MarineMax, Inc. — FY2012 Form 10-K
Reporting period: Fiscal year ended September 30, 2012. The filing also reports fourth-quarter results. MarineMax is a U.S. recreational boat retailer with 53 locations in 18 states, selling boats and related products and providing service, storage, brokerage, and financing/insurance arrangements. Florida accounted for 49% of FY2012 revenue; new Brunswick boats accounted for approximately 47%.
Financial performance
| Metric | FY2012 | FY2011 |
|---|---|---|
| Revenue | $524.5 million | $480.9 million |
| Gross profit / margin | $133.3 million / 25.4% | $119.5 million / 24.9% |
| SG&A / share of revenue | $127.9 million / 24.4% | $127.9 million / 26.6% |
| Operating income (loss) | $5.4 million | ($8.4 million) |
| Pre-tax income (loss) | $0.9 million | ($11.9 million) |
| Net income (loss) / diluted EPS | $1.1 million / $0.05 | ($11.5 million) / ($0.52) |
| Cash from (used in) operating activities | $8.7 million | ($14.7 million) |
Revenue rose 9.1%, including 11% comparable-store sales growth. Gross profit increased 11.5%; management attributed improvement to higher sales and better new-boat margins amid improved industry inventory conditions. SG&A was essentially flat in dollars, with expense leverage lowering its revenue share. Interest expense increased to $4.4 million from $3.5 million, primarily due to higher average inventory borrowings.
At September 30, 2012, cash was $23.6 million, working capital was $101.7 million, total assets were $365.1 million, and stockholders’ equity was $200.9 million. Inventory was $215.1 million. Short-term inventory and working-capital borrowings totaled $120.6 million; the company reported no long-term debt. It had approximately $39.5 million of additional borrowing availability, subject to borrowing-base limits. The $150 million GECDF facility matures in June 2015, subject to extension; a separate $30 million CGI facility supports Azimut inventory and was extended through August 2013. The company was compliant with facility covenants at year-end.
Investing activities used $7.6 million, principally for property and equipment and acquisition-related inventory; financing activities provided $3.2 million. The company reported a $176,000 tax benefit and maintained a full valuation allowance against net deferred tax assets.
Material changes and notable items
- FY2012 marked a return to annual profitability after a net loss in FY2011. Same-store sales increased 8% in FY2011 and 11% in FY2012.
- New boats grew to 62.7% of revenue, while used boats fell to 17.8%; service, repair, and storage contributed 8.3%.
- MarineMax acquired Bassett Marine in September 2012 and reported $452,000 of resulting goodwill. It also expanded its Azimut territory to the entire United States in July 2012.
- Fourth-quarter FY2012 revenue was $137.3 million and net loss was $1.6 million, versus revenue of $119.8 million and net loss of $5.7 million in the year-earlier quarter. Q4 FY2012 operating loss was $649,000.
- Hurricane Sandy damaged four Northeast stores and some inventory and customer boats after year-end. Sales and service were interrupted; the company expected the locations to be operational before the traditional boating season, but could not quantify the financial effects.
Outlook, risks, and contingencies
Management said acquisitions and new-store openings remain growth strategies, to resume as economic conditions permit; it provided no specific financial guidance. It cited improved economic conditions and industry inventory trends as contributors to current sales and margin gains, while cautioning that prolonged weak consumer demand could hurt results.
- Results are seasonal and sensitive to discretionary spending, credit availability, interest rates, fuel costs, and weather. Florida concentration increases regional exposure.
- Inventory financing depends on eligible inventory, inventory aging, lender funding, and covenant compliance. A 100-basis-point increase in variable rates was estimated to add about $1.2 million of annual pre-tax interest expense, assuming balances unchanged.
- Manufacturer concentration and dealer-agreement terms pose risks: Brunswick products represented approximately 47% of revenue, and changes to supply, incentives, pricing, or distribution rights could affect sales and margins.
- New online, offsite, and yacht-charter initiatives had not produced meaningful revenue or a material financial-statement effect; their success and recovery of implementation costs are uncertain.
- Environmental compliance and remediation, product-liability claims, and ordinary-course legal matters remain contingencies. A Surfside-3 acquisition-related suit sought damages exceeding $7 million; in December 2012 the court dismissed the individual defendants and most claims, leaving a breach-of-contract claim and allowing fraud claims to be repleaded. Management considered the remaining case without merit and not expected to have a material effect.
Investor verification priorities
- Verify the durability and composition of comparable-store growth and whether improved new-boat margins persist.
- Review inventory aging, borrowing-base availability, facility covenants, and the renewal status of the CGI facility.
- Assess Brunswick exposure and the terms, performance requirements, and renewal dates of key dealer agreements.
- Track Sandy-related interruption, insurance recoveries, repair activity, and any resulting customer or inventory claims.
- Monitor the Surfside-3 litigation, deferred-tax-asset valuation allowance, and progress and costs of newer business initiatives.
The financial statements received an unqualified audit opinion from Ernst & Young LLP; management and the auditor reported effective internal control over financial reporting as of September 30, 2012.