West Marine, Inc. released preliminary unaudited operating results for the fourth quarter ended December 31, 2005, subject to further review of certain capitalized software costs. In light of recent events, the company is reviewing uncompleted software development projects, and if and to the extent it determines that such projects are no longer expected to provide a future benefit, it may be required to realize a non-cash impairment charge. The carrying value of all uncompleted software development projects at December 31, 2005 was approximately $9.1 million, although the company does expect to receive a future benefit from some portion of these projects.
Preliminary unaudited net loss for the fourth quarter ended December 31, 2005, not including possible impairment charges related to internal software costs no longer expected to provide a future benefit, was $17.4 million, or ($0.82) per share, compared to a net loss of $3.4 million, or ($0.16) per share, for the fourth quarter of 2004. Net sales for the fourth quarter of 2005 were $124.8 million, compared to net sales of $118.1 million a year ago. Comparable store sales for the fourth quarter of 2005 increased 3.9% compared to the same period a year ago. Comparable store sales are defined as sales from stores that have been open at least thirteen months and where selling square footage did not change by more than 40% in the previous thirteen months.
FISCAL YEAR 2005
Preliminary unaudited net income for the fifty-two weeks ended December 31, 2005, not including possible impairment charges related to internal software costs no longer expected to provide a future benefit, was $2.0 million, or $0.09 per share, compared to net income of $25.5 million, or $1.20 per share, for the same period a year ago. Net sales for fiscal year 2005 were $692.3 million, compared to net sales of $683.0 million for fiscal year 2004. Comparable store sales for the fifty-two weeks ended December 31, 2005 decreased (2.2%) compared to the same period a year ago.
SIGNIFICANT ITEMS
Eric Nelson, West Marine's chief financial officer, stated, “Our preliminary unaudited fourth quarter results include two significant items not reflected in our previous guidance. First, we reduced inventory value by $2.9 million, or ($0.08) per share after-tax. Second, we recorded a $2.0 million pre-tax charge, or ($0.06) per share after-tax, for a cancelled software development project. As indicated above, we are currently completing a review of all internally developed software projects. Situations where internal software development costs are no longer expected to provide a future benefit may result in an additional impairment charge.
Other significant fourth quarter items include a $2.0 million pre-tax charge, or ($0.06) for discontinuing our use of the BoatUS tradename, and a $0.8 million pre-tax charge, or ($0.02) per share after-tax, for costs related to replacing our line of credit. Both of these charges were contemplated in our previous guidance.
