<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1999
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________________ to __________________
Commission File No. 1-14173
MARINEMAX, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 59-3496957
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification
Number)
18167 U.S. 19 NORTH, SUITE 499
Clearwater, Florida 33764
(Address of principal executive offices) (ZIP Code)
727-531-1700
(Registrant's telephone number, including area code)
Indicate by check whether the registrant: (1) has filed all reports to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the Registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
Yes X No
The number of outstanding shares of the registrant's Common Stock on April 30,
1999 was 15,085,875
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MARINEMAX, INC.
Table of Contents
Item No. Page
PART I FINANCIAL INFORMATION
1. Financial Statements (unaudited):
Condensed Consolidated Results of Operations
For the Three-Month and Six-Month Periods Ended
March 31, 1998 and March 31, 1999................................3
Condensed Consolidated Balance Sheets as of
September 30, 1998 and March 31, 1999............................4
Condensed Consolidated Statements of Cash Flows
For the Six-Month Periods Ended
March 31, 1998 and March 31, 1999................................5
Notes to Condensed Consolidated Financial Statements................7
2. Management's Discussion and Analysis of Results of Operations
and Financial Condition............................................10
PART II OTHER INFORMATION
1. Legal Proceedings....................................................15
2. Changes in Securities and Use of Proceeds............................15
3. Defaults Upon Senior Securities......................................15
4. Submission of Matters to Vote of Security Holders....................15
5. Other Information....................................................15
6. Exhibits and Reports on Form 8-K.....................................15
7. Signatures...........................................................16
2
<PAGE> 3
ITEM 1. FINANCIAL STATEMENTS
MARINEMAX, INC. AND SUBSIDIARIES
Condensed Consolidated Results of Operations
(Unaudited)
<TABLE>
<CAPTION>
For the Three-Month Period For the Six-Month Period Ended
Ended March 31, March 31,
-------------------------------- ----------------------------------
1998 1999 1998 1999
---------------- -------------- ----------------- ---------------
<S> <C> <C> <C> <C>
Revenue $ 62,381,812 $93,482,374 $108,782,986 $162,746,825
Cost of sales 47,860,724 70,940,434 84,522,947 123,618,791
---------------- -------------- ----------------- ---------------
Gross profit 14,521,088 22,541,940 24,260,039 39,128,034
Selling, general and
administrative expenses 11,747,095 18,081,046 25,974,407 33,676,688
Non-recurring settlement (Note 3) 15,000,000 - 15,000,000 -
---------------- -------------- ----------------- ---------------
Income (loss) from operations (12,226,007) 4,460,894 (16,714,368) 5,451,346
Interest expense, net 742,345 298,782 1,092,690 767,114
---------------- -------------- ----------------- ---------------
Income (loss) before income taxes (12,968,352) 4,162,112 (17,807,058) 4,684,232
Income tax provision (benefit) (4,844,338) 1,694,502 (5,185,205) 1,935,691
---------------- -------------- ----------------- ---------------
Net income (loss) (Note 3) $(8,124,014) $2,467,610 $(12,621,853) $2,748,541
================ ============== ================= ===============
Basic and diluted net
income (loss) per
common share (Note 3): $(0.87) $0.17 $(1.38) $0.19
================ ============== ================= ===============
Shares used in computing net
income (loss) per common share:
Basic 9,365,970 14,772,127 9,131,343 14,685,943
================ ============== ================= ===============
Diluted 9,365,970 14,781,896 9,131,343 14,690,828
================ ============== ================= ===============
Pro Forma Data:
Pro forma income tax provision (benefit) (343,003) (1,937,618)
---------------- -----------------
Pro forma net income (loss) $(7,781,011) $(10,684,235)
================ =================
Pro forma basic and diluted net income
(loss) per share (Note 3) $(0.83) $(1.17)
================ =================
</TABLE>
See Notes to Condensed Consolidated Financial Statements
3
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MARINEMAX, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
<TABLE>
<CAPTION>
September 30, March 31,
1998 1999
------------ ------------
(unaudited)
ASSETS
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents $ 7,860,866 $ 17,553,012
