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, 2001 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 15, 2001 was 15,216,390.
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, 2000 and March 31, 2001..............................................................3 Condensed Consolidated Balance Sheets as of September 30, 2000 and March 31, 2001..........................................................4 Condensed Consolidated Statements of Cash Flows for the Six-Month Periods Ended March 31, 2000 and March 31, 2001..............................................................5 Notes to Condensed Consolidated Financial Statements..............................................6 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................................................................................13 6. Exhibits and Reports on Form 8-K.................................................................13 7. Signatures.......................................................................................14 </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 For the Six-Month Period Ended March 31, Period Ended March 31, ---------------------- ---------------------- 2000 2001 2000 2001 ---- ---- ---- ---- <S> <C> <C> <C> <C> Revenue $ 155,240 $ 143,224 $ 248,757 $ 228,001 Cost of sales 122,461 112,718 195,236 177,158 ------- ------- ------- ------- Gross profit 32,779 30,506 53,521 50,843 Selling, general, and administrative expenses 25,412 24,776 44,146 45,843 ------- ------- ------- ------- Income from operations 7,367 5,730 9,375 5,000 Interest expense, net 1,378 579 2,558 868 ------- ------- ------- ------- Income before income taxes 5,989 5,151 6,817 4,132 Income tax provision 2,367 2,015 2,719 1,644 ------- ------- ------- ------- Net income $ 3,622 $ 3,136 $ 4,098 $ 2,488 ======= ======= ======= ======= Basic and diluted net income per common share: $ 0.24 $ 0.21 $ 0.27 $ 0.16 ======= ======= ======= ======= Shares used in computing net income per common share: Basic 15,180,211 15,195,815 15,180,211 15,223,218 ========== ========== ========== ========== Diluted 15,192,732 15,195,815 15,181,776 15,223,218 ========== ========== ========== ========== </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, 2000 2001 ---- ---- ASSETS (unaudited) <S> <C> <C> CURRENT ASSETS: Cash and cash equivalents $ 12,583 $ 14,745 Accounts receivable, net 18,845 20,310 Inventories 115,036 180,699 Prepaids and other current assets 2,464 1,415 ---------- ---------- Total current assets 148,928 217,169 Property and equipment, net 42,207 48,111 Goodwill and other assets 40,195 41,110 ---------- ---------- Total assets $ 231,330 $ 306,390 ========== ========== </TABLE> <TABLE> <CAPTION> LIABILITIES AND STOCKHOLDERS' EQUITY <S> <C> <C> CURRENT LIABILITIES: Accounts payable $ 5,717 $9,402 Customer deposits 15,918 12,135 Accrued expenses 13,568 16,463 Short-term borrowings 72,100 139,394 Current maturities of long-term debt 521 771 Current deferred tax liability 251 143 -------- --------- Total current liabilities 108,075 178,308 Long-term debt, net of current maturities 5,759 8,281 Deferred tax liability 1,358 1,650 Other liabilities 3,798 3,561 Commitments and contingencies STOCKHOLDERS' EQUITY: Preferred stock, $.001 par value, 1,000,000 shares authorized, none issued or outstanding - - Common stock, $.001 par value; 24,000,000 shares authorized, 15,221,780 and 15,185,094 shares issued and outstanding at September 30, 2000 and March 31, 2001, respectively 15 15 Additional paid-in capital 63,572 63,835 Treasury stock, at cost, 81,413 shares held at March 31,2000 - (501) Retained earnings 48,753 51,241 -------- --------- Total stockholders' equity 112,340 114,590 -------- --------- Total liabilities and stockholders' equity $231,330 $ 306,390 ======== ========= </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, 2000 2001 ---- ---- <S> <C> <C> CASH FLOWS FROM OPERATING ACTIVITIES: Net Income $ 4,098 $ 2,488 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 1,820 1,906 Deferred income tax provision (benefit) 265 184 Loss (gain) on sale of property and equipment (66) (14) Other - 35 Decrease (increase) in -- Accounts receivable, net (8,457) (1,465) Inventories (16,143) (65,621) Prepaids and other assets (9) 1,982 Increase (decrease) in -- Accounts payable (7,510) 3,685 Customer deposits (6,130) (3,868) Accrued expenses and other liabilities 7,652 2,328 Short-term borrowings 36,706 67,294 -------- -------- Net cash provided by (used in) operating activities 12,226 8,934 -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property and equipment (2,246) (3,747) Proceeds from sale of property and equipment 567 61 Cash acquired (used) in purchase of businesses (1,221) (5,585) -------- -------- Net cash provided by (used in) investing activities (2,900) (9,271) -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Issuance of common stock 367 228 Purchases of Treasury Stock - (501) Borrowings of long-term debt - 3,150 Repayments of long-term debt (808) (378) -------- -------- Net cash provided by (used in) financing activities (441) 2,499 -------- -------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 8,885 2,162 CASH AND CASH EQUIVALENTS, beginning of period 8,297 12,583 -------- -------- CASH AND CASH EQUIVALENTS, end of period $ 17,182 $ 14,745 ======== ======== Supplemental Disclosures of Cash Flow Information: Cash paid for Interest $ 3,118 $ 1,665 Income taxes $ 1,951 $ 630 </TABLE> See Notes to Condensed Consolidated Financial Statements 5
