MarineMax
Annual Report 2003

Plain-text annual report

MARINEMAX INC FORM 10-K (Annual Report) Filed 12/29/2003 For Period Ending 9/30/2003 Address 18167 US 19 N SUITE 499 CLEARWATER, Florida 33764 Telephone CIK Industry Sector Fiscal Year 813-531-1700 0001057060 Retail (Specialty) Services 09/30 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 (cid:1) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Form 10-K For fiscal year ended September 30, 2003 Commission File Number 1-14173 MarineMax, Inc. (Exact Name of Registrant as Specified in Its Charter) Delaware (State of Incorporation) 59-3496957 (I.R.S. Employer Identification No.) 18167 U.S. Highway North Suite 499 Clearwater, Florida 33764 (727) 531-1700 (Address, including zip code, and telephone number, including area code, of principal executive offices) Securities registered pursuant to Section 12(b) of the Exchange Act: Title of Each Class Name of Each Exchange on Which Registered Common Stock, par value $.001 per share Rights to Purchase Series A Junior Participating Preferred Stock New York Stock Exchange Securities registered pursuant to Section 12(g) of the Exchange Act: None Indicate by check mark whether the registrant (1) has filed all reports required 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 (cid:1) No (cid:3) Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. (cid:3) Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes (cid:1) No (cid:3) The aggregate market value of Common Stock held by nonaffiliates of the registrant (8,326,448 shares) based on the closing price of the registrant’s Common Stock as reported on the New York Stock Exchange on March 31, 2003, which was the last business day of the registrant’s most recently completed second fiscal quarter, was $75,104,561. For purposes of this computation, all officers, directors, and 10% beneficial owners of the registrant are deemed to be affiliates. Such determination should not be deemed to be an admission that such officers, directors, or 10% beneficial owners are, in fact, affiliates of the registrant.  As of December 23, 2003, there were outstanding 15,458,328 shares of registrant’s Common Stock, par value $.001 per share. Documents Incorporated by Reference Portions of the registrant’s definitive Proxy Statement for the 2004 Annual Meeting of Stockholders are incorporated by reference into Part III of this Report. MARINEMAX, INC. ANNUAL REPORT ON FORM 10-K Fiscal Year Ended September 30, 2003 TABLE OF CONTENTS PART I Business Properties Legal Proceedings Submission of Matters to a Vote of Security Holders PART II Market for the Registrant’s Common Equity and Related Stockholder Matters Selected Financial Data Item 1. Item 2. Item 3. Item 4. Item 5. Item 6. Item 7. Management’s Discussion and Analysis of Financial Condition, and Results of Operations Item 7A. Quantitative and Qualitative Disclosures About Market Risk Item 8. Item 9. Financial Statements and Supplementary Data Changes in and Disagreements with Accountants on Accounting and Financial Disclosure Item 9A. Controls and Procedures PART III Item 10. Directors and Executive Officers of the Registrant Item 11. Executive Compensation Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Item 13. Certain Relationships and Related Transactions Item 14. Principal Accountant Fees and Services Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K Signatures Index to Consolidated Financial Statements PART IV STATEMENTS REGARDING FORWARD-LOOKING STATEMENTS Page 2 33 36 36 37 38 39 45 46 46 46 46 46 46 46 46 47 50 F-1 The statements contained in this report on Form 10-K that are not purely historical are forward-looking statements within the meaning of applicable securities laws. Forward-looking statements include statements regarding our “expectations,” “anticipation,” “intentions,” “beliefs,” or “strategies” regarding the future. Forward-looking statements relating to our future economic performance, plans and objectives for future operations, and projections of revenue and other financial items that are based on our beliefs as well as assumptions made by and information currently available to us. Actual results could differ materially from those currently anticipated as a result of a number of factors, including those discussed in Item 1, “Business — Risk Factors.” 1 Item 1. Business Our Company PART I Introduction We are the largest recreational boat dealer in the United States. Through 66 retail locations in Alabama, Arizona, California, Colorado, Delaware, Florida, Georgia, Minnesota, Nevada, New Jersey, North Carolina, Ohio, South Carolina, Texas, and Utah, we sell new and used recreational boats, including pleasure boats (such as sport boats, sport cruisers, sport yachts, and yachts), ski boats, and fishing boats, with a focus on premium brands in each segment. We also sell related marine products, including engines, trailers, parts, and accessories. In addition, we arrange related boat financing, insurance, and extended service contracts; provide repair and maintenance services; and offer boat and yacht brokerage services. We are the nation’s largest retailer of Sea Ray, Boston Whaler, Meridian, and Hatteras recreational boats and yachts, all of which are manufactured by Brunswick Corporation. Sales of new Brunswick boats accounted for approximately 65% of our revenue in fiscal 2003. Brunswick is the world’s largest manufacturer of marine products and marine engines. We believe our sales represented in excess of 10% of all Brunswick marine sales, including approximately 33% of its new Sea Ray boat sales, during our 2003 fiscal year. Through operating subsidiaries, we are a party to dealer agreements with Brunswick covering Sea Ray products and we are the exclusive dealer of Sea Ray boats in our geographic markets. Subsequent to the end of fiscal 2003, we were appointed the exclusive dealer for Italy-based Ferretti Group for Ferretti Yachts and for Pershing, Riva, Apreamare, Mochi Craft, Custom Line, and CRN mega-yachts, yachts, and other recreational boats for the United States, Canada, and the Bahamas, and we have the right to become the exclusive dealer in Mexico and the Caribbean. At the same time, we were appointed the exclusive dealer for Bertram in the United States (excluding the Florida peninsula and certain portions of New England), Canada, and the Bahamas, and we have the right to become the exclusive dealer in Mexico and certain areas of the Caribbean. We believe the brands we are adding offer a migration for our existing customer base or fill a void in our product offering and accordingly will not compete with or cannibalize the business generated from our other prominent brands. We commenced operations as a result of the March 1, 1998 acquisition of five previously independent recreational boat dealers. Since that time, we have acquired 16 additional previously independent recreational boat dealers, two boat brokerage operations, and a full-service yacht repair operation. We capitalize on the experience and success of the acquired companies in order to establish a new national standard of customer service and responsiveness in the highly fragmented retail boating industry. As a result of our emphasis on premium brand boats, our average selling price for a new boat in fiscal 2003 was approximately $87,000 compared to the industry average selling price of approximately $30,000. Our stores, which operated at least 12 months, averaged approximately $12 million in annual sales in fiscal 2003. We consider a store to be one or more retail locations that are adjacent or operate as one entity. For the fiscal year ended September 30, 2003, we had revenue of approximately $608 million, operating income of approximately $35 million, and net income of approximately $20 million. Our same-store sales increased an average of approximately 8% for the last five years, including a decline of 9% in fiscal 2001. We adopt the best practices of our acquired companies as appropriate to enhance our ability to attract more customers, foster an overall enjoyable boating experience, and offer boat manufacturers stable and professional retail distribution and a broad geographic presence. We believe that our full range of services, no-haggle sales approach, prime retail locations, extensive facilities, strong management and team members, and emphasis on customer service and satisfaction before and after a boat sale are competitive advantages that enable us to be more responsive to the needs of existing and prospective customers. The U.S. recreational boating industry generated approximately $30.3 billion in retail sales in calendar 2002, including sales of new and used boats; marine products, such as engines, trailers, equipment, and accessories; and related expenditures, such as fuel, insurance, docking, storage, and repairs. Retail sales of new 2 and used boats, engines, trailers, and accessories accounted for approximately $21.8 billion of these sales in 2002. The highly fragmented retail boating industry generally consists of small dealers that operate in a single market and provide varying degrees of merchandising, professional management, and customer service. We believe that many small dealers are finding it increasingly difficult to make the managerial and capital commitments necessary to achieve higher customer service levels and upgrade systems and facilities as required by boat manufacturers and demanded by customers. We also believe that many dealers lack an exit strategy for their owners. We believe these factors contribute to our opportunity. Strategy Our goal is to enhance our position as the nation’s leading recreational boat dealer. Key elements of our operating and growth strategy include the following: • emphasizing customer satisfaction and loyalty by creating an overall enjoyable boating experience beginning with a negotiation-free purchase process, superior service, and premier facilities; • implementing the “best practices” of our acquired dealers as appropriate throughout our dealerships; • achieving efficiencies and synergies among our operations to enhance internal growth and profitability; • emphasizing employee training and development; • opening additional retail facilities in our existing and new territories; • offering additional products and services, including those involving higher profit margins; • pursuing strategic acquisitions to capitalize upon the significant consolidation opportunities in the highly fragmented recreational boat dealer industry by acquiring additional dealers and related operations and improving their performance and profitability through the implementation of our operating strategies; • expanding our Internet retail operations and marketing; • promoting national brand name recognition and the MarineMax connection; • operating with a decentralized approach to the operational management of our dealerships; and • utilizing technology throughout operations, which facilitates the interchange of information and enhances cross-selling opportunities throughout our company. Development of the Company; Expansion of Business MarineMax was founded in January 1998. MarineMax itself, however, conducted no operations until the acquisition of five independent recreational boat dealers on March 1, 1998. We acquired a sixth recreational boat dealer in April 1998. Since our initial public offering in June 1998, we have acquired 15 additional recreational boat dealers, two boat brokerage operations, and a full-service yacht repair operation. Each of our acquired dealers is continuing its operations under the MarineMax name as a wholly owned operating subsidiary of our company. We continually attempt to expand our business by providing a full range of services, offering extensive and high-quality product lines, maintaining prime retail locations, pursuing the MarineMax Value Price sales approach, and emphasizing the highest level of customer service and customer satisfaction. We also evaluate opportunities to expand our operations by acquiring recreational boat dealers to expand our geographic scope; expanding our product lines; opening new retail locations within our existing territories; and providing new products and services for our customers. 3  Acquisitions of additional recreational boat dealers represent an important strategy in our goal to enhance our position as the nation’s leading retailer of recreational boats. The following table sets forth information regarding the entities that we have acquired and their geographic regions. Acquired Companies Acquisition Date Geographic Region Bassett Boat Company of Florida Louis DelHomme Marine Gulfwind USA, Inc. Gulfwind South, Inc. Harrison’s Boat Center, Inc. and Harrison’s Marine Centers of Arizona, Inc. Stovall Marine, Inc. Cochran’s Marine, Inc. and C & N Marine Corporation Sea Ray of North Carolina, Inc. Brevard Boat Company Sea Ray of Las Vegas Treasure Cove Marina, Inc. Woods & Oviatt, Inc. Boating World Merit Marine, Inc. Suburban Boatworks, Inc. Hansen Marine, Inc. Duce Marine, Inc. Clark’s Landing, Inc. (selected New Jersey locations and operations) Associated Marine Technologies, Inc. Gulfwind Marine Partners, Inc. Seaside Marine, Inc. Sundance Marine, Inc. Killinger Marine Center, Inc. and Killinger Marine Center of Alabama, Inc. Emarine International, Inc. and Steven Myers, Inc. March 1998 March 1998 March 1998 March 1998 March 1998 April 1998 July 1998 July 1998 September 1998 September 1998 September 1998 October 1998 February 1999 March 1999 April 1999 August 1999 December 1999 April 2000 January 2001 April 2002 July 2002 June 2003 September 2003 October 2003 Southeast Florida Dallas and Houston, Texas West Central, Florida Southwest Florida Northern California and Arizona Georgia Minnesota North and South Carolina East Central Florida Nevada Northern Ohio Southeast Florida Dallas, Texas Southern New Jersey Central New Jersey Northeast Florida Utah Northern New Jersey Southeast Florida West Florida Southern California Colorado Northwest Florida and Alabama Southeast Florida Apart from acquisitions, we have opened 13 new retail locations in existing territories, excluding those opened on a temporary basis for a specific purpose. We also monitor the performance of our retail locations and close retail locations that do not meet our expectations. Based on these factors, we have closed eight retail locations since March 1998, excluding those opened on a temporary basis for a specific purpose. As a part of our acquisition strategy, we frequently engage in discussions with various recreational boat dealers regarding their potential acquisition by us. In connection with these discussions, we and each potential acquisition candidate exchange confidential operational and financial information, conduct due diligence inquiries, and consider the structure, terms, and conditions of the potential acquisition. In certain cases, the prospective acquisition candidate agrees not to discuss a potential acquisition with any other party for a specific period of time, grants us an option to purchase the prospective dealer for a designated price during a specific time, and agrees to take other actions designed to enhance the possibility of the acquisition, such as preparing audited financial information and converting its accounting system to the system specified by us. Potential acquisition discussions frequently take place over a long period of time and involve difficult business integration and other issues, including in some cases, management succession and related matters. As a result of these and other factors, a number of potential acquisitions that from time to time appear likely to occur do not result in binding legal agreements and are not consummated. 4  In addition to acquiring recreational boat dealers and opening new retail locations, we also add new product lines to expand our operations. The following table sets forth various product lines that we have added to our existing locations: Product Line Fiscal Year Geographic Regions Boston Whaler Hatteras Yachts Boston Whaler Boston Whaler MB Sports Sea Hunt Bennington Meridian Yachts Tracker Marine Grady White Hatteras Yachts Boston Whaler Century Ferretti Yachts, Pershing, Riva, Apreamare, Mochi Craft, Custom Line, and CRN Bertram 1997 1999 1999 2000 2001 2001 2002 2002 2002 2002 2002 2004 2004 2004 2004 West Central Florida; Stuart, Florida; Dallas, Texas Florida (excluding the Florida panhandle) and distribution rights for products over 82 feet for North and South America, the Caribbean, and the Bahamas Ohio North Palm Beach, Florida Northern California, Arizona, Nevada, Utah, and Texas East Central Florida and Texas Northern California, Nevada, and Utah Florida, Georgia, North and South Carolina, New Jersey, Ohio, Minnesota, Texas, and Delaware Minnesota, Georgia, and Ohio Houston, Texas Texas North and South Carolina North and South Carolina United States, Canada, and the Bahamas United States (excluding the Florida peninsula and portions of New England), Canada, and the Bahamas. We also are expanding our used boat sales and yacht brokerage services through an increased emphasis on these activities. In addition, we are expanding our F&I activities by offering our customers the ability to finance new or used boat purchases and to purchase extended service contracts and arrange insurance coverage, including boat property, credit-life, accident, disability, and casualty coverage. Finally, we are placing increased emphasis on our parts and accessory and maintenance and repair services, which we provide at most of our locations and through stand-alone service facilities, including our full-service yacht repair facility in Southeast Florida. We maintain our executive offices at 18167 U.S. 19 North, Suite 499, Clearwater, Florida 33764, and our telephone number is (727) 531- 1700. We were incorporated in the state of Delaware in January 1998. Unless the context otherwise requires, all references to “MarineMax” mean MarineMax, Inc. prior to its acquisition of five previously independent recreational boat dealers in March 1998 (including their related real estate companies) and all references to the “Company,” “our company,” “we,” “us,” and “our” mean, as a combined company, MarineMax, Inc. and the 21 recreational boat dealers, two boat brokerage operations, and one full-service yacht repair operation acquired to date (the “acquired dealers,” and together with the brokerage and repair operations, “operating subsidiaries” or the “acquired companies”). Our website is located at www.MarineMax.com . Through our website, we make available free of charge our annual report on Form 10-K, our quarterly reports on Form 10-Q, our current reports on Form 8-K, our proxy statements, and any amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934. These reports are available as soon as reasonably practicable after we electronically file those reports with the Securities and Exchange Commission. We also post on our website 5 the charters of our Audit, Compensation, and Nominating/ Corporate Governance Committees; our Corporate Governance Guidelines, Code of Business Conduct and Ethics, and Code of Ethics for the CEO and Senior Financial Officers, and any amendments or waivers thereto; and any other corporate governance materials contemplated by SEC or NYSE regulations. These documents are also available in print to any stockholder requesting a copy from our corporate secretary at our principal executive offices. General BUSINESS We are the largest recreational boat dealer in the United States. Through 66 retail locations in Alabama, Arizona, California, Colorado, Delaware, Florida, Georgia, Minnesota, Nevada, New Jersey, North Carolina, Ohio, South Carolina, Texas, and Utah, we sell new and used recreational boats, including pleasure boats (such as sport boats, sport cruisers, sport yachts, and yachts) ski boats, and fishing boats, with a focus on premium brands in each segment. We also sell related marine products, including engines, trailers, parts, and accessories. In addition, we arrange related boat and yacht financing, insurance, and extended service contracts; provide repair and maintenance services; and offer boat and yacht brokerage services. We are the nation’s largest retailer of Sea Ray, Boston Whaler, Meridian, and Hatteras recreational boats and yachts. Sales of new Sea Ray, Boston Whaler, Meridian, and Hatteras recreational boats and yachts, each of which is manufactured by Brunswick Corporation (Brunswick), accounted for approximately 65% of our revenue in fiscal 2003. Brunswick is the world’s largest manufacturer of marine products and marine engines. We believe our sales represented in excess of 10% of all Brunswick marine sales during our 2003 fiscal year. Each of our principal operating subsidiaries is a party to a dealer agreement with Brunswick covering Sea Ray products and is the exclusive dealer of Sea Ray boats in its geographic market. We also have the right to sell Hatteras Yachts throughout the state of Florida (excluding the Florida panhandle) and the state of Texas, as well as the distribution rights for Hatteras products over 82 feet for North and South America, the Caribbean, and the Bahamas. In August 2002, we were awarded the Meridian Yacht distribution rights to most of our geographic markets, excluding Arizona, California, Colorado, Nevada, and Utah. Subsequent to the end of fiscal 2003, we were appointed the exclusive dealer for Italy-based Ferretti Group for Ferretti Yachts and for Pershing, Riva, Apreamare, Mochi Craft, Custom Line, and CRN mega-yachts, yachts, and other recreational boats for the United States, Canada, and the Bahamas, and we have the right to become the exclusive dealer in Mexico and the Caribbean. At the same time, we were also appointed the exclusive dealer for Bertram in the United States (excluding the Florida peninsula and certain portions of New England), Canada, and the Bahamas, and we have the right to become the exclusive dealer in Mexico and certain areas of the Caribbean. We believe the brands we are adding offer a migration for our existing customer base or fill a void in our product offering and accordingly will not compete with or cannibalize the business generated from our other prominent brands. U.S. Recreational Boating Industry The total U.S. recreational boating industry generated approximately $30.3 billion in retail sales in calendar 2002, including retail sales of new and used recreational boats; marine products, such as engines, trailers, parts, and accessories; and related boating expenditures, such as fuel, insurance, docking, storage, and repairs. We believe that retail sales of new boats, engines, trailers, and accessories accounted for approximately $13.6 billion of such sales in 2002. Retail recreational boating sales were $17.9 billion in the late 1980s, but declined to a low of $10.3 billion in 1992. We believe this decline can be attributed to several factors, including a recession, the Gulf War, and the imposition throughout 1991 and 1992 of a luxury tax on boats sold at prices in excess of $100,000. The luxury tax was repealed in 1993 and, with the exception of 1998, retail recreational boating sales have increased every year since. The recreational boat retail market remains highly fragmented with little consolidation having occurred to date and consists of numerous boat retailers, most of which are small companies owned by individuals that operate in a single market and provide varying degrees of merchandising, professional management, and 6 customer service. We believe that many boat retailers are encountering increased pressure from boat manufacturers to improve their levels of service and systems, increased competition from larger national retailers in certain product lines, and, in certain cases, business succession issues. Strategy Our goal is to enhance our position as the nation’s leading recreational boat dealer. Key elements of our strategy include the following: Emphasizing Customer Satisfaction and Loyalty. We seek to achieve a high level of customer satisfaction and establish long-term customer loyalty by creating an overall enjoyable boating experience beginning with a negotiation-free purchase process. We further enhance and simplify the purchase process by helping to arrange financing and insurance at our retail locations with competitive terms and streamlined turnaround. We offer the customer a thorough in-water orientation of boat operations where available, as well as ongoing boat safety, maintenance, and use seminars and demonstrations for the customer’s entire family. We also continue our customer service after the sale by leading and sponsoring MarineMax Getaways! group boating trips to various destinations, rendezvous gatherings, and on-the-water organized events to provide our customers with pre-arranged opportunities to enjoy the pleasures of the boating lifestyle. We also endeavor to provide superior maintenance and repair services, often through mobile service at the customer’s wet slip and with extended service department hours and emergency service availability, that minimize the hassles of boat maintenance. Implementing Best Practices. We implement the “best practices” of our acquired dealers as appropriate throughout our dealerships. As an example, we have implemented the no-haggle sales approach at each of our dealerships. Under the MarineMax Value-Price approach, we sell our boats at posted prices, generally representing a discount from the manufacturer’s suggested retail price, thereby eliminating the anxieties of price negotiations that occur in most boat purchases. In addition, we adopt, where beneficial, the best practices of our acquired dealers in terms of location, design, layout, product purchases, maintenance and repair services (including extended service hours and mobile or dockside services), product mix, employee training, and customer education and services. Achieving Operating Efficiencies and Synergies. We strive to increase the operating efficiencies of and achieve certain synergies among our dealerships in order to enhance internal growth and profitability. We centralize various aspects of certain administrative functions at the corporate level, such as accounting, finance, insurance coverage, employee benefits, marketing, strategic planning, legal support, purchasing and distribution, and management information systems. Centralization of these functions reduces duplicative expenses and permits the dealerships to benefit from a level of scale and expertise that would otherwise be unavailable to each dealership individually. We also seek to realize cost savings from reduced inventory carrying costs as a result of purchasing boat inventories on a national level and directing boats to dealership locations that can more readily sell such boats; lower financing costs through our credit facilities; and volume purchase discounts and rebates for certain marine products, supplies, and advertising. The ability of our retail locations to offer the complementary services of our other retail locations, such as offering customer excursion opportunities, providing maintenance and repair services at the customer’s boat location, and giving access to a larger inventory, increases the competitiveness of each retail location. By centralizing these types of activities, our store managers have more time to focus on the customer and the development of their teams. Emphasizing Employee Training and Development. To promote continued internal growth, we devote substantial efforts to train our employees to understand our core retail philosophies, which focus on making the purchase of a boat and its subsequent use as hassle-free and enjoyable as possible. Through our MarineMax University, or MMU, we teach our retail philosophies to existing and new employees at various locations and online, through MMU-online. MMU is a modularized and instructor-led educational program that focuses on our retailing philosophies and provides instruction on such matters as the sales process, customer service, F&I, accounting, leadership, and human resources. 7  Opening New Facilities. We intend to continue to establish additional retail facilities in our existing and new territories. We believe that the demographics of our existing geographic territories support the opening of additional facilities, and we have opened 13 new retail facilities, excluding those opened on a temporary basis for a specific purpose, since our formation in January 1998. We also plan to reach new customers by expanding various innovative retail formats developed by us, such as mall stores and floating retail facilities. Our mall store concept is unique to the boating industry and is designed to draw mall traffic, thereby providing exposure to boating for the non- boating public as well as displaying our new product offerings to boating enthusiasts. Floating retail facilities place the sales facility, with a customer reception area and sales offices, on or anchored to a dock in a marina and use adjacent boat slips to display our new and used boats in areas of high boating activity. We continually monitor the performance of our retail locations and close retail locations that do not meet our expectations or that were opened for a specific purpose that is no longer relevant. Since March 1998, we have closed eight retail locations, excluding those opened on a temporary basis for a specific purpose. Offering Additional Products and Services, Including Those Involving Higher Profit Margins. We plan to continue to offer additional product lines and services throughout our dealerships or, when appropriate, in selected dealerships. We are offering throughout our dealerships product lines that previously have been offered only at certain of our locations. We also may obtain additional product lines through the acquisition of distribution rights directly from manufacturers and the acquisition of dealerships with distribution rights. We have increased our used boat sales and yacht brokerage services through an increased emphasis on these activities, cooperative efforts among our dealerships, and the use of the Internet. We also plan to continue to grow our financing and insurance, parts and accessories, and service businesses to better serve our customers and thereby increase revenue and improve profitability of these higher margin businesses. Pursuing Strategic Acquisitions. We capitalize upon the significant consolidation opportunities available in the highly fragmented recreational boat dealer industry by acquiring independent dealers and improving their performance and profitability through the implementation of our operating strategies. The primary acquisition focus is on well-established, high-end recreational boat dealers in geographic markets not currently served by us, particularly geographic markets with strong boating demographics, such as areas within the coastal states and the Great Lakes region. We also may seek to acquire boat dealers that, while located in attractive geographic markets, have not been able to realize favorable market share or profitability and that can benefit substantially from our systems and operating strategies. We may expand our range of product lines, service offerings, and market penetration by acquiring companies that distribute recreational boat product lines or boating-related services different from those we currently offer. As a result of the considerable industry experience and relationships of our management team, we believe we are well positioned to identify and evaluate acquisition candidates and assess their growth prospects, the quality of their management teams, their local reputation with customers, and the suitability of their locations. We believe we are regarded as an attractive acquiror by boat dealers because of (1) the historical performance and the experience and reputation of our management team within the industry; (2) our decentralized operating strategy, which generally enables the managers of an acquired dealer to continue their involvement in dealership operations; (3) the ability of management and employees of an acquired dealer to participate in our growth and expansion through potential stock ownership and career advancement opportunities; and (4) the ability to offer liquidity to the owners of acquired dealers through the receipt of common stock or cash. Brunswick has agreed to cooperate in good faith with us and not to unreasonably withhold its consent to the acquisition by us each year of Sea Ray boat dealers with aggregate total revenue not exceeding 20% of our revenue in our prior fiscal year to the extent such Sea Ray dealers desire to be acquired by us and subject to the maximum purchase restrictions as further described in “Business — Brunswick Agreement Relating to Acquisitions.” Utilization of the Internet. Our web initiative, www.MarineMax.com , provides customers with the ability to learn more about our company and our products. Our website generates direct sales and provides our stores leads to potential customers for new and used boats and brokerage services. We also plan to expand our ability to offer financing and parts and accessories on our website. 