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, 2000 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 25, 2000 was 15,215,963.
2 MARINEMAX, INC. Table of Contents <TABLE> <CAPTION> Item No. Page <S> <C> PART I FINANCIAL INFORMATION 1. Financial Statements (unaudited): Condensed Consolidated Results of Operations For the Three-Month and Six-Month Periods Ended March 31, 1999 and March 31, 2000............................................ 3 Condensed Consolidated Balance Sheets as of September 30, 1999 and March 31, 2000........................................ 4 Condensed Consolidated Statements of Cash Flows for the Six-Month Periods Ended March 31, 1999 and March 31, 2000............................................ 5 Notes to Condensed Consolidated Financial Statements............................ 7 2. Management's Discussion and Analysis of Results of Operations and Financial Condition......................................................... 8 PART II OTHER INFORMATION 1. Legal Proceedings................................................................. 12 2. Changes in Securities and Use of Proceeds......................................... 12 3. Defaults Upon Senior Securities................................................... 12 4. Submission of Matters to a Vote of Security Holders............................... 12 5. Other Information................................................................. 12 6. Exhibits and Reports on Form 8-K.................................................. 12 7. Signatures........................................................................ 13 </TABLE> 2
3 ITEM 1. FINANCIAL STATEMENTS MARINEMAX, INC. AND SUBSIDIARIES Condensed Consolidated Results of Operations (amounts in thousands except share and per share data) (Unaudited) <TABLE> <CAPTION> For the Three-Month Period For the Six-Month Period Ended March 31, Ended March 31, --------------- --------------- 1999 2000 1999 2000 ---- ---- ---- ---- <S> <C> <C> <C> <C> Revenue $ 93,482 $ 155,240 $ 162,747 $ 248,757 Cost of sales 70,940 122,461 123,619 195,236 ----------- ----------- ----------- ----------- Gross profit 22,542 32,779 39,128 53,521 Selling, general, and administrative expenses 18,081 25,412 33,677 44,146 ----------- ----------- ----------- ----------- Income from operations 4,461 7,367 5,451 9,375 Interest expense, net 299 1,378 767 2,558 ----------- ----------- ----------- ----------- Income before income taxes 4,162 5,989 4,684 6,817 Income tax provision 1,694 2,367 1,935 2,719 ----------- ----------- ----------- ----------- Net income $ 2,468 3,622 $ 2,749 4,098 =========== =========== =========== =========== Basic and diluted net income per common share: $ 0.17 $ 0.24 $ 0.19 $ 0.27 =========== =========== =========== =========== Shares used in computing net income per common share: Basic 14,772,127 15,180,211 14,685,943 15,180,211 =========== =========== =========== =========== Diluted 14,781,896 15,192,732 14,690,828 15,181,776 =========== =========== =========== =========== </TABLE> See Notes to Condensed Consolidated Financial Statements 3
4 MARINEMAX, INC. AND SUBSIDIARIES Condensed Consolidated Balance Sheets (amounts in thousands except share and per share data) <TABLE> <CAPTION> September 30, March 31, 1999 2000 ---- ---- (unaudited) <S> <C> <C> ASSETS CURRENT ASSETS: Cash and cash equivalents $ 8,297 $ 17,182 Accounts receivable, net 14,842 23,299 Inventories 137,786 156,253 Prepaids and other current assets 2,705 1,894 Current Deferred tax asset 234 184 -------- -------- Total current assets 163,864 198,812 Property and equipment, net 37,780 38,177 Goodwill and other assets 34,107 35,331 -------- -------- Total assets $235,751 $272,320 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable $ 14,802 $ 7,292 Customer deposits 10,574 4,444 Accrued expenses 10,775 17,871 Short-term borrowings 98,150 136,725 Current maturities of long-term debt 1,210 545 -------- -------- Total current liabilities 135,511 166,877 Long-term debt, net of current maturities 6,310 6,174 Deferred tax liability 1,600 1,815 Other liabilities 2,096 2,755 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, 15,136,966 and 15,192,732 shares issued and outstanding at September 30, 1999 and March 31, 2000, respectively 15 15 Additional paid-in capital 62,859 63,226 Retained earnings 27,360 31,458 -------- -------- Total stockholders' equity 90,234 94,699 -------- -------- Total liabilities and stockholders' equity $235,751 $272,320 ======== ======== </TABLE> See Notes to Condensed Consolidated Financial Statements 4
