Table of Contents
Table of Contents
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For fiscal year ended September 30, 2004
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 19 North
Suite 300
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 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 No (cid:3)
The aggregate market value of common stock held by nonaffiliates of the registrant (10,122,308 shares) based on the closing price of the
registrant’s common stock as reported on the New York Stock Exchange on March 31, 2004, which was the last business day of the registrant’s
most recently completed second fiscal quarter, was $268,949,724. 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 November 30, 2004, there were outstanding 15,811,933 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 2005 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, 2004
TABLE OF CONTENTS
PART I
ITEM 1.
ITEM 2.
ITEM 3.
ITEM 4.
BUSINESS
PROPERTIES
LEGAL PROCEEDINGS
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
PART II
ITEM 5.
ITEM 6.
ITEM 7.
ITEM 7A.
ITEM 8.
ITEM 9.
MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
REPURCHASES OF EQUITY SECURITIES
SELECTED FINANCIAL DATA
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION, AND RESULTS OF
OPERATIONS
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
ITEM 9A.
ITEM 9B.
CONTROLS AND PROCEDURES
OTHER INFORMATION
PART III
ITEM 10.
ITEM 11.
ITEM 12.
DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
EXECUTIVE COMPENSATION
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
ITEM 13.
ITEM 14.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
PRINCIPAL ACCOUNTANT FEES AND SERVICES
PART IV
EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
ITEM 15.
SIGNATURES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
EX-10.3(g)
EX-21
EX-23
EX-31.1
EX-31.2
EX-32.1
EX-32.2
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F-1
Statements Regarding Forward-Looking Statements
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.”
Table of Contents
Item 1. Business
Our Company
PART I
Introduction
We are the largest recreational boat dealer in the United States. Through 67 retail locations in Alabama, Arizona, California, Colorado,
Delaware, Florida, Georgia, Maryland, 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, yachts, and mega-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; offer boat and
yacht brokerage services; and, where available, offer slip and storage accommodations.
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 60% of our revenue in fiscal 2004.
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 34% of its new Sea Ray boat sales, during our 2004 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.
We are the exclusive dealer for Italy-based Ferretti Group for Ferretti Yachts, 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. We also are 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 commenced operations as a result of the March 1, 1998 acquisition of five previously independent recreational boat dealers. Since that time,
we have acquired 18 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 2004 was approximately $89,000 compared with the industry average selling price of approximately $30,000 based on
industry data published by the National Marine Manufacturers Association. Our stores, which operated at least 12 months, averaged approximately
$12.8 million in annual sales in fiscal 2004. 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, 2004, we had revenue of approximately $762.0 million, operating income of approximately $48.9 million, and net
income of approximately $26.3 million. Our same-store sales increased approximately 21% in fiscal 2004 and have averaged approximately 8% for
the last five years, including a decline of 9% in fiscal 2001.
We adopt the best practices developed by us and 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, premium product offerings, 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 $30.0 billion in retail sales in calendar 2003, 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 and used boats, engines, trailers, and accessories accounted for approximately $23.5 billion of these sales in 2003
based on industry
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data from the National Marine Manufacturers Association. 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 customer service, and premier facilities;
• implementing the “best practices” developed by us and 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;
• 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;
• opening additional retail facilities in our existing and new territories;
• 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, and we completed our initial public offering in June 1998. Since the initial acquisitions in March 1998,
we have acquired 18 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.
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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 businesses 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.
Imperial Marine
Port Jacksonville Marine
Southeast Florida
March 1998
March 1998 Dallas and Houston, Texas
March 1998 West Central, Florida
March 1998
Southwest Florida
March 1998 Northern California and Arizona
April 1998 Georgia
July 1998 Minnesota
July 1998 North and South Carolina
September 1998
September 1998 Nevada
September 1998 Northern Ohio
East Central Florida
October 1998
February 1999 Dallas, Texas
Southeast Florida
March 1999
Southern New Jersey
April 1999 Central New Jersey
August 1999 Northeast Florida
December 1999 Utah
April 2000 Northern New Jersey
January 2001
Southeast Florida
April 2002 West Florida
July 2002
June 2003 Colorado
Southern California
September 2003 Northwest Florida and Alabama
October 2003
Southeast Florida
June 2004 Baltimore, Maryland
June 2004 Northeast 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 nine 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.
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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
Baja
MB Sports
Meridian Yachts
Tracker Marine
Grady White
Hatteras Yachts
Boston Whaler
Century
Ferretti Yachts, Pershing, Riva, Apreamare, Mochi
Craft, Custom Line, and CRN
Bertram
Princecraft
1997
1999
1999
2000
2001
2001
2002
2002
2002
2002
2004
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
Houston, Texas and Las Vegas, Nevada
Northern California, Arizona, Nevada, Utah, and Texas
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.
California, Delaware, Georgia, Maryland, Minnesota, New Jersey, Ohio, and
Texas
As we add a brand, we believe we are offering a migration for our existing customer base or filling a gap in our product offerings. As a result,
we do not believe that new product offerings will compete with or cannibalize the business generated from our other prominent brands.
We plan to continue to expand our business through acquisitions in new geographical territories, new store openings in existing territories, and
new product lines. In addition, we plan to continue to expand other services, including conducting used boat sales; offering yacht and boat
brokerage services; offering our customers the ability to finance new or used boats; offering extended service contracts; arranging insurance
coverage, including boat property, credit-life, accident, disability, and casualty coverage; selling related marine products, including engines, trailers,
parts, and accessories; providing maintenance and repair services at our retail locations and at stand-alone service facilities, including our full-
service yacht repair facility in Southeast Florida; and expanding our ability to provide slip and storage accommodations.
We maintain our executive offices at 18167 U.S. Highway 19 North, Suite 300, 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 18 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 the charters of our Audit,
Compensation, and Nominating/Corporate Governance Committees; our Corporate
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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 67 retail locations in Alabama, Arizona, California, Colorado,
Delaware, Florida, Georgia, Maryland, 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; offer boat and yacht
brokerage services; and, where available, slip and storage accommodations.
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, accounted for
approximately 60% of our revenue in fiscal 2004. 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 2004 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. We have
distribution rights for Meridian Yachts in most of our geographic markets, excluding Arizona, California, Colorado, Nevada, and Utah. We are the
exclusive dealer for Italy-based Ferretti Group for Ferretti Yachts, 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. We also are 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 offerings 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 $30.0 billion in retail sales in calendar 2003, 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. Retail sales of new boats, engines, trailers, and accessories accounted for approximately $23.5 billion of
such sales in 2003. Retail recreational boating sales were $17.9 billion in the late 1980s, but declined to a low of $10.3 billion in 1992 based on
industry data published by the National Marine Manufacturers Association. We believe this decline was 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 and 2003, 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 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.
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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.
Emphasizing Best Practices . We emphasize the “best practices” developed by us and our acquired dealers as appropriate throughout our
locations. As an example, we follow a 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 developed by us and 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 sources; 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.
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
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accessories, service and boat storage 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 our considerable industry experience and relationships, 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.”
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
through 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 nine retail locations, excluding those opened on a temporary basis for a
specific purpose.
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 with 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.
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 conduct 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
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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 boats company-wide, locates boats needed to satisfy particular customer requests,
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; provide boat brokerage services; and offer slip and storage
accommodations.
New Boat Sales
We primarily sell recreational boats, including pleasure boats (such as sport boats, sport cruisers, sport yachts, yachts, and mega-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 2004, approximately 60% of our revenue was
derived from the sale of new boats manufactured by Brunswick. We believe that we represented 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 2004, new boat sales accounted for
approximately 68.2% 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 2004 average new boat sales price of approximately $89,000 compared with an estimated industry average selling price of approximately
$30,000 based on industry data published by the National Marine Manufacturers Association. Given our locations in some of the more affluent,
offshore boating areas in the United States and emphasis on high levels of customer service, we sell a relatively higher percentage of large
recreational boats, such as mega-yachts, 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.
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The following table is illustrative of the range and approximate manufacturers suggested retail price range of new boats that we offer, but is not
all inclusive:
Product Line and Trade Name
Overall Length
Manufacturer Suggested
Retail Price Range
Mega-Yachts
Custom Line
CRN
Motor Yachts
Hatteras Motor Yachts
Ferretti
Convertibles
Hatteras Convertibles
Bertram
Pleasure Boats
Sea Ray
Meridian
Fishing Boats
Boston Whaler
Specialty Boats & Yachts
Pershing
Riva
Apreamare
Mochi Craft
94’ to 128’
150’+
64’ to 100’
46’ to 88’
50’ to 90’
39’ to 67’
17’ to 68’
35’ to 59’
11’ to 32’
50’ to 115’
33’ to 115’
25’ to 53’
51’ to 72’
$ 9,000,000 to $15,000,000+
17,000,000+
2,300,000 to 10,000,000+
1,300,000 to 7,000,000+
1,000,000 to 7,000,000+
570,000 to 4,000,000+
20,000 to 4,000,000
250,000 to 1,400,000
8,000 to 210,000
1,600,000 to 13,000,000+
570,000 to 7,000,000+
350,000 to 2,000,000+
1,500,000 to 3,000,000+
Mega-Yachts . Custom Line and CRN are considered two of the world’s premier mega-yacht product lines and represents our most expensive
product offerings. All Custom Line and CRN models include state-of-the-art designs with live-aboard luxuries. Both the Custom Line series,
ranging from 94 feet to 128 feet, and the CRN series, ranging from over 150 feet, offer multiple decks with an enormous amount of living space,
luxurious salon/galley arrangements, and multiple VIP and guest staterooms.
Motor Yachts . Hatteras Yachts and Ferretti Group are two of the world’s premier yacht builders. The motor yacht product lines typically
include state-of-the-art designs with live-aboard luxuries. The Hatteras series 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. Ferretti is known for its European styling, speed, performance, and offers luxurious salon/galley arrangements and multiple
staterooms with private heads.
Convertibles . Hatteras Yachts and Bertram are two of the world’s premier convertible yacht builders and offer state-of-the-art designs with
live-aboard luxuries. Convertibles are primarily fishing vessels, which are well equipped to meet the needs of even the most serious tournament-
class competitor. The Hatteras series features 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. The Bertram series feature interiors that offer spacious living room and
salon/galley arrangements, multiple staterooms with private heads, and a cockpit that includes storage for big catches, ample prep area, open sink
area, live-bait storage, and stand-up rod storage.
Pleasure Boats . Sea Ray and Meridian pleasure boats target both the luxury and the family recreational boating markets and come in a variety
of configurations to suit each customer’s particular recreational boating style. 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. Sea
Ray sport yachts and yachts are available in cabin, bridge cockpit, and express cruiser models. Sea Ray sport boat and sport cruiser
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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. Meridian sport yachts and yachts are known for their solid performance and thoughtful use of space with
360-degree views and spacious salon, galley, and stateroom accommodations. Meridian sport yachts and yachts are available in sedan, motoryacht,
and pilothouse models. All Sea Ray and Meridian 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 and Meridian pleasure boats feature Mercury or
MerCruiser engines.
Fishing Boats . The fishing boats we offer, such as Boston Whaler, 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.
Specialty Boats . Pershing, Riva, Apreamare, and Mochi Craft specialty boats and yachts are known for exceptional quality, design, and
innovation and are considered premium products in their respective segments. The Pershing series is considered a perfect blend of high
performance, luxury, and the comfort of perfectly blended interior space. The Riva series is considered by those who want the best, expect the best,
and live the best as the luxury boat of choice. The Apreamare series is considered one of the most exciting and most desirable express cruisers on
the market with an unparalleled European design. The Mochi Craft series is an old-style revolution that rediscovers the natural lines of the 1950s.
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 2004, used boat sales accounted for approximately 19.0% of our revenue, and approximately 79% 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 continue to increase our used boat business as a result of the increased availability of quality
used boats generated from 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 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 “Premier Service Dealers.”
This designation is generally awarded based on meeting certain standards and qualifications.
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We also sell related marine parts and accessories, including oils, lubricants, steering and control systems, corrosion control products, engine
care, maintenance, and service products (primarily Mercury Marine’s branded products); high-performance accessories (such as propellers) and
instruments; and a complete line of boating accessories, including life jackets, inflatables, and water sports equipment. We also offer novelty items,
such as shirts, caps, and license plates bearing the manufacturer’s or dealer’s logo.
The sale of marine engines, related marine equipment, and boating accessories accounted for approximately 3.0% of our fiscal 2004 revenue.
Maintenance, Repair, and Storage 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.
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 manufacturer suggested prices and market conditions for different parts.
At many of our locations, we offer boat storage services, including in-water slip storage and inside and outside land storage. These storage
services are offered at competitive market rates and include in-season and winter storage.
Maintenance, repair, and storage services accounted for approximately 4.9% of our revenue during fiscal 2004. 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,
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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 third-party 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 to the customer 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 2004, fee income generated from F&I products accounted for approximately 3.4% of our revenue. We believe that our customers’
ability to obtain competitive financing quickly and easily at our 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 2004, brokerage services accounted for approximately 1.3% 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 are
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.
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Retail Locations
We sell our recreational boats and other marine products and offer our related boat services through 67 retail locations in Alabama, Arizona,
California, Colorado, Delaware, Florida, Georgia, Maryland, 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; Clear Lake, Lake Canroe, and Lake Lewisville in Texas; and Chesapeake Bay in Maryland. 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 customers 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.
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.
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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-hassle 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.
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, Princecraft, and Meridian. We also purchase new boats and other marine related products from
other manufacturers, including Bertram, Century, Ferretti, Grady White, MB Sports, Sea Pro, and Tracker Marine. In fiscal 2004, sales of new
Brunswick boats accounted for approximately 60% of our revenue. No other manufacturer accounted for more than 10% of our
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revenue in fiscal 2004. We believe our Sea Ray boat purchases represented approximately 34% of new Sea Ray boat sales and in excess of 10% of
all Brunswick marine product sales during fiscal 2004.
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.
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.
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 anticipated 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.
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Our revolving credit facility currently provides us with a line of credit with asset-based borrowing availability of up to $260 million for working
capital and inventory financing and an additional $20 million for traditional floorplan borrowings, all of which are determined pursuant to a
borrowing base formula. The credit facility requires us to satisfy certain covenants, including maintaining a tangible net worth ratio. The credit
facility currently matures in December 2006, with two one-year renewal options remaining. The credit facility was last amended in January 2004 to
extend the terms, increase the borrowing availability, and add a lender.
