<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 30, 1998
REGISTRATION NO. 333
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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MARINEMAX, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 5551 59-3496957
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
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WILLIAM H. MCGILL JR.,
CHAIRMAN OF THE BOARD
18167 U.S. 19 NORTH, SUITE 499
CLEARWATER, FLORIDA 33764
(727) 531-1700
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
Copies to:
ROBERT S. KANT, ESQ.
JERE M. FRIEDMAN, ESQ.
SCOTT K. WEISS, ESQ.
O'CONNOR, CAVANAGH, ANDERSON,
KILLINGSWORTH & BESHEARS, P.A.
ONE EAST CAMELBACK
PHOENIX, ARIZONA 85012-1656
(602) 263-2400
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S AGENT FOR SERVICE)
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practical after the Registration Statement becomes effective.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
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CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED PRICE(1) REGISTRATION FEE(1)
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<S> <C> <C>
Common Stock, $0.001 par value, and
Preferred Stock, $0.001 par value............. $75,000,000 $20,850
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</TABLE>
(1) Estimated solely for the purpose of calculating the amount of registration
fee pursuant to Rule 457(o).
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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<PAGE> 2
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. THE
COMPANY MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT
AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
PROSPECTUS
[MARINEMAX LOGO]
5,000,000 SHARES OF COMMON STOCK
1,000,000 SHARES OF PREFERRED STOCK
------------------
This Prospectus covers 5,000,000 shares of Common Stock and 1,000,000
shares of Preferred Stock that may be issued and sold by MarineMax, Inc. (the
"Company") from time to time in connection with acquisitions by the Company of
other businesses. The Company expects the terms of any such acquisitions will be
determined by negotiations with the owners or controlling persons of the
businesses to be acquired and the shares issued in connection with such
acquisitions will be valued at prices reasonably related to market prices
current either at the time of agreement on the terms of an acquisition or at or
about the time of delivery of the shares.
No underwriting discounts or commissions will be paid, although finder's
fees may be paid from time to time in connection with specific acquisitions. Any
person receiving such fee may be deemed to be an underwriter within the meaning
of the Securities Act of 1933, as amended (the "Securities Act").
The Company's Common Stock is traded on the New York Stock Exchange under
the symbol "HZO." Application will be made to list the shares of Common Stock
offered hereby on the New York Stock Exchange. The last reported sale price of
the Company's Common Stock on the New York Stock Exchange on December 28, 1998
was $7.94.
All expenses of the offering will be paid by the Company.
------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 7 FOR A DISCUSSION OF CERTAIN RISK
FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK
OR PREFERRED STOCK OFFERED HEREBY.
------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Prospectus is , 1998
<PAGE> 3
PROSPECTUS SUMMARY
The following summary does not contain all information that may be
important to prospective investors. Prospective investors should review the
entire Prospectus before deciding to acquire shares of the Company's capital
stock. Unless the context otherwise requires, all references to "MarineMax" mean
MarineMax, Inc. prior to its acquisition of five previously independent
recreational boat dealers (including their related real estate companies) and
all references to the "Company" mean, as a combined company, MarineMax, Inc. and
the 11 recreational boat dealers acquired to date (the "Operating Subsidiaries"
or the "Acquired Dealers").
THE COMPANY
The Company is the largest recreational boat dealer in the United States.
Through 40 retail locations in Arizona, California, Florida, Georgia, Minnesota,
Nevada, North Carolina, Ohio, and Texas, the Company sells primarily new and
used recreational boats, including pleasure boats (such as sport boats, sport
cruisers, sport yachts, and yachts) and fishing boats with a focus on premium
brands in each segment. The Company also sells related marine products,
including engines, trailers, parts, and accessories. In addition, the Company
arranges related boat financing, insurance, and extended service contracts;
provides repair and maintenance services; and offers boat brokerage services.
See "Business."
The Company is the nation's largest retailer of Sea Ray, Boston Whaler, and
other boats manufactured by Brunswick Corporation ("Brunswick"), which is the
world's largest manufacturer of recreational boats. Sales of new Brunswick boats
accounted for 88% of the Company's new boat sales in fiscal 1998, which the
Company believes represented approximately 25% of all new Sea Ray boat sales and
approximately 6% of all Brunswick marine product sales during that period. Each
of the Company's Operating Subsidiaries is a party to a 10-year dealer agreement
with Brunswick covering Sea Ray products and is the exclusive dealer of Sea Ray
boats in its geographic market.
The Company commenced operations as a combined company as a result of the
March 1, 1998 acquisition of five previously independent recreational boat
dealers and has acquired six additional previously independent recreational boat
dealers since that time. The Company is capitalizing on the experience and
success of each of the Acquired Dealers in order to establish a new national
standard of customer service and responsiveness in the highly fragmented retail
boating industry. While the average new boat retailer generates less than $3.0
million in annual sales, the retail locations of the Company (operated at least
12 months) averaged $11.2 million in annual sales in fiscal 1998. As a result of
the Company's emphasis on premium brand boats, the Company's average selling
price for a new boat in fiscal 1998 was approximately $39,500 compared to the
estimated industry average selling price of approximately $14,000. For the
fiscal year ended September 30, 1998, the Company had revenue of approximately
$291.2 million, pro forma operating income of approximately $23.1 million
(before deducting the $15.0 million non-recurring Brunswick Settlement), and pro
forma net income (before the Brunswick Settlement) of approximately $12.6
million. See "Risk Factors -- Necessity for Manufacturers' Consent to Dealer
Acquisitions and Market Expansion." The Company's same-store sales increased by
approximately 18% in fiscal 1998 and has averaged 17% for the last five years.
The Company is adopting the best practices of the Acquired Dealers as
appropriate to enhance its ability to attract more customers, foster an overall
enjoyable boating experience, and offer boat manufacturers stable and
professional retail distribution. The Company believes that its full range of
services, two years of free maintenance ("MarineMax Care"), MarineMax
Value-Price sales approach, prime retail locations, extensive facilities, and
emphasis on customer service and satisfaction before and after a boat sale are
competitive advantages that enable it to be more responsive to the needs of
existing and prospective customers. See "Business -- General."
The recreational boating industry generated approximately $19.3 billion in
retail sales in 1997, including sales of new and used boats; marine products,
such as engines, trailers, equipment, and accessories; and related expenditures,
such as fuel, insurance, docking, storage, and repairs. Retail sales of new
boats, engines, and trailers accounted for approximately $10.0 billion of such
sales in 1997. The Company estimates that the boat retailing industry includes
more than 4,000 boat retailers, most of which are small retailers that operate
in a
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<PAGE> 4
single market and provide varying degrees of merchandising, professional
management, and customer service. The Company believes that many dealers are
finding it increasingly difficult to make the managerial and capital commitments
necessary to achieve higher customer service levels and upgrade systems and
facilities as required by boat manufacturers, particularly during a period of
stagnant industry growth. The Company also believes that many dealers lack an
exit strategy for their owners. See "Business -- U.S. Recreational Boating
Industry."
The Company's executive offices are located at 18167 U.S. 19 North, Suite
499, Clearwater, Florida 33764, and its telephone number is (727) 531-1700. The
Company was incorporated in the state of Delaware in January 1998.
STRATEGY
The Company's goal is to enhance its position as the nation's leading
retailer of recreational boats. Key elements of the Company's operating and
growth strategies include the following:
- emphasizing customer satisfaction and loyalty by creating an overall
enjoyable boating experience beginning with the negotiation-free purchase
process, two years of free maintenance, and its premier facilities,
- implementing the "best practices" of each of its Acquired Dealers as
appropriate throughout its dealerships,
- achieving operating efficiencies and synergies among its dealerships to
enhance internal growth and profitability,
- operating with a decentralized approach to the operational management of
its dealerships,
- utilizing technology throughout operations,
- opening additional retail facilities in its existing and new territories,
- offering additional product lines and services throughout its existing
and acquired dealerships, and
- pursuing strategic acquisitions to capitalize upon the significant
consolidation opportunities in the highly fragmented recreational boat
dealer industry by acquiring additional dealers and improving their
performance and profitability through the implementation of the Company's
operating strategies.
See "Business -- Strategy."
DEVELOPMENT OF THE COMPANY; ACQUISITIONS
MarineMax was founded in January 1998. MarineMax itself, however, conducted
no operations until its acquisition of five independent recreational boat
dealers on March 1, 1998. The Company acquired a sixth recreational boat dealer
on April 30, 1998. Since its initial public offering in June 1998, the Company
has acquired five additional recreational boat dealers. See "Development of the
Company -- Formation and Subsequent Acquisitions."
Each of the Company's 11 Acquired Dealers is continuing its operations as a
wholly owned Operating Subsidiary of the Company. The following table sets forth
information regarding the Acquired Dealers.
<TABLE>
<CAPTION>
ACQUIRED DEALERS ACQUISITION DATE BUSINESS
---------------- ---------------- --------
<S> <C> <C>
Bassett Boat Company of Florida March 1998 Operates five retail locations in
("Bassett") Miami, Palm Beach, Pompano Beach, and
Stuart, Florida
Louis DelHomme Marine ("DelHomme") March 1998 Operates seven retail locations in
Fort Worth, Lewisville (Dallas),
League City, Montgomery, and Houston,
Texas
Gulfwind USA, Inc. ("Gulfwind USA") March 1998 Operates three retail locations in
Tampa and Clearwater, Florida
</TABLE>
4
<PAGE> 5
<TABLE>
<CAPTION>
ACQUIRED DEALERS ACQUISITION DATE BUSINESS
---------------- ---------------- --------
<S> <C> <C>
Gulfwind South, Inc. ("Gulfwind March 1998 Operates two retail locations in Fort
South") Myers and Naples, Florida
Harrison's Boat Center, Inc. and March 1998 Operates six retail locations in
Harrison's Marine Centers of Oakland, Redding, Santa Rosa, and
Arizona, Inc. (together, Sacramento, California, and Tempe,
"Harrison's") Arizona
Stovall Marine, Inc. ("Stovall") April 1998 Operates four retail locations in
Kennesaw (Atlanta), Augusta, Forest
Park (Atlanta), and Lake Lanier,
Georgia
Cochran's Marine, Inc. and C & N July 1998 Operates five retail locations in
Marine Corporation (together Rogers, Walker, Oakdale, and
"Cochran's") Woodbury, Minnesota
Sea Ray of Wilmington, Inc. July 1998 Operates one retail location in
Wrightsville Beach, North Carolina
Brevard Boat Company ("Brevard") September 1998 Operates one retail location in
Cocoa, Florida
Sea Ray of Las Vegas September 1998 Operates one retail location in Las
Vegas, Nevada
Treasure Cove Marina, Inc. September 1998 Operates four retail locations in
Mentor (Cleveland), Port Clinton, and
Toledo, Ohio
</TABLE>
In October 1998, the Company acquired the operations of Woods & Oviatt,
Inc., a premier boat brokerage operation with headquarters in Ft. Lauderdale,
Florida. Additionally in October 1998, the Company was awarded the Hatteras
Yachts dealership agreement for the state of Florida (excluding certain portions
of the Florida Panhandle) and became the U.S. distributor for Hatteras products
over 74 feet.
As a part of its acquisition strategy, the Company frequently engages in
discussions with various recreational boat dealers regarding their potential
acquisition by the Company. In connection with these discussions, the Company
and each potential acquisition candidate exchange confidential operational and
financial information, conduct due diligence inquiries, and consider the
structure, terms, and conditions of the potential acquisition. In certain cases,
the prospective acquisition candidate agrees not to discuss a potential
acquisition with any other party for a specific period of time, grants the
Company an option to purchase the prospective dealer for a designated price
during a specific time, and agrees to take other actions designed to enhance the
possibility of the acquisition, such as preparing audited financial information
and converting its accounting system to the system specified by the Company.
Potential acquisition discussions frequently take place over a long period of
time, and involve difficult business integration and other issues, including in
some cases, management succession and related matters. As a result of these and
other factors, a number of potential acquisitions that from time to time appear
likely to occur do not result in binding legal agreements and are not
consummated.
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SUMMARY CONSOLIDATED FINANCIAL DATA
(Dollars in thousands, except earnings per share data)
<TABLE>
<CAPTION>
PRO FORMA
NINE MONTHS ENDED TWELVE MONTHS FISCAL YEAR FISCAL YEAR
YEAR ENDED DECEMBER 31, SEPTEMBER 30, ENDED ENDED ENDED
------------------------------ ------------------- SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1994 1995 1996 1996 1997 1997 1998 1998(5)
-------- -------- -------- -------- -------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue.................... $141,800 $168,111 $197,609 $156,611 $200,414 $239,551 $ 291,182 $ 291,182
Cost of sales.............. 109,543 128,823 149,948 117,514 150,479 180,998 220,364 220,364
-------- -------- -------- -------- -------- -------- ----------- -----------
Gross profit............... 32,257 39,288 47,661 39,097 49,935 58,552 70,818 70,818
Selling, general, and
administrative
expenses................. 24,895 31,071 38,650 25,378 30,388 44,424 52,479 47,679
Non-recurring
settlement(1)............ -- 15,000 --
-------- -------- -------- -------- -------- -------- ----------- -----------
Income from operations..... 7,362 8,217 9,011 13,719 19,547 14,128 3,339 23,139
Interest expense, net...... 1,058 1,414 1,823 1,453 1,806 1,951 2,212 2,212
-------- -------- -------- -------- -------- -------- ----------- -----------
Income before tax
provision................ 6,305 6,803 7,188 12,266 17,741 12,177 1,127 20,927
Tax provision (benefit).... 31 (20) 42 661 596 (73) 1,705 8,371
-------- -------- -------- -------- -------- -------- ----------- -----------
Net income (loss).......... $ 6,273 $ 6,823 $ 7,146 $ 11,605 $ 17,146 $ 12,251 $ (577) $ 12,556
======== ======== ======== ======== ======== ======== =========== ===========
Net income (loss) per share: Diluted............................................................. $ (0.05) $ 1.14
=========== ===========
Weighted average number of shares: Diluted....................................................... 11,027,949 11,027,949
=========== ===========
OTHER DATA:
Number of stores(2)........ 19 22 23 23 24 26 41
Sales per store(3)......... $ 6,449 $ 6,572 $ 7,124 $ 7,027 $ 8,722 $ 10,536 $ 11,269
Same-store sales
growth(4)................ 12% 14% 14% 8% 28% 26% 18%
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30,
1998
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<S> <C> <C>
BALANCE SHEET DATA:
Working capital............................................. $ 29,079
Total assets................................................ 150,458
Long-term debt (including current portion).................. 3,692
Total stockholders equity................................... 66,335
</TABLE>
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(1) Consists of Brunswick settlement obligation. See "Risk Factors -- Necessity
for Manufacturers' Consent to Dealer Acquisitions and Market Expansion."
(2) Includes only those stores open at period end.
(3) Includes only those stores open for the entire preceding 12- or nine-month
period, respectively.
(4) New stores are included in the comparable base at the beginning of the
store's thirteenth month of operations.
(5) Pro forma amounts reflect a $4.8 million ($0.26 per diluted share) reduction
in selling, general, and administrative expense for contractually lowered
compensation, a $15.0 million ($0.82 per diluted share) reduction of the
Non-recurring Settlement, and pro forma income taxes as if all the Company's
Operating Subsidiaries always operated as C corporations for income tax
purposes.
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RISK FACTORS
An investment in shares of Common Stock offered hereby involves a high
degree of risk. Prospective investors should consider carefully the following
risk factors, in addition to the other information contained in this Prospectus,
in evaluating an investment in shares offered hereby. This Prospectus contains
forward-looking statements that involve risks and uncertainties and address,
among other things, the Company's acquisition and expansion strategy,
integration of acquired companies, capital expenditures, liquidity, third-party
contractual arrangements, cost-reduction efforts, and product demand. Actual
results may differ materially from those discussed in forward-looking statements
as a result of various factors, including those set forth below.
RECENTLY COMBINED OPERATIONS; RISKS OF INTEGRATION
MarineMax was founded in January 1998 and on March 1, 1998 acquired five
independent recreational boat dealers that operated under their principal owners
for an average of more than 21 years. MarineMax itself, however, conducted no
operations and generated no sales or revenue until its acquisition of the five
dealers on March 1, 1998. Since March 1, 1998, the Company has acquired six
additional recreational boat dealers. The Acquired Dealers operated
independently prior to their acquisition by the Company, and the Company may not
be able to integrate their businesses successfully on an economic basis. The
consolidated financial results of MarineMax cover periods when MarineMax and the
Acquired Dealers were not under common management or control and are not
necessarily indicative of the results that would have been achieved if MarineMax
and the Acquired Dealers had been operated on an integrated basis or the results
that may be realized on a consolidated basis in the future.
The success of the Company depends, in part, on the Company's ability to
integrate the operations of the Acquired Dealers and other dealerships it
acquires, including centralizing certain functions to achieve cost savings and
pursuing programs and processes that promote cooperation and the sharing of
opportunities and resources among its dealerships. The Company's senior
executives operated independently in the recreational boat industry prior to the
formation of the Company and have been assembled only recently as a management
team. Management may not be able to oversee the combined entity efficiently or
to implement effectively the Company's growth and operating strategies. To the
extent that the Company is able to implement successfully its acquisition
strategy, the resulting growth of the Company will place significant additional
demands on the Company's management and infrastructure. The Company's failure to
implement successfully its strategies or operate effectively the combined entity
could have a material adverse effect on the Company's business, financial
condition, and results of operations. These effects could include lower revenue,
higher cost of sales, increased selling, general, and administrative expenses,
and reduced margins on a consolidated basis. See "Development of the Company,"
"Business -- Strategy," and "Management."
RELIANCE ON BRUNSWICK AND OTHER KEY MANUFACTURERS
Approximately 88% of the Company's new boat revenue in fiscal 1998 resulted
from sales of products manufactured by Brunswick, including 84% from Brunswick's
Sea Ray division. The remainder of the Company's fiscal 1998 revenue from new
boat sales resulted from sales of products from a limited number of other
manufacturers, none of which accounted for more than 10% of the Company's
revenue. The Company's success depends to a significant extent on the continued
popularity and reputation for quality of the boating products of its
manufacturers, particularly Brunswick's Sea Ray boat lines. In addition, any
adverse change in the financial condition, production efficiency, product
development, and management and marketing capabilities of the Company's
manufacturers, particularly Brunswick's Sea Ray division given the Company's
reliance on Sea Ray, would have a substantial impact on the Company's business.
To ensure adequate inventory levels to support the Company's expansion, it
may be necessary for Brunswick and other manufacturers to increase production
levels or allocate a greater percentage of their production to the Company. The
interruption or discontinuance of the operations of Brunswick or other
manufacturers could cause the Company to experience shortfalls, disruptions, or
delays with respect to needed inventory. Although the Company believes that
adequate alternate sources would be available that could
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<PAGE> 8
replace any manufacturer other than Brunswick as a product source, there can be
no assurance that such alternate sources will be available at the time of any
such interruption or that alternative products will be available at comparable
quality and prices.
Through its Operating Subsidiaries, the Company maintains dealer agreements
with Brunswick covering Sea Ray products. The dealer agreement with each
Operating Subsidiary has a 10-year term and provides for the lowest product
prices charged by the Sea Ray division of Brunswick from time to time to other
domestic Sea Ray dealers, subject to the dealer meeting all the requirements and
conditions of Sea Ray's applicable programs and the right of Brunswick in good
faith to charge lesser prices to other dealers to meet existing competitive
circumstances, for unusual and non-ordinary business circumstances, or for
limited duration promotional programs. The agreements do not give the Company
the exclusive right to sell Sea Ray product lines within any particular
territory or restrict the Company from selling competing products. See
"Business -- Dealer Agreements with Brunswick."
As is typical in the industry, the Company deals with its manufacturers,
other than the Sea Ray division of Brunswick, under renewable dealer agreements.
These agreements do not contain any contractual provisions concerning product
pricing or required purchasing levels. Pricing is generally established on a
model year basis, but is subject to change at the manufacturer's sole
discretion. Any change or termination of these arrangements for any reason,
including changes in competitive, regulatory, or marketing practices, could
adversely affect the Company's business, financial condition, and results of
operations. In addition, the timing, structure, and amount of manufacturer sales
incentives and rebates could impact the timing and profitability of the
Company's sales. See "Risk Factors -- Boat Manufacturers' Control Over Dealers"
and "Business -- Operations -- Suppliers and Inventory Management."
IMPACT OF GENERAL ECONOMIC CONDITIONS; DISCRETIONARY CONSUMER SPENDING; AND
CHANGES IN TAX LAWS
The Company's operations depend upon a number of factors relating to or
affecting consumer spending for luxury goods, such as recreational boats. The
Company's operations may be adversely affected by unfavorable local, regional,
or national economic developments or by uncertainties regarding future economic
prospects that reduce consumer spending in the markets served by the Company.
Consumer spending on luxury goods can also be adversely affected as a result of
declines in consumer confidence levels, even if prevailing economic conditions
are favorable. In an economic downturn, consumer discretionary spending levels
generally decline, often resulting in disproportionately large reductions in the
sale of luxury goods. Similarly, rising interest rates could have a negative
impact on consumers' ability or willingness to finance boat purchases, which
could also adversely affect the ability of the Company to sell its products.
Local influences, such as corporate downsizing and military base closings, also
could adversely affect the Company's operations in certain markets. There can be
no assurance that the Company could maintain its profitability during any such
period of adverse economic conditions or low consumer confidence. Changes in
federal and state tax laws, such as an imposition of luxury taxes on certain new
boat purchases, also could influence consumers' decisions to purchase products
offered by the Company and could have a negative effect on the Company's sales.
For example, during 1991 and 1992 the federal government imposed a luxury tax on
new recreational boats with sales prices in excess of $100,000, which coincided
with a sharp decline in boating industry sales from a high of more than $17.9
billion in the late 1980s to a low of $10.3 billion in 1992. See "Business --
U.S. Recreational Boating Industry."
INDUSTRY FACTORS
The recreational boating industry is cyclical and has been stagnant in
overall revenue growth over the last 10-year period. General economic
conditions, consumer spending patterns, federal tax policies, and the cost and
availability of fuel can impact overall boat purchases. See "Risk
Factors -- Impact of General Economic Conditions; Discretionary Consumer
Spending; and Changes in Tax Laws" and "Risk Factors -- Fuel Prices and Supply."
The Company believes that the lack of increase in overall boat purchases is
attributable to increased competition from other recreational activities,
perceived hassles of boat ownership, and relatively poor customer service and
education throughout the retail boat industry. Although the Company's strategy
addresses many of these industry factors and the Company has achieved
significant growth during the period
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<PAGE> 9
of stagnant industry growth, there can be no assurance that the cyclical nature
of the recreational boating industry or the lack of industry growth will not
adversely affect the Company's business, financial condition, or results of
operations in the future. See "Business -- U.S. Recreational Boating Industry."
RISKS ASSOCIATED WITH ACQUISITION STRATEGY
The Company intends to grow significantly through the acquisition of
additional recreational boat dealers. This strategy will entail reviewing and
potentially reorganizing acquired business operations, corporate infrastructure
and systems, and financial controls. Unforeseen expenses, difficulties, and
delays frequently encountered in connection with rapid expansion through
acquisitions could inhibit the Company's growth and negatively impact
profitability. There can be no assurance that suitable acquisition candidates
will be identified, that acquisitions of such candidates will be consummated, or
that the operations of any acquired businesses will be successfully integrated
into the Company's operations and managed profitably without substantial costs,
delays, or other operational or financial difficulties. In addition, increased
competition for acquisition candidates may increase purchase prices for
acquisitions to levels beyond the Company's financial capability or to levels
that would not result in the returns required by the Company's acquisition
criteria.
The Company may issue Common or Preferred Stock or incur substantial
indebtedness in making future acquisitions. See "Risk Factors -- Future Capital
Needs; Debt Service Requirements; Possible Dilution Through Issuance of Stock,"
"Development of the Company," and "Certain Transactions and Relationships." The
size, timing, and integration of any future acquisitions may cause substantial
fluctuations in operating results from quarter to quarter. Consequently,
operating results for any quarter may not be indicative of the results that may
be achieved for any subsequent quarter or for a full fiscal year. These
fluctuations could adversely affect the market price of the Common Stock. See
"Risk Factors -- Possible Volatility of Stock Price."
The Company's ability to continue to grow through the acquisition of
additional dealers will depend upon various factors, including the following:
- the availability of suitable acquisition candidates at attractive
purchase prices,
- the ability to compete effectively for available acquisition
opportunities,
- the availability of funds or Common Stock with a sufficient market price
to complete the acquisitions,
- the ability to obtain any requisite manufacturer approvals, and
- the absence of one or more manufacturers attempting to impose
unsatisfactory restrictions on the Company in connection with their
approval of acquisitions.
See "Business -- Strategy" and "Risk Factors -- Necessity for Manufacturers'
Consent to Dealer Acquisitions and Market Expansion."
NECESSITY FOR MANUFACTURERS' CONSENT TO DEALER ACQUISITIONS AND MARKET EXPANSION
Brunswick's dealer agreement with each of the Company's five original
Acquired Dealers by its terms required the dealer to obtain Brunswick's consent
to any change in the ownership of the dealer. Brunswick and the Company disputed
the applicability of the change in control provisions to the Company's
acquisition of the five original Acquired Dealers. In order to avoid a long,
costly, and disruptive dispute, the Company and Brunswick entered into a
Settlement Agreement on March 12, 1998 under which Brunswick agreed not to
challenge the change in control provisions of the dealership agreements, and the
Company agreed to pay Brunswick $15.0 million, together with accrued interest,
no later than December 31, 1998. In the absence of the Settlement Agreement,
Brunswick could have terminated the dealer agreements. See "Development of the
Company -- Formation and Subsequent Acquisitions."
The Company may be required to obtain the consent of Brunswick and various
other manufacturers prior to the acquisition of other dealers. In determining
whether to approve acquisitions, manufacturers may consider many factors,
including the financial condition and ownership structure of the Company.
Further,
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manufacturers may impose conditions on granting their approvals for
acquisitions, including a limitation on the number of such manufacturers'
dealers that may be acquired by the Company. The Company's ability to meet
manufacturers' requirements for approving future acquisitions will have a direct
bearing on the Company's ability to complete acquisitions and effect its growth
strategy. There can be no assurance that a manufacturer will not terminate its
dealer agreement, refuse to renew its dealer agreement, refuse to approve future
acquisitions, or take other action that could have a material adverse effect on
the Company's acquisition program.
The Company's growth strategy also entails expanding its product lines and
geographic scope by obtaining additional distribution rights from its existing
and new manufacturers. While the Company believes it will be successful in
obtaining such distribution rights, there can be no assurance that such
distribution rights will be granted to the Company or that it can obtain
suitable alternative sources of supply if the Company is unable to obtain such
distribution rights. The inability of the Company to expand its product lines
and geographic scope by obtaining additional distribution rights could have a
material adverse effect on the Company's business, financial condition, and
results of operations.
On April 28, 1998, the Company and Brunswick entered into an agreement
providing for Brunswick to cooperate in good faith and not to unreasonably
withhold its consent to the acquisitions each year by the Company of Sea Ray
boat dealers with aggregate total revenue not exceeding 20% of the Company's
revenue in its prior fiscal year. Any acquisitions in excess of the 20%
benchmark will be at Brunswick's discretion. In the event that the Company's
sales of Sea Ray boats exceed 49% of the sales of Sea Ray boats by all Sea Ray
boat dealers (including the Company) in any fiscal year of Brunswick, the
agreement provides that Company and Brunswick will negotiate in good faith the
standards for acquisitions of Sea Ray boat dealers by the Company during
Brunswick's next succeeding fiscal year, but that Brunswick may grant or
withhold its consent to any such acquisition in its sole discretion for as long
as the Company's Sea Ray boat sales exceed the 49% benchmark.
BOAT MANUFACTURERS' CONTROL OVER DEALERS
Historically, boat manufacturers, including Brunswick, have exercised
significant control over their dealers, restricted them to specified locations,
and retained approval rights over changes in management and ownership. The
continuation of the Company's dealer agreements with most manufacturers,
including Brunswick, depends upon, among other things, the Company's achieving
stated goals for customer satisfaction ratings and market share penetration in
the market served by the applicable dealership. Failure to meet the customer
satisfaction and market share goals set forth in any dealer agreement could
result in the imposition of additional conditions in subsequent dealer
agreements, termination of such dealer agreement by the manufacturer,
limitations on boat inventory allocations, reductions in reimbursement rates for
warranty work performed by the dealer, or denial of approval of future
acquisitions. See "Business -- Dealer Agreements With Brunswick."
The Company's dealer agreements with manufacturers, including Brunswick,
generally do not give the Company the exclusive right to sell those
manufacturers' products within a given geographical area. Accordingly, a
manufacturer, including Brunswick, could authorize another dealer to start a new
dealership in proximity to one or more of the Company's locations, or an
existing dealer could move a dealership to a location that would be directly
competitive with the Company. Such an event could have a material adverse effect
on the Company and its operations. See "Business -- Dealer Agreements With
Brunswick."
The Company's dealer agreements, including those with Brunswick, provide
for termination for a variety of causes. The Company believes that it has been
and is in material compliance with all of its dealer agreements. The Company
currently believes that it will be able to renew all of the dealer agreements
upon expiration, but no such assurance can be given. See
"Business -- Operations -- Suppliers and Inventory Management" and
"Business -- Dealer Agreements With Brunswick."
Each dealer agreement with Brunswick requires the dealer to (i) promote,
display, advertise, and sell Sea Ray boats at each of its retail locations in
accordance with the agreement and applicable laws; (ii) purchase and maintain
sufficient inventory of current Sea Ray boats to meet the reasonable demand of
customers at each of its locations and to meet the minimum inventory
requirements applicable to all Sea Ray dealers;
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(iii) maintain at each retail location, or at another acceptable location, a
service department to service Sea Ray boats promptly and professionally and to
maintain parts and supplies to service Sea Ray boats properly on a timely basis;
(iv) perform all necessary installation and inspection services prior to
delivery to purchasers and perform post-sale services of all Sea Ray products
sold by the dealer or brought to the dealer for service; (v) furnish purchasers
with Sea Ray's limited warranty on new products and with information and
training as to the sale and proper operation and maintenance of Sea Ray boats;
(vi) assist Sea Ray in performing any product defect and recall campaigns; (vii)
maintain complete product sales and service records; (viii) achieve annual sales
performance in accordance with fair and reasonable sales levels established by
Sea Ray, after consultation with the dealer, based on factors such as
population, sales potential, local economic conditions, competition, past sales
history, number of retail locations, and other special circumstances that may
affect the sale of products or the dealer, in each case consistent with
standards established for all domestic Sea Ray dealers selling comparable
products; (ix) provide designated financial information; (x) conduct its
business in a manner that preserves and enhances the reputation of Sea Ray and
the dealer for providing quality products and services; (xi) maintain the
financial ability to purchase and maintain on hand required inventory levels;
(xii) indemnify Sea Ray against any claims or losses resulting from the dealer's
failure to meet its obligations to Sea Ray; (xiii) maintain customer service
ratings sufficient to maintain Sea Ray's image in the marketplace; and (xiv)
achieve within designated time periods and thereafter maintain master dealer
status (which is Sea Ray's highest performance status) for the locations
designated by Sea Ray and the dealer. See "Business -- Dealer Agreements With
Brunswick."
FUTURE CAPITAL NEEDS; DEBT SERVICE REQUIREMENTS; POSSIBLE DILUTION THROUGH
ISSUANCE OF STOCK
The Company's future capital requirements will depend upon the size,
timing, and structure of future acquisitions and its working capital and general
corporate needs. If the Company finances future acquisitions in whole or in part
through the issuance of Common Stock or securities convertible into or
exercisable for Common Stock, existing stockholders will experience a dilution
in the voting power of their Common Stock and earnings per share could be
negatively impacted. The extent to which the Company will be able or willing to
use the Common Stock for acquisitions will depend on the market value of its
Common Stock from time to time and the willingness of potential sellers to
accept Common Stock as full or partial consideration. The inability of the
Company to use its Common Stock as consideration, to generate cash from
operations, or to obtain additional funding through debt or equity financings in
order to pursue its acquisition program could materially limit the Company's
growth.
Any borrowings made to finance future acquisitions or for operations could
make the Company more vulnerable to a downturn in its operating results, a
downturn in economic conditions, or increases in interest rates on borrowings
that are subject to interest rate fluctuations. If the Company's cash flow from
operations is insufficient to meet its debt service requirements, the Company
could be required to sell additional equity securities, refinance its
obligations, or dispose of assets in order to meet its debt service
requirements. In addition, it is likely that any credit arrangements will
contain financial and operational covenants and other restrictions with which
the Company must comply, including limitations on capital expenditures and the
incurrence of additional indebtedness. There can be no assurance that such
financing will be available if and when needed by the Company or will be
available on terms acceptable to the Company. The failure to obtain sufficient
financing on favorable terms and conditions could have a material adverse effect
on the Company's growth prospects and its business, financial condition, and
results of operations.
The Company has a three-year, $105 million revolving line of credit, which
the Company plans to increase or supplement to provide $200 million of borrowing
capacity. The Company believes its expanded credit facilities will be sufficient
for its currently anticipated needs and will reflect competitive terms and
conditions. Certain of the Company's assets, principally boat inventories, are
pledged to secure the line of credit and other debt. While the Company believes
it will continue to obtain adequate financing from lenders, there can be no
assurance that such financing will be available to the Company. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources" and "Business -- Strategy."
