<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1998
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________________ to __________________
Commission File No. 1-14173
MARINEMAX, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 59-3496957
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
18167 U.S. 19 NORTH, SUITE 499
Clearwater, Florida 33764
(Address of principal executive offices) (ZIP Code)
813-531-1700
(Registrant's telephone number, including area code)
Indicate by check whether the registrant: (1) has filed all reports to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the Registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
Yes X No
The number of outstanding shares of the registrant's Common Stock on July 31,
1998 was 14,335,776
<PAGE> 2
MARINEMAX, INC.
Table of Contents
<TABLE>
<CAPTION>
Item No. Page
- -------- ----
<S> <C>
PART I FINANCIAL INFORMATION
1. Financial Statements (unaudited):
Condensed Consolidated Results of Operations
For the Three and Nine Month Periods Ended
June 30, 1998 and 1997............................................... 3
Condensed Consolidated Balance Sheets as of
June 30, 1998 and September 30, 1997................................. 4
Condensed Consolidated Statements of Cash Flows
For the Nine Month Periods Ended June 30, 1998 and June 30, 1997 .... 5
Notes to Condensed Consolidated Financial Statements................... 7
2. Management's Discussion and Analysis of Results of Operations
and Financial Condition............................................... 10
PART II OTHER INFORMATION
1. Legal Proceedings........................................................ 14
2. Use of Proceeds.......................................................... 14
3. Defaults Upon Senior Securities.......................................... 14
4. Submission of Matters to Vote of Security Holders........................ 14
5. Other Information........................................................ 14
6. Exhibits and Reports on Form 8-K......................................... 14
Signatures....................................................................... 15
</TABLE>
2
<PAGE> 3
Item 1. Financial Statements
MARINEMAX, INC. AND SUBSIDIARIES
Condensed Consolidated Results of Operations
(Unaudited)
<TABLE>
<CAPTION>
For the Three Month Period For the Nine Month Period
Ended June 30, Ended June 30,
1997 1998 1997 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
REVENUE $ 62,082,857 $ 84,827,564 $ 149,861,403 $ 188,337,443
COST OF SALES 46,402,108 64,397,268 114,933,485 144,835,423
------------- ------------- ------------- -------------
Gross profit 15,680,749 20,430,296 34,927,918 43,502,020
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 8,663,314 11,385,909 28,738,692 35,418,061
NON RECURRING SETTLEMENT OBLIGATION
(Note 3) -- -- -- 15,000,000
------------- ------------- ------------- -------------
Income (loss) from operations 7,017,435 9,044,387 6,189,226 (6,916,041)
INTEREST EXPENSE, net 633,796 1,137,586 1,158,754 2,137,748
------------- ------------- ------------- -------------
NET INCOME (LOSS) BEFORE
INCOME TAXES 6,383,639 7,906,801 5,030,472 (9,053,789)
INCOME TAX (BENEFIT) PROVISION 651,157 3,163,049 166,313 (1,417,813)
------------- ------------- ------------- -------------
NET INCOME (LOSS) (Note 3) $ 5,732,482 $ 4,743,752 $ 4,864,159 $ (7,635,976)
============= ============= ============= =============
BASIC AND DILUTED NET
INCOME (LOSS) PER
COMMON SHARE (Note 3): $ 0.73 $ 0.45 $ 0.60 $ (0.86)
============= ============= ============= =============
SHARES USED IN COMPUTING
NET INCOME (LOSS) PER
COMMON SHARE:
Basic 7,799,844 10,603,545 8,063,893 8,894,325
============= ============= ============= =============
Diluted 7,799,844 10,613,702 8,063,893 8,897,795
============= ============= ============= =============
PRO FORMA DATA:
Pro forma income tax (benefit) provision 1,903,496 1,845,876 (2,203,702)
------------- ------------- -------------
Pro forma net income (loss) $ 3,828,986 $ 3,018,283 $ (5,432,274)
============= ============= =============
Pro forma basic and diluted net income
(loss) per share (Note 3) $0.49 $0.37 $(0.61)
============= ============= =============
</TABLE>
See Notes to Condensed Consolidated Financial Statements
3
<PAGE> 4
MARINEMAX, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
<TABLE>
<CAPTION>
September 30, June 30,
1997 1998
---- ----
(unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 11,014,090 $ 15,477,710
Accounts receivable, net 6,779,176 11,993,465
Due from related parties 585,913 --
Inventories 50,404,178 60,368,520
Prepaids and other current assets 530,024 1,521,244
Deferred tax asset 529,212 2,679,175
------------ ------------
Total current assets 69,842,593 92,040,114
PROPERTY AND EQUIPMENT, net 5,389,397 17,331,730
DUE FROM RELATED PARTY 54,719 --
GOODWILL AND OTHER ASSETS 86,023 5,146,565
------------ ------------
Total assets $ 75,372,732 $114,518,409
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 6,080,006 $ 7,095,702
