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West Marine Reports 14.6% Increase In 2012 Pre-Tax Earnings And Provides 2013 Full-Year Guidance

Stocks in this article: WMAR

Non-GAAP Financial Information

This release references certain financial information not calculated in accordance with GAAP. We believe the 2011 income tax benefit from the release of substantially all of our valuation allowance is an aberration and, therefore, to provide a more useful comparison with past and future earnings, the non-GAAP measures remove income tax expense (benefit) as reported and apply our 2012 effective tax rate of 44.6% and 36.2% to fiscal fourth quarter 2011 and fiscal year 2011 pre-tax income, respectively. Management believes this non-GAAP measure provides a more meaningful view of our year-over-year earnings and EPS performance trends. In addition, we believe that ROIC is a meaningful measure of our efficient and effective use of capital. ROIC also is not a measure 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 tables set forth below.

 
West Marine, Inc.
Consolidated Balance Sheets
(Unaudited and in thousands, except share data)
     
     
  December 29, 2012 December 31, 2011
ASSETS    
Current assets:    
Cash  $ 56,542  $ 43,966
Trade receivables, net 6,723 5,771
Merchandise inventories 194,332 193,375
Deferred income taxes 4,622  7,118
Assets held for sale 4,283  -- 
Other current assets 16,371 13,792
Total current assets  282,873  264,022
     
Property and equipment, net 59,532 60,746
Long-term deferred income taxes 8,392  7,800
Other assets 3,471 3,089
TOTAL ASSETS  $ 354,268  $ 335,657
     
     
LIABILITIES AND STOCKHOLDERS' EQUITY    
Current liabilities:    
Accounts payable  $ 21,074  $ 25,085
Accrued expenses and other  40,928  41,007
Total current liabilities  62,002  66,092
     
Deferred rent and other 13,858 13,922
Total liabilities  75,860  80,014
     
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; 23,777,030 shares issued and 23,746,140 shares outstanding at December 29, 2012, and 23,022,654 shares issued and 22,991,764 shares outstanding at December 31, 2011.  24  23
Treasury stock  (385)  (385)
Additional paid-in capital  193,388  186,089
Accumulated other comprehensive loss  (791)  (727)
Retained earnings  86,172  70,643
Total stockholders' equity  278,408  255,643
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY  $ 354,268  $ 335,657
 
 
West Marine, Inc.
Consolidated Statements of Operations
(Unaudited and in thousands, except per share data)
         
  13 Weeks Ended
  December 29, 2012 December 31, 2011
Net revenues  $ 118,287 100.0%  $ 113,394 100.0%
Cost of goods sold 95,830 81.0%  92,613 81.7%
Gross profit  22,457 19.0%  20,781 18.3%
Selling, general and administrative expense 42,398 35.8% 39,608 34.9%
Restructuring (recoveries) costs (60) 0.0% 57 0.1%
Loss from operations   (19,881) (16.8)%  (18,884) (16.7)%
Interest expense 180 0.2% 252 0.2%
Loss before taxes  (20,061) (17.0)%  (19,136) (16.9)%
Benefit for income taxes (8,949) (7.6)% (5,184) (4.6)%
Net loss  $ (11,112) (9.4)%  $ (13,952) (12.3)%
         
Net loss per common and common equivalent share:        
         
Basic  $ (0.47)    $ (0.61)  
Diluted  $ (0.47)    $ (0.61)  
         
Weighted average common and common equivalent shares outstanding:        
Basic 23,604   22,911  
Diluted 23,604   22,911  
         
         
  52 Weeks Ended
  December 29, 2012 December 31, 2011
Net revenues  $ 675,251 100.0%  $ 643,443 100.0%
Cost of goods sold 477,145 70.7%  458,444 71.2%
Gross profit  198,106 29.3%  184,999 28.8%
Selling, general and administrative expense 172,837 25.6% 162,860 25.4%
Restructuring costs (recoveries) 99 0.0% (50) 0.0%
Impairment of long lived assets  -- 0.0% 50 0.0%
Income from operations   25,170 3.7%  22,139 3.4%
Interest expense 841 0.1% 918 0.1%
Income before income taxes  24,329 3.6%  21,221 3.3%
Provision (benefit) for income taxes 8,800 1.3% (8,441) (1.3)%
Net income  $ 15,529 2.3%  $ 29,662 4.6%
         
Net income per common and common equivalent share:        
         
Basic  $ 0.67    $ 1.30  
Diluted  $ 0.65    $ 1.27  
         
Weighted average common and common equivalent  shares outstanding:        
Basic 23,312   22,762  
Diluted 23,771   23,286  
 
 
West Marine, Inc.
Consolidated Statements of Cash Flows
(Unaudited and in thousands)
     
  52 Weeks Ended
  December 29, 2012 December 31, 2011
     
OPERATING ACTIVITIES:    
Net income  $ 15,529  $ 29,662
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 15,715 14,314
Impairment of long-lived assets  -- 50
Share-based compensation 3,128 2,394
Tax deficiency for equity issuance (389)  (204)
Excess tax benefit from share-based compensation  (380)  (347)
Deferred income taxes  1,588  (12,745)
Provision for doubtful accounts 223 54
Lower of cost or market inventory adjustments 869 1,154
Loss (gain) on asset disposals 103 (13)
Changes in assets and liabilities:    
Trade receivables (1,175) (220)
Merchandise inventories (1,826) 7,059
Other current assets (2,578) 2,946
Other assets (1,139) 112
Accounts payable (4,769) (4,610)
Accrued expenses and other 329 (2,330)
Deferred items and other non-current liabilities 252 (47)
Net cash provided by operating activities 25,480 37,229
     
