MarineMax, Inc. — Form 10-Q Summary
Reporting period: Second quarter and six months ended March 31, 2015; fiscal year ends September 30. Unaudited consolidated results. Unless otherwise noted, financial amounts below are in millions of dollars.
Business context
MarineMax is a U.S. recreational boat retailer, operating 53 retail locations in 16 states, plus a yacht-charter operation in the British Virgin Islands. It sells new and used boats and related products and services, including financing, insurance, brokerage, maintenance, parts, and storage. The business is seasonal and exposed to discretionary consumer demand. Brunswick brands represented about 40% of fiscal 2014 revenue; Azimut boats represented about 14%. Florida accounted for about 52% of fiscal 2014 revenue.
Key financial results
| Metric | Three months ended March 31, 2015 | Six months ended March 31, 2015 |
|---|---|---|
| Revenue | $172.1; +26.0% year over year | $330.3; +34.1% |
| Comparable-store sales | +27.2% | +35.0% |
| Gross profit / margin | $42.2 / 24.5%; prior-year margin 25.5% | $79.7 / 24.1%; prior-year margin 26.3% |
| SG&A / share of revenue | $40.6 / 23.6% | $76.7 / 23.2% |
| Operating income | $1.6; prior-year operating loss $0.9 | $3.0; prior-year operating loss $3.3 |
| Net income (loss) / diluted EPS | $0.39 / $0.02; prior-year loss $1.98 / $(0.08) | $0.60 / $0.02; prior-year loss $5.35 / $(0.22) |
| Interest expense | $1.3 | $2.4 |
Revenue growth reflected higher new and used boat sales. Management attributed comparable-store growth to improving industry and economic conditions, despite generally unfavorable weather in northern markets. Gross profit dollars rose, but margins fell as boat sales—particularly larger and used boats—made up more of revenue, displacing higher-margin brokerage, finance and insurance, service, parts, and storage revenue. SG&A increased in dollars due to personnel and health-care costs, sales commissions, and additional marketing, but declined as a percentage of revenue.
Cash flow, balance sheet, and financing
- For the six months, operating cash flow was a use of $24.9, versus a use of $30.5 a year earlier. Inventory and receivables growth were major cash uses, partly offset by increases in payables and customer deposits.
- Investing cash flow was a use of $4.1, mainly for improvements to existing retail facilities. Financing cash flow provided $43.9, primarily from net borrowings and stock-plan proceeds. Cash increased $14.9 to $42.7.
- At March 31, current assets were $346.6 and current liabilities $215.1; inventory was $277.0. Short-term borrowings were $165.3, with no long-term debt. Stockholders’ equity was $244.5.
- The inventory-financing facility has a commitment of up to $235.0, subject to borrowing-base availability; approximately $22.0 was additionally available at quarter-end. It matures in August 2017, with two possible one-year extensions subject to lender approval. The rate was 345 basis points over one-month LIBOR; the reported rate on outstanding borrowings was approximately 3.6%. The company reported covenant compliance.
- Management said existing capital resources should fund operations for at least 12 months, except in the event of possible significant acquisitions. A 100-basis-point increase in rates on the quarter-end floating-rate debt would add about $1.7 of annual pretax interest expense, assuming no mitigation.
Outlook, risks, and unusual items
No specific financial guidance was provided. Management said acquisitions and new-store openings remain part of its growth strategy and may accelerate as economic conditions improve. It believes its retailing strategies and market-share gains position it to benefit from growth opportunities, while noting that actual results depend on uncertain economic and industry conditions.
- Key risks include the cyclical, seasonal, and weather-sensitive boating market; reduced consumer spending on luxury goods; geographic concentration in Florida; and reliance on manufacturer dealer agreements and a limited number of boat suppliers.
- Inventory aging can reduce borrowing capacity under the floor-plan facility. Credit-market or lender disruption could constrain funding, while higher rates could increase interest costs and affect customers’ ability to finance purchases.
- Foreign-exchange movements may affect imported-product pricing and margins; the company reported no current foreign-currency hedges.
- The company maintained a full valuation allowance against deferred tax assets because future taxable income remained uncertain. It reported no income-tax expense or benefit for the periods presented.
- A noncash exchange of a $6.0 note receivable for property and equipment was reported in the six-month cash-flow disclosures. The company stated that ordinary-course legal matters were not expected to have a material adverse effect.
Important facts for investors to verify
- Whether strong comparable-store sales continue and translate into sustained earnings and cash generation.
- Whether the boat-sales mix continues to pressure gross margins and how inventory levels and aging affect borrowing availability.
- Current facility availability, covenant headroom, and sensitivity to LIBOR changes and lender conditions.
- Progress toward realizing deferred tax assets and the potential effect of any valuation-allowance release on future tax expense.
- Exposure to major manufacturers, Florida-market conditions, adverse weather, and foreign-currency movements.