Customer deposits 3,395,914 5,826,247
Accrued expenses 4,195,239 7,598,386
Floor plan notes payable 26,152,099 3,460,636
Short-term borrowings 2,711,677 12,398,584
Settlement payable -- 15,000,000
Current maturities of long-term debt 973,269 28,944
Due to related parties 5,555,540 2,846,676
------------ ------------
Total current liabilities 49,063,744 54,255,175
LONG-TERM DEBT, net of current maturities 5,981,487 4,382,363
DEFERRED TAX LIABILITY -- 1,273,357
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock 7,800 13,200
Additional paid-in capital -- 52,113,669
Retained earnings 20,319,701 2,480,645
------------ ------------
Total stockholders' equity 20,327,501 54,607,514
------------ ------------
Total liabilities and stockholders' equity $ 75,372,732 $114,518,409
============ ============
</TABLE>
See Notes to Condensed Consolidated Financial Statements
4
<PAGE> 5
MARINEMAX, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
For the Nine Month Periods Ended
(Unaudited)
<TABLE>
<CAPTION>
June 30, June 30,
1997 1998
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (loss) ............................................ $4,864,159 $(7,635,976)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities
Depreciation and amortization ............................ 571,244 731,587
Deferred income tax (provision) benefit .................. 666,581 (876,606)
Loss (gain) on sale of property and equipment ............ - 43,147
(Increase) decrease in --
Accounts receivable ................................. (2,507,270) (4,319,528)
Due from related parties ............................ (1,484,910) 640,632
Inventories ......................................... (9,361,861) (1,962,384)
Prepaids and other assets ........................... 485,405 (678,277)
(Decrease) increase in --
Accounts payable ..................................... 4,567,821 (68,186)
Customer deposits .................................... 1,370,402 2,335,978
Accrued expenses and other liabilities ............... (605,363) 2,752,931
Floor plan notes payable ............................. 8,109,339 (29,786,085)
Settlement payable ................................... - 15,000,000
---------- -----------
Net cash provided by (used in) operating activities 6,675,547 (23,822,767)
---------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment .......................... (1,369,537) (1,779,002)
Proceeds from sale of property and equipment ................. - 84,000
Cash acquired in purchase of business ........................ - 496,659
---------- -----------
Net cash used in investing activities ........... (1,369,537) (1,198,343)
---------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from initial public offering, net of offering
expenses and underwriting commissions ...................... - 38,308,582
Net borrowings (repayments) on notes payable to
related parties .......................................... (342,079) (3,165,106)
Borrowings on long-term debt ................................. 1,142,758 -
Repayments on long-term debt ................................. (1,435,347) (6,650,877)
Net borrowings (repayments) on short-term borrowings ......... 2,025,758 9,405,995
Distributions to stockholders ................................ (5,056,152) (8,413,864)
---------- -----------
Net cash (used in) provided by
financing activities .......................... (3,665,062) 29,484,730
---------- -----------
NET INCREASE (DECREASE) IN CASH AND 1,640,948
CASH EQUIVALENTS: 4,463,620
CASH AND CASH EQUIVALENTS, beginning of period .................... 6,149,772 11,014,090
---------- -----------
CASH AND CASH EQUIVALENTS, end of period .......................... $7,790,720 $15,477,710
========== ===========
</TABLE>
See Notes to Condensed Consolidated Financial Statements
5
<PAGE> 6
MARINEMAX, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
For the Nine Month Periods Ended
(Unaudited)
(Continued)
<TABLE>
<CAPTION>
June 30, June 30,
1997 1998
---- ----
<S> <C> <C>
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid for
Interest . . . . . . . . . . . . . . . . . . . . . . . . $ 1,551,129 $ 2,245,078
Income taxes . . . . . . . . . . . . . . . . . . . . . $ 17,100 --
SUPPLEMENTAL DISCLOSURES OF NON-CASH
INVESTING AND FINANCING ACTIVITIES:
Long-term debt issued for redemption of common stock . . . . $ 6,100,000 --
Acquisition of property and equipment, in exchange for
Common stock . . . . . . . . . . . . . . . . . . . . . . -- $10,590,206
Assumption of long-term debt in conjunction with the
acquisition of property and equipment . . . . . . . . . -- $ 4,107,428
</TABLE>
See Notes to Condensed Consolidated Financial Statements
6
<PAGE> 7
MARINEMAX, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
1. COMPANY BACKGROUND
MarineMax, Inc. (MarineMax) and subsidiaries (collectively, the
Company) are primarily engaged in the retail sale and service of new and used
boats, motors, trailers, marine parts and accessories in Arizona, California,
Florida, Georgia and Texas.
