MarineMax, Inc. — Form 10-Q Summary
Reporting period: Fiscal third quarter and nine months ended June 30, 2019. Unaudited results; amounts below are in millions of dollars except per-share data.
Business context
MarineMax is a U.S. recreational boat and yacht retailer, with 67 locations in 16 states at June 30, 2019. It also provides brokerage, service, storage, financing and insurance-related offerings, and yacht charters in the British Virgin Islands. Before the filing, the company had closed on a significant majority of Fraser Yachts Group’s operations and expected to close on the remainder shortly after filing.
Financial performance
| Metric | Three months ended June 30 | Nine months ended June 30 |
|---|---|---|
| Revenue | $383.5 vs. $361.3 in 2018; up 6.2% | $929.0 vs. $868.8; up 6.9% |
| Comparable-store sales | Up 2.8% | Up 5.1% |
| Gross profit / margin | $97.7 vs. $90.7; 25.5% vs. 25.1% | $235.4 vs. $219.2; 25.3% vs. 25.2% |
| Operating income | $28.7 vs. $26.6 | $48.0 vs. $46.2 |
| Interest expense | $2.9 vs. $2.5 | $8.5 vs. $7.9 |
| Net income | $19.1 vs. $17.4 | $29.3 vs. $27.8 |
| Diluted EPS | $0.84 vs. $0.75 | $1.26 vs. $1.21 |
Quarterly growth reflected higher new-boat revenue and contributions from finance and insurance, parts, service and storage. Nine-month growth also included higher used-boat sales and sales from stores not yet in the comparable-store base. Gross margin improved, while SG&A as a share of revenue rose to 18.0% from 17.7% for the quarter and to 20.2% from 19.9% for the nine-month period.
Cash flow, liquidity and capital
- Nine-month operating cash flow was $4.4, down from $52.4 a year earlier, principally reflecting a $41.6 inventory increase; the prior-year period benefited from inventory reductions and insurance proceeds.
- Investing cash outflow was $25.4, including $13.4 of property and equipment purchases and $13.3 of acquisition-related cash use. Financing cash inflow was $43.7, including $63.4 of net short-term borrowings and $20.3 of treasury-stock purchases.
- Cash was $71.6 at June 30, 2019. Current assets were $566.7 and current liabilities were $383.1.
- Short-term inventory and working-capital borrowings were approximately $289.8; no long-term debt was reported. The company reported $37.6 of additional borrowing availability and a 5.9% rate on outstanding borrowings. The facility provides up to $400.0 subject to borrowing-base limits and financial covenants; the company reported covenant compliance.
- During the nine months, the company repurchased approximately 1.214 million shares for about $20.3 under its share-repurchase program.
Outlook, developments and risks
- Management said existing capital resources should fund operations for at least the next 12 months, except for possible significant acquisitions. Acquisitions and new store openings remain growth priorities; no numerical earnings or revenue guidance was provided.
- In April 2019, the company acquired Sail & Ski Center, recording $11.1 of goodwill. Acquisition activity and expansion contributed to higher expenses and investment needs.
- The company cited seasonal and cyclical demand, consumer confidence and discretionary spending, weather and hurricanes, and Florida’s importance to its business as risks. Supplier and brand dependence, including Sea Ray and Azimut, and potential trade restrictions, tariffs, currency fluctuations and international operating risks were also disclosed.
- Borrowings carry variable LIBOR-based rates. Management estimated that a 100-basis-point increase would add about $2.9 of annual pretax interest expense, based on the June 30 balance.
- Management reported no material adverse expected effect from ordinary-course legal matters. ASC 606 adoption increased reported nine-month net income by $0.154 and resulted in a $0.399 after-tax cumulative retained-earnings adjustment at adoption. The company expected fiscal 2020 lease-standard adoption to materially increase reported assets and liabilities.
- Management attributed higher SG&A partly to acquisitions, new locations, marketing and restarting the British Virgin Islands charter operation after Hurricane Irma. Less favorable weather in certain markets prompted increased marketing investment.
Important facts for investors to verify
- Confirm the amended credit facility’s maturity: the financial-statement note says October 2021, while the MD&A says October 2020; both describe two possible one-year extensions subject to lender approval.
- Assess inventory growth, borrowing-base availability and the sharp decline in operating cash flow, including how seasonal inventory requirements affect liquidity.
- Review Fraser Yachts’ final acquisition closing, purchase price, integration costs and contribution to results; the filing describes the remaining closing as expected after filing.
- Monitor the company’s exposure to variable interest rates, inventory aging and covenant headroom, alongside the disclosed $37.6 of additional availability.
- Evaluate the effects of weather, discretionary-demand cycles, supplier concentration and potential tariffs on sales, margins and inventory values.