1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1999
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________________ to __________________
Commission File No. 1-14173
MARINEMAX, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 59-3496957
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification
Number)
18167 U.S. 19 NORTH, SUITE 499
Clearwater, Florida 33764
(Address of principal executive offices) (ZIP Code)
727-531-1700
(Registrant's telephone number, including area code)
Indicate by check whether the registrant: (1) has filed all reports to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the Registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
Yes X No
The number of outstanding shares of the registrant's Common Stock on July 31,
1999 was 15,237,525
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MARINEMAX, INC.
Table of Contents
Item No. Page
- -------- ----
PART I FINANCIAL INFORMATION
1. Financial Statements (unaudited):
Condensed Consolidated Results of Operations
For the Three-Month and Nine-Month Periods Ended
June 30, 1998 and June 30, 1999................................ 3
Condensed Consolidated Balance Sheets as of
September 30, 1998 and June 30, 1999........................... 4
Condensed Consolidated Statements of Cash Flows
For the Nine-Month Periods Ended
June 30, 1998 and June 30, 1999................................ 5
Notes to Condensed Consolidated Financial Statements............. 7
2. Management's Discussion and Analysis of Results of Operations
and Financial Condition.......................................... 10
PART II OTHER INFORMATION
1. Legal Proceedings............................................... 15
2. Changes in Securities and Use of Proceeds....................... 15
3. Defaults Upon Senior Securities................................. 15
4. Submission of Matters to Vote of Security Holders............... 15
5. Other Information............................................... 15
6. Exhibits and Reports on Form 8-K................................ 15
7. Signatures...................................................... 16
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ITEM 1. FINANCIAL STATEMENTS
MARINEMAX, INC. AND SUBSIDIARIES
Condensed Consolidated Results of Operations
(Unaudited)
For the Three-Month For the Nine-Month
Period Ended June 30, Period Ended June 30,
--------------------------- ---------------------------
1998 1999 1998 1999
------------ ------------ ------------ ------------
Revenue $105,250,051 $161,628,952 $214,033,037 $324,375,777
Cost of sales 80,336,888 123,691,688 164,859,835 247,310,479
------------ ------------ ------------ ------------
Gross profit 24,913,163 37,937,264 49,173,202 77,065,298
Selling, general and
administrative expenses 13,494,629 23,316,259 39,469,036 56,992,947
Non-recurring settlement
(Note 3) - - 15,000,000 -
------------ ------------ ------------ ------------
Income (loss) from
operations 11,418,534 14,621,005 (5,295,834) 20,072,351
Interest expense, net 1,468,134 597,408 2,560,824 1,364,522
------------ ------------ ------------ ------------
Income (loss) before
income taxes 9,950,400 14,023,597 (7,856,658) 18,707,829
Income tax provision
(benefit) 3,468,049 5,529,213 (1,717,156) 7,464,904
------------ ------------ ------------ ------------
Net income (loss)
(Note 3) $ 6,482,351 $ 8,494,384 $ (6,139,502) $ 11,242,925
============ ============ ============ ============
Basic and diluted net
income (loss) per
common share (Note 3): $ 0.56 $ 0.56 $ (0.62) $ 0.76
============ ============ ============ ============
Shares used in computing
net income (loss) per
common share:
Basic 11,624,855 15,228,587 9,910,101 14,866,850
============ ============ ============ ============
Diluted 11,635,267 15,238,110 9,913,571 14,873,280
============ ============ ============ ============
Pro Forma Data:
Pro forma income tax
provision (benefit) $ 512,111 $ (1,425,507)
------------ ------------
Pro forma net income
(loss) $ 5,970,240 $ (4,713,995)
============ ============
Pro forma basic and
diluted net income
(loss) per share
(Note 3) $ 0.51 $ (0.48)
============ ============
See Notes to Condensed Consolidated Financial Statements
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MARINEMAX, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
September 30, June 30,
1998 1999
------------- ------------
(unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 7,860,866 $ 21,140,383
Accounts receivable, net 18,511,878 17,144,247
Inventories 80,756,342 137,430,009
Prepaids and other current assets 2,824,345 2,262,905
Deferred tax asset -- 1,226,448
------------ ------------
Total current assets 109,953,431 179,203,992
PROPERTY AND EQUIPMENT, net 24,776,439 31,330,847
DEFERRED TAX ASSET 103,426 --
GOODWILL AND OTHER ASSETS 15,624,996 35,378,038
------------ ------------
