MarineMax, Inc. — FY2013 Form 10-K
Reporting period: Fiscal year ended September 30, 2013. The filing also reports the quarter ended September 30, 2013. MarineMax operates 54 recreational boat retail locations in 18 states and sells new and used boats, alongside service, parts, financing, brokerage, and other boating-related offerings.
Financial results
| Metric | FY2013 | FY2012 | Change |
|---|---|---|---|
| Revenue | $584.5 million | $524.5 million | +11.5% |
| Gross profit / margin | $150.9 million / 25.8% | $133.3 million / 25.4% | Margin +0.4 percentage points |
| Operating income / margin | $18.3 million / 3.1% | $5.4 million / 1.0% | Improved |
| Net income | $15.0 million | $1.1 million | Improved |
| Diluted earnings per share | $0.63 | $0.05 | Improved |
| Cash from operating activities | $7.8 million | $8.7 million | Down $0.9 million |
FY2013 same-store sales rose 11%. New boats provided 61.9% of revenue and used boats 19.4%. The average new-boat selling price was approximately $148,000, up about 15% from FY2012.
For the September 2013 quarter, revenue was $149.7 million and net income was $5.2 million, or $0.21 diluted per share; the comparable September 2012 quarter recorded revenue of $137.3 million and a net loss of $1.6 million, or $0.07 per diluted share.
Cash, liquidity, and debt
At September 30, 2013, cash was $23.8 million, working capital was $116.4 million, total assets were $381.9 million, and stockholders’ equity was $221.8 million. Inventory was $228.0 million, up from $215.1 million a year earlier. Short-term inventory and working-capital borrowings were $122.5 million; the company reported no long-term debt. It had approximately $34.8 million of additional borrowing availability under its inventory-based facilities and was in compliance with facility covenants.
The amended GE floor-plan facility provides up to $205 million, subject to borrowing-base availability, and matures in June 2016, with possible one-year extensions subject to lender approval. Its rate was one-month LIBOR plus 355 basis points. The separate CGI facility expired in August 2013; its remaining balance was refinanced under the GE facility on October 16, 2013. A 100-basis-point increase in rates on year-end short-term debt was estimated to add approximately $1.2 million in annual pre-tax interest expense.
Operating cash flow was primarily supported by earnings and partly offset by increased inventory and decreases in accrued expenses and long-term liabilities. Investing activities used $12.6 million, chiefly for capital spending and acquisition-related inventory; financing activities provided $4.9 million. Management said existing capital resources should fund operations for at least 12 months, excluding possible significant acquisitions.
Material changes and unusual items
- Revenue increased $60.0 million, including $57.7 million from comparable-store sales growth. Management attributed growth to new and used boat sales and increases in brokerage, finance and insurance, service, and parts activity, alongside improving industry conditions.
- Gross margin improved with higher sales and better new- and used-boat margins. SG&A was $132.5 million and included an approximately $11.8 million Deepwater Horizon Settlement Program recovery recorded as an expense reduction. Excluding that recovery, management said SG&A was $144.3 million, up 12.7% year over year.
- Interest expense declined to $4.2 million from $4.4 million, primarily due to lower facility rates. The FY2013 income tax benefit of $0.9 million included a favorable state tax settlement; deferred tax assets remained fully reserved.
- Cash from operations declined year over year, while inventory and short-term borrowings increased. The company expanded its GE floor-plan commitment from $150 million to $205 million and reduced the stated facility spread by 28 basis points.
Outlook, risks, and contingencies
No numerical FY2014 guidance is provided. Management said acquisitions and new locations remain growth strategies as economic conditions permit, and expressed the view that its customer-service model and market-share gains position it to benefit from improving conditions. Newly launched online, offsite-sales, and yacht-charter initiatives had not materially affected financial results.
Key risks include the cyclical, seasonal, and weather-sensitive nature of recreational boating; exposure to discretionary and luxury spending; reliance on inventory financing and borrowing-base capacity; variable interest rates; and concentration in Florida, which generated approximately 51% of FY2013 revenue. New Brunswick boats represented about 38% of revenue and Azimut boats about 13%, creating supplier and brand concentration risk. Dealer agreements, manufacturer allocations and incentives, customer financing and insurance availability, competition, and acquisition execution also affect results. The filing notes environmental compliance and remediation risks at certain properties, though management did not expect material environmental liabilities.
A lawsuit by former Surfside-3 shareholders alleges damages exceeding $10 million. The court entered summary judgment for MarineMax on the remaining claim; plaintiffs appealed. The company believes the matter should not materially affect its financial condition, results, or cash flows. Additional Deepwater Horizon claims were outstanding, but the company could not estimate any further recovery. The filing states that ordinary-course legal matters are not expected to have a material adverse effect.
The company reported an unqualified audit opinion on its FY2013 financial statements and an effective internal control over financial reporting assessment. It does not pay cash dividends and said it had no current intention to do so.
Important facts for investors to verify
- Whether comparable-store growth and improved margins persist, and how much earnings depend on the one-time $11.8 million settlement recovery.
- Inventory aging, turnover, and borrowing-base availability, including covenant headroom and the effects of any seasonal borrowing increase.
- Current sales, allocation, and dealer-agreement exposure to Brunswick and Azimut, and whether manufacturer concentration has changed.
- Progress and cash requirements of acquisitions, new locations, online/offsite initiatives, and the yacht-charter business.
- Outcome of the Surfside-3 appeal and any additional Deepwater Horizon settlement recovery.