5 MARINEMAX, INC. AND SUBSIDIARIES Condensed Consolidated Statements of Cash Flows For the Six-Month Periods Ended (amounts in thousands except share and per share data) (Unaudited) <TABLE> <CAPTION> March 31, March 31, 1999 2000 ---- ---- <S> <C> <C> CASH FLOWS FROM OPERATING ACTIVITIES: Net Income $ 2,749 $ 4,098 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 1,913 1,820 Deferred income tax provision (benefit) (592) 265 Loss (gain) on sale of property and equipment 36 (66) Stock Compensation 85 -- Decrease (increase) in -- Accounts receivable, net 3,912 (8,457) Inventories (55,235) (16,143) Prepaids and other assets (1,766) (9) Increase (decrease) in -- Accounts payable 15,114 (7,510) Customer deposits 4,623 (6,130) Accrued expenses and other liabilities 4,180 7,652 Short-term borrowings 57,633 36,706 Settlement payable (15,000) -- -------- -------- Net cash provided by (used in) operating activities 17,652 12,226 -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property and equipment (4,467) (2,246) Proceeds from sale of property and equipment 29 567 Cash used in purchase of businesses (3,352) (1,221) -------- -------- Net cash provided by (used in) investing activities (7,790) (2,900) -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from sale of common stock under employee benefit plans -- 367 Repayments on long-term debt (170) (808) -------- -------- Net cash provided by (used in) financing activities (170) (440) -------- -------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 9,692 8,885 CASH AND CASH EQUIVALENTS, beginning of period 7,861 8,297 -------- -------- CASH AND CASH EQUIVALENTS, end of period $ 17,553 $ 17,182 ======== ======== </TABLE> See Notes to Condensed Consolidated Financial Statements 5
6 MARINEMAX, INC. AND SUBSIDIARIES Condensed Consolidated Statements of Cash Flows For the Six-Month Periods Ended (amounts in thousands except share and per share data) (Unaudited) (Continued) <TABLE> <CAPTION> March 31, March 31, 1999 2000 ---- ---- <S> <C> <C> Supplemental Disclosures of Cash Flow Information: Cash paid for Interest $ 1,123 $ 3,118 Income taxes $ 676 $ 1,951 Supplemental Disclosures of Non-Cash Investing and Financing Activities: Issuance of Common Stock and Warrants in exchange for property and equipment and businesses acquired $ 4,315 -- Assumption of debt (primarily inventory financing) in conjunction with the acquisition of property and equipment and businesses acquired $11,824 -- </TABLE> See Notes to Condensed Consolidated Financial Statements 6
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 54 retail locations in 14 states, consisting of Arizona, California, Delaware, Florida, Georgia, Minnesota, Nevada, New Jersey, North Carolina, Ohio, Pennsylvania, South Carolina, Texas and Utah. 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 On December 31, 1999, the Company acquired the net assets of Duce Marine, Inc. (Duce) for approximately $1.2 million of cash, including acquisition costs. The Company assumed certain liabilities, including the outstanding floor plan obligations related to boat inventories, which primarily finance Duce Marine's Sea Ray products. The acquisition has been accounted for under the purchase method of accounting, which resulted in the recognition of approximately $975,000 in goodwill. 3. SHORT-TERM BORROWINGS: The Company has executed agreements for working capital borrowing facilities (the "Facilities") with four separate financial institutions providing for combined borrowing availability of $235 million at a weighed average interest rate of LIBOR plus 147 basis points. Borrowings under the Facilities are pursuant to a borrowing base formula and are used primarily for working capital and inventory financing. The Facilities have similar terms and mature on various dates ranging from March 2001 through December 2002. 4. SUBSEQUENT EVENTS On April 18, 2000, the Company acquired the net assets of Clarks Landing at Greenbrook, Inc., Clark's Landing at Lake Hopatcong, Inc., and Clark's Landing at Dredge Harbor, Inc. for approximately $3.6 million in cash, including acquisition costs. The Company assumed or retired certain liabilities, including the outstanding floor plan obligations related to boat inventories, which primarily finance the acquired operations new boat inventory. The acquisition has been accounted for under the purchase method of accounting, which resulted in the recognition of approximately $4.4 million in goodwill. 7
8 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 as filed with the SEC on December 29, 1999. 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 MarineMax is the largest recreational boat retailer in the United States with fiscal 1999 revenue exceeding $450 million. Through 54 retail locations in 14 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; provide boat repair and maintenance services; and offer yacht brokerage services. MarineMax was incorporated in January 1998. MarineMax has consummated a series of business combinations since its formation. Certain business combinations have been accounted for under the pooling-of-interests method of accounting (collectively, the "Pooled Companies"). Accordingly, the financial statements have been restated to reflect the operations as if the companies had operated as one entity since inception. Through March 31, 2000, the Company had acquired ten additional boat retailers, two yacht brokerage operations, and companies owning real estate used in the operations of certain subsidiaries (collectively, the "Purchased Companies"). In connection with the Purchased Companies, the Company issued an aggregate of 2,764,578 shares of common stock and paid an aggregate of approximately $18.6 million in cash, resulting in the recognition of an aggregate of $35.5 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 