Total assets $150,458,292 $245,912,877
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 8,591,679 $ 28,559,428
Customer deposits 4,815,979 8,459,850
Accrued expenses 6,044,506 18,938,102
Short-term borrowings 45,813,419 101,548,966
Current maturities of long-term debt 442,519 535,836
Deferred taxes 165,511 --
Settlement payable 15,000,000 --
------------ ------------
Total current liabilities 80,873,613 158,042,182
LONG-TERM DEBT, net of current maturities 3,249,494 3,421,841
DEFERRED TAX LIABILITY -- 144,352
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, $.001 par value,
5,000,000 shares authorized, none issued
or outstanding -- --
Common stock, $.001 par value; 40,000,000
shares authorized, 14,600,428 and 15,237,525
shares issued and outstanding at September 30,
1998 and June 30, 1999, respectively 14,601 15,238
Additional paid-in capital 57,113,708 63,839,463
Retained earnings 9,206,876 20,449,801
------------ ------------
Total stockholders' equity 66,335,185 84,304,502
------------ ------------
Total liabilities and stockholders' equity $150,458,292 $245,912,877
============ ============
See Notes to Condensed Consolidated Financial Statements
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MARINEMAX, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
For the Nine-Month Periods Ended
(Unaudited)
June 30, June 30,
1998 1999
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (loss) $ (6,139,502) $ 11,242,925
Adjustments to reconcile net income
(loss) to net cash provided by (used in)
operating activities:
Depreciation and amortization 930,415 2,773,502
Deferred income tax provision (benefit) 238,152 (1,144,181)
Loss (gain) on sale of property and
equipment 43,147 35,767
Stock Compensation -- 84,597
Decrease (increase) in --
Accounts receivable, net (6,021,947) 2,384,174
Due from related parties 640,632 --
Inventories 1,089,916 (36,878,751)
Prepaids and other assets (4,055,046) (4,621,750)
Increase (decrease) in --
Accounts payable 1,508,627 19,486,446
Customer deposits 2,928,420 (1,398,442)
Accrued expenses and other liabilities 975,670 12,051,224
Short-term borrowings (20,652,293) 36,256,301
Settlement payable 15,000,000 (15,000,000)
------------ ------------
Net cash provided by (used in)
operating activities (13,513,809) 25,271,812
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (2,566,189) (7,887,838)
Proceeds from sale of property and equipment 84,000 29,469
Cash acquired (used) in purchase of
businesses 496,659 (4,137,740)
------------ ------------
Net cash provided by (used in)
investing activities (1,985,530) (11,996,109)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from initial public offering, net
of offering expenses and underwriting
commissions 38,300,327 --
Proceeds from sale of common stock under
employee benefit plans -- 238,150
Net borrowings (repayments) on notes
payable to related parties (3,102,053) --
Repayments on long-term debt (6,084,982) (234,336)
Redemption of Common Stock (150,000) --
Distributions to stockholders (9,466,184) --
------------ ------------
Net cash provided by (used in)
financing activities 19,497,108 3,814
------------ ------------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 3,997,769 13,279,517
CASH AND CASH EQUIVALENTS,
beginning of period 11,537,934 7,860,866
------------ ------------
CASH AND CASH EQUIVALENTS, end of period $ 15,535,703 $ 21,140,383
============ ============
See Notes to Condensed Consolidated Financial Statements
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MARINEMAX, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
For the Nine-Month Periods Ended
(Unaudited)
(Continued)
June 30, June 30,
1998 1999
----------- ------------
Supplemental Disclosures of Cash Flow Information:
Cash paid for
Interest $ 2,381,352 $ 1,867,369
Income taxes $ -- $ 836,802
Supplemental Disclosures of Non-Cash Investing
and Financing Activities:
Issuance of Common Stock and Warrants in
exchange for business, property and
equipment $10,590,206 $19,479,246
Assumption of debt (primarily inventory
financing) in conjunction with
acquisition of businesses, property
and equipment $ 4,107,428 $ 6,403,645
See Notes to Condensed Consolidated Financial Statements
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MARINEMAX, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
1. COMPANY BACKGROUND AND BASIS OF PRESENTATION
MarineMax, Inc. (a Delaware corporation) was incorporated in January 1998.
MarineMax, Inc. and subsidiaries (MarineMax or the Company) engage primarily in
the retail sale and service of new and used boats, motors, trailers, marine
parts and accessories. The Company currently operates through 47 retail
locations in 13 states, consisting of Arizona, California, Delaware, Florida,
Georgia, Minnesota, Nevada, New Jersey, North Carolina, Ohio, Pennsylvania,
South Carolina and Texas.