Accounts receivable, net 18,511,878 15,225,091
Inventories 80,756,342 148,441,830
Prepaids and other current assets 2,824,345 2,980,818
Deferred tax asset -- 465,423
------------ ------------
Total current assets 109,953,431 184,666,174
PROPERTY AND EQUIPMENT, net 24,776,439 28,321,296
DEFERRED TAX ASSET 103,426 64,136
GOODWILL AND OTHER ASSETS 15,624,996 27,538,685
------------ ------------
Total assets $150,458,292 $240,590,291
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 8,591,679 $ 23,877,560
Customer deposits 4,815,979 13,035,650
Accrued expenses 6,044,506 10,687,997
Short-term borrowings 45,813,419 115,269,946
Current maturities of long-term debt 442,519 547,258
Deferred taxes 165,511 --
Settlement payable 15,000,000 --
------------ ------------
Total current liabilities 80,873,613 163,418,411
LONG-TERM DEBT, net of current maturities 3,249,494 2,974,912
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,
14,600,428 and 15,085,875 shares issued and outstanding at
September 30, 1998 and March 31, 1999, respectively 14,601 15,086
Additional paid-in capital 57,113,708 62,226,465
Retained earnings 9,206,876 11,955,417
------------ ------------
Total stockholders' equity 66,335,185 74,196,968
------------ ------------
Total liabilities and stockholders' equity $150,458,292 $240,590,291
============ ============
</TABLE>
See Notes to Condensed Consolidated Financial Statements
4
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MARINEMAX, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
For the Six-Month Periods Ended
(Unaudited)
<TABLE>
<CAPTION>
March 31, March 31,
1998 1999
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net Income (loss) $(12,621,853) $ 2,748,541
Adjustments to reconcile net income
(loss) to net cash provided by (used in)
operating activities:
Depreciation and amortization 528,381 1,912,796
Deferred income tax provision (benefit) (4,035,606) (591,644)
Loss (gain) on sale of property and equipment -- 35,767
Stock Compensation -- 84,597
Decrease (increase) in --
Accounts receivable, net (1,707,492) 3,911,747
Due from related parties 640,632 --
Inventories (26,987,861) (55,234,730)
Prepaids and other assets (2,915,111) (1,766,411)
Increase (decrease) in --
Accounts payable 3,004,682 15,114,497
Customer deposits 5,891,625 4,623,426
Accrued expenses and other liabilities 1,096,317 4,180,381
Short-term borrowings 25,772,626 57,632,834
Settlement payable 15,000,000 (15,000,000)
------------ ------------
Net cash provided by (used in)
operating activities 3,666,340 17,651,801
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (1,287,049) (4,467,053)
Proceeds from sale of property and equipment -- 29,469
Cash used in purchase of businesses -- (3,352,228)
------------ ------------
Net cash provided by (used in) investing activities (1,287,049) (7,789,812)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings (repayments) on notes
payable to related parties 96,533 --
Repayments on long-term debt (439,735) (169,843)
Redemption of Common Stock (150,000) --
Distributions to stockholders (8,650,278) --
------------ ------------
Net cash provided by (used in)
financing activities (9,143,480) (169,843)
------------ ------------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (6,764,189) 9,692,146
CASH AND CASH EQUIVALENTS,
beginning of period 11,537,934 7,860,866
------------ ------------
CASH AND CASH EQUIVALENTS, end of period $ 4,773,745 $ 17,553,012
============ ============
</TABLE>
See Notes to Condensed Consolidated Financial Statements
5
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MARINEMAX, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
For the Six-Month Periods Ended
(Unaudited)
(Continued)
<TABLE>
<CAPTION>
March 31, 1998 March 31, 1999
--------------- ---------------
Supplemental Disclosures of Cash Flow Information:
Cash paid for
<S> <C> <C>
Interest $ 1,062,003 $ 1,122,855
Income taxes $ -- $ 676,150
Supplemental Disclosures of Non-Cash Investing and Financing
Activities:
Issuance of Common Stock and Warrants in exchange for
property and equipment $ 10,590,206 $ 4,314,645
Assumption of debt (primarily inventory financing) in
conjunction with of property and equipment $ 4,107,428 $ 11,823,693
Distributions declared but not yet paid $ 815,906 $ --
</TABLE>
See Notes to Condensed Consolidated Financial Statements
6
<PAGE> 7
MARINEMAX, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
1. COMPANY BACKGROUND AND BASIS OF PRESENTATION
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
47 retail locations in 13 states, consisting of Arizona, California, Delaware,
Florida, Georgia, Minnesota, Nevada, New Jersey, North Carolina, Ohio,
Pennsylvania, South Carolina and Texas.