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The Company does not itself incur credit risk in connection with its
participation in financing the boat purchases of its customers. Instead, the
Company originates these contracts for sale to independent financial
institutions that provide credit for the Company's boat purchasers in a timely
and efficient manner and at competitive rates in accordance with existing
pre-sale agreements between the Company and such financial institutions.
RISKS RELATED TO INTERNAL GROWTH AND OPERATING STRATEGIES; MANAGEMENT OF GROWTH
In addition to pursuing growth by acquiring boat dealers, the Company
intends to continue to pursue a strategy of growth through opening new retail
locations and offering new products in its existing and new territories.
Accomplishing these goals for expansion will depend upon a number of factors,
including the following:
- the Company's ability to identify new markets in which the Company can
obtain distribution rights to sell its existing or additional product
lines;
- the Company's ability to lease or construct suitable facilities at a
reasonable cost in existing or new markets;
- its ability to hire, train, and retain qualified personnel;
- the timely integration of new retail locations into existing operations;
- the Company's ability to achieve adequate market penetration at favorable
operating margins without the acquisition of an existing dealer, and
- the Company's financial resources.
The Company's dealer agreements with Brunswick require Brunswick's consent
to open, close, or change retail locations that sell Sea Ray products, which
consent cannot be unreasonably withheld, and other dealer agreements generally
contain similar provisions. See "Business -- Dealer Agreements With Brunswick."
There can be no assurance that the Company will be able to open and operate new
retail locations or introduce new product lines on a timely or profitable basis.
Moreover, the costs associated with opening new retail locations or introducing
new product lines may adversely affect the Company's profitability.
As a result of these growth strategies, the Company expects that management
will expend significant time and effort in opening and acquiring new retail
locations and introducing new products. There can be no assurance that the
Company's systems, procedures, controls, or financial resources will be adequate
to support the Company's expanding operations. The inability of the Company to
manage its growth effectively could have a material adverse effect on the
Company's business, financial condition, and results of operations.
The Company's planned growth also will impose significant added
responsibilities on members of senior management and require it to identify,
recruit, and integrate additional senior level managers. There can be no
assurance that suitable additions to management can be identified, hired, or
retained. See "Risk Factors -- Necessity for Manufacturers' Consent to Dealer
Acquisitions and Market Expansion" and "Business -- Strategy."
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. During the two-year period ended September 30, 1998, the average net
sales for the quarterly periods ended December 31, March 31, June 30, and
September 30 represented 16%, 22%, 35%, and 27%, respectively, of the Company's
average annual net sales. 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. The Company's current operations are concentrated in the
more temperate regions of the United States, and its business could become
substantially more seasonal as it acquires dealers that operate in colder
regions of the United States.
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The Company's business is also significantly affected by weather patterns,
which may adversely impact the Company's operating results. For example, drought
conditions or reduced rainfall levels, as well as excessive rain, may force
boating areas to close or render boating dangerous or inconvenient, thereby
curtailing customer demand for the Company's products. In addition, unseasonably
cool weather and prolonged winter conditions may lead to shorter selling seasons
in certain locations. Hurricanes and other storms could result in the disruption
of the Company's operations or damage to its boat inventories and facilities.
Many of the Company's dealerships sell boats to customers for use on reservoirs,
thereby subjecting the Company's business to the continued viability of these
reservoirs for boating use. Although the Company's geographic diversity and its
future geographic expansion will reduce the overall impact on the Company of
adverse weather conditions in any one market area, such conditions will continue
to represent potential material adverse risks to the Company and its future
operating performance. As a result of the foregoing and other factors, the
Company's operating results in some future quarters could be below the
expectations of stock market analysts and investors.
COMPETITION
The Company operates in a highly competitive environment. In addition to
facing competition generally from non-boating recreation businesses seeking to
attract discretionary spending dollars, the recreational boat industry itself is
highly fragmented, resulting in intense competition for customers, product
distribution rights, and suitable retail locations, particularly on or near
waterways. Such competition is intensified during periods of stagnant industry
growth, such as currently exists.
The Company competes primarily with single-location boat dealers and, with
respect to sales of marine parts, accessories, and equipment, with national
specialty marine parts and accessories stores, catalog retailers, sporting goods
stores, and mass merchants. Competition among boat dealers is based on the
quality of available products, the price and value of the products, and
attention to customer service. There is significant competition both within
markets currently being served by the Company and in new markets that the
Company may enter. The Company competes in each of its markets with retailers of
brands of boats and engines not sold by the Company in that market. In addition,
several of the Company's competitors, especially those selling marine equipment
and accessories, are large national or regional chains that have substantial
financial, marketing, and other resources. Private sales of used boats represent
an additional source of competition. See "Business -- Competition."
INCOME FROM FINANCING, INSURANCE, AND EXTENDED SERVICE CONTRACTS
A portion of the Company's income results from referral fees derived from
the placement of customer financing, insurance products, and extended service
contracts (collectively, "F&I products"), the most significant component of
which is the participation and other fees resulting from the Company's sale of
customer financing contracts. The Company does not act as an insurance broker or
agent or issue insurance policies on behalf of insurers. During fiscal 1998, F&I
products accounted for approximately 2.3% of revenue.
The availability of financing for the Company's boat purchasers and the
level of participation and other fees received by the Company in connection with
such financing depend on the particular agreement between the Company and the
lender. These lenders may impose terms in their boat financing arrangements with
the Company that may be unfavorable to the Company or its customers, resulting
in reduced demand for its customer financing programs and lower participation
and other fees.
The reduction of profit margins on sales of F&I products or the lack of
demand for or the unavailability of these products could have a material adverse
effect on the Company's business, financial condition, and results of
operations. Furthermore, under optional extended service contracts with
customers, the Company may experience significant warranty claims that, in the
aggregate, may be material to the Company's business. See "Business -- Products
and Services -- F&I Products."
DEPENDENCE ON KEY PERSONNEL
The Company believes its success depends, in large part, upon the
continuing efforts and abilities of its executive officers. Although the Company
has a five-year employment agreement with each of its executive
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officers, the Company cannot assure that such individuals will remain with the
Company throughout the term of the agreements, or thereafter. As a result of the
Company's decentralized operating strategy, the Company also relies on the
management teams of its Operating Subsidiaries to manage the operations of its
Operating Subsidiaries. In addition, the Company likely will depend on the
senior management of any significant dealers it acquires in the future. The loss
of the services of one or more of these key employees before the Company is able
to attract and retain qualified replacement personnel could adversely affect the
Company's business. See "Management."
PRODUCT AND SERVICE LIABILITY RISKS
Products sold or serviced by the Company may expose it to potential
liability for personal injury or property damage claims relating to the use of
those products. Historically, the resolution of product liability claims has not
materially affected the Company. Manufacturers of the products sold by the
Company generally maintain product liability insurance. The Company also
maintains third-party product liability insurance that it believes to be
adequate. There can be no assurance, however, that the Company will not
experience claims that are not covered by or that are in excess of its insurance
coverage. The institution of any significant claims against the Company could
adversely affect the Company's business, financial condition, and results of
operations as well as its business reputation with potential customers. See
"Business -- Product Liability."
IMPACT OF ENVIRONMENTAL AND OTHER REGULATORY ISSUES
The Company's operations are subject to extensive regulation, supervision,
and licensing under various federal, state, and local statutes, ordinances, and
regulations. While the Company believes that it maintains all requisite licenses
and permits and is in compliance with all applicable federal, state, and local
regulations, there can be no assurance that the Company will be able to maintain
all requisite licenses and permits. The failure to satisfy those and other
regulatory requirements could have a material adverse effect on the Company's
business, financial condition, and results of operations. The adoption of
additional laws, rules, and regulations could also have a material adverse
effect on the Company's business. Various federal, state, and local regulatory
agencies, including the Occupational Safety and Health Administration ("OSHA"),
the United States Environmental Protection Agency (the "EPA"), and similar
federal and local agencies, have jurisdiction over the operation of the
Company's dealerships, repair facilities, and other operations, with respect to
matters such as consumer protection, workers' safety, and laws regarding
protection of the environment, including air, water, and soil.
The EPA recently promulgated emissions regulations for outboard marine
engines that impose stricter emissions standards for two-cycle, gasoline
outboard marine engines. Emissions from such engines must be reduced by
approximately 75% over a nine-year period beginning with the 1998 model year.
Costs of comparable new engines, if materially more expensive than previous
engines, or the inability of the Company's manufacturers to comply with EPA
requirements, could have a material adverse effect on the Company's business,
financial condition, and results of operations. See "Business -- Products and
Services -- Marine Engines and Related Marine Equipment."
Certain of the Company's facilities own and operate underground storage
tanks ("USTs") for the storage of various petroleum products. The USTs are
generally subject to federal, state, and local laws and regulations that require
testing and upgrading of USTs and remediation of contaminated soils and
groundwater resulting from leaking USTs. In addition, if leakage from
Company-owned or operated USTs migrates onto the property of others, the Company
may be subject to civil liability to third parties for remediation costs or
other damages. Based on historical experience, the Company believes that its
liabilities associated with UST testing, upgrades, and remediation are unlikely
to have a material adverse effect on its financial condition or operating
results.
As with boat dealerships generally, and parts and service operations in
particular, the Company's business involves the use, handling, storage, and
contracting for recycling or disposal of hazardous or toxic substances or
wastes, including environmentally sensitive materials, such as motor oil, waste
motor oil and filters, transmission fluid, antifreeze, freon, waste paint and
lacquer thinner, batteries, solvents, lubricants, degreasing agents, gasoline,
and diesel fuels. Accordingly, the Company is subject to regulation by federal,
state, and local
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authorities establishing investigation and health and environmental quality
standards, and liability related thereto, and providing penalties for violations
of those standards.
The Company also is subject to laws, ordinances, and regulations governing
investigation and remediation of contamination at facilities it operates or to
which it sends hazardous or toxic substances or wastes for treatment, recycling,
or disposal. In particular, the Comprehensive Environmental Response,
Compensation and Liability Act ("CERCLA" or "Superfund") imposes joint, strict,
and several liability on (i) owners or operators of facilities at, from, or to
which a release of hazardous substances has occurred; (ii) parties who generated
hazardous substances that were released at such facilities; and (iii) parties
who transported or arranged for the transportation of hazardous substances to
such facilities. A majority of states have adopted Superfund statutes comparable
to and, in some cases, more stringent than CERCLA. If the Company were to be
found to be a responsible party under CERCLA or a similar state statute, the
Company could be held liable for all investigative and remedial costs associated
with addressing such contamination. In addition, claims alleging personal injury
or property damage may be brought against the Company as a result of alleged
exposure to hazardous substances resulting from the Company's operations. In
addition, certain of the Company's retail locations are located on waterways
that are subject to federal or state laws regulating navigable waters (including
oil pollution prevention), fish and wildlife, and other matters.
The Company does not believe it has any material environmental liabilities
or that compliance with environmental laws, ordinances, and regulations will,
individually or in the aggregate, have a material adverse effect on the
Company's business, financial condition, or results of operations. However, soil
and groundwater contamination has been known to exist at certain properties
owned or leased by the Company. The Company has also been required and may in
the future be required to remove aboveground and underground storage tanks
containing hazardous substances or wastes. As to certain of the Company's
properties, specific releases of petroleum have been or are in the process of
being remediated in accordance with state and federal guidelines. The Company is
monitoring the soil and groundwater as required by applicable state and federal
guidelines. In addition, the shareholders of the Acquired Dealers have
indemnified the Company for specific environmental issues identified on certain
environmental site assessments performed by the Company as part of the
acquisitions. The Company maintains insurance for pollutant cleanup and removal.
The coverage pays for the expenses to extract pollutants from land or water at
the insured property if the discharge, dispersal, seepage, migration, release,
or escape of the pollutants is caused by or results from a covered cause of
loss. The Company also may have additional storage tank liability insurance and
"Superfund" coverage where applicable. Environmental laws and regulations are
complex and subject to frequent change. There can be no assurance that
compliance with amended, new or more stringent laws or regulations, stricter
interpretations of existing laws or the future discovery of environmental
conditions will not require additional expenditures by the Company, or that such
expenditures would not be material.
One of the properties owned by the Company was historically used as a
gasoline service station. Remedial action with respect to prior historical site
activities on this property has been completed in accordance with federal and
state law. Also, one of the Company's properties is within the boundaries of a
Superfund site, although the Company's property has not been and is not expected
to be identified as a contributor to the contamination in the area. The Company,
however, does not believe that these environmental issues will result in any
material liabilities to the Company.
Additionally, certain states have required or are considering requiring a
license in order to operate a recreational boat. While such licensing
requirements are not expected to be unduly restrictive, regulations may
discourage potential first-time buyers, thereby limiting future sales and
adversely affecting the Company's business, financial condition, and results of
operations. See "Business -- Environmental and Other Regulatory Issues."
FUEL PRICES AND SUPPLY
All of the recreational boats sold by the Company are powered by diesel or
gasoline engines. Consequently, an interruption in the supply, or a significant
increase in the price or tax on the sale, of such fuel on a regional or national
basis could have a material adverse effect on the Company's sales and operating
results. At various times in the past, diesel or gasoline fuel has been
difficult to obtain, and there can be no
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assurance that the supply of such fuels will not be interrupted, that rationing
will not be imposed, or that the price of or tax on such fuels will not
significantly increase in the future. See "Business -- U.S. Recreational Boating
Industry."
AMORTIZATION OF INTANGIBLE ASSETS
The Company's acquisitions that have been accounted for as purchases have
resulted in goodwill of approximately $15.5 million, which will be amortized
over a period of 40 years. Goodwill is an intangible asset that represents the
difference between the aggregate purchase price for the net assets acquired and
the amount of such purchase price allocated to such net assets for purposes of
the Company's balance sheet. The Company is required to amortize the goodwill
from acquisitions accounted for as purchases over a period of time, with the
amount amortized in a particular period constituting an expense that reduces the
Company's net income for that period. A reduction in net income resulting from
the amortization of goodwill may have an adverse impact upon the market price of
the Company's Common Stock.
CONFLICTS RELATING TO TRANSACTIONS WITH AFFILIATES
The Company leases two retail locations from an irrevocable trust of which
relatives of Louis R. DelHomme Jr., a principal stockholder of the Company, are
the beneficiaries; a retail location from David H. Pretasky, an executive
officer and principal stockholder of the Company; and four retail locations from
partnerships in which Paul Graham Stovall, a director, executive officer, and
principal stockholder of the Company, is an owner. These arrangements were not
negotiated on an arms'-length basis. While the Company intends to enter into any
future related party transactions on terms no less favorable than those the
Company could obtain from unrelated third parties, the interests of directors or
officers of the Company or holders of more than 5% of its Common Stock, in their
individual capacities or capacities with related third-party entities, may
conflict with the interests of such persons in their capacities with the
Company. See "Certain Transactions and Relationships."
CONTROL BY OFFICERS, DIRECTORS, AND CERTAIN STOCKHOLDERS
The Company's directors, executive officers, and persons associated with
them own beneficially a total of approximately 43% of the issued and outstanding
shares of Common Stock, exclusive of options to acquire 357,767 additional
shares of Common Stock. As a result of such ownership, such persons will have
the power effectively to control the Company, including the election of
directors, the determination of matters requiring stockholder approval, and
other matters pertaining to corporate governance. This concentration of
ownership also may have the effect of delaying or preventing a change in control
of the Company. See "Principal Stockholders."
The Company, Brunswick, and various senior executive officers of the
Company are parties to a Stockholders' Agreement, and the Company and Brunswick
are parties to a Governance Agreement, each dated April 28, 1998. Subject to
certain limitations, the Stockholders' Agreement provides various rights of
first refusal on the sale of shares of Common Stock by the parties to the
agreement, particularly in the event that Brunswick does not own its Targeted
Investment Percentage of 19% of the Company's Common Stock at the time of the
proposed sale or in the event the proposed sale is to a competitor of Brunswick.
The Governance Agreement provides for various terms and conditions concerning
Brunswick's participation in the corporate governance of the Company. Among
other provisions and subject to certain conditions, the Governance Agreement
requires Brunswick and the senior executives to vote their Common Stock for
nominees of the Board of Directors in the election of directors and to vote
their Common Stock in favor of all proposals and recommendations approved by the
Company's Board of Directors and submitted to a vote of the Company's
stockholders.
As a result, the Stockholders' Agreement and the Governance Agreement will
have the effect of increasing the control of the Company's directors, executive
officers, and persons associated with them and may have the effect of delaying
or preventing a change in control of the Company. See "Description of Capital
Stock -- Stockholders' and Governance Agreements."
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POSSIBLE VOLATILITY OF STOCK PRICE
The market price of the Company's Common Stock could be subject to wide
fluctuations as a result of many factors. Factors that could affect the trading
price include the following:
- variations in operating results,
- the level and success of the Company's acquisition program and new store
openings,
- variations in same-store sales,
- the success of dealership integration,
- relationships with manufacturers,
- changes in earnings estimates published by analysts,
- general economic, political, and market conditions,
- seasonality and weather conditions,
- governmental policies and regulations,
- the performance of the recreational boat industry in general, and
- factors relating to suppliers and competitors.
In addition, the relatively few shares held by the public, market demand
for small- and mid-capitalization stocks, and price and volume fluctuations in
the stock market unrelated to the Company's performance could result in
significant fluctuations in market price of the Company's Common Stock. The
performance of the Company's Common Stock could adversely affect the ability of
the Company to raise equity in the public markets and adversely affect its
acquisition program.
IMMEDIATE AND SUBSTANTIAL DILUTION
The issuance of additional Common Stock in the future, including shares
which may be issued pursuant to option grants and future acquisitions, may
result in dilution in the net tangible book value per share of the Common Stock.
The Board of Directors of the Company has the legal power and authority to
determine the terms of an offering of shares of the Company's capital stock (or
securities convertible into or exchangeable for such shares) to the extent of
the Company's shares of authorized and unissued capital stock. See "Description
of Capital Stock."
SHARES ELIGIBLE FOR FUTURE SALE
As of September 30, 1998, there were outstanding 14,600,428 shares of the
Company's Common Stock. Of these shares, 4,780,569 were freely tradable without
restriction or further registration under the Securities Act of 1933 (the
"Securities Act"), unless held by an "affiliate" of the Company, as that term is
defined in Rule 144 ("Rule 144") under the Securities Act. Shares held by
affiliates of the Company are subject to the resale limitations of Rule 144
described below. All of the 9,819,859 remaining outstanding shares of Common
Stock were issued in connection with the acquisition of the Acquired Dealers and
will be available for resale beginning one year after the respective dates of
the acquisitions, subject to compliance with the provisions of Rule 144 under
the Securities Act.
The Company has issued options to purchase approximately 1,707,000 shares
of Common Stock under the 1998 Incentive Stock Plan and has reserved 500,000
shares of Common Stock for issuance under the 1998 Employee Stock Purchase Plan.
The Company has filed a registration statement under the Securities Act to
register the Common Stock to be issued under these plans. As a result, shares
issued under these plans will be freely tradable without restriction unless
acquired by affiliates of the Company, who will be subject to the volume and
other limitations of Rule 144. See "Management -- 1998 Incentive Stock Plan" and
"Management -- Employee Stock Purchase Plan."
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The Company may issue additional shares of Common Stock or Preferred Stock
under the Securities Act as part of any acquisition it may complete in the
future. Pursuant to Rule 145 under the Securities Act, these shares generally
will be freely tradable after their issuance by persons not affiliated with the
Company or the acquired companies.
HOLDING COMPANY STRUCTURE
The Company is a holding company, the principal assets of which are the
shares of the capital stock of its subsidiaries, including the Operating
Subsidiaries. As a holding company without independent means of generating
operating revenue, the Company depends on dividends and other payments from its
subsidiaries to fund its obligations and meet its cash needs. Expenses of the
Company include salaries of its executive officers, insurance, professional
fees, and service of indebtedness that may be outstanding from time to time.
Financial covenants under future loan agreements of the Company's subsidiaries
may limit such subsidiaries' ability to make sufficient dividend or other
payments to permit the Company to fund its obligations or meet its cash needs,
in whole or in part.
DIVIDEND POLICY
The Company has never paid cash dividends on its Common Stock and does not
anticipate paying cash dividends in the foreseeable future. Moreover, financing
covenants under certain of the Company's loan agreements restrict its ability to
pay dividends. See "Dividend Policy."
ANTI-TAKEOVER EFFECT OF CERTIFICATE AND BYLAW PROVISIONS, DELAWARE LAW, AND
CONTRACT PROVISIONS
Certain provisions of the Company's Restated Certificate of Incorporation
and Bylaws and Delaware law may make a change in the control of the Company more
difficult to effect, even if a change in control were in the stockholders'
interest or might result in a premium over the market price for the shares held
by the stockholders. The Company's Restated Certificate of Incorporation and
Bylaws divide the Board of Directors into three classes of directors elected for
staggered three-year terms. The Restated Certificate of Incorporation also
provides that the Board of Directors may authorize the issuance of one or more
series of preferred stock from time to time and may determine the rights,
preferences, privileges, and restrictions and fix the number of shares of any
such series of preferred stock, without any vote or action by the Company's
stockholders. The Board of Directors may authorize the issuance of preferred
stock with voting or conversion rights that could adversely affect the voting
power or other rights of the holders of Common Stock. The Restated Certificate
of Incorporation also allows the Board of Directors to fix the number of
directors and to fill vacancies on the Board of Directors.
The Company also is subject to the anti-takeover provisions of Section 203
of the Delaware General Corporation Law, which prohibit the Company from
engaging in a "business combination" with an "interested stockholder" for a
period of three years after the date of the transaction in which the person
became an "interested stockholder," unless the business combination is approved
in a prescribed manner. The senior executives of the five original Acquired
Dealers and Stovall were exempted from the application of Section 203. See
"Management" and "Description of Capital Stock -- Delaware General Corporation
Law and Certain Charter Provisions."
Certain of the Company's dealer agreements could also make it difficult for
a third party to attempt to acquire a significant ownership position in the
Company. See "Risk Factors -- Boat Manufacturers' Control Over Dealers" and
"Business -- Operations -- Suppliers and Inventory Management." In addition, the
Stockholders' Agreement and Governance Agreement will have the effect of
increasing the control of the Company's directors, executive officers, and
persons associated with them and may have the effect of delaying or preventing a
change in control of the Company. See "Description of Capital
Stock -- Stockholders' and Governance Agreements."
18
<PAGE> 19
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.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
Certain statements and information contained in this Prospectus under the
headings "Business," "Risk Factors," and "Management's Discussion and Analysis
of Financial Condition and Results of Operations" concerning future, proposed,
and anticipated activities of the Company; certain trends with respect to the
Company's revenue, operating results, capital resources, and liquidity or with
respect to the markets in which the Company competes or the boating industry in
general; and other statements contained in this Prospectus regarding matters
that are not historical facts are forward-looking statements, as such term is
defined in the Securities Act. Forward-looking statements, by their very nature,
include risks and uncertainties, many of which are beyond the Company's control.
Accordingly, actual results may differ, perhaps materially, from those expressed
in or implied by such forward-looking statements. Factors that could cause
actual results to differ materially include those discussed elsewhere under
"Risk Factors."
19
<PAGE> 20
DEVELOPMENT OF THE COMPANY
FORMATION AND SUBSEQUENT ACQUISITIONS
MarineMax was incorporated in Delaware in January 1998. MarineMax itself,
however, conducted no business until March 1, 1998, when it acquired in separate
merger transactions all the issued and outstanding capital stock of five
independent recreational boat dealers. Simultaneously, MarineMax acquired in
separate contribution transactions all of the beneficial interests of companies
owning real estate used in the operations of certain of the dealers. In
connection with these acquisitions, MarineMax issued an aggregate of 9,191,870
shares of Common Stock to the stockholders of the five dealers and the owners of
the related real estate companies. As a result of the acquisitions, the Company
became the largest recreational boat dealer in the United States. After the
acquisitions, the Company commenced the integration of the five dealers by
centralizing certain administrative functions at the corporate level, such as
accounting, finance (including inventory financing), insurance coverage,
employee benefits, marketing, strategic planning, legal support, purchasing and
distribution, and management information systems. Each of the Acquired Dealers
is continuing its operations as a wholly owned Operating Subsidiary of the
Company.
The Company acquired a sixth recreational boat dealer on April 30, 1998. In
that acquisition, the Company issued 492,306 shares of Common Stock in exchange
for the issued and outstanding stock of that dealer.
Since its initial public offering in June 1998, the Company has acquired
five additional boat dealers and companies owning real estate used in the
operations of certain of these dealers. In connection with these acquisitions,
the Company issued an aggregate of 1,400,428 shares of its Common Stock and paid
an aggregate of $7,218,174 in cash. Each of the Acquired Dealers is continuing
its operations as a wholly owned Operating Subsidiary of the Company.
Each of the Acquired Dealers is continuing its operations as a wholly owned
Operating Subsidiary of the Company.
ACQUIRED DEALERS AND CURRENT OPERATING SUBSIDIARIES
The following table sets forth information regarding the Acquired Dealers,
each of which is an Operating Subsidiary of the Company.
<TABLE>
<CAPTION>
ACQUISITION
ACQUIRED DEALERS DATE BUSINESS
---------------- ----------- --------
<S> <C> <C>
Bassett Boat Company of Florida March 1998 Operates five retail locations in Miami,
("Bassett") Palm Beach, Pompano Beach, and Stuart,
Florida
Louis DelHomme Marine ("DelHomme") March 1998 Operates seven retail locations in Fort
Worth, Lewisville (Dallas), League City,
Montgomery, and Houston, Texas
Gulfwind USA, Inc. ("Gulfwind USA") March 1998 Operates three retail locations in Tampa
and Clearwater, Florida
Gulfwind South, Inc. ("Gulfwind South") March 1998 Operates two retail locations in Fort
Myers and Naples, Florida
Harrison's Boat Center, Inc. and March 1998 Operates six retail locations in Oakland,
Harrison's Marine Centers of Arizona, Redding, Santa Rosa, and Sacramento,
Inc. (together, "Harrison's") California, and Tempe, Arizona
Stovall Marine, Inc. ("Stovall") April 1998 Operates four retail locations in Kennesaw
(Atlanta) Augusta, Forest Park (Atlanta),
and Lake Lanier, Georgia
Cochran's Marine, Inc. and C & N Marine July 1998 Operates five retail locations in Rogers,
Corporation (together "Cochran's") Walker, Oakdale, and Woodbury, Minnesota
Sea Ray of Wilmington July 1998 Operates one retail location in
Wrightsville Beach, North Carolina
Brevard Boat Company ("Brevard") September 1998 Operates one retail location in Cocoa,
Florida
</TABLE>
20
<PAGE> 21
<TABLE>
<CAPTION>
ACQUISITION
ACQUIRED DEALERS DATE BUSINESS
---------------- ----------- --------
<S> <C> <C>
Sea Ray of Las Vegas September 1998 Operates one retail location in Las Vegas,
Nevada
Treasure Cove Marina, Inc. ("Treasure September 1998 Operates four retail locations in Mentor
Cove") (Cleveland), Port Clinton, and Toledo,
Ohio
</TABLE>
In October 1998, the Company acquired the operations of Woods & Oviatt,
Inc., a premier brokerage operation with headquarters in Ft. Lauderdale,
Florida. Additionally in October 1998, the Company was awarded the Hatteras
Yachts dealership agreement for the state of Florida (excluding certain portions
of the Florida Panhandle), and became the U.S. distributor for Hatteras products
over 74 feet.
As a part of its acquisition strategy, the Company frequently engages in
discussions with various recreational boat dealers regarding their potential
acquisition by the Company. In connection with these discussions, the Company
and each potential acquisition candidate exchange confidential operational and
financial information, conduct due diligence inquiries, and consider the
structure, terms, and conditions of the potential acquisition. In certain cases,
the prospective acquisition candidate agrees not to discuss a potential
acquisition with any other party for a specific period of time, grants the
Company an option to purchase the prospective dealer for a designated price
during a specific time, and agrees to take other actions designed to enhance the
possibility of the acquisition, such as preparing audited financial information
and converting its accounting system to the system specified by the Company.
Potential acquisition discussions frequently take place over a long period of
time, involve difficult business integration and other issues, including in some
cases, management succession and related matters. As a result of these and other
factors, a number of potential acquisitions that from time to time appear likely
to occur do not result in binding legal agreements and are not consummated.
PRICE RANGE OF COMMON STOCK
The Company's Common Stock has been traded on the New York Stock Exchange
under the symbol HZO since its initial public offering on June 3, 1998 at $12.50
per share. The following table sets forth high and low sale prices of the Common
Stock for each calendar quarter indicated as reported on the New York Stock
Exchange.
<TABLE>
<CAPTION>
HIGH LOW
------ ------
<S> <C> <C>
SECOND QUARTER (FROM JUNE 3, 1998)......................... $14.19 $12.38
THIRD QUARTER.............................................. $12.38 $ 7.56
FOURTH QUARTER (THROUGH DECEMBER 28, 1998)................. $ 9.06 $ 7.50
</TABLE>
On December 28, 1998, the closing sale price of the Company's Common Stock
was $7.94 per share. On December 28, 1998, there were 75 record holders and
approximately 1,500 beneficial owners of the Company's Common Stock.
DIVIDEND POLICY
The Company currently intends to retain its earnings to support the growth
and development of its business and has no present intention of paying any
dividends on its Common Stock in the foreseeable future. Any future declaration
of dividends will be subject to the discretion of the Board of Directors of the
Company and will depend on the Company's financial condition, operating results,
capital requirements, contractual restrictions with respect to the payment of
dividends, and such other factors as the Board of Directors deems relevant.
21
<PAGE> 22
SELECTED FINANCIAL DATA
(In thousands, except per share data)
The following table contains certain financial and operating data and is
qualified by the more detailed Consolidated Financial Statements and notes
thereto included elsewhere in this Prospectus. The Balance Sheet Data as of
September 30, 1997 and 1998 and the Statements of Operations Data for the year
ended December 31, 1996, the nine months ended September 30, 1997, and the year
ended September 30, 1998 were derived from the Consolidated Financial Statements
and notes thereto that have been audited by Arthur Andersen LLP, independent
certified public accountants, and are included elsewhere in this Prospectus. The
Balance Sheet Data as of December 31, 1994, 1995, and 1996 and the Statements of
Operations Data for the years ended December 31, 1994 and 1995, the nine months
ended September 30, 1996, and the 12-month period ended September 30, 1997 have
been derived from the unaudited financial statements of the Company, which in
the opinion of management, have been prepared on the same basis as the audited
financial statements and include all adjustments, consisting of normal recurring
adjustments, which management considers necessary for a fair presentation of the
selected financial data shown. The financial data shown below should be read in
conjunction with the Consolidated Financial Statements and the related notes
thereto and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
-------------------------------- --------------------
1994 1995 1996 1996 1997
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue.......................... $141,800 $168,111 $197,609 $156,611 $200,414
Cost of sales.................... 109,543 128,823 149,948 117,514 150,479
-------- -------- -------- -------- --------
Gross profit..................... 32,257 39,288 47,661 39,097 49,935
Selling, general, and
administrative expenses......... 24,895 31,071 38,650 25,378 30,388
Non-recurring settlement(1)...... -- -- -- -- --
-------- -------- -------- -------- --------
Income from operations........... 7,362 8,217 9,011 13,719 19,547
Interest expense, net............ 1,058 1,414 1,823 1,453 1,806
-------- -------- -------- -------- --------
Income before tax provision
(benefit)....................... 6,305 6,803 7,188 12,266 17,741
Tax provision (benefit).......... 31 (20) 42 661 596
-------- -------- -------- -------- --------
Net income (loss)................ $ 6,273 $ 6,823 $ 7,146 $ 11,605 $ 17,146
======== ======== ======== ======== ========
OTHER DATA:
Number of stores(2).............. 19 22 23 23 24
Sales per store(3)............... $ 6,449 $ 6,572 $ 7,124 $ 7,027 $ 8,722
Same-store sales growth(4)....... 12% 14% 14% 8% 28%
<CAPTION>
TWELVE PRO FORMA
MONTHS FISCAL YEAR FISCAL YEAR
ENDED ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1997 1998 1998(5)
------------- ------------- -------------
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue.......................... $239,551 $ 291,182 $ 291,182
Cost of sales.................... 180,998 220,364 220,364
-------- ----------- -----------
Gross profit..................... 58,552 70,818 70,818
Selling, general, and
administrative expenses......... 44,424 52,479 47,679
Non-recurring settlement(1)...... -- 15,000 --
-------- ----------- -----------
Income from operations........... 14,128 3,339 23,139
Interest expense, net............ 1,951 2,212 2,212
-------- ----------- -----------
Income before tax provision
(benefit)....................... 12,177 1,127 20,927
Tax provision (benefit).......... (73) 1,705 8,371
-------- ----------- -----------
Net income (loss)................ $ 12,251 $ (577) $ 12,556
======== =========== ===========
Net income (loss) per share:
Diluted........................... $ (0.05) $ 1.14
=========== ===========
Weighted average number of shares:
Diluted........................... 11,027,949 11,027,949
=========== ===========
OTHER DATA:
Number of stores(2).............. 26 41
Sales per store(3)............... $ 10,536 $ 11,269
Same-store sales growth(4)....... 26% 18%
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
-------------------------------- --------------------
1994 1995 1996 1997 1998
------- ------- ------ ------- -------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital............................................. $ 7,312 $ 7,408 $8,560 $23,556 $29,079
Total assets................................................ 50,339 59,992 82,312 89,591 150,458
Long-term debt (including current portion).................. 1,314 1,161 1,438 7,414 3,692
Total stockholders' equity.................................. 10,350 11,319 12,885 23,298 66,335
</TABLE>
- ---------------
(1) Consists of Brunswick settlement obligation. See "Risk Factors -- Necessity
for Manufacturers' Consent to Dealer Acquisitions and Market Expansion."
