MarineMax, Inc. — FY2014 Form 10-K
Reporting period: Fiscal year ended September 30, 2014. MarineMax is a U.S. recreational boat retailer and service provider operating 54 locations in 17 states. It focuses on premium new and used boats and also earns revenue from service, storage, financing and insurance, parts, brokerage, and yacht charters.
Financial results and liquidity
| Metric | FY2014 | FY2013 |
|---|---|---|
| Revenue | $624.7 million | $584.5 million |
| Gross profit / margin | $161.8 million / 25.9% | $150.9 million / 25.8% |
| Operating income / margin | $15.4 million / 2.5% | $18.3 million / 3.1% |
| Net income | $11.3 million | $15.0 million |
| Diluted EPS | $0.46 | $0.63 |
| Cash provided by operating activities | $10.8 million | $7.8 million |
- Revenue rose 6.9%; comparable-store sales increased 6%. New boats made up 65.2% of revenue, and used boats 16.8%.
- Gross margin improved slightly, but operating income fell 16.1% as SG&A increased 10.5% to $146.4 million. Reported net margin was approximately 1.8%.
- Cash and cash equivalents were $27.8 million; working capital was $126.1 million. Current assets were $289.0 million and current liabilities $162.8 million.
- Short-term inventory and working-capital borrowings were $124.4 million, at a 3.6% rate; the company reported no long-term debt. Its floor-plan facility commitment is up to $235 million, with approximately $38.2 million available at year-end. The facility is secured by substantially all personal property, subject to exceptions; real estate is not pledged.
- Investing activities used $12.8 million, including $9.2 million for property and equipment and a $6.0 million note receivable. Financing activities provided $6.1 million.
Changes versus prior year and unusual items
- Revenue increased $40.2 million, driven mainly by comparable-store growth and improving industry conditions. Average new-boat selling price was approximately $167,000, up about 13% from FY2013.
- Net income declined $3.8 million. FY2013 included an $11.7 million net recovery from the Deepwater Horizon Settlement Program; FY2014 included a $555,000 recovery. FY2014 also included an approximately $1.0 million gain, net of closing costs, on the sale of the Walker, Minnesota location.
- Management’s comparison excluding the Deepwater Horizon recoveries and the FY2014 store-sale gain indicates comparable SG&A increased $3.8 million, or 2.6%, and declined as a share of revenue to 23.7% from 24.7%.
- Same-store sales growth slowed from 11% in FY2013 to 6% in FY2014. Inventory increased $16.1 million year over year to $244.2 million.
Outlook, commentary, and risks
- No specific FY2015 revenue or earnings guidance is provided. Management says acquisitions and new-store openings remain strategic priorities and expects to pursue growth more actively when economic conditions improve; timing and results remain uncertain.
- Management attributed FY2014 sales growth to improving economic and industry conditions, higher comparable-store sales, and incremental growth in boat and related service categories. It said increased boat sales also raised commissions and SG&A.
- Key risks include the cyclical and seasonal nature of boating and discretionary purchases; weather and storms; reliance on manufacturer relationships and brands; and concentration in Florida, which generated 52% of FY2014 revenue. New Brunswick boats represented about 40% of revenue, including Sea Ray at 26% and Boston Whaler at 10%; Azimut boats represented about 14%.
- Liquidity depends on the inventory-backed credit facility. Borrowing availability is affected by inventory age and borrowing-base limits; the facility has leverage and current-ratio covenants. The company reported compliance at year-end. A 100-basis-point increase in variable rates was estimated to add approximately $1.2 million to annual pretax interest expense.
- The company maintained a full valuation allowance against deferred tax assets, totaling $37.5 million at September 30, 2014. A future release could result in tax expense. The company also cited environmental, product-liability, competitive, acquisition-integration, and cybersecurity risks.
- Management said ordinary-course legal matters were not expected to materially affect results. A previously disclosed lawsuit alleging damages exceeding $10 million was affirmed in the company’s favor on appeal and was definitively resolved after the plaintiffs did not timely seek Supreme Court review.
- Management and the auditor concluded internal control over financial reporting was effective as of September 30, 2014; the financial-statement audit opinion was unqualified.
Important facts for investors to verify
- Whether comparable-store growth and margins persist, particularly given the slowdown in same-store sales growth and lower operating income.
- Inventory quality, aging, turnover, and the resulting borrowing-base availability under the floor-plan facility.
- Progress on reducing reliance on Brunswick, Azimut, and Florida, and the performance of newer, higher-margin service and charter initiatives.
- The treatment and repeatability of settlement recoveries and asset-sale gains when assessing normalized earnings.
- Developments in deferred-tax-asset realizability, environmental matters, and credit-facility covenants and refinancing terms.