In October 1998, the Company formed a new subsidiary, MarineMax Motor
Yachts, Inc. (Motor Yachts), and 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 the U.S. distribution rights for Hatteras
products over 74 feet.
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.
The accompanying financial statements are unaudited and have been
prepared by the Company pursuant to the rules and regulations of the Securities
and Exchange Commission (the SEC). Although the September 30,1998 balance sheet
was derived from audited financial statements, certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to SEC rules and regulations. The accompanying condensed financial
statements and related notes should be read in conjunction with the Company's
Annual Report on Form 10-K (File number 1-4173) as filed with the SEC on
December 29, 1998.
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.
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 L.L.C.,
Walker Marina Realty, L.L.C., Marina Drive Realty I, L.L.C., and Marina Drive
Realty II, L.L.C. (collectively, Cochran's L.L.C.s) in exchange for 120,000
shares of the Company's common stock. These acquisitions have been accounted for
under the purchase method of accounting.
7
<PAGE> 8
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, valued at
approximately $5.3 million. 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 $1.3 million of cash,
including acquisition costs, and 14,652 shares of the Company's common stock,
valued at approximately $125,000. 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 $3.7 million of cash, including acquisition costs. 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 30, 1998, the Company acquired the net assets of Treasure
Cove Marina, Inc. (Treasure Cove) in exchange for approximately $3.4 million of
cash, including acquisition costs, and 250,000 shares of the Company's common
stock, valued at approximately $2.3 million. 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 $8.2 million in goodwill, representing the excess of the 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 by the Company of up to approximately $4.0 million.
On October 28, 1998, the Company acquired the net assets of Woods &
Oviatt, Inc. (Woods & Oviatt), a prominent yacht brokerage operation, in
exchange for approximately $1.1 million of cash, including acquisition costs.
The final purchase price is subject to adjustment based on various factors,
including the calendar 1998 earnings of Woods & Oviatt. 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 February 11, 1999, the Company acquired the net assets of Boating
World (Boating World) in exchange for approximately $523,000 of cash, including
acquisition costs and warrants valued at approximately $269,000, providing the
holder the right to buy 40,000 shares of MarineMax common stock at $15 per
share. The acquisition has been accounted for under the purchase method of
accounting, which resulted in the recognition of approximately $700,000 in
goodwill, representing the excess of the purchase price over the estimated fair
value of the net assets acquired.
On March 9, 1999, the Company acquired the net assets of Merit Marine
(Merit) in exchange for approximately $1.2 million of cash, including
acquisition costs, 476,000 shares of the Company's common stock, valued at
approximately $4.8 million, a $3 million promissory note, with interest payable
at LIBOR plus 125 basis points, and the assumption of certain liabilities. The
assumed liabilities include the outstanding floor plan obligations related to
boat inventories, which primarily finance Merit Marine's Sea Ray products. The
acquisition has been accounted for under the purchase method of accounting,
which resulted in the recognition of approximately $9.2 million in goodwill,
representing the excess of the purchase price over the estimated fair value of
the net assets acquired.
The Original Property Acquisitions, Stovall, Cochran's L.L.C.s,
Brevard, Vegas, Treasure Cove, Woods & Oviatt, Boating World and Merit
(collectively, the Purchased Companies) have been reflected in the Company's
financial statements subsequent to their respective acquisition dates.