As of September 30, 2004, we owed an aggregate of approximately $153.0 million under our revolving credit facility. As of September 30,
2004, our revolving credit facility provided us with an additional available borrowing capacity of approximately $65.9 million. Advances on the
facility accrued interest at a rate of 3.4% as of September 30, 2004. We were in compliance with all covenants in the facility as of September 30,
2004.
Management Information System
We believe that our management information system, which currently is being utilized by each of our operating subsidiaries and was developed
over a number of years through cooperative efforts with the 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, 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. In October 2002,
Brunswick acquired the vendor of our management information system.
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,
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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;
• 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;
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• 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, 2004, we had 1,500 employees, 1,434 of whom were in store-level operations and 66 of whom were in corporate
administration and management. 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,” “MarineMax Delivering the Boating Dream,” and “Newcoast Financial
Services.” We have registered the name “MarineMax” in the European Community. We have trademark applications pending with the U.S. Patent
and Trademark Office for “Value Price” 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, with seasonality varying in different geographic markets.
Over the three-year period ended September 30, 2004, the average revenue for the quarters ended December 31, March 31, June 30, and
September 30 represented approximately 19%, 26%, 30%, and 25%, respectively, of our average annual revenues. With the exception of Florida,
we generally realize significantly lower sales and higher levels of inventories and related short-term borrowings, in the quarterly periods ending
December 31 and March 31. The onset of the public boat and recreation shows in January stimulates boat sales and allows us to reduce our
inventory levels and related short-term borrowings throughout the remainder of the fiscal year.
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, as was
the case during fiscal 2004 when Florida and other markets were affected by four separate hurricanes. Although our geographic diversity is likely to
reduce the overall impact to us of adverse weather
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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, 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.
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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, two of our properties are within the boundaries of a
“Superfund” site, although neither property has been nor is 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. Excessive insurance claims also
could result in increased insurance premiums.
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 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.
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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 M. Aisquith
Age
61
39
36
34
44
48
37
Position
Chairman of the Board, President, Chief Executive Officer, and
Director
Executive Vice President, Chief Financial Officer, Secretary, and
Director
Vice President of Finance and Treasurer
Vice President, Chief Accounting Officer, and Controller
Vice President
Vice President
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 and as Corporate Controller
of our company since June 1, 1999. Mr. Ezzell served as 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.
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 M. 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, Texas, and California operations since August 1, 2000, March 1, 2002, March 15, 2003, and March 1, 2004, 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
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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, and Ferretti Group’s Ferretti Yachts, Riva, Pershing, and
Bertram product lines.
Approximately 60% of our revenue in fiscal 2004 resulted from sales of new boats manufactured by Brunswick, including approximately 45%
from Brunswick’s Sea Ray division and approximately 9% from Brunswick’s Hatteras Yacht division. The remainder of our fiscal 2004 revenue
from new boat sales resulted from sales of products from a limited number of other manufacturers, none of which accounted for more than 10% 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, Meridian, and Hatteras, would have a
substantial adverse impact on our business. Additionally, given the revenue generated by each yacht and mega-yacht sale, any adverse change in the
financial condition, production efficiency, product development, management, marketplace acceptance, and marketing capabilities of Ferretti Group
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.
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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 and 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 18 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.
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
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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 or increased asking prices by 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. Acquisitions also may become more difficult in the future as we acquire more of the most attractive dealers. 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.
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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 certain manufacturers, including Brunswick, 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.
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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 $260 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.
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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 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, 2004, the average revenue for the quarterly periods ended December 31, March 31, June 30,
and September 30 represented 19%, 26%, 30%, and 25%, respectively, of our average annual revenues. With the exception of Florida, we generally
realize significantly lower sales in the quarterly periods ending December 31 and March 31. The onset of the public boat and recreation shows in
January stimulates boat sales and allows us to reduce our inventory levels and related short-term borrowings throughout the remainder of the fiscal
year. 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 as was the case during fiscal 2004 when Florida and
other markets were affected by four separate hurricanes. 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 and involves 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.
Due to various matters, including environmental concerns, permitting and zoning requirements and competition for waterfront real estate, some
markets in the U.S. have experienced an increased waiting list for marina and storage availability. In general, the markets in which we currently
operate are not experiencing any unusual difficulties. However, marine retail activity could be adversely effected in markets that do not have
sufficient marine and storage availability to satisfy demand.
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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 2004, F&I products accounted for approximately 4% of our revenue.
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. Our expanding
operations may require us to add additional executive personnel in the future. 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.
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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.
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, two of our properties are within the boundaries of a
“Superfund” site, although neither property has 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.
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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 most significantly acquired specifically identifiable intangible assets are dealer
agreements, which are indefinite-lived intangibles.
Goodwill and identifiable intangible assets are accounted for in accordance with 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 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 and whenever events or changes in
circumstances indicate that the carrying value may not be recoverable. 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 as of the beginning of fiscal 2002.
SFAS 142 required the completion of a transitional impairment test within six months from the date of initial adoption. We completed the
transitional impairment test, which resulted in no impairment of goodwill or identifiable intangible assets as of the date of adoption. SFAS 142 also
requires that we assess the impairment of identifiable intangible assets and goodwill at least annually and 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 annual impairment test during the fourth quarter of fiscal 2004, based on
financial information as of the third quarter of fiscal 2004, 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. Prior to the adoption of SFAS 142, all purchase price in excess of
the tangible assets acquired was recorded as goodwill and no identifiable intangible assets were recognized. Identifiable intangible assets and net
goodwill amount to $5.5 million and $50.3 million, respectively, as of September 30, 2004.
Impairment of 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 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.
A substantial number of shares of our common stock are subject to a stockholders agreement.
We, Brunswick, William H. McGill Jr., our Chairman of the Board, President, and Chief Executive Officer, and certain retired officers and
directors, 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 for our board of directors in the election of directors as
determined by our board 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.
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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;
• 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, 2004, there were outstanding 15,711,012 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, 2004, we had issued options to purchase approximately 2,451,129 shares of common stock under our 1998 incentive stock
plan and we issued 335,760 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
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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.
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
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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.
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, 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 43 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 most 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 24 other retail locations.
The following table reflects the status, approximate size, and facilities of our various retail locations as of the date of this report.
Location
Alabama
Owned or Leased
Square
Footage(l)
Facilities at Property
Since(2)
Waterfront
Operated
Gulf Shores
Third-party lease
4,000
Retail and service
1998
—
Arizona
Tempe
California
Oakland
Company owned
34,000
Retail and service
1992
—
Third-party lease
17,700
Retail and service; 20
wetslips
1985
Alameda Estuary (San
Francisco Bay)
Santa Rosa
Third-party lease
8,100
Retail and service
1990
—
Sacramento
Company owned
24,800
Retail and service
1995
—
Sacramento (River Bend)
(floating facility)
Third-party lease
500
Retail and service; 20
wet slips
1998
Sacramento River
San Diego
San Diego
Tower Park (near San
Francisco)
Third-party lease
9,500
Retail and service
2004
—
Third-party lease
750
Retail and service; 12
wet slips
1997
Mission Bay
Third-party lease
400
Retail only
1999
Sacramento River
33
Owned or Leased
Square
Footage(l)
Facilities at Property
Since(2)
Waterfront
Operated
Grand Junction
Third-party lease
9,300
Third-party lease
16,400
Retail, service, and
storage
Retail, service, and
storage
2003
—
1986
—
Third-party lease
5,000
Retail and service; 15
wet slips
1995
Between Delaware Bay and
Chesapeake Bay
Table of Contents
Location
Colorado
Denver
Delaware
Bear
Florida
Cape Haze
Clearwater
Company owned
42,000
Company owned
18,000
Retail, service, and
storage; 8 wet slips
Retail and service; 16
wet slips
1972
Intracoastal Waterway
1973
Tampa Bay
Cocoa
Company owned
15,000
Retail and service
1968
—
Coconut Grove
Third-party lease
2,000
Retail only; 24 wet slips
2002
Biscayne Bay
Dania
Dania
Company owned
32,000
Repair and service; 16
wet slips
1991
Port Everglades
Third-party lease
3,500
Retail only
2001
Port Everglades
Ft Lauderdale
Third-party lease
2,400
Retail and service; 12
wet slips
1977
Intracoastal Waterway
Ft Lauderdale
Third-party lease
3,800
Retail only; 4 wet slips
2002
Seminole River
Fort Myers
Third-party lease
8,000
Retail and service; 18
wet slips
1983
Caloosahatchee River
Ft Walton Beach
Third-party lease
4,800
Retail only
Key Largo
Third-party lease
750
Retail only
2003
—
2002
—
Jacksonville
Third-party lease
1,000
Retail only; 7 wet slips
1995
St Johns River
Miami
Naples
Company owned
7,200
Company owned
19,600
Palm Beach
Company owned
22,800
Retail and service; 15
wet slips
Retail and service; 14
wet slips
Retail and service; 8 wet
slips
1980
Intracoastal Waterway
1997
Naples Bay
1998
Intracoastal Waterway
Pensacola
Third-party lease
24,300
Retail and service
1974
—
Pompano Beach
Company owned
23,000
Sarasota
Third-party lease
26,500
Stuart
Company owned
22,400
Retail and service; 16
wet slips
Retail, service, and
storage; 15 wet slips
Retail and service; 6 wet
slips
1990
Intracoastal Waterway
1972
Sarasota Bay
2002
Intracoastal Waterway
Stuart
Tampa
Venice
Georgia
Altoona
Company owned
6,700
Retail and service; 60
wet slips
1994
Intracoastal Waterway
Company owned
13,100
Retail and service
1995
—
Company owned
62,000
Retail, service, and
storage; 90 wet slips
1972
Intracoastal Waterway
Third-party lease
8,800
Retail and service; 4 wet
slips
2002
Lake Altoona
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Location
Owned or Leased
Square
Footage(l)
Facilities at Property
Since(2)
Waterfront
Operated
Buford (Atlanta)
Company owned
13,500
Retail and service
2001
—
Cumming (Alanta)
Third-party lease
13,000
Forest Park (Atlanta)
Third-party lease
47,300
Retail and service; 50
wet slips
Retail, service, and
storage
1981
Lake Lanier
1973
—
Maryland
Baltimore
Company owned
19,800
Retail and service
1958
—
Chesapeake Bay
Company owned
28,400
Retail, service, and
storage; 294 wet slips
1966
Gunpowder River
Minnesota
Bay Port
Oakdale
Rogers
Walker
Walker
Nevada
Las Vegas
New Jersey
Brick
Third-party lease
450
Retail only; 10 wet slips
1996
St Croix River
Third-party lease
18,500
Retail and service
1997
—
Company owned
70,000
Company owned
76,400
Company owned
6,800
Retail, service, and
storage
Retail, service, and
storage
Retail and service; 93
wet slips
1991
—
1989
—
1977
Leech Lake
Company owned
21,600
Retail and service
1990
—
Brant Beach
Third-party lease
3,800
Company owned
20,000
Retail and service; 225
wet slips
Retail and service; 36
wet slips
1977
Manasquan River
1965
Barnegat Bay
Greenbrook
Third-party lease
18,500
Retail and service
1995
—
Jersey City
Third-party lease
500
Retail only; 6 wet slips
2000
Hudson River
Lake Hopatcong
Third-party lease
4,600
Retail and service; 80
wet slips
1998
Lake Hopatcong
Ship Bottom
Third-party lease
19,300
Retail and service
1972
—
Somers Point
Affiliate lease
31,000
Retail and service; 33
wet slips
1987
Little Egg Harbor Bay
North Carolina
Wrightsville Beach
Third-party lease
34,500
Retail, service, and
storage
1996
Intracoastal Waterway
Ohio
Cleveland (Flats)
Third-party lease
19,000
Retail and service
1999
Lake Erie
Port Clinton
Third-party lease
63,700
Retail, service, and
1974
Lake Erie
Port Clinton
Third-party lease
93,300
storage; 155 wet slips
Retail, service, and
storage
1997
Lake Erie
Toledo
Third-party lease
12,200
Retail and service
1989
—
South Carolina
Myrtle Beach
Third-party lease
3,500
Retail only
1999
Coquina Harbor
Texas
Arlington
Third-party lease
31,000
Retail and service
1999
—
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Location
Houston
Houston
Owned or Leased
Square
Footage(l)
Facilities at Property
Since(2)
Waterfront
Operated
Third-party lease
10,000
Retail only (3)
1987
—
Third-party lease
10,000
Retail and service
1981
—
League City (floating
facility) (4)
Third-party lease
800
Retail and service; 20
wet slips
1988
Clear Lake
Lewisville (Dallas)
Company owned
22,000
Retail and service
1992
—
Lewisville (Dallas) (floating
facility)
Third-party lease
500
Seabrook
Company owned
32,000
Retail only; 20 wet slips
(5)
Retail and service; 30
wet slips
1994
Lake Lewisville
2002
Clear Lake
Utah
Salt Lake City
Third-party lease
21,200
Retail and service
1975
—
(1) Square footage is approximate and 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.
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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.
2002
First quarter
Second quarter
Third quarter
Fourth quarter
2003
First quarter
Second quarter
Third quarter
Fourth quarter
2004
First quarter
Second quarter
Third quarter
Fourth quarter (through November 30, 2004)
High
Low
$ 12.65
$ 15.40
$ 14.19
$ 12.95
$ 13.08
$ 14.50
$ 15.43
$ 19.90
$ 28.33
$ 32.04
$ 28.59
$ 30.43
$ 7.65
$ 10.85
$ 9.00
$ 7.15
$ 8.67
$ 9.02
$ 12.62
$ 14.39
$ 18.10
$ 23.56
$ 18.05
$ 21.50
On November 30, 2004, the closing sale price of our common stock was $29.40 per share. On November 30, 2004, there were approximately
100 record holders and approximately 4,600 beneficial owners of our common stock.