three months ended March 31, 2000 to the three months ended March 31, 1999, and the six months ended March 31, 2000 to the six months ended March 31, 1999 and should be read in conjunction with the Condensed Consolidated Financial Statements, including the related notes thereto, appearing elsewhere in this Report. CONSOLIDATED RESULTS FROM OPERATIONS Three-Month Period Ended March 31, 2000 Compared to Three-Month Period Ended March 31, 1999: Revenue. Revenue increased $61.8 million, or 66.1%, to $155.2 million for the three-month period ended March 31, 2000 from $93.5 million for the three-month period ended March 31, 1999. Of this increase, $53.8 million was attributable to 58% growth in comparable-store sales and $8.0 million was attributable to stores not eligible for inclusion in the comparable-store base. A significant portion of the increase in comparable-store sales for the three-month period ended March 31, 2000, resulted from 8
9 the October 1998 addition of the Hatteras product line in certain stores, which has resulted in higher revenue in comparable stores. Excluding the Hatteras product line, the Company's comparable store sales increase approximated 29% for the three-month period ended March 31, 2000. This increase resulted primarily from the Company's retailing strategies, which focus on customer service, 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 that customers desire. Gross Profit. Gross profit increased $10.3 million, or 45.4%, to $32.8 million for the three-month period ended March 31, 2000 from $22.5 million for the three-month period ended March 31, 1999. Gross profit as a percentage of revenue decreased to 21.1% in 2000 from 24.1% in 1999. The decrease in gross profit margin was attributable to an increase in sales of sport yachts and yachts, including Hatteras products, which historically yield lower gross profits per unit. Selling, General, and Administrative Expenses. Selling, general, and administrative expenses increased approximately $7.3 million, or 40.5%, to $25.4 million for the three-month period ended March 31, 2000 from $18.1 million for the three-month period ended March 31, 1999. Selling, general, and administrative expenses as a percentage of revenue decreased to 16.4% in 2000 from 19.3% in 1999. The decrease in selling, general, and administrative expenses as a percentage of revenue is attributable to the Company's ability to better leverage its infrastructure, including leverage associated with an increase in its Hatteras business. Interest Expense, Net. Interest expense, net increased approximately $1.1 million or 360.9%, to approximately $1.4 million in 2000 from approximately $299,000 in 1999. Interest expense, net as a percentage of revenue increased to 0.9% in 2000 from 0.3% in 1999. The increase resulted primarily from generally higher interest rates in fiscal 2000 and an increased level of debt associated with the Company's current inventory and working capital needs. Six-Month Period Ended March 31, 2000 Compared to Six-Month Period Ended March 31,1999: Revenue. Revenue increased $86.0 million, or 52.8%, to $248.7 million for the six-month period ended March 31, 2000 from $162.7 million for the six-month period ended March 31, 1999. Of this increase, $72.9 million was attributable to 47% growth in comparable-store sales and $13.1 million was attributable to stores not eligible for inclusion in the comparable-store base. A significant portion of the increase in comparable-store sales for the six-month period ended March 31, 2000 resulted from the October 1998 addition of the Hatteras product line in certain stores, which has resulted in higher revenue in comparable stores. Excluding the Hatteras product line, the Company's comparable-store sales increase approximated 22% for the six-month period ended March 31, 2000. This increase resulted primarily from the Company's retailing strategies, which focus on customer service, 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 that customers desire. Gross Profit. Gross profit increased $14.4 million, or 36.8%, to $53.5 million for the six-month period ended March 31, 2000 from $39.1 million for the six-month period ended March 31, 1999. Gross profit margin as a percentage of revenue decreased to 21.5% in 2000 from 24.0% in 1999. The decrease in gross profit margin was attributable to an increase in sales of sport yachts and yachts, including Hatteras products, which historically yield lower gross profits per unit. Selling, General, and Administrative Expenses. Selling, general, and administrative expenses increased approximately $10.4 million, or 31.1%, to $44.1 million for the six-month period ended March 31, 2000 from $33.7 million for the six-month period ended March 31, 1999. Selling, general, and administrative expenses as a percentage of revenue decreased to 17.8% in 2000 from 20.7% in 1999. The decrease in selling, general, and administrative expenses as a percentage of revenue is attributable 9