8
<PAGE> 9
3. PRO FORMA RESULTS OF OPERATIONS AND NONRECURRING SETTLEMENT
In connection with the merger of the Pooled Companies, the applicable
merged companies terminated their S corporation status and recorded a deferred
income tax charge and a corresponding net deferred tax liability of
approximately $1,250,000, representing the tax effect of differences in bases in
assets and liabilities for financial reporting and income tax purposes. The
Company has presented pro forma income tax disclosure as if the Company and
subsidiaries were C corporations for the three-month and six-month periods ended
March 31, 1998.
The Company and Brunswick Corporation (Brunswick) 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 agreed not to challenge the change
in control provisions of the dealership agreements, and the Company agreed to
pay Brunswick $15 million. The Settlement payable to Brunswick required interest
to be paid quarterly at the 30-day LIBOR rate plus 125 basis points. The $15
million Settlement payable was paid in full to Brunswick in December 1998.
4. SHORT-TERM BORROWINGS:
On March 18, 1999, the Company renegotiated and supplemented its
working capital borrowing facilities by entering into two revolving lines of
credit facilities (the Facilities) with separate institutions (the Lenders)
providing for combined borrowing availability of $155 million at a weighted
average interest rate of approximately LIBOR plus 140 basis points. Both
facilities have similar terms and mature in March 2001. As of March 31, 1999,
the total available borrowings under short-term borrowings were approximately
$20.0 million.
5. SUBSEQUENT EVENT
On April 5, 1999, the Company acquired the net assets of Suburban Boatworks,
Inc. (Suburban) in exchange for $965,000 of cash, including acquisition costs,
121,000 shares of the Company's common stock, valued at approximately $1.3
million, a $500,000 promissory note, with interest payable at LIBOR plus 125
basis points, and the assumption of certain liabilities. The assumed liabilities
include the outstanding floor plan obligations related to boat inventories,
which primarily finance Suburban's Sea Ray products. The acquisition has been
accounted for under the purchase method of accounting, which resulted in the
recognition of approximately $3.6 million in goodwill, representing the excess
of the purchase price over the estimated fair value of the net assets acquired.
9
<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION.
This Management's Discussion and Analysis of Results of Operations and Financial
Condition contains "forward-looking statements" within the meaning of Section
27A of the Securities Act of 1933, as amended (the Securities Act), and Section
21E of the Securities Exchange Act of 1934, as amended. These statements relate
to future economic performance, plans and objectives of the Company for future
operations and projections of revenue and other financial items that are based
on the belief of the Company as well as assumptions made by, and information
currently available to, the Company. Actual results could differ materially from
those currently anticipated as a result of a number of factors, including those
listed in the "Risk Factors" of the Company's Annual Report on Form 10-K
(Registration number 1-14173) as filed with the SEC on December 29, 1998. These
risks include the impact of seasonality and weather, general economic conditions
and the level of consumer spending, the Company's ability to integrate the
acquisitions into existing operations and numerous other factors identified in
the Company's filings with the Securities Exchange Commission.
GENERAL
The Company is the largest recreational boat retailer in the United
States. Through 47 retail locations in 13 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., 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 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 six
additional boat retailers, one brokerage operation 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 2,744,984 shares of its common stock, issued
40,000 warrants, paid an aggregate of approximately $11.2 million in cash and
entered into a $3.0 million promissory note, resulting in the recognition of an
aggregate of $26.6 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 three-month period ended March 31, 1999 to the
three-month period ended March 31,1998, and the six-month period ended March 31,
1999 to the six-month
10
<PAGE> 11
period ended March 31,1998 and should be read in conjunction with the condensed
consolidated financial statements of the Company, including the related notes
thereto, appearing elsewhere in this Report.
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 or
accepted by 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 approximately $4.2 million for the six months ended March 31, 1998. 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 difficult and less meaningful. Certain
employee-stockholders have entered into employment agreements with the Company,
reflecting reduced compensation when compared to historical levels.
In December 1998, the Company paid $15,000,000 in relation to a March
1998 settlement (Settlement Obligation) reached with its primary supplier,
Brunswick Corporation (see the Company's Annual Report on Form 10-K as filed
with the Securities and Exchange Commission).