(2) Includes only those stores open at period end.
(3) Includes only those stores open for the entire preceding 12- or nine-month
period, respectively.
(4) New stores are included in the comparable base at the beginning of the
store's thirteenth month of operations.
(5) Pro forma amounts reflect a $4.8 million ($0.26 per diluted share) reduction
in selling, general, and administrative expense for contractually lowered
compensation, a $15.0 million ($0.82 per diluted share) reduction of the
non-recurring Brunswick Settlement, and pro forma income taxes as if all the
Company's Operating Subsidiaries always operated as C corporations for
income tax purposes.
22
<PAGE> 23
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The Company is the largest recreational boat retailer in the United States
with fiscal 1998 revenue approaching $300 million. Through 40 retail locations
in nine 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.
MarineMax was incorporated in January 1998. MarineMax has consummated a
series of business combinations since its formation. On March 1, 1998, MarineMax
acquired, in separate merger transactions, 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 "Original Merged Companies") in exchange for 7,799,844 shares
of the Company's Common Stock. On July 7, 1998, the Company acquired, in
separate merger transactions, all of the issued and outstanding common stock of
Cochran's Marine, Inc. and C & N Marine Corporation (together "Cochran's
Marine") in a merger transaction in exchange for 603,386 shares of its Common
Stock. On July 30, 1998, the Company acquired all of the issued and outstanding
common stock of Sea Ray of Wilmington, Inc. (f.k.a. Skipper Bud's of North
Carolina) in a merger transaction in exchange for 412,390 shares of its Common
Stock.
These business combinations (collectively the "Pooled Companies") have been
accounted for under the pooling-of-interests method of accounting. Accordingly,
the financial statements of the Company have been restated to reflect the
operations as if the companies had operated as one entity since inception.
In addition to the Pooled Companies, the Company has acquired four
additional boat retailers and companies owning real estate used in the
operations of certain subsidiaries of the Company (collectively, the "Purchased
Companies"). In connection with these acquisitions, the Company issued an
aggregate of 2,268,984 shares of its common stock and paid an aggregate of
approximately $7.2 million in cash, resulting in the recognition of an aggregate
of $15.5 million in goodwill, which represents the excess of the purchase price
over the estimated fair value of the net assets acquired. The Purchased
Companies have been reflected in the Company's financial statements subsequent
to their respective acquisition dates. Each of the Purchased Companies is
continuing its operations as a wholly owned subsidiary of the Company.
Each of the Pooled Companies and Purchased Companies historically operated
with a calendar year-end, but adopted the September 30 year-end of MarineMax on
or before the completion of its acquisition. The September 30 year-end more
closely conforms to the natural business cycle of the Company. The following
discussion compares the fiscal year ended September 30, 1998 to the 12 months
ended September 30, 1997, the nine months ended September 30, 1997 to the nine
months ended September 30, 1996, and calendar 1996 to calendar 1995 and should
be read in conjunction with the consolidated financial statements of the
Company, including the related notes thereto, appearing elsewhere in this
Prospectus.
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 Pooled 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 Pooled Companies include compensation to employee-stockholders
totaling $4.8 million and $8.2 million for the fiscal year ended September 30,
1998 and the 12 months ended September 30, 1997, respectively, $4.7
23
<PAGE> 24
million and $4.4 million for the nine months ended September 30, 1997 and 1996,
respectively, and $9.8 million and $7.3 million for the years ended December 31,
1996 and 1995, respectively. As a result of the varying practices regarding
compensation to employee-stockholders among the Pooled 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.
RESULTS OF OPERATIONS
The following table sets forth certain financial data as a percentage of
revenue for the periods indicated:
<TABLE>
<CAPTION>
CALENDAR YEAR ENDED DECEMBER 31, NINE MONTHS ENDED SEPTEMBER 30,
----------------------------------- -----------------------------------
1995 1996 1996 1997
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue....................... $168,111 100.0% $197,609 100.0% $156,611 100.0% $200,414 100.0%
Cost of sales................. 128,823 76.6% 149,948 75.9% 117,514 75.0% 150,479 75.1%
-------- -------- -------- --------
Gross profit.................. 39,288 23.4% 47,661 24.1% 39,097 25.0% 49,935 24.9%
Selling, general, and
administrative expenses...... 31,071 18.2% 38,650 19.6% 25,378 16.2% 30,388 15.2%
Non-recurring settlement...... -- 0.0% -- 0.0% -- 0.0% -- 0.0%
-------- -------- -------- --------
Income from operations........ 8,217 4.9% 9,011 4.6% 13,719 8.8% 19,547 9.8%
Interest expense, net......... 1,414 0.8% 1,823 0.9% 1,453 0.9% 1,806 0.9%
-------- -------- -------- --------
Income before tax provision... 6,803 4.0% 7,188 3.6% 12,266 7.8% 17,741 8.9%
======== ======== ======== ========
<CAPTION>
TWELVE MONTHS FISCAL YEAR
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
1997 1998
---------------- ----------------
<S> <C> <C> <C> <C>
Revenue....................... $239,551 100.0% $291,182 100.0%
Cost of sales................. 180,998 75.6% 220,364 75.7%
-------- --------
Gross profit.................. 58,552 24.4% 70,818 24.3%
Selling, general, and
administrative expenses...... 44,424 18.5% 52,479 18.0%
Non-recurring settlement...... -- 0.0% 15,000 5.2%
-------- --------
Income from operations........ 14,128 5.9% 3,339 1.1%
Interest expense, net......... 1,951 0.8% 2,212 0.8%
-------- --------
Income before tax provision... 12,177 5.1% 1,127 0.4%
======== ========
</TABLE>
Fiscal Year Ended September 30, 1998 Compared to Twelve Months Ended September
30, 1997
Revenue. Revenue increased $51.6 million, or 21.6%, to $291.2 million for
the fiscal year ended September 30, 1998 from $239.6 million for the 12-month
period ended September 30, 1998. Of this increase, $43.0 million was
attributable to 18% growth in comparable stores sales in 1998 and $8.6 million
was attributable to stores not eligible for inclusion in the comparable store
base. The increase in comparable store sales in fiscal 1998 resulted primarily
from more effective utilization of the prospective customer tracking feature of
the integrated computer system, a trend toward larger boats in certain markets,
a greater emphasis on used boat sales, the continued implementation of the
MarineMax Value-Price sales approach, which the Company believes has resulted in
increased closing rate on sales, and participation in additional boat shows.
Gross Profit. Gross profit increased $12.3 million, or 20.9%, to $70.8
million for the fiscal year ended September 30, 1998 from $58.5 million for the
12-month period ended September 30, 1997. Gross profit margin as a percentage of
revenue decreased slightly from 24.4% to 24.3% during the 12-month period ended
September 30, 1997 and the fiscal year ended September 30, 1998. The decrease
was due to increased sales of products with a historically lower gross profit
percentage, such as used boat sales, partially offset by the implementation of
the MarineMax Value-Price sales approach, which generally results in improved
overall gross profit margins.
Selling, General, and Administrative Expenses. Selling, general, and
administrative expenses increased approximately $8.1 million, or 18.1%, to $52.5
million for the fiscal year ended September 30, 1998 from $44.4 million for the
12-month period ended September 30, 1997. Selling, general, and administrative
expenses as a percentage of revenue decreased to 18.0% in 1998 from 18.5% in
1997. This reduction was primarily due to proportionally lower
stockholder-employee compensation.
Non-Recurring Settlement. The Non-Recurring Settlement for the fiscal year
ended September 30, 1998 was attributable to a $15.0 million settlement under
the Settlement Agreement the Company entered into with Brunswick.
Interest Expense, Net. Interest expense, net increased approximately
$261,000, or 13.4%, to $2.2 million for the fiscal year ended September 30, 1998
from $2.0 million for the 12-month period ended September 30, 1997. Interest
expense, net as a percentage of revenue, remained relatively constant at 0.8%
during the fiscal year ended September 30, 1998 and the 12-month period ended
September 30, 1997. Total interest charges
24
<PAGE> 25
increased as a result of increased debt associated with higher levels of
outstanding borrowings related to the increased level of inventories required to
support the increase in revenue.
Nine Months Ended September 30, 1997 Compared to Nine Months Ended September 30,
1996
Revenue. Revenue increased $43.8 million, or 27.9%, to $200.4 million for
the nine-month period ended September 30, 1997 from $156.6 million for the
nine-month period ended September 30, 1996. Of this increase, $39.0 million was
attributable to 25.9% growth in comparable stores sales in 1997 and $4.8 million
was attributable to stores not eligible for inclusion in the comparable store
base. The increase in comparable store sales in 1997 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
MarineMax Value-Price sales approach at seven retail locations, which the
Company believes has resulted in increased closing rate on sales, and
participation in additional boat shows.
Gross Profit. Gross profit increased $10.8 million, or 27.7%, to $49.9
million for the nine-month period ended September 30, 1997 from $39.1 million
for the nine-month period ended September 30, 1996. Gross profit margin as a
percentage of revenue remained relatively constant at 24.9% during the
nine-month periods ended September 30, 1997 and 1996.
Selling, General, and Administrative Expenses. Selling, general, and
administrative expenses increased approximately $5.0 million, or 19.7%, to $30.4
million for the nine-month period ended September 30, 1997 from $25.4 million
for the nine-month period ended September 30, 1996. Selling, general, and
administrative expenses as a percentage of revenue decreased to 15.2% in 1997
from 16.2% in 1996. This reduction was primarily due to proportionally lower
stockholder-employee compensation.
Interest Expense, Net. Interest expense, net increased approximately
$352,000, or 24.2%, to $1.8 million for the nine-month period ended September
30, 1997 from $1.5 million for the nine-month period ended September 30, 1996.
Interest expense, net as a percentage of revenue, remained relatively constant
at 0.9% during the nine-month periods ended September 30, 1997 and 1996. Total
interest charges increased as a result of increased debt associated with the
redemption of Common Stock and higher levels of outstanding borrowings related
to the increased level of inventories required to support the increase in
revenue.
Year Ended December 31, 1996 Compared to Year Ended December 31, 1995
Revenue. Revenue increased $29.5 million, or 17.5%, to $197.6 million in
1996 from $168.1 million in 1995. Of this increase, $22.9 million was
attributable to 14.2% growth in comparable stores sales and $6.6 million was
attributable to stores not eligible for inclusion in the comparable store base.
The increase in comparable store sales in 1996 was due primarily to increased
use of the prospective customer tracking feature of the integrated computer
system, a stronger emphasis on used boat sales and parts and service sales, the
addition of product lines (such as Baja, Challenger, Sea Hunt, and Sea Pro) in
selected locations, and participation in additional boat shows.
Gross Profit. Gross profit increased $8.4 million, or 21.1%, to $47.7
million in 1996 from $39.3 million in 1995. Gross profit as a percentage of
revenue increased to 24.1% in 1996 from 23.4% in 1995. The gross profit increase
was primarily due to more effective utilization of the integrated computer
system, which allowed for more timely monitoring and emphasis on daily and
monthly gross profit margins, and increased sales of products that historically
result in higher gross profits such as finance and insurance contracts.
Selling, General, and Administrative Expenses. Selling, general, and
administrative expenses increased approximately $7.6 million, or 24.4%, to $38.7
million in 1996 from $31.1 million in 1995. Selling, general, and administrative
expenses as a percentage of revenue increased to 19.6% in 1996 from 18.5% in
1995. The increase in selling, general, and administrative expenses as a
percentage of revenue was primarily due to an additional $1.2 million of
stockholder-employee compensation and $800,000 in additional advertising expense
in excess of their proportion to the increase in revenue. The increase in
advertising expense was primarily associated with the addition of new product
lines as noted above.
Interest Expense, Net. Interest expense, net increased approximately
$409,000, or 29.0%, to $1.8 million in 1996 from $1.4 million in 1995. Interest
expense, net as a percentage of revenue, increased to 0.9% in 1996
25
<PAGE> 26
from 0.8% in 1995. The increase in interest charges was a result of increased
debt associated with the redemption of Common Stock and higher levels of
outstanding borrowings related to the increased level of inventories required to
support the increase in revenue.
QUARTERLY DATA AND SEASONALITY
The following table sets forth certain unaudited quarterly financial data
for each of the Company's last eight quarters. The information has been derived
from unaudited financial statements that, in the opinion of management, reflect
all adjustments (consisting only of normal recurring adjustments) necessary for
the fair presentation of such quarterly financial information.
The Pooled 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. As a result of the varying practices
regarding compensation to employee-stockholders among the Pooled 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.
Additionally, due to the issuance of Common Stock in connection with the
acquisition of property and equipment and the initial public offering of
4,780,569 shares (3,515,824 by the Company and 1,264,745 by Selling
Stockholders) the comparisons of earnings per share is also difficult and less
meaningful on a historical basis.
The operating results for any quarter are not necessarily indicative of the
results to be expected for any future period.
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31, JUNE 30, SEPTEMBER 30,
1996 1997 1997 1997
------------- ---------- --------- --------------
<S> <C> <C> <C> <C>
Revenue....................... $ 39,137 $ 52,183 $ 78,133 $ 70,097
Cost of sales................. 30,519 40,055 58,531 51,893
--------- --------- --------- ---------
Gross profit.................. 8,617 12,128 19,603 18,204
Selling, general, and
administrative expenses..... 14,036 8,865 10,717 10,806
Non-recurring settlement......
--------- --------- --------- ---------
Income (loss) from
operations.................. (5,419) 3,263 8,886 7,398
Interest expense (income),
net......................... 145 287 727 792
--------- --------- --------- ---------
Income (loss) before tax
provision................... (5,564) 2,976 8,159 6,606
Tax provision (benefit)....... (669) 22 186 388
--------- --------- --------- ---------
Net income (loss)............. $ (4,895) $ 2,955 $ 7,973 $ 6,218
========= ========= ========= =========
Net income (loss) per share:
Diluted..................... $ (0.51) $ 0.33 $ 0.90 $ 0.70
========= ========= ========= =========
Weighted average number of
shares: Diluted............. 9,676,931 8,901,818 8,901,818 8,901,818
========= ========= ========= =========
<CAPTION>
DECEMBER 31, MARCH 31, JUNE 30, SEPTEMBER 30,
1997 1998 1998 1998
------------- ---------- ---------- --------------
<S> <C> <C> <C> <C>
Revenue....................... $ 46,401 $ 62,382 $ 105,250 $ 77,149
Cost of sales................. 36,662 47,861 80,337 55,505
--------- --------- ---------- ----------
Gross profit.................. 9,739 14,521 24,913 21,645
Selling, general, and
administrative expenses..... 14,227 11,747 13,495 13,010
Non-recurring settlement...... 15,000
--------- --------- ---------- ----------
Income (loss) from
operations.................. (4,488) (12,226) 11,419 8,635
Interest expense (income),
net......................... 350 742 1,468 (349)
--------- --------- ---------- ----------
Income (loss) before tax
provision................... (4,839) (12,968) 9,950 8,984
Tax provision (benefit)....... (341) (4,844) 3,468 3,422
--------- --------- ---------- ----------
Net income (loss)............. $ (4,498) $ (8,124) $ 6,482 $ 5,562
========= ========= ========== ==========
Net income (loss) per share:
Diluted..................... $ (0.51) $ (0.87) $ 0.56 $ 0.39
========= ========= ========== ==========
Weighted average number of
shares: Diluted............. 8,901,818 9,365,970 11,629,478 14,334,967
========= ========= ========== ==========
</TABLE>
All quarters have been restated to include the results of operations of the
Cochran's Marine and the Sea Ray of Wilmington, Inc. acquisitions that have been
accounted for under the pooling-of-interests method of accounting. Additionally,
in order to maintain consistency and comparability between periods, certain
amounts have been reclassified from the previously reported financial statements
to conform with the financial statements of the current period.
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 acquisitions and new store openings.
These cash needs have historically been financed with cash from operations and
borrowings under credit facilities. Historically, the Pooled Companies utilized
a combination of floor plan financing, working capital lines of credit, and
loans from stockholders to finance inventory levels. These historic facilities
had varying interest rates, terms, and payment requirements. The Company depends
upon dividends and other
26
<PAGE> 27
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 fiscal year ended September 30, 1998 and the nine-month periods
ended September 30, 1997 and 1996, the Company generated cash flows from
operating activities of approximately $16.6 million, $24.5 million, and $8.2
million, respectively. For the calendar years ended December 31, 1996 and 1995,
cash flows used by operating activities were $11.9 million and $262,000. In
addition to net income, cash provided by operating activities was due primarily
to inventory management, including floor plan management. Employee-stockholder
compensation significantly impacts net income and therefore cash flows provided
by and used in operations, which causes variations in operating cash flows.
For the fiscal year ended September 30, 1998, cash flows used in investing
activities was approximately $10.8 million. For the nine-month periods ended
September 30, 1997 and 1996, the cash flows used in investing activities
approximated $1.3 million in both periods. For the calendar years ended December
31, 1996 and 1995, cash flows used in investing activities were $1.6 million and
$1.2 million, respectively. Cash used in investing activities was primarily
attributable to cash used in business acquisitions and purchases of property and
equipment associated with opening new or improving existing retail facilities.
For the fiscal year ended September 30, 1998, cash flows used in financing
activities approximated $9.4 million. For the nine-month periods ended September
30, 1997 and 1996, cash flows used in financing activities approximated $14.3
million and $2.7 million, respectively. For the calendar years ended December
31, 1996 and 1995, cash flows provided by financing activities were $13.9
million and $2.1 million, respectively. Cash provided by financing activities
was primarily attributable to increased borrowings on short-term, long-term, and
stockholder debt. Cash flows used in financing activities reflect the repayment
of short-term, long-term, and stockholder debt and distributions made to
employee-stockholders for tax and other purposes, which have historically been
made in the quarter ended December 31.
At September 30, 1998, the Company's indebtedness totaled approximately
$64.5 million, of which approximately $3.7 million was associated with the
Company's real estate holdings, $15.0 million was associated with the Brunswick
Settlement, and the remaining $45.8 million was associated with financing the
Company's current inventory level and working capital needs.
During the year, the Company replaced the various lines of credit of the
Acquired Dealers with a Loan and Security Agreement, dated April 7, 1998, with
Nations Credit Distribution Finance, Inc. ("NDF"). The agreement provides for a
revolving line of credit facility to the Company with maximum available
borrowings of $105 million (the "Loan"). Advances on the Loan 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
will be based upon the value of new and used inventory, parts inventory, and
accounts receivable of the Company and each of its direct and indirect
subsidiaries. Advances may be used for inventory, working capital, and other
purposes satisfactory to NDF. No more than $10 million in advances may be
outstanding for working capital purposes, unless the Company and its
subsidiaries pledge their real property assets. The Loan is guaranteed by each
of the Company's direct and indirect subsidiaries. The Loan and guaranties of
the subsidiaries are secured by all of the accounts, inventories, other goods,
equipment, furniture, and fixtures of the Company and all of the subsidiaries.
Since March 1, 1998, the Company has acquired six additional boat dealers
and companies owning real estate used in the operations of certain subsidiaries
of the Company. In connection with these acquisitions, the Company issued an
aggregate of 2,268,984 shares of its common stock and paid an aggregate of
approximately $7.2 million in cash, resulting in the recognition of an aggregate
of $15.5 million in goodwill, which represents the excess of the purchase price
over the estimated fair value of the net assets acquired. See "Development of
the Company -- Formation and Subsequent Acquisitions".
In June 1998, the Company completed its initial public offering (the "IPO")
of 4,780,569 shares of Common Stock (3,515,824 shares by the Company and
1,264,745 shares by certain Selling Stockholders). The IPO generated net cash
proceeds to the Company of approximately $38.3 million, net of underwriting
discounts and offering costs of approximately $2.5 million. Subsequent to the
IPO, the Company used
27
<PAGE> 28
approximately $1.5 million to enhance the Company's management information
systems, $7.2 million in the acquisition of businesses, and the remaining $29.6
million to pay down debt.
Except as specified in this "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and in the attached consolidated
financial statements, the Company has no material commitments for capital for
the next 12 months. The Company believes that its existing capital resources,
including plans to increase or supplement its credit facilities resulting in
approximately $200 million of borrowing capacity, will be sufficient to finance
the Company's operations for at least the next 12 months.
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.
28
<PAGE> 29
BUSINESS
GENERAL
The Company is the largest recreational boat dealer in the United States
with revenue approaching $300 million. Through 40 retail locations in Arizona,
California, Florida, Georgia, Minnesota, Nevada, North Carolina, Ohio, and
Texas, the Company sells primarily new and used recreational boats, including
pleasure boats (such as sport boats, sport cruisers, sport yachts, and yachts)
and fishing boats, with a focus on the premium brands in each segment. The
Company also sells related marine products, including engines, trailers, parts,
and accessories. In addition, the Company arranges related boat financing,
insurance, and extended service contracts, provides repair and maintenance
services, and offers boat brokerage services.
The Company is the nation's largest retailer of Sea Ray, Boston Whaler, and
other boats manufactured by Brunswick, which is the world's largest manufacturer
of recreational boats. Sales of new Brunswick boats accounted for 88% of the
Company's new boat sales in fiscal 1998, which the Company believes represented
approximately 25% of all new Sea Ray boat sales and approximately 6% of all
Brunswick marine product sales during that period. Each of the Company's
Operating Subsidiaries is a party to a 10-year dealer agreement with Brunswick
covering Sea Ray products.
For the fiscal year ended September 30, 1998, the Company had revenue of
$291.2 million, pro forma operating income of approximately $23.1 million
(before deducting the $15.0 million non-recurring Brunswick Settlement), and pro
forma net income (before the Brunswick Settlement) of approximately $12.6
million. The Company's same-store sales increased by approximately 18% in fiscal
1998 and has averaged 17% for the last five years, respectively.
The Company commenced operations as a combined company as a result of the
March 1, 1998 acquisition of five previously independent boat dealers and has
acquired six additional independent dealers since that time. The Company is
capitalizing on the experience and success of each of the Acquired Dealers in
order to establish a new national standard of customer service and
responsiveness in the highly fragmented retail boating industry. Each of the
Acquired Dealers is the exclusive dealer of Sea Ray boats in its geographic
market. While the Company believes the average new boat retailer generates less
than $3.0 million in annual sales, the retail locations of the Company (operated
at least 12 months) averaged $11.2 million in annual sales in fiscal 1998. Given
the Company's emphasis on premium brand boats, the Company's average selling
price for a new boat in fiscal 1998 was approximately $39,500 compared to the
Company's estimated industry average selling price of approximately $14,000.
The Company is adopting the best practices of the Acquired Dealers as
appropriate to enhance its ability to attract more customers, foster an overall
enjoyable boating experience, and offer boat manufacturers stable and
professional retail distribution. The Company believes that its full range of
services, two years of free maintenance (MarineMax Care), MarineMax Value-Price
sales approach, prime retail locations, extensive facilities, and emphasis on
customer service and satisfaction before and after a boat sale are competitive
advantages that enable it to be more responsive to the needs of existing and
prospective customers.
The Company plans to expand its operations through internal growth and
acquisitions. See "Risk Factors -- Risks Associated With Acquisition Strategy"
and "Business -- Strategy." Brunswick has agreed to cooperate in good faith with
the Company and not to unreasonably withhold its consent to the acquisition by
the Company each year of Sea Ray boat dealers with aggregate total revenue not
exceeding 20% of the Company's revenue in its prior fiscal year.
U.S. RECREATIONAL BOATING INDUSTRY
The Company believes that total U.S. recreational boating sales generated
$19.3 billion in revenue in 1997, including retail sales of new and used
recreational boats; marine products, such as engines, trailers, parts, and
accessories; and related boating expenditures, such as fuel, insurance, docking,
storage, and repairs. The Company believes that retail sales of new boats,
engines, trailers, and accessories accounted for approximately $10.0 billion of
such sales in 1997. Retail recreational boating sales were $17.9 billion in the
late 1980s, but declined to a low of $10.3 billion in 1992. The Company believes
this decline can be attributed to a recession,
29
<PAGE> 30
the Gulf War, and the imposition throughout 1991 and 1992 of a luxury tax on
boats sold at prices in excess of $100,000. The luxury tax was repealed in 1993,
and retail recreational boating sales have increased each year thereafter.
Sales in the recreational boat industry are impacted significantly by other
recreational opportunities; economic factors, including general economic
conditions, consumer income levels, tax law changes, and fuel prices; and
demographics. The share of recreational dollars that U.S. consumers spend on
boating declined from 3.1% in 1988, the boating industry's peak year, to 2.0% in
1996. The Company believes that the decline in boating is attributable to poor
customer service throughout the industry, lack of boater education, and the
perception that boating is time consuming, costly, and difficult.
Most boat purchasers are in the 35 to 54 age group. Although these
individuals account for 36% of the U.S. population over age 16, they account for
over 50% of discretionary income and represent the fastest growing segment of
the U.S. population, growing at a 2.5% annual rate.
The recreational boat retail market remains highly fragmented with little
consolidation having occurred to date. The Company estimates that the boat
retailing industry includes more than 4,000 boat retailers, most of which are
small companies owned by individuals that operate in a single market, have
annual sales of less than $3 million, and provide varying degrees of
merchandising, professional management, and customer service. The Company
believes that many such retailers are encountering increased pressure from boat
manufacturers to improve their levels of service and systems, increased
competition from larger national retailers in certain product lines, and, in
certain cases, business succession issues.
STRATEGY
The Company's goal is to enhance its position as the nation's leading
operator of recreational boat dealerships. Key elements of the Company's
operating and growth strategies include the following:
Operating Strategies
Emphasizing Customer Satisfaction and Loyalty. The Company seeks to
achieve a high level of customer satisfaction and establish long-term customer
loyalty by creating an overall enjoyable boating experience beginning with the
negotiation-free purchase process. The Company further enhances and simplifies
the purchase process by offering financing and insurance at its retail locations
with competitive terms and streamlined turnaround. The Company provides the
customer with a thorough in-water orientation of boat operation as well as
ongoing boat safety, maintenance, and use seminars and demonstrations for the
customer's entire family. The Company also continues its customer service after
the sale by leading and sponsoring MarineMax Getaways! group boating trips to
various destinations, rendezvous gatherings, and on-the-water organized events
to provide its customers with pre-arranged opportunities to enjoy the pleasures
of the boating lifestyle. The Company also endeavors to provide superior
maintenance and repair services, often at the customer's wet slip and with
extended service department hours, that minimize the hassles of boat
maintenance.
Implementing Best Practices. The Company is implementing the "best
practices" of each of the Acquired Dealers as appropriate throughout its
dealerships. In particular, the Company is phasing in throughout its dealerships
the MarineMax Value-Price sales approach, now implemented at most of its
dealerships. Under the MarineMax Value-Price approach, the Company sells its
boats at posted prices, generally representing a discount from the
manufacturer's suggested retail price, without further price negotiation,
thereby eliminating the anxieties of price negotiations that occur in most boat
purchases. In addition, the Company is adopting, where beneficial, the best
practices of each Acquired Dealer in terms of location design and layout,
product purchases, maintenance and repair services (including extended service
hours and mobile or dockside services), product mix, employee training, and
customer education and services.
Achieving Operating Efficiencies and Synergies. The Company plans to
increase the operating efficiencies of and achieve certain synergies among its
dealerships in order to enhance internal growth and profitability. The Company
is centralizing certain administrative functions at the corporate level, such as
30
<PAGE> 31
accounting, finance, insurance coverage, employee benefits, marketing, strategic
planning, legal support, purchasing and distribution, and management information
systems. Centralization of these functions should reduce duplicative expenses
and permit the dealerships to benefit from a level of scale and expertise that
would otherwise be unavailable to each dealership individually. The Company also
expects to realize cost savings from reduced inventory carrying costs as a
result of purchasing boat inventories on a national level and directing boats to
dealership locations that can more readily sell such boats; lower financing
costs through new credit facilities; and volume purchase discounts and rebates
for certain marine products, supplies, and advertising. The ability of each of
the Company's retail locations to offer complementary services of the Company's
other retail locations, such as offering customer excursion opportunities,
providing maintenance and repair services at the customer's boat location, and
giving access to a larger inventory, increases the competitiveness of each
retail location.
Operating with Decentralized Management. The Company has adopted a
decentralized approach to the operational management of its dealerships. The
decentralized management approach takes advantage of the extensive experience of
local managers, enabling them to implement policies and make decisions,
including the appropriate product mix, based on the needs of the local market.
Local management authority also fosters responsive customer service and promotes
long-term community and customer relationships. In addition, the centralization
of certain administrative functions at the corporate level enhances the ability
of local managers to focus their efforts on day-to-day dealership operations.
Utilizing Technology Throughout Operations. The Company believes that its
management information system, which currently is being utilized by each
Operating Subsidiary and was developed over the past seven years through
cooperative efforts with a common vendor, enhances the Company's ability to
integrate successfully the operations of the Operating Subsidiaries and future
acquired dealers. The system facilitates the interchange of information and
enhances cross-selling opportunities throughout the Company. The system
integrates each level of operations on a Company-wide basis, including
purchasing, inventory, receivables, financial reporting and budgeting, and sales
management. The system also provides sales representatives with prospect and
customer information that aids them in tracking the status of their contacts
with prospects, automatically generates follow-up correspondence to such
prospects, posts Company-wide the availability of a particular boat, locates
boats needed to satisfy a particular customer request, and monitors the
maintenance and service needs of customers' boats. Company representatives also
utilize the computer system to assist in arranging customer financing and
insurance packages.
Growth Strategies
Pursuing Strategic Acquisitions. The Company intends to capitalize upon
the significant consolidation opportunities available in the highly fragmented
recreational boat dealer industry by acquiring additional dealers and improving
their performance and profitability through the implementation of the Company's
operating strategies. The primary acquisition focus is on well-established,
high-end recreational boat dealers in geographic markets not currently served by
the Operating Subsidiaries, particularly geographic markets with strong boating
demographics, such as areas within the coastal states and the Great Lakes
region. The Company also may seek to acquire boat dealers that, while located in
attractive geographic markets, have not been able to realize favorable market
share or profitability and that can benefit substantially from the Company's
systems and operating strategies. The Company may expand its range of product
lines and its market penetration by acquiring dealers that distribute
recreational boat product lines different from those currently offered by the
Company. As a result of the considerable industry experience and relationships
of the Company's management team, the Company believes it is well positioned to
identify and evaluate acquisition candidates and assess their growth prospects,
the quality of their management teams, their local reputation with customers,
and the suitability of their locations. The Company believes it is regarded as
an attractive acquiror by boat dealers because of (i) the Company's historical
performance and the experience and reputation of its management team within the
industry; (ii) the Company's decentralized operating strategy, which enables the
managers of an acquired dealer to continue their involvement in dealership
operations; (iii) the ability of management and employees of an acquired dealer
to participate in the Company's growth and expansion through potential stock
ownership and career advancement opportunities; and (iv) the ability to
31
<PAGE> 32
offer liquidity to the owners of acquired dealers through the receipt of Common
Stock or cash. Brunswick has agreed to cooperate in good faith with the Company
and not to unreasonably withhold its consent to the acquisition by the Company
each year of Sea Ray boat dealers with aggregate total revenue not exceeding 20%
of the Company's revenue in its prior fiscal year to the extent such Sea Ray
dealers desire to be acquired by the Company. See "Business -- Brunswick
Agreement Relating to Acquisitions."
Opening New Facilities. The Company intends to establish additional retail
facilities in its existing and new territories. The Company believes that the
demographics of its existing geographic territories support the opening of
additional facilities and has opened two new retail locations (Palm Beach,
Florida and Sacramento, California) since the Company's acquisition of the five
original Acquired Dealers in March 1998. The Company also plans to reach new
customers by expanding various innovative retail formats developed by the
Operating Subsidiaries, such as mall stores and floating retail facilities. The
mall store concept is unique to the boating industry and is designed to draw
mall traffic, thereby providing exposure to boating and to the Company's boats
to the non-boating public as well as displaying its new product offerings to
boating enthusiasts. Floating retail facilities place the sales facility, with a
customer reception area and sales offices, on or anchored to a dock in a marina
and use adjacent boat slips to display its new and used boats in areas of high
boating activity. These retail formats generated approximately 7.9% of the
Company's revenue in fiscal 1998. The Company's dealer agreements with Brunswick
require Brunswick's consent to open, close, or change retail locations that sell
Sea Ray products, which consent cannot be unreasonably withheld, and other
dealer agreements generally contain similar provisions. See "Business -- Dealer
Agreements With Brunswick."