6 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 and is the largest boat retailer in the United States. MarineMax, Inc. and subsidiaries (MarineMax or the Company) engage primarily in the retail sale, brokerage and service of new and used boats, motors, trailers, marine parts and accessories. The Company currently operates through 53 retail locations in 13 states, consisting of Arizona, California, Delaware, Florida, Georgia, Minnesota, Nevada, New Jersey, North Carolina, Ohio, South Carolina, Texas, and Utah. MarineMax is the nation's largest retailer of Sea Ray, Boston Whaler, and Hatteras Yachts. Brunswick Corporation (Brunswick) is the world's largest manufacturer of recreational boats, including Sea Ray and Boston Whaler. Sales of new Brunswick boats accounted for 82% of the Company's new boat revenue in fiscal 2000. The Company represents approximately 8% of all Brunswick marine product sales during the same period. Each of the Company's applicable 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. In October 1998, the Company formed a new subsidiary, MarineMax Motor Yachts, Inc. (Motor Yachts), and entered into a Dealership Agreement with Hatteras Yachts, a division of Genmar Industries, Inc. The agreement gives the Company the right to sell Hatteras Yachts throughout the state of Florida (excluding the Florida Panhandle) and the U.S. distribution rights for Hatteras products over 82 feet. The Company is party to dealer agreements with other manufacturers, each of which gives the Company the right to sell various makes and models of boats within a given geographic region. In order to maintain consistency and comparability between periods presented, certain amounts have been reclassified from the previously reported consolidated 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 January 8, 2001, the Company acquired the net assets of Associated Marine Technologies, Inc. (Associated), including the assumption of certain liabilities and related property and buildings, for approximately $5.6 million in cash. Associated operates a full-service yacht repair facility near Ft. Lauderdale, Florida. The acquisition has been accounted for under the purchase method of accounting, which resulted in the recognition of approximately $2.3 million in goodwill. 6
7 MARINEMAX, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements 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 weighted average interest rate of LIBOR plus 143 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 July 2001 through December 2002. 4. LONG-TERM DEBT On February 20, 2001 the Company entered into a $3.15 million mortgage note payable collateralized by the property and building purchased in the Associated acquisition. Payments of $37,621 are due monthly and bear an interest rate of 7.64%. The mortgage note payable matures in March 2011. 5. STOCKHOLDERS' EQUITY In November 2000, the Company's Board of Directors approved a share repurchase plan allowing the Company to repurchase up to 300,000 shares of its common stock. Under the plan, the Company may buy back common stock from time to time in the open market or in privately negotiated blocks, dependant upon various factors, including price and availability of the shares, and general market conditions. As of March 31, 2001, an aggregate of 81,413 shares of Common Stock has been repurchased under the plan for an aggregate purchase price of $0.5 million. On February 27, 2001, the Company's stockholders authorized an amendment to the Company's certificate of incorporation to reduce the total number of authorized shares of stock from 45.0 million to 25.0 million, consisting of 24.0 million shares of common stock and 1.0 million shares of preferred stock, and authorized the Company's Board of Directors, without further action of stockholders, to increase the total number of shares of stock from the reduced amount to the amount of 45.0 million, consisting of 40.0 million shares of common stock and 5.0 million shares of preferred stock. 