In October 1998, the Company formed a new subsidiary, MarineMax Motor
Yachts, Inc. (Motor Yachts), and entered in to a Dealership Agreement with
Hatteras Yachts, a division of Genmar Industries, Inc. The Agreement gives the
Company the rights to sell Hatteras Yachts throughout the state of Florida
(excluding the Florida Panhandle) and the U.S. distribution rights for Hatteras
products over 74 feet.
In order to maintain consistency and comparability between periods
presented, certain amounts have been reclassified from the previously reported
financial statements to conform with the financial statement presentation of the
current period. The consolidated financial statements include the accounts of
the Company and its subsidiaries, all of which are wholly owned. All significant
intercompany transactions and accounts have been eliminated.
The accompanying financial statements are unaudited and have been prepared
by the Company pursuant to the rules and regulations of the Securities and
Exchange Commission (the SEC). Although the September 30,1998 balance sheet was
derived from audited financial statements, certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to SEC rules and regulations. The accompanying condensed financial
statements and related notes should be read in conjunction with the Company's
Amended Annual Report on Form 10-K/A (File number 1-4173) as filed with the SEC
on July 29, 1999.
2. ACQUISITIONS
The Company has consummated a series of business combinations. On March 1,
1998, the Company acquired, in separate merger transactions, all of the issued
and outstanding common stock of Bassett Boat Company of Florida, Gulfwind South,
Inc., Gulfwind U.S.A., Inc., 11502 Dumas, Inc. and subsidiaries d/b/a Louis
DelHomme Marine, Harrison's Boat Center, Inc., and Harrison's Marine Centers of
Arizona, Inc. (collectively, the Original Merged Companies) in exchange for
7,799,844 shares of the Company's common stock.
On July 7, 1998, the Company acquired, in separate merger transactions,
all of the issued and outstanding common stock of Cochran's Marine, Inc. and C &
N Marine Corporation (together Cochran's Marine) in exchange for 603,386 shares
of its common stock.
On July 30, 1998, the Company acquired, in a merger transaction, all of
the issued and outstanding common stock of Sea Ray of Wilmington, Inc. (f.k.a.
Skipper Bud's of North Carolina) in exchange for 412,390 shares of its common
stock.
These business combinations (collectively, the Pooled Companies) have been
accounted for under the pooling-of-interests method of accounting. Accordingly,
the financial statements of the Company have been restated to reflect the
operations as if the Pooled Companies had operated as one entity since
inception.
On March 1, 1998, MarineMax effected business combinations in which it
acquired, in separate merger transactions, the beneficial interests in Bassett
Boat Company, Bassett Realty, L.L.C., Gulfwind South Realty, L.L.C., Harrison's
Realty, L.L.C. and Harrison's Realty California, L.L.C. (collectively, the
Original Property Acquisitions) in exchange for 1,392,026 shares of the
Company's common stock. Additionally, on July 7, 1998, MarineMax acquired, in
separate merger transactions, the beneficial interests in C & N Realty L.L.C.,
Walker Marina Realty, L.L.C., Marina Drive Realty I, L.L.C., and Marina Drive
Realty II, L.L.C. (collectively, Cochran's L.L.C.s) in exchange for 120,000
shares of the Company's common stock. These acquisitions have been accounted for
under the purchase method of accounting.
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On April 30, 1998, the Company acquired, in a merger transaction, all of
the issued and outstanding common stock of Stovall Marine, Inc. (Stovall) in
exchange for 492,306 shares of the Company's common stock, valued at
approximately $5.3 million. The acquisition has been accounted for under the
purchase method of accounting, which resulted in the recognition of
approximately $5.3 million in goodwill.
On September 3, 1998, the Company acquired the net assets of Brevard Boat
Sales, Inc. (Brevard) in exchange for approximately $1.3 million of cash,
including acquisition costs, and 14,652 shares of the Company's common stock,
valued at approximately $125,000. The acquisition has been accounted for under
the purchase method of accounting, which resulted in the recognition of
approximately $1.1 million in goodwill.
On September 15, 1998, the Company acquired the net assets, including the
retail location of Sea Ray of Las Vegas (Vegas) in exchange for approximately
$3.7 million of cash, including acquisition costs. The acquisition has been
accounted for under the purchase method of accounting, which resulted in the
recognition of approximately $1.1 million in goodwill.
On September 30, 1998, the Company acquired the net assets of Treasure
Cove Marina, Inc. (Treasure Cove) in exchange for approximately $7.8 million of
cash, including acquisition costs, and 250,000 shares of the Company's common
stock, valued at approximately $2.3 million. The acquisition has been accounted
for under the purchase method of accounting, which resulted in the recognition
of an approximately $12.6 million in goodwill.