MarineMax was formed in January 1998. MarineMax effected a business
combination on March 1, 1998 in which it acquired all of the issued and
outstanding common stock of Bassett Boat Company of Florida, Gulfwind South,
Inc., Gulfwind U.S.A., Inc., 11502 Dumas, Inc. and subsidiaries d/b/a Louis
DelHomme Marine, Harrison's Boat Center, Inc., and Harrison's Marine Centers of
Arizona, Inc. (collectively, the Merged Companies) and all of the beneficial
interests in Bassett Boat Company, Bassett Realty, L.L.C., Gulfwind South
Realty, L.L.C., Harrison's Realty, L.L.C. and Harrison's Realty California,
L.L.C. (collectively, the Property Companies) in exchange for 9,191,869 shares
of the Company's common stock (the Pooling).
The business combination referred to above has been accounted for under
the pooling-of-interests method of accounting. Thus, the accompanying financial
statements have been restated to include the accounts and operating results of
MarineMax and the Merged Companies for all dates and periods prior to the
combination. The Property Companies have been reflected in the accompanying
financial statements as of March 1, 1998.
2. BASIS OF PRESENTATION
The accompanying financial statements are unaudited and have been
prepared by the Company pursuant to the rules and regulations of the Securities
and Exchange Commission (the "SEC"). Although the September 30,1997 balance
sheet was derived from audited financial statements, certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted pursuant to SEC rules and regulations. The accompanying condensed
financial statements and related notes should be read in conjunction with the
Company's Registration Statement on Form S-1 (File number 333-47873) as declared
effective by the SEC on June 1, 1998.
The Company believes that the financial statements include all adjustments of
a normal and recurring nature necessary to present fairly the results of
operations, financial position and cash flows for the periods presented. The
consolidated financial statements include the accounts of the Company and its
subsidiaries, all of which are wholly owned. All significant intercompany
transactions and accounts have been eliminated.
Effective September 30, 1997 the Company changed its fiscal year-end from
December 31 to September 30 to coincide more closely with its natural business
cycle.
3. INITIAL PUBLIC OFFERING, PRO FORMA RESULTS OF OPERATIONS AND NONRECURRING
SETTLEMENT OBLIGATION
In June 1998, the Company completed its initial public offering ("IPO")
of 4,780,569 shares of Common Stock. Of the 4,780,569 shares of common stock
sold, the Company sold 3,515,824 shares and certain stockholders sold 1,264,745
shares. Of the 3,515,824 shares the Company sold, 1,654,624 shares were sold at
a price per share of $12.50 and 1,861,200 shares were sold to Brunswick
Corporation ("Brunswick") for $11.625 per share. The IPO generated net cash
proceeds of approximately $38.3 million after deducting underwriting discounts
and offering costs to date of approximately $2.6 million.
In connection with the Pooling, the applicable merged companies
terminated their S corporation status and recorded a deferred income tax charge
and a corresponding net deferred tax liability of approximately $1,680,000,
representing the tax effect of differences in bases in assets and liabilities
for financial reporting and income tax purposes. The Company has
7
<PAGE> 8
MARINEMAX, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
presented pro forma income tax disclosure as if the Company and subsidiaries
were C corporations for the nine month period ended June 30, 1998 and the three
and nine month periods ended June 30, 1997.
The Non Recurring Settlement Obligation for the nine month period ended
June 30, 1998 was attributable to the $15.0 million obligation under the
Settlement Agreement the Company entered into with Brunswick Corporation as
outlined in the Company's Registration Statement on Form S-1 (Commission File
number 333- 47873).
A portion of the proceeds from the IPO was used to repay the Company's
outstanding indebtedness. The Company expects to use the balance of the proceeds
for business acquisitions, working capital, general corporate purposes, and
payment of the remaining balance of offering expenses.
4. DEBT:
On April 7, 1998, the Company executed an agreement for a new working
capital line of credit with a financial institution under which the Company
refinanced substantially all of its outstanding floor plan notes payable. The
maximum available borrowings under the new working capital line of credit are
$105 million. The new working capital line of credit bears interest at LIBOR
plus 125 basis points, and has a three-year term.
5. ACQUISITIONS
On April 30, 1998, the Company acquired all of the issued and
outstanding Common Stock of Stovall Marine, Inc. (Stovall) (a Georgia
corporation) in exchange for 492,306 shares of the Company's common stock. The
acquisition has been accounted for under the purchase method of accounting,
which resulted in the recognition of approximately $5.2 million of goodwill,
representing the excess purchase price over the estimated fair value of net
assets acquired. The goodwill is being amortized over 40 years.
