MARINEMAX INC
FORM 10-K
(Annual Report)
Filed 12/14/2006 For Period Ending 9/30/2006
Address
18167 US 19 N SUITE 499
CLEARWATER, Florida 33764
Telephone
CIK
Industry
Sector
Fiscal Year
813-531-1700
0001057060
Retail (Specialty)
Services
09/30
Table of Contents
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
(cid:3) (cid:3) (cid:3) (cid:3)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For fiscal year ended September 30, 2006
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 if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes
(cid:1) No (cid:3)
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the
Securities Act. Yes (cid:1) No (cid:3)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes (cid:3) No (cid:1)
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:1)
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filed, or a non-accelerated filer.
See definition of “accelerated filer and large accelerated filer” in Rule 12B-2 of the Exchange Act.
Large accelerated filer (cid:1) Accelerated Filer (cid:3) Non-accelerated filer (cid:1)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes (cid:1) No
(cid:3)
The aggregate market value of common stock held by nonaffiliates of the registrant (16,925,391 shares) based on the
closing price of the registrant’s common stock as reported on the New York Stock Exchange on March 31, 2006, which was
the last business day of the registrant’s most recently completed second fiscal quarter, was $567,339,106. 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, 2006, there were outstanding 18,610,001 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 2007 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, 2006
TABLE OF CONTENTS
PART I
ITEM 1.
ITEM 1A.
ITEM 1B.
ITEM 2.
ITEM 3.
ITEM 4.
BUSINESS
RISK FACTORS
UNRESOLVED STAFF COMMENTS
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.
ITEM 9A.
ITEM 9B.
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
CONTROLS AND PROCEDURES
OTHER INFORMATION
PART III
ITEM 10.
ITEM 11.
ITEM 12.
ITEM 13.
ITEM 14.
DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
EXECUTIVE COMPENSATION
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
AND RELATED STOCKHOLDER MATTERS
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
PRINCIPAL ACCOUNTANT FEES AND SERVICES
Page
1
23
34
34
38
38
39
40
41
48
49
49
49
51
51
51
51
51
51
PART IV
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
ITEM 15.
SIGNATURES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
EX-23.1
EX-31.1
EX-31.2
EX-32.1
EX-32.2
52
54
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 1A. 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 88 retail locations in Alabama, Arizona,
California, Colorado, Connecticut, Delaware, Florida, Georgia, Maryland, Minnesota, Missouri, Nevada, New
Jersey, New York, North Carolina, Ohio, Oklahoma, Rhode Island, South Carolina, Tennessee, Texas, and Utah, we
sell new and used recreational boats, including pleasure, 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 59% of our revenue in fiscal 2006. Brunswick is the world’s largest manufacturer of marine products
and marine engines. We believe our sales represented in excess of 13% of all Brunswick marine sales, including
approximately 40% of its Sea Ray boat sales, during our 2006 fiscal year. Through operating subsidiaries, we are a
party to dealer agreements with Brunswick covering these products and we are the exclusive dealer of each in our
geographic markets.
We are the exclusive dealer for Italy-based Ferretti Group for Ferretti Yachts, Pershing, Riva, Apreamare, and
Mochi Craft mega-yachts, yachts, and other recreational boats for the United States, Canada, the Bahamas, and
Mexico. 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.
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 20 additional previously independent recreational boat
dealers, two boat brokerage operations, and two full-service yacht repair operations. 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 2006 was approximately $116,000, an increase of 12% from fiscal
2005, compared with the industry average calendar 2005 selling price of approximately $31,000 based on industry
data published by the National Marine Manufacturers Association. Our stores, which operated at least 12 months,
averaged approximately $17.1 million in annual sales in fiscal 2006. 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, 2006, we had revenue of
$1.2 billion, operating income of $84.0 million, and net income of $39.4 million. Our same-store sales increased
approximately 7% in fiscal 2006 and has averaged approximately 12% for the last five years.
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 $37.3 billion in retail sales in calendar 2005,
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 $28.9 billion of these sales in 2005 based on industry
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
1
Table of Contents
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;
• 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 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;
• promoting national brand name recognition and the MarineMax connection;
• expanding our Internet retail operations and marketing;
• emphasizing the “best practices” developed by us and our acquired dealers as appropriate throughout our
dealerships;
• 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 20 additional recreational boat
dealers, two boat brokerage operations, and two full-service yacht repair operations. 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.
2
Table of Contents
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
Port Arrowhead Marina, Inc.
Great American Marina(1)
Surfside — 3 Marina, Inc.
(1) Joint venture
March 1998
March 1998
March 1998
March 1998
Southeast Florida
Dallas and Houston, Texas
West Central, Florida
Southwest Florida
March 1998
April 1998
Northern California and Arizona
Georgia
July 1998
July 1998
September 1998
September 1998
September 1998
October 1998
February 1999
March 1999
April 1999
August 1999
December 1999
Minnesota
North and South Carolina
East Central Florida
Nevada
Northern Ohio
Southeast Florida
Dallas, Texas
Southern New Jersey
Central New Jersey
Northeast Florida
Utah
April 2000
January 2001
April 2002
July 2002
June 2003
Northern New Jersey
Southeast Florida
West Florida
Southern California
Colorado
September 2003
Northwest Florida and Alabama
October 2003
June 2004
June 2004
January 2006
February 2006
March 2006
Southeast Florida
Baltimore, Maryland
Northeast Florida
Missouri, Oklahoma
West Florida
Connecticut, Maryland, New York, Rhode
Island
Apart from acquisitions, we have opened 20 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.