On October 28, 1998, the Company acquired the net assets of Woods &
Oviatt, Inc. (Woods & Oviatt), a prominent yacht brokerage operation, in
exchange for approximately $1.7 million of cash, including acquisition costs.
The acquisition has been accounted for under the purchase method of accounting,
which resulted in the recognition of approximately $1.7 million in goodwill.
On February 11, 1999, the Company acquired the net assets of Boating World
(Boating World) in exchange for approximately $523,000 of cash, including
acquisition costs and warrants valued at approximately $269,000. The warrants
provide the holder the right to buy 40,000 shares of MarineMax common stock at
$15.00 per share and were valued using a Black-Scholes model assuming a 5.25%
risk free rate of return, a volatility factor of 44.7% and an expected dividend
yield of 0%. The acquisition has been accounted for under the purchase method of
accounting, which resulted in the recognition of approximately $700,000 in
goodwill.
On March 9, 1999, the Company acquired the net assets of Merit Marine
(Merit) in exchange for approximately $1.2 million of cash, including
acquisition costs, 476,000 shares of the Company's common stock, valued at
approximately $4.8 million, a $3 million promissory note, with interest payable
at LIBOR plus 125 basis points, and the assumption of certain liabilities. The
assumed liabilities include the outstanding floor plan obligations related to
boat inventories, which primarily finance Merit Marine's Sea Ray products. The
acquisition has been accounted for under the purchase method of accounting,
which resulted in the recognition of approximately $9.2 million in goodwill.
On April 5, 1999, the Company acquired the net assets of Suburban
Boatworks, Inc. (Suburban) in exchange for $965,000 of cash, including
acquisition costs, 121,090 shares of the Company's common stock, valued at
approximately $1.4 million, a $500,000 promissory note, with interest payable at
LIBOR plus 125 basis points, and the assumption of certain liabilities. The
assumed liabilities include the outstanding floor plan obligations related to
boat inventories, which primarily finance Suburban's Sea Ray products. The
acquisition has been accounted for under the purchase method of accounting,
which resulted in the recognition of approximately $3.6 million in goodwill.
The Original Property Acquisitions, Stovall, Cochran's L.L.C.s, Brevard,
Vegas, Treasure Cove, Woods & Oviatt, Boating World, Merit and Suburban
(collectively, the Purchased Companies) have been reflected in the Company's
financial statements subsequent to their respective acquisition dates. The
Company's common stock issued in conjunction with the acquisition of each of the
Purchased Companies has been valued at approximately the current market price on
each of their respective acquisition dates. The goodwill associated with the
acquisition of the Purchased Companies represents the excess of the purchase
price over the estimated fair value of the net assets acquired and is being
amortized over forty years on a straight-line basis.
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3. PRO FORMA RESULTS OF OPERATIONS AND NONRECURRING SETTLEMENT
In connection with the merger of the Pooled Companies, the applicable
merged companies terminated their S corporation status and recorded a deferred
income tax charge and a corresponding net deferred tax liability of
approximately $1,250,000, representing the tax effect of differences in bases in
assets and liabilities for financial reporting and income tax purposes. The
Company has presented pro forma income tax disclosure as if the Company and
subsidiaries were C corporations for the three-month and nine-month periods
ended June 30, 1998.
The Company and Brunswick Corporation (Brunswick) disputed the
applicability of the change in control provisions in the dealership agreements
of the Original Merged Companies. In order to avoid a long, costly and
disruptive dispute, the Company and Brunswick agreed not to challenge the change
in control provisions of the dealership agreements, and the Company agreed to
pay Brunswick $15 million. The Settlement payable to Brunswick required interest
to be paid quarterly at the 30-day LIBOR rate plus 125 basis points. The $15
million Settlement payable was paid in full to Brunswick in December 1998.
4. SHORT-TERM BORROWINGS:
On March 18, 1999, the Company renegotiated and supplemented its working
capital borrowing facilities by entering into two revolving line of credit
facilities (the Facilities) with separate institutions (the Lenders) providing
for combined borrowing availability of $155 million at a weighted average
interest rate of approximately LIBOR plus 140 basis points. Both facilities have
similar terms and mature in March 2001. As of June 30, 1999, the total available
borrowings under short-term borrowings were approximately $44.0 million.