The condensed consolidated financial statements included with this
filing include a pro forma adjustment for income taxes as if the Company was a C
corporation from its inception. The condensed consolidated financial statements
do not include pro forma adjustments for the effects of contractually reduced
compensation levels of certain members of management nor the planned addition of
public company expenses.
CONSOLIDATED RESULTS FROM OPERATIONS
Three-Month Period Ended March 31, 1999 Compared to Three-Month Period Ended
March 31, 1998:
Revenue. Revenue increased $31.1 million, or 49.9%, to $93.5 million
for the three-month period ended March 31, 1999 from $62.4 million for the
three-month period ended March 31, 1998. Of this increase, $10.8 million was
attributable to 18% growth in comparable stores sales and $20.3 million was
attributable to stores not eligible for inclusion in the comparable store base.
The increase in comparable store sales for the three-month period ended March
31, 1999 resulted primarily from the Company's retailing strategies, including
the implementation of MarineMax Value-Price sales approach and MarineMax Care
(two years of defined maintenance), more effective utilization of the
prospective customer tracking feature of the integrated computer system, and
increased access to all MarineMax store inventories, which assists the Company's
retail locations in offering the products customers desire.
Gross Profit. Gross profit increased $8.0 million, or 55.2%, to $22.5
million for the three-month period ended March 31, 1999 from $14.5 million for
the three-month period ended March 31, 1998. Gross profit as a percentage of
revenue increased to 24.1% in 1999 from 23.3% in 1998. The increase in gross
profit margin was attributable to the implementation of the Company's retailing
strategies, including the implementation of MarineMax Value-Price sales approach
and MarineMax Care, the Company's expanded brokerage operations and increased
sales of products that historically result in higher gross profits such as
service and parts and finance and insurance contracts.
11
<PAGE> 12
Selling, General, and Administrative Expenses. Selling, general, and
administrative expenses increased by approximately $6.3 million, or 53.9%, to
$18.1 million for the three-month period ended March 31, 1999 from $11.8 million
for the three-month period ended March 31, 1998. Selling, general, and
administrative expenses as a percentage of revenue increased to 19.3% in 1999
from 18.8% in 1998. This increase resulted from the investment of additional
resources to train employees at MarineMax University, the Company's Clearwater,
FL, based training facility, and the additional overhead associated with being a
public company, partially offset by reductions in other selling, general, and
administrative expenses through achieving operating efficiencies and synergies.
Non-Recurring Settlement. The Non-Recurring Settlement for the
three-month period ended March 31, 1998 was attributable to the $15.0 million
charge under the Settlement Agreement the Company entered into with Brunswick.
Interest Expense, Net. Interest expense, net decreased approximately
$444,000 or 59.8%, to approximately $298,000 in 1999 from approximately $742,000
in 1998. Interest expense, net as a percentage of revenue decreased to 0.3% in
1999 from 1.2% in 1998. The decrease resulted primarily from the reduced
interest rate on the Company's lines of credit and reduced level of debt as a
result of the Company's June 3, 1998, Initial Public Offering.
Six-Month Period Ended March 31, 1999 Compared to Six-Month Period Ended March
31,1998:
Revenue. Revenue increased $54.0 million, or 49.6%, to $162.7 million
for the six-month period ended March 31, 1999 from $108.7 million for the
six-month period ended March 31, 1998. Of this increase, $20.5 million was
attributable to 18% growth in comparable stores sales in 1999 and $33.5 million
was attributable to stores not eligible for inclusion in the comparable store
base. The increase in comparable store sales in 1999 resulted primarily from the
Company's experience-based retailing strategies, including the implementation of
MarineMax Value-Price sales approach and MarineMax Care more effective
utilization of the prospective customer tracking feature of the integrated
computer system, and a greater emphasis on used boat sales.
