MarineMax, Inc. (HZO)

F1Q12 Earnings Call

January 31, 2012 10:00 a.m. ET


Brad Cohen - ICR, Inc.

Michael McLamb - Executive Vice President, Chief Financial Officer and Secretary

William McGill, Jr. - Chairman, Chief Executive Officer and President


Greg McKinley - Dougherty and Company

Phil Anderson - Longbow Research

Jimmy Baker - B. Riley & Co.



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Good day, everyone and welcome to the MarineMax Incorporated First Quarter 2012 Earnings Conference Call. Today’s call is being recorded. At this time, for opening remarks and introductions, I’d like to turn the call over to Mr. Brad Cohen. Please go ahead, sir.

Brad Cohen

Thank you, operator. Good morning, everyone, and thank you for joining this discussion of MarineMax’s 2012 fiscal first quarter results. I’m sure that you’ve all received a copy of the press release that went out this morning, but if you have not, please call Linda Cameron at 727-531-1700 and she will fax or e-mail one to you right away.

I’d now like to introduce the management team of MarineMax; Mr. Bill McGill, Chairman, President and Chief Executive Officer; and Mike McLamb, Chief Financial Officer of the company. Management will make some comments about the quarter and then will be available for your questions. Mike?

Michael McLamb

Thank you, Brad. Good morning, everyone, and thank you for joining this call. Before I turn the call over to Bill, I’d like to tell you that certain of our comments are forward-looking statements as defined in the Private Securities Litigation Reform Act. These statements involve risks and uncertainties that may cause actual results to differ materially from expectations. These risks include, but are not limited to, the impact of seasonality and weather, general economic conditions and the level of consumer spending, the company’s ability to capitalize on opportunities or grow its market share, and numerous other factors identified in our Form 10-K and other filings with the Securities and Exchange Commission.

With that in mind, I’d like to turn the call over to Bill.

William McGill, Jr.

Thank you, Mike, and good morning everyone. I am proud of our team for producing over a 30% improvement in our first quarter bottom-line on a comparable basis. It was a quarter that largely saw declining unit sales for the segments of the industry in which we participate. The December quarter was our fifth quarter in a row of growth in new unit sales. Our unit growth which is in contrast to the unit declines reported by the end industry, comes on top of very strong unit growth in the December quarter of last year.

The last reported data shows that we are gaining market share and we are confident that the trend is continuing today. Our sales came with higher margins in the quarter. As we had previously indicated, pricing is firming, although it is still has ways to go before we get back to our historical margins. We also were able to incrementally expand our higher margins businesses like finance and insurance, service, storage and our parts and accessories businesses. As these businesses grow, they help to increase our consolidated margins.

We had a modest increase in the absolute dollars of expenses when compared with the prior year on a comparable basis. While our SG&A expenses are slightly worse as the percentage of sales, they are better as a percentage of gross profit dollars. For the quarter, we had generally better performing stores and departments then a year ago. As such, compensation incrementally increases plus our increase in boat sales gross profits results in an incremental commission increase. Having said this, we are focused on managing cost and putting the company in the best possible position to return to profitability.

To that point we did close one store during the quarter by consolidating it into a nearby operation. We continue to evaluate all our expenses with a long-term focus on not lessening what we do to keep our customers happy and keep them boating. We continue to put emphasis on the things that we can manage, like our expense structure and our higher margin businesses. All of these businesses help our continued efforts to expand our reach beyond our current customer base and provide more stability from what has been a volatile marine industry.

These efforts should result in improved gross margins over time. While there has always been mix shifts that impact our gross margins from quarter-to-quarter, we believe that we can continue to make progress on our annual gross margins so long as we do not have a meaningful deterioration in the economy. We experienced a slight increase in inventory dollars from the September quarter, as we mentioned in the last call, we did reduce orders that impacted the quarter resulting in a smaller seasonal increase then would be historically expected.

The December quarter inventory was up from 2010 primarily due to the ramping up of stocking levels for new brands added to our stores, replenishing used boats from the trades we have taken, and to a lesser degree, yachts added to our new business venture MarineMax Vacations which I will discuss in a minute. We have made further reductions in orders that impact boats incoming for the March quarter. These reductions are more of a smoothing of orders then a statement of concern. The marine industry’s manufacturers improved ability to adjust orders today along with our trends, makes us feel comfortable with inventory levels.

Aging continued to be in good shape. That success we have realized by expanding our higher margin businesses, led us to explore other opportunities that can contribute to our results in the future while offsetting some of the cyclicality that comes with boat sales. In particular one such item is MarineMax Vacation Charter. You have seen articles on MarineMax Vacations, a business we launched this October. While still in its infancy, it has received a fair amount of press in our industry. To date we have invested limited capital in the form of inventory and efforts to launch MarineMax Vacations. We realize that many of our existing customers already charter with their family and friends, and we can now capitalize in the opportunity to leverage our current customer base and provide them another great MarineMax experience.

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