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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, 2003, and 2004 and the statement of operations
data for the fiscal years ended September 30, 2002, 2003, and 2004 were derived from the consolidated financial statements and notes thereto that
have been audited by Ernst & Young LLP, independent registered certified public accounting firm. The balance sheet data as of September 30,
2000 and 2001 and the statements of operations data for the fiscal years ended September 30, 2000 and 2001 were derived from the consolidated
financial statements and notes thereto that were 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
Fiscal Year Ended September 30,
2000
2001
2002
2003
2004
(Amounts in thousands except share and per share data)
$
550,654
419,080
$
504,071
383,984
$
540,716
416,137
$
607,501
459,729
$
762,009
573,616
131,574
92,520
39,054
4,127
34,927
13,534
120,087
92,734
27,353
2,396
24,957
9,608
124,579
95,567
29,012
1,264
27,748
10,683
147,772
113,299
34,473
2,471
32,002
12,321
188,393
139,470
48,923
6,499
42,424
16,126
Net income
$
21,393
$
15,349
$
17,065
$
19,681
$
26,298
Net income per share:
Diluted
Weighted average number of shares:
Diluted
Other Data:
Number of retail locations(1)
Sales per store(2) (4)
Same-store sales growth(3) (4)
$
1.41
$
1.01
$
1.10
$
1.26
$
1.58
15,204,182
15,238,719
15,540,973
15,671,470
16,666,107
$
52
14,056
20 %
$
53
12,382
$
(9 )%
59
12,273
3 %
$
65
11,900
6 %
$
67
12,831
21 %
2000
2001
2002
2003
2004
September 30,
Balance Sheet Data:
Working capital
Total assets
Long-term debt (including current portion) (5)
Total stockholders’ equity
$ 40,853
231,330
6,280
112,340
$ 47,447
264,490
8,640
127,693
$ 55,426
301,146
21,765
145,190
$ 67,003
329,155
22,343
166,056
$ 88,013
474,359
26,237
196,821
(1)
Includes only those retail locations open at period end.
(2)
Includes only those stores open for the entire preceding 12-month period.
(3) New and acquired stores are included in the comparable base at the end of the store’s thirteenth month of operations.
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(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 2004 revenue exceeding $762 million. Through our current 67 retail
locations in 16 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; offer yacht and boat
brokerage services, and where available, offer slip and storage accommodations.
MarineMax was incorporated in January 1998. We have significantly expanded our operations through the acquisition of 18 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, 2004, we completed the acquisition of three recreational boat dealers. During June 2004, we
acquired substantially all of the assets, including real estate, and assumed certain liabilities of Imperial Marine (Imperial), a privately held boat
dealership with locations in Baltimore and the northern Chesapeake area of Maryland, for approximately $9.3 million in cash, including acquisition
costs. Imperial operates a highway location and a marina on the Gunpowder River. Imperial generated approximately $12.0 million of revenue in its
last completed fiscal year prior to the acquisition. The acquisition expands our ability to serve consumers in the Mid-Atlantic United States boating
community. Additionally, the acquisition allows us to capitalize on Imperial’s market position and leverage our inventory management and
inventory financing resources over the acquired locations. The acquisition resulted in the recognition of approximately $1.1 million in tax
deductible goodwill, including acquisition costs, and approximately $580,000 in tax deductible indefinite-lived intangible assets (dealer
agreements). Imperial has been included in our consolidated financial statements since the date of acquisition.
During June 2004, we purchased inventory and certain equipment and assumed certain liabilities from the previous Jacksonville, Florida-based
Sea Ray dealer (Jacksonville) for the sport boat and sport cruiser product lines for approximately $900,000 in cash, including acquisition costs. The
purchase enhanced our ability to serve customers in the northeast Florida boating community by adding the sport boat and sport cruiser product
lines to our existing Sea Ray product offerings. The acquisition resulted in the recognition of approximately $240,000 in tax deductible goodwill,
including acquisition costs, and approximately $450,000 in tax deductible indefinite-lived intangible assets (dealer agreements). Jacksonville has
been included in our consolidated financial statements since the date of acquisition.
During October 2003, we acquired substantially all of the assets and assumed certain liabilities of Emarine International, Inc. and Steven Myers,
Inc. (Emarine), a privately held boat dealership located in Fort Lauderdale, Florida, for approximately $305,000 in cash. The acquisition resulted in
the recognition of approximately $300,000 in tax deductible goodwill, including acquisition costs. The acquisition provides us with an established
retail location to sell the newly offered Ferretti Group products in the southeast Florida boating community. The assets purchase agreement contains
an earn out provision, which may impact the final purchase price annually, based on the future profits of the location through September 2005,
assuming certain conditions and provisions are met. Based on these conditions and provisions, there was no earn out for fiscal 2004. In
August 2004, the earn out provisions were modified withdrawing the requirements for any future earn out payments. Emarine has been included in
our consolidated financial statements since the date of acquisition.
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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. The acquisition resulted in the recognition of approximately $600,000 in tax deductible goodwill,
including acquisition costs, and approximately $300,000 in tax deductible indefinite-lived intangible assets (dealer agreements). The acquisition
expands our ability to serve consumers in the Alabama and Florida panhandle boating communities. Additionally, the acquisition further allows us
to leverage our inventory management and inventory financing resources over the acquired locations. Killinger Marine has been included in our
consolidated financial statements since the date of acquisition.
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
acquisition resulted in the recognition of approximately $1.7 million in tax deductible goodwill, including acquisition costs, and approximately
$900,000 in tax deductible indefinite-lived intangible assets (dealer agreements). The acquisition expands our ability to serve consumers in the
western United States boating community. Additionally, the acquisition further allows us to leverage our inventory management and inventory
financing resources over the acquired locations. 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. Based on
these conditions and provisions, the fiscal 2004 earn out was approximately $2,500. Sundance Marine has been included in our consolidated
financial statements since the date of the acquisition.
During the fiscal year ended September 30, 2002, we completed the acquisition of two recreational boat dealers. During 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 resulted in the recognition of approximately $100,000 in tax deductible 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.
During 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. The acquisition expanded our ability to serve consumers in the west Florida boating community. Additionally,
the acquisition further allows us to leverage our inventory management and inventory financing resources over the acquired locations. The
acquisition resulted in the recognition of approximately $6.2 million in tax deductible goodwill, including acquisition costs, and approximately
$3.3 million in tax deductible indefinite-lived intangible assets (dealer agreements). Gulfwind has been included in our consolidated financial
statements since the date of the acquisition.
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,
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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. We recognize revenue from slip and storage services on a straight line basis over the term of the slip or storage agreement.
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 recognized at the later of customer acceptance of the insurance product as evidenced by contract execution, or 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.
Certain finance and extended warranty commissions and marketing fees on insurance products may be charged back if a customer terminates or
defaults on the underlying contract within a specified period of time. Based upon our experience of terminations and defaults, we maintain a charge
back allowance that was not material to our financial statements taken as a whole as of September 30, 2003 or 2004. Should results differ materially
from our historical experiences, we would need to modify our estimate of future charge backs, which could have a material adverse effect on our
operating margins.
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 impacted 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. Also,
based on the requirements of our co-op assistance programs from our manufacturers, EITF 02-16 permits the netting of the assistance against
related advertising expenses. We adopted EITF 02-16 prospectively for fiscal 2003 during the quarter ended December 31, 2002. Had we been
required to adopt EITF 02-16 at the beginning of fiscal 2002, the amount of interest assistance that was originally recorded as a reduction of interest
expense that would now be accounted for as a reduction of cost of sales within each year was approximately $4.0 million and $2.9 million in fiscal
2002 and 2003, respectively.
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 of our inventory to fall below carrying value, further
reductions may be required.
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Valuation of Goodwill and Other Intangible Assets
Goodwill and identifiable intangible assets are accounted for in accordance with 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 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 report separately from goodwill. We have determined that our most significant
acquired identifiable intangible assets are the dealer agreements, which are indefinite-lived intangible assets. SFAS 142 requires that goodwill and
indefinite-lived intangible assets no longer be amortized, but instead tested for impairment at least annually and whenever events or changes in
circumstances indicate that the carrying value may not be recoverable. 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 as of the beginning of fiscal 2002.
SFAS 142 required the completion of a transitional impairment test within six months from the date of the initial adoption. We completed the
transitional impairment test, which resulted in no impairment of goodwill or identifiable intangible assets as of the date of adoption. SFAS 142 also
requires that we assess the impairment of identifiable intangible assets and goodwill at least annually and 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 annual impairment test during the fourth quarter of fiscal 2004, based on
financial information as of the third quarter of fiscal 2004, 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 the application of SFAS 142. We will continue to test goodwill
and identifiable intangible assets for impairment at least annually and 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 $5.5 million and $50.3 million,
respectively, as of September 30, 2004.
The most significant estimates used in our goodwill valuation model include estimates of the future growth in our cash flows and future working
capital needs to support our projected growth. Should circumstances change causing these assumptions to differ materially than expected, our
goodwill may become impaired, resulting in a material adverse effect on our operating margins.
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.
Results of Operations
The following table sets forth certain financial data as a percentage of revenue for the periods indicated:
Revenue
Cost of sales
Fiscal Year Ended September 30,
2002
2003
2004
$ 540,716
416,137
100.0 % $ 607,501
77.0 % 459,729
100.0 % $ 762,009
75.7 % 573,616
(Amounts in thousands)
Gross profit
Selling, general, and administrative Expenses
124,579
95,567
23.0 % 147,772
17.7 % 113,299
24.3 % 188,393
18.7 % 139,470
Income from operations
Interest expense, net
Income before tax provision
Income tax provision
29,012
1,264
27,748
10,683
5.3 %
0.2 %
34,473
2,471
5.7 %
0.4 %
48,923
6,499
5.1 %
2.0 %
32,002
12,321
5.3 %
2.0 %
42,424
16,126
100.0 %
75.3 %
24.7 %
18.3 %
6.4 %
0.9 %
5.6 %
2.1 %
Net income
$ 17,065
3.1 % $ 19,681
3.2 % $ 26,298
3.5 %
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Fiscal Year Ended September 30, 2004 Compared with Fiscal Year Ended September 30, 2003
Revenue. Revenue increased $154.5 million, or 25.4%, to $762.0 million for the fiscal year ended September 30, 2004 from $607.5 million for
the fiscal year ended September 30, 2003. Of this increase, $30.1 million was attributable to stores opened or acquired that were not eligible for
inclusion in the comparable-store base and $124.4 million was attributable to a $20.7% growth in comparable-store sales in fiscal 2004. The
increase in comparable-store sales in fiscal 2004 resulted primarily from an increase of approximately $117.5 million in boat sales, primarily sales
from existing product lines of approximately $71.5 million and sales from new product lines added over the past 24 months of approximately
$46.0 million. These increases in boat sales helped generate increases in sales of our finance, insurance, parts, and service products of
approximately $6.9 million.
Gross Profit . Gross profit increased $40.6 million, or 27.5%, to $188.4 million for the fiscal year ended September 30, 2004 from
$147.8 million for the fiscal year ended September 30, 2003. Gross profit margin as a percentage of revenue increased to 24.7% in fiscal 2004 from
24.3% in fiscal 2003. This increase was primarily attributable to an increase in smaller, higher margin boat sales, a general increase in gross profit
margins of most categories of boat sales, and incremental improvements in finance, insurance, brokerage, parts, and service revenues, which
generally yield higher gross profits than boat sales. Gross profit as a percentage of revenue increased by approximately 0.2% as a result of the
implementation of EITF 02-16, which 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.
Selling, General, and Administrative Expenses . Selling, general, and administrative expenses increased $26.2 million, or 23.1%, to
$139.5 million for the fiscal year ended September 30, 2004 from $113.3 million for the fiscal year ended September 30, 2003. This increase was
primarily attributable to additional expenses, including marketing, incurred by our comparable-store locations associated with the comparable-store
sales increase and approximately $600,000 to protect and repair our facilities and inventories from hurricanes in fiscal 2004. Selling, general, and
administrative expenses as a percentage of revenue decreased to 18.3% in fiscal 2004 from 18.7% in fiscal 2003. The decrease in selling, general,
and administrative expenses as a percentage of revenue was attributable to additional leveraging of our expense structure due to our comparable-
store sales increase, partially offset by the hurricane related expenses and stores opened or acquired that operate at a higher expense structure than
our other locations.
Interest Expense . Interest expense increased $4.0 million, or 160.0%, to $6.5 million for the fiscal year ended September 30, 2004 from
$2.5 million for the fiscal year ended September 30, 2003. Interest expense as a percentage of revenue increased to 0.9% in fiscal 2004 from 0.4%
in fiscal 2003. The increase in total interest charges was a result of the implementation of EITF 02-16, which increased interest expense by
approximately $2.7 million. Additionally, interest expense increased by approximately $1.3 million as a result of additional borrowings associated
with our revolving credit facility and mortgages, partially offset by a more favorable interest rate environment.
Income Tax Provision. Income taxes increased $3.8 million, or 30.9%, to $16.1 million for the fiscal year ended September 30, 2004 from
$12.3 million for the fiscal year ended September 30, 2003 as a result of increased earnings. Our effective tax rate decreased to 38.0% for the fiscal
year ended September 30, 2004 from 38.5% for the fiscal year ended September 30, 2003 as a result of a review of our effective tax rate calculation
for the jurisdictions in which we currently operate.
Fiscal Year Ended September 30, 2003 Compared with 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 opened or acquired that were 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 an increase of approximately $19.3 million in boat sales, primarily sales from our new
product lines and the timing of certain yacht sales, and approximately $11.7 million in increased sales of our finance, insurance, parts, and service
products.
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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 was 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 a result of increased long-term borrowings associated with mortgages on facilities and
equipment, which increased interest expense by approximately $500,000, and the implementation of EITF 02-16, which increased interest expense
by approximately $1.0 million. This increase was partially offset by a more favorable interest rate environment associated with our variable rate
debt, which reduced interest expense by approximately $300,000.
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.
Quarterly Data and Seasonality
Our business, as well as the entire recreational boating industry, is highly seasonal, with seasonality varying in different geographic markets.
With the exception of Florida, we generally realize significantly lower sales and higher levels of inventories, and related short-term borrowings, in
the quarterly periods ending December 31 and March 31. The onset of the public boat and recreation shows in January stimulates boat sales and
allows us to reduce our inventory levels and related short-term borrowings throughout the remainder of the fiscal year. Our business could become
substantially more seasonal as we acquire dealers that operate in colder regions of the United States.
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.
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The operating results for any quarter are not necessarily indicative of the results to be expected for any future period.