8  Promoting Brand Name Recognition and the MarineMax Connection. We are promoting our brand name recognition to take advantage of our status as the nation’s only coast-to-coast marine retailer. This strategy also recognizes that many existing and potential customers who reside in Northern markets and vacation for substantial periods in Southern markets will prefer to purchase and service their boats from the same well-known company. We refer to this strategy as the “MarineMax Connection.” As a result, our signage emphasizes the MarineMax name at each of our locations, and we have increased our national advertising in various print and other media. Operating with Decentralized Management. We maintain a generally decentralized approach to the operational management of our dealerships. The decentralized management approach takes advantage of the extensive experience of local managers, enabling them to implement policies and make decisions, including the appropriate product mix, based on the needs of the local market. Local management authority also fosters responsive customer service and promotes long-term community and customer relationships. In addition, the centralization of certain administrative functions at the corporate level enhances the ability of local managers to focus their efforts on day- to-day dealership operations and the customers. Utilizing Technology Throughout Operations. We believe that our management information system, which currently is being utilized by each operating subsidiary and was developed over a number of years through cooperative efforts with a common vendor, enhances our ability to integrate successfully the operations of our operating subsidiaries and future acquired dealers. The system facilitates the interchange of information and enhances cross-selling opportunities throughout our company. The system integrates each level of operations on a company-wide basis, including purchasing, inventory, receivables, financial reporting, budgeting, and sales management. The system also provides sales representatives with prospect and customer information that aids them in tracking the status of their contacts with prospects, automatically generates follow-up correspondence to such prospects, facilitates the availability of a particular boat company-wide, locates boats needed to satisfy a particular customer request, and monitors the maintenance and service needs of customers’ boats. Our representatives also utilize the computer system to assist in arranging customer financing and insurance packages. Our managers use a web-based tool to access essentially all financial and operational data from anywhere at any time. Products and Services We offer new and used recreational boats and related marine products, including engines, trailers, parts, and accessories. While we sell a broad range of new and used boats, we focus on premium brand products. In addition, we assist in arranging related boat financing, insurance, and extended service contracts; provide boat maintenance and repair services; and offer boat brokerage services. New Boat Sales We primarily sell recreational boats, including pleasure boats (such as sport boats, sport cruisers, sport yachts, and yachts) and fishing boats. The principal products we offer are manufactured by Brunswick, the leading worldwide manufacturer of recreational boats, including Sea Ray pleasure boats, Boston Whaler fishing boats, Meridian Yachts, and Hatteras Yachts. In fiscal 2003, approximately 65% of our revenue was derived from the sale of new boats manufactured by Brunswick. We believe that we represent in excess of 10% of all of Brunswick’s marine product sales during that period. We also sell mega-yachts, yachts, and other recreational boats manufactured by Bertram and the Italy- based Ferretti Group, including Ferretti Yachts, Pershing, Riva, Apreamare, Mochi Craft, Custom Line, and CRN. Certain of our dealerships also sell luxury yachts, fishing boats, ski boats, and pontoon boats provided by other manufacturers. During fiscal 2003, new boat sales accounted for approximately 68% of our revenue. We offer recreational boats in most market segments, but have a particular focus on premium quality pleasure boats and yachts as reflected by our fiscal 2003 average new boat sales price of approximately $87,000 compared with our estimated industry average selling price of approximately $30,000. Given our locations in some of the more affluent, offshore boating areas in the United States and emphasis on high levels of customer 9 service, we sell a relatively higher percentage of large recreational boats, such as yachts and sport cruisers. We believe that the product lines we offer are among the highest quality within their respective market segments, with well-established trade-name recognition and reputations for quality, performance, and styling. The following table is illustrative of the range of new boats that we offer, but is not all inclusive: Product Line and Trade Name Number of Models Overall Length Manufacturer Suggested Retail Price Range Motor Yachts and Convertibles Hatteras Motor Yachts Hatteras Convertibles Pleasure Boats Sea Ray Yachts Sea Ray Sport Yachts Sea Ray Sport Cruisers Sea Ray Sport Boats Fishing Boats Boston Whaler 9 9 63’ to 100’+ 50’ to 90’ $ 2,300,000 to $8,000,000 + 1,000,000 to 6,000,000 + 6 10 9 15 50’ to 68’ 36’ to 48’ 26’ to 34’ 17’ to 27’ 850,000 to 3,100,000 320,000 to 950,000 65,000 to 230,000 18,000 to 81,500 16 12’ to 29’ 5,000 to 190,000 Motor Yachts and Convertibles. Hatteras Yachts is one of the world’s premier yacht builders. The Hatteras fleet is one of the most extensive serving the luxury megayacht segment of the market, with configurations for cruising and sport fishing. All Hatteras models include state-of-the-art designs with live-aboard luxury. The motor yacht series, ranging from 63 feet to over 100 feet, offers a flybridge with extensive guest seating; covered aft deck, which may be fully or partially enclosed, providing the boater with additional living space; an elegant salon; and multiple staterooms for accommodations. The convertibles are primarily fishing vessels, which are well equipped to meet the needs of even the most serious tournament-class competitor. Ranging from 50 feet to 90 feet, Hatteras convertibles feature interiors that offer luxurious salon/galley arrangements, multiple staterooms with private heads, and a cockpit that includes a bait and tackle center, fishbox, and freezer. Pleasure Boats. Sea Ray pleasure boats target both the luxury and the family recreational boating markets. Sea Ray sport yachts and yachts serve the luxury segment of the recreational boating market and include top-of-the-line living accommodations with a salon, a fully equipped galley, and multiple staterooms. The sport yachts and yachts come in a variety of configurations, including aft cabin, bridge cockpit, and express cruiser models, to suit each customer’s particular recreational boating style. Sea Ray sport boat and sport cruiser models are designed for performance and dependability to meet family recreational needs and include many of the features and accommodations of Sea Ray’s sport yacht and yacht models. All Sea Ray pleasure boats feature custom instrumentation that may include an electronics package; various hull, deck, and cockpit designs that can include a swim platform, bow pulpit, and raised bridge; and various amenities, such as swivel bucket helm seats, lounge seats, sun pads, wet bars, built-in ice chests, and refreshment centers. Most Sea Ray pleasure boats feature Mercury or MerCruiser engines. Fishing Boats. The fishing boats we offer range from entry level models to advanced models designed for fishing and water sports in lakes, bays, and off-shore waters, with cabins with limited live-aboard capability. The fishing boats typically feature livewells, in-deck fishboxes, splash-well gates with rodholders, rigging stations, cockpit coaming pads, and fresh and saltwater washdowns. Newly Offered Products. With the appointment of the Ferretti Group products, we are offering mega-yachts, yachts, and other recreational boats produced by Ferretti Yachts, Pershing, Riva, Apreamare, Mochi Craft, Custom Line, CRN and Bertram. We will offer various product models of mega-yachts, yachts and recreational boats ranging in size from 33 feet to over 200 feet in length. These newly offered products are known for exceptional quality, design, and innovation and are considered premium products in each respective segment, with manufacturer’s suggested retail prices ranging from $400,000 to more than $15.0 million. 10 Used Boat Sales We sell used versions of the new makes and models we offer and, to a lesser extent, used boats of other makes and models generally taken as trade-ins. During fiscal 2003, used boat sales accounted for approximately 17% of our revenue, and approximately 77% of the used boats we sold were Brunswick models. Our used boat sales depend on our ability to source a supply of high-quality used boats at attractive prices. We acquire substantially all of our used boats through customer trade-ins. We intend to increase our used boat business as a result of the increased availability of quality used boats generated from our acquisition of used boats in our expanding sales efforts, the increasing number of used boats that are well-maintained through our service initiatives, our ability to market used boats throughout our combined dealership network to match used boat demand, and the experience of our yacht brokerage operations. Additionally, substantially all of our used boat inventory is posted on our web site, www.MarineMax.com , which expands the awareness and availability of our products to a large audience of boating enthusiasts. At most of our retail locations, we offer the Sea Ray Legacy TM warranty plan available for used Sea Ray boats less than six years old. The Legacy plan applies to each qualifying used Sea Ray boat, which has passed a 48-point inspection, and provides protection against failure of most mechanical parts for up to three years. We believe that the Sea Ray Legacy warranty plan, which is only available for used Sea Ray boats purchased from a Sea Ray dealer, enhances our sales of used Sea Ray boats by motivating purchasers of used Sea Ray boats to purchase only from a Sea Ray dealer and motivating sellers of Sea Ray boats to sell through a Sea Ray dealer. Marine Engines, Related Marine Equipment and Boating Accessories We offer marine engines and propellers, substantially all of which are manufactured by Mercury Marine, a division of Brunswick. We sell marine engines and propellers primarily to retail customers as replacements for their existing engines or propellers. Mercury Marine has introduced various new engine models that reduce engine emissions to comply with current Environmental Protection Agency requirements. See “Business — Environmental and Other Regulatory Issues.” An industry leader for almost six decades, Mercury Marine specializes in state- of-the-art marine propulsion systems and accessories. Many of our operating subsidiaries have been recognized by Mercury Marine as “Platinum Dealers.” This designation is generally awarded based on meeting certain standards and qualifications. We also sell related marine parts and accessories, including oils, lubricants, steering and control systems, corrosion control products, engine care and service products (primarily Mercury Marine’s Quicksilver line); high-performance accessories (such as propellers) and instruments; and a complete line of boating accessories, including life jackets, inflatables, and wakeboards. We also offer novelty items, such as shirts, caps, and floormats bearing the manufacturer’s or dealer’s logo. The sale of marine engines, related marine equipment, and boating accessories accounted for approximately 3.1% of our fiscal 2003 revenue. Maintenance and Repair Services Providing customers with professional, prompt maintenance and repair services is critical to our sales efforts and contributes to our profitability. We provide maintenance and repair services at most of our retail locations, with extended service hours at certain of our locations. In addition, in many of our markets, we provide mobile maintenance and repair services at the location of the customer’s boat. We believe that this service commitment is a competitive advantage in the markets in which we compete and is critical to our efforts to provide a trouble-free boating experience. To further this commitment, in certain of our markets, we have opened stand-alone maintenance and repair facilities in locations that are more convenient for our customers and that increase the availability of such services. We also believe that our maintenance and repair services contribute to strong customer relationships and that our emphasis on preventative maintenance and quality service increases the potential supply of well-maintained boats for our used boat sales. 11  We perform both warranty and non-warranty repair services, with the cost of warranty work reimbursed by the manufacturer in accordance with the manufacturer’s warranty reimbursement program. For warranty work, Brunswick reimburses a percentage of the dealer’s posted service labor rates, with the percentage varying depending on the dealer’s customer satisfaction index rating and attendance at service training courses. We derive the majority of our warranty revenue from Brunswick products, as Brunswick products comprise the majority of products sold. Certain other manufacturers reimburse warranty work at a fixed amount per repair. Because boat manufacturers permit warranty work to be performed only at authorized dealerships, we receive substantially all of the warranted maintenance and repair work required for the new boats we sell. The third-party extended warranty contracts we offer also result in an ongoing demand for our maintenance and repair services for the duration of the term of the extended warranty contract. Our maintenance and repair services are performed by manufacturer-trained and certified service technicians. In charging for our mechanics’ labor, many of our dealerships use a variable rate structure designed to reflect the difficulty and sophistication of different types of repairs. The percentage markups on parts are similarly based on market conditions for different parts. Maintenance and repair services accounted for approximately 5.5% of our revenue during fiscal 2003. This includes warranty and non- warranty services. F&I Products At each of our retail locations, we offer our customers the ability to finance new or used boat purchases and to purchase extended service contracts and arrange insurance coverage, including boat property, credit life, and accident, disability, and casualty insurance coverage (collectively, “F&I”). We have relationships with various national marine product lenders under which the lenders purchase retail installment contracts evidencing retail sales of boats and other marine products that are originated by us in accordance with existing pre-sale agreements between us and the lenders. These arrangements permit us to receive a portion of the finance charges expected to be earned on the retail installment contract based on a variety of factors, including the credit standing of the buyer, the annual percentage rate of the contract charged to the buyer, and the lender’s then current minimum required annual percentage rate charged to the buyer on the contract. This participation is subject to repayment by us if the buyer prepays the contract or defaults within a designated time period, usually 90 to 180 days. To the extent required by applicable state law, our dealerships are licensed to originate and sell retail installment contracts financing the sale of boats and other marine products. We also offer extended service contracts under which, for a predetermined price, we provide all designated services pursuant to the service contract guidelines during the contract term at no additional charge above a deductible. While we sell all new boats with the boat manufacturer’s standard hull warranty of generally five years and standard engine warranty of generally one year, extended service contracts provide additional coverage beyond the time frame or scope of the manufacturer’s warranty. Purchasers of used boats generally are able to purchase an extended service contract, even if the selected boat is no longer covered by the manufacturer’s warranty. Generally, we receive a fee for arranging an extended service contract. Most required services under the contracts are provided by us and paid for by the third-party contract holder. We also are able to assist our customers with the opportunity to purchase credit life insurance, accident and disability insurance, and property and casualty insurance. Credit life insurance policies provide for repayment of the boat financing contract if the purchaser dies while the contract is outstanding. Accident and disability insurance policies provide for payment of the monthly contract obligation during any period in which the buyer is disabled. Property and casualty insurance covers loss or damage to the boat. We do not act as an insurance broker or agent or issue insurance policies on behalf of insurers. We, however, provide marketing activities and other related services to insurance companies and brokers for which we receive marketing fees. One of our strategies is to generate increased marketing fees by offering more competitive insurance products. During fiscal 2003, fee income generated from F&I products accounted for approximately 3.8% of our revenue. We believe that our customers’ ability to obtain competitive financing quickly and easily at our 12 dealerships complements our ability to sell new and used boats. We also believe our ability to provide customer-tailored financing on a “same- day” basis gives us an advantage over many of our competitors, particularly smaller competitors that lack the resources to arrange boat financing at their dealerships or that do not generate sufficient volume to attract the diversity of financing sources that are available to us. Brokerage Services Through employees or subcontractors that are licensed boat or yacht brokers, we offer boat or yacht brokerage services at most of our retail locations. For a commission, we offer for sale brokered boats or yachts, listing them on the “BUC” system, and advising our other retail locations of their availability through our integrated computer system and posting them on our web site, www.MarineMax.com . The BUC system, which is similar to a real estate multiple listing service, is a national boat or yacht listing service of approximately 900 brokers maintained by BUC International. Often sales are co-brokered, with the commission split between the buying and selling brokers. We believe that our access to potential used boat customers and methods of listing and advertising customers’ brokered boats or yachts is more extensive than is typical among brokers. In addition to generating revenue from brokerage commissions, our brokerage services also enable us to offer a broad array of used boats or yachts without increasing related inventory costs. During fiscal 2003, brokerage services accounted for approximately 1.0% of our revenue. Our brokerage customers generally receive the same high level of customer service as our new and used boat customers. Our waterfront retail locations enable in-water demonstrations of an on-site brokered boat. Our maintenance and repair services, including mobile service, also is generally available to our brokerage customers. The purchaser of a Sea Ray boat brokered through us also can take advantage of MarineMax Getaways! weekend and day trips and other rendezvous gatherings and in-water events, as well as boat operation and safety seminars. We believe that the array of services we offer are unique in the brokerage business. Retail Locations We sell our recreational boats and other marine products and offer our related boat services through 66 retail locations in Alabama, Arizona, California, Colorado, Delaware, Florida, Georgia, Minnesota, Nevada, New Jersey, North Carolina, Ohio, South Carolina, Texas, and Utah. Each retail location generally includes an indoor showroom (including some of the industry’s largest indoor boat showrooms) and an outside area for displaying boat inventories, a business office to assist customers in arranging financing and insurance, and maintenance and repair facilities. Many of our retail locations are waterfront properties on some of the nation’s most popular boating locations, including the Delta Basin and Mission Bay in California; multiple locations on the Intracoastal Waterway, the Atlantic Ocean, Biscayne Bay, Naples Bay (next to the Gulf of Mexico), Tampa Bay, and the Caloosahatchee River in Florida; Lake Lanier and Lake Altoona in Georgia; Leech Lake and the St. Croix River in Minnesota; Barnegat Bay, the Delaware River, the Hudson River, Lake Hopatcong, Little Egg Harbor, and the Manasquan River in New Jersey; Lake Erie in Ohio; and Clear Lake, Lake Canroe, and Lake Lewisville in Texas. Our waterfront retail locations, most of which include marina-type facilities and docks at which we display our boats, are easily accessible to the boating populace, serve as in-water showrooms, and enable the sales force to give the customer immediate in-water demonstrations of various boat models. Most of our other locations are in close proximity to water. We plan to reach new customers by expanding in new locations through various innovative retail formats, such as mall stores and floating retail facilities. Our mall store concept is unique to the boating industry and is designed to draw mall traffic, thereby providing exposure to boating to the non-boating public as well as displaying our new product offerings to boating enthusiasts. Floating retail facilities place the sales facility, with a customer reception area and sales offices, on or anchored to a dock in a marina and use adjacent boat slips to display new and used boats in areas of high boating activity. 13 Operations Dealership Operations and Management We have adopted a generally decentralized approach to the operational management of our dealerships. While certain administrative functions are centralized at the corporate level, local management is primarily responsible for the day-to-day operations of the retail locations. Each retail location is managed by a store manager, who oversees the day-to-day operations, personnel, and financial performance of the individual store, subject to the direction of a district manager, who generally has responsibility for the retail locations within a specified geographic region. Typically, each retail location also has a staff consisting of a sales manager, an F&I manager, a parts and service manager, sales representatives, maintenance and repair technicians, and various support personnel. We attempt to attract and retain quality employees at our retail locations by providing them with ongoing training to enhance sales professionalism and product knowledge, career advancement opportunities within a larger company, and favorable benefit packages. We maintain a formal training program, called MarineMax University or “MMU,” which provides training for employees in all aspects of our operations. Training sessions are held at our various regional locations covering a variety of topics. MMU-online offers various modules over the Internet. Highly trained, professional sales representatives are an important factor to our successful sales efforts. These sales representatives are trained at MMU to recognize the importance of fostering an enjoyable sales process, to educate customers on the operation and use of the boats, and to assist customers in making technical and design decisions in boat purchases. The overall focus of MMU is to teach our core retailing values, which focus on customer service. Sales representatives receive compensation primarily on a commission basis. Each store manager is a salaried employee with incentive bonuses based on the performance of the managed dealership. Maintenance and repair service managers receive compensation on a salary basis with bonuses based on the performance of their departments. Our management information system provides each store and department manager with daily financial and operational information, enabling them to monitor their performance on a daily, weekly, and monthly basis. We have a uniform, fully integrated management information system serving each of our dealerships. Sales and Marketing Our sales philosophy focuses on selling the pleasures of the boating lifestyle. We believe that the critical elements of our sales philosophy include our appealing retail locations, our no-haggle sales approach, highly trained sales representatives, high level of customer service, emphasis on educating the customer and the customer’s family on boat usage, and providing our customers with opportunities for boating. We strive to provide superior customer service and support before, during, and after the sale. Each retail location offers the customer the opportunity to evaluate a large variety of new and used boats in a comfortable and convenient setting. Our full-service retail locations facilitate a turn-key purchasing process that includes attractive lender financing packages, extended service agreements, and insurance. Many of our retail locations are located on waterfronts and marinas, which attract boating enthusiasts and enable customers to operate various boats prior to making a purchase decision. We sell our boats at posted value prices that generally represent a discount from the manufacturer’s suggested retail price. Our sales approach focuses on customer service by minimizing customer anxiety associated with price negotiation. As a part of our sales and marketing efforts, we also participate in boat shows and in-the-water sales events at area boating locations, typically held in January and February, in each of our markets and in certain locations in close proximity to our markets. These shows and events are normally held at convention centers or marinas, with area dealers renting space. Boat shows and other offsite promotions are an important venue for generating sales orders. The boat shows also generate a significant amount of interest in our products resulting in boat sales after the show. 14  We emphasize customer education through one-on-one education by our sales representatives and, at some locations, our delivery captains, before and after a sale, and through in-house seminars for the entire family on boat safety, the use and operation of boats, and product demonstrations. Typically, one of our delivery captains or the sales representative delivers the customer’s boat to an area boating location and thoroughly instructs the customer about the operation of the boat, including hands-on instructions for docking and trailering the boat. To enhance our customer relationships after the sale, we lead and sponsor MarineMax Getaways! group boating trips to various destinations, rendezvous gatherings, and on-the-water organized events that promote the pleasures of the boating lifestyle. Each company-sponsored event, planned and led by a company employee, also provides a favorable medium for acclimating new customers to boating and enables us to promote actively new product offerings to boating enthusiasts. As a result of our relative size, we believe we have a competitive advantage within the industry by being able to conduct an organized and systematic advertising and marketing effort. Part of our marketing effort includes an integrated prospect management system that tracks the status of each sales representative’s contacts with a prospect, automatically generates follow-up correspondence, facilitates company-wide availability of a particular boat or other marine product desired by a customer, and tracks the maintenance and service needs for the customer’s boat. Suppliers and Inventory Management We purchase substantially all of our new boat inventory directly from manufacturers, which allocate new boats to dealerships based on the amount of boats sold by the dealership. We also exchange new boats with other dealers to accommodate customer demand and to balance inventory. We purchase new boats and other marine-related products from Brunswick, which is the world’s largest manufacturer of marine products, including Sea Ray, Boston Whaler, Baja, Hatteras, and Meridian. We also purchase new boats and other marine related products from other manufacturers, including Bennington, Bertram, Century, Ferretti, Grady White, MB Sports, Sea Hunt, Sea Pro, and Tracker Marine. In fiscal 2003, sales of new Brunswick boats accounted for 65% of our revenue. We believe our Sea Ray boat purchases represented approximately 33% of Sea Ray boat sales and in excess of 10% of all Brunswick marine product sales during fiscal 2003. No other manufacturer accounted for a significant portion of our net purchases in fiscal 2003. Through operating subsidiaries, we have entered into agreements with Brunswick covering Sea Ray products. The dealer agreements with the Sea Ray division of Brunswick do not restrict our right to sell any Sea Ray product lines or competing products. The terms of the multi-year dealer agreements appoint us as the non-exclusive dealer for the retail sale, display, and servicing of designated Sea Ray products and repair parts currently or in the future sold by Sea Ray in the designated geographic areas. The dealer agreement with Ferretti Group and Bertram does not restrict our right to sell any Ferretti Group and Bertram product lines but has certain restrictions relating to competing products. The three-year dealer agreement appoints us as the exclusive dealer for the retail sale, display, and servicing of designated Ferretti Group and Bertram products and repair parts currently or in the future sold by Ferretti Group and Bertram in the designated geographic areas, as defined therein. Arrangements with certain other manufacturers may restrict our right to offer some product lines in certain markets. We typically deal with each of our manufacturers, other than the Sea Ray division of Brunswick, Ferretti Group, and Bertram, under an annually renewable, non-exclusive dealer agreement. Manufacturers generally establish prices on an annual basis, but may change prices in their sole discretion. Manufacturers typically discount the cost of inventory and offer inventory financing assistance during the manufacturers’ slow seasons, generally October through March. To obtain lower cost of inventory, we strive to capitalize on these manufacturer incentives to take product delivery during the manufacturers’ slow seasons. This permits us to gain pricing advantages and better product availability during the selling season. 