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): February 21, 2007
West Marine, Inc.
----------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
Delaware 0-22512 77-0355502
- ----------------- --------------- ------------------
(State or Other (Commission File (I.R.S. Employer
Jurisdiction of Number) Identification No.)
Incorporation)
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.
As described below under Item 4.02, on February 27, 2007, West Marine, Inc.
(the "Company") announced certain preliminary restated financial results in a
press release attached to this report as Exhibit 99.1.
Item 4.02. Non-Reliance on Previously Issued Financial Statements or a
Related Audit Report or Completed Interim Review.
In light of recent changes in the Company's business model, management reviewed
its inventory accounting practices and reevaluated various indirect costs
included in inventory value.
In connection with this review, management focused on changes in the Company's
accounting adopted in 2003 to include a portion of store occupancy costs in
capitalized indirect costs. After consultation with Deloitte & Touche LLP, the
Company's independent registered public accounting firm, management determined
that the inclusion of a portion of store occupancy costs and certain other
indirect costs included in inventory was an error requiring correction by
restating the Company's previously issued financial statements.
Additionally, during the course of this review, an error in the Company's 2003
financial statements was identified in the reporting of the adoption of
Emerging Issues Task Force Issue No. 02-16, "Accounting by a Customer
(Including a Reseller) for Certain Consideration Received from a Vendor," which
will be corrected by separately reporting the cumulative effect of a change
in accounting principle in the Company's 2003 statement of income.
On February 21, 2007, upon the recommendation of management, the Company's
Board of Directors authorized the restatement of the Company's financial
statements for the fiscal years ended December 28, 2002 through December 31,
2005 and its quarterly financial statements for fiscal year 2005 and the first
three quarters of fiscal year 2006. The restated results will be reflected in
the Company's Form 10-K for the year ended December 30, 2006, which is due to
be filed on March 15, 2007.
Until these restated financial statements are filed with the Securities and
Exchange Commission, the Company's audited financial statements for each of the
four years in the period ended December 31, 2005 together with the related
reports of Deloitte & Touche LLP, and the Company's quarterly financial
statements for 2005 and the first three quarters of 2006 should not be relied
upon.
The Audit Committee of the Company's Board of Directors has discussed the above
matter with the Company's independent registered public accounting firm,
Deloitte & Touche LLP.
Item 9.01. Financial Statements and Exhibits.
(a) Not Applicable.
(b) Not Applicable.
(c) Not Applicable.
(d) Exhibit:
99.1 Press Release dated February 27, 2007
(furnished pursuant to Item 2.02 of Form 8-K).
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: February 27, 2007 By:/s/ Thomas R. Moran
----------------------------
Thomas R. Moran
Senior Vice President and
Chief Financial Officer
Exhibit 99.1
West Marine Announces Preliminary Results of Internal Review of Inventory
Cost Accounting Method and Cumulative Impact to Net Income in
Fiscal Years 2002 - 2006
Watsonville, California, February 27, 2007- West Marine (Nasdaq: WMAR) today
announced a change in its method of reporting certain indirect inventory-related
expenses and capitalization, and the resulting restatement of earnings. These
adjustments are the result of the previously announced Company-initiated review
of indirect inventory cost capitalization practices, and are expected to
provide greater transparency and clarity. There is no cash flow impact and
only a nominal cumulative net income impact in the most recent seven quarters.
The primary impact is to fiscal years 2003 and 2004.
"We examined changes in our business model, including refinements the Company
has made, and will continue to make, in our supply chain practices and
inventory management. We reevaluated our approach to capitalizing indirect
inventory costs and concluded that a portion of store occupancy and certain
other indirect costs should be excluded," said Tom Moran, West Marine's Chief
Financial Officer.
During the course of its examination, the Company determined that it had
incorrectly capitalized a portion of these indirect costs in its inventory
value, and further determined that in its adoption in 2003 of a new accounting
pronouncement, Emerging Issues Task Force Issue No. 02-16 ("EITF 02-16"),
"Accounting by a Customer (Including a Reseller) for Certain Consideration
Received from a Vendor," it did not appropriately report the cumulative effect
of such adoption, requiring correction of the previously issued financial
statements. These corrections require restating West Marine's audited financial
statements for fiscal years 2002 through 2005, and its quarterly financial
statements for fiscal years 2005 and the first three quarters of 2006.