December 31,
March 31,
2002
2003
June 30,
2003
September 30, December 31,
March 31,
2003
2003
2004
June 30,
2004
September 30,
2004
Revenue
Cost of sales
$
97,975 $
74,320
159,063 $
124,822
187,173 $
143,469
163,290 $
117,118
156,659 $
121,559
202,316 $
157,160
219,729 $
164,691
183,305
130,206
(Amounts in thousands except share and per share data)
Gross profit
Selling, general, and
23,655
34,241
43,704
46,172
35,100
45,156
55,038
53,099
administrative expenses
23,802
27,370
29,278
32,849
30,015
34,269
36,602
38,584
Income (loss) from
Operations
Interest expense, Net
Income (loss) before tax
provision
Tax provision (benefit)
(147 )
633
6,871
216
14,426
683
13,323
939
5,085
1,459
10,887
1,701
18,436
1,706
14,515
1,633
(780 )
(300 )
6,655
2,562
13,743
5,291
12,384
4,768
3,626
1,396
9,186
3,537
16,730
6,324
12,882
4,869
Net income (loss)
$
(480 ) $
4,093 $
8,452 $
7,616 $
2,230 $
5,649 $
10,406 $
8,013
Net income (loss) per
share:
Diluted
$
(0.03 ) $
0.26 $
0.54 $
0.48 $
0.14 $
0.34 $
0.61 $
0.48
Weighted average number
of shares:
Diluted
15,537,053 15,541,897 15,656,203 15,950,257 16,280,368 16,728,845 16,937,505 16,717,805
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. We regularly monitor the aging of our inventories and current market trends to
evaluate our current and future inventory needs. This evaluation is also used in conjunction with our review of our current and expected operating
performance and expected growth to determine the adequacy of our financing needs. These cash needs have historically been financed with cash
generated from operations and borrowings under our line of credit facility. We currently depend upon dividends, other payments from our
consolidated operating subsidiaries, and our line of credit facility to fund our current operations and meet our cash needs. Currently, no agreements
exist that restrict this flow of funds from our operating subsidiaries.
For the fiscal years ended September 30, 2002, 2003, and 2004, we generated cash flows from operating activities of approximately $4.2 million,
$27.2 million, and $21.0 million, respectively. In addition to net income, cash provided by operating activities was due primarily to inventory
management, including the management of inventory financing and an increase in accounts payable due to the timing of certain payments to our
manufacturers.
For the fiscal years ended September 30, 2002, 2003, and 2004, cash used in investing activities was approximately $22.3 million, $19.4 million,
and $23.3 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, improving existing, or relocating existing retail facilities.
For the fiscal years ended September 30, 2002 and 2004, cash provided by financing activities was approximately $12.4 million and
$6.9 million, respectively. For the fiscal year ended September 30, 2003, cash used in financing activities approximated $1.6 million. For the fiscal
years ended September 30, 2002 and 2004, cash provided by financing activities was primarily attributable to proceeds from borrowings on long-
term debt (mortgages) on equipment and real estate acquired, common shares issued upon the exercise of stock options and stock purchases under
our Employee Stock Purchase Plan, partially offset by repayments of long-term debt. For the fiscal year ended September 30, 2003, cash used in
financing activities was primarily attributable to repayments of
45
Table of Contents
long-term debt, partially offset by common shares issued upon the exercise of stock options and stock purchases under our Employee Stock
Purchase Plan.
As of September 30, 2004, our indebtedness totaled approximately $179.2 million, of which approximately $26.2 million was associated with
our real estate holdings and $153.0 million was associated with financing our inventory and working capital needs.
In December 2001, we entered into a revolving credit facility that provided a line of credit with asset-based borrowing availability of up to $220
million. The facility also allowed us $20 million in traditional floorplan borrowings. The facility, which had a three-year term with two one-year
renewal options, replaced 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 accrued interest at a rate of LIBOR plus 175 to 260 basis points, which
was determined in accordance with a Performance Pricing grid, as defined in the credit facility. Borrowings under the facility were pursuant to a
borrowing base formula and were used primarily for working capital and inventory financing. The terms and conditions of the facility were similar
to the terms and conditions of the prior separate line of credit facilities.
In January 2004, we amended the credit facility, which extended the term of, added a lender to, and increased the borrowing availability under
the credit facility. The expanded facility provides us with a line of credit with asset based borrowing availability of up to $260 million for working
capital and inventory financing and an additional $20 million for traditional floorplan borrowings, all of which are determined pursuant to a
borrowing base formula. With the extended term, the credit facility currently matures in December 2006, with two one-year renewal options
remaining.
During the fiscal years ended September 30, 2002, 2003, and 2004, we completed the acquisition of seven 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 $32.2 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, 2004:
Year Ending
September 30,
Line of
Credit
Long-Term
Debt
Operating
Leases
Total
2005
2006
2007
2008
2009
Thereafter
Total
153,000
—
—
—
—
—
(Amounts in thousands)
2,885
3,020
3,054
2,999
3,157
11,122
6,546
5,708
5,264
4,135
1,304
1,711
162,431
8,728
8,318
7,134
4,461
12,833
$ 153,000
$ 26,237
$ 24,668
$ 203,905
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
At September 30, 2004, approximately 93% of our short- and long-term debt bore 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 as a result of interest rates charged
46
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on certain underlying obligations that are variable. At September 30, 2004, a hypothetical 100 basis point increase in interest rates on our variable
rate obligations would have resulted in an increase of approximately $1.7 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 us to reduce the outstanding
balances or additional interest assistance that would be received from vendors due to the hypothetical interest rate increase.
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, cost of goods sold, cash
flows, and earnings we recognize for the Ferretti Group product line. 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 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, 2004. 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 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 9B. Other Information
Not applicable.
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Table of Contents
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 2005 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 2005 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 2005 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 2005 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 2005 Annual Meeting of Stockholders.
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Table of Contents
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
(1) Current Report on Form 8-K dated September 7, 2004, indicated in Item 7.01, the press release issued by MarineMax, Inc. dated
September 7, 2004, updating fourth quarter 2004 earnings per share range due to recent hurricanes.
(2) Current Report on Form 8-K dated July 22, 2004 indicated in Items 9 and 12, the press release issued by MarineMax, Inc. dated July 22,
2004 reporting financial results of its third quarter of fiscal 2004 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)
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)
10.1(c)
Merger Agreement between Registrant and its acquisition subsidiary and Gulfwind USA, Inc. and its stockholders (1)
10.1(d)
Merger Agreement between Registrant and its acquisition subsidiary and Gulfwind South, Inc. and its stockholders (1)
10.1(e)
Merger Agreement between Registrant and its acquisition subsidiary and Harrison’s Boat Center, Inc. and its stockholders (1)
10.1(f)
Merger Agreement between Registrant and its acquisition subsidiary and Harrison’s Marine Centers of Arizona, Inc. and its
stockholders (1)
10.1(g)
Merger Agreement between Registrant and its acquisition subsidiary and Stovall Marine, Inc. and its stockholders (1)
10.1(h)
10.1(i)
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)
Asset Purchase Agreement between Registrant and Treasure Cove Marina, Inc. (3)
10.2(a)
Contribution Agreement between Registrant and Bassett Boat Company and its owner (1)
10.2(b)
Contribution Agreement between Registrant and Bassett Realty, L.L.C. and its owner (1)
10.2(c)
Contribution Agreement between Registrant and Gulfwind South Realty, L.L.C. and its owners (1)
10.2(d)
Contribution Agreement between Registrant and Harrison’s Realty, L.L.C. and its owners (1)
49
Table of Contents
Exhibit
Number
Exhibit
10.2(e)
Contribution Agreement between Registrant and Harrison’s Realty California, L.L.C. and its owners (1)
10.3(e)
Employment Agreement between Registrant and William H. McGill Jr. (9)
10.3(f)
Employment Agreement between Registrant and Michael H. McLamb (9)
10.3(g)
Employment Agreement dated August 18, 2004 between Registrant and Michael H. McLamb
10.4
10.5
10.6
10.7
10.8
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)
10.9
Stockholders’ Agreement among Registrant, Brunswick Corporation, and Senior Founders of Registrant, dated April 28, 1998 (1)
10.10
Governance Agreement between Registrant and Brunswick Corporation, dated April 28, 1998 (1)
10.11
Agreement Relating to Acquisitions between Registrant and Brunswick Corporation, dated April 28, 1998 (1)
10.12
10.17
10.17(a)
10.18
21
23
31.1
31.2
32.1
32.2
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)
Amendment No. 2 to Credit and Security Agreement dated January 30, 2004 among the Registrant and its subsidiaries as
Borrowers, Keybank National Association, N.A., Bank of America, N.A., and various other lenders, as Lenders (10)
Hatteras Sales and Service Agreement, dated July 1, 2003 among the Registrant, MarineMax Motor Yachts, LLC, and Hatteras
Yachts Division of Brunswick Corporation (10)
List of Subsidiaries
Consent of Ernst & Young 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.
50
Table of Contents
(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.
(10) Incorporated by reference to Registrant’s Form 10-Q for the quarterly period ended December 31, 2003, as filed on February 17, 2004.
51
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SIGNATURES
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.
MarineMax, Inc.
/s/ William H. McGill Jr.
By: William H. McGill Jr.
Chairman of the Board, President, and Chief
Executive Officer
Date: December 10, 2004
Pursuant to the requirements of 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 10, 2004
Executive Vice President, Chief Financial Officer,
Secretary, and Director (Principal Accounting and
Financial Officer)
Director
Director
Director
Director
Director
52
December 10, 2004
December 10, 2004
December 10, 2004
December 10, 2004
December 10, 2004
December 10, 2004
Table of Contents
MARINEMAX, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Registered Certified Public Accounting Firm
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-3
F-4
F-5
F-6
F-7
Table of Contents
REPORT OF INDEPENDENT REGISTERED CERTIFIED PUBLIC ACCOUNTING FIRM
The Board of Directors and Stockholders of
MarineMax, Inc.
We have audited the accompanying consolidated balance sheets of MarineMax, Inc. and subsidiaries as of September 30, 2003 and 2004, and the
related consolidated statements of operations, stockholders’ equity, and cash flows for each of the three years in the period ended September 30,
2004. 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 the standards of the Public Company Accounting Oversight Board (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, 2003 and 2004, and the consolidated results of their operations and their cash flows for each of the three
years in the period ended September 30, 2004, in conformity with U.S. generally accepted accounting principles.
ERNST & YOUNG LLP
Tampa, Florida,
November 3, 2004
F-2
MARINEMAX, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands except share and per share data)
ASSETS
Table of Contents
CURRENT ASSETS:
Cash and cash equivalents
Accounts receivable, net
Inventories, net
Prepaid expenses and other current assets
Deferred tax assets
Total current assets
Property and equipment, net
Goodwill and other intangible assets, net
Other long-term assets
Total assets
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable
Customer deposits
Accrued expenses
Short-term borrowings
Current maturities of long-term debt
Total current 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,
2003 and 2004
Common stock, $.001 par value; 24,000,000 shares authorized, 15,401,686 and 15,711,012 shares issued and
outstanding at September 30, 2003 and 2004, respectively
Additional paid-in capital
Retained earnings
Treasury stock, at cost, 30,000 shares held at September 30, 2004
Total stockholders’ equity
Total liabilities and stockholders’ equity
See accompanying notes.
F-3
September 30,
2003
September 30,
2004
$ 10,508
21,757
165,382
4,127
1,528
203,302
71,899
53,144
810
$ 15,076
24,977
283,797
5,966
3,465
333,281
84,507
55,862
709
$ 329,155
$ 474,359
$ 12,402
9,924
14,629
97,000
2,344
136,299
6,801
19,999
$ 55,841
15,917
17,625
153,000
2,885
245,268
8,918
23,352
163,099
277,538
—
—
15
65,235
100,806
—
16
70,325
127,098
(618 )
166,056
196,821
$ 329,155
$ 474,359
Table of Contents
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 tax provision
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
Diluted
For the Year
Ended
September 30,
2002
For the Year
Ended
September 30,
2003
For the Year
Ended
September 30,
2004
$
540,716
416,137
$
607,501
459,729
$
762,009
573,616
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
$
$
$
188,393
139,470
48,923
6,499
42,424
16,126
26,298
1.69
1.58
$
$
$
15,270,827
15,337,873
15,585,314
15,540,973
15,671,470
16,666,107
See accompanying notes.
F-4
Table of Contents
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, 2001
15,221,378
$ 15
$ 63,931
$ 64,091 $ (344 )
$ 127,693
Net income
Issuance of treasury stock
Issuance of common stock
Shares issued upon exercise of stock options
—
53,396
5,159
5,771
—
—
—
—
—
(5 )
39
72
17,065 —
—
326
— —
— —
17,065
321
39
72
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
Shares issued upon exercise of stock options
Tax benefit of options exercised
—
(15,000 )
17,349
60,928
52,705
—
—
—
—
—
—
—
—
—
(121 )
640
624
55
19,681 —
(134 )
—
(31 )
152
— —
— —
— —
19,681
(134 )
—
640
624
55
BALANCE, September 30, 2003
15,401,686
15
65,235
100,806 —
166,056
Net income
Purchase of treasury stock
Issuance of treasury stock
Issuance of common stock
Shares issued upon exercise of stock options
Tax benefit of options exercised
—
(32,000 )
2,000
67,988
271,338
—
—
—
—
—
1
—
—
—
—
716
2,964
1,410
26,298 —
(678 )
—
60
(6 )
— —
— —
26,298
(678 )
54
716
2,965
1,410
BALANCE, September 30, 2004
15,711,012
$ 16
$ 70,325
$ 127,098 $ (618 )
$ 196,821
See accompanying notes.
F-5
Table of Contents
MARINEMAX, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization
Deferred income taxes
(Gain) loss on sale of property and equipment
Tax benefit of options exercised
Other
(Increase) decrease in — Accounts receivable
Inventories
Prepaid expenses and other assets
Increase (decrease) in — Accounts payable
Customer deposits
Accrued expenses and other liabilities
Short-term borrowings
For the Year
Ended
For the Year
Ended
September 30,
September 30,
2002
2003
For the Year
Ended
September 30,
2004
$ 17,065
$ 19,681
$ 26,298
3,614
1,570
(70 )
—
80
(290 )
3,531
(2,318 )
(1,681 )
1,967
(364 )
(18,942 )
4,440
1,001
(29 )
55
275
(7,356 )
8,309
148
3,025
732
(1,897 )
(1,186 )
5,273
180
1
1,410
80
(3,220 )
(110,369 )
(1,640 )
43,439
5,989
2,608
50,939
Net cash provided by operating activities
4,162
27,198
20,988
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
(15,022 )
(7,516 )
287
(10,716 )
(8,988 )
258
(10,232 )
(10,174 )
235
Net cash used in investing activities
(22,251 )
(19,446 )
(20,171 )
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings on long-term debt
Repayments on long-term debt
Purchase of treasury stock
Issuance of common stock
13,100
(1,037 )
—
352
—
(2,422 )
(134 )
989
Net cash provided by (used in) financing activities
12,415
(1,567 )
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS:
CASH AND CASH EQUIVALENTS, beginning of period
(5,674 )
9,997
6,185
4,323
3,200
(2,426 )
(678 )
3,655
3,751
4,568
10,508
CASH AND CASH EQUIVALENTS, end of period
$ 4,323
$ 10,508
$ 15,076
SUPPLEMENTAL DISCLOSURE INFORMATION
Assumption of debt (primarily inventory financing) in conjunction with
businesses acquired and the purchase of property and equipment
$ 17,005
$ 3,000
$
3,120
See accompanying notes.