On July 7, 1998, the Company acquired Cochran's Marine, Inc., C & N
Marine, C & N Realty LLC, Walker Marina Realty, LLC, Marina Drive Realty I, LLC,
and Marina Drive Realty II, LLC (collectively, Cochran's) in a stock-for-stock
merger by issuing 723,386 shares of its Common Stock in exchange for all the
stock and membership interests of Cochran's. The four LLC's own three retail
facilities (including a marina) and a storage building utilized in Cochran's
operations. The acquisition has been accounted for under the
pooling-of-interests method of accounting.
On July 30, 1998, the Company acquired Sea Ray of North Carolina
(f.k.a. Skipper Bud's of North Carolina) in a stock-for-stock merger by issuing
412,390 shares of its Common Stock for all the stock of Sea Ray of North
Carolina. The acquisition has been accounted for under the pooling-of-interests
method of accounting.
The table below presents the Company's Supplementary Condensed Consolidated
Statements of Operations for the three and nine month periods ended June 30,
1997 and 1998, respectively, as if Cochran's and Sea Ray of North Carolina were
included as a part of the Company historically.
8
<PAGE> 9
MARINEMAX, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
<TABLE>
<CAPTION>
For the Three Month For the Nine Month Periods
Periods Ended June 30, Ended June 30,
1997 1998 1997 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
REVENUE 79,250,717 105,156,392 172,109,205 217,293,722
========== =========== =========== ===========
NET INCOME (LOSS) 7,408,605 6,663,459 5,789,874 (6,363,323)
========== =========== =========== ===========
BASIC AND DILUTED NET INCOME
(LOSS) PER COMMON SHARE: $0.84 $0.57 $0.65 $(0.64)
========== =========== =========== ===========
SHARES USED IN COMPUTING NET
INCOME (LOSS) PER COMMON
SHARE:
Basic 8,815,620 11,619,321 8,875,740 9,910,101
========== =========== =========== ===========
Diluted 8,815,620 11,629,478 8,875,740 9,913,486
========== =========== =========== ===========
PRO FORMA DATA:
Pro forma income tax
(benefit) provision 2,431,148 584,554 2,109,653 (1,875,036)
---------- ----------- ----------- -----------
Pro forma net income (loss) 4,977,457 6,078,905 3,680,221 (4,488,287)
========== =========== =========== ===========
Pro forma basic and diluted
net income (loss) per share $0.56 $0.52 $0.41 $(0.45)
========== =========== =========== ===========
</TABLE>
6. NEW ACCOUNTING PRONOUNCEMENTS
During June 1996 and June 1997, the Financial Accounting Standards
Board issued SFAS No. 130, "Reporting Comprehensive Income" (SFAS 130), and SFAS
No. 131, "Disclosures About Segments of An Enterprise and Related Information"
(SFAS 131), respectively. The major provisions of these statements and their
impact on the Company are discussed below.
SFAS 130, effective for fiscal years beginning after December 15, 1997,
requires the presentation of comprehensive income in an entity's financial
statements. Comprehensive income represents all changes in equity of an entity
during the reporting period, including net income and charges directly to equity
which are excluded from net income. This statement is not anticipated to have
any impact on the Company as the Company currently does not enter into any
transactions that result in charges (or credits) directly to equity (such as
additional minimum pension liability changes, currency translation adjustments,
unrealized gains and losses on available-for-sale securities, etc.).
SFAS 131, effective for fiscal years beginning after December 15, 1997,
establishes standards for the way that public business enterprises report
information about operating segments in annual financial statements and requires
that those enterprises report selected information about operating segments in
interim financial reports issued to stockholders. It also establishes standards
for related disclosures about products and services, geographic areas, and major
customers. The Company's management does not believe this statement will have
any impact on its consolidated financial statements.
9
<PAGE> 10
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION.
This Management's Discussion and Analysis of Results of Operations and
Financial Condition contains "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended (the "Securities Act"),
and Section 21E of the Securities Exchange Act of 1934, as amended. These
statements relate to future economic performance, plans and objectives of the
Company for future operations and projections of revenue and other financial
items that are based on the belief of the Company as well as assumptions made
by, and information currently available to, the Company. Actual results could
differ materially from those currently anticipated as a result of a number of
factors, including those listed in the "Risk Factors" section of the prospectus
included in the Company's Registration Statement on Form S-1 (Registration
number 333-47873) as declared effective by the SEC on June 1, 1998. These
factors include, the Company's brief combined operating history and its ability
to identify and acquire suitable acquisition candidates, to integrate acquired
companies into its operations, to implement internal control and management
financial and operational reporting systems, and to manage risks associated with
opening new retail locations and offering new products.
GENERAL
The following discussion and analysis relates to the Company prior to
its July 7, 1998 acquisition of Cochran's and its July 30, 1998 acquisition of
Sea Ray of North Carolina. Cochran's operates five retail locations in
Minnesota. Sea Ray of North Carolina operates one retail location in North
Carolina.