Gross Profit. Gross profit increased $14.9 million, or 61.3%, to $39.1
million for the six-month period ended March 31, 1999 from $24.2 million for the
six-month period ended March 31, 1998. Gross profit margin as a percentage of
revenue increased to 24.0% in 1999 from 22.3% in 1998. The increase in gross
profit margin was attributable to the implementation of the Company's
experience-based retailing strategies, including the implementation of MarineMax
Value-Price sales approach and MarineMax Care 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 $7.7 million, or 29.7%, to $33.7
million for the six-month period ended March 31, 1999 from $26.0 million for the
six-month period ended March 31, 1998. Selling, general, and administrative
expenses as a percentage of revenue decreased to 20.7% in 1999 from 23.9% in
1998. Substantially all of this decrease was attributable to a $4.2 million
reduction of stockholder-employee compensation in the six-month period ended
March 31, 1999 versus the six-month period ended March 31, 1998. In addition,
the Company experienced a reduction in selling, general, and administrative
expenses by achieving operating efficiencies and synergies, which was partially
offset by additional expenses associated with MarineMax University and being a
public company.
Non-Recurring Settlement. The Non-Recurring Settlement for the
six-month period ended March 31, 1998 was attributable to the $15.0 million
charge under the Settlement Agreement the Company entered into with Brunswick.
Interest Expense, Net. Interest expense, net decreased approximately
$326,000, or 29.8%, to $767,000 in 1999 from $1.1 million in 1998. Interest
expense, net as a percentage of revenue decreased to 0.5% in 1999 from 1.0% in
1998. This decrease resulted primarily from the reduced interest rate on the
12
<PAGE> 13
Company's lines of credit and reduced level of debt as a result of the Company's
Initial Public Offering. The decrease was partially offset by increased debt
associated with higher levels of outstanding borrowings related to the increased
level of inventories required to support the increased level of revenue.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash needs are primarily for working capital to support
operations, including new and used boat and related parts inventories,
off-season liquidity, and growth through new retail openings and acquisitions.
These cash needs have historically been financed with cash from operations and
borrowings under credit facilities. Historically, the Company utilized a
combination of floor plan financing, working capital lines of credit, and loans
from stockholders to finance inventory levels. These historic credit facilities
had varying interest rates, terms, and payment requirements. The Company depends
upon dividends and other payments from its operating subsidiaries to fund its
obligations and meet its cash needs. No agreements exist that restrict this flow
of funds.
At March 31, 1999, the Company's indebtedness totaled approximately
$118.8 million, of which approximately $3.5 million was associated with the
Company's real estate holdings and the remaining $115.3 million was associated
with financing the Company's current inventory level and working capital needs.
On March 18, 1999, the Company renegotiated and supplemented its
working capital borrowing facilities by entering into two revolving lines of
credit facilities (the Facilities) with separate institutions (the Lenders)
providing for combined borrowing availability of $155 million at a weighted
average interest rate of approximately LIBOR plus 140 basis points. Both
facilities have similar terms and mature in March 2001. As of March 31, 1999,
the total available borrowings under short-term borrowings were approximately
$20.0 million.
The Company is currently in the process of increasing its inventory and
working capital borrowing capacity. The Company has obtained two commitment
letters from separate financial institutions. Upon completion and execution of
the legal documentation, the inventory and working capital borrowing capacity of
the Company is expected to be increased to over $230 million, pursuant to the
commitment letters.
During the six-month period March 31, 1999, the Company acquired two
additional boat retailers and one brokerage operation. In connection with these
acquisitions, the Company paid an aggregate of approximately $2.8 million in
cash, executed a $3.0 million promissory note, and issued stock and warrant
consideration, resulting in the recognition of an aggregate of approximately
$11.0 million in goodwill, which represents the excess of the purchase price
over the estimated fair value of the net assets acquired.
The Company's working capital lines of credit and internally generated
working capital are expected by the Company's management to be sufficient to
meet the Company's cash requirements at least through the remainder of fiscal
1999.
IMPACT OF SEASONALITY AND WEATHER ON OPERATIONS
The Company's business, as well as the entire recreational boating
industry, is highly seasonal, with seasonality varying in different geographic
markets. With the exception of Florida, the Company generally realizes
significantly lower sales in the quarterly period ending December 31 with boat
sales generally improving in January with the onset of the public boat and
recreation shows. 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 retailers that operate in colder
regions of the United States.