15  We transfer individual boats among our retail locations to fill customer orders that otherwise might take substantially longer to fill from the manufacturer. This reduces delays in delivery, helps us maximize inventory turnover, and assists in minimizing potential overstock or out-of- stock situations. We actively monitor our inventory levels to maintain levels appropriate to meet current market demands. We are not bound by contractual agreements governing the amount of inventory that we must purchase in any year from any manufacturer, but the failure to purchase at agreed upon levels may result in the loss of certain manufacturer incentives. We participate in numerous end-of-summer manufacturer boat shows, which manufacturers sponsor to sell off their remaining inventory at reduced costs before the introduction of new model year products, typically beginning in July. Inventory Financing Marine manufacturers customarily provide interest assistance programs to retailers. The interest assistance varies by manufacturer and may include periods of free financing or reduced interest rate programs. The interest assistance may be paid directly to the retailer or the financial institution depending on the arrangements the manufacturer has established. We believe that our financing arrangements with manufacturers are standard within the industry. In March 2003, the Emerging Issues Task Force (EITF) of the Financial Accounting Standards Board (FASB) revised certain provisions of its previously reached conclusions on EITF 02-16, “Accounting by a Customer (Including a Reseller) for Certain Consideration Received from a Vendor” (EITF 02-16), and provided additional transitional guidance. EITF 02-16 does not provide for restatement or reclassification of prior year amounts; rather it requires prospective application for new agreements or modifications of existing agreements entered into subsequent to December 31, 2002. We determined that EITF 02-16 impacts the way we account for interest assistance received from vendors beginning after July 1, 2003 with the renewal of and amendments to our dealer agreements with the manufacturers of our products. EITF 02-16 most significantly requires us to classify interest assistance received from manufacturers as a reduction of inventory cost and related cost of sales as opposed to netting the assistance against our interest expense incurred with our lenders. In December 2001, we entered into a revolving credit facility that provides a line of credit with asset-based borrowing availability of up to $220 million. The facility also allows us $20 million in traditional floorplan borrowings. The facility, which has a three-year term with two one-year renewal options, replaced four separate line of credit facilities. During November 2002, we exercised one of the two one-year renewal options, which the bank approved, extending the maturity date to December 2005. The facility accrues interest at a rate of LIBOR plus 175 to 260 basis points, which is determined in accordance with a performance pricing grid, as defined in the credit facility. Borrowings under the facility are pursuant to a borrowing base formula and are used primarily for working capital and inventory financing. The terms and conditions of the facility are similar to the terms and conditions of the prior separate line of credit facilities. As of September 30, 2003, we owed an aggregate of approximately $97.0 million under our revolving credit facility. As of September 30, 2003, our revolving credit facility provided us with an additional available borrowing capacity of approximately $72.9 million. Advances on the facility accrued interest at a rate of 2.9% as of September 30, 2003. Management Information System We believe that our management information system, which currently is being utilized by each of our operating subsidiaries and was developed by certain of the acquired dealers over a number of years through cooperative efforts with a common vendor, enhances our ability to integrate successfully the operations of our operating subsidiaries and future acquisitions, facilitates the interchange of information, and enhances cross-selling opportunities throughout our company. The system integrates each level of operations on a company-wide basis, including purchasing, inventory, receivables, financial reporting and budgeting, and sales management. The system enables us to monitor each dealership’s operations in order to identify quickly areas requiring additional focus and to manage inventory. The system also provides sales representatives with prospect and customer information that aids them in tracking the status of their contacts with prospects, 16 automatically generates follow-up correspondence to such prospects, facilitates the availability of a particular boat company-wide, locates boats needed to satisfy a particular customer request, and monitors the maintenance and service needs of customers’ boats. Company representatives also utilize the system to assist in arranging financing and insurance packages. Brunswick Agreement Relating to Acquisitions We and Brunswick are parties to an agreement providing for Brunswick to cooperate in good faith and not to unreasonably withhold its consent to the acquisitions each year by us of Sea Ray boat dealers with aggregate total revenue not exceeding 20% of our revenue in our prior fiscal year. Any acquisitions in excess of the 20% benchmark will be at Brunswick’s discretion. In the event that our purchases of Sea Ray boats exceed 49% of the purchases of Sea Ray boats by all Sea Ray boat dealers, including us, in any fiscal year of Brunswick, the agreement provides that we and Brunswick will negotiate in good faith the standards for acquisitions of Sea Ray boat dealers by us during Brunswick’s next succeeding fiscal year but that Brunswick may grant or withhold its consent to any such acquisition in its sole discretion for as long as our Sea Ray boat purchases exceed the 49% benchmark. Dealer Agreements with Brunswick Brunswick, through its Sea Ray division, and we, through our principal operating subsidiaries, are parties to Sales and Service Agreements relating to Sea Ray products. These dealer agreements appoint one of our operating subsidiaries as a non-exclusive dealer for the retail sale, display, and servicing of designated Sea Ray products and repair parts currently or in the future sold by Sea Ray. Each dealer agreement designates a non-exclusive area of primary responsibility for the dealer, which is a geographical area in proximity to the dealer’s retail locations based on such areas that are customarily designated by Sea Ray and applicable to its domestic dealers. Each dealer agreement also specifies retail locations, which the dealer may not close, change, or add to without the prior written consent of Sea Ray, provided that Sea Ray may not unreasonably withhold its consent. Upon at least one year’s prior notice and the failure by the dealer to cure, Sea Ray may remove the dealer’s right to operate any particular retail location if the dealer fails to meet its material obligations, performance standards, or terms, conditions, representations, warranties, and covenants applicable to that location. Each dealer agreement also restricts the dealer from selling, advertising, soliciting for sale, or offering for resale any Sea Ray products outside its area of primary responsibility without the prior written consent of Sea Ray as long as similar restrictions also apply to all domestic Sea Ray dealers selling comparable Sea Ray products. Each dealer agreement provides for the lowest product prices charged by the Sea Ray division of Brunswick from time to time to other domestic Sea Ray dealers, subject to the dealer meeting all the requirements and conditions of Sea Ray’s applicable programs and the right of Brunswick in good faith to charge lesser prices to other dealers to meet existing competitive circumstances, for unusual and non-ordinary business circumstances, or for limited duration promotional programs. Each dealer agreement requires the dealer to • promote, display, advertise, and sell Sea Ray boats at each of its retail locations in accordance with the agreement and applicable laws; • purchase and maintain sufficient inventory of current Sea Ray boats to meet the reasonable demand of customers at each of its locations and to meet the minimum inventory requirements applicable to all Sea Ray dealers; • maintain at each retail location, or at another acceptable location, a service department to service Sea Ray boats promptly and professionally and to maintain parts and supplies to service Sea Ray boats properly on a timely basis; • perform all necessary installation and inspection services prior to delivery to purchasers and perform post-sale services of all Sea Ray products sold by the dealer or brought to the dealer for service; • furnish purchasers with Sea Ray’s limited warranty on new products and with information and training as to the sale and proper operation and maintenance of Sea Ray boats; 17 • assist Sea Ray in performing any product defect and recall campaigns; • maintain complete product sales and service records; • achieve sales performance in accordance with fair and reasonable sales levels established by Sea Ray, after consultation with the dealer, based on factors such as population, sales potential, local economic conditions, competition, past sales history, number of retail locations, and other special circumstances that may affect the sale of products or the dealer, in each case consistent with standards established for all domestic Sea Ray dealers selling comparable products; • provide designated financial information; • conduct its business in a manner that preserves and enhances the reputation of Sea Ray and the dealer for providing quality products and services; • maintain the financial ability to purchase and maintain on hand required inventory levels; • indemnify Sea Ray against any claims or losses resulting from the dealer’s failure to meet its obligations to Sea Ray; • maintain customer service ratings sufficient to maintain Sea Ray’s image in the marketplace; and • achieve within designated time periods and thereafter maintain master dealer status (which is Sea Ray’s highest performance status) for the locations designated by Sea Ray and the dealer. Each dealer agreement may be terminated • by Sea Ray if the dealer fails or refuses to place a minimum stocking order of the next model year’s products in accordance with requirements applicable to all Sea Ray dealers generally or fails to meet its financial obligations as they become due to Sea Ray or to the dealer’s lenders; • by Sea Ray or the dealer where good cause exists (including the material breach, default, or noncompliance with any material term, provision, warranty, or obligation under the agreement) and has not been cured within 60 days of prior written notice of the claimed deficiency or at the end of the 60-day period without the opportunity to cure where the cause constitutes bad faith; • by Sea Ray or the dealer in the event of the insolvency, bankruptcy, or receivership of the other; • by Sea Ray in the event of the assignment of the agreement by the dealer without the prior written consent of Sea Ray; • by Sea Ray upon at least 10 days’ prior written notice in the event of the failure to pay any sums due and owing to Sea Ray that are not disputed in good faith; • by Sea Ray if a majority of our Board of Directors does not consist of specified senior executives and Other Designated Members (as defined in the Stockholders’ Agreement); or • upon the mutual consent of the dealer and Sea Ray. Employees As of September 30, 2003, we had 1,279 employees, 1,233 of whom were in store-level operations and 46 of whom were in corporate administration and management. This includes 73 store-level employees that were added in conjunction with the 2003 acquisitions of Sundance Marine, Inc. and Killinger Marine Center, Inc. We are not a party to any collective bargaining agreements and are not aware of any efforts to unionize our employees. We consider our relations with our employees to be excellent. Trademarks and Service Marks We have registered trade names and trademarks with the U.S. Patent and Trademark Office for various names, including “MarineMax,” “MarineMax Getaways,” “MarineMax Care,” “Delivering the Dream,” and “MarineMax Delivering the Boating Dream.” We have registered the name “MarineMax” in the European 18 Community. We have trademark applications pending with the U.S. Patent and Trademark Office for “NewCoast Financial Services” and “Women on Water.” We have trade name and trademark applications pending in Canada for various names, including “MarineMax,” “MarineMax Value-Price,” “Value-Price,” “Delivering the Dream,” “Selling and Delivering the Dream,” “Selling the Dream,” and “The Water Gene.” There can be no assurance that any of these applications will be granted. Seasonality and Weather Conditions Our business, as well as the entire recreational boating industry, is highly seasonal. Over the three-year period ended September 30, 2003, the average revenues for the quarters ended December 31, March 31, June 30, and September 30 represented 17%, 26%, 32%, and 25%, respectively, of our average annual revenues. With the exception of Florida, our geographic territories generally realize significantly lower sales in the quarterly period ending December 31, with boat sales generally improving in January with the onset of the public boat and recreation shows. Our business is also subject to weather patterns, which may adversely affect our results of operations. For example, drought conditions (or merely reduced rainfall levels) or excessive rain, may close area boating locations or render boating dangerous or inconvenient, thereby curtailing customer demand for our products. In addition, unseasonably cool weather and prolonged winter conditions may lead to a shorter selling season in certain locations. Hurricanes and other storms could result in disruptions of our operations or damage to our boat inventories and facilities. Although our geographic diversity is likely to reduce the overall impact to us of adverse weather conditions in any one market area, these conditions will continue to represent potential, material adverse risks to us and our future financial performance. Environmental and Other Regulatory Issues Our operations are subject to extensive regulation, supervision, and licensing under various federal, state, and local statutes, ordinances, and regulations. While we believe that we maintain all requisite licenses and permits and are in compliance with all applicable federal, state, and local regulations, there can be no assurance that we will be able to maintain all requisite licenses and permits. The failure to satisfy those and other regulatory requirements could have a material adverse effect on our business, financial condition, and results of operations. The adoption of additional laws, rules, and regulations could also have a material adverse effect on our business. Various federal, state, and local regulatory agencies, including the Occupational Safety and Health Administration, or OSHA, the United States Environmental Protection Agency, or EPA, and similar federal and local agencies, have jurisdiction over the operation of our dealerships, repair facilities, and other operations with respect to matters such as consumer protection, workers’ safety, and laws regarding protection of the environment, including air, water, and soil. The EPA has various air emissions regulations for outboard marine engines that impose more strict emissions standards for two-cycle, gasoline outboard marine engines. Emissions from such engines must be reduced by approximately 75% over a nine-year period beginning with the 1998 model year. Costs of comparable new engines, if materially more expensive than previous engines, or the inability of our manufacturers to comply with EPA requirements, could have a material adverse effect on our business, financial condition, and results of operations. Certain of our facilities own and operate underground storage tanks, or USTs, for the storage of various petroleum products. The USTs are generally subject to federal, state, and local laws and regulations that require testing and upgrading of USTs and remediation of contaminated soils and groundwater resulting from leaking USTs. In addition, if leakage from company-owned or operated USTs migrates onto the property of others, we may be subject to civil liability to third parties for remediation costs or other damages. Based on historical experience, we believe that our liabilities associated with UST testing, upgrades, and remediation are unlikely to have a material adverse effect on our financial condition or operating results. As with boat dealerships generally, and parts and service operations in particular, our business involves the use, handling, storage, and contracting for recycling or disposal of hazardous or toxic substances or wastes, including environmentally sensitive materials, such as motor oil, waste motor oil and filters, transmission fluid, 19 antifreeze, freon, waste paint and lacquer thinner, batteries, solvents, lubricants, degreasing agents, gasoline, and diesel fuels. Accordingly, we are subject to regulation by federal, state, and local authorities establishing requirements for the use, management, handling, and disposal of these materials and health and environmental quality standards, and liability related thereto, and providing penalties for violations of those standards. We are also subject to laws, ordinances, and regulations governing investigation and remediation of contamination at facilities we operate to which we send hazardous or toxic substances or wastes for treatment, recycling, or disposal. We do not believe we have any material environmental liabilities or that compliance with environmental laws, ordinances, and regulations will, individually or in the aggregate, have a material adverse effect on our business, financial condition, or results of operations. However, soil and groundwater contamination has been known to exist at certain properties owned or leased by us. We have also been required and may in the future be required to remove aboveground and underground storage tanks containing hazardous substances or wastes. As to certain of our properties, specific releases of petroleum have been or are in the process of being remedied in accordance with state and federal guidelines. We are monitoring the soil and groundwater as required by applicable state and federal guidelines. In addition, the shareholders of the acquired dealers have indemnified us for specific environmental issues identified on environmental site assessments performed by us as part of the acquisitions. We maintain insurance for pollutant cleanup and removal. The coverage pays for the expenses to extract pollutants from land or water at the insured property, if the discharge, dispersal, seepage, migration, release, or escape of the pollutants is caused by or results from a covered cause of loss. We may also have additional storage tank liability insurance and “Superfund” coverage where applicable. In addition, certain of our retail locations are located on waterways that are subject to federal or state laws regulating navigable waters (including oil pollution prevention), fish and wildlife, and other matters. Two of the properties we own were historically used as gasoline service stations. Remedial action with respect to prior historical site activities on these properties has been completed in accordance with federal and state law. Also, one of our properties is within the boundaries of a “Superfund” site, although our property has not been and is not expected to be identified as a contributor to the contamination in the area. We, however, do not believe that these environmental issues will result in any material liabilities to us. Additionally, certain states have required or are considering requiring a license in order to operate a recreational boat. While such licensing requirements are not expected to be unduly restrictive, regulations may discourage potential first-time buyers, thereby limiting future sales, which could adversely affect our business, financial condition, and results of operations. Product Liability The products we sell or service may expose us to potential liabilities for personal injury or property damage claims relating to the use of those products. Historically, the resolution of product liability claims has not materially affected our business. Our manufacturers generally maintain product liability insurance, and we maintain third-party product liability insurance, which we believe to be adequate. However, we may experience legal claims in excess of our insurance coverage, and those claims may not be covered by insurance. Furthermore, any significant claims against us could adversely affect our business, financial condition, and results of operations and result in negative publicity. Competition We operate in a highly competitive environment. In addition to facing competition generally from recreation businesses seeking to attract consumers’ leisure time and discretionary spending dollars, the recreational boat industry itself is highly fragmented, resulting in intense competition for customers, quality products, boat show space, and suitable retail locations. We rely to a certain extent on boat shows to generate sales. Our inability to participate in boat shows in our existing or targeted markets could have a material adverse effect on our business, financial condition, and results of operations. We compete primarily with single-location boat dealers and, with respect to sales of marine equipment, parts, and accessories, with national specialty marine stores, catalog retailers, sporting goods stores, and mass 20 merchants. Dealer competition continues to increase based on the quality of available products, the price and value of the products, and attention to customer service. There is significant competition both within markets we currently serve and in new markets that we may enter. We compete in each of our markets with retailers of brands of boats and engines we do not sell in that market. In addition, several of our competitors, especially those selling boating accessories, are large national or regional chains that have substantial financial, marketing, and other resources. However, we believe that our integrated corporate infrastructure and marketing and sales capabilities, our cost structure, and our nationwide presence enable us to compete effectively against these companies. Private sales of used boats is an additional significant source of competition. Executive Officers The following table sets forth information concerning each of our executive officers: Name William H. McGill Jr. Michael H. McLamb Kurt M. Frahn Jack P. Ezzell Edward A. Russell Michael J. Aiello Anthony K. Aisquith Age 60 38 Position Chairman of the Board, President, Chief Executive Officer, and Director Executive Vice President, Chief Financial Officer, Secretary, and Director 35 Vice President of Finance and Treasurer 33 Vice President, Chief Accounting Officer, and Controller 43 Vice President 47 Vice President 36 Vice President William H. McGill Jr. has served as the Chief Executive Officer of MarineMax since January 23, 1998 and as the Chairman of the Board and as a director of our company since March 6, 1998. Mr. McGill served as the President of our company from January 23, 1988 until September 8, 2000 and re-assumed the position on July 1, 2002. Mr. McGill was the principal owner and president of Gulfwind USA, Inc., one of our operating subsidiaries, from 1973 until its merger with us. Michael H. McLamb has served as Executive Vice President of our company since October 2002, as Chief Financial Officer since January 23, 1998, as Secretary since April 5, 1998, and as a director of our company since November 1, 2003. Mr. McLamb served as Vice President and Treasurer of our company from January 23, 1998 until October 22, 2002. Mr. McLamb, a certified public accountant, was employed by Arthur Andersen, LLP from December 1987 to December 1997, serving most recently as a senior manager. Kurt M. Frahn has served as Vice President of Finance and Treasurer of our company since October 22, 2002. Mr. Frahn served as Director of Taxes and Acquisitions of our company from May 15, 1998 until October 22, 2002. Mr. Frahn was employed by Arthur Andersen, LLP from September 3, 1991 until May 15, 1998, serving most recently as a tax consulting manager. Jack P. Ezzell has served as Vice President and Chief Accounting Officer of our company since October 22, 2002. Mr. Ezzell served as Corporate Controller of our company from June 1, 1999 until October 22, 2002 and Assistant Controller from January 13, 1998 until June 1, 1999. Mr. Ezzell, a certified public accountant, was employed by Arthur Andersen, LLP from August 1996 until January 1998, serving most recently as a senior auditor. Edward A. Russell has served as Vice President of our company since October 22, 2002. Mr. Russell has served as the Regional Manager of our Florida operations since August 1, 2002. Prior to that, Mr. Russell served as the District President for our Central and West Florida operations from March 1998 until August 1, 2002. Mr. Russell was an owner and General Sales Manager of Gulfwind USA Inc., one of our operating subsidiaries, now called MarineMax of Central Florida, from 1984 until its merger with our company in March 1998. 21  Michael J. Aiello has served as Vice President of our company since October 22, 2002. Mr. Aiello has served as the Regional Manager of the state of New Jersey and surrounding areas since 1999 and was a principal owner and operator of Merit Marine Inc., one of our operating subsidiaries, now called MarineMax of Mid-Atlantic, from 1985 until its merger with our company in March 1999. Anthony K. Aisquith has served as Vice President of our company since November 1, 2003. Mr. Aisquith has served as the Regional Manager of our Georgia, Carolinas, and Texas operations since August 1, 2000, March 1, 2002, and March 15, 2003, respectively. Mr. Aisquith previously served as the Store Manager of our Tampa, Florida location from October 1, 1997 until August 1, 2000 and as a salesperson in our Clearwater, Florida location from June 18, 1995 until October 1, 1997. Mr. Aisquith joined our company on June 18, 1995 after 10 years of experience in the auto industry. RISK FACTORS Our success depends to a significant extent on the continued popularity and reputation for quality of the boating products of our manufacturers, particularly Brunswick’s Sea Ray and Hatteras boat lines. Approximately 65% of our revenue in fiscal 2003 resulted from sales of new boats manufactured by Brunswick, including 55% from Brunswick’s Sea Ray division and 10% from Brunswick’s Hatteras Yacht division. The remainder of our fiscal 2003 revenue from new boat sales resulted from sales of products from a limited number of other manufacturers, none of which accounted for a significant portion of our revenue. Any adverse change in the financial condition, production efficiency, product development, management, marketplace acceptance and marketing capabilities of our manufacturers, particularly Brunswick given our reliance on Sea Ray and Hatteras, would have a substantial adverse impact on our business. To ensure adequate inventory levels to support our expansion, it may be necessary for Brunswick and other manufacturers to increase production levels or allocate a greater percentage of their production to us. The interruption or discontinuance of the operations of Brunswick or other manufacturers could cause us to experience shortfalls, disruptions, or delays with respect to needed inventory. Although we believe that adequate alternate sources would be available that could replace any manufacturer other than Brunswick as a product source, those alternate sources may not be available at the time of any interruption, and alternative products may not be available at comparable quality and prices. Through our principal operating subsidiaries, we maintain dealer agreements with Brunswick covering Sea Ray products. Each dealer agreement has a multi-year term and provides for the lowest product prices charged by the Sea Ray division of Brunswick from time to time to other domestic Sea Ray dealers. These terms are subject to • the dealer meeting all the requirements and conditions of Sea Ray’s applicable programs; and • the right of Brunswick in good faith to charge lesser prices to other dealers; — to meet existing competitive circumstances; — for unusual and non-ordinary business circumstances; or — for limited duration promotional programs. The agreements do not give us the exclusive right to sell Sea Ray product lines within any particular territory or restrict us from selling competing products. Through certain of our operating subsidiaries, we also maintain dealer agreements with Hatteras covering Hatteras products. Each agreement allows Hatteras to revise prices at any time, and such new prices will supersede previous prices. Pursuant to the agreement, we must bear any losses we incur as a result of such price changes and may not recover from Hatteras for any losses. In addition, certain of our operating subsidiaries may not represent manufacturers or product lines that compete directly with Hatteras without its prior written consent. 22  As is typical in the industry, we deal with manufacturers, other than the Sea Ray division of Brunswick, Ferretti Group, and Bertram, under renewable annual dealer agreements. These agreements do not contain any contractual provisions concerning product pricing or required purchasing levels. Pricing is generally established on a model year basis, but is subject to change in the manufacturer’s sole discretion. Any change or termination of these arrangements for any reason could adversely affect product availability, cost and our financial performance. Our operations depend upon a number of factors relating to or affecting consumer spending for luxury goods, such as recreational boats. Unfavorable local, regional, national, or global economic developments or uncertainties regarding future economic prospects could reduce consumer spending in the markets we serve and adversely affect our business. Consumer spending on luxury goods also may decline as a result of lower consumer confidence levels, even if prevailing economic conditions are favorable. In an economic downturn, consumer discretionary spending levels generally decline, at times resulting in disproportionately large reductions in the sale of luxury goods. Similarly, rising interest rates could have a negative impact on the ability or willingness of consumers to finance boat purchases, which could also adversely affect our ability to sell our products and impact the profitability of our finance and insurance activities. Local influences, such as corporate downsizing and military base closings, also could adversely affect our operations in certain markets. We may be unable to maintain our profitability during any period of adverse economic conditions or low consumer confidence. Changes in federal and state tax laws, such as an imposition of luxury taxes on new boat purchases, and stock market performance also could influence consumers’ decisions to purchase products we offer and could have a negative effect on our sales. For example, during 1991 and 1992 the federal government imposed a luxury tax on new recreational boats with sales prices in excess of $100,000, which coincided with a sharp decline in boating industry sales from a high of more than $17.9 billion in the late 1980s to a low of $10.3 billion in 1992. General economic conditions that impact the recreational boating industry could inhibit our growth and negatively impact our profitability. General economic conditions, consumer spending patterns, federal tax policies, interest rate levels, and the cost and availability of fuel can impact overall boat purchases. We believe that the level of boat purchases has been adversely affected by increased competition from other recreational activities, perceived hassles of boat ownership, and relatively poor customer service and education throughout the retail boat industry. Although our strategy addresses many of these industry factors and we have expanded our operations during periods of stagnant or declining industry trends, the cyclical nature of the recreational boating industry or the lack of industry growth could adversely affect our business, financial condition, or results of operations in the future. Our success depends, in part, on our ability to continue to make successful acquisitions and to integrate the operations of acquired dealers and each dealer we acquire in the future. Since March 1, 1998, we have acquired 21 recreational boat dealers, two boat brokerage operations, and a full-service yacht repair facility. Each acquired dealer operated independently prior to its acquisition by us. Our success depends, in part, on our ability to continue to make successful acquisitions and to integrate the operations of acquired dealers and each dealer we acquire in the future, including centralizing certain functions to achieve cost savings and pursuing programs and processes that promote cooperation and the sharing of opportunities and resources among our dealerships. We may not be able to oversee the combined entity efficiently or to implement effectively our growth and operating strategies. To the extent that we successfully pursue our acquisition strategy, our resulting growth will place significant additional demands on our management and infrastructure. Our failure to pursue successfully our acquisition strategies or operate effectively the combined entity could have a material adverse effect on our rate of growth and operating performance. 