The Company is the largest recreational boat retailer in the United
States. Through 28 retail locations in five states, the Company sells new and
used recreational boats and related marine products, including engines, boats,
trailers, parts, and accessories. The Company also arranges related boat
financing, insurance and extended warranty contracts, provides boat repair and
maintenance services, and offers boat brokerage services. The Company was formed
in January 1998 and merged with five recreational boat retailers on March 1,
1998 and an additional recreational boat retailer on April 30, 1998 (the "Merged
Companies"). The Merged Companies had an average operating history of 21 years
under the ownership existing at the time of the Mergers. Each of the Merged
Companies historically operated with a calendar year end, but adopted the
September 30 year end of MarineMax upon completion of the Mergers. The September
30 year end more closely conforms to the natural business cycle of the Company.
The following discussion compares the three month period ended June 30, 1998 to
the three month period ended June 30,1997, and the nine month period ended June
30, 1998 to the nine month period ended June 30,1997.
The Company derives its revenue from (i) selling new and used
recreational boats and related marine products; (ii) arranging financing,
insurance, and extended warranty products; (iii) providing boat repair and
maintenance services; and (iv) offering boat brokerage services. Revenue from
boat or related marine product sales, boat repair and maintenance services, and
boat brokerage services is recognized at the time the product is delivered to
the customer or the service is completed. Revenue earned by the Company for
arranging financing, insurance, and extended warranty products is recognized at
the later of customer acceptance of the service contract terms as evidenced by
contract execution, or when the related boat sale is recognized. Cost of sales
generally includes the cost of the recreational boat or other marine product,
plus any additional parts or consumables used in providing maintenance, repair,
and rigging services.
The Merged Companies operated historically as independent, privately
owned entities, and their results of operations reflect varying tax structures,
including both S and C corporations, which have influenced the historical level
of employee-stockholder compensation. The selling, general, and administrative
expenses of the Merged Companies include compensation to employee-stockholders
totaling approximately $300,000, $1.4 million, $5.4 million and $7.0 million for
the three month and nine month periods ended June 30, 1998 and 1997,
respectively. As a result of the varying practices regarding compensation to
employee-stockholders among the Merged Companies, the comparison of operating
margins from period to period is not meaningful. Certain employee-stockholders
have entered into employment agreements with the Company, reflecting reduced
compensation when compared to historical levels.
10
<PAGE> 11
For the three and nine month periods ended June 30, 1997 and a portion
of the nine month period ended June 30, 1998, MarineMax was a private company,
comprised of, for the most part, S corporations for income tax purposes.
Accordingly the tax liability of the Company was passed though to its
shareholders, resulting in very little recorded income tax expense, reflecting
primarily pretax earnings as net income. The planned addition of public company
related expenses, partially offset by contractually reduced levels of
compensation for certain members of management, make the three and nine month
net income comparison less meaningful. When the companies merged on March 1,
1998, the respective S corporations terminated their S election and recorded a
deferred income tax provision.
In the March 1998 quarter, the Company recorded a $15,000,000 charge to
earnings in relation to a settlement (Settlement Obligation) reached with its
primary supplier, Brunswick Corporation (see the Company's Registration
Statement on Form S-1 for more details). The condensed consolidated financial
statements included with this filing include a pro forma adjustment for income
taxes as if the Company was a C corporation from its inception. The condensed
consolidated financial statements do not include pro forma adjustments for the
effects of contractually reduced compensation levels of certain members of
management, the elimination of the $15.0 million Brunswick settlement amount,
nor the planned addition of public company expenses.
CONSOLIDATED RESULTS FROM OPERATIONS
Three Month Period Ended June 30, 1998 Compared to Three Month Period Ended June
30, 1997:
Revenue. Revenue increased $22.7 million, or 36.6%, to $84.8 million
for the three month period ended June 30, 1998 from $62.1 million for the three
month period ended June 30, 1997. Of this increase, $15.9 million was
attributable to 28.4% growth in comparable stores sales in 1998 and $6.8 million
was attributable to stores not eligible for inclusion in the comparable store
base. The increase in comparable store sales for the three month period ended
June 30, 1998 resulted primarily from implementation of the MarineMax
Value-Price sales approach (which the Company believes has resulted in an
increased closing rate on sales), and a greater emphasis on used boat sales and
increased access to all MarineMax store inventories since the Mergers, which
assists the Company's retail locations in offering the products customers
desire. These factors were partially offset by reduced sales in the Company's
Northern California operations caused by El Nino.
