 | |
| Excess tax benefit from share-based compensation | | | - | | | | (217 | ) |
| Deferred income taxes | | | 1,780 | | | | 3,287 | |
| Provision for doubtful accounts | | | 208 | | | | 37 | |
| Lower of cost or market inventory adjustments | | | 1,832 | | | | 1,759 | |
| Loss on asset disposals | | | 855 | | | | 330 | |
| Changes in assets and liabilities: | | | | | | | | |
| Trade receivables | | | (507 | ) | | | (439 | ) |
| Merchandise inventories | | | (10,387 | ) | | | (13,021 | ) |
| Other current assets | | | 2,220 | | | | (6,431 | ) |
| Other assets | | | (379 | ) | | | (659 | ) |
| Accounts payable | | | (7,901 | ) | | | 10,787 | |
| Accrued expenses and other | | | 7,111 | | | | 3,458 | |
| Deferred items and other non-current liabilities | | | 480 | | | | 1,776 | |
| Net cash provided by operating activities | | | 23,307 | | | | 23,958 | |
| | | | | | | | | |
| INVESTING ACTIVITIES: | | | | | | | | |
| Proceeds from sale of property and equipment | | | 67 | | | | 57 | |
| Purchases of property and equipment | | | (22,613 | ) | | | (24,573 | ) |
| Net cash used in investing activities | | | (22,546 | ) | | | (24,516 | ) |
| | | | | | | | | |
| FINANCING ACTIVITIES: | | | | | | | | |
| Borrowings on line of credit | | | 875 | | | | 2,240 | |
| Repayments on line of credit | | | (875 | ) | | | (2,240 | ) |
| Proceeds from exercise of stock options | | | 1,141 | | | | 1,651 | |
| Proceeds from sale of common stock pursuant to Associates Stock Buying Plan | | | 590 | | | | 654 | |
| Excess tax benefit from share-based compensation | | | - | | | | 217 | |
| Treasury shares acquired | | | (114 | ) | | | (4,766 | ) |
| Net cash provided by (used in) financing activities | | | 1,617 | | | | (2,244 | ) |
| | | | | | | | | |
| Effect of exchange rate changes on cash | | | 107 | | | | 69 | |
| | | | | | | | | |
| NET INCREASE (DECREASE) IN CASH | | | 2,484 | | | | (2,733 | ) |
| | | | | | | | | |
| CASH AT BEGINNING OF PERIOD | | | 45,675 | | | | 48,408 | |
| CASH AT END OF PERIOD | | $ | 48,159 | | | $ | 45,675 | |
| Other cash flow information: | | | | | | | | |
| Cash paid for interest | | $ | 287 | | | $ | 328 | |
| Cash paid for income taxes, net of refunds of $151 and $1,394 | | | (27 | ) | | | 2,064 | |
| Non-cash investing activities: | | | | | | | | |
| Property and equipment additions in accounts payable | | | 1,657 | | | | 725 | |
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 | | | 14 Weeks Ended | | | 52 Weeks Ended | | | 53 Weeks Ended | |
| | | January 2, 2016 | | | January 3, 2015 | | | January 2, 2016 | | | January 3, 2015 | |
| | | | | | | | | | | | | |
| GAAP Net Income | | $ | (11.1 | ) | | $ | (10.3 | ) | | $ | 4.5 | | | $ | 1.9 | |
| | | | | | | | | | | | | | | | | |
| Add Back: | | | | | | | | | | | | | | | | |
| Interest Expense | | | 0.1 | | | | 0.1 | | | | 0.5 | | | | 0.4 | |
| Depreciation and Amortization | | | 5.3 | | | | 4.8 | | | | 20.5 | | | | 18.2 | |
| Income Tax Expense | | | (9.3 | ) | | | (8.7 | ) | | | 2.8 | | | | 2.1 | |
| | | | (3.9 | ) | | | (3.8 | ) | | | 23.8 | | | | 20.7 | |
| | | | | | | | | | | | | | | | | |
| EBITDA | | $ | (15.0 | ) | | $ | (14.1 | ) | | $ | 28.3 | | | $ | 22.6 | |
| | | | | | | | | | | | | | | | | |
| Add Back: | | | | | | | | | | | | | | | | |
| Employee overhead reductions | | | 1.2 | | | | - | | | | 1.2 | | | | - | |
| | | | | | | | | | | | | | | | | |
| Adjusted EBITDA | | $ | (13.8 | ) | | $ | (14.1 | ) | | $ | 29.5 | | | $ | 22.6 | |