23 Unforeseen expenses, difficulties, and delays frequently encountered in connection with rapid expansion through acquisitions could inhibit our growth and negatively impact our profitability. Our growth strategy of acquiring additional recreational boat dealers involves significant risks. This strategy entails reviewing and potentially reorganizing acquired business operations, corporate infrastructure and systems, and financial controls. Unforeseen expenses, difficulties, and delays frequently encountered in connection with rapid expansion through acquisitions could inhibit our growth and negatively impact our profitability. We may be unable to identify suitable acquisition candidates or to complete the acquisitions of candidates that we identify. Increased competition for acquisition candidates may increase purchase prices for acquisitions to levels beyond our financial capability or to levels that would not result in the returns required by our acquisition criteria. In addition, we may encounter difficulties in integrating the operations of acquired dealers with our own operations or managing acquired dealers profitably without substantial costs, delays, or other operational or financial problems. We may issue common or preferred stock and incur substantial indebtedness in making future acquisitions. The size, timing, and integration of any future acquisitions may cause substantial fluctuations in operating results from quarter to quarter. Consequently, operating results for any quarter may not be indicative of the results that may be achieved for any subsequent quarter or for a full fiscal year. These fluctuations could adversely affect the market price of our common stock. Our ability to continue to grow through the acquisition of additional dealers will depend upon various factors, including the following: • the availability of suitable acquisition candidates at attractive purchase prices; • the ability to compete effectively for available acquisition opportunities; • the availability of funds or common stock with a sufficient market price to complete the acquisitions; • the ability to obtain any requisite manufacturer or governmental approvals; and • the absence of one or more manufacturers attempting to impose unsatisfactory restrictions on us in connection with their approval of acquisitions. As a part of our acquisition strategy, we frequently engage in discussions with various recreational boat dealers regarding their potential acquisition by us. In connection with these discussions, we and each potential acquisition candidate exchange confidential operational and financial information, conduct due diligence inquiries, and consider the structure, terms, and conditions of the potential acquisition. In certain cases, the prospective acquisition candidate agrees not to discuss a potential acquisition with any other party for a specific period of time, grants us an option to purchase the prospective dealer for a designated price during a specific time, and agrees to take other actions designed to enhance the possibility of the acquisition, such as preparing audited financial information and converting its accounting system to the system specified by us. Potential acquisition discussions frequently take place over a long period of time and involve difficult business integration and other issues, including in some cases, management succession and related matters. As a result of these and other factors, a number of potential acquisitions that from time to time appear likely to occur do not result in binding legal agreements and are not consummated. We may be required to obtain the consent of Brunswick and various other manufacturers prior to the acquisition of other dealers. In determining whether to approve acquisitions, manufacturers may consider many factors, including our financial condition and ownership structure. Manufacturers also may impose conditions on granting their approvals for acquisitions, including a limitation on the number of their dealers that we may acquire. Our ability to meet manufacturers’ requirements for approving future acquisitions will have a direct bearing on our ability to complete acquisitions and effect our growth strategy. There can be no assurance that a manufacturer will not terminate its dealer agreement, refuse to renew its dealer agreement, refuse to approve future acquisitions, or take other action that could have a material adverse effect on our acquisition program. 24  We and Brunswick have entered into an agreement providing for Brunswick to cooperate in good faith and not to unreasonably withhold its consent to the acquisitions each year by us of Sea Ray boat dealers with aggregate total revenue not exceeding 20% of our revenue in our prior fiscal year. Any acquisitions in excess of the 20% benchmark will be at Brunswick’s discretion. In the event that our purchases of Sea Ray boats exceed 49% of the purchases of Sea Ray boats by all Sea Ray boat dealers, including us, in any fiscal year of Brunswick, the agreement provides that we and Brunswick will negotiate in good faith the standards for acquisitions of Sea Ray boat dealers by us during Brunswick’s next succeeding fiscal year, but that Brunswick may grant or withhold its consent to any such acquisition in its sole discretion for as long as our Sea Ray boat purchases exceed the 49% benchmark. Our growth strategy also entails expanding our product lines and geographic scope by obtaining additional distribution rights from our existing and new manufacturers. We may not be able to secure additional distribution rights or obtain suitable alternative sources of supply if we are unable to obtain such distribution rights. The inability to expand our product lines and geographic scope by obtaining additional distribution rights could have a material adverse effect on the growth and profitability of our business. Boat manufacturers exercise substantial control over our business. We depend on our dealer agreements. Through dealer agreements, boat manufacturers, including Brunswick, exercise significant control over their dealers, restrict them to specified locations, and retain approval rights over changes in management and ownership, among other things. The continuation of our dealer agreements with most manufacturers, including Brunswick, depends upon, among other things, our achieving stated goals for customer satisfaction ratings and market share penetration in the market served by the applicable dealership. Failure to meet the customer satisfaction, market share goals, and other conditions set forth in any dealer agreement could have various consequences, including the following: • the termination of the dealer agreement; • the imposition of additional conditions in subsequent dealer agreements; • limitations on boat inventory allocations; • reductions in reimbursement rates for warranty work performed by the dealer; • loss of certain manufacturer to dealer incentives; or • denial of approval of future acquisitions. Our dealer agreements with manufacturers, including Brunswick, generally do not give us the exclusive right to sell those manufacturers’ products within a given geographical area. Accordingly, a manufacturer, including Brunswick, could authorize another dealer to start a new dealership in proximity to one or more of our locations, or an existing dealer could move a dealership to a location that would be directly competitive with us. These events could have a material adverse effect on our competitive position and financial performance. The failure to receive rebates and other dealer incentives on inventory purchases could substantially reduce our margins. We rely on manufacturers’ programs that provide incentives for dealers to purchase and sell particular boat makes and models or for consumers to buy particular boat makes or models. Any eliminations, reductions, limitations, or other changes relating to rebate or incentive programs that have the effect of reducing the benefits we receive could increase the effective cost of our boat purchases, reduce our margins and competitive position, and have a material adverse effect on our financial performance. 25 Our growth strategy may require us to secure significant additional capital, the amount of which will depend upon the size, timing, and structure of future acquisitions and our working capital and general corporate needs. If we finance future acquisitions in whole or in part through the issuance of common stock or securities convertible into or exercisable for common stock, existing stockholders will experience dilution in the voting power of their common stock and earnings per share could be negatively impacted. The extent to which we will be able or willing to use our common stock for acquisitions will depend on the market value of our common stock from time to time and the willingness of potential sellers to accept our common stock as full or partial consideration. Our inability to use our common stock as consideration, to generate cash from operations, or to obtain additional funding through debt or equity financings in order to pursue our acquisition program could materially limit our growth. Any borrowings made to finance future acquisitions or for operations could make us more vulnerable to a downturn in our operating results, a downturn in economic conditions, or increases in interest rates on borrowings that are subject to interest rate fluctuations. If our cash flow from operations is insufficient to meet our debt service requirements, we could be required to sell additional equity securities, refinance our obligations, or dispose of assets in order to meet our debt service requirements. In addition, our credit arrangements contain financial and operational covenants and other restrictions with which we must comply, including limitations on capital expenditures and the incurrence of additional indebtedness. Adequate financing may not be available if and when we need it or may not be available on terms acceptable to us. The failure to obtain sufficient financing on favorable terms and conditions could have a material adverse effect on our growth prospects and our business, financial condition, and results of operations. Our current revolving credit facility provides a line of credit with asset-based borrowing availability of up to $220 million and allows us $20 million in traditional floorplan borrowings. We have pledged certain of our assets, principally boat inventories, to secure borrowings under our credit facility. While we believe we will continue to obtain adequate financing from lenders, such financing may not be available to us. Our internal growth and operating strategies of opening new locations and offering new products involve risk. In addition to pursuing growth by acquiring boat dealers, we intend to continue to pursue a strategy of growth through opening new retail locations and offering new products in our existing and new territories. Accomplishing these goals for expansion will depend upon a number of factors, including the following: • our ability to identify new markets in which we can obtain distribution rights to sell our existing or additional product lines; • our ability to lease or construct suitable facilities at a reasonable cost in existing or new markets; • our ability to hire, train, and retain qualified personnel; • the timely integration of new retail locations into existing operations; • our ability to achieve adequate market penetration at favorable operating margins without the acquisition of existing dealers; and • our financial resources. Our dealer agreements with Brunswick require Brunswick’s consent to open, close, or change retail locations that sell Sea Ray products, and other dealer agreements generally contain similar provisions. We may not be able to open and operate new retail locations or introduce new product lines on a timely or profitable basis. Moreover, the costs associated with opening new retail locations or introducing new product lines may adversely affect our profitability. As a result of these growth strategies, we expect to expend significant time and effort in opening and acquiring new retail locations and introducing new products. Our systems, procedures, controls, and financial 26 resources may not be adequate to support our expanding operations. The inability to manage our growth effectively could have a material adverse effect on our business, financial condition, and results of operations. Our planned growth also will impose significant added responsibilities on members of senior management and require us to identify, recruit, and integrate additional senior level managers. We may not be able to identify, hire, or train suitable additions to management. Our business, as well as the entire recreational boating industry, is highly seasonal, with seasonality varying in different geographic markets. In addition, weather conditions may adversely impact our business. During the three-year period ended September 30, 2003, the average revenue for the quarterly periods ended December 31, March 31, June 30, and September 30 represented 17%, 26%, 32%, and 25%, respectively, of our average annual revenues. With the exception of Florida, we generally realize significantly lower sales in the quarterly period ending December 31 with boat sales generally improving in January with the onset of the public boat and recreation shows. Our business could become substantially more seasonal as we acquire dealers that operate in colder regions of the United States. Weather conditions may adversely impact our operating results. For example, drought conditions, reduced rainfall levels, and excessive rain may force boating areas to close or render boating dangerous or inconvenient, thereby curtailing customer demand for our products. In addition, unseasonably cool weather and prolonged winter conditions may lead to shorter selling seasons in certain locations. Hurricanes and other storms could result in the disruption of our operations or damage to our boat inventories and facilities. Many of our dealerships sell boats to customers for use on reservoirs, thereby subjecting our business to the continued viability of these reservoirs for boating use. Although our geographic diversity and our future geographic expansion will reduce the overall impact on us of adverse weather conditions in any one market area, weather conditions will continue to represent potential material adverse risks to us and our future operating performance. As a result of the foregoing and other factors, our operating results in some future quarters could be below the expectations of stock market analysts and investors. We face intense competition. We operate in a highly competitive environment. In addition to facing competition generally from non-boating recreation businesses seeking to attract discretionary spending dollars, the recreational boat industry itself is highly fragmented, resulting in intense competition for customers, product distribution rights, and suitable retail locations, particularly on or near waterways. Competition increases during periods of stagnant industry growth. We compete primarily with single-location boat dealers and, with respect to sales of marine parts, accessories, and equipment, with national specialty marine parts and accessories stores, catalog retailers, sporting goods stores, and mass merchants. Competition among boat dealers is based on the quality of available products, the price and value of the products, and attention to customer service. There is significant competition both within markets we currently serve and in new markets that we may enter. We compete in each of our markets with retailers of brands of boats and engines we do not sell in that market. In addition, several of our competitors, especially those selling marine equipment and accessories, are large national or regional chains that have substantial financial, marketing, and other resources. Private sales of used boats represent an additional source of competition. We depend on income from financing, insurance, and extended service contracts. A portion of our income results from referral fees derived from the placement or marketing of various F&I products, consisting of customer financing, insurance products, and extended service contracts, the most significant component of which is the participation and other fees resulting from our sale of customer financing contracts. During fiscal 2003, F&I products accounted for approximately 3.8% of our revenue. 27  The availability of financing for our boat purchasers and the level of participation and other fees we receive in connection with such financing depend on the particular agreement between us and the lender and the current rate environment. Lenders may impose terms in their boat financing arrangements with us that may be unfavorable to us or our customers, resulting in reduced demand for our customer financing programs and lower participation and other fees. The reduction of profit margins on sales of F&I products or the lack of demand for or the unavailability of these products could have a material adverse effect on our operating margins. We depend on key personnel. Our success depends, in large part, upon the continuing efforts and abilities of our executive officers. Although we have an employment agreement with certain of our executive officers, we cannot assure that these or other executive personnel will remain with us. As a result of our decentralized operating strategy, we also rely on the management teams of our operating subsidiaries. In addition, we likely will depend on the senior management of any significant businesses we acquire in the future. The loss of the services of one or more of these key employees before we are able to attract and retain qualified replacement personnel could adversely affect our business. The products we sell or service may expose us to potential liability for personal injury or property damage claims relating to the use of those products. Manufacturers of the products we sell generally maintain product liability insurance. We also maintain third-party product liability insurance that we believe to be adequate. We may experience claims that are not covered by or that are in excess of our insurance coverage. The institution of any significant claims against us could subject us to damages, result in higher insurance costs, and harm our business reputation with potential customers. Environmental and other regulatory issues may impact our operations. Our operations are subject to extensive regulation, supervision, and licensing under various federal, state, and local statutes, ordinances, and regulations. The failure to satisfy those and other regulatory requirements could have a material adverse effect on our business, financial condition, and results of operations. Various federal, state, and local regulatory agencies, including OSHA or the EPA, and similar federal and local agencies, have jurisdiction over the operation of our dealerships, repair facilities, and other operations, with respect to matters such as consumer protection, workers’ safety, and laws regarding protection of the environment, including air, water, and soil. The EPA recently promulgated emissions regulations for outboard marine engines that impose stricter emissions standards for two-cycle, gasoline outboard marine engines. Emissions from such engines must be reduced by approximately 75% over a nine-year period beginning with the 1998 model year. Costs of comparable new engines, if materially more expensive than previous engines, or the inability of our manufacturers to comply with EPA requirements, could have a material adverse effect on our business, financial condition, and results of operations. Certain of our facilities own and operate USTs for the storage of various petroleum products. USTs are generally subject to federal, state, and local laws and regulations that require testing and upgrading of USTs and remediation of contaminated soils and groundwater resulting from leaking USTs. In addition, we may be subject to civil liability to third parties for remediation costs or other damages if leakage from our owned or operated USTs migrates onto the property of others. Our business involves the use, handling, storage, and contracting for recycling or disposal of hazardous or toxic substances or wastes, including environmentally sensitive materials, such as motor oil, waste motor oil and filters, transmission fluid, antifreeze, freon, waste paint and lacquer thinner, batteries, solvents, lubricants, degreasing agents, gasoline, and diesel fuels. Accordingly, we are subject to regulation by federal, state, and local authorities establishing investigation and health and environmental quality standards, and liability related thereto, and providing penalties for violations of those standards. 28  We also are subject to laws, ordinances, and regulations governing investigation and remediation of contamination at facilities we operate or to which we send hazardous or toxic substances or wastes for treatment, recycling, or disposal. In particular, the Comprehensive Environmental Response, Compensation and Liability Act, or CERCLA or “Superfund,” imposes joint, strict, and several liability on • owners or operators of facilities at, from, or to which a release of hazardous substances has occurred; • parties who generated hazardous substances that were released at such facilities; and • parties who transported or arranged for the transportation of hazardous substances to such facilities. A majority of states have adopted “Superfund” statutes comparable to and, in some cases, more stringent than CERCLA. If we were to be found to be a responsible party under CERCLA or a similar state statute, we could be held liable for all investigative and remedial costs associated with addressing such contamination. In addition, claims alleging personal injury or property damage may be brought against us as a result of alleged exposure to hazardous substances resulting from our operations. In addition, certain of our retail locations are located on waterways that are subject to federal or state laws regulating navigable waters (including oil pollution prevention), fish and wildlife, and other matters. Soil and groundwater contamination has been known to exist at certain properties owned or leased by us. We have also been required and may in the future be required to remove aboveground and underground storage tanks containing hazardous substances or wastes. As to certain of our properties, specific releases of petroleum have been or are in the process of being remediated in accordance with state and federal guidelines. We are monitoring the soil and groundwater as required by applicable state and federal guidelines. We also may have additional storage tank liability insurance and “Superfund” coverage where applicable. Environmental laws and regulations are complex and subject to frequent change. Compliance with amended, new or more stringent laws or regulations, more strict interpretations of existing laws, or the future discovery of environmental conditions may require additional expenditures by us, and such expenditures may be material. Two of the properties we own were historically used as gasoline service stations. Remedial action with respect to prior historical site activities on these properties has been completed in accordance with federal and state law. Also, one of our properties is within the boundaries of a “Superfund” site, although our property has not been identified as a contributor to the contamination in the area. Additionally, certain states have required or are considering requiring a license in order to operate a recreational boat. These regulations could discourage potential buyers, thereby limiting future sales and adversely affecting our business, financial condition, and results of operations. Fuel prices and supply may affect our business. All of the recreational boats we sell are powered by diesel or gasoline engines. Consequently, an interruption in the supply, or a significant increase in the price or tax on the sale, of fuel on a regional or national basis could have a material adverse effect on our sales and operating results. At various times in the past, diesel or gasoline fuel has been difficult to obtain. The supply of fuels may be interrupted, rationing may be imposed, or the price of or tax on fuels may significantly increase in the future. We must evaluate goodwill and identifiable intangible assets for impairment annually and we would recognize an impairment loss if the carrying amount of goodwill or an identifiable intangible asset exceeds its fair value. Intangible assets and goodwill represent the excess of the purchase price of businesses acquired over the fair value of the net tangible assets acquired at the date of acquisition. We have determined that our only identifiable intangible assets are dealer agreements, which are indefinite- lived intangibles. Through our fiscal year ended September 30, 2001, we were required to amortize the intangible assets and goodwill from acquisitions accounted for as purchases over a period of time, with the amount amortized in a particular period constituting an expense that reduced our net income for that period. 29  In June 2001, the Financial Accounting Standards Board (FASB), issued Statement of Financial Accounting Standards No. 141, “Business Combinations” (SFAS 141), and Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets” (SFAS 142). SFAS 141 requires business combinations initiated after June 30, 2001 to be accounted for using the purchase method of accounting and identifiable intangible assets acquired in a business combination to be recognized as assets and reported separately from goodwill. SFAS 142 requires that goodwill and indefinite-lived intangible assets no longer be amortized, but instead tested for impairment at least annually. SFAS 142 was effective for fiscal years beginning after December 15, 2001, with early application permitted in certain circumstances. We elected to early adopt SFAS 142 in fiscal 2002. SFAS 142 required the completion of a transitional impairment test within six months from the date of initial adoption of the statement. In addition to the initial assessment, we assess the impairment of identifiable intangible assets and goodwill at least annually or whenever events or changes in circumstances indicate that the carrying value may not be recoverable. If the carrying amount of an identifiable intangible asset or goodwill exceeds its fair value, we would recognize an impairment loss. We measure any potential impairment based on various business valuation methodologies, including a projected discounted cash flow method. We completed the transitional impairment test, which resulted in no impairment of goodwill or identifiable intangible assets. We have also completed the annual impairment test at June 30, 2003, which resulted in no impairment of goodwill or identifiable intangible assets. To date, we have not recognized any impairment of goodwill or identifiable intangible assets in connection with SFAS 142. We will continue to test goodwill and identifiable intangible assets for impairment at least annually on June 30, or whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Prior to the adoption of SFAS 142, all purchase price in excess of the net tangible assets was recorded as goodwill and no identifiable intangible assets were recognized. Identifiable intangible assets and net goodwill amounted to $4.5 million and $48.6 million, respectively, as of September 30, 2003. A reduction in net income resulting from the impairment of identifiable intangible assets or goodwill may have an adverse impact upon the market price of our common stock, impairment in the identifiable intangible assets or goodwill or regulatory action that changes the impairment testing methodology, requires amortization, or a write-off of identifiable intangible assets or goodwill may materially and adversely affect the financial position of our company. A substantial number of shares of our common stock are subject to a stockholders agreement. We, Brunswick, and William H. McGill Jr., our Chairman of the Board, President, and Chief Executive Officer, are parties to a stockholders’ agreement, and we and Brunswick are parties to a governance agreement, each dated April 28, 1998. Subject to certain limitations, the stockholders’ agreement provides various rights of first refusal on the sale of shares of common stock by the parties to the agreement, particularly in the event that Brunswick does not own its targeted investment percentage of 19% of our common stock at the time of the proposed sale or in the event the proposed sale is to a competitor of Brunswick. Among other provisions and subject to certain conditions, the stockholders’ agreement also requires the parties to vote their common stock for nominees of the board of directors in the election of directors and to vote their common stock in favor of all proposals and recommendations approved by our board of directors and submitted to a vote of our stockholders. The governance agreement provides for various terms and conditions concerning Brunswick’s participation in the corporate governance of our company. As a result, the stockholders’ agreement and the governance agreement will have the effect of increasing the control of our directors, executive officers, and persons associated with them and may have the effect of delaying or preventing a change in control of our company. The market price of our common stock could be subject to wide fluctuations as a result of many factors. Factors that could affect the trading price of our common stock include the following: • variations in operating results; 30 • the thin trading volume and relatively small public float of our common stock; • the level and success of our acquisition program and new store openings; • variations in same-store sales; • the success of dealership integration; • relationships with manufacturers; • changes in earnings estimates published by analysts; • general economic, political, and market conditions; • seasonality and weather conditions; • governmental policies and regulations; • the performance of the recreational boat industry in general; and • factors relating to suppliers and competitors. In addition, market demand for small-capitalization stocks, and price and volume fluctuations in the stock market unrelated to our performance could result in significant fluctuations in market price of our common stock. The performance of our common stock could adversely affect our ability to raise equity in the public markets and adversely affect our acquisition program. The issuance of additional common stock in the future, including shares that we may issue pursuant to option grants and future acquisitions, may result in dilution in the net tangible book value per share of our common stock. Our board of directors has the legal power and authority to determine the terms of an offering of shares of our capital stock, or securities convertible into or exchangeable for these shares, to the extent of our shares of authorized and unissued capital stock. A substantial number of shares are eligible for future sale. As of September 30, 2003, there were outstanding 15,401,686 shares of our common stock. Substantially all of these shares are freely tradable without restriction or further registration under the securities laws, unless held by an “’affiliate” of our company, as that term is defined in Rule 144 under the securities laws. Shares held by affiliates of our company, which generally include our directors, officers, and certain principal stockholders, are subject to the resale limitations of Rule 144 described below. Outstanding shares of common stock issued in connection with the acquisition of any acquired dealers are available for resale beginning one year after the respective dates of the acquisitions, subject to compliance with the provisions of Rule 144 under the securities laws. As of September 30, 2003, we had issued options to purchase approximately 2,326,589 shares of common stock under our 1998 incentive stock plan and we issued 204,774 of the 500,000 shares of common stock reserved for issuance under our 1998 employee stock purchase plan. We have filed a registration statement under the securities laws to register the common stock to be issued under these plans. As a result, shares issued under these plans will be freely tradable without restriction unless acquired by affiliates of our company, who will be subject to the volume and other limitations of Rule 144. We may issue additional shares of common stock or preferred stock under the securities laws as part of any acquisition we may complete in the future. If issued pursuant to an effective registration statement, these shares generally will be freely tradable after their issuance by persons not affiliated with us or the acquired companies. 