6. EMPLOYEE STOCK PURCHASE PLAN On February 27, 2001, the Company's stockholders authorized an amendment to the Company's 1998 Incentive Stock Plan to increase the number of shares of common stock that may be issued under the plan to the lesser of 4.0 million shares or 20% of the then-outstanding shares of common stock. 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 27, 2000. 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 2000 revenue exceeding $550 million. Through 53 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 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, 2001, the Company acquired nine additional boat retailers, two yacht brokerage operations, a full-service yacht repair facility, 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 $27.8 million in cash, resulting in the recognition of an aggregate of $42.5 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, 2001 to the three months ended March 31, 2000, and the six months ended March 31, 2001 to the six months ended March 31, 2000 and should be read in conjunction with the Condensed Consolidated Financial Statements, including the related notes thereto, appearing elsewhere in this Report. 8
9 CONSOLIDATED RESULTS FROM OPERATIONS Three-Month Period Ended March 31, 2001 Compared to Three-Month Period Ended March 31, 2000: Revenue. Revenue decreased $12.0 million, or 7.7%, to $143.2 million for the three-month period ended March 31, 2001 from $155.2 million for the three-month period ended March 31, 2000. Of this decrease, $16.8 million was attributable to an 11% decline in same-store sales and $4.8 million related to stores not eligible for inclusion in the comparable-store base. The decrease in comparable-store sales for the three-month period ended March 31, 2001, resulted from the unusually harsh winter and the slowing economic environment during the three-month period ended March 31, 2001. Additionally, the decrease was attributable to the exceptional comparable-store sales growth of 58% during the three-month period ended March 31, 2000. Gross Profit. Gross profit decreased $2.3 million, or 6.9%, to $30.5 million for the three-month period ended March 31, 2001 from $32.8 million for the three-month period ended March 31, 2000. Gross profit margin as a percentage of revenue increased to 21.3% in 2001 from 21.1% in 2000. The increase was attributable to better inventory management, which led to the availability of products in greater demand. Commissions received on certain finance and insurance products also expanded modestly during the quarter. This was partially offset by an increase in the sale of larger products, which historically yield lower gross profits per unit. Selling, General, and Administrative Expenses. Selling, general, and administrative expenses decreased approximately $0.6 million, or 2.5%, to $24.8 million for the three-month period ended March 31, 2001 from $25.4 million for the three-month period ended March 31, 2000. Selling, general, and administrative expenses as a percentage of revenue increased to 17.3% from 16.4% in 2000. The increase in selling, general, and administrative expenses as a percentage of revenue is attributable to a weaker leveraging of the operating expense structure, due to the sales decrease. Additionally, as the Company acquires dealers that operate in colder regions of the United States, the business becomes more seasonal. Interest Expense, Net. Interest expense, net decreased approximately $0.8 million or 58.0%, to approximately $0.6 million for the three-month period ended March 31, 2001 from approximately $1.4 million for the three-month period ended March 31, 2000. Interest expense, net as a percentage of revenue, decreased to 0.4% in 2001 from 0.9% in 2000. The decrease in total interest charges was the result of reduced average borrowings and a more favorable interest rate environment in fiscal 2001. Six-Month Period Ended March 31, 2001 Compared to Six-Month Period Ended March 31,2000: Revenue. Revenue decreased $20.8 million, or 8.3%, to $228.0 million for the six-month period ended March 31, 2001 from $248.8 million for the six-month period ended March 31, 2000. Of this decrease, $28.0 million was attributable to a 12% decline in same-store sales and $7.2 million related to stores not eligible for inclusion in the comparable-store base. The decrease in comparable-store sales for the six-month period ended March 31, 2001, resulted from the unusually harsh winter and the slowing economic environment during the six-month period ended March 31, 2001. Additionally, the decrease was attributable to the exceptional comparable-store sales growth of 47% during the three-month period ended March 31, 2000. 9