5. SUBSEQUENT EVENTS:
On July 12, 1999, the Company executed an agreement for an additional
working capital borrowing facility with a separate financial institution
providing for a borrowing availability of $30 million at an interest rate of
LIBOR plus 160 basis points. Borrowings under this facility are pursuant to a
borrowing base formula and are used primarily for financing the Company's
inventory. This facility has similar terms to the Company's existing working
capital borrowing facilities and matures in July 2002.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION.
This Management's Discussion and Analysis of Results of Operations and Financial
Condition contains "forward-looking statements" within the meaning of Section
27A of the Securities Act of 1933, as amended (the Securities Act), and Section
21E of the Securities Exchange Act of 1934, as amended. These statements relate
to future economic performance, plans and objectives of the Company for future
operations and projections of revenue and other financial items that are based
on the belief of the Company as well as assumptions made by, and information
currently available to, the Company. Actual results could differ materially from
those currently anticipated as a result of a number of factors, including those
listed in the "Risk Factors" of the Company's Amended Annual Report on Form
10-K/A (Registration number 1-14173) as filed with the SEC on July 29, 1999.
These risks include the impact of seasonality and weather, general economic
conditions and the level of consumer spending, the Company's ability to
integrate the acquisitions into existing operations and numerous other factors
identified in the Company's filings with the Securities and Exchange Commission.
GENERAL
The Company is the largest recreational boat retailer in the United
States. Through 47 retail locations in 13 states, the Company sells new and used
recreational boats and related marine products, including engines, boats,
trailers, parts, and accessories. The Company also arranges related boat
financing, insurance and extended warranty contracts; provides boat repair and
maintenance services; and offers boat brokerage services.
MarineMax was incorporated in January 1998. MarineMax has consummated a
series of business combinations since its formation. On March 1, 1998, MarineMax
acquired, in separate merger transactions, all of the issued and outstanding
common stock of Bassett Boat Company of Florida, Gulfwind South, Inc., Gulfwind
U.S.A., 11502 Dumas, Inc. and subsidiaries d/b/a Louis DelHomme Marine,
Harrison's Boat Center, Inc., and Harrison's Marine Centers of Arizona, Inc.
(collectively, the Original Merged Companies) in exchange for 7,799,844 shares
of the Company's Common Stock. On July 7, 1998 the Company acquired, in separate
merger transactions, all of the issued and outstanding common stock of Cochran's
Marine, Inc. and C & N Marine Corporation (together Cochran's Marine) in
exchange for 603,386 shares of its Common Stock. On July 30, 1998, the Company
acquired all of the issued and outstanding common stock of Sea Ray of
Wilmington, Inc. (f.k.a. Skipper Bud's of North Carolina) in a merger
transaction in exchange for 412,390 shares of its Common Stock.
These business combinations (collectively, the Pooled Companies) have been
accounted for under the pooling-of-interests method of accounting. Accordingly,
the financial statements of the Company have been restated to reflect the
operations as if the companies had operated as one entity since inception.
In addition to the Pooled Companies, the Company has acquired seven
additional boat retailers, one brokerage operation and companies owning real
estate used in the operations of certain subsidiaries of the Company
(collectively, the Purchased Companies). In connection with these acquisitions,
the Company issued an aggregate of 2,866,074 shares of its common stock, issued
40,000 warrants, paid an aggregate of approximately $17.2 million in cash and
entered into promissory notes totaling $3.5 million, resulting in the
recognition of an aggregate of $35.3 million in goodwill, which represents the
excess of the purchase price over the estimated fair value of the net assets
acquired. The Purchased Companies have been reflected in the Company's financial
statements subsequent to their respective acquisition dates. Each of the
Purchased Companies is continuing its operations as a wholly owned subsidiary of
the Company.
Each of the Pooled Companies and Purchased Companies historically operated
with a calendar year-end, but adopted the September 30 year-end of MarineMax on
or before the completion of its acquisition. The September 30 year-end more
closely conforms to the natural business cycle of the Company. The following
discussion compares the three-month period ended June 30, 1999 to the
three-month period ended June 30,1998, and the nine-month period ended June 30,
1999 to the nine-month
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period ended June 30,1998 and should be read in conjunction with the condensed
consolidated financial statements of the Company, including the related notes
thereto, appearing elsewhere in this Report.
The Pooled Companies operated historically as independent, privately owned
entities, and their results of operations reflect varying tax structures,
including both S and C corporations, which have influenced the historical level
of employee-stockholder compensation. The selling, general, and administrative
expenses of the Pooled Companies include compensation to employee-stockholders
totaling approximately $4.6 million for the nine months ended June 30, 1998. As
a result of the varying practices regarding compensation to
employee-stockholders among the Pooled Companies, the comparison of operating
margins from period to period is difficult and less meaningful. Certain
employee-stockholders have entered into employment agreements with the Company,
reflecting reduced compensation when compared to historical levels.