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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 and offer boat storage service, in certain
locations. As of September 30, 2004, we operated through 67 retail locations in 16 states, consisting of Alabama, Arizona, California, Colorado,
Delaware, Florida, Georgia, Maryland, 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 accounted for approximately 65%,
65%, and 60% of our revenue in fiscal 2002, 2003, and 2004, 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. We also have dealer agreements with Ferretti Group and Bertram. These agreements allow
us to purchase, stock, sell, and service these manufacturers’ boats and products. These agreements also allow us to use these manufacturers’ 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 ten-year dealer agreement with Brunswick
covering Sea Ray products, and is the exclusive dealer of Sea Ray boats in its geographic markets. The dealer agreement was entered into in 1998.
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. Our subsidiary, MarineMax International, LLC, is a party to a dealer agreement with Ferretti Group and Bertram
Yachts. The agreement appoints us as the exclusive dealer for Ferretti Yachts, Pershing, Riva, Apreamare, Mochi Craft, Custom Line, and CRN
mega-yachts, yachts and other recreational boats for the United States, Canada, and the Bahamas. The agreement also appoints us as the exclusive
dealer for Bertram in the United States (excluding the Florida peninsula and certain portions of New England), Canada, and the Bahamas.
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, 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.
In order to maintain consistency and comparability between periods presented, certain amounts may have been reclassified from the previously
reported consolidated financial statements to conform to the consolidated financial statement presentation of the current period. 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 conducted no operations until the acquisition of five independent recreational boat dealers on March 1, 1998. Since the initial acquisitions in
March 1998, we have acquired 18 recreational boat dealers, two boat brokerage operations, and one full-service yacht repair facility. 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
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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 fiscal years ending September 30, 2002, 2003, and 2004.
During 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. The acquisition expanded our ability to serve consumers in the west Florida boating community. Additionally,
the acquisition further allows us to leverage our inventory management and inventory financing resources over the acquired locations. The
acquisition resulted in the recognition of approximately $6.2 million in tax deductible goodwill, including acquisition costs, and approximately
$3.3 million in tax deductible indefinite-lived intangible assets (dealer agreements). Gulfwind has been included in our consolidated financial
statements since the date of acquisition.
During 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 resulted in the recognition of
approximately $100,000 in tax deductible 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.
During 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 resulted in the recognition of approximately $1.7 million in tax deductible goodwill, including acquisition costs, and approximately
$900,000 in tax deducible indefinite-lived intangible assets (dealer agreements). The acquisition expands our ability to serve consumers in the
western United States boating community. Additionally, the acquisition further allows us to leverage our inventory management and inventory
financing resources over the acquired locations. 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. Based on
these conditions and provisions, the fiscal 2004 earn out was approximately $2,500 and was accounted for as an adjustment to the recognized
amount of tax deductible goodwill. Sundance Marine has been included in our consolidated financial statements since the date of acquisition.
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. The acquisition resulted in the recognition of approximately $600,000
in tax deductible goodwill, including acquisition costs, and approximately $300,000 in tax deductible indefinite-lived intangible assets (dealer
agreements). The acquisition expands our ability to serve consumers in the Alabama and Florida panhandle boating communities. Additionally, the
acquisition further allows us to leverage our inventory management and inventory financing resources over the acquired locations. Killinger Marine
has been included in our consolidated financial statements since the date of acquisition.
During October 2003, we acquired substantially all of the assets and assumed certain liabilities of Emarine International, Inc. and Steven Myers,
Inc. (Emarine), a privately held boat dealership located in Fort Lauderdale, Florida, for approximately $305,000 in cash. The acquisition resulted in
the recognition of approximately $300,000 in tax deductible goodwill, including acquisition costs. The acquisition provides us with an established
retail location to sell the newly offered Ferretti Group products in the southeast Florida boating community. The asset purchase agreement contains
an earn out provision, which may impact the final purchase price annually, based on the future profits of the location through September 2005,
assuming certain conditions and provisions are met. Based on these conditions and provisions, there was no earn out for fiscal 2004. In
August 2004, the earn out provisions were modified withdrawing the requirements for any future earn out payments. Emarine has been included in
our consolidated financial statements since the date of acquisition.
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During June 2004, we acquired substantially all of the assets, including real estate, and assumed certain liabilities of Imperial Marine (Imperial),
a privately held boat dealership with locations in Baltimore and the northern Chesapeake area of Maryland, for approximately $9.3 million in cash,
including acquisition costs, and approximately $450,000 held in escrow. Imperial operates a highway location and a marina on the Gunpowder
River. Imperial generated approximately $12.0 million of revenue in its last completed fiscal year prior to the acquisition. The acquisition expands
our ability to serve consumers in the Mid-Atlantic United States boating community. Additionally, the acquisition allows us to capitalize on
Imperial’s market position and leverage our inventory management and inventory financing resources over the acquired locations. The acquisition
resulted in the recognition of approximately $1.1 million in tax deductible goodwill, including acquisition costs, and approximately $580,000 in tax
deductible indefinite-lived intangible assets (dealer agreements). Imperial has been included in our consolidated financial statements since the date
of acquisition.
During June 2004, we purchased inventory, certain equipment and assumed certain liabilities from the previous Jacksonville, Florida based Sea
Ray dealer (Jacksonville) for the sport boat and sport cruiser product lines for approximately $900,000 in cash, including acquisition costs. The
purchase enhanced our ability to serve customers in the northeast Florida boating community by adding the sport boat and sport cruiser product
lines to our existing Sea Ray product offerings. The acquisition resulted in the recognition of approximately $240,000 in tax deductible goodwill,
including acquisition costs, and approximately $450,000 in tax deductible indefinite-lived intangible assets (dealer agreements). Jacksonville has
been included in our 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.
Our unaudited pro forma consolidated results of operations, assuming all significant fiscal 2002 acquisitions had occurred at the beginning of the
period presented, is as follows for the fiscal year ended September 30,
Revenue
Net income
Basic earnings per share
Diluted earnings per share
2002
(Amounts in thousands
except earnings per share)
$ 566,036
$ 17,134
1.12
$
1.10
$
Pro forma results of operations have not been presented with respect to any of the fiscal 2003 or 2004 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 $5.2 million, $5.2 million, and $6.5 million for the years ended September 30, 2002, 2003, and
2004, respectively, including interest on debt to finance our real estate holdings and new boat inventory. We made income tax payments of
approximately $7.5 million, $9.1 million, and $16.2 million for the years ended September 30, 2002, 2003, and 2004, respectively.
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Vendor Consideration Received
We account for consideration received from our vendors in accordance with Emerging Issues Task Force Issue No. 02-16, “Accounting by a
Customer (Including a Reseller) for Certain Consideration Received from a Vendor” (EITF 02-16). 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. Additionally, based on the requirements of our co-op assistance programs from our
manufacturers, EITF 02-16 permits the netting of the assistance against related advertising expenses. We adopted EITF 02-16 during the quarter
ended December 31, 2002 and determined that the standard impacted 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. As a result of applying this
standard and reviewing our new and existing contracts during the years ended September 30, 2003 and 2004, interest assistance of approximately
$700,000 and $4.8 million, respectively, was recorded as a reduction of inventory and cost of sales, with cost of sales decreasing by approximately
$700,000 and $2.5 million during the years ended September 30, 2003 and 2004, respectively.
Inventories
Inventory costs consist of the amount paid to acquire the inventory, the cost of equipment added, reconditioning costs and transportation costs
relating to relocating inventory prior to sale. 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, 2003 or 2004.
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
3-10
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
We account for goodwill and identifiable intangible assets in accordance with 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 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. We have determined that our most significant acquired
identifiable intangible assets are the dealer agreements, which are indefinite-lived intangible assets. SFAS 142 requires that goodwill and indefinite-
lived intangible assets no longer be amortized, but instead tested for impairment at least annually and whenever events or changes in circumstances
indicate that the carrying value may not be recoverable. 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 as of the beginning of fiscal 2002.
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SFAS 142 required the completion of a transitional impairment test within six months from the date of initial adoption. We completed the
transitional impairment test, which resulted in no impairment of goodwill or identifiable intangible assets as of the date of adoption. SFAS 142 also
requires that we assess the impairment of identifiable intangible assets and goodwill at least annually and 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 annual impairment test during the fourth quarter of fiscal 2004, based on
financial information as of the third quarter of fiscal 2004, 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 the application of SFAS 142.
There was no goodwill amortization expense for the fiscal years ended September 30, 2002, 2003, and 2004. Accumulated amortization of
goodwill was approximately $2.6 million at September 30, 2003 and 2004.
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 or acceptance of the related boats to customers.
Insurance
We retain varying levels of risk relating to the insurance policies we maintain, most significantly workers’ compensation insurance and
employee medical benefits. As a result, we are responsible for the claims and losses incurred under these programs, limited by per occurrence
deductibles and paid claims or losses up to pre-determined maximum exposure limits. Any losses above the pre-determined exposure limits are paid
by our third-party insurance carriers. We estimate our future losses using our historical loss experience, our judgment, and industry information.
Revenue Recognition
We recognize revenue from boat, motor, and trailer sales and parts, service, and storage 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 revenue from slip and storage services on a straight-line basis over the term of the slip or storage
agreement. 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 at the later of customer acceptance of the insurance product as evidenced by contract execution or 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,
2003 or 2004, is based on our experience with repayments or defaults on the related finance or insurance contracts.
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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, 2003 or 2004, 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 consolidated 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 and stock purchases 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
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 earnings per share, as reported
would have been the following for the fiscal years ended September 30,
2002
2003
2004
Net income as reported
Compensation cost, net of related
$ 17,065
(Amounts in thousands except earnings per share)
$ 19,681
$ 26,298
tax effects
$ 1,122
$ 1,215
Pro forma net income
$ 15,943
$ 18,466
$ 1,536
$ 24,762
Basic earnings per share:
As reported
$ 1.12
$ 1.28
$ 1.69
Pro forma
$ 1.04
$ 1.20
$ 1.59
Diluted earnings per share:
As reported
$ 1.10
$ 1.26
$ 1.58
Pro forma
$ 1.04
$ 1.20
$ 1.51
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. Based on the requirements of our co-op assistance programs from our manufacturers, EITF
02-16 permits the netting of the assistance against the related advertising expenses. Total advertising and promotional expenses approximated
$7.0 million, $8.3 million and $10.0 million, net of related co-op assistance of approximately $1.4 million, $1.1 million and $1.8 million for the
years ended September 30, 2002, 2003, and 2004, respectively.
Income Taxes
Deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial
statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.
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New Accounting Pronouncements
In December 2003, the Financial Accounting Standards Board (FASB) issued Interpretation 46(R), “Consolidation of Variable Interest
Entities” (FIN 46(R)). FIN 46(R); is a revision to and supersedes Interpretation 46, “Consolidation of Variable Interest Entities” (FIN 46), which
was issued in January 2003. FIN 46(R) clarifies the application of Accounting Research Bulletin No. 51, “Consolidated Financial Statements”, to
certain entities in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for
the entity to finance its activities without additional subordinated financial support from other parties. A variable interest entity is required to be
consolidated by the company that has a majority of the exposure to expected losses of the variable interest entity. Either FIN 46 or FIN 46(R)
applies to variable interest entities or potential variable interest entities commonly referred to as special purpose entities by the end of the first fiscal
year or interim period ending after December 15, 2003. FIN 46(R) applies to all variable interest entities by the end of the first fiscal year or interim
period ending after March 15, 2004. We do not expect the issuance of FIN 46(R) to have a material impact on our consolidated financial statements.
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.
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 consolidated financial statements.
Use of Estimates and Assumptions
The preparation of consolidated 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, valuation of
long-lived assets, and valuation of accruals. 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, service, and storage. 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, 2003 or 2004, 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.
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The accounts receivable balances consisted of the following as of September 30,
Trade receivables
Amounts due from manufacturers
Other receivables
2003
2004
(Amounts in thousands)
$ 14,453
6,234
1,070
$ 17,012
6,930
1,035
$ 21,757
$ 24,977
5. INVENTORIES:
Inventories consisted of the following as of September 30,
New boats, motors and trailers
Used boats, motors and trailers
Parts, accessories and other
6. PROPERTY AND EQUIPMENT:
Property and equipment consisted of the following as of September 30,
Land
Buildings and improvements
Machinery and equipment
Furniture and fixtures
Vehicles
Less — Accumulated depreciation
2003
2004
(Amounts in thousands)
$ 134,200
26,661
4,521
$ 243,347
33,102
7,348
$ 165,382
$ 283,797
2003
2004
(Amounts in thousands)
$ 22,174
43,302
15,083
8,654
3,814
93,027
(21,128 )
$ 25,629
51,948
17,561
9,857
4,826
109,821
(25,314 )
$ 71,899
$ 84,507
7. GOODWILL AND OTHER INTANGIBLE ASSETS:
Goodwill and identifiable intangible assets are accounted for in accordance with 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 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. We have determined that our most significant
acquired identifiable intangible assets are the dealer agreements, which are indefinite-lived intangible assets. SFAS 142 requires that goodwill and
indefinite-lived intangible assets no longer be amortized, but instead tested for impairment at least annually and whenever events or changes in
circumstances indicate that the carrying value may not be recoverable. 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 as of the beginning of fiscal 2002.
SFAS 142 required the completion of a transitional impairment test within six months from the date of initial adoption. We completed the
transitional impairment test, which resulted in no impairment of goodwill or identifiable intangible assets as of the date of adoption. SFAS 142 also
requires that we assess the impairment of identifiable intangible assets and goodwill at least annually and whenever events or changes in
circumstances indicate that the
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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 annual impairment test during the fourth quarter of fiscal 2004, based on financial information as
of the third quarter of fiscal 2004, 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 the application of SFAS 142.