Offering Additional Product Lines and Services. The Company plans to offer
throughout its existing and acquired dealerships product lines that previously
have been offered only at certain of its locations. The Company also may obtain
additional product lines through the acquisition of distribution rights directly
from manufacturers and the acquisition of dealerships with distribution rights.
For example, the Company added Baja, Sea Hunt, and Sea Pro product lines in
1996; Boston Whaler product lines in 1997; and Hattaras product lines in fiscal
1999. In addition, the Company plans to increase its used boat sales and boat
brokerage services through an increased emphasis on these activities and
cooperative efforts among its dealerships. The Company also plans to offer
enhanced financing and insurance packages designed to better serve customers and
thereby increase sales and improve profitability.
PRODUCTS AND SERVICES
The Company offers new and used recreational boats and related marine
products, including engines, trailers, parts, and accessories. While the Company
sells a broad range of new and used boats, its dealerships tend to focus on
premium brand products. In addition, the Company arranges related boat
financing, insurance, and extended service contracts; provides boat maintenance
and repair services; and offers boat brokerage services.
New Boat Sales
The Company primarily sells recreational boats, including pleasure boats
(such as sport boats, sport cruisers, sport yachts, and yachts) and fishing
boats. The principal products offered by the Company are manufactured by
Brunswick, the leading worldwide manufacturer of recreational boats, including
Sea Ray pleasure boats and Boston Whaler offshore fishing boats. In fiscal 1998,
approximately 88% of new boats sold by the Company were manufactured by
Brunswick. The Company believes that it accounted for approximately 25% of Sea
Ray's U.S. marine product sales, and 6% of all of Brunswick's marine product
sales in fiscal 1998. Certain of the Company's dealerships also sell bass boats,
fishing boats, and pontoon boats provided by other manufacturers. During fiscal
1998, new boat sales accounted for approximately 69% of revenue.
The Company offers recreational boats in most market segments, but has a
particular focus on larger boats as reflected by the Company's fiscal 1998
average new boat sales price of approximately $39,500 compared to the Company's
estimated industry average selling price of approximately $14,000. Given the
Company's locations in some of the more affluent, offshore boating areas in the
United States and emphasis on high levels of customer service, the Company sells
a relatively higher percentage of large recreational boats
32
<PAGE> 33
such as yachts and sport cruisers. The Company believes that the product lines
offered by it are among the highest quality within their respective market
segments, with well-established trade-name recognition and reputations for
quality, performance, and styling.
The following table illustrates the range of the Company's new boat product
lines.
<TABLE>
<CAPTION>
PRODUCT LINE NUMBER OVERALL MANUFACTURER SUGGESTED
AND TRADE NAME OF MODELS LENGTH RETAIL PRICE RANGE
-------------- --------- ---------------------- --------------------------
<S> <C> <C> <C> <C> <C>
MOTOR YACHTS AND CONVERTIBLES
Hatteras Motor Yachts...................... 10 52' to 100'+ $983,000 to $8,000,000+
Hatteras Convertibles...................... 8 50' to 90' 944,800 to 5,000,000
PLEASURE BOATS
Sea Ray Yachts............................. 6 50' to 63' 809,000 to 2,138,000
Sea Ray Sport Yachts....................... 10 37' to 48 1/2' 289,000 to 810,000
Sea Ray Sport Cruisers..................... 12 24 1/2' to 33 1/2' 71,000 to 219,000
Sea Ray Sport Boats........................ 19 18' to 25 1/2' 18,000 to 61,500
FISHING BOATS
Boston Whaler.............................. 17 11' to 28' 6,000 to 117,000
Sea Pro.................................... 19 17' to 26 1/2' 10,000 to 30,000
Sea Hunt................................... 3 17' to 21' 12,000 to 15,000
HIGH-PERFORMANCE BOATS
Baja Marine................................ 23 18' to 42 1/2' 22,000 to 229,000
JET BOATS
Sea Rayder................................. 1 15 1/2' 16,000
Boston Whaler Rage......................... 1 15' 16,000 to 18,000
SKI BOATS
Malibu Boats............................... 7 20' to 21' 19,000 to 55,000
</TABLE>
Motor Yachts and Convertibles. Hatteras Yachts is one of the world's
premier yacht builders. The Hatteras fleet is one of the most extensive serving
the luxury megayacht segment of the market, with configurations for cruising and
sport fishing. All Hatteras models include state-of-the-art designs with
live-aboard luxury that can be customized to accommodate an individual's
desires. The motor yacht series ranging from 52 feet to over 100 feet offers a
flybridge with extensive guest seating, covered aft deck, which may be fully or
partially enclosed, providing the boater with additional living space, an
elegant salon, and up to four staterooms for accommodations. The convertibles
are well equipped to meet the needs of even the most serious tournament-class
competitor. Ranging from 50 feet to 90 feet, Hatteras convertibles feature
interiors that offer luxurious salon/galley arrangements, up to four staterooms
with private heads, and a cockpit that includes a bait and tackle center,
fishbox, and freezer.
Pleasure Boats. Sea Ray pleasure boats target both the luxury and the
family recreational boating markets. Sea Ray sport yachts and yachts serve the
luxury segment of the recreational boating market and include top-of-the-line
living accommodations with a salon, a fully equipped galley, and up to three
staterooms. The sport yachts and yachts come in a variety of configurations,
including aft cabin, bridge cockpit, and express cruiser models, to suit each
customer's particular recreational boating style. Sea Ray sport boat and sport
cruiser models are designed for performance and dependability to meet family
recreational needs and include many of the features and accommodations of Sea
Ray's sport yacht and yacht models. All Sea Ray pleasure boats feature custom
instrumentation that may include an electronics package; Mercury or MerCruiser
engines; various hull, deck, and cockpit designs that can include a swim
platform, bow pulpit, and raised bridge; and various amenities, such as swivel
bucket helm seats, lounge seats, sun pads, wet bars, built-in ice chests,
insulated in-floor fish boxes, fight chairs, rod holders, and bait prep and
refreshment centers.
Fishing Boats. The fishing boats offered by the Company include a
10-horsepower fishing skiff model; models designed for fishing and water sports
in lakes and bays; and a 28-foot, 450-horsepower fiberglass
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offshore fishing boat with cabins with limited live-aboard capability. The
fishing boats typically feature livewells, in-deck fishboxes, splash-well gates
with rodholders, rigging stations, cockpit coaming pads, and fresh and saltwater
washdowns.
High-Performance Boats. The high-performance boats that the Company sells
are manufactured by Baja Marine. Powered by MerCruiser sterndrive engines, Baja
high-performance boats are designed to deliver superior handling and durability
at high speeds. The larger offshore models have cabins featuring a V-berth and a
fully equipped galley.
Ski Boats. The Company sells Malibu ski boats designed to achieve a smooth
ride and the flattest wakes possible for increased skier performance and safety.
Most of Malibu's ski boat models are powered by 310-horsepower engines. Malibu's
ski boats have been named Ski Boat of the Year each of the last seven years by
Powerboat Magazine and Hot Boat Magazine.
Used Boat Sales
The Company offers used versions of the new makes and models it offers and,
to a lesser extent, used boats of other makes and models generally taken as
trade-ins. Approximately 76% of the used boats sold by the Company in fiscal
1998 were Brunswick models.
The Company's used boat sales depend on its ability to source a supply of
high-quality used boats at attractive prices. The Company acquires substantially
all of its used boats through customer trade-ins. The Company intends to
increase its used boat business as a result of the increased availability of
quality used boats generated from its acquisition of used boats in its expanding
sales efforts, the increasing number of used boats that are well-maintained
through its boat maintenance plans, its ability to market used boats throughout
its combined dealership network to match used boat demand, and the experience of
its newly acquired Woods & Oviatt boat brokerage operation.
The Company recently introduced at its retail locations the Sea Ray
Legacy(TM) two-year warranty plan available for used Sea Ray boats less than six
years old. The Legacy plan guarantees that each qualifying used Sea Ray boat has
passed a 48-point inspection and provides protection against failure of most
mechanical parts. The Company believes that the Sea Ray Legacy warranty plan,
which is only available for used Sea Ray boats purchased from a Sea Ray dealer,
will enhance its sales of used Sea Ray boats by motivating purchasers of used
Sea Ray boats to purchase only from a Sea Ray dealer and motivating sellers of
Sea Ray boats to sell through a Sea Ray dealer.
Marine Engines and Related Marine Equipment
The Company offers marine engines and propellers, all of which are
manufactured by Mercury Marine, a division of Brunswick. The Company sells
marine engines and propellers primarily to retail customers as replacements for
their existing engines or propellers. The engines range in price from $560 to
$33,900, and propellers range in price from $35 to $4,300. In 1998, Mercury
Marine introduced various new engine models that reduce engine emissions to
comply with current Environmental Protection Agency requirements, including its
OPTIMAX(R) 200-horsepower outboard engine, featuring a new direct fuel injection
technology that also increases fuel efficiency. See "Business -- Environmental
and Other Regulatory Issues." An industry leader for almost six decades, Mercury
Marine specializes in state-of-the-art marine propulsion systems and
accessories. Each of the Operating Subsidiaries has been recognized by Mercury
Marine as a "Platinum Dealer," which is generally awarded to the top 5% of
Mercury Marine dealers, for an average of 10 consecutive years.
The Company also sells related marine parts and accessories, including
oils, lubricants, steering and control systems, corrosion control products,
engine care and service products (primarily Mercury Marine's Quicksilver line),
Kiekhaefer high-performance accessories (such as propellers), instruments, and a
complete line of boating accessories, including life jackets, inflatables, and
wakeboards. The Company also offers novelty items, such as shirts, caps, and
floormats bearing the Sea Ray or dealer logo.
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Maintenance and Repair Services
Providing customers with professional, prompt maintenance and repair
services is critical to the Company's sales efforts and contributes to the
direct profitability of the Company. The Company provides maintenance and repair
services at most of its retail locations, with extended service hours at certain
of its locations. In addition, in many of its markets, the Company provides
mobile maintenance and repair services at the location of the customer's boat.
The Company believes that this service commitment is a competitive advantage in
the markets in which the Company competes and is critical to its efforts to
provide a trouble-free boating experience. The Company also believes that its
maintenance and repair services contribute to strong customer relationships and
that its emphasis on preventative maintenance and quality service increases the
potential supply of well-maintained boats for its used boat sales.
The Company's MarineMax Care Program provides for hassle-free boating by
covering certain of the manufacturer's scheduled maintenance for up to two
years. The Company's dealerships include generally the MarineMax Care Program as
part of the MarineMax Value-Price of the boat. Company technicians provide
maintenance on a regularly scheduled basis at either the Company's retail
locations or dockside. The Company notifies its customers when their boats are
due for periodic service, thereby encouraging preventative maintenance.
The Company performs both warranty and non-warranty repair services, with
the cost of warranty work reimbursed by the manufacturer in accordance with the
manufacturer's warranty reimbursement program. For warranty work, Brunswick
reimburses a percentage of the dealer's posted service labor rates, with the
percentage varying depending on the dealer's customer satisfaction index rating
and attendance at service training courses. The Company derives the majority of
its warranty revenue from Brunswick products, as Brunswick products comprise the
majority of products sold. Certain other manufacturers reimburse warranty work
at a fixed amount per repair. Because boat manufacturers permit warranty work to
be performed only at authorized dealerships, the Company receives substantially
all of the warranted maintenance and repair work required for the new boats it
sells. The Company's extended warranty contracts also result in an ongoing
demand for the Company's maintenance and repair services for the duration of the
term of the extended warranty contract.
The Company's maintenance and repair services are performed by
manufacturer-trained and certified service technicians. In charging for its
mechanics' labor, many of the Company's dealerships use a variable rate
structure designed to reflect the difficulty and sophistication of different
types of repairs. The percentage markups on parts are similarly based on market
conditions for different parts.
F&I Products
At each of its retail locations, the Company offers its customers the
ability to finance new or used boat purchases and to purchase extended service
contracts and insurance coverage, including credit-life, accident/ disability
coverage, and boat property and casualty coverage (collectively, "F&I
products"). During fiscal 1998, F&I products accounted for approximately 2.3% of
revenue. The Company believes that its customers' ability to obtain competitive
financing quickly and easily at the Company's dealerships complements its
ability to sell new and used boats. The Company also believes its ability to
provide customer-tailored financing on a "same- day" basis gives it an advantage
over many of its competitors, particularly smaller competitors that lack the
resources to arrange boat financing at their dealerships or that do not generate
sufficient volume to attract the diversity of financing sources that are
available to the Company.
The Company has relationships with various national marine product lenders
under which the lenders purchase retail installment contracts evidencing retail
sales of boats and other marine products that are originated by the Company in
accordance with existing pre-sale agreements between the Company and such
lenders. These arrangements permit the Company to participate in the financing
by receiving a portion of the finance charges expected to be earned on the
retail installment contract based on a variety of factors, including the credit
standing of the buyer, the annual percentage rate of the contract charged to the
buyer, and the lender's then current minimum required annual percentage rate
charged to the buyer on the contract. This participation is subject to repayment
by the Company if the buyer prepays the contract or defaults within a designated
time period, usually 90 to 180 days. To the extent required by applicable state
law, the Company's
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dealerships are licensed to originate and sell retail installment contracts
financing the sale of boats and other marine products.
The Company also is able to offer its customers the opportunity to purchase
credit life insurance, credit accident and disability insurance, as well as
property and casualty insurance coverage. Credit life insurance policies provide
for repayment of the boat financing contract if the purchaser dies while the
contract is outstanding. Accident and disability insurance policies provide for
payment of the monthly contract obligation during any period in which the buyer
is disabled. Property and casualty insurance covers loss or damage to the boat.
Some buyers choose to include their insurance premiums in their financing
contract. The Company does not act as an insurance broker or agent or issue
insurance policies on behalf of insurers. The Company, however, provides
marketing activities and other related services to insurance companies and
brokers for which it receives marketing fees. One of the Company's strategies is
to generate increased marketing fees by offering more competitive insurance
products.
The Company also offers extended service contracts under which, for a
predetermined price, the Company provides all designated services recommended in
the manufacturer's maintenance guidelines during the contract term at no
additional charge above a deductible. While the Company sells all new boats with
the boat manufacturer's standard warranty of generally five years, extended
service contracts provide additional coverage beyond the time frame or scope of
the manufacturer's warranty. Purchasers of used boats generally are able to
purchase an extended service contract, even if the selected boat is no longer
covered by the manufacturer's warranty. Generally, the Company receives a fee,
often up to 50% of the premium, for arranging an extended service contract. The
Company manages the service obligations that it sells and provides the parts and
service (or pays the cost of others that may provide such parts and services)
for claims made under the contracts. Most required services under the contracts
are provided by the Company. Claims and cancellations have been insignificant
during the past five years.
Boat Brokerage Services
Through employees or subsidiaries that are licensed boat brokers, the
Company offers boat brokerage services at most of its retail locations and will
be extending its newly acquired Woods & Oviatt boat brokerage operations
throughout its dealerships. For a commission of typically between 10% and 14%,
the Company offers for sale brokered boats, listing them on the "BUC" system,
and advising its other retail locations of their availability through the
Company's integrated computer system. The BUC system, which is similar to a real
estate multiple listing service, is a national boat listing service of
approximately 600 brokers maintained by BUC International. Often sales are
co-brokered, with the commission split between the buying and selling brokers.
The Company believes that its access to potential used boat customers and
methods of listing and advertising customers' brokered boats is more extensive
than is typical among boat brokers. In addition to generating revenue from
brokerage commissions, the Company's boat brokerage services also enable the
Company to offer a broad array of used boats without increasing related
inventory costs.
The Company's brokerage customers receive the same high level of customer
service as its new and used boat customers. The Company's waterfront retail
locations enable in-water demonstrations of an on-site brokered boat. The
Company's maintenance and service, including mobile service, also is available
to the Company's brokerage customers. The purchaser of a Sea Ray boat brokered
through the Company also can take advantage of MarineMax Getaways! weekend and
day trips and other rendezvous gatherings and in-water events, as well as boat
operation and safety seminars. The Company believes that the array of services
it offers are unique in the boat brokerage business.
RETAIL LOCATIONS
The Company sells its recreational boats and other marine products and
offers its related boat services through 40 retail locations in Arizona,
California, Florida, Georgia, Minnesota, Nevada, North Carolina, Ohio, and
Texas. Each retail location generally includes an indoor showroom (including
some of the industry's largest indoor boat showrooms) and outside area for
displaying boat inventories, a business office to assist customers in arranging
financing and insurance, and repair and maintenance facilities. Most of the
Company's
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retail locations are waterfront properties on some of the nation's most popular
boating locations, including the Intracoastal Waterway, Naples Bay (next to the
Gulf of Mexico), Tampa Bay, and the Caloosahatchee River in Florida; Clear Lake,
Lake Conroe, and Lake Lewisville in Texas; the Delta Basin in northern
California; Lake Erie in Ohio; Leech Lake and the St. Croix River in Minnesota;
and Lake Lanier in Georgia. The Company's waterfront retail locations, most of
which include marina-type facilities and docks at which the Company displays its
boats, are easily accessible to the boating populace, serve as in-water
showrooms, and enable the sales force to give the customer immediate in-water
demonstrations of various boat models.
The Company plans to reach new customers by expanding in new locations
through various innovative retail formats such as mall stores and floating
retail facilities. Located in a shopping mall and utilizing a wooden dock set in
a seaside scene to "anchor" seven to 10 new boat models offered by the Company,
the mall store concept is unique to the boating industry and is designed to draw
mall traffic, thereby providing exposure to boating and to the Company's boats
to the non-boating public as well as displaying its new product offerings to
boating enthusiasts. Floating retail facilities place the sales facility, with a
customer reception area and sales offices, on or anchored to a dock in a marina
and use adjacent boat slips to display new and used boats in areas of high
boating activity. The Company currently has two mall stores and four floating
retail facilities. See "Business -- Properties."
OPERATIONS
Dealership Operations and Management
The Company has adopted a decentralized approach to the operational
management of its dealerships. While certain administrative functions are
centralized at the corporate level, local management is primarily responsible
for the day-to-day operations of the retail locations. Each retail location is
managed by a store manager, who oversees the day-to-day operations, personnel,
and financial performance of the individual store, subject to the direction of a
district manager, who generally has responsibility for the retail locations
within a specified geographic region. Typically, each retail location also has a
staff consisting of a sales manager, an F&I manager, a parts and service
manager, sales representatives, maintenance and repair technicians, and various
support personnel.
The Company attempts to attract and retain quality employees at its retail
locations by providing them with ongoing training to enhance sales
professionalism and product knowledge, career advancement opportunities within a
larger company, and favorable benefit packages. Recently, the Company
established a formal training program in Clearwater, Florida, called "MarineMax
University," to provide training for employees in all aspects of the Company's
operations. Extensive four-week training sessions are held periodically
throughout the year.
Sales representatives receive compensation primarily on a commission basis.
Store managers are salaried employees with incentive bonuses based on the
performance of the dealership they manage. Maintenance and repair service
managers receive compensation primarily on a salary basis with commission
incentives. The Company's management information system provides each store
manager and sales representative with daily sales information, enabling them to
monitor their performance on a daily, weekly, and monthly basis. The Company has
a uniform, fully integrated management information system serving each of its
dealerships. See "Business -- Operations -- Management Information System."
Sales and Marketing
The Company's sales philosophy focuses on selling the pleasures of the
boating lifestyle. The Company believes that the critical elements of its sales
philosophy include its appealing retail locations, hassle-free MarineMax
Value-Price approach, highly trained sales representatives, high level of
customer service, emphasis on educating the customer and the customer's family
on boat use, and providing its customers with opportunities for boating. The
Company strives to provide superior customer service and support before, during,
and after the sale.
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The Company's retail locations offer each customer the opportunity to
evaluate a large variety of new and used boats in a comfortable and convenient
setting. The Company's full-service retail locations facilitate a turn-key
purchasing process that includes attractive lender financing packages, extended
service agreements, and insurance. Most of the Company's retail locations are
located on waterfronts and marinas, which attract boating enthusiasts and enable
customers to operate various boats prior to making a purchase decision.
The Company sells its boats at posted value prices that generally represent
a discount from the manufacturer's suggested retail price, frequently including
two years of free maintenance. The MarineMax Value-Price sales approach
eliminates customer anxiety associated with price negotiation and the ongoing
hassles of maintaining the boat.
Highly trained, professional sales representatives are an important factor
to the Company's successful sales efforts. These sales representatives are
trained to recognize the importance of fostering an enjoyable sales process, to
educate customers on the operation and use of the boats, and to assist customers
in making technical and design decisions in boat purchases.
As a part of its sales and marketing efforts, the Company also participates
in boat shows and in-the-water sales events at area boating locations, typically
held in January and February, in each of its markets and in certain locations in
close proximity to its markets. These shows and events are normally held at
convention centers or marinas, with area dealers renting space. Boat shows and
other offsite promotions are an important venue for generating sales orders for
the Company's new boats. The boat shows also generate a significant amount of
interest in the Company's products resulting in boat sales after the show. The
Company plans to sponsor its own boat shows.
The Company emphasizes customer education through one-on-one education by
its sales representatives and, at some locations, its delivery captains, before
and after a sale, and through in-house seminars for the entire family on boat
safety, the use and operation of boats, and product demonstrations. One of the
Company's delivery captains or the sales representative delivers the customer's
boat to an area boating location and thoroughly instructs the customer about the
operation of the boat, including hands-on instructions for docking and
trailering the boat. To enhance its customer relationships after the sale, the
Company leads and sponsors MarineMax Getaways! group boating trips to various
destinations, rendezvous gatherings, and on-the-water organized events that
promote the pleasures of the boating lifestyle. Each Company-sponsored event,
planned and led by a Company employee, also provides a favorable medium for
acclimating new customers to boating and enables the Company to actively promote
new product offerings to boating enthusiasts.
As a result of the Company's relative size, the Company believes it has a
competitive advantage within the industry by being able to conduct an organized
and systematic advertising and marketing effort. Part of its marketing effort
includes an integrated prospect management system that tracks the status of each
sales representative's contacts with a prospect, automatically generates
follow-up correspondence, posts Company-wide availability of a particular boat
or other marine product desired by a customer, and tracks the maintenance and
service needs for the customer's boat.
Suppliers and Inventory Management
The Company purchases substantially all of its new boat inventory directly
from manufacturers, which allocate new boats to dealerships based on the amount
of boats sold by the dealership. The Company also exchanges new boats with other
dealers to accommodate customer demand and to balance inventory.
The Company purchases new boats and other marine products primarily from
Brunswick, Hatteras (Genmar), SeaPro, Sea Hunt, and Malibu Boats. The Company is
the largest volume purchaser of Brunswick's Sea Ray boats, which the Company
believes represented approximately 25% of all new Sea Ray boat sales during
fiscal 1998. Approximately 88% of the Company's net purchases in fiscal 1998
were from Brunswick; no other manufacturer accounted for more than 10% of the
Company's net purchases in fiscal 1998. Brunswick has entered into a 10-year
dealer agreement with each of the Operating Subsidiaries covering Sea Ray
products. See "Business -- Dealer Agreements With Brunswick."
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The Company typically deals with each of its manufacturers, other than the
Sea Ray division of Brunswick, under an annually renewable, non-exclusive dealer
agreement. Manufacturers generally establish prices on an annual basis, but may
change prices in their sole discretion. Manufacturers typically discount the
cost of inventory and offer inventory financing assistance during the
manufacturers' slow seasons, generally September through December. To obtain
lower cost of inventory, the Company intends to capitalize on these manufacturer
incentives to take product delivery during the manufacturers' slow seasons. This
permits the Company to gain pricing advantages and better product availability
during the selling season.
The dealer agreements with the Sea Ray division of Brunswick do not
restrict the Company's right to sell any Sea Ray product lines or competing
products. See "Business -- Dealer Agreements With Brunswick." Arrangements with
certain other manufacturers may restrict the Company's right to offer some
product lines in certain markets. The Company does not believe that these
restrictions will have a material impact on the Company's business, financial
condition, or results of operations. See "Risk Factors -- Boat Manufacturers'
Control Over Dealers."
The Company transfers individual boats among its retail locations to fill
customer orders that otherwise might take three to four weeks to receive from
the manufacturer. This reduces delays in delivery, helps the Company maximize
inventory turnover, and assists in minimizing potential overstock or
out-of-stock situations. The Company actively monitors its inventory levels to
maintain the appropriate inventory levels to meet current market demands. The
Company is not bound by contractual agreements governing the amount of inventory
that it must purchase in any year from any manufacturer. The Company
participates in numerous end-of-summer manufacturer boat shows, which
manufacturers sponsor to sell off their remaining inventory at reduced costs
before the introduction of new model year products, typically beginning in July.
Inventory Financing
Marine manufacturers customarily provide interest assistance programs to
retailers. The interest assistance varies by manufacturer and may include
periods of free financing or reduced interest rate programs. The interest
assistance may be paid directly to the retailer or the financial institution
depending on the arrangements the manufacturer has established. The Company
believes that its financing arrangements with manufacturers are standard within
the industry. As of September 30, 1998, the Company owed an aggregate of
approximately $45.8 million under the 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"). 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. Advances may be used for acquisition of
inventory, working capital, and other purposes satisfactory to NDF. No more than
$10 million in advances may be outstanding for working capital purposes, unless
the Company and its subsidiaries pledge their real property assets. The Company
plans to increase its credit facilities by approximately $95 million.
Management Information System
The Company believes that its management information system, which
currently is being utilized by each Operating Subsidiary and was developed by
certain of the Acquired Dealers over the past seven years through cooperative
efforts with a common vendor, enhances the Company's ability to integrate
successfully the operations of the Operating Subsidiaries and future
acquisitions, facilitates the interchange of information, and enhances
cross-selling opportunities throughout the Company. The system integrates each
level of operations on a Company-wide basis, including purchasing, inventory,
receivables, financial reporting and budgeting, and sales management. The system
enables the Company to monitor each dealership's operations in order to identify
quickly areas requiring additional focus and to manage inventory. The system
also provides sales representatives with prospect and customer information that
aids them in tracking the status of their contacts with prospects, automatically
generates follow-up correspondence to such prospects, posts Company-wide the
availability of a particular boat, locates boats needed to satisfy a particular
customer request, and monitors the maintenance and service needs of customers'
boats. Company representatives also utilize the system to assist
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in arranging financing and insurance packages. The Company has implemented
changes to its management information system that it believes addresses the Year
2000 issue.
BRUNSWICK AGREEMENT RELATING TO ACQUISITIONS
On April 28, 1998, the Company and Brunswick entered into an agreement
providing for Brunswick to cooperate in good faith and not to unreasonably
withhold its consent to the acquisitions each year by the Company of Sea Ray
boat dealers with aggregate total revenue not exceeding 20% of the Company's
revenue in its prior fiscal year. Any acquisitions in excess of the 20%
benchmark will be at Brunswick's discretion. In the event that the Company's
sales of Sea Ray boats exceed 49% of the sales of Sea Ray boats by all Sea Ray
boat dealers (including the Company) in any fiscal year of Brunswick, the
agreement provides that Company and Brunswick will negotiate in good faith the
standards for acquisitions of Sea Ray boat dealers by the Company during
Brunswick's next succeeding fiscal year but that Brunswick may grant or withhold
its consent to any such acquisition in its sole discretion for as long as the
Company's Sea Ray boat sales exceed the 49% benchmark.
DEALER AGREEMENTS WITH BRUNSWICK
Brunswick, through its Sea Ray division, and the Company, through each of
the Operating Subsidiaries, are parties to Sales and Service Agreements (the
"Dealer Agreements") relating to Sea Ray products. Each Dealer Agreement
appoints one of the Operating Subsidiaries as a non-exclusive dealer for the
retail sale, display, and servicing of designated Sea Ray products and repair
parts currently or in the future sold by Sea Ray. Each Dealer Agreement
designates a non-exclusive area of primary responsibility for the dealer, which
is a geographical area in proximity to the dealer's retail locations based on
such areas that are customarily designated by Sea Ray and applicable to its
domestic dealers. Each Dealer Agreement also specifies retail locations, which
the dealer may not close, change, or add to without the prior written consent of
Sea Ray, provided that Sea Ray may not unreasonably withhold its consent. Upon
at least one year's prior notice and the failure by the dealer to cure, Sea Ray
may remove the dealer's right to operate any particular retail location if the
dealer fails to meet its material obligations, performance standards, or terms,
conditions, representations, warranties, and covenants applicable to that
location. Each Dealer Agreement also restricts the dealer from selling,
advertising, soliciting for sale, or offering for resale any Sea Ray products
outside its area of primary responsibility without the prior written consent of
Sea Ray as long as similar restrictions also apply to all domestic Sea Ray
dealers selling comparable Sea Ray products. Each Dealer Agreement provides for
the lowest product prices charged by the Sea Ray division of Brunswick from time
to time to other domestic Sea Ray dealers, subject to the dealer meeting all the
requirements and conditions of Sea Ray's applicable programs and the right of
Brunswick in good faith to charge lesser prices to other dealers to meet
existing competitive circumstances, for unusual and non-ordinary business
circumstances, or for limited duration promotional programs.
Each Dealer Agreement requires the dealer to (i) promote, display,
advertise, and sell Sea Ray boats at each of its retail locations in accordance
with the agreement and applicable laws; (ii) purchase and maintain sufficient
inventory of current Sea Ray boats to meet the reasonable demand of customers at
each of its locations and to meet the minimum inventory requirements applicable
to all Sea Ray dealers; (iii) maintain at each retail location, or at another
acceptable location, a service department to service Sea Ray boats promptly and
professionally and to maintain parts and supplies to service Sea Ray boats
properly on a timely basis; (iv) perform all necessary installation and
inspection services prior to delivery to purchasers and perform post-sale
services of all Sea Ray products sold by the dealer or brought to the dealer for
service; (v) furnish purchasers with Sea Ray's limited warranty on new products
and with information and training as to the sale and proper operation and
maintenance of Sea Ray boats; (vi) assist Sea Ray in performing any product
defect and recall campaigns; (vii) maintain complete product sales and service
records; (viii) achieve annual sales performance in accordance with fair and
reasonable sales levels established by Sea Ray, after consultation with the
dealer, based on factors such as population, sales potential, local economic
conditions, competition, past sales history, number of retail locations, and
other special circumstances that may affect the sale of products or the dealer,
in each case consistent with standards established for all domestic Sea Ray
dealers
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selling comparable products; (ix) provide designated financial information; (x)
conduct its business in a manner that preserves and enhances the reputation of
Sea Ray and the dealer for providing quality products and services; (xi)
maintain the financial ability to purchase and maintain on hand required
inventory levels; (xii) indemnify Sea Ray against any claims or losses resulting
from the dealer's failure to meet its obligations to Sea Ray; (xiii) maintain
customer service ratings sufficient to maintain Sea Ray's image in the
marketplace; and (xiv) achieve within designated time periods and thereafter
maintain master dealer status (which is Sea Ray's highest performance status)
for the locations designated by Sea Ray and the dealer.
Each Dealer Agreement has an initial term of 10 years. Each Dealer
Agreement, however, may be terminated (a) by Sea Ray if the dealer fails or
refuses to place a minimum stocking order of the next model year's products in
accordance with requirements applicable to all Sea Ray dealers generally or
fails to meet its financial obligations as they become due to Sea Ray or to the
dealer's lenders; (b) by Sea Ray or the dealer where good cause exists
(including the material breach, default, or noncompliance with any material
term, provision, warranty, or obligation under the agreement) and has not been
cured within 60 days of prior written notice of the claimed deficiency or at the
end of the 60-day period without the opportunity to cure where the cause
constitutes bad faith; (c) by Sea Ray or the dealer in the event of the
insolvency, bankruptcy, or receivership of the other; (d) by Sea Ray in the
event of the assignment of the agreement by the dealer without the prior written
consent of Sea Ray; (e) by Sea Ray upon at least 10 days' prior written notice
in the event of the failure to pay any sums due and owing to Sea Ray that are
not disputed in good faith; (f) by Sea Ray if a majority of the Board of
Directors of the Company does not consist of the senior executives and Other
Designated Members (as defined in the Stockholders' Agreement); or (g) upon the
mutual consent of the dealer and Sea Ray. See "Description of Capital
Stock -- Stockholder and Governance Agreements."
EMPLOYEES
As of September 30, 1998, the Company had 731 employees, 713 of whom were
in store-level operations and 18 of whom were in corporate administration and
management. The Company is not a party to any collective bargaining agreements
and is not aware of any efforts to unionize its employees. The Company considers
its relations with its employees to be excellent.
TRADEMARKS AND SERVICE MARKS
The Company has trade name and trademark applications pending with the U.S.
Patent and Trademark Office for various names, including "MarineMax," "MarineMax
Value-Price," "Value-Price," "Delivering the Dream," "Selling and Delivering the
Dream," "Selling the Dream," and "The Water Gene." There can be no assurance
that any of these applications will be granted.
SEASONALITY
The Company's business, as well as the entire recreational boating
industry, is highly seasonal. Over the two-year period ended September 30, 1998,
the average net sales for the quarters ended December 31, March 31, June 30, and
September 30 represented 16%, 22%, 35%, and 27%, respectively, of the Company's
average annual net sales. With the exception of Florida, the Company's
geographic territories generally realize 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, and continue
through July.