The condensed consolidated financial statements included with this filing
include a pro forma adjustment for income taxes as if the Company was a C
corporation from its inception. The condensed consolidated financial statements
do not include pro forma adjustments for the effects of contractually reduced
compensation levels of certain members of management nor the planned addition of
public company expenses.
In December 1998, the Company paid $15,000,000 in relation to a March 1998
settlement (Settlement Obligation) reached with its primary supplier, Brunswick
Corporation (see the Company's Amended Annual Report on Form 10-K/A as filed
with the SEC on July 29, 1999).
CONSOLIDATED RESULTS FROM OPERATIONS
Three-Month Period Ended June 30, 1999 Compared to Three-Month Period Ended June
30, 1998:
Revenue. Revenue increased $56.3 million, or 53.6%, to $161.6 million for
the three-month period ended June 30, 1999 from $105.3 million for the
three-month period ended June 30, 1998. Of this increase, $3.3 million was
attributable to 6% growth in comparable stores sales and $53.0 million was
attributable to stores not eligible for inclusion in the comparable store base.
The increase in comparable store sales for the three-month period ended June 30,
1999 resulted primarily from the Company's retailing strategies, including the
implementation of the MarineMax Value-Price sales approach and MarineMax Care
(two years of defined maintenance), more effective utilization of the
prospective customer tracking feature of the integrated computer system, and
increased access to all MarineMax store inventories, which assists the Company's
retail locations in offering the products that customers desire.
Gross Profit. Gross profit increased $13.0 million, or 52.2%, to $37.9
million for the three-month period ended June 30, 1999 from $24.9 million for
the three-month period ended June 30, 1998. Gross profit as a percentage of
revenue decreased to 23.5% in 1999 from 23.7% in 1998. The decrease in gross
profit margin was attributable to reduced sales of products, such as finance and
insurance contracts, that historically result in higher gross profits. The
reduction in sales of these products was caused by a temporary promotion offered
by Sea Ray, the Company's primary manufacturer, in which the customer was
entitled to an extended warranty contract at Sea Ray's expense.
Selling, General, and Administrative Expenses. Selling, general, and
administrative expenses increased by approximately $9.8 million, or 72.8%, to
$23.3 million for the three-month period ended June 30, 1999 from $13.5 million
for the three-month period ended June 30, 1998. Selling, general, and
administrative expenses as a percentage of revenue increased to 14.4% in 1999
from 12.8% in 1998. This increase resulted from the investment of additional
resources to train employees at MarineMax University; investments in
establishing service departments in certain markets; and the additional overhead
associated with operating as a public company, partially offset by reductions in
other selling, general, and administrative expenses through achieving operating
efficiencies and synergies.
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Interest Expense, Net. Interest expense, net decreased approximately
$903,000 or 59.3%, to approximately $597,000 in 1999 from approximately $1.5
million in 1998. Interest expense, net as a percentage of revenue decreased to
0.4% in 1999 from 1.4% in 1998. The decrease resulted primarily from the reduced
interest rate on the Company's lines of credit and reduced level of debt as a
result of the Company's cash and inventory management activities, including the
application of the June 1998 IPO proceeds.
Nine-Month Period Ended June 30, 1999 Compared to Nine-Month Period Ended June
30,1998:
Revenue. Revenue increased $110.4 million, or 51.6%, to $324.4 million for
the nine-month period ended June 30, 1999 from $214.0 million for the nine-month
period ended June 30, 1998. Of this increase, $27.3 million was attributable to
16% growth in comparable stores sales in 1999 and $83.1 million was attributable
to stores not eligible for inclusion in the comparable store base. The increase
in comparable store sales in 1999 resulted primarily from the Company's
experience-based retailing strategies, including the implementation of the
MarineMax Value-Price sales approach and MarineMax Care, more effective
utilization of the prospective customer tracking feature of the integrated
computer system, and a greater emphasis on used boat sales.
Gross Profit. Gross profit increased $27.9 million, or 56.8%, to $77.1
million for the nine-month period ended June 30, 1999 from $49.2 million for the
nine-month period ended June 30, 1998. Gross profit margin as a percentage of
revenue increased to 23.8% in 1999 from 23.0% in 1998. The increase in gross
profit margin was attributable to the implementation of the Company's
experience-based retailing strategies, including the implementation of the
MarineMax Value-Price sales approach and MarineMax Care and increased sales of
products, such as finance and insurance contracts, that historically result in
higher gross profits.