Gross Profit. Gross profit increased $4.7 million, or 30.3%, to $20.4
million for the three month period ended June 30, 1998 from $15.7 million for
the three month period ended June 30, 1997. Gross profit as a percentage of
revenue decreased to 24.1% in 1998 from 25.3% in 1997. The decrease in gross
profit margin is attributable to an increase in used boat sales that
historically result in lower gross profits. The decrease was also attributable
to distressed sales in the Company's Northern California operations due to El
Nino.
Selling, General, and Administrative Expenses. Selling, general, and
administrative expenses increased by approximately $2.7 million, or 31.4%, to
$11.4 million for the three month period ended June 30, 1998 from $8.7 million
for the three month period ended June 30, 1997. Selling, general, and
administrative expenses as a percentage of revenue decreased to 13.4% in 1998
from 14.0% in 1997. Substantially all of the decrease was attributable to
achieving operating efficiencies and synergies subsequent to the Mergers and the
reduction of employee-stockholder compensation activities, offset by additional
overhead associated with the combination of the Merged Companies and their
management.
11
<PAGE> 12
Interest Expense, Net. Interest expense, net increased approximately
$504,000 or 79.5%, to $1.1 million in 1998 from approximately $634,000 in 1997.
Interest expense, net as a percentage of revenue increased to 1.3% in 1998 from
1.0% in 1997. This increase resulted primarily from increased debt associated
with the Settlement Obligation, increased debt associated with the Property
Acquisitions and higher levels of outstanding borrowings related to the
increased level of inventories required to support the increased level of
revenue.
Nine Month Period Ended June 30, 1998 Compared to Nine Month Period Ended June
30,1997:
Revenue. Revenue increased $38.4 million, or 25.7%, to $188.3 million
for the nine month period ended June 30, 1998 from $149.9 million for the nine
month period ended June 30, 1997. Of this increase, $32.2 million was
attributable to 23.0% growth in comparable stores sales in 1998 and $6.3 million
was attributable to stores not eligible for inclusion in the comparable store
base. The increase in comparable store sales in 1998 resulted primarily from
more effective utilization of the prospective customer tracking feature of the
integrated computer system, a greater emphasis on used boat sales, the addition
of the Boston Whaler product line at 12 locations, the introduction of the
Value-Price sales approach and increased access to all MarineMax store
inventories since the Mergers, which assists the Company's retail locations in
offering the products customers desire. These factors were partially offset by
reduced sales in the Company's Northern California operations caused by El Nino.
Gross Profit. Gross profit increased $8.6 million, or 24.5%, to $43.5
million for the nine month period ended June 30, 1998 from $34.9 million for the
nine month period ended June 30, 1997. Gross profit margin as a percentage of
revenue decreased to 23.1% in 1998 from 23.3% in 1997. The decrease in gross
profit margin is attributable to an increase in used boat sales that
historically have resulted in lower gross profits. The decrease was also
attributable to distressed sales in the Company's Northern California operations
due to El Nino.
Selling, General, and Administrative Expenses. Selling, general, and
administrative expenses increased approximately $6.7 million, or 23.2%, to $35.4
million for the nine month period ended June 30, 1998 from $28.7 million for the
nine month period ended June 30, 1997. Selling, general, and administrative
expenses as a percentage of revenue decreased to 18.8% in 1998 from 19.2% in
1997. Substantially all of the decrease was attributable to a reduction of
stockholder compensation in 1998 and to fixed expenses remaining relatively
constant while being spread across increased revenue. This was partially offset
by additional overhead associated with the combination of the Companies and its
management.
Settlement Obligation. The Settlement Obligation for the nine month
period ended June 30, 1998 was attributable to the $15.0 million obligation
under the Settlement Agreement the Company entered into with Brunswick.
Interest Expense, Net. Interest expense, net increased approximately
$979,000, or 84.5%, to $2.1 million in 1998 from $1.2 million in 1997. Interest
expense, net as a percentage of revenue increased to 1.1% in 1998 from 0.8% in
1997. This increase resulted primarily from increased debt associated with the
redemption of common stock, the Settlement Obligation and higher levels of
outstanding borrowings related to the increased level of inventories required to
support the increase in revenue.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash needs are primarily for working capital to support
operations, including new and used boat and related parts inventories,
off-season liquidity, and growth through new retail openings and acquisitions.
These cash needs have historically been financed with cash from operations and
borrowings under credit facilities. Historically, the Merged Companies utilized
a combination of floor plan financing, working capital lines of credit, and
loans from stockholders to finance inventory levels. These historic credit
facilities had varying interest rates, terms, and payment requirements. The
Company depends upon dividends and other
12
<PAGE> 13
payments from its operating subsidiaries to fund its obligations and meet its
cash needs. No agreements exist that restrict this flow of funds.