YEAR 2000 COMPLIANCE
13
<PAGE> 14
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 has developed 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.
14
<PAGE> 15
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
As reported in the Company's 10-K Report for the fiscal year
ended September 30, 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. Following the termination, the
Company, commenced binding arbitration before the American Arbitration
Association; the Company filed a lawsuit against the LaMannas in the
United States District of Florida, Tampa Division, Case No.
98-2429-CIV-T-2SF; and subsequently the LaMannas filed a lawsuit
against the Company and certain directors in the Superior Court of
Shasta County, California Case No. 136666 (collectively, the
"Proceedings").
In April 1999, the Company, the LaMannas, and the other parties to the
proceedings arrived at an agreement to all differences that arose among
them, dismissed all of the Proceedings with prejudice, and executed
mutual releases of all claims. The LaMannas have agreed to work with
the Company under Consulting Agreements that extend through February
2003.
Item 2. Changes in Securities and Use of Proceeds
On February 11, 1999, the Company issued warrants to Larry
Reynolds, valued at approximately $269,000 providing the holder to
purchase 40,000 shares of MarineMax common stock at an exercise price
of $15 per share, in conjunction with its acquisition of Boating World.
The Company issued the warrants without registration in reliance on the
exemption provided by Section 4(2) of the Securities Act of 1933, as
amended.
On March 3, 1999, the Company issued 2,514 shares of its
common stock to outside directors of the Company in lieu of cash
directors' fees. The Company issued the common stock without
registration in reliance on the exemption provided by Section 4(2) of
the Securities Act of 1933, as amended.
On March 9, 1999, the Company issued 476,000 shares of its
common stock valued at approximately $4.8 million to James Andreotta,
Robert Andreotta and Michael Aiello in conjunction with its acquisition
of Merit Marine. The Company issued the common stock without
registration in reliance on the exemption provided by Section 4(2) of
the Securities Act of 1933, as amended.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
ITEM 5. OTHER INFORMATION
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27.1 Financial Data Schedule
15
<PAGE> 16
MARINEMAX, INC.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MARINEMAX INC.
May 12, 1999 By: /s/ Michael H. McLamb
Michael H. McLamb
Chief Financial Officer, Vice
President, Secretary and Treasurer
16
<PAGE> 17
Exhibit Index
Ex - 27.1 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This exhibit contains summary financial information extracted from the
Registrant's financial statements for the period ended March 31, 1999, and is
qualified in its entirety by reference to such financial statements. This
exhibit shall not be deemed filed for purposes of Section 11 of the Securities
and Exchange Act of 1933 and Section 18 of the Securities and Exchange Act of
1934, or otherwise subject to the liability of such Sections, nor shall it be
deemed a part of any other filing which incorporates this report by reference,
unless such other filing expressly incorporates this Exhibit by reference.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-START> OCT-01-1998
<PERIOD-END> MAR-31-1999
<CASH> 17,533,012
<SECURITIES> 0
<RECEIVABLES> 15,225,091
<ALLOWANCES> 0
<INVENTORY> 148,441,830
<CURRENT-ASSETS> 184,666,174
<PP&E> 36,783,305
<DEPRECIATION> 8,462,009
<TOTAL-ASSETS> 240,590,291
<CURRENT-LIABILITIES> 163,418,411
<BONDS> 3,522,170
0
0
<COMMON> 62,241,551
<OTHER-SE> 11,955,417
<TOTAL-LIABILITY-AND-EQUITY> 240,590,291
<SALES> 162,746,825
<TOTAL-REVENUES> 162,746,825
<CGS> 123,618,791
<TOTAL-COSTS> 123,618,791
<OTHER-EXPENSES> 33,676,688
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 767,114
<INCOME-PRETAX> 4,684,232
<INCOME-TAX> 1,935,691
<INCOME-CONTINUING> 2,748,541
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,748,541
<EPS-PRIMARY> 0.19
<EPS-DILUTED> 0.19
</TABLE>
