MarineMax, Inc. — FY2015 Form 10-K
Reporting period: Fiscal year ended September 30, 2015. The filing also provides unaudited results for the quarter ended September 30, 2015 (“Q4”). Amounts below are in U.S. dollars.
Business context
MarineMax is a U.S. recreational boat retailer with 53 locations in 15 states. It sells new and used boats and provides related financing, insurance, service, storage, brokerage, and yacht-charter services. Florida generated 53% of FY2015 revenue. New Brunswick boats represented about 40% of revenue, including Sea Ray at 25% and Boston Whaler at 12%; new Azimut boats represented about 12%.
Financial performance and liquidity
| Metric | FY2015 | FY2014 |
|---|---|---|
| Revenue | $751.4 million | $624.7 million |
| Gross profit / margin | $184.8 million / 24.6% | $161.8 million / 25.9% |
| Operating income / margin | $25.3 million / 3.4% | $15.4 million / 2.5% |
| Income before taxes | $20.9 million | $11.4 million |
| Net income | $48.3 million | $11.3 million |
| Diluted EPS | $1.92 | $0.46 |
| Cash from operations | $2.5 million | $10.8 million |
- Revenue rose 20.3%; comparable-store sales increased 22%. Revenue growth reflected higher new and used boat sales and gains in brokerage, storage, finance and insurance, service, and charter activities.
- Gross margin fell 1.3 percentage points. Management attributed the decline mainly to a greater mix of lower-margin used and larger boats and boat sales growing faster than higher-margin services.
- FY2015 net income included a $27.4 million income-tax benefit, principally from releasing most of the deferred-tax-asset valuation allowance. Pre-tax income was $20.9 million. The tax benefit also lifted Q4 net income to $32.8 million; Q4 revenue was $189.3 million versus $164.1 million a year earlier.
- Cash and cash equivalents were $32.6 million; working capital was $161.7 million. Current assets were $345.1 million and current liabilities $183.4 million.
- Short-term inventory borrowings were $137.2 million, up from $124.4 million; the company reported no long-term debt. The floor-plan facility had $54.5 million of additional availability, subject to borrowing-base limits. The company was in compliance with its covenants.
- Inventory increased to $273.9 million from $244.2 million. Operating cash flow declined as inventory and receivables grew. Investing activities used $3.8 million; financing activities provided $6.0 million, including $10.5 million of share repurchases.
Changes, outlook, and risks
- FY2015 was the company’s strongest revenue year in the periods presented, with same-store growth accelerating from 6% in FY2014 to 22%. The company made no acquisition in FY2015, after relatively small acquisitions in each of FY2013 and FY2014.
- Management intends to pursue acquisitions, new locations, and growth in higher-margin services as economic conditions improve. It stated that existing capital resources should support operations for at least 12 months, except potentially significant acquisitions. The filing provides no specific FY2016 revenue or earnings guidance.
- In October 2015, after year-end, the company amended its floor-plan facility: the commitment increased from $235 million to $260 million and maturity was extended to October 2018, with possible one-year extensions subject to lender approval. The rate is one-month LIBOR plus 345 basis points.
- Key risks include economic and discretionary-spending cycles, seasonality and severe weather, variable-rate borrowing costs, inventory aging and borrowing-base availability, and dependence on major manufacturers and dealer agreements. Brunswick and Azimut product sales together accounted for about 52% of revenue. Florida concentration, competition, customer financing and insurance availability, acquisitions, and environmental, product-liability, and cybersecurity exposures are also cited.
- Management reported effective disclosure controls and internal control over financial reporting; the auditor issued unqualified opinions on the financial statements and internal controls. Ordinary-course legal matters were not expected to have a material adverse effect. The company does not pay cash dividends.
Important facts for investors to verify
- How much of the $48.3 million annual net income and $32.8 million Q4 net income is attributable to the non-cash deferred-tax valuation-allowance release, and what recurring earnings imply after that benefit.
- Whether strong sales growth can continue while restoring gross margin and converting earnings into operating cash flow, given higher inventory and receivables.
- Floor-plan borrowing availability, inventory aging, covenant headroom, and sensitivity to LIBOR increases; a 100-basis-point rate rise was estimated to add about $1.4 million in annual pre-tax interest expense at the year-end balance.
- Exposure to Brunswick, Azimut, and Florida, and any changes to manufacturer agreements, product availability, or dealer incentives.
- Execution and funding assumptions behind planned acquisitions, store openings, and expansion of higher-margin services; the filing gives no quantified earnings guidance.