31 We rely on our operating subsidiaries. We are a holding company, the principal assets of which are the shares of the capital stock or membership interests of our corporate or limited liability company subsidiaries, including the operating subsidiaries. As a holding company without independent means of generating operating revenue, we depend on dividends and other payments from our subsidiaries to fund our obligations and meet our cash needs. Financial covenants under future loan agreements of our subsidiaries may limit our subsidiaries’ ability to make sufficient dividend or other payments to permit us to fund our obligations or meet our cash needs, in whole or in part. We do not pay cash dividends. We have never paid cash dividends on our common stock and do not anticipate paying cash dividends in the foreseeable future. Moreover, financial covenants under certain of our credit facilities restrict our ability to pay dividends. Our stockholders’ rights plan may adversely affect existing stockholders. Our Stockholders’ Rights Plan may have the effect of deterring, delaying, or preventing a change in control that might otherwise be in the best interests of our stockholders. Under the Rights Plan, we issued a dividend of one Preferred Share Purchase Right for each share of our common stock held by stockholders of record as of the close of business on September 7, 2001. In general, subject to certain limited exceptions, the stock purchase rights become exercisable when a person or group acquires 15% or more of our common stock or a tender offer or exchange offer for 15% or more of our common stock is announced or commenced. After any such event, our other stockholders may purchase additional shares of our common stock at 50% of the then-current market price. The rights will cause substantial dilution to a person or group that attempts to acquire us on terms not approved by our board of directors. The rights may be redeemed by us at $0.01 per stock purchase right at any time before any person or group acquires 15% or more of our outstanding common stock. The rights should not interfere with any merger or other business combination approved by our board of directors. The rights expire on August 28, 2011. Certain provisions of our restated certificate of incorporation and bylaws and Delaware law may make a change in the control of our company more difficult to complete, even if a change in control were in the stockholders’ interest or might result in a premium over the market price for the shares held by the stockholders. Our certificate of incorporation and bylaws divide the board of directors into three classes of directors elected for staggered three-year terms. The certificate of incorporation also provides that the board of directors may authorize the issuance of one or more series of preferred stock from time to time and may determine the rights, preferences, privileges, and restrictions and fix the number of shares of any such series of preferred stock, without any vote or action by our stockholders. The board of directors may authorize the issuance of preferred stock with voting or conversion rights that could adversely affect the voting power or other rights of the holders of common stock. The certificate of incorporation also allows our board of directors to fix the number of directors and to fill vacancies on the board of directors. We also are subject to the anti-takeover provisions of Section 203 of the Delaware General Corporation Law, which prohibits us from engaging in a “business combination” with an “interested stockholder” for a period of three years after the date of the transaction in which the person became an “interested stockholder,” unless the business combination is approved in a prescribed manner. Certain of our dealer agreements could also make it difficult for a third party to attempt to acquire a significant ownership position in our company. In addition, the stockholders’ agreement and governance agreement will have the effect of increasing the control of our directors, executive officers, and persons associated with them. 32 Our prior engagement of Arthur Andersen LLP as our independent auditors during fiscal year 2001 may adversely affect our ability to make timely filings with the Securities and Exchange Commission, Our former auditor, Arthur Andersen LLP, issued an audit report with respect to our audited consolidated financial statements as of and for the fiscal year ended September 30, 2001, which is included in this report. During 2002, Arthur Andersen LLP was found guilty on a federal obstruction charge and ceased practicing before the SEC. Arthur Andersen has not reissued its audit report with respect to the audited consolidated financial statements as of and for the fiscal year ended September 30, 2001 included in this report. Furthermore, Arthur Andersen has not consented to the inclusion of its audit report in this report. As a result, relief that may generally be available to stockholders under the federal securities laws against auditing firms may not be available as a practical matter against Andersen since it has ceased operations and has limited or no assets available for creditors. The SEC has said that it will continue accepting financial statements audited by Andersen as long as a reasonable effort is made to have Andersen reissue its reports and to obtain a manually signed accountant’s report from Andersen. Our access to the capital markets and our ability to make timely filings with the SEC could be impaired if the SEC ceases accepting financial statements from a prior period audited by Andersen for which we are not able to obtain a reissued audit report from Andersen. In that case, we would not be able to access the public markets unless another independent accounting firm is able to audit the financial statements originally audited by Andersen. Any delay or inability to access the public capital markets caused by these circumstances could have a material adverse effect on us. Our sales of Ferretti Group product may be adversely affected by fluctuations in currency exchange rates between the U.S. dollar and the Euro. Products purchased from the Italy-based Ferretti Group are subject to fluctuations in the Euro to U.S. dollar exchange rate, which ultimately may impact the retail price at which we can sell such products. Accordingly, fluctuations in the value of the Euro as compared with the U.S. dollar may impact the price points at which we can sell profitably Ferretti Group products, and such price points may not be competitive with other product lines in the United States. Accordingly, such fluctuations in exchange rates ultimately may impact the amount of revenue or cost of goods sold, cash flows, and earnings we recognize for the Ferretti Group product line. The impact of these currency fluctuations could increase, particularly as our revenue from the Ferretti Group products increase as a percentage of our total revenue. We cannot predict the effects of exchange rate fluctuations on our operating results. We do not currently intend to engage in foreign currency exchange hedging transactions to manage our foreign currency exposure. If and when we do engage in foreign currency exchange hedging transactions, we cannot assure that our strategies will adequately protect our operating results from the effects of exchange rate fluctuations. Item 2. Properties We lease our corporate offices in Clearwater, Florida. We also lease 46 of our retail locations under leases, many of which contain multi- year renewal options and, some of which grant us a first right of refusal to purchase the property at fair value. In all such cases, we pay a fixed rent at negotiated rates. In substantially all of the leased locations, we are responsible for taxes, utilities, insurance, and routine repairs and maintenance. We own the property associated with our 20 other retail locations. 33  The following table reflects the status, approximate size, and facilities of our various retail locations as of the date of this report. Location Owned or Leased Square Footage(l) Facilities at Property Operated Since(2) Waterfront Alabama Gulf Shores Arizona Tempe California Oakland Santa Rosa Sacramento Sacramento (River Bend) (floating facility) Sacramento San Diego Tower Park (near San Francisco) Colorado Denver Grand Junction Delaware Bear Florida Burnt Store Cape Haze Clearwater Cocoa Coconut Grove Dania Dania Ft Lauderdale Ft Lauderdale Fort Myers Ft Walton Beach Key Largo Third-party lease 4,000 Retail and service Company owned 34,000 Retail and service 1998 — 1992 — Third-party lease Third-party lease Company owned 17,700 8,100 24,800 Retail and service; 20 wet slips Retail and service Retail and service Alameda Estuary (San Francisco Bay) — — 1985 1990 1995 Third-party lease Third-party lease Third-party lease Retail and service; 20 wet slips Retail only; 10 wet slips Retail and service; 12 wet slips 500 300 750 1998 2002 Sacramento River Sacramento River 1997 Mission Bay Third-party lease 400 Retail only 1999 Sacramento River Third-party lease Third-party lease 16,400 9,300 Retail and service Retail and service 2003 1986 — — Third-party lease 5,000 Retail and service; 15 wet slips 1995 Between Delaware Bay and Chesapeake Bay Third-party lease 700 Retail only; 4 wet slips 2002 Charlotte Harbor Company owned 18,000 Company owned Company owned Third-party lease 42,000 15,000 2,000 Company owned Third-party lease 32,000 3,500 Third-party lease Third-party lease Third-party lease Third-party lease Third-party lease 2,400 3,799 8,000 6,000 750 Retail, service, and storage; 8 wet slips Retail and service; 16 wet slips Retail and service Retail only; 5 wet slips Repair and service; 16 wet slips Retail only; 8 wet slips Retail and service; 15 wet slips Retail only; 4 wet slips Retail and service; 18 wet slips Retail only Retail only 34 1972 Intracoastal Waterway 1973 1968 2002 Tampa Bay — Biscayne Bay 1991 2001 Port Everglades Port Everglades 1977 2002 1983 2003 2002 Intracoastal Waterway Seminole River Caloosahatchee River — — Location Owned or Leased Square Footage(l) Facilities at Property Operated Since(2) Waterfront Jacksonville Miami Naples Palm Beach Pensacola Pompano Beach Sarasota Stuart Stuart Tampa Venice Georgia Altoona Buford (Atlanta) Forest Park (Atlanta) Lake Lanier Minnesota Bay Port Rogers Walker Walker Woodbury Nevada Las Vegas New Jersey Brick Brant Beach Greenbrook Jersey City Lake Hopatcong Third-party lease 1,000 Retail only; 7 wet slips 1995 St Johns River Company owned 7,200 Company owned 19,600 Company owned Third-party lease 22,800 24,274 Company owned 23,000 Third-party lease 26,500 Company owned 22,400 Company owned Company owned 6,700 13,100 Company owned 62,000 Third-party lease Third-party lease Third-party lease 8,800 8,500 47,300 Third-party lease 13,000 Third-party lease Company owned Company owned 450 70,000 76,400 Company owned Third-party lease 6,800 13,392 Retail and service; l5 wet slips Retail and service; 13 wet slips Retail and service; 8 wet slips Retail and service Retail and service; 16 wet slips Retail, service, and storage; 15 wet slips Retail and service; 6 wet slips Retail and service; 60 wet slips Retail and service Retail, service, and storage; 90 wet slips Retail and service; 4 wet slips Retail and service Retail and service Retail and service; 50 wet slips Retail only; 10 wet slips Retail, service, and storage Retail, service, and storage Retail and service; 93 wet slips Retail and service 1980 Intracoastal Waterways 1997 Naples Bay 1998 1974 Intracoastal Waterways — 1990 Intracoastal Waterways 1972 Sarasota Bay 2002 Intracoastal Waterway 1994 1995 Intracoastal Waterways — 1972 Intracoastal Waterway 2002 2001 1973 Lake Altoona — — 1981 Lake Lanier 1996 1991 1989 St Croix River — — 1977 1997 Leech Lake — Company owned 21,600 Retail and service 1990 — Company owned 20,000 Third-party lease Third-party lease Third-party lease 3,800 18,500 500 Third-party lease 4,600 Retail and service; 225 wet slips Retail and service; 36 wet slips Retail and service Retail only; 6 wet slips Retail and service; 80 wet slips 1977 Manasquan River 1965 1995 2000 Barnegat Bay — Hudson River 1998 Lake Hopatcong 35 Location Owned or Leased Square Footage(l) Facilities at Property Operated Since(2) Waterfront Ship Bottom Somers Point North Carolina Wrightsville Beach Ohio Cleveland (Flats) Port Clinton Port Clinton Toledo South Carolina Myrtle Beach Texas Arlington Houston Houston League City (floating facility) (4) Lewisville (Dallas) Lewisville (Dallas) (floating facility) Seabrook Utah Salt Lake City Third-party lease 19,300 Retail and service 1972 — Affiliate lease 31,000 Retail and service; 33 wet slips 1987 Little Egg Harbor Bay Third-party lease 34,523 Retail, service, and storage 1996 Intracoastal Waterway Third-party lease 19,000 Retail and service 1999 Lake Erie Third-party lease Third-party lease Third-party lease 63,700 93,250 12,240 Retail, service, and storage; 155 wet slips Retail, service, and storage Retail and service 1974 1997 1989 Lake Erie Lake Erie — Third-party lease 3,480 Retail only 1999 Coquina Harbor Third-party lease Third-party lease Third-party lease 21,000 10,000 10,000 Retail and service Retail only (3) Retail and service Third-party lease Third-party lease 800 10,000 Retail and service; 20 wet slips Retail and service Third-party lease 500 Company owned 32,000 Retail only; 20 wet slips (5) Retail and service; 30 wet slips 1999 1987 1981 — — — 1988 1992 Clear Lake Lake Lewisville 1994 Lake Lewisville 2002 Clear Lake Third-party lease 21,200 Retail and service 1975 — (1) Square footage does not include outside sales space or dock or marina facilities. (2) Operated since date is the date the facility was opened by us or opened prior to its acquisition by us. (3) Shares service facility located at the other Houston retail locations. (4) We own the floating facility, however, the related dock and marina space is leased by us from an unaffiliated third party. (5) Shares service facility located at the other Lewisville retail location. Item 3. Legal Proceedings We are involved in various legal proceedings arising out of our operations in the ordinary course of business. We do not believe that such proceedings, even if determined adversely, will have a material adverse effect on our business, financial condition, or results of operations. Item 4. Submission of Matters to a Vote of Security Holders Not applicable. 36 Item 5. Market for the Registrant’s Common Equity and Related Stockholder Matters PART II Our common stock has been traded on the New York Stock Exchange under the symbol HZO since our initial public offering on June 3, 1998 at $12.50 per share. The following table sets forth high and low sale prices of the common stock for each calendar quarter indicated as reported on the New York Stock Exchange. 2001 First quarter Second quarter Third quarter Fourth quarter 2002 First quarter Second quarter Third quarter Fourth quarter 2003 First quarter Second quarter Third quarter Fourth quarter (through December 23, 2003) High Low $ 9.00 $ 5.50 $ 9.95 $ 7.30 $ 9.41 $ 6.00 $ 8.63 $ 6.31 $ 12.65 $ 7.65 $ 15.40 $ 10.85 $ 14.19 $ 9.00 $ 12.95 $ 7.15 $ 13.08 $ 8.67 $ 14.50 $ 9.02 $ 15.43 $ 12.62 $ 19.85 $ 14.39 On December 23, 2003, the closing sale price of our common stock was $18.87 per share. On December 23, 2003, there were approximately 100 record holders and approximately 2,100 beneficial owners of our common stock. 37 Item 6. Selected Financial Data The following table contains certain financial and operating data and is qualified by the more detailed consolidated financial statements and notes thereto included elsewhere in this report. The balance sheet data as of September 30, 2002 and 2003 and the statement of operations data for the fiscal years ended September 30, 2002 and 2003 were derived from the consolidated financial statements and notes thereto that have been audited by Ernst & Young LLP, independent certified public accountants. The balance sheet data as of September 30, 1999, 2000, and 2001 and the statements of operations data for the fiscal years ended September 30, 1999, 2000, and 2001 were derived from the consolidated financial statements and notes thereto that have been audited by Arthur Andersen LLP, independent certified public accountants. The financial data shown below should be read in conjunction with the consolidated financial statements and the related notes thereto and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this report. Statement of Operations Data: Revenue Cost of sales Gross profit Selling, general, and administrative expenses Income from operations Interest expense, net Income before tax provision Tax provision Net income Net income per share: Diluted Fiscal Year Ended September 30, 1999 2000 2001 2002 2003 (Amounts in thousands except share and per share data) $ 450,058 $ 338,403 550,654 $ 419,080 504,071 383,984 $ 540,716 $ 416,137 607,501 459,729 111,655 131,574 120,087 124,579 147,772 79,484 92,520 92,734 95,567 113,299 32,171 2,040 30,131 11,978 39,054 4,127 34,927 13,534 27,353 2,396 24,957 9,608 29,012 1,264 27,748 10,683 34,473 2,471 32,002 12,321 $ 18,153 $ 21,393 $ 15,349 $ 17,065 $ 19,681 $ 1.21 $ 1.41 $ 1.01 $ 1.10 $ 1.26 Weighted average number of shares: Diluted 14,964,727 15,204,182 15,238,719 15,540,973 15,671,470 Other Data: Number of retail locations(1) Sales per store(2)(4) Same-store sales growth(3)(4) $ 51 12,938 $ 18 % 52 14,056 $ 20 % 53 12,382 $ 59 12,273 $ 65 11,900 (9 )% 3 % 6 % September 30, 1999 2000 2001 2002 2003 Balance Sheet Data: Working capital Total assets Long-term debt (including current portion)(5) Total stockholders’ equity $ 28,353 $ 40,853 $ 47,447 $ 55,426 $ 67,003 235,751 231,330 264,490 301,146 329,155 8,640 21,765 22,343 90,234 112,340 127,693 145,190 166,056 6,280 7,520 (1) Includes only those retail locations open at period end. (2) Includes only those stores open for the entire preceding 12- or nine-month period, respectively. 38 (3) New and acquired stores are included in the comparable base at the end of the store’s thirteenth month of operations. (4) A store is one or more retail locations that are adjacent or operate as one entity. (5) Amount excludes our short-term borrowings for working capital and inventory financing. Item 7. Management’s Discussion and Analysis of Financial Condition, and Results of Operations We are the largest recreational boat retailer in the United States with fiscal 2003 revenue exceeding $607 million. Through our current 66 retail locations in 15 states, we sell new and used recreational boats and related marine products, including engines, trailers, parts, and accessories. We also arrange related boat financing, insurance, and extended warranty contracts; provide boat repair and maintenance services; and offer yacht and boat brokerage services. MarineMax was incorporated in January 1998. We have significantly expanded our operations through the acquisition of 21 recreational boat dealers, two boat brokerage operations, and one full-service yacht repair facility since our formation. As a part of our acquisition strategy, we frequently engage in discussions with various recreational boat dealers regarding their potential acquisition by us. Potential acquisition discussions frequently take place over a long period of time and involve difficult business integration and other issues, including in some cases, management succession and related matters. As a result of these and other factors, a number of potential acquisitions that from time to time appear likely to occur do not result in binding legal agreements and are not consummated. During the fiscal year ended September 30, 2003, we completed the acquisition of two recreational boat dealers. During September 2003, we acquired substantially all of the assets and assumed certain liabilities of Killinger Marine Center, Inc. and Killinger Marine Center of Alabama, Inc., a privately held boat dealership with locations in Ft. Walton Beach and Pensacola, Florida and Gulf Shores, Alabama, for approximately $2.3 million in cash, including acquisition costs. During June 2003, we acquired substantially all of the assets and assumed certain liabilities of Sundance Marine, Inc., a privately held boat dealership with locations in Denver and Grand Junction, Colorado, for approximately $3.3 million in cash, including acquisition costs. The asset purchase agreement contains an earn out provision, which will impact the final purchase price annually, based on the future profits of the region through September 2008, assuming certain conditions and provisions are met. These acquisitions were accounted for under the purchase method of accounting. During the fiscal year ended September 30, 2002, we completed the acquisition of two recreational boat dealers. During April 2002, we acquired the net assets, including the owned sales and marina facilities, and assumed certain liabilities of Gulfwind Marine Partners, Inc. and affiliates, a privately held boat dealership with locations in Sarasota, Venice, and Cape Haze, Florida, for approximately $16.0 million in cash. During July 2002, we acquired substantially all of the assets and assumed certain liabilities of Seaside Marine, Inc., a privately held boat dealership in San Diego, California, for approximately $100,000 in cash, including acquisition costs. These acquisitions were accounted for under the purchase method of accounting. During the fiscal year ended September 30, 2001, we completed the acquisition of a full-service yacht repair facility. We acquired the net assets, including the assumption of certain liabilities and related property and buildings, for approximately $5.6 million in cash, including acquisition costs. The acquisition was accounted for under the purchase method of accounting. We derive our revenue from selling new and used recreational boats and related marine products; arranging third-party financing, insurance, and extended warranty products; providing boat repair and maintenance services; and offering boat and yacht brokerage services. Revenue from boat or related marine product sales, boat repair and maintenance services, and boat or yacht brokerage services is recognized at the time the product is delivered to the customer or the service is completed. Revenue earned by us 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. 39  Cost of sales generally includes the cost of the recreational boat or other marine product, plus any additional labor, parts, or consumables used in providing maintenance, repair, and rigging services. Application of Critical Accounting Policies We have identified the policies below as critical to our business operations and the understanding of our results of operations. The impact and risks related to these policies on our business operations is discussed throughout Management’s Discussion and Analysis of Financial Condition and Results of Operations when such policies affect our reported and expected financial results. In the ordinary course of business, we have made a number of estimates and assumptions relating to the reporting of results of operations and financial condition in the preparation of our financial statements in conformity with accounting principles generally accepted in the United States. We base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances. The results form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ significantly from those estimates under different assumptions and conditions. We believe that the following discussion addresses our most critical accounting policies, which are those that are most important to the portrayal of our financial condition and results of operations and require our most difficult, subjective, and complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. Revenue Recognition We recognize revenue from boat, motor, and trailer sales, and parts and service operations at the time the boat, motor, trailer, or part is delivered to or accepted by the customer or service is completed. We recognize commissions earned from a brokerage sale at the time the related brokerage transaction closes. Commissions earned by us for placing notes with financial institutions in connection with customer boat financing are recognized when the related boat sales are recognized. Marketing fees earned on credit life, accident and disability, and hull insurance products sold by third-party insurance companies are also recognized when the related boat sale is recognized. Commissions earned on extended warranty service contracts sold on behalf of third-party insurance companies are recognized at the later of customer acceptance of the service contract terms as evidenced by contract execution, or when the related boat sale is recognized. Vendor Consideration Received In November 2002, the Emerging Issues Task Force (EITF) of the Financial Accounting Standards Board (FASB) reached a consensus on Issue No. 02-16, “Accounting by a Customer (Including a Reseller) for Certain Consideration Received from a Vendor” (EITF 02-16). EITF 02-16 establishes the accounting standards for the recognition and measurement of cash consideration paid by a vendor to a reseller. EITF 02-16 is effective for interim period financial statements beginning after December 15, 2002, with early adoption permitted. In March 2003, the EITF revised certain provisions of its previously reached conclusions on EITF 02-16 and provided additional transitional guidance. EITF 02-16 does not provide for restatement or reclassification of prior year amounts; rather it requires prospective application for new agreements or modifications of existing agreements entered into subsequent to December 31, 2002. We determined that EITF 02-16 impacts our accounting for certain consideration received from vendors beginning July 1, 2003 with the renewal of and amendments to our dealer agreements with the manufacturers of our products. EITF 02-16 most significantly requires us to classify interest assistance received from manufacturers as a reduction of inventory cost and related cost of sales as opposed to netting the assistance against our interest expense incurred with our lenders. We adopted EITF 02-16 prospectively for fiscal 2003 during the quarter ended December 31, 2002. Had we adopted EITF 02-16 at the beginning of fiscal 2001, the amount of interest assistance that would have been offset to cost of sales instead of netted against interest expense would have been approximately $4.4 million, $4.0 million, and $2.9 million in fiscal 2001, 2002, and 2003, respectively. 40 Inventories New and used boat inventories are stated at the lower of cost, determined on a specific-identification basis, or market. Parts and accessories are stated at the lower of cost, determined on the first-in, first-out basis, or market. If the carrying amount of our inventory exceeds its fair value, we reduce the carrying amount to reflect fair value. We utilize our historical experience and current sales trends as the basis for our lower of cost or market analysis. If events occur and market conditions change, causing the fair value to fall below carrying value, further reductions may be required. Valuation of Goodwill and Other Intangible Assets In June 2001, the Financial Accounting Standards Board (FASB), issued Statement of Financial Accounting Standards No. 141, “Business Combinations” (SFAS 141), and Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets” (SFAS 142). SFAS 141 requires business combinations initiated after June 30, 2001 to be accounted for using the purchase method of accounting and that identifiable intangible assets acquired in a business combination be recognized as assets and reported separately from goodwill. We have determined that our only identifiable intangible assets are dealer agreements, which are indefinite-lived intangibles. SFAS 142 requires that goodwill and indefinite-lived intangible assets no longer be amortized, but instead tested for impairment at least annually. SFAS 142 was effective for fiscal years beginning after December 15, 2001, with early application permitted in certain circumstances. We elected to early adopt SFAS 142 in fiscal 2002. SFAS 142 required the completion of a transitional impairment test within six months from the date of initial adoption of the statement. In addition to the initial assessment, we assess the impairment of identifiable intangible assets and goodwill at least annually or whenever events or changes in circumstances indicate that the carrying value may not be recoverable. If the carrying amount of an identifiable intangible asset or goodwill exceeds its fair value, we would recognize an impairment loss. We measure any potential impairment based on various business valuation methodologies, including a projected discounted cash flow method. We completed the transitional impairment test, which resulted in no impairment of goodwill or identifiable intangible assets. We have also completed the annual impairment test at June 30, 2003, which resulted in no impairment of goodwill or identifiable intangible assets. To date, we have not recognized any impairment of goodwill or identifiable intangible assets in connection with SFAS 142. We will continue to test goodwill and identifiable intangible assets for impairment at least annually on June 30, or whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Prior to the adoption of SFAS 142, all purchase price in excess of the net tangible assets was recorded as goodwill and no identifiable intangible assets were recognized. Identifiable intangible assets and net goodwill amounted to $4.5 million and $48.6 million, respectively, as of September 30, 2003. For a more comprehensive list of our accounting policies, including those which involve varying degrees of judgment, see Note 3 — “Significant Accounting Policies” of Notes to Consolidated Financial Statements. 