The Company's business is also subject to weather patterns, which may
adversely affect the Company's results of operations. For example, drought
conditions (or merely reduced rainfall levels) or excessive rain, may close area
boating locations or render boating dangerous or inconvenient, thereby
curtailing customer demand for the Company's products. In addition, unseasonably
cool weather and prolonged winter conditions may lead to a shorter selling
season in certain locations. Hurricanes and other storms could result in
disruptions of the Company's operations or damage to its boat inventories and
facilities. Although the Company's geographic diversity is likely to reduce the
overall impact to the Company of adverse weather
41
<PAGE> 42
conditions in any one market area, such conditions will continue to represent
potential, material adverse risks to the Company and its future financial
performance.
ENVIRONMENTAL AND OTHER REGULATORY ISSUES
The Company's operations are subject to extensive regulation, supervision,
and licensing under various federal, state, and local statutes, ordinances, and
regulations. While the Company believes that it maintains all requisite licenses
and permits and is in compliance with all applicable federal, state, and local
regulations, there can be no assurance that the Company will be able to maintain
all requisite licenses and permits. The failure to satisfy those and other
regulatory requirements could have a material adverse effect on the Company's
business, financial condition, and results of operations. The adoption of
additional laws, rules, and regulations could also have a material adverse
effect on the Company's business. Various federal, state, and local regulatory
agencies, including OSHA, the EPA, and similar federal and local agencies, have
jurisdiction over the operation of the Company's dealerships, repair facilities,
and other operations with respect to matters such as consumer protection,
workers' safety, and laws regarding protection of the environment, including
air, water, and soil.
The EPA recently promulgated air emissions regulations for outboard marine
engines that impose stricter emissions standards for two-cycle, gasoline
outboard marine engines. Emissions from such engines must be reduced by
approximately 75% over a nine-year period beginning with the 1998 model year.
Costs of comparable new engines, if materially more expensive than previous
engines, or the inability of the Company's manufacturers to comply with EPA
requirements, could have a material adverse effect on the Company's business,
financial condition, and results of operations.
Certain of the Company's facilities own and operate underground storage
tanks ("USTs") for the storage of various petroleum products. The USTs are
generally subject to federal, state, and local laws and regulations that require
testing and upgrading of USTs and remediation of contaminated soils and
groundwater resulting from leaking USTs. In addition, if leakage from
Company-owned or operated USTs migrates onto the property of others, the Company
may be subject to civil liability to third parties for remediation costs or
other damages. Based on historical experience, the Company believes that its
liabilities associated with UST testing, upgrades, and remediation are unlikely
to have a material adverse effect on its financial condition or operating
results.
As with boat dealerships generally, and parts and service operations in
particular, the Company's business involves the use, handling, storage, and
contracting for recycling or disposal of hazardous or toxic substances or
wastes, including environmentally sensitive materials, such as motor oil, waste
motor oil and filters, transmission fluid, antifreeze, freon, waste paint and
lacquer thinner, batteries, solvents, lubricants, degreasing agents, gasoline,
and diesel fuels. Accordingly, the Company is subject to regulation by federal,
state, and local authorities establishing requirements for the use, management,
handling, and disposal of these materials and health and environmental quality
standards, and liability related thereto, and providing penalties for violations
of those standards. The Company is also subject to laws, ordinances, and
regulations governing investigation and remediation of contamination at
facilities it operates to which it sends hazardous or toxic substances or wastes
for treatment, recycling, or disposal.
The Company does not believe it has any material environmental liabilities
or that compliance with environmental laws, ordinances, and regulations will,
individually or in the aggregate, have a material adverse effect on the
Company's business, financial condition, or results of operations. However, soil
and groundwater contamination has been known to exist at certain properties
owned or leased by the Company. The Company has also been required and may in
the future be required to remove aboveground and underground storage tanks
containing hazardous substances or wastes. As to certain of the Company's
properties, specific releases of petroleum have been or are in the process of
being remedied in accordance with state and federal guidelines. The Company is
monitoring the soil and groundwater as required by applicable state and federal
guidelines. In addition, the shareholders of the Acquired Dealers have
indemnified the Company for specific environmental issues identified on
environmental site assessments performed by the Company as part of the
acquisitions. The Company maintains insurance for pollutant cleanup and removal.
The coverage pays for the expenses to
42
<PAGE> 43
extract pollutants from land or water at the insured property, if the discharge,
dispersal, seepage, migration, release or escape of the pollutants is caused by
or results from a covered cause of loss. The Company may also have additional
storage tank liability insurance and "Superfund" coverage where applicable. In
addition, certain of the Company's retail locations are located on waterways
that are subject to federal or state laws regulating navigable waters (including
oil pollution prevention), fish and wildlife, and other matters.
One of the properties owned by the Company was historically used as a
gasoline service station. Remedial action with respect to prior historical site
activities on this property has been completed in accordance with federal and
state law. Also, one of the Company's properties is within the boundaries of a
Superfund site, although the Company's property has not been and is not expected
to be identified as a contributor to the contamination in the area. The Company,
however, does not believe that these environmental issues will result in any
material liabilities to the Company.
Additionally, certain states have required or are considering requiring a
license in order to operate a recreational boat. While such licensing
requirements are not expected to be unduly restrictive, regulations may
discourage potential first-time buyers, thereby limiting future sales, which
could adversely affect the Company's business, financial condition, and results
of operations.
PRODUCT LIABILITY
Products sold or serviced by the Company may expose it to potential
liabilities for personal injury or property damage claims relating to the use of
those products. Historically, the resolution of product liability claims has not
materially affected the Company's business. The Company's manufacturers
generally maintain product liability insurance, and the Company maintains
third-party product liability insurance, which it believes to be adequate.
However, there can be no assurance that the Company will not experience legal
claims in excess of its insurance coverage or that claims will be covered by
insurance. Furthermore, any significant claims against the Company could
adversely affect the Company's business, financial condition, and results of
operations and result in negative publicity.
COMPETITION
The Company operates in a highly competitive environment. In addition to
facing competition generally from recreation businesses seeking to attract
consumers' leisure time and discretionary spending dollars, the recreational
boat industry itself is highly fragmented, resulting in intense competition for
customers, quality products, boat show space, and suitable retail locations. The
Company believes that the principal factors influencing competition within the
recreational boat industry are product features and quality, dealer service,
price, location, selection, and the availability of customer financing. The
Company relies to a certain extent on boat shows to generate sales. The
inability of the Company to participate in boat shows in its existing or
targeted markets could have a material adverse effect on the Company's business,
financial condition, and results of operations.
The Company competes primarily with single-location boat dealers and, with
respect to sales of marine equipment, parts, and accessories, with national
specialty marine stores, catalog retailers, sporting goods stores, and mass
merchants. Dealer competition continues to increase based on the quality of
available products, the price and value of the products, and attention to
customer service. There is significant competition both within markets currently
being served by the Company and in new markets that the Company may enter. The
Company competes in each of its markets with retailers of brands of boats and
engines not sold by the Company in that market. In addition, several of the
Company's competitors, especially those selling boating accessories, are large
national or regional chains that have substantial financial, marketing, and
other resources. However, the Company believes that its integrated corporate
infrastructure and marketing and sales capabilities, its cost structure, and its
nationwide presence enable it to compete effectively against these companies.
Private sales of used boats is an additional significant source of competition.
43
<PAGE> 44
PROPERTIES
The Company leases its corporate offices in Clearwater, Florida and
additional administrative, warehouse, and service facilities in Texas. The
Company also leases 25 of its retail locations under leases that generally
contain multi-year renewal options and often grant the Company a first right of
refusal to purchase the property at fair value. In all such cases, the Company
pays a fixed rent at market rates. In substantially all of the leased locations,
the Company is responsible for taxes, utilities, insurance, and routine repairs
and maintenance. The Company owns the property associated with its 15 other
retail locations. See "Development of the Company" and "Certain Transactions and
Relationships."
The following table reflects the status, approximate size, and facilities
of the Company's various retail locations as of the date of this Prospectus.
<TABLE>
<CAPTION>
OWNED OR SQUARE FACILITIES OPERATED
LOCATION LEASED FOOTAGE(1) AT PROPERTY SINCE WATERFRONT
- -------------------------- ----------------- ---------- -------------------------------- -------- -------------------
<S> <C> <C> <C> <C> <C>
ARIZONA
Tempe..................... Company owned 34,000 Retail and service 1992 --
CALIFORNIA
Oakland................... Third-party lease 17,700 Retail and service; 20 wet slips 1985 Alameda Estuary
(San Francisco Bay)
Redding................... Company owned 11,700 Retail and service 1978 --
Santa Rosa................ Third-party lease 8,100 Retail and service 1990 --
Sacramento................ Company owned 24,800 Retail and service 1995 --
Sacramento (River Bend)
(floating facility)..... Third-party lease 500 Retail and service; 20 wet slips 1998 Sacramento River
FLORIDA
Brandon (mall store)...... Third-party lease 1,000 Retail only 1998 --
Clearwater................ Company owned 42,000 Retail and service; 16 wet slips 1973 Tampa Bay
Cocoa..................... Company owned 15,000 Retail and service 1968 --
Ft. Lauderdale............ Third-party lease 2,400 Retail and service; 15 wet slips 1977 Intracoastal
Waterway
Fort Myers................ Third-party lease 8,000 Retail and service; 18 wet slips 1983 Caloosahatchee
River
Miami..................... Company owned 7,200 Retail and service; 15 wet slips 1980 Intracoastal
Waterway
Naples.................... Company owned 19,600 Retail and service; 13 wet slips 1997 Naples Bay
Palm Beach................ Company owned 22,800 Retail and service; 8 wet slips 1998 Intracoastal
Waterway
Palm Beach (mall store)... Third-party lease 2,000 Retail only 1998 --
Pompano Beach............. Company owned 23,000 Retail and service; 16 wet slips 1990 Intracoastal
Waterway
Stuart(2)................. Company owned 6,700 Retail and service; 60 wet slips 1994 Intracoastal
Waterway
Tampa..................... Company owned 13,100 Retail and service 1995 --
GEORGIA
Augusta................... Affiliate lease 8,000 Retail and service; 15 wet slips 1988 Clark Hill Lake
Forest Park (Atlanta)..... Affiliate lease 47,300 Retail and service 1973 --
Kennesaw (Atlanta)........ Affiliate lease 12,000(3) Retail and service 1996 --
Lake Lanier............... Affiliate lease 3,000 Retail and service; 50 wet slips 1981 Lake Lanier
MINNESOTA
Bay Port.................. Third-party lease 450 Retail only; 10 wet slips 1996 St. Croix River
Rogers.................... Company owned 70,000 Retail, service, and storage 1991 --
Walker.................... Company owned 76,400 Retail, service, and storage 1989 --
Walker.................... Company owned 6,800 Retail and service; 93 wet slips 1977 Leech Lake
Woodbury.................. Third-party lease 13,392 Retail and service 1997 --
</TABLE>
44
<PAGE> 45
<TABLE>
<CAPTION>
OWNED OR SQUARE FACILITIES OPERATED
LOCATION LEASED FOOTAGE(1) AT PROPERTY SINCE WATERFRONT
- -------------------------- ----------------- ---------- -------------------------------- -------- -------------------
<S> <C> <C> <C> <C> <C>
NEVADA
Las Vegas................. Company owned 21,600 Retail and service 1990 --
NORTH CAROLINA
Wrightsville Beach........ Affiliate lease 34,523 Retail, service, and storage 1996 Intracoastal
Waterway
OHIO
Mentor (Cleveland)........ Third-party lease 17,500 Retail and service 1991 --
Port Clinton.............. Affiliate lease 63,700 Retail, service, and storage; 1974 Lake Erie
155 wet slips
Port Clinton.............. Affiliate lease 93,250 Retail, service, and storage 1997 Lake Erie
Toledo.................... Affiliate lease 12,240 Retail and service 1989 --
TEXAS
Fort Worth................ Third-party lease 1,600 Retail only 1997 --
Houston................... Affiliate lease 10,000 Retail only(4) 1987 --
Houston................... Affiliate lease 10,000 Retail only(4) 1981 --
League City (floating
facility)(5)............ Third-party lease 800 Retail and service; 30 wet slips 1988 Clear Lake
Lewisville (Dallas)....... Third-party lease 10,000 Retail and service 1992 Lake Lewisville
Lewisville (Dallas)
(floating facility)..... Third-party lease 500 Retail only; 20 wet slips(5) 1994 Lake Lewisville
Montgomery (floating
facility)............... Third-party lease 600 Retail only; 10 wet slips 1995 Lake Conroe
</TABLE>
- ---------------
(1) Square footage does not include outside sales space or dock or marina
facilities.
(2) The Stuart retail property consists of two parcels, each of which is owned
by a separate, wholly owned subsidiary of the Company.
(3) Includes 4,000 square feet currently under construction for a new service
center.
(4) Service performed at Houston service center leased by the Company from an
affiliate of one of the Operating Subsidiaries.
(5) The floating facility is owned by the Company; however, the related dock and
marina space is leased by the Company from an unaffiliated third-party.
(6) Shares service facility located at the other Lewisville retail location.
LEGAL PROCEEDINGS
The Company is involved in various legal proceedings arising out of its
operations in the ordinary course of business. The Company does not believe that
such proceedings, even if determined adversely, will have a material adverse
effect on its business, financial condition, or results of operations.
On November 28, 1998, the Company terminated for cause the employment of
Richard C. LaManna Jr., Richard C. LaManna III, and Darrell C. LaManna
(collectively, the "LaMannas") under their employment agreements dated as of
March 1, 1998. The Company also removed each of the LaMannas as officers of the
Company. In accordance with the terms of the employment agreements, the Company
ceased the payment of compensation to the LaMannas. The LaMannas have disputed
the termination of their employment by the Company, including the termination of
their compensation. As a result, the Company, on December 23, 1998, commenced
binding arbitration before the American Arbitration Association in Tampa,
Florida as required by the terms of the employment agreements. The Company's
Demand for Arbitration and Statement of Claims to resolve any disputes arising
out of the employment agreements was based on various breaches and acts of
misconduct by the LaMannas.
45
<PAGE> 46
On November 30, 1998, the Company filed a lawsuit against the LaMannas in
the United States District Court for the Middle District of Florida, Tampa
Division, Case No. 98-2429-CIV-T-25F. The Company alleges that the LaMannas
engaged in activities in connection with the Company's acquisition of Harrison's
Boat Center, Inc., Harrison's Marine Center of Arizona, Inc., and related
entities (collectively, "Harrison's") that constituted breaches of the
representations and warranties in the merger documents. The complaint requests
damages, attorneys' fees and costs, and a declaratory judgment regarding the
Company's rights, status, and legal relations relative to, among other things,
the LaMannas' agreement to indemnify the Company.
On December 21, 1998, the LaMannas filed a lawsuit against the Company and
certain of its directors in the Superior Court of Shasta County, California,
Case No. 136666. The complaint alleges that the Company and certain of its
officers and directors engaged in activities during and after the Company's
acquisition of Harrison's that constituted fraud, constructive fraud, breach of
fiduciary duty, conversion, breach of contract, wrongful termination in
violation of public policy, age discrimination, discrimination based on
perceived disability, intentional and negligent infliction of emotional
distress, negligent misrepresentation, defamation, and conspiracy, all allegedly
in violation of California state law. In particular, the plaintiffs allege that
certain of the Acquired Dealers and certain of the Company's officers and
directors (i) fraudulently induced the plaintiffs to sign various documents,
including their employment agreements, (ii) did not treat the plaintiffs
equitably in the merger valuation process, and (iii) terminated the plaintiffs
without cause. The complaint requests damages, rescission, and punitive damages.
The Company believes that this lawsuit is substantively without merit and is
procedurally defective since, among other things, the claims set forth in the
lawsuit either are subject to binding arbitration or are properly subject to the
proceeding before the United States District Court for the Middle District of
Florida. The Company intends to vigorously defend this action and to pursue its
Florida Federal District Court action and the arbitration against the LaMannas.
46
<PAGE> 47
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth information concerning each of the directors
and executive officers of the Company:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
William H. McGill Jr...... 55 Chairman of the Board, President, Chief Executive Officer,
and Director(1)(2)(3)
Michael H. McLamb......... 33 Vice President, Chief Financial Officer, Secretary, and
Treasurer
Richard R. Bassett........ 45 Executive Vice President and Director(1)(2)(3)
Paul Graham Stovall....... 60 Senior Vice President and Director(1)(2)(3)
David L. Cochran.......... 52 Senior Vice President
David H. Pretasky......... 50 Senior Vice President -- Operations
Richard C. LaManna Jr..... 60 Director
Robert S. Kant............ 54 Director(2)(4)
R. David Thomas........... 66 Director(2)(4)(5)
Stewart Turley............ 64 Director(2)(4)(5)
</TABLE>
- ---------------
(1) Member of the Acquisition Committee
(2) Member of the 1998 Incentive Stock Plan Committee
(3) Member of the Employee Stock Purchase Plan Committee
(4) Member of the Compensation Committee
(5) Member of the Audit Committee
William H. McGill Jr. has served as the President and Chief Executive
Officer of MarineMax since January 23, 1998 and as the Chairman of the Board and
as a director of the Company since March 6, 1998. Mr. McGill was the principal
owner and president of Gulfwind USA, Inc., one of the Operating Subsidiaries,
from 1973 until its merger with the Company.
Michael H. McLamb has served as Vice President, Chief Financial Officer,
and Treasurer of MarineMax since January 23, 1998 and as Secretary of the
Company since April 5, 1998. Mr. McLamb, a certified public accountant, was
employed by Arthur Andersen LLP from December 1987 to December 1997, serving
most recently as a senior manager.
Richard R. Bassett has served as Executive Vice President of the Company
since October 1, 1998 and a director of the Company since March 6, 1998. Mr.
Bassett served as Senior Vice President of the Company from March 6, 1998 until
October 1, 1998. Mr. Bassett was the owner and president of Bassett Boat Company
of Florida, one of the Operating Subsidiaries, from 1979 until its merger with
the Company.
Paul Graham Stovall has served as a Senior Vice President and director of
the Company since May 1, 1998. Mr. Stovall was a principal owner and president
of Stovall Marine, Inc., one of the Operating Subsidiaries, from 1960 until its
merger with the Company.
David L. Cochran has served as a Senior Vice President of the Company since
October 1, 1998. Mr. Cochran was a principal owner and president of Cochran's
Marine, Inc. and C&N Marine, Inc. (together "Cochran's"), one of the Operating
Subsidiaries, from 1977 until its merger with the Company.
David H. Pretasky has served as Senior Vice President -- Operations of the
Company since October 1, 1998. Mr. Pretasky was a principal owner and president
of SeaRay of Wilmington, Inc. (f/k/a Skipper Buds of North Carolina, Inc.), one
of the Operating Subsidiaries, from 1996 until its merger with the Company.
Prior to 1996, Mr. Pretasky was a member of management and principal in a large
multi-state marine retailer.
47
<PAGE> 48
Richard C. LaManna Jr. has served as a director of the Company since March
6, 1998. Mr. LaManna served as a Senior Vice President of the Company from March
6, 1998 until November 29, 1998. Mr. LaManna was the president and a principal
owner of Harrison's Boat Center, Inc. and Harrison's Marine Centers of Arizona,
Inc., Operating Subsidiaries of the Company, from 1978 until their merger with
the Company.
Robert S. Kant has served as a director of the Company since August 10,
1998. Mr. Kant has been a senior member of the law firm of O'Connor, Cavanagh,
Anderson, Killingsworth & Beshears, a professional association, for more than
five years.
R. David Thomas has served as a director of the Company since August 10,
1998. Mr. Thomas, the founder of Wendy's International, Inc., has served as
Senior Chairman of that company since 1985. Mr. Thomas served as Chairman of the
Board of Wendy's, International, Inc. from 1972 until 1985 and as President and
Chief Executive Officer from 1969 until 1972. Mr. Thomas served on the Board of
Trustees of Duke University and Nova Southwest University.
Stewart Turley has served as a director of the Company since August 10,
1998. Mr. Turley retired in 1997 as Chairman of Eckerd Corporation, which he
originally joined in 1966. Mr. Turley served as Chairman, President, and Chief
Executive Officer of Eckerd Corporation from 1975 until 1993. He served as
Chairman and Chief Executive Officer from 1993 until 1996, and remained as
Chairman of the Board until his retirement in 1997. He has been a director of
Eckerd Corporation since 1971. Mr. Turley also serves as a director of Springs
Industries, Inc. and Sprint Corporation.
The Company's Restated Certificate of Incorporation and Bylaws divide the
Board of Directors of the Company into three classes. At each annual meeting of
stockholders, directors in each class will be elected for three-year terms to
succeed the directors of that class whose terms are expiring. Messrs. Bassett,
Stovall, and Thomas are Class I directors whose terms will expire in 1999;
Messrs. McGill, Turley, and Kant are Class II directors whose terms will expire
in 2000; and Mr. LaManna is a Class III director whose term will expire in 2001.
Officers serve at the pleasure of the Board of Directors. There are no family
relationships among any of the directors or executive officers of the Company.
COMMITTEES OF THE BOARD OF DIRECTORS
The Company's Board of Directors has an Audit Committee and a Compensation
Committee, each consisting entirely of independent directors, as well as a Stock
Plan Committee, an Employee Stock Purchase Plan Committee, and an Acquisition
Committee.
The responsibilities of the Audit Committee include recommending to the
Board of Directors the independent public accountants to be selected to conduct
the annual audit of the books and records of the Company, reviewing the proposed
scope of such audit, reviewing accounting and financial controls of the Company
with the independent public accountants and the Company's financial accounting
staff, and reviewing and approving transactions between the Company and its
directors, officers, and their affiliates. The Compensation Committee provides a
general review of the Company's compensation plans and policies to ensure that
they meet corporate objectives. The responsibilities of the Stock Plan Committee
include administering the 1998 Incentive Stock Plan, including selecting the
officers and salaried employees to whom options and awards will be granted; the
responsibilities of the Employee Stock Purchase Plan Committee include the
administration of the Employee Stock Purchase Plan; and the responsibilities of
the Acquisition Committee include the review of potential acquisitions.
DIRECTOR COMPENSATION
Each member of the Board of Directors who is not a full-time employee of
the Company receives a quarterly director's fee of $10,000. The entire fee is
payable in shares of Common Stock based on its fair market value. All directors
are reimbursed for out-of-pocket expenses incurred in attending meetings of the
Board of Directors or committees. In addition, independent directors receive
automatic stock option grants
48
<PAGE> 49
and are eligible to receive discretionary grants of stock options under the
Company's 1998 Incentive Stock Plan. See "Management -- 1998 Incentive Stock
Plan." Officers of the Company receive no additional compensation for serving on
the Board of Directors.
EXECUTIVE COMPENSATION
The following table sets forth the total compensation received for services
rendered in all capacities to the Company for the fiscal year ended September
30, 1998 by the Company's Chief Executive Officer and its four other most highly
compensated executive officers (together the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
------------------------------------------------
ANNUAL COMPENSATION(1) AWARDS PAYOUTS
------------------------------------ ----------------------- -------
RESTRICTED
OTHER ANNUAL STOCK SECURITIES LTIP ALL OTHER
NAME AND COMPENSATION AWARD(S) UNDERLYING PAYOUTS COMPENSATION
PRINCIPAL POSITION AT YEAR-END SALARY($) BONUS($) ($)(2) ($) OPTIONS(3) ($) ($)(1)(4)
- ------------------------------ ---------- -------- ------------ ---------- ---------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
William H. McGill Jr......... $ 87,500 $361,740 -- -- 120,000 -- --
Chairman, President,
and Chief Executive Officer
Richard R. Bassett........... $ 87,500 $195,416 -- -- 64,167 -- 5,854
Executive Vice President
Michael H. McLamb............ $103,125 $100,000 -- -- 133,600 -- --
Vice President, Chief
Financial Officer,
Secretary, and Treasurer
Richard C. LaManna Jr.(5).... $ 87,500 $ 4,403 -- -- 10,000 -- 1,692
Senior Vice President
Richard C. LaManna III(5).... $ 87,500 $ 21,692 -- -- 30,000 -- 1,876
Vice President
</TABLE>
- ---------------
(1) Includes compensation for Messrs. McGill, Bassett, LaManna Jr., and LaManna
III since March 1, 1998 and Mr. McLamb since January 21, 1998.
(2) Other annual compensation did not exceed the lesser of $50,000 or 10% of the
total salary and bonus for any of the Named Executive Officers.
(3) The exercise price of all options granted were equal to or greater than the
fair market value of the Company's Common Stock on the date of grant.
(4) Amounts represent the Company's matching portion of 401(k) or profit sharing
plan contributions.
(5) The employment of Mr. LaManna Jr. and Mr. LaManna III with the Company
terminated on November 29, 1998.
49
<PAGE> 50
OPTION GRANTS
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
----------------------------------------------------- POTENTIAL REALIZABLE
% VALUE AT ASSUMED
NUMBER OF OF TOTAL ANNUAL RATES OF STOCK
SECURITIES OPTIONS PRICE APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OR OPTION TERM(S)(7)
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION -----------------------
GRANTED(#) FISCAL YEAR ($/SH) DATE 5%($) 10%($)
---------- ------------ ----------- ---------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
William H. McGill Jr. ....... 40,000(1) 2.3% $13.75 2003 $ 88,141 $ 255,255
William H. McGill Jr. ....... 80,000(2) 4.7% $12.50 2008 $628,895 $1,593,742
Richard R. Bassett........... 40,000(1) 2.3% $13.75 2003 $ 88,141 $ 255,255
Richard R. Bassett........... 24,167(2) 1.4% $12.50 2008 $189,981 $ 481,450
Michael H. McLamb............ 28,000(2) 1.6% $12.50 2008 $220,113 $ 557,810
Michael H. McLamb............ 16,000(3)(6) 0.9% $12.50 2008 $125,779 $ 318,748
Michael H. McLamb............ 19,600(4)(6) 1.1% $12.50 2008 $154,079 $ 390,467
Michael H. McLamb............ 70,000(5)(6) 4.1% $10.00 2008 $440,226 $1,115,620
Richard C. LaManna Jr........ 10,000(2) 0.6% $12.50 2008 $ 78,612 $ 199,218
Richard C. LaManna III....... 30,000(2) 1.8% $12.50 2008 $235,835 $ 597,653
</TABLE>
- ---------------
(1) Qualified stock options exercisable during the five-year period from the
date of grant with such options vesting 20% on each of the first, second,
third, fourth, and fifth anniversaries of the date of grant.
(2) Non-qualified stock options exercisable during the 10-year period from the
date of grant with such options vesting 20% on each of the third, fourth,
fifth, sixth, and seventh anniversaries of the date of grant.
(3) Qualified stock options exercisable during the 10-year period from the date
of grant with 8,000 of such options vesting on the date of grant and 8,000
of such options vesting on the first day after the first anniversary of the
date of grant.
(4) Non-qualified options exercisable during the 10-year period from the date of
grant with such options vesting on the date of grant.
(5) Non-qualified options exercisable during the 10-year period from the date of
grant with 20% of such options vesting on each of the first, second, third,
fourth, and fifth anniversaries of the date of grant.
(6) Represents options reissued to Mr. McLamb in June 1998, after the original
options granted in April 1998 were cancelled. See "Executive
Compensation -- Option Repricings."
(7) Calculated from a base price equal to the exercise price of each option,
which was the fair market value of the Common Stock on the date of grant.
The amounts represent only certain assumed rates of appreciation. Actual
gains, if any, on stock option exercises and Common Stock holdings cannot be
predicted, and there can be no assurance that the gains set forth on the
table will be achieved.
50
<PAGE> 51
OPTION EXERCISES AND HOLDINGS
The following table represents certain information respecting the options
held by the Named Executive Officers.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
ACQUIRED ON VALUE OPTIONS AT FISCAL YEAR-END AT FISCAL YEAR-END($)(1)
EXERCISE REALIZED ----------------------------- ----------------------------
NAME (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
William H. McGill Jr. ... -- -- -0- 120,000 -- --
Richard R. Bassett....... -- -- -0- 64,167 -- --
Michael H. McLamb........ -- -- 27,600 106,000 -- --
Richard C. LaManna
Jr. ................... -- -- -0- 10,000 -- --
Richard C. LaManna III... -- -- -0- 30,000 -- --
</TABLE>
- ---------------
(1) Calculated based on $9.25, which was the closing sales price of the Common
Stock as quoted on the New York Stock Exchange on September 30, 1998,
multiplied by the number of applicable shares in-the-money less the total
exercise price.
OPTION REPRICINGS
The following table sets forth certain information with respect to the
cancellation of outstanding stock options held by and the grant of replacement
options to one of the Company's executive officers during fiscal 1998. The
Company has not repriced any options held by any of its other executive officers
since the date on which the Company's Common Stock became registered under
Section 12 of the Exchange Act.
TEN-YEAR OPTION REPRICINGS
<TABLE>
<CAPTION>
NUMBER OF MARKET
SECURITIES PRICE OF EXERCISE
UNDERLYING STOCK AT PRICE AT
OPTIONS TIME OF TIME OF LENGTH OF ORIGINAL
REPRICED OR REPRICING OR REPRICING OR NEW OPTION TERM REMAINING
AMENDED AMENDMENT AMENDMENT EXERCISE AT DATE OF REPRICING
NAME AND PRINCIPAL POSITION DATE (#) ($) ($) PRICE ($) OR AMENDMENT
- --------------------------- -------- ----------- ------------ ------------ --------- ---------------------
<S> <C> <C> <C> <C> <C> <C>
Michael H. McLamb(1)......... 6/18/98 35,600 $12.50 $15.00 $12.50 9 years and 10 months
Michael H. McLamb(1)......... 6/18/98 70,000 $12.50 $12.00 $10.00 9 years and 10 months
</TABLE>
- ---------------
(1) Mr. McLamb has served as Vice President, Chief Financial Officer, and
Treasurer of the Company since January 23, 1998 and as Secretary of the
Company since April 5, 1998. The repricing of Mr. McLamb's options were
pursuant to provisions of his employment agreement which provided for
options at designated levels.
1998 INCENTIVE STOCK PLAN
On April 5, 1998 and April 30, 1998, respectively, the Board of Directors
adopted and the stockholders approved the MarineMax, Inc. 1998 Incentive Stock
Plan (the "Plan"). The Plan provides for the grant of incentive and nonqualified
stock options to acquire Common Stock of the Company, the direct grant of Common
Stock, the grant of stock appreciation rights ("SARs"), and the grant of other
cash awards to key personnel, directors, consultants, independent contractors,
and others providing valuable services to the Company and its subsidiaries. The
Company believes that the Plan represents an important factor in attracting and
retaining executive officers and other key employees, directors, and consultants
and constitutes a significant part of its compensation program. The Plan
provides such individuals with an opportunity to acquire a proprietary interest
in
51
<PAGE> 52
the Company and thereby align their interests with the interests of the
Company's other stockholders and give them an additional incentive to use their
best efforts for the long-term success of the Company.
The Plan provides that a maximum of the lesser of 4,000,000 shares or 15%
of the then-outstanding shares of Common Stock of the Company may be issued
under the Plan. The maximum number of shares of stock with respect to which
options or other awards may be granted to any employee (including officers)
during the term of the Plan may not exceed 50% of the shares of Common Stock
covered by the Plan. As of the date of this Prospectus, options to purchase
approximately 1,707,000 shares of Common Stock have been granted. Of these
options, approximately 36,000 are vested and the remainder vest over a
seven-year period.
The power to administer the Plan with respect to executive officers and
directors of the Company and all persons who own 10% or more of the Company's
issued and outstanding stock rests exclusively with the Board of Directors or a
committee consisting of two or more non-employee directors who are appointed by
the Board of Directors. The power to administer the Plan with respect to other
persons rests with the Board of Directors.
The Plan will terminate in April 2008, and options may be granted at any
time during the life of the Plan. Options become exercisable at such time as may
be determined by the Board of Directors or the Plan administrator. The exercise
prices of options will be determined by the Board of Directors or the Plan
administrator, but if an option is intended to be an incentive stock option, the
exercise price may not be less than 100% (110% if the option is granted to a
stockholder who at the time of the grant of the option owns stock possessing
more than 10% of the total combined voting power of all classes of stock of the
Company) of the fair market value of the Common Stock at the time of the grant.
The Plan also includes an Automatic Grant Program providing for the
automatic grant of options ("Automatic Options") to non-employee directors of
the Company. Under the Automatic Grant Program, each non-employee whose election
to the Board of Directors was proposed as of June 3, 1998 received an Automatic
Option to acquire 10,000 shares of Common Stock on that date (an "Initial
Grant"). Each subsequent newly elected non-employee member of the Board of
Directors will receive as an Initial Grant an Automatic Option to acquire 5,000
shares of Common Stock on the date of his or her first appointment or election
to the Board of Directors. In addition, an Automatic Option to acquire 2,500
shares of Common Stock will be granted to each non-employee director at the
meeting of the Board of Directors held immediately after each annual meeting of
stockholders (an "Annual Grant"). A non-employee member of the Board of
Directors will not be eligible to receive an Annual Grant if the option grant
date of such Annual Grant would be within 90 days of such non-employee member
receiving his or her Initial Grant. Each Initial Grant will vest and become
exercisable in a series of three equal and successive installments with the
first installment vested on the date of grant (or the date of election to the
Board of Directors, if later) and the next two installments 12 months and 24
months after the date of grant. Each Annual Grant will vest and become
exercisable 12 months after the date of grant. Each Automatic Option will vest
and become exercisable only if the optionholder has not ceased serving as a
director as of such vesting date.