INVESTING ACTIVITIES:    
Purchases of property and equipment (17,953) (17,710)
Proceeds from sale of property and equipment 122 64
Net cash used in investing activities (17,831) (17,646)
     
FINANCING ACTIVITIES:    
Borrowings on line of credit 5,224 28,758
Repayments on line of credit (5,224) (28,758)
Proceeds from exercise of stock options 3,863 1,339
Proceeds from sale of common stock pursuant to Associates Stock Buying Plan 698 669
Excess tax benefit from share-based compensation  380  347
Net cash provided by financing activities 4,941 2,355
     
Effect of exchange rate changes on cash (14) 9
     
NET INCREASE IN CASH 12,576 21,947
     
CASH AT BEGINNING OF PERIOD 43,966 22,019
CASH AT END OF PERIOD  $ 56,542  $ 43,966
Other cash flow information:    
Cash paid for interest  $ 693  $ 645
Cash paid for income taxes 7,222 3,547
Non-cash investing activities:    
Property and equipment additions in accounts payable 999 1,757
 
 
West Marine, Inc.
Reconciliation of Non-GAAP Finanical Information
Adjusted net income (loss) and adjusted net income (loss) per share
(Unaudited and in thousands, except per share data)
     
  13 Weeks Ended 13 Weeks Ended
  December 29, 2012 December 31, 2011
     
GAAP Net loss  $ (11,112)  $ (13,952)
Add Back: income tax benefit as reported  (8,949)  (5,184)
GAAP loss before taxes  (20,061)  (19,136)
Less: income tax expense at 44.6%  (8,949)  (8,536)
Non-GAAP adjusted net loss  $ (11,112)  $ (10,600)
     
     
  13 Weeks Ended 13 Weeks Ended
  December 29, 2012 December 31, 2011
     
GAAP Net loss per diluted share  $ (0.47)  $ (0.61)
Add Back: income benefit as reported  (0.38)  (0.23)
GAAP loss before taxes per diluted share  (0.85)  (0.84)
Less: income tax expense at 44.6%  (0.38)  (0.37)
Non-GAAP adjusted net loss per diluted share  $ (0.47)  $ (0.47)
     
     
  52 Weeks Ended 52 Weeks Ended
  December 29, 2012 December 31, 2011
     
GAAP Net income  $ 15,529  $ 29,662
Add Back: income tax (benefit) expense as reported  8,800  (8,441)
GAAP income before taxes  24,329  21,221
Less: income tax expense at 36.2%  8,800  7,676
Non-GAAP adjusted net income  $ 15,529  $ 13,545
     
     
  52 Weeks Ended 52 Weeks Ended
  December 29, 2012 December 31, 2011
     
GAAP Net income per diluted share  $ 0.65  $ 1.27
Add Back: income tax (benefit) expense as reported  0.37  (0.36)
GAAP income before taxes per diluted share  1.02  0.91
Less: income tax expense at 36.2%  0.37  0.33
Non-GAAP adjusted net income per diluted share  $ 0.65  $ 0.58
 
 
West Marine, Inc.
Reconciliation of Non-GAAP Finanical Information
Return on Invested Capital ("ROIC")
(Unaudited and in thousands)
  52 Weeks Ended   52 Weeks Ended   52 Weeks Ended  
  December 29, 2012   December 31, 2011   January 1, 2011  
GAAP net income    $ 15,529      $ 29,662      $ 13,227  
Add back: income tax (benefit) expense as reported    8,800      (8,441)      1,020  
GAAP income before taxes    24,329      21,221      14,247  
Less: income tax expense at 36.2%    8,800      7,676      5,153  
Adjusted net income   15,529     13,545     9,094  
                   
Add back:                  
Interest expense  841      918      637    
Rent expense (fixed) 46,373     43,818     42,662    
Total  47,214  30,137   1  44,736  28,554  1  43,299  27,638   1
                   
                 
Net income after adjustments and after-tax add backs (numerator)  $ 45,666      $ 42,100      $ 36,731  
                   
Total Capital:                  
                   
Long-term debt    --       --       --   
Operating leases capitalized at 8x annual rent expense    370,987      350,542      341,299  
Total stockholder's equity    278,408      255,643      221,761  
Less: Cash and cash equivalents    (56,542)      (43,966)      (22,019)  
Total Capital (long-term debt + operating leases capitalized at 8x annual rent expense + total stockholders' equity -- cash and cash equivalents)    592,853      562,219      541,041  
                 
Average total capital (denominator) 2  $ 577,536      $ 551,630      $ 531,770  
                 
ROIC 7.9%     7.6%     6.9%  
ROIC using GAAP amounts 3   7.9%     16.7%     10.0%  
                   
1 Total after-tax add backs after applying an assumed tax rate of 36.2%.
2 Average total capital is calculated as the sum of the current year and prior year ending total capital divided by two.
3 ROIC using GAAP amounts was derived as the quotient of GAAP net income with after-tax add backs divided by average total capital.
CONTACT: West Marine, Inc.
         Tom Moran, Senior Vice President and Chief Financial Officer
         (831) 761-4229

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