The changes in the carrying amounts of identifiable intangible assets and net goodwill for the fiscal years ended September 30, were as follows:
Goodwill
Identifiable
Intangible Assets
Balance, September 30, 2002
Additions through acquisitions during the period
(Amounts in thousands)
$ 3,276
1,229
$ 46,313
2,326
Balance, September 30, 2003
Additions through acquisitions during the period
48,639
1,683
4,505
1,035
Balance, September 30, 2004
$ 50,322
$ 5,540
8. SHORT-TERM BORROWINGS:
In December 2001, we entered into a revolving credit facility with four financial institutions that provided us a line of credit with asset-based
borrowing availability of up to $220 million. The facility also allowed us $20 million in traditional floorplan borrowings. The facility had a three-
year term, with two one-year renewal options. During December 2002, we exercised one of the two one-year renewal options, which the bank
approved, extending the maturity date to December 2005. The facility accrued interest at a rate of LIBOR plus 175 to 260 basis points, which was
determined in accordance with a Performance Pricing grid, as defined in the credit facility. Borrowings under the facility were pursuant to a
borrowing base formula and were used primarily for working capital and inventory financing.
In January 2004, we amended the credit facility which extended the term of, added a lender to, and increased the borrowing availability under
the credit facility. The expanded facility provides us with a line of credit with asset based borrowing availability of up to $260 million for working
capital and inventory financing and an additional $20 million for traditional floorplan borrowings, all of which are determined pursuant to a
borrowing base formula. The credit facility requires us to satisfy certain covenants, including maintaining a tangible net worth ratio. As of
September 30, 2004, we were in compliance with all of the covenants. With the extended term, the credit facility currently matures in
December 2006, with two one-year renewal options remaining.
Short-term borrowings as of September 30, 2003 and 2004 were $97.0 million and $153.0 million, respectively. The additional available
borrowings under the credit facility at September 30, 2004 were approximately $65.9 million. At September 30, 2003 and 2004, the interest rate on
the outstanding short-term borrowings was 2.9% and 3.4%, respectively. 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,
F-15
Table of Contents
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 - Vendor Consideration Received” for further discussion of the adoption of this standard.
9. LONG-TERM DEBT:
Long-term debt consisted of the following as of September 30,
Various mortgage notes payable to financial institutions, due
in monthly installments ranging from $800 to $9,000,
bearing interest at rates ranging from 5.96% to 9.79%,
maturing February 2006 through September 2006,
collateralized by machinery, equipment, and real estate
Various mortgage notes payable to financial institutions, due
in monthly installments ranging from $25,800 to $51,000,
bearing interest at rates ranging from 3.34% to 3.79%,
maturing May 2007 through July 2014, collateralized by
certain vehicles and machinery, equipment, and real estate
Various mortgage notes payable to financial institutions, due
in monthly installments ranging from $37,600 to $59,700,
bearing interest at a rates ranging from 6.75% to 7.75%,
maturing September 2010 through July 2012, collateralized
by certain vehicles and machinery, equipment, and real
estate
Less — Current maturities
The aggregate maturities of long-term debt were as follows at September 30, 2004:
2005
2006
2007
2008
2009
Thereafter
Total
F-16
2003
2004
(Amounts in thousands)
$ 1,333
$ 1,268
8,002
13,210
13,088
11,759
22,343
(2,344 )
26,237
(2,885 )
$ 19,999
$ 23,352
(Amounts in thousands)
$ 2,885
3,020
3,054
2,999
3,157
11,122
$ 26,237
Table of Contents
10. INCOME TAXES:
The components of our provision for income taxes consisted of the following for the fiscal years ended September 30,
Current provision:
Federal
State
2002
2003
2004
(Amounts in thousands)
$ 8,243
870
$ 10,074
1,246
$ 14,310
1,636
Total current provision
9,113
11,320
15,946
Deferred provision:
Federal
State
$ 1,427
143
$
910
91
$
Total deferred provision
1,570
1,001
164
16
180
Total income tax provision
$ 10,683
$ 12,321
$ 16,126
Below is a reconciliation of the statutory federal income tax rate to our effective tax rate for the fiscal years ended September 30,
Federal tax provision
State tax provision, net of federal benefit
Other
Effective tax rate
2002
2003
2004
35.0 %
3.3 %
0.2 %
35.0 %
3.5 %
0.0 %
35.0 %
2.8 %
0.2 %
38.5 %
38.5 %
38.0 %
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, were as follows:
Current deferred tax assets (liabilities):
Inventories
Accrued expenses
Net current deferred tax assets
Long-term deferred tax assets (liabilities):
Depreciation and amortization
Other
Net long-term deferred tax liabilities
2003
2004
(Amounts in thousands)
$
(38 )
1,566
$ 1,073
2,392
$ 1,528
$ 3,465
$ (6,912 )
111
$ (9,052 )
134
$ (6,801 )
$ (8,918 )
As of September 30, 2004, 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.
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, 2004, we have purchased an
aggregate of 128,413 shares of common stock under the plan for an aggregate purchase price of approximately $1.3 million. As of September 30,
2004, 89,611 and 8,802 of those repurchased shares have been reissued in conjunction with our Employee Stock Purchase Plan and our Incentive
Stock Plan, respectively.
F-17
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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.
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,
Risk-free interest rate
Dividend yield
Expected life
Volatility
2002
2003
2004
5.4 %
0.0 %
5.4 years
38.8 %
5.1 %
0.0 %
5.4 years
40.7 %
5.0 %
0.0 %
5.4 years
41.9 %
Using these assumptions, the fair value of the stock options granted as of September 30, 2002, 2003, and 2004 was approximately $10.0 million,
$11.6 million, and $15.2 million, respectively, which would be amortized as compensation expense over the vesting period of the options.
A summary of the status of our stock option plans for the fiscal years ended September 30, was as follows:
2002
2003
2004
Options
Weighted-
Average
Exercise Price
Weighted-
Average
Exercise Price
Options
Weighted-
Average
Exercise Price
Options
2,273,209
356,160
(5,771 )
(247,152 )
$ 10.85
$ 8.84
$ 12.50
$ 10.69
2,376,446
395,800
(52,705 )
(394,872 )
$ 10.55
$ 9.96
$ 11.85
$ 11.24
2,324,669
514,594
(271,338 )
(122,845 )
$ 10.31
$ 18.56
$ 11.51
$ 9.91
2,376,446
$ 10.55
2,324,669
$ 10.31
2,446,095
$ 11.92
Outstanding
beginning of year
Granted
Exercised
Forfeited
Outstanding end of
year
The following table summarizes information about outstanding and exercisable stock options at September 30, 2004:
Options Outstanding
Options Exercisable
Range of Exercise
Prices
$ 7.00 - 11.00
$11.01 - 15.00
$15.01 - 19.00
$19.01 - 23.00
$23.01 - 27.00
$27.01 - 31.00
Options
1,205,658
760,937
396,500
38,500
18,500
26,000
2,446,095
Weighted-
Average
Remaining
Contractual Life in
Years
6.3
4.4
8.9
9.5
9.5
9.6
6.3
Weighted-
Average
Exercise
Price
$ 8.73
$ 12.57
$ 17.80
$ 20.41
$ 25.85
$ 28.51
$ 11.92
F-18
Options
306,043
510,128
—
—
—
—
816,171
Weighted-
Average
Exercise
Price
$ 9.03
$ 12.53
$ —
$ —
$ —
$ —
$ 11.21
Table of Contents
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.
During the fiscal year ended September 30, 2004, all warrants issued in conjunction with the fiscal 1999 Boating World acquisition were
exercised. The warrants enabled the holder to purchase 40,000 shares of our common stock at $15.00 per share.
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.
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,
Weighted average common shares outstanding
used in calculating basic earnings per share
Effect of dilutive options
Weighted average common and common
equivalent shares used in calculating diluted
earnings per share
2002
2003
2004
15,270,827
270,146
15,337,873
333,597
15,585,314
1,080,793
15,540,973
15,671,470
16,666,107
Options to purchase 1,136,201, 860,905, and 17,460 shares of common stock were outstanding as of September 30, 2002, 2003, and 2004,
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.
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 $6.5 million, $7.2 million, and $8.9 million for the fiscal years
ended September 30, 2002, 2003, and 2004, respectively. Rental payments to related parties under both cancelable and non-cancelable operating
leases approximated $367,000 and $385,000 for the fiscal years ended September 30, 2003 and 2004, 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 and 2004, 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 would obtain from third parties.
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Table of Contents
Future minimum lease payments under non-cancelable operating leases at September 30, 2004, were as follows:
2005
2006
2007
2008
2009
Thereafter
Total
(Amounts in thousands)
$ 6,546
5,708
5,264
4,135
1,304
1,711
$ 24,668
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, 2004. 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 our 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, up 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 $1.1 million for the fiscal years ended September 30, 2002, 2003,
and 2004.
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 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.
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Table of Contents
Exhibit
Number
EXHIBIT INDEX
Exhibit
10.3(g)
Employment Agreement dated August 18, 2004 between Registrant and Michael H. McLamb
21
23
31.1
31.2
32.1
32.2
List of Subsidiaries
Consent of Ernst & Young 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.
THIS EMPLOYMENT AGREEMENT (this “Agreement”), by and between MarineMax, Inc., a Delaware corporation (the “Company”), and
Michael H. McLamb (“Executive”) is entered into and effective as of the 18th day of August, 2004.
EMPLOYMENT AGREEMENT
RECITALS
A. The Company is engaged primarily in the business of selling, renting, leasing, and servicing boating, nautical, and other related lifestyle
entertainment products and services, and related activities (collectively, the “Watercraft Business”), and Executive has experience in such business.
B. Executive currently serves as Executive Vice President and Chief Financial Officer of the Company. The Company desires to assure itself of the
continued availability of Executive.
C. The Company desires to employ Executive, and Executive desires to accept such employment, pursuant to the terms and conditions set forth in
this Agreement, which shall replace the existing employment agreement between the Company and Executive.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual promises, terms, covenants, and conditions set forth herein and the performance of each, it is
hereby agreed as follows:
1. EMPLOYMENT AND DUTIES.
(a) EMPLOYMENT. The Company hereby employs Executive, and Executive hereby agrees to act, as Executive Vice President and Chief
Financial Officer of the Company. As such, Executive shall have responsibilities, duties, and authority reasonably accorded to, expected of, and
consistent with Executive’s position, and Executive shall report directly to the Chief Executive Officer and to the Board of Directors of the
Company (the “Board”). Executive hereby accepts this employment upon the terms and conditions herein contained and, subject to paragraph l(c)
hereof, agrees to devote his best efforts and substantially all of his business time and attention to promote and further the business of the Company.
(b) POLICIES. Executive shall faithfully adhere to, execute, and fulfill all lawful policies established by the Company.
(c) OTHER ACTIVITIES. Executive shall not, during the term of his employment hereunder, be engaged in any other business activity pursued for
gain, profit, or other pecuniary advantage if such activity interferes in any material respect with Executive’s duties and responsibilities hereunder.
The foregoing limitations shall not be construed as prohibiting Executive from (i) making personal investments in such form or manner as will
neither require his services in the operation or affairs of the companies or enterprises in which such investments are made nor subject Executive to
any conflict of interest with respect to his duties to the Company, (ii) serving on any civic or charitable boards or committees, (iii) delivering
lectures or fulfilling speaking engagements, or
(iii) serving, with the written approval of the Board, as a director of one or more public corporations, in each case so long as any such activities do
not significantly interfere with the performance of Executive’s responsibilities under this Agreement.
(d) PLACE OF PERFORMANCE. Executive shall not be required by the Company or in the performance of his duties to relocate his primary
residence.
2. COMPENSATION. For all services rendered by Executive, the Company shall compensate Executive as follows:
(a) BASE SALARY Effective the date hereof, the base salary payable to Executive shall be Two Hundred Twenty-five Thousand Dollars
($225,000) per year, payable on a regular basis in accordance with the Company’s standard payroll procedures, but not less than monthly. On at
least an annual basis, the Board or a committee of the Board shall review Executive’s performance and may make increases to such base salary if,
in its sole discretion, any such increase is warranted. In no event shall Executive’s base salary be reduced to a level below Two Hundred Twenty-
five Thousand Dollars ($225,000).
(b) BONUS OR OTHER INCENTIVE COMPENSATION. Executive shall be eligible to receive a bonus or other incentive compensation as may
be determined by the Board or a committee of the Board based upon such factors as the Board or such committee, in its sole discretion, may deem
relevant, including, without limitation, the performance of Executive and the Company; provided, however, that the Board or a committee of the
Board shall establish for each fiscal year of the Company a bonus program in which Executive shall be entitled to participate, which provides
Executive with a reasonable opportunity, based on the past compensation practices of the Company and Executive’s then base salary, to maintain or
increase Executive’s total compensation compared to the previous fiscal year.
(c) EXECUTIVE PERQUISITES, BENEFITS, AND OTHER COMPENSATION. Executive shall be entitled to receive additional benefits and
compensation from the Company in such form and to such extent as specified below:
(i) REIMBURSEMENT FOR EXPENSES. Reimbursement for business travel and other out-of-pocket expenses reasonably incurred by Executive
in the performance of his services under this Agreement. All reimbursable expenses shall be appropriately documented in reasonable detail by
Executive upon submission of any request for reimbursement and shall be in a format and manner consistent with the Company’s expense reporting
policy.
(ii) VACATION. Paid vacation in accordance with the applicable policy of the Company as in effect from time to time, but in no event shall
Executive be entitled to less than four (4) weeks paid vacation per year.
(iii) OTHER EXECUTIVE PERQUISITES. The Company shall provide Executive with other executive perquisites as may be made available to or
deemed appropriate for Executive by the Board or a committee of the Board and participation in all other Company-
2
wide employee benefits (including group insurance, pension, retirement, and other plans and programs) as are available to the Company’s executive
officers from time to time.