Selling, General, and Administrative Expenses. Selling, general, and
administrative expenses increased approximately $17.5 million, or 44.4%, to
$57.0 million for the nine-month period ended June 30, 1999 from $39.5 million
for the nine-month period ended June 30, 1998. Selling, general, and
administrative expenses as a percentage of revenue decreased to 17.6% in 1999
from 18.4% in 1998. Substantially all of this decrease was attributable to a
$4.6 million reduction of stockholder-employee compensation in the nine-month
period ended June 30, 1999 versus the nine-month period ended June 30, 1998. In
addition, the Company experienced a reduction in selling, general, and
administrative expenses by achieving operating efficiencies and synergies, which
was partially offset by additional expenses associated with MarineMax University
and operating as a public company.
Non-Recurring Settlement. The Non-Recurring Settlement for the nine-month
period ended June 30, 1998 was attributable to the $15.0 million charge under
the Settlement Agreement the Company entered into with Brunswick.
Interest Expense, Net. Interest expense, net decreased approximately $1.2
million, or 46.7%, to $1.4 million in 1999 from $2.6 million in 1998. Interest
expense, net as a percentage of revenue decreased to 0.4% in 1999 from 1.2% in
1998. The decrease resulted primarily from the reduced interest rate on the
Company's lines of credit and reduced level of debt as a result of the Company's
cash and inventory management activities. The decrease was partially offset by
increased debt associated with higher levels of outstanding borrowings related
to the increased level of inventories required to support the increased level of
revenue.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash needs are primarily for working capital to support
operations, including new and used boat and related parts inventories,
off-season liquidity, and growth through new retail openings and acquisitions.
These cash needs have historically been financed with cash from operations and
borrowings under credit facilities. Historically, the Company utilized a
combination of floor plan financing, working capital lines of credit, and loans
from stockholders to finance inventory levels. These historic
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credit facilities had varying interest rates, terms, and payment requirements.
The Company depends upon dividends and other payments from its operating
subsidiaries to fund its obligations and meet its cash needs. No agreements
exist that restrict this flow of funds.
At June 30, 1999, the Company's indebtedness totaled approximately $105.5
million, of which approximately $4.0 million was associated with the Company's
real estate holdings and the remaining $101.5 million was associated with
financing the Company's current inventory level and working capital needs.
On March 18, 1999, the Company renegotiated and supplemented its working
capital borrowing facilities by entering into two revolving lines of credit
facilities (the Facilities) with separate institutions (the Lenders) providing
for combined borrowing availability of $155 million at a weighted average
interest rate of approximately LIBOR plus 140 basis points. Both facilities have
similar terms and mature in March 2001. As of June 30, 1999, the total available
borrowings under short-term borrowings were approximately $53.5 million.
On July 12, 1999, the Company executed an agreement for a new working
capital borrowing facility with a separate financial institution providing for a
borrowing availability of $30 million at an interest rate of LIBOR plus 160
basis points. Borrowings under this facility are pursuant to a borrowing base
formula and are used primarily for financing the Company's inventory. This
facility has similar terms to the Company's existing working capital borrowing
facilities and matures in July 2002.
The Company is currently in the process of increasing its inventory and
working capital borrowing capacity. The Company has obtained a commitment letter
from another financial institution. Pursuant to the commitment letter upon
completion and execution of the legal documentation the Company anticipates that
its inventory and working capital borrowing capacity will be increased from the
current $185 million to over $230 million.
During the nine-month period ended June 30, 1999, the Company acquired
three additional boat retailers and one brokerage operation. In connection with
these acquisitions, the Company paid an aggregate of approximately $4.4 million
in cash, including acquisition costs, executed promissory notes totaling $3.5
million, and issued stock and warrant consideration, resulting in the
recognition of an aggregate of approximately $15.2 million in goodwill, which
represents the excess of the purchase price over the estimated fair value of the
net assets acquired.
The Company believes that its working capital lines of credit and
internally generated working capital will sufficient to meet the Company's cash
requirements at least through the remainder of fiscal 1999.
IMPACT OF SEASONALITY AND WEATHER ON OPERATIONS
The Company's business, as well as the entire recreational boating
industry, is highly seasonal, with seasonality varying in different geographic
markets. With the exception of Florida, the Company generally realizes
significantly lower sales in the quarterly period ending December 31 with boat
sales generally improving in January with the onset of the public boat and
recreation shows. The Company's current operations are concentrated in the more
temperate regions of the United States, and its business could become
substantially more seasonal as it acquires retailers that operate in colder
regions of the United States.