The exercise price per share of Common Stock subject to an Initial Grant on
June 3, 1998 is $12.50, the initial public offering price per share and the
exercise price per share of Common Stock subject to other Automatic Options will
be equal to 100% of the fair market value (as defined in the Plan) of the
Company's Common Stock on the date such option is granted. Each Automatic Option
will expire on the tenth anniversary of the date on which such Automatic Option
was granted. In the event the non-employee director ceases to serve as a member
of the Board of Directors or dies while serving as a director, the optionholder
or the optionholder's estate or successor by bequest or inheritance may exercise
any Automatic Options that have vested by the time of cessation of service until
the earlier of (a) 90 days after the cessation of service, or (b) the expiration
of the term of the Automatic Option. The Board of Directors believes that the
grant of Automatic Options to non-employee directors is necessary to attract,
retain, and motivate independent directors.
The Plan is not intended to be the exclusive means by which the Company may
issue options or warrants to acquire its Common Stock, stock awards, or any
other type of award. To the extent permitted by applicable law and New York
Stock Exchange requirements, the Company may issue any other options, warrants,
or awards other than pursuant to the Plan without stockholder approval.
52
<PAGE> 53
EMPLOYEE STOCK PURCHASE PLAN
On April 5, 1998 and April 30, 1998, respectively, the Board of Directors
adopted and the stockholders approved the MarineMax, Inc. 1998 Employee Stock
Purchase Plan (the "Stock Purchase Plan"), which is intended to qualify for
favorable income tax treatment under Section 423 of the Internal Revenue Code
and is intended to offer financial incentives for employees to purchase Common
Stock of the Company. The Stock Purchase Plan is administered by an appointed
committee of the Board of Directors.
The Stock Purchase Plan provides for the issuance of up to 500,000 shares
of Common Stock. The Stock Purchase Plan is available to all regular, full-time
employees of the Company who have completed at least one year of continuous
service.
The Stock Purchase Plan provides for implementation of up to 10 annual
offerings beginning on the first day of October in the years 1998 through 2007,
with each offering terminating on September 30 of the following year. Each
annual offering may be divided into two six-month offerings. For each offering,
the purchase price per share will be the lower of (i) 85% of the closing price
of the Common Stock on the first day of the offering period or (ii) 85% of the
closing price of the Common Stock on the last day of the offering. The purchase
price is paid through periodic payroll deductions not to exceed 10% of the
participant's earnings during each offering period. However, no participant may
purchase more than $25,000 worth of Common Stock annually.
EMPLOYMENT AGREEMENTS
The Company has five-year employment agreements with each of William H.
McGill Jr., Richard R. Bassett, Michael H. McLamb, Paul Graham Stovall, David L.
Cochran, and David H. Pretasky (together, the "Executives"). The employment
agreements with each of these officers provides for a base salary of $150,000
per year.
As described above, the employment agreement of each executive officer
provides for incentive compensation based upon the performance of the Company
and the employee as determined by the Company's Board of Directors. The Board of
Directors approved an incentive compensation program for 1998. The program
provided for a quarterly bonus equal to 1.25% of the quarterly pre-tax profits
of the Company for Mr. McGill, subject to the Company achieving its budgeted
quarterly earnings. Additionally, the program provided for Mr. McGill to receive
an annual bonus targeted at 50% of his base salary plus quarterly bonuses
subject to the Company achieving its annual budgeted earnings. The program also
provided for Messrs. Bassett, Stovall, Cochran, Pretasky, and other officers of
the Company to receive a quarterly bonus equal to 1.25% of the quarterly pre-tax
profits for their respective regional territories, subject to the Company
achieving its quarterly budgeted earnings. Additionally, the program provided
for Messrs. Bassett, Stovall, Cochran, Pretasky, and other officers to receive
an annual bonus targeted at 50% of base salary and a quarterly bonus based upon
the customer satisfaction index and the Company's financial performance, subject
to the Company achieving its annual budgeted earnings. Under the plan, the
Company would not pay quarterly and annual bonuses to any executive if the
Company did not achieve its budgeted earnings. In connection with their
employment, certain of the Executives will also receive options to purchase
Common Stock. See "Management -- 1998 Stock Incentive Plan." The Board of
Directors has not as yet determined incentive compensation arrangements for
1999.
The Company may terminate each officer's employment for good cause, as
defined in the respective agreements. The Company also may terminate each
officer's employment without good cause if such termination is approved by a
majority of the members of the Board of Directors (excluding such officer), but
the officer so terminated will receive his base salary for the remaining term of
his employment agreement or one year, whichever is greater, and certain bonus
and other payments. Each agreement also will terminate automatically upon the
death of the respective officer. In the event of a termination of employment by
the Company or the employee following any "change in control" of the Company as
defined in the agreement, each employment agreement provides for the employee to
receive his fixed compensation in a lump sum and bonus payments that would have
been payable through the end of the Company's then-current fiscal year as if his
employment had not been terminated. Section 280G of the Internal Revenue Code
may limit the
53
<PAGE> 54
deductibility of such payments for federal income tax purposes. If these
payments are not deductible and if the Company has income at least equal to such
payments, an amount of income equal to the amount of such payments could not be
offset. As a result, the income that was not offset would be "phantom income"
(i.e. income without cash) to the Company. A "change in control" would include a
merger or consolidation of the Company, a sale of all or substantially all of
the assets of the Company, under certain circumstances changes in the identity
of a majority of the members of the Board of Directors of the Company, or
acquisitions of more than 20% of the Company's Common Stock, subject to certain
limitations.
Each employment agreement contains a covenant not to compete with the
Company for a period of two years immediately following termination of
employment or, in the case of a termination by the Company without cause in the
absence of a change in control, with certain exceptions, for a period of one
year following termination of employment.
54
<PAGE> 55
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of the date of this Prospectus for
(i) all directors, the Chief Executive Officer, and the other executive officers
(including the four other most highly compensated executive officers), (ii) all
directors and executive officers as a group, and (iii) each person known by the
Company to own beneficially more than 5% of the outstanding shares of Common
Stock.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED
-------------------------
NAME OF BENEFICIAL OWNER(1) NUMBER(2) PERCENT(2)
--------------------------- ---------- -----------
<S> <C> <C>
William H. McGill Jr. ...................................... 1,603,457(3) 10.98%
Richard R. Bassett.......................................... 3,147,486(4) 21.55%
Paul Graham Stovall......................................... 137,478 .94%
David L. Cochran............................................ 731,385(5) 5.01%
David H. Pretasky........................................... 94,443(6) .65%
Michael H. McLamb........................................... 27,951(7) .19%
Richard C. LaManna Jr.(8)................................... 465,566(8) 3.19%
Robert S. Kant.............................................. 13,978(9) .10%
R. David Thomas............................................. 75,644(10) .52%
Stewart Turley.............................................. 15,644(11) .11%
All directors and executive officers as a group (10
persons).................................................. 6,313,032 43.11%
Brunswick................................................... 1,861,200 12.74%
Louis R. DelHomme Jr.(12) .................................. 1,055,428(12) 7.23%
</TABLE>
- ---------------
(1) Except as otherwise indicated, all persons listed have an address in care
of the Company at 18167 U.S. 19 North, Suite 499, Clearwater, Florida
33764, and have sole voting and investment power over their shares unless
otherwise indicated. Brunswick maintains its address at 1 North Field
Court, Lake Forest, Illinois 60045.
(2) The numbers and percentages shown include shares of Common Stock issuable
to the identified person pursuant to stock options that may be exercised
within 60 days after November 30, 1998. In calculating the percentage of
ownership, such shares are deemed to be outstanding for the purpose of
computing the percentage of shares of Common Stock owned by such person,
but are not deemed to be outstanding for the purpose of computing the
percentage of shares of Common Stock owned by any other stockholder.
(3) Includes 38,000 shares owned by Mr. McGill's wife as to which Mr. McGill
disclaims beneficial ownership. Does not include 120,000 shares issuable
upon the exercise of stock options that may not be exercised within 60 days
of November 30, 1998.
(4) Does not include 64,167 shares issuable upon the exercise of stock options
that may not be exercised within 60 days of November 30, 1998.
(5) Includes 324,692 shares owned by Mr. Cochran's wife as to which Mr. Cochran
disclaims beneficial ownership. Also includes 5,000 shares owned by Walker
Building Center, Inc. of which Mr. Cochran is a majority owner and controls
the voting interest of the Company's Common Stock held by Walker Building
Center, Inc.
(6) Does not include 41,667 shares issuable upon the exercise of stock options
that may not be exercised within 60 days of November 30, 1998.
(7) Includes 27,600 shares issuable upon the exercise of stock options that may
be exercised within 60 days of November 30, 1998, but does not include
106,000 shares subject to options that may not be exercised by that date.
(8) Includes 316,939 shares held by Richard C. LaManna Jr. and Judith L.
LaManna, as joint tenants, and 104,095 shares held by Richard C. LaManna
Jr. and Judith L. LaManna as co-trustees of the LaManna Family Trust. Does
not include 10,000 shares issuable upon the exercise of stock options that
may not be
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<PAGE> 56
exercised within 60 days of November 30, 1998. Mr. LaManna Jr. maintains
his address at 3452 Green Stone Place, Redding, California 96001.
(9) Includes 1,667 shares issuable upon the exercise of stock options that may
be exercised within 60 days of November 30, 1998, but does not include
3,333 shares subject to options that may not be exercised by that date.
(10) Includes 3,333 shares issuable upon the exercise of stock options that may
be exercised within 60 days of November 30, 1998, but does not include
6,667 shares subject to options that may not be exercised by that date.
Also includes 5,000 shares held by Lorraine Thomas and 60,000 shares held
by R. L. Richards as trustee of the R. David Thomas Trust.
(11) Includes 3,333 shares issuable upon the exercise of stock options that may
be exercised within 60 days of November 30, 1998, but does not include
6,667 shares subject to options that may not be exercised by that date.
(12) Owned of record by Spicer Partnership Ltd. Spicer Partnership Ltd. owned
substantially all of the capital stock of DelHomme prior to its merger with
the Company. Louis R. DelHomme Jr. is the majority owner of Spicer
Partnership Ltd. and controls the voting interest of the Company's Common
Stock held by Spicer Partnership Ltd. Mr. DelHomme, Jr. maintains his
address at 2206 Twin Oaks, Kemoh, Texas 77565.
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<PAGE> 57
CERTAIN TRANSACTIONS AND RELATIONSHIPS
The following summarizes certain material agreements between MarineMax,
certain Operating Subsidiaries, and companies owning real estate used in the
Company's operations (the "Property Companies"), and certain material business
relationships of the Company.
CERTAIN ACQUISITIONS -- TERMS OF THE AGREEMENTS
William H. McGill Jr., Richard R. Bassett, Louis R. DelHomme Jr., Paul
Graham Stovall, Richard C. LaManna Jr., David L. Cochran, David H. Pretasky
(each of whom is a current or former director, executive officer, or both of the
Company) were principal owners of Acquired Dealers and their related Property
Companies at the time of their acquisition by the Company. Except in the case of
Mr. McGill who has served as an officer of the Company since January 1988, the
other individuals became directors, officers, or both after the applicable
acquisition.
The following table sets forth the name of each director and officer of the
Company who was a principal owner of an Acquired Dealer and any related Property
Company, the name of the Acquired Dealer owned by such director or officer, the
number of shares of the Company's Common Stock received by such individual as an
owner of the Acquired Dealer and its related Property Companies, and the amount
of long-term debt of the Acquired Dealer and its related Property Companies at
the time of the acquisition.
<TABLE>
<CAPTION>
SHARES OF
COMMON LONG-TERM
INDIVIDUAL ACQUIRED DEALER STOCK OUTSTANDING DEBT
---------- ---------------- --------- ----------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Richard R. Bassett.......................... Bassett 3,813,086 $ 0
Louis R. DelHomme........................... DelHomme 1,329,266 0
William McGill Jr........................... Gulfwind USA 2,032,913 6,248
R. LaManna Jr., R. LaManna III, D.
LaManna................................... Harrison's 1,077,369 2,138
Paul Graham Stovall......................... Stovall 492,306 0
David L. Cochran............................ Cochran's 723,386 2,300
David H. Pretasky........................... Sea Ray of 412,390 709
Wilmington, Inc.
</TABLE>
The number of shares of Common Stock issued to the stockholders of each
Acquired Dealer and related Property Companies described above was determined
based on negotiations between the Company and those companies. In determining
the number of shares of Common Stock issued in connection with each of the
acquisitions, the parties considered the historical cash flows and pro forma
operating results of the Acquired Dealer and on the appraised values of the
properties owned by the Property Company.
With the exception of the number of shares issued in connection with each
acquisition, the acquisition of each of the Acquired Dealers and related
Property Companies was subject to substantially the same terms and conditions.
Each acquisition was subject to customary conditions. These conditions included,
among others, the accuracy on the closing date of the acquisitions of the
representations and warranties of the Acquired Dealer and its principal
stockholders and of the Company, the performance by each of them of all
covenants included in the agreements relating to the acquisitions, and the
absence of a material adverse change in the results of operations, financial
condition, or business of each Acquired Dealer. The acquisition agreements
provide that the stockholders of the Acquired Dealer and owners of the Property
Companies will indemnify the Company from certain liabilities that may arise in
connection with the respective acquisition. A portion of the Common Stock
payable as consideration in connection with each acquisition is pledged for a
period of up to one year from the effectiveness of the acquisition as security
for the indemnification obligations of the respective stockholders and owners.
Pursuant to the acquisition agreements, the stockholders of the Acquired Dealers
agreed not to compete with the Company for five years, commencing on the date of
the acquisitions.
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<PAGE> 58
EMPLOYMENT AGREEMENTS
As part of the acquisition agreements, certain stockholders of the Acquired
Dealers entered into employment agreements with the Company. See
"Management -- Employment Agreement."
LEASES OF REAL PROPERTY FROM AFFILIATES
The Company leases two retail locations in Houston, Texas from the
Sherri-Lindsey Spicer Trust, an irrevocable trust of which relatives of Louis R.
DelHomme Jr. are the beneficiaries. The trustee of the trust is Robert B.
Arrington, an unrelated third party. Mr. DelHomme is a former director and
officer of the Company.
The Company also leases four retail locations in Georgia from separate
partnerships, the majority of each of which is owned by the former owners of
Stovall. Paul Graham Stovall became a director and officer of the Company
following the Stovall acquisition.
The Company leases a retail location in North Carolina from Pretasky Roach
Properties, LLC, which is 50% owned by David H. Pretasky. Mr. Pretasky became an
officer of the Company following the acquisition of Sea Ray of Wilmington, Inc.
by the Company.
The Company believes that the rents for these properties do not exceed
their fair market rates, that the leases provide for standard market terms, and
that the terms of the leases are on terms as favorable as could have been
received from unrelated third parties.
FUTURE TRANSACTIONS
The Company has adopted a policy that it will not enter into any material
transaction in which a director or officer has a direct or indirect financial
interest unless the transaction is determined by the Company's Board of
Directors to be fair as to the Company or is approved by a majority of the
Company's disinterested directors or by the Company's stockholders, as provided
for under Delaware law.
BUSINESS RELATIONSHIPS
Robert S. Kant, a director of the Company since August 10, 1998, is a
senior member of the law firm O'Connor, Cavanagh, Anderson, Killingsworth &
Beshears, a Professional Association. This firm serves as the Company's primary
legal counsel.
58
<PAGE> 59
DESCRIPTION OF CAPITAL STOCK
The Company's authorized capital stock consists of 40,000,000 shares of
Common Stock, par value $0.001 per share, and 5,000,000 shares of serial
preferred stock ("Serial Preferred Stock"), par value $0.001 per share. As of
November 30, 1998, there were issued and outstanding 14,607,361 shares of Common
Stock, and no shares of Serial Preferred Stock.
COMMON STOCK
The holders of Common Stock are entitled to one vote for each share on all
matters submitted to a vote of stockholders and do not have cumulative voting
rights. Accordingly, the holders of a majority of the stock entitled to vote in
any election of directors may elect all of the directors standing for election.
Subject to the preferences that may be applicable to any then outstanding
preferred stock, the holders of Common Stock will be entitled to receive such
dividends, if any, as may be declared by the Board of Directors from time to
time out of legally available funds. Upon the liquidation, dissolution, or
winding up of the Company, the holders of Common Stock will be entitled to share
ratably in all assets of the Company that are legally available for
distribution, after payment of all debts and other liabilities and subject to
the prior rights of holders of any preferred stock then outstanding. The holders
of Common Stock have no preemptive, subscription, redemption, or conversion
rights.
PREFERRED STOCK
The Board of Directors is authorized, subject to any limitations prescribed
by the laws of the state of Delaware, but without further action by the
Company's stockholders, to provide for the issuance of Serial Preferred Stock in
one or more series, to establish from time to time the number of shares to be
included in such series, to fix the designations, powers, preferences, and
rights of the shares of each such series and any qualifications, limitations, or
restrictions thereof, and to increase or decrease the number of shares of any
such series (but not below the number of shares of such series then outstanding)
without any further vote or action by the stockholders. The Board of Directors
may authorize and issue Serial Preferred Stock with voting or conversion rights
that could adversely affect the voting power or other rights of the holders of
Common Stock. In addition, the issuance of Serial Preferred Stock may have the
effect of delaying, deterring, or preventing a change in control of the Company.
The Company has no current plan to issue any shares of Serial Preferred Stock.
DELAWARE GENERAL CORPORATION LAW AND CERTAIN CHARTER PROVISIONS
The provisions of the Company's Restated Certificate of Incorporation and
Bylaws and the Delaware GCL summarized below may have the effect of
discouraging, delaying, or preventing hostile takeovers, including those that
might result in a premium over the market price, or discouraging, delaying, or
preventing changes in control or management of the Company.
The Company is subject to the provisions of Section 203 of the Delaware
GCL. In general, this statute prohibits a publicly held Delaware corporation
from engaging, under certain circumstances, in a "business combination" with an
"interested stockholder" for a period of three years after the date of the
transaction in which the person becomes an interested stockholder, unless (i)
prior to the date at which the stockholder became an interested stockholder, the
Board of Directors approved either the business combination or the transaction
in which the stockholder becomes an interested stockholder; (ii) upon
consummation of the transaction in which the stockholder becomes an interested
stockholder, the stockholder owned at least 85% of the outstanding voting stock
of the corporation (excluding shares held by directors who are officers or held
in certain employee stock plans); or (iii) the business combination is approved
by the Board of Directors and by two-thirds of the outstanding voting stock of
the corporation (excluding shares held by the interested stockholder) at a
meeting of stockholders (and not by written consent) held on or subsequent to
the date of the business combination. An "interested stockholder" is a person
who, together with affiliates and associates, owns (or at any time within the
prior three years did own) 15% or more of the corporation's voting stock.
Section 203 defines a "business combination" to include mergers, consolidations,
stock sales, asset based transactions, and other transactions resulting in a
financial benefit to the interested stockholder. The Company's Restated
Certificate of Incorporation exempts from the application of Section 203 each of
the
59
<PAGE> 60
persons who received Common Stock in the acquisitions of the five original
Operating Subsidiaries and Stovall.
The Company's Restated Certificate of Incorporation and Bylaws divide the
Board of Directors of the Company into three classes, each class to be as nearly
equal in number of directors as possible. At each annual meeting of
stockholders, directors in each class will be elected for three-year terms to
succeed the directors of that class whose terms are expiring. Messrs. Bassett,
Stovall, and Thomas are Class I directors whose terms will expire in 1999;
Messrs. Kant, McGill, and Turley are Class II directors whose term will expire
in 2000; and Mr. LaManna is a Class III director whose term will expire in 2001.
In accordance with the Delaware GCL, directors serving on classified boards of
directors may only be removed from office for cause. These provisions could,
under certain circumstances, operate to delay, defer, or prevent a change in
control of the Company.
The Company's Restated Certificate of Incorporation and Bylaws contain a
number of other provisions relating to corporate governance and to the rights of
stockholders. These provisions include (a) the authority of the Board to fill
vacancies on the Board, and (b) the authority of the Board to issue preferred
stock in series with such voting rights and other powers as the Board may
determine.
STOCKHOLDERS' AND GOVERNANCE AGREEMENTS
The Company, Brunswick, and various current or former senior executives of
the Company (consisting of William H. McGill Jr., Richard R. Bassett, Louis R.
DelHomme Jr., Richard C. LaManna Jr., and Paul Graham Stovall) have entered into
a stockholders' agreement (the "Stockholders' Agreement"), and the Company and
Brunswick have entered into a governance agreement (the "Governance Agreement").
Subject to certain exceptions, the Stockholders' Agreement restricts the right
of the senior executives (which, for this purpose, includes transferees upon the
death, pledge, or deposit in trust of or by a senior executive) and Brunswick to
sell Common Stock without first complying with the provisions of the agreement.
Under the agreement, the senior executives may not sell any Common Stock without
first offering to sell the Common Stock to Brunswick if Brunswick does not own
19% of the then-outstanding shares of Common Stock (the "Targeted Investment
Percentage") and then to the Company, the other senior executives, and
Brunswick. Likewise, Brunswick may not sell any Common Stock without first
offering to sell the Common Stock to the Company and the senior executives. The
price per share will be the average closing price of the Common Stock on the New
York Stock Exchange during the period commencing on the trading day the offer is
made and ending on the day of the acceptance of the offer.
The Stockholders' Agreement does not restrict transfers of Common Stock
resulting from a transaction that involves a change in control of the Company or
a transaction approved by a majority of the Board of Directors. The
Stockholders' Agreement excepts each party from the resale restrictions for
sales of Common Stock in any calendar year of up to the lesser of 1% of the
issued and outstanding Common Stock or 10% of the shares owned by the party. In
addition, the senior executives will not be restricted from selling Common Stock
if, at the time of the proposed sale, Brunswick owns the Targeted Investment
Percentage and a majority of the members of the Board of Directors constitutes
the senior executives and Other Designated Members (as described below) or if
the Dealer Agreements between Brunswick and the Operating Subsidiaries are not
then in full force and effect. As defined in the Stockholders' Agreement, the
term "Other Designated Member" means any individual designated by the Company to
serve as a member of its Board of Directors and agreed to by Brunswick, which
approval will not be unreasonably withheld by Brunswick taking into account
whether such individual has the requisite knowledge and experience in business
and financial matters as to be reasonably capable of serving as a director of a
public corporation with revenue, assets, and operations comparable to the
Company. All members of the Company's current Board of Directors are senior
executives or Other Designated Members.
The Stockholders' Agreement also gives Brunswick the right to achieve and
maintain its Targeted Investment Percentage through open market purchases and
through purchases in any future stock offerings by the Company. The
Stockholders' Agreement also grants Brunswick a right of first refusal on any
proposed sale
60
<PAGE> 61
of the Company's capital stock to any person that competes with the principal
lines of Brunswick's marine business.
Under the Stockholders' Agreement, Brunswick and the senior executives also
have agreed to vote their Common Stock in all elections for directors of the
Company for board nominees proposed by the Company's Board of Directors if such
nominees are either senior executives or Other Designated Members and if,
assuming the election of such persons, the majority of the Board of Directors
will consist of the senior executives and Other Designated Members. In addition,
Brunswick and the senior executives have agreed to vote their Common Stock in
favor of all proposals and recommendations made by the Company's Board of
Directors and submitted to a vote of the Company's stockholders at an annual or
special meeting as long as such proposals or recommendations were approved by a
majority of the Board of Directors of the Company and a majority of the
Company's Board of Directors consists of the senior executives and Other
Designated Members.
The Stockholders' Agreement has a term of 10 years. The rights of
Brunswick, however, under the Stockholders' Agreement are applicable only during
such time as the Dealer Agreements remain in full force and effect.
The Governance Agreement generally restricts Brunswick from owning more
than its Targeted Investment Percentage of 19% of the outstanding Common Stock.
The Governance Agreement prohibits Brunswick from (i) seeking to affect or
influence the control of the management or Board of Directors of the Company or
its business, operations, or policies; (ii) entering into a voting trust or
other agreement respecting the voting of Common Stock other than the
Stockholders' Agreement; (iii) making or participating in any solicitation of
proxies to vote Common Stock or seeking to influence any person to vote Common
Stock or being a participant in any solicitation in opposition to the
recommendation of the majority of the Company's Board of Directors with respect
to any matter; (iv) initiating, proposing, or otherwise soliciting any
stockholder proposals; (v) entering into any group or otherwise acting in
concert with any person for the purpose of acquiring, holding, voting, or
disposing of any Common Stock; or (vi) encouraging, supporting, or participating
in any tender or exchange offer unless at least 51% of the then-outstanding
Common Stock (excluding any Common Stock owned by Brunswick) has been tendered
in response to such offer or the Company announces that it supports such offer.
The Governance Agreement terminates upon the earlier of (a) 10 years from
the date of the agreement; (b) such time, if any, that a majority of the Board
of Directors has not consisted of the senior executives and Other Designated
Members for a period of 60 consecutive days; or (c) the date on which Brunswick
has owned less than 5% of the Common Stock for two consecutive years; provided
that Brunswick may take no actions inconsistent with the agreement for a period
of six months after the termination by it of the Dealer Agreements for cause.
The Governance Agreement also will be inoperative during any period that
Brunswick owns less than 5% of the Common Stock.
PLAN OF DISTRIBUTION
This Prospectus covers 5,000,000 shares of Common Stock and 1,000,000
shares of Preferred Stock that may be issued and sold by the Company from time
to time in connection with the acquisition by the Company of other businesses.
It is expected that the terms of any such acquisitions will be determined by
negotiations with the owners or controlling persons of the businesses to be
acquired and that the shares issued in connection with such acquisitions will be
valued at prices reasonably related to market prices current either at the time
of agreement on the terms of an acquisition or at or about the time of delivery
of the shares.
No underwriting discounts or commissions will be paid, although finder's
fees may be paid from time to time in connection with specific acquisitions. Any
person receiving such fee may be deemed to be an Underwriter within the meaning
of the Securities Act.
61
<PAGE> 62
LEGAL OPINIONS
The validity of the shares of Common Stock offered hereby will be passed
upon for the Company by O'Connor, Cavanagh, Anderson, Killingsworth & Beshears,
a professional association, Phoenix, Arizona ("O'Connor Cavanagh"). Members of
O'Connor Cavanagh own a total of 12,311 shares of the Company's Common Stock.
Robert S. Kant, a senior member of O'Connor Cavanagh, is a director of the
Company.
EXPERTS
The consolidated financial statements included in this Prospectus and
Registration Statement have been audited by Arthur Andersen LLP, independent
certified public accountants, as indicated in their report with respect thereto,
and are included herein in reliance upon the authority of said firm as experts
in giving said reports.
ADDITIONAL INFORMATION
The Company has filed with the Commission a Registration Statement under
the Securities Act with respect to the Common Stock offered by this Prospectus.
This Prospectus does not contain all of the information set forth in the
Registration Statement and the exhibits thereto. For further information with
respect to the Company and the Common Stock offered by this Prospectus,
reference is made to the Registration Statement, including the exhibits thereto.
Statements contained in this Prospectus as to the contents of any contract or
other document referred to are not necessarily complete, and in each instance
reference is made to the copy of such contract or other document filed as an
exhibit to the Registration Statement, each such statement being qualified in
all respects by such reference. The Registration Statement, together with
exhibits thereto, may be inspected at the public reference facilities of the
Commission at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549 and at
the following Regional Offices of the Commission: New York Regional Office,
Seven World Trade Center, New York, New York 10048, and Chicago Regional Office,
500 West Madison Street, Chicago, Illinois 60661. Copies of the material
contained therein may be obtained at prescribed rates from the Commission's
public reference facilities in Washington, D.C. The public may obtain
information on the operation of the Public Reference Room by calling the
Commission at 1-800-SEC-0330. The Commission also maintains a Web site that
contains reports, proxy and information statements and other materials that are
filed through the Commission's Electronic Data Gathering, Analysis, and
Retrieval system. This Web site can be accessed at http://www.sec.gov.
62
<PAGE> 63
MARINEMAX, INC. AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Certified Public Accountants........ F-2
Consolidated Balance Sheets............................... F-3
Consolidated Statements of Operations..................... F-4
Consolidated Statements of Stockholders' Equity........... F-5
Consolidated Statements of Cash Flows..................... F-6
Notes to Consolidated Financial Statements................ F-7
</TABLE>
F-1
<PAGE> 64
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and
Stockholders of MarineMax, Inc.:
We have audited the accompanying consolidated balance sheets of MarineMax,
Inc. (a Delaware corporation) and subsidiaries as of September 30, 1997 and
1998, and the related consolidated statements of operations, stockholders'
equity and cash flows for the year ended December 31, 1996, the nine-month
period ended September 30, 1997 and the year ended September 30, 1998. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
MarineMax, Inc. and subsidiaries as of September 30, 1997 and 1998 and the
results of their operations and their cash flows for the year ended December 31,
1996, the nine-month period ended September 30, 1997, and the year ended
September 30, 1998 in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Tampa, Florida,
October 28, 1998 (Except with respect to the matter discussed in
Note 8, as to which the date is December 28, 1998).