3. NON-COMPETITION AGREEMENT.
(a) NON-COMPETITION. Executive shall not, during the period of his employment by or with the Company, and for a period equal to the longer
of two (2) years immediately following the termination of his employment under this Agreement or the time during which severance payments are
being made by the Company to Executive in accordance with this Agreement, for any reason whatsoever, directly or indirectly, for himself or on
behalf of or in conjunction with any other person:
(i) OTHER ACTIVITIES. Engage, as an officer, director, shareholder, owner, principal, partner, lender, joint venturer, employee, independent
contractor, consultant, advisor, or sales representative, in any Competitive Business within the Restricted Territory;
(ii) SOLICITATION OF EMPLOYEES. Call upon any person who is, at that time, within the Restricted Territory, an employee of the Company or
any of its subsidiaries, in a managerial capacity for the purpose or with the intent of enticing such employee away from or out of the employ of the
Company or any of its subsidiaries;
(iii) SOLICITATION OF CUSTOMERS. Call upon any person or entity that is, at that time, or that has been, within one (1) year prior to that time,
a customer of the Company or any of its subsidiaries, within the Restricted Territory for the purpose of soliciting or selling products or services in
direct competition with the Company or any of its subsidiaries within the Restricted Territory;
(iv) SOLICITATION OF ACQUISITION CANDIDATES. Call upon any prospective acquisition candidate, on Executive’s own behalf or on
behalf of any person, which candidate was, to Executive’s knowledge after due inquiry, either called upon by the Company, or for which the
Company made an acquisition analysis, for the purpose of acquiring such candidate.
(b) CERTAIN DEFINITIONS. As used in this Agreement, the following terms shall have the meanings ascribed to them:
(i) COMPETITIVE BUSINESS shall mean any person that sells, rents, brokers, leases, stores, repairs, restores, or services recreational boats or
other boating products or provides services relating to recreational boats or other boating products;
(ii) PERSON shall mean any individual, corporation, limited liability company, partnership, firm, or other business of whatever nature;
(iii) RESTRICTED TERRITORY shall mean any state or other political jurisdiction in which, or any location within two hundred (200) miles of
which, the Company or any subsidiary of the Company maintains any facilities; sells, rents, brokers, leases, stores,
3
repairs, restores, or services recreational boats or other boating products; or provides services relating to recreational boats or other boating
products; and
(iv) SUBSIDIARY shall mean the Company’s consolidated subsidiaries, including corporations, partnerships, limited liability companies, and any
other business organization in which the Company holds at least a fifty percent (50%) equity interest.
(c) ENFORCEMENT. Because of the difficulty of measuring economic losses to the Company as a result of a breach of the foregoing covenants,
and because of the immediate and irreparable damage that could be caused to the Company for which it would have no other adequate remedy,
Executive agrees that the foregoing covenants may be enforced by the Company in the event of breach by him, by injunctions and restraining
orders.
(d) REASONABLE RESTRAINT. It is agreed by the parties that the foregoing covenants in this paragraph 3 impose a reasonable restraint on
Executive in light of the activities and business of the Company (including the Company’s subsidiaries) on the date of the execution of this
Agreement and the current plans of the Company (including the Company’s subsidiaries); but it is also the intent of the Company and Executive
that such covenants be construed and enforced in accordance with the changing activities, business, and locations of the Company (including the
Company’s subsidiaries) throughout the term of this covenant, whether before or after the date of termination of the employment of Executive. For
example, if, during the term of this Agreement, the Company (including the Company’s subsidiaries) engages in new and different activities, enters
a new business, or establishes new locations for its current activities or business in addition to or other than the activities or business enumerated
above or the locations currently established therefor, then Executive will be precluded from soliciting the customers or employees of such new
activities or business or from such new location and from directly competing with such new business within the Restricted Territory through the
term of these covenants.
(e) OTHER ACTIVITIES. It is further agreed by the parties that, in the event that Executive shall cease to be employed hereunder and enters into a
business or pursues other activities not in competition with the Company (including the Company’s subsidiaries), or similar activities or business in
locations, the operation of which, under such circumstances, does not violate this paragraph 3, and in any event such new business, activities, or
location are not in violation of this paragraph 3 or of Executive’s obligations under this paragraph 3, if any, Executive shall not be chargeable with a
violation of this paragraph 3 if the Company (including the Company’s subsidiaries) shall thereafter enter the same, similar, or a competitive
(i) business, (ii) course of activities, or (iii) location, as applicable.
(f) SEPARATE COVENANTS. The covenants in this paragraph 3 are severable and separate, and the unenforceability of any specific covenant
shall not affect the provisions of any other covenant. Moreover, in the event any court of competent jurisdiction shall determine that the scope, time,
or territorial restrictions set forth are unreasonable, then it is the intention of the parties that such restrictions be enforced to the fullest extent that
the court deems reasonable, and the Agreement shall thereby be reformed.
4
(g) INDEPENDENT AGREEMENT. All of the covenants in this paragraph 3 shall be construed as an agreement independent of any other
provision in this Agreement, and the existence of any claim or cause of action of Executive against the Company, whether predicated on this
Agreement or otherwise, shall not constitute a defense to the enforcement by the Company of such covenants. It is specifically agreed that the
period of two (2) years following termination of employment stated at the beginning of this paragraph 3, during which the agreements and
covenants of Executive made in this paragraph 3 shall be effective, shall be computed by excluding from such computation any time during which
Executive is in violation of any provision of this paragraph 3.
4. TERM; TERMINATION; RIGHTS ON TERMINATION.
(a) TERM. Unless terminated sooner as provided herein, the term of Executive’s employment under this Agreement shall begin on the date hereof
and continue for three (3) years thereafter (the “Initial Term”) and shall continue on a renewal basis from year to year thereafter (each a “Renewal
Term” and with the Initial Term, the “Term”) on the same terms and conditions in effect as of the time of the latest renewal unless and until notice
of non-renewal shall be given by either party to the other not less than sixty (60) days prior to the end of the then current term.
(b) TERMINATION. Executive’s employment under this Agreement may be terminated in any one of the followings ways:
(i) DEATH OF EXECUTIVE. The employment of Executive shall terminate immediately upon Executive’s death provided that the Company shall,
for a period of six (6) months following such death, pay to the estate of Executive an amount equal to Executive’s base salary and any earned
bonus. In the event of such termination, all options to purchase Common Stock of the Company held by Executive shall thereupon vest and shall be
exercisable during their full term notwithstanding the termination of employment.
(ii) DISABILITY OF EXECUTIVE. If, as a result of incapacity due to physical or mental illness or injury, Executive shall have been absent from
his full-time duties hereunder for six (6) consecutive months, then thirty (30) days after receiving written notice (which notice may occur before or
after the end of such six (6) month period, but which shall not be effective earlier than the last day of such six (6) month period), the Company may
terminate Executive’s employment provided Executive is unable to resume his full-time duties at the conclusion of such notice period. Also,
Executive may terminate his employment if his health should become impaired to an extent that makes the continued performance of his duties
hereunder hazardous to his physical or mental health or his life, provided that Executive shall have furnished the Company with a written statement
from a qualified doctor to such effect and provided, further, that, at the Company’s request made within thirty (30) days of the date of such written
statement, Executive shall submit to an examination by a doctor selected by the Company who is reasonably acceptable to Executive or Executive’s
doctor and such doctor shall have concurred in the conclusion of Executive’s doctor. In the event Executive’s employment under this Agreement is
terminated as a result of Executive’s disability, Executive shall receive from the Company, in a lump-sum payment due within ten (10) days of the
effective date of termination, an amount equal to the average of the base salary and bonus paid to Executive for
5
the two (2) prior full fiscal years, for the lesser of the time period then remaining under the Term of this Agreement or for one (1) year. In the event
of such termination, all options to purchase Common Stock of the Company held by Executive shall thereupon vest and shall be exercisable during
their full term notwithstanding the termination of employment.
(iii) TERMINATION BY THE COMPANY FOR GOOD CAUSE. The Company may terminate Executive’s employment upon ten (10) days prior
written notice to Executive for “Good Cause,” which shall mean any one or more of the following: (A) Executive’s willful, material, and irreparable
breach of this Agreement; (B) Executive’s gross negligence in the performance or intentional nonperformance (continuing for thirty (30) days after
receipt of written notice of need to cure) of any of Executive’s material duties and responsibilities hereunder; (C) Executive’s willful dishonesty,
fraud, or misconduct with respect to the business or affairs of the Company, which materially and adversely affects the operations or reputation of
the Company; (D) Executive’s conviction of a felony crime involving dishonesty or moral turpitude; or (E) a confirmed positive illegal drug test
result. In the event of a termination by the Company for Good Cause, Executive shall have no right to any severance compensation.
(iv) TERMINATION BY THE COMPANY WITHOUT GOOD CAUSE OR BY EXECUTIVE WITH GOOD REASON; FAILURE OF THE
COMPANY TO RENEW. The Company may terminate Executive’s employment without Good Cause during the Term hereof upon the approval of
a majority of the members of the Board, excluding Executive if Executive is a member of the Board. Executive may terminate his employment
under this Agreement for Good Reason upon ten (10) days prior notice to the Company. In addition, the Company may determine not to renew
Executive’s employment under this Agreement.
(A) RESULT OF TERMINATION BY THE COMPANY WITHOUT GOOD CAUSE OR BY EXECUTIVE WITH GOOD REASON. Should the
Company terminate Executive’s employment without Good Cause or should Executive terminate his employment with Good Reason during the
Term, or should the Company determine not to renew Executive’s employment under this Agreement at any time following the Initial Term, the
Company shall pay to Executive for eighteen (18) months after such termination, on such dates as would otherwise be paid by the Company, an
amount equal to the average of the base salary and bonus paid to Executive for the two (2) prior full fiscal years. Further, if the Company terminates
Executive’s employment without Good Cause or Executive terminates his employment with Good Reason, (1) all options to purchase Common
Stock of the Company held by Executive shall vest thereupon and shall be exercisable during their full term notwithstanding the termination of
employment, and (2) Executive shall be entitled to receive all other unpaid benefits due and owing through Executive’s last day of employment.
Further, any termination by the Company without Good Cause or by Executive for Good Reason shall operate to shorten the period of non-
competition set forth in paragraph 3 and during which the terms of paragraph 3 apply to one (1) year from the date of termination of employment.
(B) DEFINITION OF GOOD REASON. Executive shall have “Good Reason” to terminate his employment upon the occurrence of any of the
following events: (1) Executive is demoted by means of a reduction in authority, responsibilities, or duties; (2) Executive’s annual base salary as
determined pursuant to paragraph 2 is reduced to a level that is
6
less than ninety percent (90%) of the base salary paid to Executive during the prior contract year under this Agreement; (3) a change is made in
Executive’s bonus other than as contemplated by paragraph 2(b), unless Executive has agreed in writing to that demotion, reduction, or change; or
(4) the Company breaches a material provision of this Agreement.
(v) RESIGNATION BY EXECUTIVE WITHOUT GOOD REASON. Executive may, without cause, and without Good Reason terminate his own
employment under this Agreement, effective thirty (30) days after written notice is provided to the Company or such earlier time as any such
resignation may be accepted by the Company. If Executive resigns or otherwise terminates his employment without Good Reason, Executive shall
receive no severance compensation.
(vi) CHANGE IN CONTROL OF THE COMPANY.
(A) POSSIBILITY OF CHANGE IN CONTROL. Executive understands and acknowledges that the Company may be merged or consolidated with
or into another entity and that such entity shall automatically succeed to the rights and obligations of the Company hereunder or that the Company
may undergo another type of Change in Control. In the event such a merger or consolidation or other Change in Control is initiated prior to the end
of the Term, then the provisions of this paragraph 4(b)(vi) shall be applicable.
(B) TERMINATION BY EXECUTIVE. Subject to the exceptions set forth in paragraph 4(b)(vi)(E), if any Change of Control is initiated during
Executive’s employment hereunder, Executive may, at his sole discretion, elect to terminate his employment under this Agreement by providing
written notice to the Company at least five (5) business days at any time prior to or within one (1) year after the closing of the transaction giving
rise to the Change in Control. In such case, the applicable provisions of paragraph 4(b)(iv) hereof will apply as though the Company had terminated
Executive’s employment without Good Cause during the Term; however, under such circumstances, the amount of the severance payments due to
Executive shall be paid in a lump sum, the non-competition and non-solicitation provisions of paragraph 3 hereof shall all apply for a period of one
(1) year from the effective date of termination.
(C) EFFECTIVE DATE OF CHANGE IN CONTROL. For purposes of applying paragraph 4 hereof under the circumstances described in 4(b)(vi)
(B) above, the effective date of the Change in Control will be the closing date of the transaction giving rise to the Change in Control and all
compensation, reimbursements, and lump-sum payments due Executive must be paid in full by the Company following such Change in Control
promptly following Executive’s election to terminate his employment. Further, Executive will be given sufficient time and opportunity to elect
whether to exercise all or any of his options to purchase the Company’s Common Stock, such that he may convert the options to shares of the
Company’s Common Stock at or prior to or within one (1) year after the closing of the transaction giving rise to the Change in Control, if he so
desires.
(D) DEFINITION OF CHANGE IN CONTROL. A “Change in Control” shall mean a change in control of a nature that would be required to be
reported in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Securities
7
Exchange Act of 1934, as amended, as in effect on the date of this Agreement, or if Item 6(e) is no longer in effect, any regulations issued by the
Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934, as amended, which serve similar purposes; provided further
that, without limitation, a Change in Control shall be deemed to have occurred if and when:
(1) TURNOVER OF BOARD. The following individuals no longer constitute a majority of the members of the Board: (A) the individuals who, as
of the date of this Agreement, constitute the Board (the “Current Directors”); (B) the individuals who thereafter are elected to the Board and whose
election, or nomination for election, to the Board was approved by a vote of at least two-thirds (2/3) of the Current Directors then still in office
(such directors becoming “Additional Directors” immediately following their election); and (C) the individuals who are elected to the Board and
whose election, or nomination for election, to the Board was approved by a vote of at least two-thirds (2/3) of the Current Directors and Additional
Directors then still in office (such directors also becoming “Additional Directors” immediately following their election);
(2) TENDER OFFER. A tender offer or exchange offer is made whereby the effect of such offer is to take over and control the Company, and such
offer is consummated for the equity securities of the Company representing twenty percent (20%) or more of the combined voting power of the
Company’s then outstanding voting securities;
(3) MERGER OR CONSOLIDATION. The stockholders of the Company shall approve a merger, consolidation, recapitalization, or reorganization
of the Company, a reverse stock split of outstanding voting securities, or consummation of any such transaction if stockholder approval is not
obtained, other than any such transaction that would result in at least seventy-five percent (75%) of the total voting power represented by the voting
securities of the surviving entity outstanding immediately after such transaction being beneficially owned by the holders of outstanding voting
securities of the Company immediately prior to the transaction, with the voting power of each such continuing holder relative to other such
continuing holders not substantially altered in the transaction; or
(4) LIQUIDATION OR SALE OF ASSETS. The stockholders of the Company shall approve a plan of complete liquidation of the Company or an
agreement for the sale or disposition by the Company of all or a substantial portion of the Company’s assets to another person or entity, which is
not a wholly owned subsidiary of the Company (i.e., fifty percent (50%) or more of the total assets of the Company).