41 Results of Operations The following table sets forth certain financial data as a percentage of revenue for the periods indicated: Fiscal Year Ended September 30, 2001 2002 2003 Revenue Cost of sales (Amounts in thousands) $ 504,071 100.0 % $ 540,716 100.0 % $ 607,501 100.0 % 383,984 76.2 % 416,137 77.0 % 459,729 75.7 % Gross profit Selling, general, and administrative expenses 120,087 23.8 % 124,579 23.0 % 147,772 24.3 % 95,567 17.7 % 113,299 18.7 % 92,734 18.4 % Income from operations Interest expense, net Income before tax provision Income tax provision Net income 27,353 5.4 % 2,396 0.4 % 29,012 5.3 % 1,264 0.2 % 34,473 2,471 5.7 % 0.4 % 24,957 5.0 % 9,608 1.9 % 27,748 5.1 % 10,683 2.0 % 32,002 12,321 5.3 % 2.0 % $ 15,349 3.0 % $ 17,065 3.1 % $ 19,681 3.2 % Fiscal Year Ended September 30, 2003 Compared to Fiscal Year Ended September 30, 2002 Revenue. Revenue increased $66.8 million, or 12.4%, to $607.5 million for the fiscal year ended September 30, 2003 from $540.7 million for the fiscal year ended September 30, 2002. Of this increase, $35.8 million was attributable to stores not eligible for inclusion in the comparable-store base and $31.0 million was attributable to a 6% growth in comparable-store sales in fiscal 2003. The increase in comparable- store sales in fiscal 2003 resulted primarily from the timing of certain yacht sales, revenue from our new product lines, and increased sales of our finance and insurance, parts, and service products. Gross Profit. Gross profit increased $23.2 million, or 18.6%, to $147.8 million for the fiscal year ended September 30, 2003 from $124.6 million for the fiscal year ended September 30, 2002. Gross profit margin as a percentage of revenue increased to 24.3% in fiscal 2003 from 23.0% in fiscal 2002. This increase was primarily attributable to an increase in finance and insurance, parts and service revenue, which generally yield higher gross margins than boat sales. In addition, less margin pressure on smaller boats also contributed to the gross profit increase. This increase was partially offset by an increase in sales of larger boats, which historically carry lower gross profits. Selling, General, and Administrative Expenses. Selling, general, and administrative expenses increased $17.7 million, or 18.6%, to $113.3 million for the fiscal year ended September 30, 2003 from $95.6 million for the fiscal year ended September 30, 2002. Selling, general, and administrative expenses as a percentage of revenue increased to 18.7% in fiscal 2003 from 17.7% in fiscal 2002. The increase in selling, general, and administrative expenses as a percentage of revenue is attributable to additional costs associated with marketing and an increased level of operations compared to that of the prior year. Interest Expense, Net. Interest expense, net increased $1.2 million, or 95.5%, to $2.5 million for the fiscal year ended September 30, 2003 from $1.3 million for fiscal year ended September 30, 2002. Interest expense, net as a percentage of revenue, increased to 0.4% in fiscal 2003 from 0.2% in fiscal 2002. The increase in total interest charges was the result of increased long-term borrowings associated with mortgages on facilities and equipment and the implementation of EITF 02-16, partially offset by a more favorable interest rate environment. Income Tax Provision. Income taxes increased $1.6 million, or 15.3%, to $12.3 million for the fiscal year ended September 30, 2003 from $10.7 million for fiscal year ended September 30, 2002. Our effective tax rate remained constant at 38.5% in fiscal 2003 and fiscal 2002. 42 Fiscal Year Ended September 30, 2002 Compared to Fiscal Year Ended September 30, 2001 Revenue. Revenue increased $36.6 million, or 7.2%, to $540.7 million for the fiscal year ended September 30, 2002 from $504.1 million for the fiscal year ended September 30, 2001. Of this increase, $23.1 million was attributable to stores not eligible for inclusion in the comparable- store base and $13.5 million was attributable to 3% growth in comparable-store sales in fiscal 2002. We believe the increase in comparable- store sales in fiscal 2002 resulted primarily from our focus on our core retailing strategies of customer service and delivering a family-oriented boating experience. Gross Profit. Gross profit increased $4.5 million, or 3.7%, to $124.6 million for the fiscal year ended September 30, 2002 from $120.1 million for the fiscal year ended September 30, 2001. Gross profit margin as a percentage of revenue decreased to 23.0% in fiscal 2002 from 23.8% in fiscal 2001. The decrease was attributable to a proportionate increase in sales of larger boats, which historically carry lower gross profits and downward pressure on the selling price of our boats due to softer economic and market conditions. This decline was partially offset by an increase in parts and service revenue and commissions/marketing fees received on certain finance and insurance products, which generally yield higher gross margins than boat sales. Selling, General, and Administrative Expenses. Selling, general, and administrative expenses increased $2.8 million, or 3.1%, to $95.6 million for the fiscal year ended September 30, 2002 from $92.7 million for the fiscal year ended September 30, 2001. Selling, general, and administrative expenses as a percentage of revenue decreased to 17.7% in fiscal 2002 from 18.4% in fiscal 2001. The decrease in selling, general, and administrative expenses as a percentage of revenue is attributable to our cost-containment initiatives, including workforce reductions, resulting in a stronger leveraging of our operating structure and approximately $1.0 million from the elimination of goodwill amortization, which represents the impact of adopting SFAS 142, partially offset by the acquisition of Gulfwind Marine, which currently operates at a lower operating margin than the rest of our company. Interest Expense, Net. Interest expense, net decreased $1.1 million, or 47.2%, to $1.3 million for the fiscal year ended September 30, 2002 from $2.4 million for fiscal year ended September 30, 2001. Interest expense, net as a percentage of revenue, decreased to 0.2% in fiscal 2002 from 0.5% in fiscal 2001. The decrease in total interest charges was the result of a more favorable interest rate environment, partially offset by an increase in long-term borrowings or mortgages placed on new and acquired facilities. Income Tax Provision. Income taxes increased $1.1 million, or 11.2%, to $10.7 million for the fiscal year ended September 30, 2002 from $9.6 million for fiscal year ended September 30, 2001. Our effective tax rate remained constant at 38.5% in fiscal 2002 and fiscal 2001. 43 Quarterly Data and Seasonality The following table sets forth certain unaudited quarterly financial data for each of our last eight quarters. The information has been derived from unaudited financial statements that we believe reflect all adjustments, consisting only of normal recurring adjustments, necessary for the fair presentation of such quarterly financial information. The operating results for any quarter are not necessarily indicative of the results to be expected for any future period. Revenue Cost of sales Gross profit Selling, general, and administrative expenses Income (loss) from operations Interest expense, Net provision Income (loss) before tax Tax provision (benefit) Net income (loss) Net income (loss) per share: Diluted Weighted average number of shares: Diluted December 31, 2001 March 31, 2002 June 30, 2002 September 30, 2002 December 31, 2002 March 31, 2003 June 30, 2003 September 30, 2003 $ 100,585 80,870 $ 133,794 $ 106,233 170,595 130,466 $ 135,742 98,568 $ 97,975 74,320 $ 159,063 $ 124,822 187,173 143,469 $ 163,290 117,118 (Amounts in thousands except share and per share data) 19,715 19,803 (88 ) 167 (255 ) (97 ) 27,561 40,129 37,174 23,655 34,241 43,704 21,852 27,126 26,786 23,802 27,370 29,278 5,709 264 13,003 478 10,388 355 5,445 2,096 12,525 4,822 10,033 3,862 (147 ) 633 (780 ) (300 ) 6,871 216 14,426 683 6,655 2,562 13,743 5,291 46,172 32,849 13,323 939 12,384 4,768 $ (158 ) $ 3,349 $ 7,703 $ 6,171 $ (480 ) $ 4,093 $ 8,452 $ 7,616 $ (0.01 ) $ 0.22 $ 0.49 $ 0.40 $ (0.03 ) $ 0.26 $ 0.54 $ 0.48 15,246,459 15,253,479 15,780,582 15,588,763 15,537,053 15,541,897 15,656,203 15,950,257 Liquidity and Capital Resources Our cash needs are primarily for working capital to support operations, including new and used boat and related parts inventories, off- season liquidity, and growth through acquisitions and new store openings. These cash needs have historically been financed with cash from operations and borrowings under credit facilities. We depend upon dividends and other payments from our consolidated operating subsidiaries to fund our obligations and meet our cash needs. Currently, no agreements exist that restrict this flow of funds. For the fiscal years ended September 30, 2001, 2002, and 2003, we generated cash flows from operating activities of approximately $9.6 million, $4.2 million, and $27.1 million, respectively. In addition to net income, cash provided by operating activities was due primarily to inventory management, including the management of inventory financing. For the fiscal years ended September 30, 2001, 2002, and 2003, cash flows used in investing activities were approximately $14.4 million, $22.3 million, and $19.4 million, respectively. Cash used in investing activities was primarily attributable to cash used in business acquisitions and to purchase property and equipment associated with opening new or improving existing retail facilities. For the fiscal years ended September 30, 2001 and 2002, cash flows provided by financing activities approximated $2.2 million and $12.4 million, respectively. For the fiscal year ended September 30, 2003, cash flows used in financing activities approximated $1.5 million. For the fiscal years ended September 30, 2001 44 and 2002, cash flows provided by financing activities reflect the proceeds from borrowing on long-term debt and mortgages, which was partially offset by the repayment of long-term debt. For the fiscal year ended September 30, 2003, cash used in financing activities was primarily attributable to repayments on long-term debt. As of September 30, 2003, our indebtedness totaled approximately $119.3 million, of which approximately $22.3 million was associated with our real estate holdings and $97.0 million was associated with financing our inventory and working capital needs. In December 2001, we entered into a revolving credit facility that provides a line of credit with asset-based borrowing availability of up to $220 million. The facility also allows us $20 million in traditional floorplan borrowings. The facility, which has a three-year term with two one-year renewal options, replaces four separate line of credit facilities. In November 2002, we exercised one of the two one-year renewal options, which the bank approved, extending the maturity date to December 2005. The facility accrues interest at a rate of LIBOR plus 175 to 260 basis points, which is determined in accordance with a Performance Pricing grid, as defined in the credit facility. Borrowings under the facility are pursuant to a borrowing base formula and are used primarily for working capital and inventory financing. The terms and conditions of the facility are similar to the terms and conditions of the prior separate line of credit facilities. During the fiscal years ended September 30, 2001, 2002, and 2003, we completed the acquisition of five marine retail operations. We acquired the net assets, related property, and buildings and assumed or retired certain liabilities, including the outstanding floorplan obligations related to new boat inventories, for approximately $27.3 million in cash, including acquisition costs. Except as specified in this “Management’s Discussion and Analysis of Financial Condition, and Results of Operations” and in our consolidated financial statements, we have no material commitments for capital for the next 12 months. We believe that our existing capital resources will be sufficient to finance our operations for at least the next 12 months, except for possible significant acquisitions. Contractual Commitments and Commercial Commitments The following table sets forth a summary of our material contractual obligations and commercial commitments as of September 30, 2003: Year Ending September 30, Line of Credit Long-Term Debt Operating Leases Total 2004 2005 2006 2007 2008 Thereafter Total (Amounts in thousands) $ 97,000 — — — — $ 2,344 2,453 2,567 2,579 2,509 9,891 $ 5,929 4,283 3,667 3,421 2,531 1,142 $ 105,273 6,736 6,234 6,000 5,040 11,033 $ 97,000 $ 22,343 $ 20,973 $ 140,316 Item 7A. Quantitative and Qualitative Disclosures about Market Risk At September 30, 2003, approximately 88% of our short- and long-term debt bears interest at variable rates, generally tied to a reference rate such as the LIBOR rate or the prime rate of interest of certain banks. Changes in interest rates on loans from these financial institutions could affect our earnings due to interest rates charged on certain underlying obligations that are variable. At September 30, 2003, a hypothetical 100 basis point increase in interest rates on our variable rate obligations would result in an increase of approximately $1.1 million in annual pre-tax interest expense. This estimated increase is based upon the outstanding balances of all of our variable rate obligations and assumes no mitigating changes by management to reduce the outstanding balances due to the hypothetical interest rate increase. 45 Item 8. Financial Statements and Supplementary Data Reference is made to the financial statements, the notes thereto, and the report thereon, commencing on page F-1 of this report, which financial statement, notes, and report are incorporated herein by reference. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure Not applicable. Item 9A. Controls and Procedures We have evaluated, with the participation of our Chief Executive Officer and Chief Financial Officer, the effectiveness of our disclosure controls and procedures as of September 30, 2003. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have each concluded that our disclosure controls and procedures are effective to ensure that we record, process, summarize, and report information required to be disclosed by us in our quarterly reports filed under the Securities Exchange Act within the time periods specified by the Securities and Exchange Commission’s rules and forms. During the fiscal year covered by this report, there have not been any changes in our internal controls over financial reporting that have materially affected, or its reasonably likely to materially affect, our internal control over financial reporting. Subsequent to the date of their evaluation, there have not been any significant changes in our internal controls or in other facts that could significantly affect these controls, including any corrective action with regard to significant deficiencies and material weaknesses. Item 10. Directors and Executive Officers of the Registrant PART III The information required by this Item relating to our directors is incorporated herein by reference to the definitive Proxy Statement to be filed pursuant to Regulation 14A of the Exchange Act for our 2004 Annual Meeting of Stockholders. The information required by this Item relating to our executive officers included in “Business — Executive Officers.” Item 11. Executive Compensation The information required by this Item is incorporated herein by reference to the definitive Proxy Statement to be filed pursuant to Regulation 14A of the Exchange Act for our 2004 Annual Meeting of Stockholders. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters The information required by this Item is incorporated herein by reference to the definitive Proxy Statement to be filed pursuant to Regulation 14A of the Exchange Act for our 2004 Annual Meeting of Stockholders. Item 13. Certain Relationships and Related Transactions The information required by this Item is incorporated herein by reference to the definitive Proxy Statement to be filed pursuant to Regulation 14A of the Exchange Act for our 2004 Annual Meeting of Stockholders. Item 14. Principal Accountant Fees and Services The information required by this Item is incorporated herein by reference to the definitive Proxy Statement to be filled pursuant to Regulation 14A of the Exchange Act for our 2004 Annual Meeting of Stockholders. 46 Item 15. Exhibits, Financial Statement Schedules, and Reports On Form 8-K (a) Financial Statements and Financial Statement Schedules PART IV (1) Financial Statements are listed in the Index to Consolidated Financial Statements on page F-1 of this report. (2) No financial statement schedules are included because such schedules are not applicable, are not required, or because required information is included in the consolidated financial statements or notes thereto. (b) Reports on Form 8-K Current Report on Form 8-K dated July 24, 2003, indicated in Item 9, the press release issued by MarineMax, Inc. dated July 24, 2003, reporting the financial results of its third quarter of fiscal 2003 and its year-to-date results. (c) Exhibits Exhibit Number Exhibit 3 .1 3 .2 3 .3 4 .1 4 .2 10 .1(a) 10 .1(b) 10 .1(c) 10 .1(d) 10 .1(e) 10 .1(f) 10 .1(g) 10 .1(h) 10 .1(i) Restated Certificate of Incorporation of the Registrant, including all amendments to date(7) Amended and Restated Bylaws of the Registrant(7) Certificate of Designation of Series A Junior Participating Preferred Stock(7) Specimen of Common Stock Certificate(7) Rights Agreement, dated August 28, 2001 between Registrant and American Stock Transfer & Trust Company, as Rights Agent(3) Merger Agreement between Registrant and its acquisition subsidiary and Bassett Boat Company of Florida and Richard Bassett(1) Merger Agreement between Registrant and its acquisition subsidiary and 11502 Dumas, Inc. d/b/a Louis DelHomme Marine and its stockholders(1) Merger Agreement between Registrant and its acquisition subsidiary and Gulfwind USA, Inc. and its stockholders(1) Merger Agreement between Registrant and its acquisition subsidiary and Gulfwind South, Inc. and its stockholders(1) Merger Agreement between Registrant and its acquisition subsidiary and Harrison’s Boat Center, Inc. and its stockholders(1) Merger Agreement between Registrant and its acquisition subsidiary and Harrison’s Marine Centers of Arizona, Inc. and its stockholders(1) Merger Agreement between Registrant and its acquisition subsidiary and Stovall Marine, Inc. and its stockholders(1) Agreement of Merger and Plan of Reorganization dated as of the 7th day of July, 1998 by and among MarineMax, Inc., C & N Acquisition Corp. (a subsidiary of MarineMax, Inc.), C & N Marine Corporation and the Stockholders named therein(2) Agreement of Merger and Plan of Reorganization dated as of the 7th day of July, 1998 by and among MarineMax, Inc., Cochrans Acquisition Corp. (a subsidiary of MarineMax, Inc.), Cochrans Marine, Inc. and the Stockholders named therein(2) 10 .1(j) 10 .2(a) 10 .2(b) Asset Purchase Agreement between Registrant and Treasure Cove Marina, Inc.(3) Contribution Agreement between Registrant and Bassett Boat Company and its owner(1) Contribution Agreement between Registrant and Bassett Realty, L.L.C. and its owner(1) 47 Exhibit Number 10 .2(c) 10 .2(d) 10 .2(e) 10 .3(e) 10 .3(f) 10 .3(g) 10 .4 10 .5 10 .6 10 .7 10 .8 10 .9 10 .10 10 .11 10 .12 10 .17 21 23 .1 23 .2 31 .1 31 .2 32 .1 32 .2 Exhibit Contribution Agreement between Registrant and Gulfwind South Realty, L.L.C. and its owners(1) Contribution Agreement between Registrant and Harrison’s Realty, L.L.C. and its owners(1) Contribution Agreement between Registrant and Harrison’s Realty California, L.L.C. and its owners(1) Employment Agreement between Registrant and David L. Cochran(4) Employment Agreement between Registrant and William H. McGill Jr.(9) Employment Agreement between Registrant and Michael H. McLamb(9) 1998 Incentive Stock Plan, as amended through November 15, 2000(8) 1998 Employee Stock Purchase Plan(1) Settlement Agreement between Brunswick Corporation and Registrant(1) Letter of Intent between Registrant and Stovall(1) Restated Agreement Relating to the Purchase of MarineMax Common Stock between Registrant and Brunswick Corporation, dated as of April 28, 1998(1) Stockholders’ Agreement among Registrant, Brunswick Corporation, and Senior Founders of Registrant, dated April 28, 1998(1) Governance Agreement between Registrant and Brunswick Corporation, dated April 28, 1998(1) Agreement Relating to Acquisitions between Registrant and Brunswick Corporation, dated April 28, 1998(1) Form of Sea Ray Sales and Service Agreement(1) Credit and Security Agreement dated as of December 18, 2001 among the Registrant and its subsidiaries, as Borrowers, and Banc of America Specialty Finance, Inc. and various other lenders, as Lenders(8) List of Subsidiaries Consent of Ernst & Young LLP Notice regarding consent of Arthur Andersen LLP Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a), promulgated under the Securities Exchange Act of 1934, as amended. Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a), promulgated under the Securities Exchange Act of 1934, as amended. Certification pursuant to U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (1) Incorporated by reference to Registration Statement on Form S-1 (Registration 333-47873). (2) Incorporated by reference to Registrant’s Current Report on Form 8-K dated July 7, 1998, as filed on July 20, 1998. (3) Incorporated by reference to Registrant’s Form 8-K Report dated September 30, 1998, as filed on October 20, 1998. (4) Incorporated by reference to Registrant’s Form 10-K for the year ended September 30, 1998, as filed on December 9, 1998. (5) Incorporated by reference to Registrant’s Form 10-K for the year ended September 30, 1999, as filed on December 29 1999. 48 (6) Incorporated by reference to Registration Statement on Form 8-A as filed on September 5, 2001. (7) Incorporated by reference to Registrant’s Form 10-K for the year ended September 30, 2001, as filed on December 20, 2001. (8) Incorporated by reference to Registrant’s Form 10-Q for the quarterly period ended December 31, 2001, as filed on February 14, 2002. (9) Incorporated by reference to Registrant’s Form 10-Q for the quarterly period ended December 31, 2002, as filed on February 14, 2003. 49  Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. SIGNATURES MARINEMAX, INC. /s/ WILLIAM H. MCGILL JR. WILLIAM H. MCGILL JR. Chairman of the Board, President, and Chief Executive Officer Date: December 29, 2003 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacity and on the dates indicated. Signature Capacity Date /s/ WILLIAM H. MCGILL JR. William H. McGill Jr. /s/ MICHAEL H. MCLAMB Michael H. McLamb /s/ ROBERT D. BASHAM Robert D. Basham /s/ GERALD M. BENSTOCK Gerald M. Benstock /s/ JOHN B. FURMAN John B. Furman /s/ ROBERT S. KANT Robert S. Kant /s/ DEAN S. WOODMAN Dean S. Woodman Chairman of the Board, President, and Chief Executive Officer (Principal Executive Officer) December 29, 2003 Executive Vice President, Chief Financial Officer, Secretary, and Director (Principal Accounting and Financial Officer) Director Director Director Director Director 50 December 29, 2003 December 29, 2003 December 29, 2003 December 29, 2003 December 29, 2003 December 29, 2003 MARINEMAX, INC. AND SUBSIDIARIES INDEX TO CONSOLIDATED FINANCIAL STATEMENTS CONSOLIDATED FINANCIAL STATEMENTS Reports of Independent Certified Public Accountants Consolidated Balance Sheets Consolidated Statements of Operations Consolidated Statements of Stockholders’ Equity Consolidated Statements of Cash Flows Notes to Consolidated Financial Statements F-1 Page F-2 F-4 F-5 F-6 F-7 F-8 REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS Board of Directors and Stockholders MarineMax, Inc. We have audited the accompanying consolidated balance sheets of MarineMax, Inc. and subsidiaries as of September 30, 2002 and 2003, and the related consolidated statements of operations, stockholders’ equity, and cash flows for each of the two years in the period ended September 30, 2003. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. The financial statements of MarineMax, Inc. for the year ended September 30, 2001 were audited by other auditors who have ceased operations and whose report dated October 18, 2001, expressed an unqualified opinion on those statements. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of MarineMax, Inc. and subsidiaries at September 30, 2002 and 2003, and the consolidated results of their operations and their cash flows for each of the two years in the period ended September 30, 2003, in conformity with accounting principles generally accepted in the United States. As discussed above, the financial statements of MarineMax, Inc. and subsidiaries for the year ended September 30, 2001, were audited by other auditors who have ceased operations. As described in Note 7, the 2001 financial statements have been revised to include the transitional disclosures required by Statement of Financial Accounting Standards (Statement) No. 142, Goodwill and Other Intangible Assets, which was adopted by the Company as of October 1, 2001. Our audit procedures with respect to the disclosures in Note 7 with respect to 2001 included (a) agreeing the previously reported net income to the previously issued financial statements and the adjustments to reported net income representing amortization expense (including any related tax effects) recognized in that period related to goodwill that is no longer being amortized to the Company’s underlying records obtained from management, and (b) testing the mathematical accuracy of the reconciliation of adjusted net income to reported net income, and the related earnings-per-share amounts. In our opinion, the disclosures for 2001 in Note 7 are appropriate and have been properly applied. However, we were not engaged to audit, review, or apply any procedures to the 2001 financial statements of the Company other than with respect to such disclosures and, accordingly, we do not express an opinion or any other form of assurance on the 2001 financial statements taken as a whole. Tampa, Florida, October 17, 2003 ERNST & YOUNG LLP F-2 REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS THIS REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS IS A COPY OF A REPORT PREVIOUSLY ISSUED BY ARTHUR ANDERSEN LLP AND HAS NOT BEEN REISSUED BY ARTHUR ANDERSEN LLP. To MarineMax, Inc.: We have audited the accompanying consolidated balance sheets of MarineMax, Inc. (a Delaware corporation) and subsidiaries as of September 30, 2000 and 2001, and the related consolidated statements of operations, stockholders’ equity and cash flows for each of the three years in the period ended September 30, 2001. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of MarineMax, Inc. and subsidiaries as of September 30, 2000 and 2001, and the results of their operations and their cash flows for each of the three years in the period ended September 30, 2001, in conformity with accounting principles generally accepted in the United States. Tampa, Florida, October 18, 2001 ARTHUR ANDERSEN LLP F-3 MARINEMAX, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Amounts in thousands except share and per share data) ASSETS CURRENT ASSETS: Cash and cash equivalents Accounts receivable, net Inventories, net Prepaids and other current assets Current deferred tax asset Total current assets Property and equipment, net Goodwill and other intangible assets, net Other long-term assets Total assets September 30, 2002 September 30, 2003 $ 4,323 14,268 164,121 3,613 213 186,538 64,016 49,589 1,003 $ 10,508 21,757 165,382 4,127 1,528 203,302 71,899 53,144 810 $ 301,146 $ 329,155 LIABILITIES AND STOCKHOLDERS’ EQUITY CURRENT LIABILITIES: Accounts payable Customer deposits Accrued expenses Short-term borrowings Current maturities of long-term debt Total current liabilities Other liabilities Deferred tax liabilities Long-term debt, net of current maturities Total liabilities COMMITMENTS AND CONTINGENCIES STOCKHOLDERS’ EQUITY: Preferred stock, $.001 par value, 1,000,000 shares authorized, none issued or outstanding at September 30, 2002 and 2003. Common stock, $.001 par value; 24,000,000 shares authorized, 15,285,704 and 15,401,686 shares issued and outstanding at September 30, 2002 and 2003, respectively Additional paid-in capital Retained earnings Treasury stock, at cost, 2,349 shares held at September 30, 2002 Total stockholders’ equity Total liabilities and stockholders’ equity See accompanying notes. F-4 $ 9,283 9,149 15,772 95,000 1,908 131,112 502 4,485 19,857 155,956 $ 12,402 9,924 14,629 97,000 2,344 136,299 — 6,801 19,999 163,099 — — 15 64,037 81,156 (18 ) 145,190 $ 301,146 15 65,235 100,806 — 166,056 $ 329,155 MARINEMAX, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Amounts in thousands except share and per share data) Revenue Cost of sales Gross profit Selling, general, and administrative expenses Income from operations Interest expense, net Income before income taxes Income tax provision Net income Basic net income per common share Diluted net income per common share Weighted average number of common shares used in computing net income per common share: Basic For the Year Ended September 30, 2001 For the Year Ended September 30, 2002 For the Year Ended September 30, 2003 $ 504,071 383,984 $ 540,716 416,137 $ 607,501 459,729 120,087 92,734 27,353 2,396 24,957 9,608 15,349 1.01 1.01 $ $ $ 124,579 95,567 29,012 1,264 27,748 10,683 17,065 1.12 1.10 $ $ $ 147,772 113,299 34,473 2,471 32,002 12,321 19,681 1.28 1.26 $ $ $ 15,220,322 15,270,827 15,337,873 Diluted 15,238,719 15,540,973 15,671,470 See accompanying notes. F-5 MARINEMAX, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Amounts in thousands except share data) Common Stock Shares Amount Additional Paid-in Capital Retained Earnings Treasury Stock Total Stockholders’ Equity BALANCE, September 30, 2000 15,221,780 $ 15 $ 63,572 $ 48,753 $ — $ 112,340 Net income Purchase of treasury stock Issuance of treasury stock Issuance of common stock — (81,413 ) 25,668 55,343 — — — — — — 5 354 15,349 — (11 ) — — (501 ) 157 — 15,349 (501 ) 151 354 BALANCE, September 30, 2001 15,221,378 15 63,931 64,091 (344 ) 127,693 Net income Issuance of treasury stock Issuance of common stock — 53,396 10,930 — — — — (5 ) 111 17,065 — — — 326 — 17,065 321 111 BALANCE, September 30, 2002 15,285,704 15 64,037 81,156 (18 ) 145,190 Net income Purchase of treasury stock Issuance of treasury stock Issuance of common stock — (15,000 ) 17,349 113,633 — — — — — — — 1,198 19,681 — (31 ) — — (134 ) 152 — 19,681 (134 ) 121 1,198 BALANCE, September 30, 2003 15,401,686 $ 15 $ 65,235 $ 100,806 $ — $ 166,056 See accompanying notes. F-6 MARINEMAX, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Amounts in thousands) For the Year Ended September 30, 2001 For the Year Ended September 30, 2002 For the Year Ended September 30, 2003 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 15,349 $ 17,065 $ 19,681 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization Deferred income tax provision Gain on sale of property and equipment Other (Increase) decrease in — Accounts receivable Inventories Prepaids and other assets Increase (decrease) in — Accounts payable Customer deposits Accrued expenses and other liabilities Short-term borrowings Net cash provided by operating activities CASH FLOWS FROM INVESTING ACTIVITIES: Cash used in business acquisitions, net of cash acquired Purchases of property and equipment Proceeds from sale of property and equipment Net cash used in investing activities CASH FLOWS FROM FINANCING ACTIVITIES: Issuance of common stock Borrowings on long-term debt Repayments on long-term debt Purchase of treasury stock Net cash provided by (used in) financing activities NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS: CASH AND CASH EQUIVALENTS, beginning of period 3,984 1,092 (30 ) 144 6,231 (32,879 ) 1,802 (945 ) (8,821 ) (2,194 ) 25,900 9,633 (5,585 ) (8,940 ) 86 (14,439 ) 361 3,186 (826 ) (501 ) 2,220 (2,586 ) 12,583 3,614 1,570 (70 ) 80 (290 ) 3,531 (2,318 ) (1,681 ) 1,967 (364 ) (18,942 ) 4,162 (15,022 ) (7,516 ) 287 (22,251 ) 352 13,100 (1,037 ) — 12,415 (5,674 ) 9,997 4,440 1,001 (29 ) 275 (7,356 ) 8,309 148 3,025 732 (1,897 ) (1,186 ) 27,143 (10,716 ) (8,988 ) 258 (19,446 ) 1,044 — (2,422 ) (134 ) (1,512 ) 6,185 4,323 CASH AND CASH EQUIVALENTS, end of period $ 9,997 $ 4,323 $ 10,508 SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING ACTIVITIES: Assumption of debt (primarily inventory financing) in conjunction with businesses acquired and the purchase of property and equipment $ — $ 17,005 $ 3,000 See accompanying notes. F-7 MARINEMAX, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Company Background and Basis of Presentation We were incorporated in Delaware in January 1998, and are the largest recreational boat retailer in the United States. We engage primarily in the retail sale, brokerage, and service of new and used boats, motors, trailers, marine parts, and accessories. As of September 30, 2003, we operated through 65 retail locations in 15 states, consisting of Alabama, Arizona, California, Colorado, Delaware, Florida, Georgia, Minnesota, Nevada, New Jersey, North Carolina, Ohio, South Carolina, Texas, and Utah. We are the nation’s largest retailer of Sea Ray, Boston Whaler, Meridian, and Hatteras Yachts, all of which are manufactured by Brunswick Corporation (Brunswick), the world’s largest manufacturer of marine products. Sales of new Brunswick boats (including Hatteras Yachts, which Brunswick acquired in November 2001) accounted for approximately 70%, 65%, and 65% of our revenue in fiscal 2001, 2002, and 2003, respectively. We believe we represented approximately 10% of all Brunswick marine product sales during the same periods. We have entered into dealership agreements with Sea Ray, Boston Whaler, Meridian, Hatteras Yachts, Mercury Marine, and Baja Marine Corporation, all subsidiaries or divisions of Brunswick. These agreements allow us to purchase, stock, sell, and service Brunswick boats and products. These agreements also allow us to use Brunswick’s names, trade symbols, and intellectual properties in our operations. Each of our operating dealership subsidiaries that carry the Sea Ray product line is a party to a multi-year dealer agreement with Brunswick covering Sea Ray products, expiring beginning in 2008, and is the exclusive dealer of Sea Ray boats in its geographic markets. Our subsidiary, MarineMax Motor Yachts, LLC, is a party to a dealer agreement with Hatteras Yachts. The agreement gives us the right to sell Hatteras Yachts throughout the state of Florida (excluding the Florida Panhandle) and the state of Texas, as well as the U.S. distribution rights for Hatteras products over 82 feet. As is typical in the industry, we deal with manufacturers, other than the Sea Ray division of Brunswick, under renewable annual dealer agreements, each of which gives us the right to sell various makes and models of boats within a given geographic region. Any change or termination of these agreements for any reason, including changes in competitive, regulatory, or marketing practices, including rebate or incentive programs, could adversely affect our results of operations. Although there are a limited number of manufacturers of the type of boats and products that we sell, we believe that other suppliers could provide similar boats and products on comparable terms. A change in suppliers, however, could cause a loss of revenue, which would affect operating results adversely. The consolidated financial statements include our accounts and the accounts of our subsidiaries, all of which are wholly owned. All significant intercompany transactions and accounts have been eliminated. 2. Acquisitions We have significantly expanded our operations through the acquisition of 20 recreational boat dealers, two boat brokerage operations, and one full-service yacht repair facility since our formation. As a part of our acquisition strategy, we frequently engage in discussions with various recreational boat dealers regarding their potential acquisition by us. Potential acquisition discussions frequently take place over a long period of time and involve difficult business integration and other issues, including, in some cases, management succession and related matters. As a result of these and other factors, a number of potential acquisitions that from time to time appear likely to occur do not result in binding legal agreements and are not consummated. The following are the acquisitions we have completed during the years ending September 30, 2001, 2002, and 2003. In January 2001, we 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, including acquisition costs. Associated operates a full- service yacht repair facility near F-8 MARINEMAX, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) Ft. Lauderdale, Florida. The acquisition allows us to better serve our Hatteras and yacht customers. The acquisition was accounted for under the purchase method of accounting, which resulted in the recognition of approximately $2.3 million in goodwill. Associated has been included in our consolidated financial statements since the date of acquisition. In April 2002, we acquired the net assets of Gulfwind Marine Partners, Inc. and Affiliates (Gulfwind), including related property and buildings, for approximately $16.0 million in cash, including acquisition costs, and assumed certain liabilities. Gulfwind operates sales and service facilities located in Sarasota, Venice, and Cape Haze, Florida. Gulfwind generated approximately $60.0 million of revenue in its last completed fiscal year prior to the acquisition, and the acquisition expanded our ability to serve consumers in the west Florida boating community. The acquisition was accounted for under the purchase method of accounting, which based on our initial valuation resulted in the recognition of approximately $6.2 million in goodwill, including acquisition costs, and approximately $3.3 million in indefinite-lived intangible assets (primarily dealer agreements). Gulfwind has been included in our consolidated financial statements since the date of acquisition. In July 2002, we purchased inventory and certain equipment from the previous San Diego-based Sea Ray dealer (San Diego) for approximately $100,000 in cash, including acquisition costs, and assumed certain liabilities. The acquisition was accounted for under the purchase method of accounting, which based on our initial valuation resulted in the recognition of approximately $100,000 in goodwill, including acquisition costs. This purchase enhanced our ability to serve consumers in the western United States. San Diego has been included in our consolidated financial statements since the date of acquisition. In June 2003, we acquired substantially all the assets and assumed certain liabilities of Sundance Marine, Inc., a privately held boat dealership with locations in Denver and Grand Junction, Colorado, for approximately $3.3 million in cash, including acquisition costs. The acquisition was accounted for under the purchase method of accounting, which based on our initial valuation resulted in the recognition of approximately $1.7 million in goodwill, including acquisition costs, and approximately $900,000 in indefinite-lived intangible assets (primarily dealer agreements). The acquisition expands our ability to serve consumers in the western United States boating community. The asset purchase agreement contains an earn out provision, which will impact the final purchase price annually, based on the future profits of the region through September 2008, assuming certain conditions and provisions are met. Sundance Marine has been included in our condensed consolidated financial statements since the date of acquisition. In September 2003, we acquired substantially all of the assets and assumed certain liabilities of Killinger Marine Center, Inc. and Killinger Marine Center of Alabama, Inc., a privately held boat dealership with locations in Ft. Walton Beach and Pensacola, Florida and Gulf Shores, Alabama, for approximately $2.3 million in cash, including acquisition costs. The acquisition was accounted for under the purchase method of accounting, which based on our initial valuation resulted in the recognition of approximately $600,000 in goodwill, including acquisition costs, and approximately $300,000 in indefinite-lived intangible assets (primarily dealer agreements). The acquisition expands our ability to serve consumers in the Alabama and Florida panhandle boating communities. Killinger Marine has been included in our condensed consolidated financial statements since the date of acquisition. The unaudited pro forma results of operations are presented for informational purposes only. The unaudited pro forma results of operations include an adjustment to record income taxes as if the significant acquisitions were taxed as C corporations from the beginning of the period presented until their respective acquisition dates. The unaudited pro forma results of operations do not include adjustments to remove certain private company expenses, which will not be incurred in future periods. The unaudited pro forma results of operations may not necessarily reflect our future results of operations or what the results of operations would have been had we owned and operated these businesses as of the beginning of the period presented. F-9 MARINEMAX, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) Our unaudited pro forma consolidated results of operations, assuming all significant fiscal 2002 acquisitions accounted for under the purchase method of accounting had occurred at the beginning of each period presented, are as follows for the fiscal years ended September 30, 2001 and 2002: Revenue Net income Basic earnings per share Diluted earnings per share 2001 2002 (Unaudited) (Amounts in thousands except earnings per share) $ 567,402 $ 16,400 1.08 $ 1.08 $ $ 566,036 $ 17,134 1.12 $ 1.10 $ Pro forma results of operations have not been presented with respect to any of the fiscal 2001 or 2003 acquisitions, as the effects of those acquisitions were not significant on either an individual or an aggregate basis in the related acquisition year. 3. Significant Accounting Policies Statements of Cash Flows For purposes of the consolidated statements of cash flows, we consider all highly liquid investments with an original maturity of three months or less to be cash equivalents. We made interest payments of approximately $2.4 million, $1.3 million, and $2.5 million for the fiscal years ended September 30, 2001, 2002, and 2003, respectively, including interest on debt to finance our real estate holdings and new boat inventory, net of interest assistance provided by manufacturers during fiscal 2001 and 2002, and through the third quarter of fiscal 2003. During the fourth quarter of fiscal 2003, we accounted for interest assistance provided by manufacturers in accordance with EITF 02-16, which most significantly requires us to classify interest assistance received from manufacturers as a reduction of inventory cost and related cost of sales as opposed to netting the assistance against our interest expense incurred with our lenders. We made income tax payments of approximately $8.1 million, $7.5 million, and $9.1 million for the fiscal years ended September 30, 2001, 2002, and 2003, respectively. Inventories New and used boat, motor, and trailer inventories are stated at the lower of cost, determined on a specific-identification basis, or market. Parts and accessories are stated at the lower of cost, determined on the first-in, first-out basis, or market. Based on the agings of the inventories and our consideration of current market trends, we maintain a valuation allowance, which was not material to the consolidated financial statements taken as a whole as of September 30, 2002 or 2003. F-10 MARINEMAX, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) Property and Equipment Property and equipment are recorded at cost, net of accumulated depreciation, and are depreciated over their estimated useful lives using the straight-line method. Useful lives for purposes of computing depreciation are as follows: Buildings and improvements Machinery and equipment Furniture and fixtures Vehicles Years 5-40 5-10 5-10 5 The cost of property and equipment sold or retired and the related accumulated depreciation are removed from the accounts at the time of disposition, and any resulting gain or loss is included in the consolidated statements of operations. Maintenance, repairs and minor replacements are charged to operations as incurred; major replacements and improvements are capitalized and amortized over their useful lives. Goodwill and Other Intangible Assets In June 2001, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 141, “Business Combinations” (SFAS 141), and Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets” (SFAS 142). SFAS 141 requires business combinations initiated after June 30, 2001 to be accounted for using the purchase method of accounting and that identifiable intangible assets acquired in a business combination be recognized as assets and reported separately from goodwill. We have determined that our only identifiable intangible assets are dealer agreements, which are indefinite-lived intangibles. SFAS 142 requires that goodwill and indefinite-lived intangible assets no longer be amortized, but instead tested for impairment at least annually. SFAS 142 was effective for fiscal years beginning after December 15, 2001, with early application permitted in certain circumstances. We elected to early adopt SFAS 142 in fiscal 2002. SFAS 142 required the completion of a transitional impairment test within six months from the date of initial adoption of the statement. In addition to the initial assessment, we assess the impairment of identifiable intangible assets and goodwill at least annually or whenever events or changes in circumstances indicate that the carrying value may not be recoverable. If the carrying amount of an identifiable intangible asset or goodwill exceeds its fair value, we would recognize an impairment loss. We measure any potential impairment based on various business valuation methodologies, including a projected discounted cash flow method. We completed the transitional impairment test, which resulted in no impairment of goodwill or identifiable intangible assets. We have also completed the annual impairment test at June 30, 2003, which resulted in no impairment of goodwill or identifiable intangible assets. To date, we have not recognized any impairment of goodwill or identifiable intangible assets in connection with SFAS 142. We will continue to test goodwill and identifiable intangible assets for impairment at least annually on June 30, or whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Prior to the adoption of SFAS 142, all purchase price in excess of the net tangible assets was recorded as goodwill and amortized over 40 years on a straight-line basis. No identifiable intangible assets were recognized. For the fiscal year ended September 30, 2001, goodwill amortization expense was approximately $1.0 million. There was no amortization expense for the fiscal years ended September 30, 2002 and 2003. Accumulated amortization of goodwill was approximately $2.6 million at September 30, 2002 and 2003. F-11 MARINEMAX, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) Impairment of Long-Lived Assets Statement of Financial Accounting Standards No. 144, “Accounting for Impairment or Disposal of Long-Lived Assets” (SFAS 144), requires that long-lived assets, such as property and equipment and purchased intangibles subject to amortization, be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of the asset is measured by comparison of its carrying amount to undiscounted future net cash flows the asset is expected to generate. If such assets are considered to be impaired, the impairment to be recognized is measured as the amount by which the carrying amount of the asset exceeds its fair market value. Estimates of expected future cash flows represent management’s best estimate based on currently available information and reasonable and supportable assumptions. Any impairment recognized in accordance with SFAS 144 is permanent and may not be restored. To date, we have not recognized any impairment of long-lived assets in connection with SFAS 144. Customer Deposits Customer deposits primarily include amounts received from customers toward the purchase of boats. We recognize these deposits as revenue upon delivery of the related boats to customers. Revenue Recognition We recognize revenue from boat, motor, and trailer sales and parts and service operations at the time the boat, motor, trailer, or part is delivered to or accepted by the customer or service is completed. We recognize commissions earned from a brokerage sale at the time the related brokerage transaction closes. We recognize commissions earned by us for placing notes with financial institutions in connection with customer boat financing when the related boat sale is recognized. We also recognize marketing fees earned on credit life, accident and disability, and hull insurance products sold by third-party insurance companies when the related boat sale is recognized. Pursuant to negotiated agreements with financial and insurance institutions, we are charged back for a portion of these fees should the customer terminate or default on the related finance or insurance contract before it is outstanding for a stipulated minimal period of time. The chargeback allowance, which was not material to the consolidated financial statements taken as a whole as of September 30, 2002 or 2003, is based on our experience with repayments or defaults on the related finance or insurance contracts. We also recognize commissions earned on extended warranty service contracts sold on behalf of third-party insurance companies at the later of customer acceptance of the service contract terms as evidenced by contract execution, or recognition of the related boat sale. We are charged back for a portion of these commissions should the customer terminate or default on the service contract prior to its scheduled maturity. The chargeback allowance, which was not material to the consolidated financial statements taken as a whole as of September 30, 2002 or 2003, is based upon our experience with repayments or defaults on the service contracts. Stock-Based Compensation We account for stock-based compensation plans under Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” (APB 25), under which no compensation cost has been recognized in these financial statements. Statement of Financial Accounting Standards No. 123, “Accounting for Stock-Based Compensation” (SFAS 123), allows companies to continue following the accounting guidance of APB 25, but requires pro forma disclosure of net income and earnings per share for the effects on compensation expense had the fair value method of accounting for stock options been adopted. For SFAS 123 purposes, the fair value of each option grant has been estimated as of the date of grant using the Black-Scholes option-pricing model. In March 2003, we adopted the Financial Accounting Standards Board, Statement of Financial Accounting Standards No. 148, “Accounting for Stock-Based Compensation — Transitions and F-12 MARINEMAX, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) Disclosure” (SFAS 148). Under SFAS 148, the pro forma disclosures of stock-based compensation, as if the fair value method had been used, are required in both annual and interim financial statements. Had compensation cost been determined using the fair value method described in SFAS 123, our net income and net income per share, as reported would have been the following for the fiscal years ended September 30, 2001, 2002, and 2003: Net income as reported Compensation cost, net of related tax effects Pro forma net income Diluted earnings per share: As reported Pro forma 2001 2002 2003 (Amounts in thousands except earnings per share) $ 15,349 $ 17,065 $ 19,681 691 $ 1,103 $ 2,186 $ $ 13,163 $ 16,374 $ 18,578 $ 1.01 $ 1.10 $ 1.26 $ 0.86 $ 1.05 $ 1.21 See Note 12 — “Stock Option and Purchase Plans” for further discussion and assumptions used to calculate the above pro forma information. Advertising and Promotional Costs Advertising and promotional costs are expensed as incurred and are included in selling, general, and administrative expenses in the accompanying consolidated statements of operations. Total advertising and promotional expenses, net of related co-op assistance, approximated $4.9 million, $7.0 million and $8.3 million for the fiscal years ended September 30, 2001, 2002, and 2003, respectively. Concentrations of Credit Risk Financial instruments, which potentially subject us to concentrations of credit risk, consist principally of cash and cash equivalents and accounts receivable. Concentrations of credit risk with respect to cash and cash equivalents are limited primarily to financial institutions. Concentrations of credit risk arising from receivables are limited primarily to manufacturers and financial institutions. New Accounting Pronouncements In November 2002, the Emerging Issues Task Force (EITF) of the Financial Accounting Standards Board (FASB) reached a consensus on Issue No. 02-16, “Accounting by a Customer (Including a Reseller) for Certain Consideration Received from a Vendor” (EITF 02-16). EITF 02-16 establishes the accounting standards for the recognition and measurement of cash consideration paid by a vendor to a reseller. The consensus, which was modified in March 2003, revised certain provisions of its previously reached conclusions and provided additional transitional guidance. EITF 02-16 does not provide for restatement or reclassification of prior year amounts; rather it requires prospective application for new agreements or modifications to existing agreements entered into subsequent to December 31, 2002. EITF 02-16 is effective for interim period financial statements beginning after December 15, 2002, with early adoption permitted. We adopted EITF 02-16 during the quarter ended December 31, 2002. We determined that EITF 02-16 impacts our accounting for certain consideration received from vendors beginning July 1, 2003 with the renewal of and amendments to our dealer agreements with the manufacturers of our products. The adoption of this standard did not have a material impact on our consolidated financial statements. F-13 MARINEMAX, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) In November 2002, the Emerging Issues Task Force (EITF) of the Financial Accounting Standards Board (FASB) reached a consensus on Issue No. 00-21, “Revenue Arrangements With Multiple Deliverables” (EITF 00-21). EITF 00-21 provides guidance for determining the unit (s) of accounting in arrangements that include multiple products, services, and/or rights to use assets. The consensus, which was modified in May 2003 to clarify the scope of EITF 00-21 and its interaction with other authoritative literature, is applicable to arrangements entered into for reporting periods beginning after June 15, 2003. The adoption of this standard did not have any effect on our consolidated financial statements. In November 2002, the Financial Accounting Standards Board (FASB) issued Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others” (FIN 45). FIN 45 elaborates on the existing disclosure requirements for most guarantees, including loan guarantees such as standby letters of credit. It also clarifies that at the time a company issues a guarantee, the company must recognize an initial liability for the fair value, or market value, of the obligations it assumes under that guarantee and must disclose that information in its interim and annual financial statements. FIN 45 is effective on a prospective basis to guarantees issued or modified after December 31, 2002. The requirements of FIN 45 are effective for financial statements of interim or annual periods ending after December 15, 2002. The adoption of this standard did not have a material impact on our consolidated financial statements. In December 2002, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 148, “Accounting for Stock-Based Compensation — Transition and Disclosure” (SFAS 148). SFAS 148 amends SFAS 123, “Accounting for Stock- Based Compensation”, to provide alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. SFAS 148 also amends the disclosure requirements of SFAS 123 to require prominent disclosures in both annual and interim financial statements of the method of accounting for stock-based compensation and the effect of the method used on reported results. SFAS 148’s amendment for the transition and annual disclosure requirements is effective for fiscal years ending after December 15, 2002. SFAS 148’s amendment of the disclosure requirements is effective for interim periods beginning after December 15, 2002. We adopted SFAS 148 in the quarter ended March 31, 2003. In January 2003, the Financial Accounting Standards Board (FASB) issued Interpretation No. 46, “Consolidation of Variable Interest Entities” (FIN 46), which clarifies the application of Accounting Research Bulletin No. 51, “Consolidated Financial Statements.” FIN 46 requires the consolidation of variable interest entities in which an enterprise absorbs a majority of the entity’s expected losses, receives a majority of the entity’s expected residual returns, or both, as a result of ownership, contractual or other financial interests in the entity. Currently, entities are generally consolidated by an enterprise that has a controlling financial interest through ownership of a majority voting interest in the entity. FIN 46 is effective immediately for variable interest entities created after January 31, 2003. For variable interest entities in which an enterprise holds a variable interest that it acquired before February 1, 2003, FIN 46 applies in the first fiscal year or interim period beginning after December 15, 2003. We do not expect the issuance of FIN 46 to have a material impact on our consolidated financial statements. In May 2003, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 150, “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity” (SFAS 150). SFAS 150 establishes standards for classifying and measuring as liabilities certain financial instruments that embody obligations of the issuer and have characteristics of both liabilities and equity. SFAS 150 is effective for all financial instruments created or modified after May 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003. We adopted SFAS 150 in the quarter ended June 30, 2003, which resulted in no impact on our consolidated financial statements. F-14 MARINEMAX, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) Fair Value of Financial Instruments The carrying amount of our financial instruments approximates fair value due either to length of maturity or existence of interest rates that approximate prevailing market rates unless otherwise disclosed in these financial statements. Use of Estimates and Assumptions The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting periods. The estimates made by us in the accompanying consolidated financial statements relate to valuation allowances, valuation of goodwill and intangible assets, and valuation of long-lived assets. Actual results could differ from those estimates. 