For the nine month period ended June 30, 1997, cash flows generated by
operating activities approximated $6.7 million. For the nine month period ended
June 30,1998, cash flows used by operating activities approximated $23.8
million. In addition to net income, cash provided by operating activities was
due primarily to inventory management, including floor plan management.
Historically, stockholder-employee compensation significantly impacted net
income and therefore cash flows from operations, which caused variations in
operating cash flows. The period ended June 30, 1998 also reflects the repayment
of the Company's floor plan liability.
For the nine month periods ended June 30, 1997 and 1998, cash flows
used by investing activities approximated $1.4 million and 1.2 million,
respectively. Cash used in investing activities was primarily attributable to
purchases of property and equipment associated with opening new or improving
existing retail locations.
For the nine month period ended June 30, 1997, cash flows used by
financing activities approximated $3.7 million. For the nine month period ended
June 30, 1998, cash flows provided by financing activities approximated $29.5
million. Cash flows used by financing activities during the nine month period
ended June 30, 1997 reflect distributions made to stockholder-employees for tax
and other purposes, which historically were made in the quarter ended December
31. The cash flow provided by financing activities during the nine month period
ended June 30, 1998 consist of the proceeds from the Company's IPO, repayment of
term debt, payment of distributions made to stockholder-employees and borrowings
under the Company's new working capital line of credit.
At June 30, 1998, the Company's term indebtedness totaled approximately
$19.4 million, of which approximately $15.0 million is due to Brunswick
Corporation as a result of the Settlement obligation, while the remaining term
indebtedness is primarily associated with the Company's real estate holdings.
At June 30, 1998, the Company had approximately $3.5 million of floor
plan financing outstanding under its existing agreements with various lenders.
The Company replaced the majority of the floor plan lines of credit of the
Merged Companies with a Loan and Security Agreement, dated April 7, 1998, with
Nations Credit Distribution Finance, Inc. ("NDF"), providing for a revolving
line of credit loan to the Company in the maximum amount of $105 million (the
"Loan"). As of June 30, 1998, the Company's outstanding balance on the line of
credit was approximately $12.4 million. Advances accrue interest at the 90-day
London Interbank Offered Rate plus 125 basis points. The Loan terminates on
April 1, 2001. The availability of loan advances from time to time is based upon
the value of new and used inventory, parts and accounts receivable of the
Company and each of its direct and indirect subsidiaries. Based on these terms
at June 30, 1998 the Company had additional available borrowings of $59.0
million pursuant to this facility. Advances may be used for inventory, working
capital, and other purposes satisfactory to NDF.
IMPACT OF SEASONALITY AND WEATHER ON OPERATIONS
The Company's business, as well as the entire recreational boating
industry, is highly seasonal, with seasonality varying in different geographic
markets. With the exception of Florida, the Company generally realizes
significantly lower sales in the quarterly period ending December 31 with boat
sales generally improving in January with the onset of the public boat and
recreation shows. Except for the Company's recent acquisition of Cochran's
Marine (a Minnesota-based retailer), the Company's current operations are
concentrated in the more temperate regions of the United States, and its
business could become substantially more seasonal if it acquires retailers that
operate in colder regions of the United States.
13
<PAGE> 14
YEAR 2000 COMPLIANCE
Many currently installed computer systems and software products are
coded to accept only two-digit entries to represent years in the date code
field. Computer systems and products that do not accept four-digit year entries
will need to be upgraded or replaced to accept four-digit entries to distinguish
years beginning with 2000 from prior years. The Company believes that its
management information system complies with the Year 2000 requirements, and the
Company currently does not anticipate that it will experience any material
disruption to its operations as a result of the failure of its management
information system to be Year 2000 compliant. There can be no assurance,
however, that computer systems operated by third parties, including customers,
vendors, credit card transaction processors, and financial institutions, with
which the Company's management information system interface will continue to
properly interface with the Company's system and will otherwise be compliant on
a timely basis with Year 2000 requirements. The Company currently is developing
a plan to evaluate the Year 2000 compliance status of third parties with which
its system interfaces. Any failure of the Company's management information
system or the systems of third parties to timely achieve Year 2000 compliance
could have a material adverse effect on the Company's business, financial
condition, and operating results.
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There were no new material developments in the legal proceedings
previously reported by the Company and no new material legal proceedings during
the quarter ended June 30, 1998.
ITEM 2. USE OF PROCEEDS
On June 1,1998, the Company's registration statement on form
S-1 (Commission File Number 333-47873) for the Company's initial public offering
("IPO") of 4,780,569 shares of its Common Stock became effective. Of the
4,780,569 shares of common stock sold, the Company sold 3,515,824 shares and
certain stockholders sold 1,264,745 shares. Of the 3,515,824 shares the Company
sold, 1,654,624 shares were sold at a price per share of $12.50 and 1,861,200
shares were sold to Brunswick Corporation ("Brunswick") for $11.625 per share.