"Our outlook for 2007 and beyond, which we believe will be marked by continued
growth and improving profitability, is unaffected by these changes in accounting
treatment," said Peter Harris, West Marine's Chief Executive Officer. "These
changes bear no reflection on the quality of our assets, nor do they have any
impact on our strong reported cash flow. We look forward to continuing our
focus on servicing our boating customers beyond their expectations with
knowledgeable, caring and passionate associates in this and future years to
increase value for our shareholders."
The effect of these changes on previously reported net income is as follows:
Net Income Effect (after tax)*
(dollars in thousands)
39 Weeks
Ended
September 30,
2002 2003 2004 2005 2006
- ------------------------------------------------------------------------------------------------------------
Previously Reported
Net Income (Loss) $ 18,908 $ 20,090 $ 25,534 $ (2,179) $ 5,042
Corrections to
Previously Reported
Net Income (Loss) (922) (1) ( 6,478) (2) (3,357) (1) (135) (1) 144 (1)
Cumulative Effect of
Change in Accounting
Principle -- ( 7,978) -- -- --
-------- ---------- -------- --------- --------
Total Impact of
Corrections Including
Cumulative Effect (922) (14,456) (3,357) (135) 144
-------- ---------- -------- --------- --------
Restated Net Income
(Loss) After
Cumulative Effect $ 17,986 $ 5,634 $ 22,177 $ (2,314) $ 5,186
(1) Indirect inventory cost adjustments, including a portion of store occupancy costs
(2) Includes the following corrections:
-$7,978 after tax reclassification from Cost of Goods Sold to Cumulative Effect of Change in
Accounting Principle to properly report the change in accounting for the adoption of EITF 02-16
as of the beginning of fiscal year 2003.
-($9,343) correction of cumulative effect of change in accounting method included in Cost of Goods
Sold, related to a portion of store occupancy costs capitalized in inventory beginning in fiscal
year 2003.
-($5,113) correction of a portion of store occupancy costs and certain other indirect costs
capitalized in inventory during fiscal year 2003.
* The restated results presented above are preliminary and unaudited, and
they may change as West Marine finalizes its financial statements.
Additional adjustments, primarily affecting goodwill and 2003 operating
results, could result from the Company's further review of its
accounting for an acquisition that occurred in January 2003. The final
restated results will be reflected in West Marine's Form 10-K for the
year ended December 30, 2006, which is due to be filed on March 15, 2007.
West Marine will provide additional comments and take questions in its Fourth
Quarter 2006 Results and 2007 Earnings Guidance conference call on Thursday,
March 1, 2007 at 8:30 AM PST. The dial-in number for the call is (888) 756-1546
in the U.S. and Canada and (706) 634-1083 for International calls and the access
code is 8821173. The call will also be web cast on our web site at
www.westmarine.com, in the Investor Relations section.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This press release includes "forward-looking statements" within the meaning of
Section 21E of the Securities Exchange Act of 1934 including forward-looking
statements concerning earnings expectations and statements that are predictive
or express expectations that depend on future events or conditions that involve
risks and uncertainties. These forward-looking statements include, among other
things, statements that relate to West Marine's revenue expectations, as well
as facts and assumptions underlying these revenue expectations. Actual results
may differ materially from the results expressed or implied in these
forward-looking statements due to various risks, uncertainties or other
factors. Risk factors that may affect our earnings in the future include those
set forth in West Marine's Form 10-K for the fiscal year ended December 31,
2005 as updated in its Form 10-Q for the fiscal quarter ended July 1, 2006.
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.
ABOUT WEST MARINE
West Marine, the country's favorite retailer of boating supplies and
accessories, has nearly 400 stores located in 38 states, Puerto Rico and
Canada. Our catalog and Internet channels offer customers approximately 50,000
products and the convenience of exchanging catalog and Internet purchases at
our retail stores. Our Port Supply division is one of the country's largest
wholesale distributors of marine equipment serving boat manufacturers, marine
services, commercial vessel operators and government agencies. For more
information on West Marine's products and store locations, or to start shopping,
visit www.westmarine.com or call 1-800-BOATING (1-800-262-8464).
CONTACT: West Marine, Inc.
Deborah Ajeska, 831-761-4229
Assistant Vice President of Financial
Planning and Analysis
SOURCE: West Marine, Inc.