MarineMax, Inc. — FY2017 Form 10-K
Reporting period: Fiscal year ended September 30, 2017. The filing was dated December 6, 2017. MarineMax is a U.S. recreational boat and yacht retailer; it reported 62 retail locations across 17 states at year-end and operated a yacht-charter business in the British Virgin Islands.
Financial and operating performance
| Metric | FY2017 | FY2016 |
|---|---|---|
| Revenue | $1,052.3 million | $942.1 million |
| Gross profit / margin | $265.3 million / 25.2% | $226.0 million / 24.0% |
| Operating income / margin | $45.3 million / 4.3% | $40.3 million / 4.3% |
| Net income / net margin | $23.5 million / 2.2% | $22.6 million / 2.4% |
| Diluted EPS | $0.95 | $0.91 |
| Operating cash flow | $4.7 million | $22.9 million |
| Cash and cash equivalents at year-end | $42.0 million | $38.6 million |
| Working capital at year-end | $139.1 million | $159.2 million |
Revenue increased 11.7%; comparable-store sales rose 5%. Gross margin improved on boat sales and a higher contribution from service, parts, storage, and charter activities. SG&A rose 18.4% to $220.0 million, including $2.9 million of Hurricane Irma-related expenses; excluding that amount, SG&A was $217.1 million, or 20.6% of revenue versus 19.7% in FY2016. Interest expense rose 37.0% to $7.5 million, primarily due to higher borrowings and rates.
Revenue mix: new boats were 70.9% of revenue, used boats 14.9%, maintenance/repair/storage/charter 6.3%, parts and accessories 3.6%, finance and insurance 2.4%, and brokerage 1.9%. New Brunswick boats represented approximately 42% of revenue; Sea Ray 23%, Boston Whaler 17%, and Azimut 9%.
Fiscal fourth quarter: Revenue was $250.6 million and net income was $3.9 million, compared with $227.4 million and $5.6 million, respectively, in the September 2016 quarter.
Debt, liquidity, and capital allocation
Year-end short-term inventory and working-capital borrowings were $254.2 million, up from $166.6 million; the company reported no long-term debt. The floor-plan facility provides up to $350 million, subject to borrowing-base availability, and had approximately $52.8 million of additional availability. Its rate was 345 basis points above one-month LIBOR; outstanding borrowings carried a 4.7% rate at year-end. MarineMax was in compliance with its leverage and current-ratio covenants. A 100-basis-point rate increase was estimated to add about $2.5 million to annual pretax interest expense.
Operating cash flow was $4.7 million, investing cash outflow $32.1 million, and financing cash inflow $30.7 million. Inventory increased by $79.3 million year over year. The company repurchased $42.7 million of shares during FY2017 and had 387,129 shares remaining under its repurchase authorization at September 30. It does not pay cash dividends.
Changes, outlook, and notable items
- Compared with FY2016, revenue growth slowed from 25.4% to 11.7%, and comparable-store growth from 22% to 5%. Net income increased modestly, while net margin declined from 2.4% to 2.2%.
- MarineMax acquired Hall Marine Group in January 2017. The acquisition contributed to higher SG&A and goodwill; year-end goodwill was $25.9 million.
- Hurricane Irma damaged facilities in Florida and the British Virgin Islands, including $7.6 million of BVI inventory. The company recorded $2.9 million of expenses; the full damage and potential insurance proceeds were not yet quantifiable. MarineMax expected its charter business to resume operations during FY2018.
- On December 5, 2017, Brunswick announced its intent to sell Sea Ray. MarineMax said the outcome and impact were uncertain as of the filing date—a material uncertainty given Brunswick brands generated about 42% of FY2017 revenue.
- No specific numerical FY2018 earnings or revenue guidance was provided. Management said acquisitions and new store openings remain growth priorities and that it expects existing capital resources to fund operations for at least 12 months, except potentially for significant acquisitions.
- Key risks include dependence on discretionary and luxury spending, Florida’s 55% share of FY2017 revenue, seasonal and weather exposure, reliance on manufacturers and dealer agreements, variable-rate floor-plan financing, and execution/integration risks from acquisitions. The company also expects the new lease-accounting standard to materially increase reported assets and liabilities; planned adoption was FY2020.
Most important facts for investors to verify
- How Brunswick’s proposed Sea Ray sale affects dealer agreements, product supply, pricing, and MarineMax’s concentrated brand exposure.
- Whether the $52.8 million of reported facility availability remains adequate as inventory and short-term borrowings rise, and whether covenant headroom is sufficient.
- The final cost, insurance recovery, and operational impact of Hurricane Irma, particularly for damaged BVI inventory and the charter business.
- Whether margin gains and comparable-store growth can be sustained as boat sales become a larger share of revenue and SG&A grows.
- The filing gives different location counts by date: 62 at September 30 and 60 as of filing. Verify the current operating footprint and any closures or changes.