F-2
<PAGE> 65
MARINEMAX, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30, SEPTEMBER 30,
1997 1998
------------- -------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................. $11,537,934 $ 7,860,866
Accounts receivable, net.................................. 8,204,334 18,511,878
Due from related parties.................................. 585,913 --
Inventories............................................... 61,945,438 80,756,342
Prepaids and other current assets......................... 679,198 2,824,345
Deferred tax assets....................................... 529,212 --
----------- ------------
Total current assets................................... 83,482,029 109,953,431
PROPERTY AND EQUIPMENT, net................................. 5,902,000 24,776,439
DUE FROM RELATED PARTY...................................... 54,719 --
DEFERRED TAX ASSET.......................................... -- 103,426
GOODWILL AND OTHER ASSETS................................... 152,538 15,624,996
----------- ------------
Total assets........................................... $89,591,286 $150,458,292
=========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable.......................................... $ 6,209,029 $ 8,591,679
Customer deposits......................................... 3,536,045 4,815,979
Accrued expenses.......................................... 5,409,977 6,044,506
Short-term borrowings..................................... 38,231,619 45,813,419
Current maturities of long-term debt...................... 1,047,272 442,519
Settlement payable........................................ -- 15,000,000
Deferred taxes............................................ -- 165,511
Due to related parties.................................... 5,492,487 --
----------- ------------
Total current liabilities.............................. 59,926,429 80,873,613
----------- ------------
LONG-TERM DEBT, net of current maturities................... 6,367,019 3,249,494
----------- ------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, $.001 par value, 5,000,000 shares
authorized, none issued or outstanding.................... -- --
Common stock, $.001 par value; 40,000,000 shares authorized,
8,901,818 and 14,600,428 shares issued and outstanding at
September 30, 1997 and 1998, respectively................. 8,902 14,601
Additional paid-in capital.................................. -- 57,113,708
Retained earnings........................................... 23,288,936 9,206,876
----------- ------------
Total stockholders' equity............................. 23,297,838 66,335,185
----------- ------------
Total liabilities and stockholders' equity............. $89,591,286 $150,458,292
=========== ============
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
F-3
<PAGE> 66
MARINEMAX, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE NINE-
FOR THE YEAR MONTH PERIOD FOR THE YEAR
ENDED ENDED ENDED
DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30,
1996 1997 1998
-------------- ------------- -------------
<S> <C> <C> <C>
REVENUE...................................... $197,608,890 $200,413,762 $291,182,186
COST OF SALES................................ 149,947,980 150,478,921 220,364,383
------------ ------------ ------------
Gross profit............................... 47,660,910 49,934,841 70,817,803
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES................................... 38,650,159 30,387,637 52,478,624
NON-RECURRING SETTLEMENT..................... -- -- 15,000,000
------------ ------------ ------------
Income from operations..................... 9,010,751 19,547,204 3,339,179
INTEREST EXPENSE, net........................ 1,823,187 1,805,716 2,211,858
------------ ------------ ------------
INCOME BEFORE INCOME TAXES................... 7,187,564 17,741,488 1,127,321
INCOME TAX PROVISION......................... 42,029 595,823 1,704,783
------------ ------------ ------------
NET INCOME (LOSS)............................ $ 7,145,535 $ 17,145,665 $ (577,462)
============ ============ ============
BASIC AND DILUTED NET INCOME (LOSS) PER
COMMON SHARE:.............................. $ 0.74 $ 1.93 $ (0.05)
============ ============ ============
UNAUDITED PRO FORMA INCOME TAX PROVISION
(BENEFIT).................................. 2,841,362 6,404,639 (1,188,928)
------------ ------------ ------------
UNAUDITED PRO FORMA NET INCOME............... $ 4,304,173 $ 10,741,025 $ 611,466
============ ============ ============
UNAUDITED PRO FORMA BASIC AND DILUTED NET
INCOME PER COMMON SHARE.................... $ 0.45 $ 1.21 $ 0.06
============ ============ ============
WEIGHTED AVERAGE NUMBER OF COMMON SHARES USED
IN COMPUTING NET INCOME (LOSS) PER COMMON
SHARE AND UNAUDITED PRO FORMA NET INCOME
PER COMMON SHARE:
Basic...................................... 9,628,348 8,901,818 11,025,410
============ ============ ============
Diluted.................................... 9,628,348 8,901,818 11,027,949
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-4
<PAGE> 67
MARINEMAX, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEAR ENDED DECEMBER 31, 1996, THE NINE-MONTH PERIOD ENDED
SEPTEMBER 30, 1997 AND THE YEAR ENDED SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL TOTAL
-------------------- PAID-IN RETAINED STOCKHOLDERS'
SHARES AMOUNT CAPITAL EARNINGS EQUITY
---------- ------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C>
BALANCE, January 1, 1996............ 9,264,541 $ 9,265 $ 590,673 $10,718,908 $11,318,846
Net Income.......................... -- -- -- 7,145,535 7,145,535
Capital contribution................ 412,390 412 20,588 -- 21,000
Distributions to stockholders....... -- -- -- (5,600,753) (5,600,753)
---------- ------- ----------- ----------- -----------
BALANCE, December 31, 1996.......... 9,676,931 9,677 611,261 12,263,690 12,884,628
Net Income.......................... -- -- -- 17,145,665 17,145,665
Redemption of common stock.......... (775,113) (775) (612,261) (5,486,964) (6,100,000)
Capital contribution................ -- -- 1,000 -- 1,000
Distributions to stockholders....... -- -- -- (633,455) (633,455)
---------- ------- ----------- ----------- -----------
BALANCE, September 30, 1997......... 8,901,818 8,902 -- 23,288,936 23,297,838
Net Loss............................ -- -- -- (577,462) (577,462)
Issuance of common stock............ 3,515,824 3,516 38,296,811 -- 38,300,327
Redemption of common stock.......... (86,198) (86) (149,914) -- (150,000)
Issuance of common stock in exchange
for property and equipment........ 2,268,984 2,269 14,928,397 -- 14,930,666
Contribution of former S Corporation
retained earnings................. -- -- 4,038,414 (4,038,414) --
Distributions to stockholders....... -- -- -- (9,466,184) (9,466,184)
---------- ------- ----------- ----------- -----------
BALANCE, September 30, 1998......... 14,600,428 $14,601 $57,113,708 $ 9,206,876 $66,335,185
========== ======= =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-5
<PAGE> 68
MARINEMAX, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE NINE-
FOR THE YEAR MONTH PERIOD FOR THE YEAR
ENDED ENDED ENDED
DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30,
1996 1997 1998
------------ ------------- -------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)......................................... $ 7,145,535 $ 17,145,665 $ (577,462)
Adjustments to reconcile net income to net cash (used in)
provided by operating activities:
Depreciation and amortization........................... 819,784 726,657 1,685,058
Deferred income tax (benefit) provision................. (594,899) 137,369 591,297
(Gain) loss on sale of property and equipment........... (17,054) 993 60,616
(Increase) decrease in --
Accounts receivable, net................................ (2,129,417) (2,785,080) (9,231,684)
Due from related parties................................ (481,623) (69,520) 640,632
Inventories............................................. (18,316,073) 5,035,675 9,434,118
Prepaids and other assets............................... 338,821 (191,410) (1,882,655)
Increase (decrease) in --
Accounts payable........................................ 1,738,263 1,899,839 100,069
Customer deposits....................................... (2,286,207) 1,196,761 1,022,563
Accrued expenses and other liabilities.................. 1,845,565 1,354,173 (275,404)
Settlement payable...................................... -- -- 15,000,000
------------ ------------ ------------
Net cash (used in) provided by operating activities... (11,937,305) 24,451,122 16,567,148
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash used in business acquisitions, net of cash
acquired................................................ -- -- (7,218,174)
Purchases of property and equipment....................... (1,633,308) (1,325,001) (3,665,422)
Proceeds from sale of property and equipment.............. 60,201 30,988 84,000
------------ ------------ ------------
Net cash used in investing activities................. (1,573,107) (1,294,013) (10,799,596)
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock.................................. 21,000 1,000 38,300,327
Redemption of common stock................................ -- -- (150,000)
Net borrowings (repayments) on notes payable to related
parties................................................. (114,433) 2,187,544 (5,785,729)
Borrowings on long-term debt.............................. 1,464,223 1,917,381 --
Repayments on long-term debt.............................. (1,187,350) (2,041,090) (10,122,305)
Net borrowings (repayments) on short-term borrowings...... 19,293,776 (15,911,114) (22,057,729)
Distributions to stockholders............................. (5,600,753) (470,455) (9,629,184)
------------ ------------ ------------
Net cash provided by (used in) financing activities..... 13,876,463 (14,316,734) (9,444,620)
------------ ------------ ------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS:....... 366,051 8,840,375 (3,677,068)
CASH AND CASH EQUIVALENTS, beginning of period.............. 2,331,508 2,697,559 11,537,934
------------ ------------ ------------
CASH AND CASH EQUIVALENTS, end of period.................... $ 2,697,559 $ 11,537,934 $ 7,860,866
============ ============ ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for
Interest................................................ $ 3,009,471 $ 2,763,240 $ 3,229,158
Income taxes............................................ $ 33,701 $ 35,745 $ 4,680,840
SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING
ACTIVITIES:
Issuance of common stock in exchange for property and
equipment............................................... -- -- $ 48,781,253
Assumption of debt (primarily inventory financing) in
conjunction with the acquisition of property and
equipment............................................... -- -- $ 33,850,587
Distributions declared but not yet paid................... -- $ 163,000 --
Long-term debt issued for redemption of common stock...... -- $ 6,100,000 --
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-6
<PAGE> 69
MARINEMAX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BUSINESS AND ORGANIZATION:
MarineMax, Inc. (a Delaware corporation) was incorporated in January 1998.
MarineMax, Inc. and subsidiaries (MarineMax or the Company) engage primarily in
the retail sale and service of new and used boats, motors, trailers, marine
parts and accessories. The Company currently operates through 40 retail
locations in nine states, consisting of Arizona, California, Florida, Georgia,
Minnesota, Nevada, North Carolina, Ohio and Texas.
In June 1998, the Company completed its initial public offering (IPO) of
4,780,569 shares of common stock. The Company sold 3,515,824 shares, and certain
stockholders sold 1,264,745 shares. Of these shares, 1,654,624 shares were sold
to the public at a price per share of $12.50 and 1,861,200 shares were sold to
Brunswick Corporation for $11.625 per share. The IPO generated net cash proceeds
of approximately $38.3 million, net of underwriting discounts and offering costs
of approximately $2.5 million.
In order to maintain consistency and comparability between periods
presented, certain amounts have been reclassified from the previously reported
financial statements to conform with the financial statement presentation of the
current period. 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.
2. ACQUISITIONS:
The Company has consummated a series of business combinations. On March 1,
1998, the Company acquired, in separate merger transactions, 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 Original Merged Companies) in exchange for
7,799,844 shares of the Company's common stock.
On July 7, 1998, the Company acquired, in separate merger transactions, all
of the issued and outstanding common stock of Cochran's Marine, Inc. and C & N
Marine Corporation (together Cochran's Marine) in exchange for 603,386 shares of
its common stock.
On July 30, 1998, the Company acquired in a merger transaction all of the
issued and outstanding common stock of Sea Ray of Wilmington, Inc. (f.k.a.
Skipper Bud's of North Carolina) in exchange for 412,390 shares of its common
stock.
These business combinations (collectively, the Pooled Companies) have been
accounted for under the pooling-of-interests method of accounting. Accordingly,
the financial statements of the Company have been restated to reflect the
operations as if the Pooled Companies had operated as one entity since
inception.
Cochran's Marine and Sea Ray of Wilmington, Inc. acquisitions generated
combined revenue of approximately $30.4 million and net income of approximately
$1.1 million prior to their July 7, 1998 and July 30, 1998 acquisition dates,
respectively. Cochran's Marine and Sea Ray of Wilmington, Inc. 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 stockholder compensation and
resulted in no or little recorded income tax expense.
On March 1, 1998, MarineMax effected business combinations in which it
acquired, in separate merger transactions, 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
Original Property Acquisitions) in exchange for 1,392,026 shares of the
Company's common stock. Additionally, on July 7, 1998, MarineMax acquired, in
separate merger transactions, the beneficial interests in C & N Realty LLC,
Walker Marina Realty, LLC, Marina Drive Realty I, LLC, and Marina Drive Realty
II, LLC (collectively,
F-7
<PAGE> 70
MARINEMAX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Cochran's LLCs) in exchange for 120,000 shares of the Company's common stock.
These acquisitions have been accounted for under the purchase method of
accounting.
On April 30, 1998, the Company acquired in a merger transaction all of the
issued and outstanding common stock of Stovall Marine, Inc (Stovall) 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 $5.3 million in goodwill, representing the excess
of the purchase price over the estimated fair value of the net assets acquired.
On September 3, 1998, the Company acquired the net assets of Brevard Boat
Sales, Inc. (Brevard) in exchange for approximately $1.1 million and 14,652
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 $1.1 million in goodwill, representing the excess of the purchase
price over the estimated fair value of the net assets acquired.
On September 15, 1998, the Company acquired the net assets, including the
retail location, of Sea Ray of Las Vegas (Vegas) in exchange for approximately
$3.5 million. The acquisition has been accounted for under the purchase method
of accounting, which resulted in the recognition of approximately $1.0 million
in goodwill, representing the excess of the purchase price over the estimated
fair value of the net assets acquired.
On September 30, 1998, the Company acquired the net assets of Treasure Cove
Marina, Inc. (Treasure Cove) in exchange for approximately $3.1 million and
250,000 shares of the Company's common stock. The asset purchase agreement calls
for the final purchase price to be determined based upon results from operations
for the period ended December 31, 1998. The acquisition has been accounted for
under the purchase method of accounting, which resulted in the recognition of an
estimated $8.1 million in goodwill, representing the excess of the estimated
purchase price over the estimated fair value of the net assets acquired. The
final purchase price could result in either a refund to the Company or an
additional payment of up to approximately $5.0 million.
The Original Property Acquisitions, Stovall, Cochran's LLCs, Brevard, Vegas
and Treasure Cove (collectively, the Acquired Companies) have been reflected in
the Company's financial statements subsequent to their respective acquisition
dates.
The Company's unaudited pro forma consolidated results of operations
assuming all significant 1998 acquisitions accounted for under the purchase
method of accounting had occurred on January 1, 1997 are as follows for the
nine-month period ended September 30, 1997 and the fiscal year ended September
30, 1998:
<TABLE>
<CAPTION>
FOR THE NINE-
MONTH PERIOD FOR THE YEAR
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
1997 1998
------------- -------------
<S> <C> <C>
Revenue............................................... $237,679,526 $346,729,581
Net income............................................ 18,474,044 2,605,230
Diluted earnings per share............................ $ 1.27 $ 0.18
</TABLE>
The unaudited pro forma results of operations are presented for
informational purposes only and may not necessarily reflect the future results
of operations of the Company or what the results of operations would have been
had the Company owned and operated these businesses as of January 1, 1997.
F-8
<PAGE> 71
MARINEMAX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
3. SIGNIFICANT ACCOUNTING POLICIES:
FISCAL YEAR
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. As a result, the accompanying financial statements present the nine-month
transition period, which began January 1, 1997 and ended September 30, 1997.
Results of operations (unaudited) for the nine-month period ended September 30,
1996 were as follows:
<TABLE>
<CAPTION>
FOR THE
NINE-MONTH
PERIOD ENDED
SEPTEMBER 30,
1996
-------------
<S> <C>
Revenue..................................................... $156,610,835
Cost of sales............................................... 117,513,908
------------
Gross profit........................................... 39,096,927
Selling, general, and administrative expenses............... 25,377,507
------------
Income from operations................................. 13,719,420
Interest expense, net....................................... 1,453,444
------------
Income before income tax provision.......................... 12,265,976
Income tax provision........................................ 660,930
------------
Net income............................................. $ 11,605,046
============
</TABLE>
CASH AND CASH EQUIVALENTS
For purposes of the consolidated statements of cash flows, the Company
considers all highly liquid investments with an original maturity of three
months or less to be cash equivalents.
INVENTORIES
New and used boat inventories are stated at the lower of cost, determined
on a specific-identification basis, or market. Parts and accessories are stated
at the lower of cost, determined on the first-in, first-out basis, or market.
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost and depreciated over their
estimated useful lives using the straight-line method. Useful lives for purposes
of computing depreciation are as follows:
<TABLE>
<CAPTION>
YEARS
-----
<S> <C>
Buildings and improvements.................................. 5-40
Machinery and equipment..................................... 5-10
Furniture and fixtures...................................... 5-10
Vehicles.................................................... 5
</TABLE>
The cost of property and equipment sold or retired and the related
accumulated depreciation are removed from the accounts at the time of
disposition, and any resulting gain or loss is included in the consolidated
statements of income. Maintenance, repairs and minor replacements are charged to
operations as incurred; major replacements and improvements are capitalized and
amortized over their useful lives.
F-9
<PAGE> 72
MARINEMAX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
GOODWILL AND OTHER ASSETS
Goodwill and other assets consist primarily of the cost of acquired
businesses in excess of the fair value of net assets acquired and other in
tangible assets. The cost in excess of the fair value of net assets is amortized
over forty years on a straight-line basis. Accumulated amortization of goodwill
was approximately $53,000 at September 30, 1998.
CUSTOMER DEPOSITS
Customer deposits primarily include amounts received from customers toward
the purchase of boats. These deposits are recognized as revenue when the related
boats are delivered to customers.
LONG-LIVED ASSETS
Statement of Financial Accounting Standards (SFAS) No. 121, "Accounting for
the Impairment of Long-lived Assets and Long-lived Assets to be Disposed
Of"(SFAS 121), requires that long-lived assets be reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount of
the asset in question may not be recoverable. The Company groups long-lived
assets by store location for purposes of assessing the recoverability of
carrying value and measuring potential impairment. SFAS 121 was adopted in 1996
and did not have a material effect on the Company's consolidated results of
operations, cash flows or financial position.
REVENUE RECOGNITION
Revenue from boat, motor and trailer sales and parts and service operations
is recognized at the time the boat, motor, trailer or part is delivered to or
accepted by the customer or service is completed. Revenue earned by the Company
for notes placed with financial institutions in connection with customer boat
financing is recognized when the related boat sale is recognized. Commissions
earned on credit life, accident and disability insurance sold on behalf of
third-party insurance companies are also recognized when the related boat sale
is recognized. Pursuant to negotiated agreements with financial institutions,
the Company is charged back for a portion of these fees should the customer
terminate the finance contract before it is outstanding for stipulated minimal
periods of time. The chargeback reserve, which was not material to the
consolidated financial statements taken as a whole as of September 30, 1997 or
1998, is based on the Company's experience for repayments or defaults on the
finance contracts.
Commissions earned on extended warranty service contracts sold on behalf of
unrelated third-party insurance companies are 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. The Company is charged
back for a portion of these commissions should the customer terminate the
service contract prior to its scheduled maturity. The chargeback reserve, which
was not material to the consolidated financial statements taken as a whole as of
September 30, 1997 or 1998, is based upon the Company's experience for
repayments or defaults on the service contracts.
ADVERTISING AND PROMOTIONAL COSTS
Advertising and promotional costs are expensed as incurred and are included
in selling, general and administrative expenses in the accompanying consolidated
statements of operations. Total advertising and promotional expenses
approximated $2,886,000, $2,662,000 and $3,443,000 for the year ended December
31, 1996, the nine-month period ended September 30, 1997 and the year ended
September 30, 1998, respectively.
F-10
<PAGE> 73
MARINEMAX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
INCOME TAXES AND UNAUDITED PRO FORMA INCOME TAX PROVISION
Certain subsidiaries of the Company elected S corporation status under the
provisions of the Internal Revenue Code prior to the business combinations
accounted for under the pooling-of-interests method of accounting. Accordingly,
income of these subsidiaries was passed through to the stockholders and these
subsidiaries historically recorded no provision for income taxes. The
accompanying consolidated statement of operations includes an unaudited pro
forma income tax provision assuming the subsidiaries had been taxed as C
corporations during that period. The pro forma income tax benefit disclosed for
the year ended September 30, 1998 is the result of a deferred tax liability
recorded on the conversion from S corporation to C corporation tax status of
certain subsidiaries of the Company (See Note 10).
The other subsidiaries have been taxed as C corporations and have followed
the liability method of accounting for income taxes in accordance with SFAS No.
109, "Accounting for Income Taxes" (SFAS 109). Under SFAS 109, deferred income
taxes are recorded based upon differences between the financial reporting and
tax bases of assets and liabilities and are measured using the enacted tax rates
and laws that will be in effect when the underlying assets are received or
liabilities are settled.
SUPPLIER AND CUSTOMER CONCENTRATION
Dealership Agreements
The Company has entered into dealership agreements with the Sea Ray
division of Brunswick Corporation, Boston Whaler, Inc., Mercury Marine and Baja
Marine Corporation (all subsidiaries or divisions of Brunswick
Corporation)(collectively, Brunswick). Approximately 88 percent of the Company's
new boat revenue during fiscal 1998 was derived from products acquired from
Brunswick. These agreements allow the Company to purchase, stock, sell and
service boats and products of Brunswick. These agreements also allow the Company
to use Brunswick's names, trade symbols and intellectual properties.
Although there are a limited number of manufacturers of the type of boats
and products that the Company sells, the Company believes that other suppliers
could provide similar boats and products on comparable terms. A change in
suppliers, however, could cause a potential loss of revenue, which would affect
operating results adversely. The Company's existing dealership agreements with
Brunswick and various other manufacturers are renewable subject to certain terms
and conditions in the agreements and expire in 1999 through 2008.
Concentrations of Credit Risks
Financial instruments, which potentially subject the Company to
concentrations of credit risk, consist principally of cash and cash equivalents
and accounts receivable. Concentrations of credit risk with respect to cash and
cash equivalents are limited primarily to financial institutions. Concentrations
of credit risk arising from receivables are limited primarily to manufacturers
and financial institutions.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's financial instruments consist of cash and cash equivalents,
accounts receivable and debt. The carrying amount of these financial instruments
approximates fair value due either to length of maturity or existence of
interest rates that approximate prevailing market rates unless otherwise
disclosed in these financial statements.
USE OF ESTIMATES AND ASSUMPTIONS
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and
F-11
<PAGE> 74
MARINEMAX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenue and expenses during
the reporting period. Actual results could differ from those estimates.
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 does not believe this statement will have any impact on
its consolidated financial statements.
4. ACCOUNTS RECEIVABLE:
Trade receivables consist of receivables from financial institutions, which
provide funding for customer boat financing and amounts due from financial
institutions earned from arranging financing with the Company's customers. These
receivables are normally collected within 30 days of the sale. Trade receivables
also include amounts due from customers on the sale of boats and parts and
service. Amounts due from manufacturers represent receivables for various
manufacturer programs and parts and service work performed pursuant to the
manufacturers' warranties. The accounts receivable balances consisted of the
following as of September 30, 1997 and 1998:
<TABLE>
<CAPTION>
SEPTEMBER 30, SEPTEMBER 30,
1997 1998
------------- -------------
<S> <C> <C>
Trade receivables......................................... $4,537,923 $ 7,991,846
Amounts due from manufacturers............................ 3,468,897 10,270,715
Other receivables......................................... 197,514 249,317
---------- -----------
$8,204,334 $18,511,878
========== ===========
</TABLE>
F-12
<PAGE> 75
MARINEMAX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
5. INVENTORIES:
Inventories consisted of the following as of September 30, 1997 and 1998:
<TABLE>
<CAPTION>
SEPTEMBER 30, SEPTEMBER 30,
1997 1998
------------- -------------
<S> <C> <C>
New boats, motors and trailers............................ $50,944,696 $65,462,656
Used boats, motors and trailers........................... 6,962,908 10,080,991
Parts, accessories and other.............................. 4,037,834 5,212,695
----------- -----------
$61,945,438 $80,756,342
=========== ===========
</TABLE>
6. PROPERTY AND EQUIPMENT:
Property and equipment consisted of the following as of September 30, 1997
and 1998:
<TABLE>
<CAPTION>
SEPTEMBER 30, SEPTEMBER 30,
1997 1998
------------- -------------
<S> <C> <C>
Land...................................................... $ 859,005 $ 7,774,418
Buildings and improvements................................ 3,639,135 13,577,625
Machinery and equipment................................... 3,398,142 5,966,441
Furniture and fixtures.................................... 2,087,579 2,614,183
Vehicles.................................................. 1,596,558 1,687,979
----------- -----------
11,580,419 31,620,646
Less -- Accumulated depreciation and amortization......... (5,678,419) (6,844,207)
----------- -----------
$ 5,902,000 $24,776,439
=========== ===========
</TABLE>
7. SHORT-TERM BORROWINGS:
On April 7, 1998, the Company executed an agreement for a new working
capital line of credit (the Line of Credit) with a financial institution under
which the Company refinanced the majority of its outstanding floor plan notes
payable. The maximum available borrowings under the Line of Credit are $105
million. The Line of Credit bears interest at LIBOR plus 125 basis points and
has a three-year term.
Short-term borrowings consisted of the following as of September 30, 1997,
and 1998:
<TABLE>
<CAPTION>
SEPTEMBER 30, SEPTEMBER 30,
1997 1998
------------- -------------
<S> <C> <C>
Line of Credit payable to financial institution, due in
April 2001, bearing interest due monthly at the 90 day
LIBOR rate plus 125 basis points (6.56% at September 30,
1998), collateralized by certain accounts receivables
and inventories......................................... $ -- $45,044,322
Floor plan notes payable due to financial institutions,
due when related boats are sold, bearing interest at
rates ranging from 11% to 11.5% at September 30, 1998,
collateralized by certain inventories................... 38,231,619 769,097
----------- -----------
$38,231,619 $45,813,419
=========== ===========
</TABLE>
The Company receives interest assistance directly from boat manufacturers,
including Brunswick. The interest assistance varies by manufacturer and may
include periods of free financing or reduced interest rate programs. The
interest assistance may be paid directly to the Company or the Company's lender
depending on the arrangements the manufacturer has established. Discontinuance
of these programs could result in an increase in interest expense.
F-13
<PAGE> 76
MARINEMAX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The maximum borrowings permitted and total available borrowings under the
short-term borrowings at September 30, 1998 were approximately $107 million and
$ 54.6 million, respectively. The weighted average interest rate on borrowings
outstanding under the short-term borrowings as of September 30, 1997 and 1998
was approximately 7.50% and 6.64%, respectively.
8. LONG-TERM DEBT:
Long-term debt consisted of the following as of September 30, 1997 and
1998:
<TABLE>
<CAPTION>
SEPTEMBER 30, SEPTEMBER 30,
1997 1998
------------- -------------
<S> <C> <C>
Various mortgage notes payable, due in monthly
installments ranging from $1,988 to $15,609, bearing
interest at rates ranging from 8.75% to 9.25%, maturing
May 2000 through May 2003, collateralized by property
and equipment........................................... $ 812,628 $3,055,608
Various notes payable, due in monthly installments ranging
from $390 to $3,900, bearing interest at rates ranging
from 4.9% to 10.25%, maturing April 1999 through May
2017, collateralized by certain company vehicles and
property and equipment.................................. 646,244 636,405
Unsecured note payable to former stockholder, paid in full
during the year ended September 30, 1998................ 5,955,419 --
----------- ----------
7,414,291 3,692,013
Less -- Current maturities................................ (1,047,272) (442,519)
----------- ----------
$ 6,367,019 $3,249,494
=========== ==========
</TABLE>
The aggregate maturities of long-term debt were as follows at September 30,
1998:
<TABLE>
<CAPTION>
PERIOD ENDING
SEPTEMBER 30, AMOUNT
- ------------- ----------
<S> <C>
1999............................................. $ 442,519
2000............................................. 550,438
2001............................................. 348,133
2002............................................. 1,838,176
2003............................................. 136,972
Thereafter....................................... 375,775
----------
$3,692,013
==========
</TABLE>
9. SETTLEMENT PAYABLE:
The Company and Brunswick Corporation disputed the applicability of the
change in control provisions in the dealership agreements of the Original Merged
Companies. In order to avoid a long, costly and disruptive dispute, the Company
and Brunswick Corporation entered into a settlement agreement on March 12, 1998,
under which Brunswick Corporation agreed not to challenge the change in control
provisions of the dealership agreements, and the Company agreed to pay Brunswick
Corporation $15 million by December 31, 1998. The $15 million payable to
Brunswick Corporation bears interest from March 12, 1998 and is payable
quarterly at the 30 day LIBOR rate plus 1.25% (6.63% at September 30, 1998).
F-14
<PAGE> 77
MARINEMAX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
10. INCOME TAXES:
Federal income taxes for those subsidiaries taxed as C corporations were as
follows for the year ended December 31, 1996, the nine-month period ended
September 30, 1997 and the year ended September 30, 1998:
<TABLE>
<CAPTION>
FOR THE NINE-
FOR THE YEAR MONTH PERIOD FOR THE YEAR
ENDED ENDED ENDED
DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30,
1996 1997 1998
------------ ------------- -------------
<S> <C> <C> <C>
Current..................................... $ 635,785 $458,454 $ 988,142
Deferred.................................... (593,756) 137,369 716,641
--------- -------- ----------
$ 42,029 $595,823 $1,704,783
========= ======== ==========
</TABLE>
Below is a reconciliation of the statutory federal income tax rate to the
Company's effective tax rate for the year ended December 31, 1996, the
nine-month period ended September 30, 1997, and for the year ended September 30,
1998:
<TABLE>
<CAPTION>
FOR THE NINE-
FOR THE YEAR MONTH PERIOD FOR THE YEAR
ENDED ENDED ENDED
DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30,
1996 1997 1998
------------ ------------- -------------
<S> <C> <C> <C>
Federal tax provision....................... 34% 35% 34%
State tax provision, net of federal
benefit................................... 6% 6% 6%
Net deferred tax liability recorded on the
conversion from S corporation to C
corporation tax status.................... -- -- 111%
S corporation income not subject to federal
and state income taxes.................... (45)% (44)% (6)%
Other....................................... 6% 6% 6%
--------- -------- ----------
Effective tax rate........................ 1% 3% 151%
========= ======== ==========
</TABLE>
Deferred income taxes reflect the impact of temporary differences between
the amount of assets and liabilities recognized for financial reporting purposes
and such amounts recognized for income tax purposes. The components of deferred
taxes are as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30, SEPTEMBER 30,
1997 1998
------------- -------------
<S> <C> <C>
Current deferred tax assets (liability):
Inventories............................................. $ -- $ 236,000
Accrued expenses........................................ 368,394 330,056
Net operating loss (NOL) carryforwards.................. 160,818 196,000
Conversion from LIFO to FIFO............................ -- (934,208)
Other................................................... -- 6,641
-------- ---------
Net current deferred tax asset (liability)........... $529,212 $(165,511)
======== =========
Long-term deferred tax asset:
Depreciation and amortization........................... $ -- $ 103,426
-------- ---------
Net long-term deferred tax asset..................... $ -- $ 103,426
======== =========
</TABLE>
F-15
<PAGE> 78
MARINEMAX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
As of September 30, 1998, the Company had NOL carryforwards of
approximately $490,000. The NOL carryforwards will be available to offset future
taxable income and will expire in various amounts from fiscal year 2009 through
fiscal year 2012.
Concurrent with the business combinations discussed in Note 1, the Company
recorded a deferred tax liability of approximately $1,250,000 for income taxes
that are payable by the Company upon conversion of certain of the subsidiaries
from S corporation to C corporation income tax status.
As of September 30, 1998, the Company estimated that it is more likely than
not that it will recognize the benefit of its deferred tax assets and,
accordingly, no valuation allowance has been recorded.
11. DUE TO RELATED PARTIES:
Due to related parties included non-collateralized demand notes, payable to
stockholders or their affiliated companies. These amounts were paid in full
during the year ended September 30, 1998.
12. STOCK SPLIT:
On April 5, 1998, the Board of Directors approved a stock split whereby
each outstanding share of Company's common stock was converted into
approximately 1.082 shares of common stock. This stock split has been
retroactively reflected in the accompanying consolidated financial statements.
13. STOCK AND OPTION PLANS:
On April 5, 1998 and April 30, 1998, respectively the Board of Directors
adopted and the stockholders approved the following stock option plans:
1998 Incentive Stock Plan (the Incentive Stock Plan) -- The Incentive Stock
Plan provides for the grant of incentive and non-qualified stock options to
acquire common stock of the Company, the direct grant of common stock, the grant
of stock appreciation rights and the grant of other cash awards to key
personnel, directors, consultants, independent contractors and others providing
valuable services to the Company. A maximum of the lesser of 4,000,000 shares or
15% of the then outstanding shares of common stock of the Company may be issued
under the Incentive Stock Plan. The Incentive Stock Plan terminates in April
2008, and options may be granted at any time during the life of the Incentive
Stock Plan. The date on which options vest and the exercise prices of options
are determined by the Board of Directors or the Plan Administrator.
The Incentive Stock Plan also includes an Automatic Grant Program providing
for the automatic grant of options (Automatic Options) to non-employee directors
of the Company. Under the Automatic Grant Program, each non-employee whose
election to the Board of Directors was proposed as of the date of the Company's
initial public offering received an Automatic Option to acquire 10,000 shares of
common stock on that date (an Initial Grant). Each subsequent newly elected
non-employee member of the Board of Directors will receive as an Initial Grant
an Automatic Option to acquire 5,000 shares of common stock on the date of his
or her first appointment or election to the Board of Directors. In addition, an
Automatic Option to acquire 2,500 shares of common stock will be granted to each
non-employee director at the meeting of the Board of Directors held immediately
after each annual meeting of stockholders (an Annual Grant). Each Initial Grant
will vest and become exercisable in a series of three equal and successive
installments with the first installment vested on the date of grant (or the date
of election to the Board of Directors, if later) and the next two installments
12 months and 24 months after the date of grant. Each Annual Grant will vest and
become exercisable 12 months after the date of grant. Each Automatic Option will
vest and become exercisable only if the optionholder has not ceased serving as a
director as of such vesting date. The exercise price per share of common stock
subject to an Initial Grant on the date of the Company's initial public offering
was equal to the initial public offering price per share and the exercise price
per share of common stock subject to other Automatic Options will be equal to
100% of the fair market value (as defined in the Incentive Stock Plan) of
F-16
<PAGE> 79
MARINEMAX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
the Company's common stock on the date such option is granted. Each Automatic
Option will expire on the tenth anniversary of the date on which such Automatic
Option was granted.
Employee Stock Purchase Plan (the Stock Purchase Plan) -- The Stock
Purchase Plan provides for up to 500,000 shares of common stock to be issued,
and is available to all regular employees of the Company who have completed at
least one year of continuous service.
The Stock Purchase Plan provides for implementation of up to 10 annual
offerings beginning on the first day of October in the years 1998 through 2007,
with each offering terminating on September 30 of the following year. Each
annual offering may be divided into two six-month offerings. For each offering,
the purchase price per share will be the lower of (i) 85% of the closing price
of the common stock on the first day of the offering or (ii) 85% of the closing
price of the common stock on the last day of the offering. The purchase price is
paid through periodic payroll deductions not to exceed 10% of the participant's
earnings during each offering period. However, no participant may purchase more
than $25,000 worth of common stock annually.
The Company accounts for its stock-based compensation plans under
Accounting Principles Board Opinion No. 25 ("APB 25"), under which no
compensation cost has been recognized. In October 1995, the FASB issued SFAS No.
123, "Accounting for Stock-Based Compensation" ("SFAS 123"), which was effective
for fiscal years beginning after December 15, 1995. SFAS 123 allows companies to
continue following the accounting guidance of APB 25, but requires pro forma
disclosure of net income and earnings per share for the effects on compensation
expense had the accounting guidance of SFAS 123 been adopted. The Company
adopted SFAS 123 for disclosure purposes during the year ended September 30,
1998. For SFAS 123 purposes, the fair value of each option grant has been
estimated as of the date of grant using the Black-Scholes option pricing model
with the following weighted average assumptions: risk-free interest rates
ranging from 5.62 to 5.78 percent, depending on the date of grant, expected life
of 10 years, dividend rate of zero percent, and expected volatility of 34
percent. Using these assumptions, the fair value of the stock options granted in
the year ended September 30, 1998, is approximately $7.7 million, which would be
amortized as compensation expense over the vesting period of the options. Had
compensation cost been determined consistent with SFAS 123, utilizing the
assumptions detailed above, the Company's net loss and net loss per share, as
reported would have been the following pro forma amounts:
<TABLE>
<CAPTION>
SEPTEMBER 30,
1998
-------------
<S> <C>
NET LOSS:
As reported............................................... $ (577,462)
===========
Pro forma................................................. $(1,683,258)
===========
DILUTED EARNINGS PER SHARE:
As reported............................................... $ (0.05)
===========
Pro forma................................................. $ (0.15)
===========
</TABLE>
A summary of the status of the Company's stock option plans as of September
30, 1998, and for the year then ended is presented in the table and narrative
below:
<TABLE>
<CAPTION>
WEIGHTED-AVERAGE
OPTIONS EXERCISE PRICE
--------- -----------------
<S> <C> <C>
Outstanding -- beginning of year......................... -- $ --
Granted.................................................. 1,626,128 12.37
---------
Outstanding end of year.................................. 1,626,128 12.37
=========
</TABLE>
F-17
<PAGE> 80
MARINEMAX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
- ------------------------------------------------------------------------------
WEIGHTED-
NUMBER AVERAGE
OUTSTANDING AS OF REMAINING WEIGHTED-
RANGE OF EXERCISE SEPTEMBER 30, CONTRACTUAL LIFE IN AVERAGE EXERCISE
PRICES 1998 YEARS PRICE
- ----------------- ----------------- ------------------- ----------------
<S> <C> <C> <C>
$10.00-10.75 137,765 9.77 $10.37
$12.25-12.50 1,408,363 9.67 $12.48
$ 13.75 80,000 9.66 $13.75
</TABLE>
As of September 30, 1998, there were 30,321 options that were exercisable
at a weighted average exercise price of $12.50. Generally, the options granted
have a term of ten years from the grant date and vest 20 percent per annum
beginning at the end of year three. No options were granted during the year
ended December 31, 1996 or the nine-month period ended September 30, 1997.