10 Gross Profit. Gross profit decreased $2.7 million, or 5.0%, to $50.8 million for the six-month period ended March 31, 2001 from $53.5 million for the six-month period ended March 31, 2000. Gross profit margin as a percentage of revenue increased to 22.3% in 2001 from 21.5 % in 2000. The increase was attributable to improved margins being realized as a result of better inventory management, which led to the availability of products in greater demand. Additionally, finance and insurance commissions increased modestly and certain manufacturer promotions were in place during the six-month period ended March 31, 2001 that were not in place during six-month period ended March 31, 2000. Selling, General, and Administrative Expenses. Selling, general, and administrative expenses increased approximately $1.7 million, or 3.8% to $45.8 million for the six-month period ended March 31, 2001 from $44.1 million for the six-month period ended March 31, 2000. Selling, general, and administrative expenses as a percentage of revenue increased to 20.1% from 17.8% in 2000. The increase in selling, general, and administrative expenses as a percentage of revenue is attributable to a weaker leveraging of the operating expense structure, due to the sales decrease. Additionally, as the Company acquires dealers that operate in colder regions of the United States, the business becomes more seasonal. Interest Expense, Net. Interest expense, net decreased approximately $1.7 million, or 66.1%, to $0.9 million for the six-month period ended March 31, 2001 from approximately $2.6 million for the six-month period ended March 31, 2000. Interest expense, net as a percentage of revenue, decreased to 0.4% in 2001 from 1.0% in 2000. The decrease in total interest charges was the result of reduced average borrowings and a more favorable interest rate environment in fiscal 2001. 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. On February 20, 2001, the Company entered into a $3.15 million mortgage note payable collateralized by the property and building purchased in the Associated acquisition. Payments of $37,621 are due monthly and bear an interest rate of 7.64%. The mortgage note payable matures in March 2011. At March 31, 2001, the Company's indebtedness totaled approximately $148.4, of which approximately $9.1 was associated with the Company's real estate holdings and the remaining $139.3 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 weighted average interest rate of LIBOR plus 143 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 July 2001 through December 2002. 10
11 Through March 31, 2001, the Company has acquired nine recreational boat dealers, two yacht brokerage operations, a full-service yacht repair facility, 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 $27.8 million in cash, resulting in the recognition of an aggregate of $42.5 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. 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 2000 Annual Meeting of Stockholders was held on February 27, 2001. The following nominees were elected to the Company's Board of Directors to serve as Class III directors for a three-year term expiring in 2004, or until their successors are elected and qualified, or until their earlier resignation or removal: Nominee Votes in Favor Withheld - ------- -------------- -------- Gerald M. Benstock 12,968,045 -- Dean S. Woodman 12,968,045 -- The following directors' terms of office continued after the 2000 Annual meeting of Stockholders: William H. McGill Jr., Richard R. Bassett, Paul Graham Stovall, Robert S. Kant, R. David Thomas, and Stewart Turley. Additionally, the following issues were voted upon by the Company's stockholders: To amend the Company's certificate of incorporation to reduce the number of authorized shares of stock subject to subsequent increase by the Company's Board of Directors: Votes in Favor Opposed Abstained Broker Non-Vote - -------------- ------- --------- --------------- 11,150,942 36,974 6,729 1,902,851 To amend the Company's 1998 Incentive Stock Plan to increase the number of shares that may be issued: Votes in Favor Opposed Abstained Broker Non-Vote - -------------- ------- --------- --------------- 9,956,291 1,225,454 12,900 1,902,851 12
13 To approve the Company's revised incentive compensation program: Votes in Favor Opposed Abstained Broker Non-Vote - -------------- ------- --------- --------------- 10,658,526 198,867 337,252 1,902,851 To ratify Arthur Andersen LLP as the independent certified public accountants of the Company for the fiscal year ending September 30, 2001: Votes in Favor Opposed Abstained Broker Non-Vote - -------------- ------- --------- --------------- 13,061,969 3,800 31,457 - ITEM 5. OTHER INFORMATION Not applicable ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits 13
14 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 30, 2001 By: /s/ Michael H. McLamb --------------------------- Michael H. McLamb Chief Financial Officer, Vice President, Secretary and Treasurer 14