SEC Drills into Restatement

West Marine expects costs of the probe to significantly harm its financial results.
Stephen TaubOctober 26, 2007

West Marine Inc. says the Securities and Exchange Commission has launched an informal inquiry into its recent restatement of prior results. The company disclosed the probe in a regulatory filing, but not in the accompanying press release announcing its third-quarter results.

An oil refiner and marketer, West Marine warned that the inquiry will affect its results of operations and, in particular, its selling, general, and administrative expense line item as it incurs “significant costs” responding to the SEC’s requests. “Such costs will be incurred on an ongoing basis as the staff conducts its informal inquiry,” the company added.

West Marine earlier restated its results for fiscal years 2002 through 2005 and quarterly financial statements for fiscal year 2005 and the first three quarters of fiscal year 2006. Those restatements were on a review and reevaluation of various indirect costs included in inventory cost and of the company’s adoption of an accounting standard in fiscal 2003.

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According to West Marine, the SEC has requested additional materials relating to its inventory accounting practices from 2001 to 2006. “The SEC staff has advised us that their informal inquiry and request for information should not be construed as an indication by the SEC or its staff that any violations of law have occurred, nor should it be considered an adverse reflection upon any person, entity or security,” the company said.