(E) EXCEPTIONS FROM CHANGE IN CONTROL. A Change in Control shall not be considered to have taken place for purposes of this
paragraph 4 in the event that both (1) the Change in Control shall have been specifically approved by at least two-thirds (2/3) of the Current and
Additional Directors (as defined above) and (2) the provisions of this Agreement remain in full force and effect as to Executive. Sales of the
Company’s Common Stock beneficially owned or controlled by the Company shall not be considered in determining whether a Change in Control
has occurred.
8
(F) EXCESS PARACHUTE PAYMENTS. Anything in this Agreement to the contrary notwithstanding, in the event it shall be determined that any
payment, distribution or other action by the Company to or for the benefit of the Executive (whether paid or payable or distributed or distributable
pursuant to the terms of this Agreement or otherwise, (including any additional payments required under this Section 4((b)(vii)(F)) (a “Payment”)
would be subject to an excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the “Code”), or any interest or
penalties are incurred by the Executive with respect to any such excise tax (such excise tax, together with any such interest and penalties, are
hereinafter collectively referred to as the “Excise Tax”), the Company shall make a payment to the Executive (a “Gross-Up Payment”) in an amount
such that after payment by the Executive of all taxes (including any Excise Tax) imposed upon the Gross-Up Payment, the Executive retains (or has
had paid to the Internal Revenue Service on his behalf) an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments
The Gross-Up Payment will be due and payable by the Company or its successor within ten (10) days after Executive delivers a written request for
reimbursement accompanied by a copy of his tax return(s) showing the Excise Tax actually incurred by Executive.
(G) NOTIFICATION. Executive shall be notified in writing by the Company at any time that the Company anticipates that a Change in Control
may take place.
(c) PAYMENTS TO TERMINATION DATE. Upon termination of Executive’s employment under this Agreement for any reason provided above,
Executive shall be entitled to receive all compensation earned and all benefits and reimbursements due through the effective date of termination.
Additional compensation subsequent to termination, if any, will be due and payable to Executive only to the extent and in the manner expressly
provided above. All other rights and obligations of the Company and Executive under this Agreement shall cease as of the effective date of
termination, except that the Company’s obligations under paragraph 8 (relating to indemnification of Executive) and Executive’s obligations under
paragraph 3 (relating to non-competition), paragraph 5 (relating to return of Company property), paragraph 6 (relating to inventions), paragraph 7
(relating to trade secrets), and paragraph 9 (relating to prior agreements) shall survive such termination in accordance with their terms.
(d) FAILURE TO PAY EXECUTIVE. If termination of Executive’s employment arises out of the Company’s failure to pay Executive on a timely
basis the amounts to which he is entitled under this Agreement or as a result of any other breach of this Agreement by the Company, as determined
by a court of competent jurisdiction or pursuant to the provisions of paragraph 14, the Company shall pay all amounts and damages to which
Executive may be entitled as a result of such breach, including interest thereon and all reasonable legal fees and expenses and other costs incurred
by Executive to enforce his rights hereunder. Further, none of the provisions of paragraph 3 (relating to non-competition) shall apply in the event
Executive’s employment under this Agreement is terminated as a result of a breach by the Company.
5. RETURN OF COMPANY PROPERTY. All records, designs, patents, business plans, financial statements, manuals, memoranda, lists, and other
property delivered to or compiled by Executive by or on behalf of the Company (or its subsidiaries) or its representatives, vendors, or customers
that pertain to the business of the Company (or its subsidiaries) shall be and remain the property of the Company and be subject at all times to its
discretion and control. Likewise,
9
all correspondence, reports, records, charts, advertising materials, and other similar data pertaining to the business, activities, or future plans of the
Company (or its subsidiaries) that is collected by Executive shall be delivered promptly to the Company without request by it upon termination of
Executive’s employment.
6. INVENTIONS. Executive shall disclose promptly to the Company any and all significant conceptions and ideas for inventions, improvements,
and valuable discoveries, whether patentable or not, which are conceived or made by Executive, solely or jointly with another, during the period of
employment or within one (1) year thereafter, and which are directly related to the business or activities of the Company (or its subsidiaries) and
which Executive conceives as a result of his employment by the Company. Executive hereby assigns and agrees to assign all his interests therein to
the Company or its nominee. Whenever requested to do so by the Company, Executive shall execute any and all applications, assignments, and
other instruments that the Company shall deem necessary to apply for and obtain Letters Patent of the United States or any foreign country or to
otherwise protect the Company’s interest therein.
7. TRADE SECRETS. Executive agrees that he will not, during or after the period of employment under this Agreement, disclose the specific terms
of the Company’s relationships or agreements with its respective significant vendors or customers, or any other significant and material trade secret
of the Company, whether in existence or proposed, to any person, firm, partnership, corporation, or business for any reason or purpose whatsoever.
8. INDEMNIFICATION. In the event Executive is made a party to any threatened, pending, or completed action, suit, or proceeding, whether civil,
criminal, administrative, or investigative (other than an action by the Company against Executive), by reason of the fact that he is or was
performing services under this Agreement, then the Company shall indemnify Executive against all expenses (including attorneys’ fees), judgments,
fines, and amounts paid in settlement, as actually and reasonably incurred by Executive in connection therewith to the maximum extent permitted
by applicable law. The advancement of expenses shall be mandatory. In the event that both Executive and the Company are made a party to the
same third-party action, complaint, suit, or proceeding, the Company agrees to engage competent legal representation, and Executive agrees to use
the same representation, provided that if counsel selected by the Company shall have a conflict of interest that prevents such counsel from
representing Executive, Executive may engage separate counsel and the Company shall pay all attorneys’ fees of such separate counsel. Further,
while Executive is expected at all times to use his best efforts to faithfully discharge his duties under this Agreement, Executive cannot be held
liable to the Company for errors or omissions made in good faith if Executive has not exhibited gross, willful, and wanton negligence and
misconduct or performed criminal and fraudulent acts that materially damage the business of the Company. Notwithstanding this paragraph 8, the
provision of any written indemnification agreement applicable to the directors or officers of the Company to which Executive shall be a party shall
apply rather than this paragraph 8 to the extent inconsistent with this paragraph 8.
9. NO PRIOR AGREEMENTS. Executive hereby represents and warrants to the Company that the execution of this Agreement by Executive and
his employment by the Company and the performance of his duties hereunder will not violate or be a breach of any
10
agreement with a former employer, client, or any other person or entity. Further, Executive agrees to indemnify the Company for any claim,
including, but not limited to, attorneys’ fees and expenses of investigation, by any such third party that such third party may now have or may
hereafter come to have against the Company based upon or arising out of any non-competition, invention, or secrecy agreement between Executive
and such third party that was in existence as of the date of this Agreement.
10. ASSIGNMENT; BINDING EFFECT. Executive understands that he is being employed by the Company on the basis of his personal
qualifications, experience, and skills. Executive agrees, therefore, he cannot assign all or any portion of his performance under this Agreement.
Subject to the preceding two (2) sentences and the express provisions of paragraph 11 below, this Agreement shall be binding upon, inure to the
benefit of and be enforceable by the parties hereto and their respective heirs, legal representatives, successors, and assigns.
11. COMPLETE AGREEMENT. This Agreement is not a promise of future employment. Executive has no oral representations, understandings, or
agreements with the Company or any of its officers, directors, or representatives covering the same subject matter as this Agreement. This written
Agreement is the final, complete, and exclusive statement and expression of the agreement between the Company and Executive and of all the
terms of this Agreement, and it cannot be varied, contradicted, or supplemented by evidence of any prior or contemporaneous oral or written
agreements. This written Agreement may not be later modified except by a further writing signed by a duly authorized officer of the Company and
Executive, and no term of this Agreement may be waived except by writing signed by the party waiving the benefit of such term. This Agreement
hereby supersedes any other employment agreements or understandings, written or oral, between the Company and Executive.
12. NOTICE. Whenever any notice is required hereunder, it shall be given in writing addressed as follows:
To the Company:
To Executive:
In either case with a copy to:
MarineMax, Inc.
18167 U.S. Highway 19 North, Suite 300
Clearwater, Florida 33764
Attention: Chief Executive Officer
Michael H. McLamb
18167 U.S. Highway 19 North, Suite 300
Clearwater, Florida 33764
Greenberg Traurig, LLP
2375 East Camelback Road
Suite 700
Phoenix, Arizona 85016
Attention: Robert S. Kant, Esq.
Notice shall be deemed given and effective on the earlier of three (3) days after the deposit in the U.S. mail of a writing addressed as above and sent
first class mail, certified,
11
return receipt requested, or when actually received. Either party may change the address for notice by notifying the other party of such change in
accordance with this paragraph 13.
13. SEVERABILITY; HEADINGS. If any portion of this Agreement is held invalid or inoperative, the other portions of this Agreement shall be
deemed valid and operative and, so far as is reasonable and possible, effect shall be given to the intent manifested by the portion held invalid or
inoperative. The paragraph headings herein are for reference purposes only and are not intended in any way to describe, interpret, define or limit the
extent or intent of the Agreement or of any part hereof.
14. MEDIATION ARBITRATION. All disputes arising out of this Agreement shall be resolved as set forth in this paragraph 15. If any party hereto
desires to make any claim arising out of this Agreement (“Claimant”), then such party shall first deliver to the other party (“Respondent”) written
notice (“Claim Notice”) of Claimant’s intent to make such claim explaining Claimant’s reasons for such claim in sufficient detail for Respondent to
respond. Respondent shall have ten (10) business days from the date the Claim Notice was given to Respondent to object in writing to the claim
(“Notice of Objection”), or otherwise cure any breach hereof alleged in the Claim Notice. Any Notice of Objection shall specify with particularity
the reasons for such objection. Following receipt of the Notice of Objection, if any, Claimant and Respondent shall immediately seek to resolve by
good faith negotiations the dispute alleged in the Claim Notice, and may at the request of either party, utilize the services of an independent
mediator. If Claimant and Respondent are unable to resolve the dispute in writing within ten (10) business days from the date negotiations began,
then without the necessity of further agreement of Claimant or Respondent, the dispute set forth in the Claim Notice shall be submitted to binding
arbitration (except for claims arising out of paragraphs 3 or 7 hereof), initiated by either Claimant or Respondent pursuant to this paragraph. Such
arbitration shall be conducted before a panel of three (3) arbitrators in Tampa, Florida, in accordance with the National Rules for the Resolution of
Employment Disputes of the American Arbitration Association (“AAA”) then in effect provided that the parties may agree to use arbitrators other
than those provided by the AAA. The arbitrators shall not have the authority to add to, detract from, or modify any provision hereof nor to award
punitive damages to any injured party. The arbitrators shall have the authority to order back-pay, severance compensation, vesting of options (or
cash compensation in lieu of vesting of options), reimbursement of costs, including those incurred to enforce this Agreement, and interest thereon in
the event the arbitrators determine that Executive was terminated without disability or without Good Cause, as defined in paragraphs 4(b) and 4(c)
hereof, respectively, or that the Company has otherwise materially breached this Agreement. A decision by a majority of the arbitration panel shall
be final and binding. Judgment may be entered on the arbitrators’ award in any court having jurisdiction. The direct expense of any mediation or
arbitration proceeding and, to the extent Executive prevails, all reasonable legal fees shall be borne by the Company.
15. NO PARTICIPATION IN SEVERANCE PLANS. Except as contemplated by this Agreement, Executive acknowledges and agrees that the
compensation and other benefits set forth in this Agreement are and shall be in lieu of any compensation or other benefits that may otherwise be
payable to or on behalf of Executive pursuant to the terms of any severance pay arrangement of the Company or any affiliate thereof, or any other
similar arrangement of the
12
Company or any affiliates thereof providing for benefits upon involuntary termination of employment.
16. GOVERNING LAW. This Agreement shall in all respects be construed according to the laws of the state of Florida, notwithstanding the
conflict of laws provisions of such state.
17. COUNTERPARTS; FACSIMILE. This Agreement may be executed by facsimile and in two (2) or more counterparts, each of which shall be
deemed an original and all of which together shall constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.
MARINEMAX, INC.
By: /s/ Bill McGill
Title CEO, Chairman
Name: William H. McGill
Its: CEO, Chairman
Michael H. McLamb
EXECUTIVE:
/s/ Michael H. McLamb
13
LIST OF SUBSIDIARIES OF
MARINEMAX, INC.
(as of December 6, 2004)
Exhibit 21
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 Colorado, Inc.
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)
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
Delaware
Georgia
Delaware
Minnesota
Delaware
North Carolina
Delaware
Delaware
Delaware
Name Of Subsidiary
MarineMax of Southwest Florida, LLC (3)
MarineMax of Utah, Inc.
MarineMax Services, Inc. (5)
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. (5)
MMX Partners, Inc.
MMX Ventures, LP (10)
Newcoast Financial Services, Inc.
Walker Marina Realty, L.L.C.
State Of Incorporation
Or Organization
Delaware
Delaware
Delaware
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) 99% owned by MMX Partners, Inc. as limited partner and 1% owned by MMX GP, LLC as general partner.
CONSENT OF INDEPENDENT REGISTERED
CERTIFIED PUBLIC ACCOUNTING FIRM
Exhibit 23
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 November 3, 2004, with respect to the consolidated financial statements of MarineMax, Inc. included in the
Annual Report (Form 10-K) for the year ended September 30, 2004.
/s/ Ernst & Young LLP
Tampa, Florida
December 10, 2004
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 10, 2004
/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 10, 2004
/s/ Michael H. McLamb
Michael H. McLamb
Chief Financial Officer
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report on Form 10-K of MarineMax, Inc. (the “Company”) for the fiscal year ended September 30, 2004, 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.
/s/ William H. McGill Jr.
William H. McGill Jr.
Chief Executive Officer
December 10, 2004
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report on Form 10-K of MarineMax, Inc. (the “Company”) for the fiscal year ended September 30, 2004, 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 10, 2004