4. Accounts Receivable Trade receivables consist primarily of receivables from financial institutions, which provide funding for customer boat financing, and amounts due from financial institutions earned from arranging financing with our customers. These receivables are normally collected within 30 days of the sale. Trade receivables also include amounts due from customers on the sale of boats, parts, and service. Amounts due from manufacturers represent receivables for various manufacturer programs and parts and service work performed pursuant to the manufacturers’ warranties. The allowance for uncollectible receivables, which was not material to the consolidated financial statements taken as a whole as of September 30, 2002 or 2003, is based on our consideration of customer payment practices, past transaction history with customers, and economic conditions. We review the allowance for uncollectible receivables when a future event or other change in circumstances results in a change in the estimate of the ultimate collectibility of a specific account. The accounts receivable balances consisted of the following as of September 30, 2002 and 2003: Trade receivables Amounts due from manufacturers Other receivables 5. Inventories Inventories consisted of the following as of September 30, 2002 and 2003: New boats, motors and trailers Used boats, motors and trailers Parts, accessories and other F-15 2002 2003 (Amounts in thousands) $ 9,036 4,590 642 $ 14,453 6,234 1,070 $ 14,268 $ 21,757 2002 2003 (Amounts in thousands) $ 137,924 21,980 4,217 $ 134,200 26,661 4,521 $ 164,121 $ 165,382 MARINEMAX, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) 6. Property and Equipment Property and equipment consisted of the following as of September 30, 2002 and 2003: Land Buildings and improvements Machinery and equipment Furniture and fixtures Vehicles Less — Accumulated depreciation 2002 2003 (Amounts in thousands) $ 19,763 40,123 10,637 7,277 3,373 $ 22,174 43,302 15,083 8,654 3,814 81,173 (17,157 ) 93,027 (21,128 ) $ 64,016 $ 71,899 7. Goodwill and Other Intangible Assets In June 2001, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 141, “Business Combinations” (SFAS 141), and Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets” (SFAS 142). SFAS 141 requires business combinations initiated after June 30, 2001 to be accounted for using the purchase method of accounting and that identifiable intangible assets acquired in a business combination be recognized as assets and reported separately from goodwill. We have determined that our only identifiable intangible assets are dealer agreements, which are indefinite-lived intangibles. SFAS 142 requires that goodwill and indefinite-lived intangible assets no longer be amortized, but instead tested for impairment at least annually. SFAS 142 was effective for fiscal years beginning after December 15, 2001, with early application permitted in certain circumstances. We elected to early adopt SFAS 142 in fiscal 2002. SFAS 142 required the completion of a transitional impairment test within six months from the date of initial adoption of the statement. In addition to the initial assessment, we assess the impairment of identifiable intangible assets and goodwill at least annually or whenever events or changes in circumstances indicate that the carrying value may not be recoverable. If the carrying amount of an identifiable intangible asset or goodwill exceeds its fair value, we would recognize an impairment loss. We measure any potential impairment based on various business valuation methodologies, including a projected discounted cash flow method. We completed the transitional impairment test, which resulted in no impairment of goodwill or identifiable intangible assets. We have also completed the annual impairment test at June 30, 2003, which resulted in no impairment of goodwill or identifiable intangible assets. To date, we have not recognized any impairment of goodwill or identifiable intangible assets in connection with SFAS 142. We will continue to test goodwill and identifiable intangible assets for impairment at least annually on June 30, or whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Prior to the adoption of SFAS 142, all purchase price in excess of the net tangible assets was recorded as goodwill and no identifiable intangible assets were recognized. F-16 MARINEMAX, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) The changes in the carrying amounts of identifiable intangible assets and net goodwill, based on our initial valuations, for the fiscal years ended September 30, 2002 and 2003, were as follows: Balance, September 30, 2001 Additions through acquisitions during the period Balance, September 30, 2002 Additions through acquisitions during the period Balance, September 30, 2003 Dealer Agreement Intangibles Goodwill (Amounts in thousands) $ — 3,276 $ 3,276 1,229 $ 39,992 6,321 $ 46,313 2,326 $ 4,505 $ 48,639 The following presents the reduction of goodwill amortization, net of related tax effects, due to the adoption of SFAS 142 in fiscal 2002 on the results of operations for the fiscal year ended September 30, 2001 (amounts in thousands except share data and earnings per share): Net income as reported Goodwill amortization adjusted for income taxes Adjusted net income Diluted earnings per share: Net income per common share Goodwill amortization Adjusted net income per common share Weighted average common shares outstanding Basic earnings per share: Net income per common share Goodwill amortization Adjusted net income per common share Weighted average common shares outstanding $ 15,349 699 $ 16,048 $ 1.01 .04 $ 1.05 15,238,719 $ 1.01 .04 $ 1.05 15,220,322 8. Short-Term Borrowings In December 2001, we entered into a revolving credit facility with four finance institutions that provides us a line of credit with asset-based borrowing availability of up to $220 million. The facility also allows us $20 million in traditional floorplan borrowings. The facility has a three-year term, with two one-year renewal options. During November 2002, we exercised one of the two one-year renewal options, which the bank approved, extending the maturity date to December 2005. The facility accrues interest at a rate of LIBOR plus 175 to 260 basis points, which is determined in accordance with a performance pricing grid, as defined in the credit facility. Borrowings under the facility are pursuant to a borrowing base formula and are used primarily for working capital and inventory financing. The facility requires us to maintain certain financial covenants, including a tangible net worth ratio, among other restrictions. As of September 30, 2003, we were in compliance with all of the financial covenants. Short-term borrowings as of September 30, 2002 and 2003 were $95.0 million and $97.0 million, respectively. The additional available borrowings under the Facilities at September 30, 2003 were approxi- F-17 MARINEMAX, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) mately $72.9 million. At September 30, 2003, the interest rate on the outstanding borrowings was 2.9%. Generally, our short-term borrowings are collateralized by certain accounts receivable and inventories. As is common in our industry, we receive interest assistance directly from boat manufacturers, including Brunswick. The interest assistance programs vary by manufacturer and generally include periods of free financing or reduced interest rate programs. The interest assistance may be paid directly to us or our lender depending on the arrangements the manufacturer has established. We adopted EITF 02-16 during the quarter ended December 31, 2002, which most significantly requires us to classify interest assistance received from manufacturers as a reduction of inventory cost and related cost of sales as opposed to netting the assistance against our interest expense incurred with our lenders. See Note 3 — “Significant Accounting Policies — New Accounting Pronouncements” for further discussion of the adoption of this standard. 9. Long-Term Debt Long-term debt consisted of the following as of September 30, 2002 and 2003: Various mortgage notes payable to financial institutions, due in monthly installments ranging from $3,500 to $59,700, bearing interest at rates ranging from 3.06% to 7.75%, maturing February 2006 through December 2012, collateralized by machinery and equipment Various mortgage notes payable to financial institutions, due in monthly installments ranging from $1,000 to $2,200, bearing interest at a rates ranging from 7.90% to 9.79%, maturing June 2006 through March 2010, collateralized by certain vehicles and machinery and equipment Less — Current maturities The aggregate maturities of long-term debt were as follows at September 30, 2003: Year Ending September 30, 2004 2005 2006 2007 2008 Thereafter Total F-18 2002 2003 (Amounts in thousands) $ 21,467 $ 22,321 298 22 21,765 (1,908 ) 22,343 (2,344 ) $ 19,857 $ 19,999 Amount $ 2,344 2,453 2,567 2,579 2,509 9,891 $ 22,343 MARINEMAX, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) 10. Income Taxes The components of our provision for income taxes consisted of the following for the fiscal years ended September 30, 2001, 2002, and 2003: Current provision: Federal State Total current provision Deferred provision: Federal State Total deferred provision Total income tax provision 2001 2002 2003 (Amounts in thousands) $ 7,737 779 $ 8,243 $ 10,074 870 1,246 8,516 9,113 11,320 $ 993 $ 1,427 $ 99 143 910 91 1,092 1,570 1,001 $ 9,608 $ 10,683 $ 12,321 Below is a reconciliation of the statutory federal income tax rate to our effective tax rate for the fiscal years ended September 30, 2001, 2002, and 2003: 2001 2002 2003 Federal tax provision State tax provision, net of federal benefit Other Effective tax rate 35.0 % 35.0 % 35.0 % 3.5 % 0.0 % 3.0 % 0.5 % 3.3 % 0.2 % 38.5 % 38.5 % 38.5 % Deferred income taxes reflect the impact of temporary differences between the amount of assets and liabilities recognized for financial reporting purposes and such amounts recognized for income tax purposes. The components of deferred taxes as of September 30, 2002 and 2003, were as follows: Current deferred tax assets (liabilities): Inventories Accrued expenses Other Net current deferred tax assets (liabilities) Long-term deferred tax assets (liabilities): Depreciation and amortization Other Net long-term deferred tax liabilities 2002 2003 (Amounts in thousands) $ (701 ) 632 282 $ (38 ) 1,363 203 $ 213 $ 1,528 $ (4,754 ) 269 $ (7,067 ) 266 $ (4,485 ) $ (6,801 ) As of September 30, 2003, we estimated that it is more likely than not that we will recognize the benefit of our deferred tax assets and, accordingly, no valuation allowance has been recorded. F-19 MARINEMAX, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) 11. Stockholders’ Equity In November 2000, our Board of Directors approved a share repurchase plan allowing our company to repurchase up to 300,000 shares of our common stock. Under the plan, we 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 September 30, 2003, we purchased an aggregate of 96,413 shares of common stock under the plan for an aggregate purchase price of $635,000. As of September 30, 2003, 89,611 and 6,802 of those repurchased shares have been reissued in conjunction with our Employee Stock Purchase Plan and our Incentive Stock Plan. 12. Stock Option and Purchase Plans On April 5, 1998 and April 30, 1998, respectively, the Board of Directors adopted and the stockholders approved the following stock plans: 1998 Incentive Stock Plan (the Incentive Stock Plan) — The Incentive Stock Plan provides for the grant of incentive and non-qualified stock options to acquire our common stock, the grant of common stock, the grant of stock appreciation rights, and the grant of other cash awards to key personnel, directors, consultants, independent contractors, and others providing valuable services to us. A maximum of the lesser of 4,000,000 shares or 20% of the then outstanding shares of our common stock may be issued under the Incentive Stock Plan. The Incentive Stock Plan terminates in April 2008, and options may be granted at any time during the life of the Incentive Stock Plan. The date on which options vest and the exercise prices of options are determined by the Board of Directors or the Plan Administrator. The Incentive Stock Plan also includes an Automatic Grant Program providing for the automatic grant of options (Automatic Options) to our non-employee directors. Employee Stock Purchase Plan (the Stock Purchase Plan) — The Stock Purchase Plan provides for up to 500,000 shares of common stock to be issued, and is available to all our regular employees who have completed at least one year of continuous service. The Stock Purchase Plan provides for implementation of up to 10 annual offerings beginning on the first day of October in the years 1998 through 2007, with each offering terminating on September 30 of the following year. Each annual offering may be divided into two six-month offerings. For each offering, the purchase price per share will be the lower of (i) 85% of the closing price of the common stock on the first day of the offering or (ii) 85% of the closing price of the common stock on the last day of the offering. The purchase price is paid through periodic payroll deductions not to exceed 10% of the participant’s earnings during each offering period. However, no participant may purchase more than $25,000 worth of common stock annually. The fair value of each option grant has been estimated as of the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions for the fiscal years ended September 30, 2001, 2002, and 2003: Risk-free interest rate Dividend yield Expected life Volatility 2001 2002 2003 4.4 % 0.0 % 5.4 % 0.0 % 5.1 % 0.0 % 7.6 years 5.4 years 5.4 years 43.6 % 38.8 % 40.7 % Using these assumptions, the fair value of the stock options granted as of September 30, 2001, 2002, and 2003 was approximately $7.4 million, $7.5 million, and $11.5 million, respectively, which would be amortized as compensation expense over the vesting period of the options. F-20 MARINEMAX, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) A summary of the status of our stock option plans for the fiscal years ended September 30, 2001, 2002, and 2003, was as follows: 2001 2002 2003 Options Weighted-Average Exercise Price Options Weighted-Average Exercise Price Options Weighted-Average Exercise Price Outstanding beginning of year Granted Exercised Forfeited 2,273,539 327,772 — (328,102 ) $ 11.04 $ 8.71 $ — $ 10.98 2,273,209 356,160 (3,851 ) (247,152 ) $ 10.85 $ 8.84 $ 12.50 $ 10.69 2,378,366 395,800 (52,705 ) (394,872 ) $ 10.55 $ 9.96 $ 11.85 $ 11.24 Outstanding end of year 2,273,209 $ 10.85 2,378,366 $ 10.55 2,326,589 $ 10.30 The following table summarizes information about outstanding and exercisable stock options at September 30, 2003: Range of Exercise Prices Options Options Outstanding Weighted-Average Remaining Contractual Life in Years $7.00 – 9.00 $9.01 – 11.00 $11.01 – 13.00 $13.01 – 15.00 930,676 444,010 888,463 63,440 2,326,589 7.9 6.2 5.0 9.3 6.5 Options Exercisable Weighted- Average Exercise Price $ 8.28 $ 9.74 $ 12.43 $ 13.98 Options 78,444 144,201 511,317 3,640 Weighted- Average Exercise Price $ 7.94 $ 9.89 $ 12.42 $ 13.75 $ 10.30 737,602 $ 11.46 Generally, the options granted have a term of 10 years from the grant date and vest 20% per annum beginning at the end of year three. Also outstanding at September 30, 2003, were warrants issued in conjunction with the fiscal 1999 Boating World acquisition. The warrants provide the holder the right to buy 40,000 shares of our common stock at $15.00 per share. 13. Net Income Per Share The following is a reconciliation of the shares used in the denominator for calculating basic and diluted earnings per share for the fiscal years ended September 30, 2001, 2002, and 2003: Weighted average common shares outstanding used in calculating basic earnings per share Effect of dilutive options 2001 2002 2003 15,220,322 18,397 15,270,827 270,146 15,337,873 333,597 Weighted average common and common equivalent shares used in calculating diluted earnings per share 15,238,719 15,540,973 15,671,470 Options to purchase 1,757,048, 1,136,201, and 860,905 shares of common stock were outstanding as of September 30, 2001, 2002, and 2003, respectively, but were not included in the computation of diluted earnings per share because the options’ exercise prices were greater than the average market price of our common stock. F-21 MARINEMAX, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) 14. Commitments and Contingencies Lease Commitments We lease certain land, buildings, machinery, equipment, and vehicles related to our dealerships under non-cancelable third-party operating leases. Rental payments, including month-to-month rentals, were approximately $6.2 million, $6.5 million, and $7.2 million for the fiscal years ended September 30, 2001, 2002, and 2003, respectively. Rental payments to related parties under both cancelable and non-cancelable operating leases approximated $800,000 and $367,000 for the fiscal years ended September 30, 2001 and 2003, respectively. There were no rental payments to related parties for the fiscal year ended September 30, 2002. The rental payments to related parties, under both cancelable and non-cancelable operating leases during fiscal 2003, represent rental payments for buildings to an entity partially owned by an officer of our company. We believe the terms of the transaction are consistent with those that we could obtain from third parties. Future minimum lease payments under non-cancelable operating leases at September 30, 2003, were as follows: Year Ending September 30, 2004 2005 2006 2007 2008 Thereafter Total Amount $ 5,929 4,283 3,667 3,421 2,531 1,142 $ 20,973 Other Commitments and Contingencies We are party to various legal actions arising in the ordinary course of business. The ultimate liability, if any, associated with these matters was not determinable at September 30, 2003. While it is not feasible to determine the outcome of these actions at this time, we do not believe that these matters will have a material adverse effect on our consolidated financial condition, results of operations, or cash flows. We are subject to federal and state environmental regulations, including rules relating to air and water pollution and the storage and disposal of gasoline, oil, other chemicals and waste. We believe that we are in compliance with such regulations. 15. Employee 401(k) Profit Sharing Plans Effective January 1, 2001, we amended the MarineMax, Inc. 401(k) Profit Sharing Plan (the Plan). Employees are eligible to participate in the Plan following their 90-day introductory period starting either April 1 or October 1, provided that they are 21 years of age. Under the Plan, we match 50% of participants’ contributions, subject to a maximum of 5% of each participants’ compensation. We contributed, under the Plan, or pursuant to previous similar plans, amounts ranging from approximately $700,000 to approximately $800,000 for the fiscal years ended September 30, 2001, 2002, and 2003. 16. Preferred Share Purchase Rights During September 2001, we adopted a Stockholders’ Rights Plan (the Rights Plan) that may have the effect of deterring, delaying, or preventing a change in control that might otherwise be in the best interests of F-22 MARINEMAX, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) our stockholders. Under the Rights Plan, a dividend of one Preferred Share Purchase Right was issued for each share of common stock held by the stockholders of record as of the close of business on September 7, 2001. Each right entitles stockholders to purchase, at an exercise price of $50 per share, one-thousandth of a share of a newly created Series A Junior Participating Preferred Stock. In general, subject to certain limited exceptions, the stock purchase rights become exercisable when a person or group acquires 15% or more of our common stock or a tender offer or exchange offer for 15% or more of our common stock is announced or commenced. After any such event, other stockholders may purchase additional shares of our common stock at 50% of the then-current market price. The rights will cause substantial dilution to a person or group that attempts to acquire us on terms not approved by our Board of Directors. The rights should not interfere with any merger or other business combination approved by the Board of Directors. The rights may be redeemed by us at $0.01 per stock purchase right at any time before any person or group acquires 15% or more of the outstanding common stock. The rights expire on August 28, 2011. The Rights Plan adoption and Rights Distribution is a non-taxable event with no impact on our financial results. 17. Subsequent Events Subsequent to our fiscal year end, we were appointed the exclusive dealer for Italy-based Ferretti Group for Ferretti Yachts, Pershing, Riva, Apreamare, Mochi Craft, Custome Line, and CRN in the United States, Canada, and the Bahamas, and we have the right to become the exclusive dealer in Mexico and the Caribbean. We also were appointed the exclusive dealer for Bertram in the United States (excluding the Florida peninsula and certain portions of New England), Canada, and the Bahamas, and we have the right to become the exclusive dealer in Mexico and certain areas of the Caribbean. The three-year dealer agreement, which can be extended subject to its terms, appoints us as the exclusive dealer for the retail sale, display, and servicing of designated Ferretti Group and Bertram products and repair parts currently or in the future sold by Ferretti Group and Bertram in the designated geographic areas. Simultaneous with the exclusive dealer appointments, we acquired our 66th retail location. We acquired substantially all of the assets and assumed certain liabilities of Emarine International, Inc. and Steven Myers, Inc., a privately held boat dealership located in Fort Lauderdale, Florida, for approximately $105,000 in cash. The acquisition was accounted for under the purchase method of accounting, which resulted in the recognition of approximately $300,000 in goodwill, including acquisition costs. The acquisition provides us with an established retail location, which sells Ferretti Group and Bertram products in the Southeast Florida boating community. The asset purchase agreement contains an earn out provision, which will impact the final purchase price annually, based on the future profits of the location, assuming certain conditions and provisions are met. F-23 Exhibit Number 3 .1 3 .2 3 .3 4 .1 4 .2 10 .1(a) 10 .1(b) 10 .1(c) 10 .1(d) 10 .1(e) 10 .1(f) 10 .1(g) 10 .1(h) 10 .1(i) 10 .1(j) 10 .2(a) 10 .2(b) 10 .2(c) 10 .2(d) 10 .2(e) 10 .3(e) 10 .3(f) 10 .3(g) 10 .4 10 .5 10 .6 10 .7 10 .8 10 .9 INDEX TO EXHIBITS Exhibit Restated Certificate of Incorporation of the Registrant, including all amendments to date(7) Amended and Restated Bylaws of the Registrant(7) Certificate of Designation of Series A Junior Participating Preferred Stock(7) Specimen of Common Stock Certificate(7) Rights Agreement, dated August 28, 2001 between Registrant and American Stock Transfer & Trust Company, as Rights Agent(3) Merger Agreement between Registrant and its acquisition subsidiary and Bassett Boat Company of Florida and Richard Bassett(1) Merger Agreement between Registrant and its acquisition subsidiary and 11502 Dumas, Inc. d/b/a Louis DelHomme Marine and its stockholders(1) Merger Agreement between Registrant and its acquisition subsidiary and Gulfwind USA, Inc. and its stockholders(1) Merger Agreement between Registrant and its acquisition subsidiary and Gulfwind South, Inc. and its stockholders(1) Merger Agreement between Registrant and its acquisition subsidiary and Harrison’s Boat Center, Inc. and its stockholders(1) Merger Agreement between Registrant and its acquisition subsidiary and Harrison’s Marine Centers of Arizona, Inc. and its stockholders(1) Merger Agreement between Registrant and its acquisition subsidiary and Stovall Marine, Inc. and its stockholders(1) Agreement of Merger and Plan of Reorganization dated as of the 7th day of July, 1998 by and among MarineMax, Inc., C & N Acquisition Corp. (a subsidiary of MarineMax, Inc.), C & N Marine Corporation and the Stockholders named therein(2) Agreement of Merger and Plan of Reorganization dated as of the 7th day of July, 1998 by and among MarineMax, Inc., Cochrans Acquisition Corp. (a subsidiary of MarineMax, Inc.), Cochrans Marine, Inc. and the Stockholders named therein(2) Asset Purchase Agreement between Registrant and Treasure Cove Marina, Inc.(3) Contribution Agreement between Registrant and Bassett Boat Company and its owner(1) Contribution Agreement between Registrant and Bassett Realty, L.L.C. and its owner(1) Contribution Agreement between Registrant and Gulfwind South Realty, L.L.C. and its owners(1) Contribution Agreement between Registrant and Harrison’s Realty, L.L.C. and its owners(1) Contribution Agreement between Registrant and Harrison’s Realty California, L.L.C. and its owners(1) Employment Agreement between Registrant and David L. Cochran(4) Employment Agreement between Registrant and William H. McGill Jr.(9) Employment Agreement between Registrant and Michael H. McLamb(9) 1998 Incentive Stock Plan, as amended through November 15, 2000(8) 1998 Employee Stock Purchase Plan(1) Settlement Agreement between Brunswick Corporation and Registrant(1) Letter of Intent between Registrant and Stovall(1) Restated Agreement Relating to the Purchase of MarineMax Common Stock between Registrant and Brunswick Corporation, dated as of April 28, 1998(1) Stockholders’ Agreement among Registrant, Brunswick Corporation, and Senior Founders of Registrant, dated April 28, 1998(1) Exhibit Number 10 .10 10 .11 10 .12 10 .17 21 23 .1 23 .2 31 .1 31 .2 32 .1 32 .2 Exhibit Governance Agreement between Registrant and Brunswick Corporation, dated April 28, 1998(1) Agreement Relating to Acquisitions between Registrant and Brunswick Corporation, dated April 28, 1998(1) Form of Sea Ray Sales and Service Agreement(1) Credit and Security Agreement dated as of December 18, 2001 among the Registrant and its subsidiaries, as Borrowers, and Banc of America Specialty Finance, Inc. and various other lenders, as Lenders(8) List of Subsidiaries Consent of Ernst & Young LLP Notice regarding consent of Arthur Andersen LLP Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a), promulgated under the Securities Exchange Act of 1934, as amended. Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a), promulgated under the Securities Exchange Act of 1934, as amended. Certification pursuant to U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (1) Incorporated by reference to Registration Statement on Form S-1 (Registration 333-47873). (2) Incorporated by reference to Registrant’s Current Report on Form 8-K dated July 7, 1998, as filed on July 20, 1998. (3) Incorporated by reference to Registrant’s Form 8-K Report dated September 30, 1998, as filed on October 20, 1998. (4) Incorporated by reference to Registrant’s Form 10-K for the year ended September 30, 1998, as filed on December 9, 1998. (5) Incorporated by reference to Registrant’s Form 10-K for the year ended September 30, 1999, as filed on December 29 1999. (6) Incorporated by reference to Registration Statement on Form 8-A as filed on September 5, 2001. (7) Incorporated by reference to Registrant’s Form 10-K for the year ended September 30, 2001, as filed on December 20, 2001. (8) Incorporated by reference to Registrant’s Form 10-Q for the quarterly period ended December 31, 2001, as filed on February 14, 2002. (9) Incorporated by reference to Registrant’s Form 10-Q for the quarterly period ended December 31, 2002, as filed on February 14, 2003. LIST OF SUBSIDIARIES OF MARINEMAX, INC. (as of December 23, 2003) Exhibit 21 State Of Incorporation Or Organization Nevada Florida Delaware Delaware Delaware Nevada Delaware Delaware Delaware Delaware Delaware Delaware Delaware Delaware Delaware Delaware Delaware Arizona California Delaware Georgia Delaware Minnesota Delaware North Carolina Delaware Delaware Delaware Delaware Delaware Delaware Name Of Subsidiary 11502 Dumas, Inc. Bassett Boat Company Bassett Realty, L.L.C C & N Marine Realty, L.L.C Delaware Avlease, LLC Dumas GP, Inc. Dumas GP, L.L.C. (1) Gulfwind South Realty, L.L.C Harrison’s Realty California, L.L.C Harrison’s Realty, L.L.C Marina Drive Realty I, L.L.C Marina Drive Realty II, L.L.C MarineMax International, LLC (3) MarineMax MidAtlantic, LP (2) MarineMax Motor Yachts, LLC (3) MarineMax New Jersey GP, Inc. (4) MarineMax NJ Partners, Inc. (4) MarineMax of Arizona, Inc. MarineMax of California, Inc. MarineMax of Central Florida, LLC (3) MarineMax of Georgia, Inc. MarineMax of Las Vegas, Inc. MarineMax of Minnesota, Inc. MarineMax of New Jersey Holdings, Inc. MarineMax of North Carolina, Inc. MarineMax of Ohio, Inc. MarineMax of Sarasota, LLC (3) MarineMax of Southeast Florida, LLC (3) MarineMax of Southwest Florida, LLC (3) MarineMax of Utah, Inc. MarineMax Services, Inc. (5) Name Of Subsidiary MarineMax TX, L.P. (6) MarineMax U.S.A., Inc. MMX GP, LLC (7) MMX Holdings, LLC (8) MMX Interests, LLC (9) MMX Member, Inc. (10) MMX Partners, Inc. MMX Ventures, LP (11) Newcoast Financial Services, Inc. Walker Marina Realty, L.L.C State Of Incorporation Or Organization Texas Nevada Delaware Delaware Delaware Delaware Delaware Delaware Delaware Delaware (1) Wholly owned subsidiary of 11502 Dumas, Inc. (2) 99% owned by MarineMax NJ Partners, Inc. as limited partner and 1% owned by MarineMax New Jersey GP, Inc., as general partner. (3) Wholly owned subsidiary of MMX Holdings, LLC. (4) Wholly owned subsidiary of MarineMax of New Jersey Holdings, Inc. (5) Wholly owned subsidiary of MMX Partners, Inc. (6) 99% owned by 11502 Dumas, Inc. as limited partner and 1% owned by Dumas GP, L.L.C. as general partner. (7) 99% owned by MMX Partners, Inc. and 1% owned by MMX Member, Inc. (8) 99% owned by MMX Interests, LLC and 1% owned by MMX GP, LLC. (9) 99% owned by MMX Ventures, LP and 1% owned by MMX GP, LLC. (10) Wholly owned subsidiary of MMX Partners, Inc. (11) 99% owned by MMX Partners, Inc. as limited partner and 1% owned by MMX GP, LLC as general partner. CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS We consent to the incorporation by reference in the Registration Statements (Form S-8 No. 333-83332) pertaining to the 1998 Incentive Stock Plan of MarineMax, Inc. and (Form S-8 No. 333-63307) pertaining to the 1998 Incentive Stock Plan and the 1998 Employee Stock Purchase Plan of MarineMax, Inc. of our report dated October 17, 2003, with respect to the consolidated financial statements of MarineMax, Inc. included in the Annual Report (Form 10-K) for the year ended September 30, 2003. /s/ Ernst & Young LLP Exhibit 23.1 Tampa, Florida December 29, 2003 Exhibit 23.2 NOTICE REGARDING CONSENT OF ARTHUR ANDERSEN LLP Section 11(a) of the Securities Act of 1933 provides that if any part of a registration statement, when such part became effective, contained an untrue statement of a material fact, or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading, any person acquiring a security pursuant to such registration statement (unless it is proved that at the time of such acquisition such person knew of such untruth or omission) may sue, among others, every accountant who has consented to be named as having prepared or certified any part of the registration statement, with respect to the statement in such registration statement, report, or valuation, which purports to have been prepared or certified by the accountant. On June 3, 2002, MarineMax, Inc. (the “Company”) dismissed Arthur Andersen LLP (“Andersen”) as its independent auditor and appointed Ernst & Young LLP to replace Andersen. Prior to the date of filing this Form 10-K, Andersen ceased operations. As a result, after reasonable efforts, the Company has been unable to obtain Andersen’s written consent to the incorporation by reference of Andersen’s audit report dated October 18, 2001 appearing in the Company’s Form 10-K for the fiscal year ended September 30, 2001 into our Registration Statements (Reg. Nos. 333-63307, 333-69911, 333-85835, 333-30094, and 333-83332). Such audit report is included in this Form 10-K. Under these circumstances, Rule 437a under the Securities Act of 1933 permits the Company to file this Form 10-K, which is incorporated by reference into the above listed registration statements, without a written consent from Andersen. However, as a result, Andersen will not have any liability under Section 11(a) of the Securities Act for any untrue statements of a material fact contained in the financial statements audited by Andersen or any omissions of a material fact required to be stated therein. Accordingly, you would be unable to assert a claim against Andersen under Section 11(a) of the Securities Act. The Company believes, however, that other persons who are liable under Section 11(a) of the Securities Act, including the officers and directors of the Company, may still rely on Andersen’s audit reports as being made by an expert under the due diligence defense provision of Section 11(b) of the Securities Act. The law in this area remains unsettled, however, and no assurance can be given that a court will find such reliance to be justified. Exhibit 31.1 I, William H. McGill Jr., certify that: 1. I have reviewed this annual report on Form 10-K of MarineMax, Inc.; CERTIFICATION 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and c) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and 5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. Date: December 29, 2003 /s/ WILLIAM H. MCGILL, JR. William H. McGill Jr. Chief Executive Officer Exhibit 31.2 I, Michael H. McLamb, certify that: 1. I have reviewed this report on Form 10-K of MarineMax, Inc.; CERTIFICATION 2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and c) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and 5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. Date: December 29, 2003 /s/ MICHAEL H. MCLAMB Michael H. McLamb Chief Financial Officer CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 Exhibit 32.1 In connection with the Annual Report on Form 10-K of MarineMax, Inc. (the “Company”) for the fiscal year ended September 30, 2003, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, William H. McGill Jr., Chief Executive Officer of the Company, certify, to my best knowledge and belief, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(a) or 78o(d)); and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. December 29, 2003 /s/ WILLIAM H. MCGILL JR. William H. McGill Jr. Chief Executive Officer CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 Exhibit 32.2 In connection with the Annual Report on Form 10-K of MarineMax, Inc. (the “Company”) for the fiscal year ended September 30, 2003, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Michael H. McLamb, Chief Financial Officer of the Company, certify, to my best knowledge and belief, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(a) or 78o(d)); and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ MICHAEL H. MCLAMB Michael H. McLamb Chief Financial Officer December 29, 2003 End of Filing © 2005 | EDGAR Online, Inc. 

Continue reading text version or see original annual report in PDF format above