10 to the Company's ability to better leverage its infrastructure, including leverage associated with an increase in its Hatteras business. Interest Expense, Net. Interest expense, net increased approximately $1.8 million, or 233.5%, to $2.6 million in 2000 from $767,000 thousand in 1999. Interest expense, net as a percentage of revenue increased to 1.03% in 2000 from 0.5% in 1999. The increase resulted primarily from generally higher interest rates in fiscal 2000 and an increased level of debt associated with the Company's current inventory and working capital needs. 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 from operations and borrowings under credit facilities. 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, 2000, the Company's indebtedness totaled approximately $143.4 million, of which approximately $6.7 million was associated with the Company's real estate holdings and the remaining $136.7 million was associated with financing the Company's inventory and working capital needs. The Company has agreements for working capital borrowing facilities (the "Facilities") with four separate financial institutions providing for combined borrowing availability of $235 million at a weighed average interest rate of LIBOR plus 147 basis points. Borrowings under the Facilities are pursuant to a borrowing base formula and are used primarily for working capital and inventory financing. The Facilities have similar terms and mature on various dates ranging from March 2001 through December 2002. Through March 31, 2000, the Company has acquired ten recreational boat dealers, two yacht brokerage operations, 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 2,764,578 shares of its common stock and paid an aggregate of approximately $18.6 million in cash, resulting in the recognition of an aggregate of $35.5 million in goodwill, which represents the excess of the purchase price over the estimated fair value of the net assets acquired. Except as specified in this "Management's Discussion and Analysis of Results of Operations and Financial Condition" and in the attached condensed consolidated financial statements, the Company has no material commitments for capital for the next 12 months. The Company believes that its existing capital resources will be sufficient to finance the Company's operations for at least the next 12 months, except for possible significant acquisitions. 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 and its business could become substantially more seasonal as it acquires retailers that operate in colder regions of the United States. 10
11 YEAR 2000 COMPLIANCE The year 2000 issue results from computer programs and hardware being written with two digits rather than four digits to define the applicable year. As a result, there is a risk that date sensitive software may recognize a date using "00" as the year 1900, rather than the year 2000. This potentially could result in system failure or miscalculations causing disruptions of operations, including a temporary inability to process transactions or engage in normal business activities. The Company has experienced no year 2000 adverse effects on its internal systems and is not aware of any involved in its supply chain, including purchasing, distribution, sales, and accounting. Also, no errors were found related to date processing before or after January 1, 2000. The Company will continue to evaluate year 2000 related exposures at its suppliers and customers over the next several months. The Company will also continue to monitor its hardware, software, and imbedded systems as they are added or modified to ensure that latent defects do not manifest themselves over the next few months. 11
12 PART II OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS Not applicable ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS Not applicable ITEM 3. DEFAULTS UPON SENIOR SECURITIES Not applicable ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS The Company's 1999 Annual Meeting of Stockholders was held on March 1, 2000. The following nominees were elected to the Company's Board of Directors to serve as Class I directors for a three-year term expiring in 2003, or until their successors are elected and qualified, or until their earlier resignation or removal: <TABLE> <CAPTION> Nominee Votes in Favor Withheld ------- -------------- -------- <S> <C> <C> William H. McGill, Jr. 13,045,715 -- Robert S. Kant 13,045,715 -- Stewart Turley 13,102,565 -- </TABLE> The following directors' terms of office continued after the 2000 Annual meeting of Stockholders: Richard R. Bassett, Paul Graham Stovall, R. David Thomas, and Dean S. Woodman. Additionally, appointment to ratify Arthur Andersen LLP as the independent certified public accountants of the Company for the fiscal year ending September 30, 2000 was voted upon by the Company's stockholders: <TABLE> <CAPTION> Votes in Favor Opposed Abstained Broker Non-Vote -------------- ------- --------- --------------- <S> <C> <C> <C> 13,071,579 28,147 11,759 -- </TABLE> ITEM 5. OTHER INFORMATION Not applicable ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits 27.1 Financial Data Schedule 12
13 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. April 8, 2000 By: /s/ Michael H. McLamb ------------------------------------- Michael H. McLamb Chief Financial Officer, Vice President, Secretary and Treasurer 13
14 EXHIBIT INDEX Exhibit 27.1 - Financial Data Schedule