YEAR 2000 COMPLIANCE
The Company currently is addressing a universal situation commonly
referred to as the "Year 2000 Problem." Year 2000 Problems result from the
inability of computer programs or computerized equipment to accurately
calculate, store or use a date subsequent to December 31, 1999. The erroneous
date can be interpreted in a number of different ways; typically the year 2000
is represented as the year 1900. This could result in a system failure or
miscalculations causing disruptions of operations including, among other things,
a temporary inability to process transactions, send invoices or engage in
similar normal business activities. The Company has developed a plan to devote
the necessary resources to
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identify and modify internal systems impacted by the Year 2000 Problem or to
implement new year 2000 compliant systems in a timely manner.
The Company's plan includes conducting an inventory of all hardware and
software that may be subject to the Year 2000 Problem, surveying third party
suppliers of all of the mission critical dealership systems and implementing an
action plan to correct deficiencies before the end of calendar 1999.
The Company depends upon the dealerships' transactional computer systems
for daily operations. All of the Company's dealerships use an identical dealer
management system supported by a major computer system provider for the marine
industry. The Company has contacted the provider and has received written
assurance that its systems are, or will be, year 2000 ready. In addition to
assurances from the system provider, the Company is performing internal testing
to ensure the dealer management systems are year 2000 compliant. The Company
depends upon this provider, as do most other dealerships using the providers
system, to address the year 2000 issues. If the provider fails to adequately
address the year 2000 issue and does not correct the problems in a timely
manner, the Company may materially and adversely affected.
The Company depends upon manufacturers for the production and delivery of
new boats and parts. The Company has contacted the manufacturers and has
received written assurances from them that their systems are, or will be, year
2000 ready. The Company depends upon the manufacturers, as do all other
dealerships worldwide that sell their products, to address the year 2000 issues.
If the manufacturers fail to adequately address the year 2000 issue and do not
correct the problems in a timely manner, the Company may experience shortages in
new boat and parts inventories.
As of July 25, 1999, the Company has received a written response from 90%
of its mission critical vendors. In addition, the Company has formulated a
contingency plan under which alternative third party service providers and
vendors could be utilized and a manual dealership management system could be
implemented, which would enable the Company to continue its retail operations.
While the Company has developed contingency plans, failure by the Company, its
manufacturers or third party service providers and vendors to adequately address
the year 2000 issue could have an adverse effect on the Company.
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PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Not applicable.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
On April 5, 1999, the Company issued 121,090 shares of its common
stock valued at approximately $1.4 million to the former principal of
Suburban Boatworks, Inc in conjunction with the Company's acquisition of
Suburban Boatworks, Inc. The Company issued the common stock without
registration in reliance on the exemption provided by Section 4(2) of the
Securities Act of 1933, as amended.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company's 1999 Annual Meeting of Stockholders was held on March
2, 1999. The following nominees were elected to the Company's Board of
Directors to serve as Class I directors for a three-year term expiring in
2002, or until their successors are elected and qualified, or until their
earlier resignation or removal:
Votes in
Nominee Favor Withheld
------- ----- --------
Richard R. Bassett 12,947,779 6,750
Paul Graham Stovall 12,947,779 6,750
R. David Thomas 12,947,779 6,750
The following additional item was voted upon by the Company's
stockholders:
Broker
Votes in Favor Opposed Abstained Non-Vote
-------------- ------- --------- --------
12,910,818 35,043 8,668 --
The following directors' terms of office continued after the 1999 Annual
meeting of Stockholders: William H. McGill, Robert S. Kant, Stuart Turley,
and Richard C. LaManna, Jr. In April 1999, Richard C. LaManna, Jr.
resigned his position to the Company's Board of Directors.
ITEM 5. OTHER INFORMATION
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.13 Amended and Restated Loan and Security Agreement between the
Company and NationsCredit Distribution Finance, Inc.
10.16 Accounts Receivable and Inventory Financing Agreement between the
Company and Transamerica Commercial Finance Corporation.
27.1 Financial Data Schedule
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MARINEMAX, INC.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MARINEMAX INC.
August 10, 1999 By: /s/ Michael H. McLamb
----------------------------------
Michael H. McLamb
Chief Financial Officer, Vice
President, Secretary and Treasurer
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EXHIBIT INDEX
10.13 Amended and Restated Loan and Security Agreement between the
Company and NationsCredit Distribution Finance, Inc.
10.16 Accounts Receivable and Inventory Financing Agreement between the
Company and Transamerica Commercial Finance Corporation.
27.1 Financial Data Schedule