14. NET INCOME (LOSS) PER SHARE:
The Company adopted SFAS 128, "Earnings per Share" during the year ended
September 30, 1998. Accordingly, basic and diluted earnings per share ("EPS")
are shown on the face of the accompanying consolidated statements of operations.
The following is a reconciliation of the numerator and denominator used in the
basic and diluted EPS calculations:
<TABLE>
<CAPTION>
FOR THE FISCAL YEAR ENDED
SEPTEMBER 30, 1998
-----------------------------------------
LOSS SHARES PER SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT
----------- ------------- ---------
<S> <C> <C> <C>
Basic EPS:
Income available to common stockholders........ $(577,462) 11,025,410 $(0.05)
Effect of dilutive securities:
Options...................................... -- 2,539 --
--------- ---------- ------
Diluted EPS:
Income available to common stockholders........ $(577,462) 11,027,949 $(0.05)
========= ========== ======
</TABLE>
There were no dilutive securities granted or outstanding during the year
ended December 31, 1996 or the nine-months ended September 30, 1997.
Options to purchase 1,556,128 shares of common stock at prices ranging from
$10.75 to $13.75 per share were outstanding as of September 30, 1998, but were
not included in the computation of diluted EPS because the options' exercise
prices were greater than the average market price of the Company's common stock
since the options' grant dates.
15. COMMITMENTS AND CONTINGENCIES:
LEASE COMMITMENTS
The Company leases certain land, buildings, machinery, equipment and
vehicles related to its dealerships under non-cancelable operating leases.
Rental payments, including month-to-month rentals, were approximately
$1,473,000, $1,387,000 and $2,653,000 for the year ended December 31, 1996, the
nine-month period ended September 30, 1997 and the year ended September 30,
1998, respectively. Rental payments to related parties under both cancelable and
non-cancelable operating leases approximated $1,326,000, $1,085,000 and $226,000
for the year ended December 31, 1996, for the nine-month period ended September
30, 1997, and for the year ended September 30, 1998, respectively.
F-18
<PAGE> 81
MARINEMAX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Future minimum lease payments under non-cancelable operating leases at
September 30, 1998, were as follows:
<TABLE>
<CAPTION>
PERIOD ENDING
SEPTEMBER 30, AMOUNT
- ------------- ----------
<S> <C>
1999............................................. $1,829,142
2000............................................. 1,838,740
2001............................................. 1,635,403
2002............................................. 1,498,311
2003............................................. 1,225,773
----------
Thereafter....................................... $3,743,593
==========
</TABLE>
OTHER COMMITMENTS
The Company is party to various legal actions arising in the ordinary
course of business. The ultimate liability, if any, associated with these
matters was not determinable at September 30, 1998. While it is not feasible to
determine the outcome of these actions at this time, the Company does not
believe that these matters will have a material adverse effect on the Company's
consolidated financial condition, results of operations or cash flows.
The Company is subject to federal and state environmental regulations,
including rules relating to air and water pollution and the storage and disposal
of gasoline, oil, other chemicals and waste. The Company believes that it is in
compliance with such regulations.
16. EMPLOYEE 401(K) PROFIT SHARING PLANS:
Certain subsidiaries maintain defined contribution benefit plans (the
Plans). The Plans provide for matching contributions from the subsidiaries that
are limited to certain percentages of employee contributions. Additional
discretionary amounts may be contributed by the subsidiaries. The subsidiaries
contributed approximately $353,000, $234,000 and $390,000 to the Plans for the
year ended December 31, 1996, the nine-month period ended September 30, 1997 and
the year ended September 30, 1998, respectively.
Effective October 1, 1998, the Company adopted the MarineMax Inc. 401k
Profit Sharing Plan (the New Plan). Under the New Plan all employees as of
September 1, 1998 are eligible to participate. Employees hired subsequent to
September 1, 1998 must complete one year of service before they are eligible to
participate. Under the New Plan, the Company matches participants'
contributions, subject to a maximum of 2% of each participant's compensation.
17. MARINEMAX MOTOR YACHTS, INC.:
Subsequent to year-end, the Company formed a new subsidiary, MarineMax
Motor Yachts, Inc. (Motor Yachts). In October 1998, Motor Yachts entered in to a
Dealership Agreement with Hatteras Yachts, a Division of Genmar Industries, Inc.
The Agreement gives the company the rights to sell Hatteras Yachts throughout
the state of Florida, excluding the Florida Panhandle and became the U.S.
distributor for Hatteras products over 74 feet. In addition, Motor Yachts
acquired the net assets of Woods & Oviatt, Inc., a prominent yacht brokerage
operation, in exchange for approximately $1.0 million. The final purchase price
is subject to adjustment based on various factors, including the calendar 1998
earnings of Woods & Oviatt, Inc. The acquisition has been accounted for under
the purchase method of accounting, which resulted in the recognition of
approximately $1.0 million in goodwill, representing the excess of the purchase
price over the estimated fair value of the net assets acquired.
F-19
<PAGE> 82
MARINEMAX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
18. SUBSEQUENT EVENT:
On December 21, 1998, a lawsuit was filed against the Company and certain
officers and directors alleging various matters in connection with the Company's
acquisition of Harrison's Boat Center, Inc. and Harrison's Marine Center of
Arizona, Inc. The Company believes the lawsuit is without merit and that the
ultimate outcome will have no material impact on the Company's financial
position taken as a whole.
F-20
<PAGE> 83
------------------------------------------------------
------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE INFORMATION OR MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS IN CONNECTION WITH THE OFFER
MADE HEREBY. IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE
SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY
SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF
ANY DATE SUBSEQUENT TO THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 3
Risk Factors.......................... 7
Development of the Company............ 20
Price Range of Common Stock........... 21
Dividend Policy....................... 21
Selected Financial Data............... 22
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 23
Business.............................. 29
Management............................ 47
Principal Stockholders................ 55
Certain Transactions and
Relationships....................... 57
Description of Capital Stock.......... 59
Plan of Distribution.................. 61
Legal Opinions........................ 62
Experts............................... 62
Additional Information................ 62
</TABLE>
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
5,000,000 SHARES OF
COMMON STOCK
1,000,000 SHARES OF
PREFERRED STOCK
MARINEMAX, INC.
--------------------
PROSPECTUS
--------------------
, 1998
------------------------------------------------------
------------------------------------------------------
<PAGE> 84
[ALTERNATE PAGE]
PROSPECTUS
MARINEMAX, INC.
COMMON STOCK
PREFERRED STOCK
------------------------
This Prospectus, as appropriately amended or supplemented, may be used from
time to time principally by persons who have received shares of Common Stock,
$0.001 par value, and/or shares of Preferred Stock, $0.001 par value, (the
"Shares"), of MarineMax, Inc. (the "Company") in mergers or acquisitions of
other businesses or properties made by the Company, or their transferees or
pledgees, and who wish to offer and sell such Shares (such persons are herein
referred to as the "Selling Stockholder" or "Selling Stockholders") in
transactions in which they and any broker-dealer through whom such Shares are
sold may be deemed to be underwriters within the meaning of the Securities Act
of 1933, as amended (the "Securities Act"), as more fully described herein. The
Company will not receive any of the proceeds from the sale of Shares by the
Selling Stockholders. Any commissions paid or concessions allowed to any
broker-dealer, and, if any broker-dealer purchases such Shares as principal, any
profits received on the resale of such Shares, may be deemed to be underwriting
discounts and commissions under the Securities Act. Printing, certain legal,
filing and other similar expenses of this offering will be paid by the Company.
Selling Stockholders will bear all other expenses of this offering, including
brokerage fees, any underwriting discounts, or commissions.
The Company's Common Stock is traded on the New York Stock Exchange under
the symbol "HZO" Application will be made to list the shares of Common Stock and
Preferred Stock offered hereby on the New York Stock Exchange. The last reported
sale price of the Company's Common Stock on the New York Stock Exchange on
December 28, 1998 was $7.94.
FOR INFORMATION CONTAINING CERTAIN FACTORS RELATING TO THIS OFFERING, SEE
"RISK FACTORS," BEGINNING ON PAGE 7.
------------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Prospectus is , 1998
<PAGE> 85
[ALTERNATE PAGE]
PLAN OF DISTRIBUTION
This Prospectus, as appropriately amended or supplemented, may be used from
time to time principally by persons who have received shares of Common Stock,
Preferred Stock, or both in acquisitions made by the Company of other businesses
or properties, or their transferees or pledgees, who wish to offer and sell such
Shares (such persons are herein referred to as the "Selling Stockholder" or
"Selling Stockholders") in transactions in which they and any person acting on
their behalf through whom such Shares are sold may be deemed to be underwriters
within the meaning of the Securities Act. The Company will receive none of the
proceeds from any such sales. The Company will pay substantially all of the
expenses incident to this offering of the Shares by the Selling Stockholders to
the public other than commissions and discounts of underwriters, brokers,
dealers, or agents.
There presently are no arrangements or understandings, formal or informal,
pertaining to the distribution of the Shares described herein. Upon the Company
being notified by a Selling Stockholder that any material arrangements have been
entered into for the sale of Shares, to the extent required, the Company will
file, during any period in which offers or sales are being made, one or more
supplements to this Prospectus to set forth the names of Selling Stockholders
and any other material information with respect to the plan of distribution not
previously disclosed. In addition, any Shares which qualify for sale pursuant to
Section 4 of, or Rules 144 or 144A under, the Securities Act may be sold under
such provisions rather than pursuant to this Prospectus.
Selling Stockholders may sell the Shares being offered hereby from time to
time in transactions (which may involve crosses and block transactions) on the
New York Stock Exchange in negotiated transactions or otherwise at market prices
prevailing at the time of the sale or at negotiated prices or in transactions
directly to one or more purchasers, including pledgees in privately negotiated
transactions (including sales pursuant to pledges). Selling Stockholders may
sell some or all of the shares in transactions involving broker-dealers, who may
act either as agent or as principal. Broker-dealers participating in such
transactions as agent may receive commissions from Selling Stockholders (and, if
they act as agent for the purchaser of such Shares, from such purchaser), such
commissions computed in appropriate cases in accordance with the applicable
rules of the New York Stock Exchange, which commissions may be at negotiated
rates where permissible under such rules.
Participating broker-dealers may agree with Selling Stockholders to sell a
specified number of Shares at a stipulated price per share and, to the extent
such broker-dealer is unable to do so acting as an agent for Selling
Stockholders, to purchase as principal any unsold Shares at the price required
to fulfill the broker-dealer's commitment to Selling Stockholders. In addition
or alternatively, Shares may be sold by Selling Stockholders and/or by or
through other broker-dealers in special offerings or secondary distributions
pursuant to and in compliance with the governing rules of the New York Stock
Exchange, and in connection therewith commissions in excess of the customary
commissions prescribed by the rules of New York Stock Exchange may be paid to
participating broker-dealers, or, in the case of certain secondary
distributions, a discount or concession from the offering price may be allowed
to participating broker-dealers in excess of the customary commission.
Broker-dealers who acquire Shares as principal may thereafter resell such Shares
from time to time in transactions (which may involve crosses and block
transactions and which may involve sales to or through other broker-dealers,
including transactions of the nature described in the preceding two sentences)
on New York Stock Exchange, in negotiated transactions or otherwise, at market
prices prevailing at the time of sale or at negotiated prices, and in connection
with such resales may pay to or receive commissions from the purchaser of such
Shares.
Selling Stockholders will be subject to applicable provisions of the
Exchange Act and the rules and regulations thereunder, including without
limitation Regulation M, which provisions may limit the timing of purchases and
sales of any of the Shares by the Selling Stockholders. All of the foregoing may
affect the marketability of the Shares.
<PAGE> 86
[ALTERNATE PAGE]
The Company may agree to indemnify each Selling Stockholder as an
underwriter under the Securities Act against certain liabilities, including
liabilities arising under the Securities Act. Each Selling Stockholder may
indemnify any broker-dealer that participates in transactions involving sales of
the Shares against certain liabilities, including liabilities arising under the
Securities Act.
LEGAL MATTERS
The validity of the shares offered hereby will be passed upon for the
Company by O'Connor, Cavanagh, Anderson, Killingsworth & Beshears, a
Professional Association, Phoenix, Arizona ("O'Connor Cavanagh"). Members of
O'Connor Cavanagh own a total of 12,311 shares of the Company's Common Stock.
Robert S. Kent, a senior member of O'Connor Cavanagh, is a director of the
Company.
EXPERTS
The consolidated financial statements included in this Prospectus have been
audited by Arthur Andersen LLP, independent certified public accountants, as
indicated in their report with respect thereto, and are included herein in
reliance upon the authority of said firm as experts in giving said reports.
ADDITIONAL INFORMATION
The Company has filed with the Commission a Registration Statement under
the Securities Act with respect to the Common Stock offered by this Prospectus.
This Prospectus does not contain all of the information set forth in the
Registration Statement and the exhibits thereto. For further information with
respect to the Company and the Common Stock offered by this Prospectus,
reference is made to the Registration Statement, including the exhibits thereto.
Statements contained in this Prospectus as to the contents of any contract or
other document referred to are not necessarily complete, and in each instance
reference is made to the copy of such contract or other document filed as an
exhibit to the Registration Statement, each such statement being qualified in
all respects by such reference. The Registration Statement, together with
exhibits thereto, may be inspected at the public reference facilities of the
Commission at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549 and at
the following Regional Offices of the Commission: New York Regional Office,
Seven World Trade Center, New York, New York 10048, and Chicago Regional Office,
500 West Madison Street, Chicago, Illinois 60661. Copies of the material
contained therein may be obtained at prescribed rates from the Commission's
public reference facilities in Washington, D.C. The public may obtain
information on the operation of the Public Reference Room by calling the
Commission at 1-800-SEC-0330. The Commission also maintains a Web site that
contains reports, proxy and information statements and other materials that are
filed through the Commission's Electronic Data Gathering, Analysis, and
Retrieval system. This Web site can be accessed at http://www.sec.gov.
<PAGE> 87
[ALTERNATE PAGE]
------------------------------------------------------
------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE INFORMATION OR MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS IN CONNECTION WITH THE OFFER
MADE HEREBY. IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE
SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY
SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF
ANY DATE SUBSEQUENT TO THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 3
Risk Factors.......................... 7
Development of the Company............ 20
Price Range of Common Stock........... 21
Dividend Policy....................... 21
Selected Financial Data............... 22
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 23
Business.............................. 29
Management............................ 47
Principal Stockholders................ 55
Certain Transactions and
Relationships....................... 57
Description of Capital Stock.......... 59
Plan of Distribution.................. 61
Legal Opinions........................ 62
Experts............................... 62
Additional Information................ 62
</TABLE>
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
5,000,000 SHARES OF
COMMON STOCK
1,000,000 SHARES OF
PREFERRED STOCK
MARINEMAX, INC.
--------------------
PROSPECTUS
--------------------
, 1998
------------------------------------------------------
------------------------------------------------------
<PAGE> 88
PART II.
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Restated Certificate of Incorporation and Bylaws of the Registrant
provide that the Registrant will indemnify and advance expenses, to the fullest
extent permitted by the Delaware General Corporation Law, to each person who is
or was a director or officer of the Registrant, or who serves or served any
other enterprise or organization at the request of the Registrant (an
"Indemnitee").
Under Delaware law, to the extent that an Indemnitee is successful on the
merits in defense of a suit or proceeding brought against him or her by reason
of the fact that he or she is or was a director, officer, or agent of the
Registrant, or serves or served any other enterprise or organization at the
request of the Registrant, the Registrant shall indemnify him or her against
expenses (including attorneys' fees) actually and reasonably incurred in
connection with such action.
If unsuccessful in defense of a third-party civil suit or a criminal suit,
or if such a suit is settled, an Indemnitee may be indemnified under Delaware
law against both (i) expenses, including attorney's fees, and (ii) judgments,
fines, and amounts paid in settlement if he or she acted in good faith and in a
manner he or she reasonably believed to be in, or not opposed to, the best
interests of the Registrant, and, with respect to any criminal action, had no
reasonable cause to believe his or her conduct was unlawful.
If unsuccessful in defense of a suit brought by or in the right of the
Registrant, where the suit is settled, an Indemnitee may be indemnified under
Delaware law only against expenses (including attorneys' fees) actually and
reasonably incurred in the defense or settlement of the suit if he or she acted
in good faith and in a manner he or she reasonably believed to be in, or not
opposed to, the best interests of the Registrant except that if the Indemnitee
is adjudged to be liable for negligence or misconduct in the performance of his
or her duty to the Registrant, he or she cannot be made whole even for expenses
unless a court determines that he or she is fully and reasonably entitled to
indemnification for such expenses.
Also under Delaware law, expenses incurred by an officer or director in
defending a civil or criminal action, suit, or proceeding may be paid by the
Registrant in advance of the final disposition of the suit, action, or
proceeding upon receipt of an undertaking by or on behalf of the officer or
director to repay such amount if it is ultimately determined that he or she is
not entitled to be indemnified by the Registrant. The Registrant may also
advance expenses incurred by other employees and agents of the Registrant upon
such terms and conditions, if any, that the Board of Directors of the Registrant
deems appropriate.
ITEM 21. EXHIBITS.
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
- ------- -------
<S> <C>
3.1 Restated Certificate of Incorporation of the Registrant(1)
3.2 Bylaws of the Registrant(1)
4 Specimen of Stock Certificate(1)
5 Opinion of O'Connor, Cavanagh, Anderson, Killingsworth &
Beshears, a professional association
10.1(a) Merger Agreement between Registrant and its acquisition
subsidiary and Bassett Boat Company of Florida and Richard
Bassett(1)
10.1(b) Merger Agreement between Registrant and its acquisition
subsidiary and 11502 Dumas, Inc. d/b/a Louis DelHomme Marine
and its stockholders(1)
10.1(c) Merger Agreement between Registrant and its acquisition
subsidiary and Gulfwind USA, Inc. and its stockholders(1)
10.1(d) Merger Agreement between Registrant and its acquisition
subsidiary and Gulfwind South, Inc. and its stockholders(1)
</TABLE>
II-1
<PAGE> 89
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
- ------- -------
<S> <C>
10.1(e) Merger Agreement between Registrant and its acquisition
subsidiary and Harrison's Boat Center, Inc. and its
stockholders(1)
10.1(f) Merger Agreement between Registrant and its acquisition
subsidiary and Harrison's Marine Centers of Arizona, Inc.
and its stockholders(1)
10.1(g) Merger Agreement between Registrant and its acquisition
subsidiary and Stovall Marine, Inc. and its stockholders(1)
10.1(h) Agreement of Merger and Plan of Reorganization dated as of
the 7th day of July, 1998 by and among MarineMax, Inc., C &
N Acquisition Corp. (a subsidiary of MarineMax, Inc.), C & N
Marine Corporation and the Stockholders named therein(2)
10.1(i) 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(2)
10.1(j) Asset Purchase Agreement between Registrant and Treasure
Cove Marina, Inc.(3)
10.2(a) Contribution Agreement between Registrant and Bassett Boat
Company and its owner(1)
10.2(b) Contribution Agreement between Registrant and Bassett
Realty, L.L.C. and its owner(1)
10.2(c) Contribution Agreement between Registrant and Gulfwind South
Realty, L.L.C. and its owners(1)
10.2(d) Contribution Agreement between Registrant and Harrison's
Realty, L.L.C. and its owners(1)
10.2(e) Contribution Agreement between Registrant and Harrison's
Realty California, L.L.C. and its owners(1)
10.3(a) Employment Agreement between Registrant and William H.
McGill Jr.(1)
10.3(b) Employment Agreement between Registrant and Michael H.
McLamb(1)
10.3(c) Employment Agreement between Registrant and Richard R.
Bassett(1)
10.3(d) Employment Agreement between Registrant and Paul Graham
Stovall(1)
10.3(e) Employment Agreement between Registrant and David L.
Cochran(4)
10.3(f) Employment Agreement between Registrant and David H.
Pretasky(4)
10.4 1998 Incentive Stock Plan(1)
10.5 1998 Employee Stock Purchase Plan(1)
10.6 Settlement Agreement between Brunswick Corporation and
Registrant(1)
10.7 Letter of Intent between Registrant and Stovall(1)
10.8 Restated Agreement Relating to the Purchase of MarineMax
Common Stock between Registrant and Brunswick Corporation,
dated as of April 28, 1998(1)
10.9 Stockholders' Agreement among Registrant, Brunswick
Corporation, and Senior Founders of Registrant, dated April
28, 1998(1)
10.10 Governance Agreement between Registrant and Brunswick
Corporation, dated April 28, 1998(1)
10.11 Agreement Relating to Acquisitions between Registrant and
Brunswick Corporation, dated April 28, 1998(1)
10.12 Form of Sea Ray Sales and Service Agreement(1)
10.13 Loan and Security Agreement between Registrant and
NationsCredit Distribution Finance, Inc.(1)
10.14 Guaranty and Security Agreement of NationsCredit
Distribution Finance, Inc.(1)
10.15 Guaranty and Security Agreement of NationsCredit
Distribution Finance, Inc. by Stovall Marine, Inc.(1)
21 List of Subsidiaries(4)
23.1 Consent of O'Connor, Cavanagh, Anderson, Killingsworth &
Beshears, a professional association (included in Exhibit 5)
23.2 Consent of Arthur Andersen LLP
24 Power of Attorney of Directors and Executive Officers
(included on the Signature Page of the Registration
Statement)
27 Financial Data Schedule(4)
</TABLE>
II-2
<PAGE> 90
- ---------------
(1) Incorporated by reference to Registration Statement on the Registrant's Form
S-1 (Registration 333-47873)
(2) Incorporated by reference to Registrant's Current Report on Form 8-K dated
July 7, 1998, as filed on July 20, 1998
(3) Incorporated by reference to Registrant's Current Report on Form 8-K dated
September 30, 1998, as filed on October 20, 1998
(4) Incorporated by reference to Registrant's Form 10-K dated September 30, 1998
as filed on December 29, 1998.
(b) Financial Statement Schedules
All other schedules have been omitted on the basis of immateriality or
because such schedules are not otherwise applicable.
ITEM 22. UNDERTAKINGS.
(a) The undersigned Registrant hereby undertakes that:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933 (the "Act").
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low and high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than 20 percent change in
the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement.
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement.
(2) That, for the purpose of determining any liability under the Act,
each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial bona fide
offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(c) (1) The undersigned registrant hereby undertakes as follows: that prior
to any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration
II-3
<PAGE> 91
form with respect to reofferings by persons who may be deemed underwriters, in
addition to the information called for by the other items of the applicable
form.
(2) The registrant undertakes that every prospectus: (i) that is filed
pursuant to paragraph (1) immediately preceding, or (ii) that purports to meet
the requirements of Section 10(a)(3) of the Act and is used in connection with
an offering of securities subject to Rule 415, will be filed as a part of an
amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(d) Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers, and controlling persons of the registrant
pursuant to the foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer, or controlling person of the registrant, in the
successful defense of any action, suit, or proceeding) is asserted by such
director, officer, or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
(e) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-4
<PAGE> 92
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Clearwater, State of
Florida, on December 29, 1998.
MARINEMAX, INC.
By: /s/ WILLIAM H. MCGILL JR.
------------------------------------
William H. McGill Jr.
President
In accordance with the requirements of the Securities Act of 1933, this
registration statement was signed by the following persons in the capacities and
on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ WILLIAM H. MCGILL JR. Chairman of the Board, December 29, 1998
- ----------------------------------------------------- President, Chief Executive
William H. McGill Jr. Officer, and Director
(Principal Executive
Officer)
/s/ MICHAEL H. MCLAMB Vice President, Chief December 29, 1998
- ----------------------------------------------------- Financial Officer,
Michael H. McLamb Secretary, and Treasurer
(Principal Financial and
Accounting Officer)
/s/ RICHARD R. BASSETT Executive Vice President and December 29, 1998
- ----------------------------------------------------- Director
Richard R. Bassett
/s/ PAUL GRAHAM STOVALL Senior Vice President and December 29, 1998
- ----------------------------------------------------- Director
Paul Graham Stovall
Director
- -----------------------------------------------------
Richard C. LaManna Jr.
/s/ ROBERT S. KANT Director December 29, 1998
- -----------------------------------------------------
Robert S. Kant
/s/ R. DAVID THOMAS Director December 29, 1998
- -----------------------------------------------------
R. David Thomas
/s/ STEWART TURLEY Director December 29, 1998
- -----------------------------------------------------
Stewart Turley
</TABLE>
II-5
<PAGE> 93
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
- ------- -------
<S> <C>
3.1 Restated Certificate of Incorporation of the Registrant(1)
3.2 Bylaws of the Registrant(1)
4 Specimen of Stock Certificate(1)
5 Opinion of O'Connor, Cavanagh, Anderson, Killingsworth &
Beshears, a professional association
10.1(a) Merger Agreement between Registrant and its acquisition
subsidiary and Bassett Boat Company of Florida and Richard
Bassett(1)
10.1(b) Merger Agreement between Registrant and its acquisition
subsidiary and 11502 Dumas, Inc. d/b/a Louis DelHomme Marine
and its stockholders(1)
10.1(c) Merger Agreement between Registrant and its acquisition
subsidiary and Gulfwind USA, Inc. and its stockholders(1)
10.1(d) Merger Agreement between Registrant and its acquisition
subsidiary and Gulfwind South, Inc. and its stockholders(1)
10.1(e) Merger Agreement between Registrant and its acquisition
subsidiary and Harrison's Boat Center, Inc. and its
stockholders(1)
10.1(f) Merger Agreement between Registrant and its acquisition
subsidiary and Harrison's Marine Centers of Arizona, Inc.
and its stockholders(1)
10.1(g) Merger Agreement between Registrant and its acquisition
subsidiary and Stovall Marine, Inc. and its stockholders(1)
10.1(h) Agreement of Merger and Plan of Reorganization dated as of
the 7th day of July, 1998 by and among MarineMax, Inc., C &
N Acquisition Corp. (a subsidiary of MarineMax, Inc.), C & N
Marine Corporation and the Stockholders named therein(2)
10.1(i) 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(2)
10.1(j) Asset Purchase Agreement between Registrant and Treasure
Cove Marina, Inc.(3)
10.2(a) Contribution Agreement between Registrant and Bassett Boat
Company and its owner(1)
10.2(b) Contribution Agreement between Registrant and Bassett
Realty, L.L.C. and its owner(1)
10.2(c) Contribution Agreement between Registrant and Gulfwind South
Realty, L.L.C. and its owners(1)
10.2(d) Contribution Agreement between Registrant and Harrison's
Realty, L.L.C. and its owners(1)
10.2(e) Contribution Agreement between Registrant and Harrison's
Realty California, L.L.C. and its owners(1)
10.3(a) Employment Agreement between Registrant and William H.
McGill Jr.(1)
10.3(b) Employment Agreement between Registrant and Michael H.
McLamb(1)
10.3(c) Employment Agreement between Registrant and Richard R.
Bassett(1)
10.3(d) Employment Agreement between Registrant and David L.
Cochran(4)
10.3(e) Employment Agreement between Registrant and David H.
Pretasky(4)
10.3(h) Employment Agreement between Registrant and Paul Graham
Stovall(1)
10.4 1998 Incentive Stock Plan(1)
10.5 1998 Employee Stock Purchase Plan(1)
10.6 Settlement Agreement between Brunswick Corporation and
Registrant(1)
10.7 Letter of Intent between Registrant and Stovall(1)
10.8 Restated Agreement Relating to the Purchase of MarineMax
Common Stock between Registrant and Brunswick Corporation,
dated as of April 28, 1998(1)
10.9 Stockholders' Agreement among Registrant, Brunswick
Corporation, and Senior Founders of Registrant, dated April
28, 1998(1)
10.10 Governance Agreement between Registrant and Brunswick
Corporation, dated April 28, 1998(1)
</TABLE>
<PAGE> 94
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
- ------- -------
<S> <C>
10.11 Agreement Relating to Acquisitions between Registrant and
Brunswick Corporation, dated April 28, 1998(1)
10.12 Form of Sea Ray Sales and Service Agreement(1)
10.13 Loan and Security Agreement between Registrant and
NationsCredit Distribution Finance, Inc.(1)
10.14 Guaranty and Security Agreement of NationsCredit
Distribution Finance, Inc.(1)
10.15 Guaranty and Security Agreement of NationsCredit
Distribution Finance, Inc. by Stovall Marine, Inc.(1)
21 List of Subsidiaries(4)
23.1 Consent of O'Connor, Cavanagh, Anderson, Killingsworth &
Beshears, a professional association (included in Exhibit 5)
23.2 Consent of Arthur Andersen LLP
24 Power of Attorney of Directors and Executive Officers
(included on the Signature Page of the Registration
Statement)
27 Financial Data Schedule(4)
</TABLE>
- ---------------
(1) Incorporated by reference to Registration Statement on the Registrant's Form
S-1 (Registration 333-47873).
(2) Incorporated by reference to Registrant's Current Report on Form 8-K dated
July 7, 1998, as filed on July 20, 1998.
(3) Incorporated by reference to Registrant's Current Report on Form 8-K dated
September 30, 1998, as filed on October 20, 1998.
(4) Incorporated by reference to Registrant's Form 10-K dated September 30,
1998, as filed on December 29, 1998.
<PAGE> 1
EXHIBIT 5
The Law Offices of
O'CONNOR, CAVANAGH, ANDERSON, KILLINGSWORTH & BESHEARS
One East Camelback Road, Suite 1100
Phoenix, Arizona 85012
Telephone: (602) 263-2400
Fax: (602) 263-2900
December 29, 1998
MarineMax, Inc.
18167 U.S. 19 North
Suite 499
Clearwater, Florida 33764
RE: REGISTRATION STATEMENT ON FORM S-4
Ladies and Gentlemen:
As special legal counsel to MarineMax, Inc., a Delaware corporation (the
"Company"), we have assisted in the preparation of the Company's Registration
Statement on Form S-4 to be filed on or about December 30, 1998 with the
Securities and Exchange Commission (the "Registration Statement"), in connection
with the registration under the Securities Act of 1933, as amended, of shares of
common stock, par value $.001 per share, and shares of serial preferred stock,
par value $.001 per share, of the Company covered by the Registration Statement
(the "Shares"). The facts, as we understand them, are set forth in the
Registration Statement.
With respect to the opinion set forth below, we have examined originals,
certified copies, or copies otherwise identified to our satisfaction as being
true copies, only of the following:
A. The Restated Certificate of Incorporation of the Company, as filed
with the Secretary of State of the State of Delaware on March 5, 1998;
B. The Bylaws of the Company, as amended through the date hereof;
C. The Registration Statement; and
<PAGE> 2
MarineMax, Inc.
December 29, 1998
Page 2
D. The resolutions of the Board of Directors of the Company relating
to the organization of the Company and the approval of the filing of the
Registration Statement and the transactions in connection therewith.
Subject to the assumptions that (i) the documents and signatures
examined by us are genuine and authentic and (ii) the persons executing the
documents examined by us have the legal capacity to execute such documents, and
subject to the further limitations and qualifications set forth below, it is our
opinion that, when (a) the Registration Statement as then amended shall have
been declared effective by the Commission, (b) with respect to any shares of
serial preferred stock to be issued pursuant to the Registration Statement, all
actions required by law to authorize and to establish the designations, powers,
preferences, and rights of any series of such serial preferred stock have been
taken, and (c) the Shares have been duly issued, executed, authenticated,
delivered, paid for and sold by the Company as described in the Registration
Statement, the Shares will be validly issued, fully paid and nonassessable.
Please be advised that we are members of the State Bar of Arizona, and
our opinion is limited to the legality of matters under the laws of the State of
Arizona and the General Corporation Laws of the State of Delaware. Further, our
opinion is based solely upon existing laws, rules and regulations, and we
undertake no obligation to advise you of any changes that may be brought to our
attention after the date hereof.
We hereby expressly consent to any reference to our firm in the
Registration Statement, inclusion of this Opinion as an exhibit to the
Registration Statement, and to the filing of this Opinion with any other
appropriate governmental agency.
Very truly yours,
/s/ O'Connor, Cavanagh, Anderson
Killingsworth & Beshears
<PAGE> 1
EXHIBIT 23.2
ARTHUR ANDERSEN LLP
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
As independent certified public accountants, we hereby consent to the use of our
report (and to all references to our firm) included in or made a part of this
Registration Statement.
ARTHUR ANDERSEN LLP
TAMPA, FLORIDA
DECEMBER 28, 1998