The IPO generated net cash proceeds of approximately $38.3 million after
deducting underwriting discounts and offering costs to date of approximately
$2.6 million. The Company's managing underwriters were Smith Barney, Inc. and
William Blair & Company, LLC.
The net proceeds of the IPO after payment of underwriting discounts and
offering costs to date were $38.3 million. Through June 30, 1998 the Company has
used approximately $1.0 million to enhance the Company's management information
systems, $5.3 million to pay down term debt, and, pending the ultimate use of
the proceeds from the offering, the remaining $32.0 million has been applied to
reduce the outstanding balance on the Company's line of credit.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDS
Not applicable.
ITEM 5. OTHER INFORMATION
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
27.1 Financial Data Schedule
99.1 Agreement of Merger and Plan of Reorganization dated as of the 7th
day of July, 1998 by and among MarineMax, Inc., C & N Marine
Acquisition Corp. (a subsidiary of MarineMax, Inc.), C & N Marine
Corporation and the Stockholders named therein (1)
99.2 Agreement of Merger and Plan of Reorganization dated as of the 7th
day of July, 1998 by and among MarineMax, Inc., Cochrans
Acquisition Corp. (a subsidiary of MarineMax, Inc.), Cochrans
Marine, Inc. and the Stockholders named therein (1)
- --------------------------
(1) Incorporated by reference to the Exhibits to the Company's Current Report
on Form 8-K dated July 7, 1998, as filed on July 20, 1998
(b) Reports on Form 8-K
On July 20, 1998, the Company filed a Current Report on Form 8-K dated July
7, 1998, reporting the acquisition of Cochran's.
14
<PAGE> 15
MARINEMAX, INC.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MARINEMAX INC.
BY: /s/ MICHAEL H. McLAMB
August 13, 1998 -------------------------
Michael H. McLamb
Chief Financial Officer, Vice
President, Secretary and Treasurer
15
<PAGE> 16
EXHIBIT INDEX
Exhibit
Number Description
------- -----------
27.1 Financial Data Schedule
99.1 Agreement of Merger and Plan of Reorganization dated as of the 7th
day of July, 1998 by and among MarineMax, Inc., C & N Marine
Acquisition Corp. (a subsidiary of MarineMax, Inc.), C & N Marine
Corporation and the Stockholders named therein (1)
99.2 Agreement of Merger and Plan of Reorganization dated as of the 7th
day of July, 1998 by and among MarineMax, Inc., Cochrans
Acquisition Corp. (a subsidiary of MarineMax, Inc.), Cochrans
Marine, Inc. and the Stockholders named therein (1)
- --------------------------
(1) Incorporated by reference to the Exhibits to the Company's Current Report
on Form 8-K dated July 7, 1998, as filed on July 20, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS EXHIBIT CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S FINANCIAL STATEMENTS FOR THE PERIOD ENDED JUNE 30, 1998, AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. THIS
EXHIBIT SHALL NOT BE DEEMED FILED FOR PURPOSES OF SECTION 11 OF THE SECURITIES
AND EXCHANGE ACT OF 1933 AND SECTION 18 OF THE SECURITIES AND EXCHANGE ACT OF
1934, OR OTHERWISE SUBJECT TO THE LIABILITY OF SUCH SECTIONS, NOR SHALL IT BE
DEEMED A PART OF ANY OTHER FILING WHICH INCORPORATES THIS REPORT BY REFERENCE,
UNLESS SUCH OTHER FILING EXPRESSLY INCORPORATES THIS EXHIBIT BY REFERENCE.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> OCT-01-1997
<PERIOD-END> JUN-30-1998
<CASH> 15,477,710
<SECURITIES> 0
<RECEIVABLES> 11,993,465
<ALLOWANCES> 0
<INVENTORY> 60,368,520
<CURRENT-ASSETS> 92,040,114
<PP&E> 26,490,691
<DEPRECIATION> 9,158,961
<TOTAL-ASSETS> 114,518,409
<CURRENT-LIABILITIES> 54,255,175
<BONDS> 5,655,720
0
0
<COMMON> 13,200
<OTHER-SE> 54,594,314
<TOTAL-LIABILITY-AND-EQUITY> 114,518,409
<SALES> 188,337,443
<TOTAL-REVENUES> 188,337,443
<CGS> 144,835,423
<TOTAL-COSTS> 144,835,423
<OTHER-EXPENSES> 50,418,061
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,137,748
<INCOME-PRETAX> (9,053,789)
<INCOME-TAX> (1,417,813)
<INCOME-CONTINUING> (7,635,976)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (7,635,976)
<EPS-PRIMARY> (0.86)
<EPS-DILUTED> (0.86)
</TABLE>