3
Table of Contents
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.
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
Boston Whaler
Hatteras Yachts
Boston Whaler
Boston Whaler
Baja
Meridian Yachts
Grady White
Hatteras Yachts
Boston Whaler
Century
Ferretti Yachts, Pershing, Riva,
Apreamare, and Mochi Craft
Bertram
Princecraft
Baja
Boston Whaler
Tracker Marine
Azimut
Atlantis
Cabo
Laguna
Fiscal Year
1997
1999
1999
2000
2001
2002
2002
2002
2004
2004
2004
2004
2004
2005
2005
2005
2006
2006
2006
2006
Geographic Regions
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
Florida, Georgia, North and South Carolina, New Jersey,
Ohio, Minnesota, Texas, and Delaware
Houston, Texas
Texas
North and South Carolina
North and South Carolina
United States, Canada, the Bahamas, and Mexico
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
Tempe, Arizona, Colorado, Dallas, Texas, and Utah
Houston and Dallas, Texas
Las Vegas, Nevada
Northeast United States from Maryland to Maine
Northeast United States from Maryland to Maine
Cape Haze, Clearwater, Destin, and Naples, Florida
Florida, New Jersey, New York
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
4
Table of Contents
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; 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 20 recreational boat dealers, two boat brokerage operations, and two full-service yacht repair operations
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
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.
5
Table of Contents
General
BUSINESS
We are the largest recreational boat dealer in the United States. Through 88 retail locations in Alabama, Arizona,
California, Colorado, Connecticut, Delaware, Florida, Georgia, Maryland, Minnesota, Missouri, Nevada, New
Jersey, New York, North Carolina, Ohio, Oklahoma, Rhode Island, South Carolina, Tennessee, Texas, and Utah, we
sell new and used recreational boats, including pleasure boats (such as sport boats, sport cruisers, sport yachts, and
yachts), 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 59% of our revenue in fiscal 2006. Brunswick
is the world’s largest manufacturer of marine products and marine engines. We believe our sales represented in
excess of 13% of all Brunswick marine sales during our 2006 fiscal year. Our principal operating subsidiaries are a
party to dealer agreements with Brunswick covering these products and are the exclusive dealer of such 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, and Mochi Craft mega-yachts, yachts,
and other recreational boats for the United States, Canada, the Bahamas, and Mexico. 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. We are also the exclusive dealer for Cabo Yachts throughout the state of Florida. We are
the exclusive dealer for Italy-based Azimut-Benetti Group for Azimut and Atlantis mega-yachts, yachts, and other
recreational boats for the Northeast United States from Maryland to Maine.
U.S. Recreational Boating Industry
The total U.S. recreational boating industry generated approximately $37.3 billion in retail sales in calendar
2005, 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 $28.9 billion of such sales in 2005. 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.
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
6
Table of Contents
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 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
7
Table of Contents
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. We have entered into an agreement regarding acquisitions with the Sea Ray Division of
Brunswick. Under the agreement, acquisitions of Sea Ray dealers will be mutually agreed upon by us and Sea
Ray with reasonable efforts to be made to include a balance of Sea Ray dealers that have been successful and
those that have not been. The agreement provides that Sea Ray will not unreasonably withhold its consent to any
proposed acquisition of a Sea Ray dealer by us, subject to the conditions set forth in the agreement, 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 markets. We believe that the demographics of our existing geographic territories support the opening of
additional facilities, and we have opened 20 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.
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.
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.
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
8
Table of Contents
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 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 and Laguna fishing boats; Meridian Yachts; Cabo Yachts; and Hatteras Yachts. In
fiscal 2006, we derived approximately 59% of our revenue from the sale of new boats manufactured by Brunswick.
We believe that we represented in excess of 13% 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, and Mochi Craft. Certain of our dealerships also sell
luxury yachts, fishing boats, and pontoon boats provided by other manufacturers, including Italy-based Azimut.
During fiscal 2006, new boat sales accounted for approximately 70.9% 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 2006 average new boat sales price of approximately $116,000, an increase
of 12% from fiscal 2005, compared with an estimated industry average calendar 2005 selling price of approximately
$31,000 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.
9
Table of Contents
The following table is illustrative of the range and approximate manufacturer suggested retail price range of new
boats that we offer, but is not all inclusive:
Product Line and Trade Name
Motor Yachts
Hatteras Motor Yachts
Ferretti
Azimut
Convertibles
Hatteras Convertibles
Bertram
Cabo
Pleasure Boats
Sea Ray
Meridian
Fishing Boats
Boston Whaler
Laguna
Specialty Boats & Yachts
Pershing
Riva
Apreamare
Mochi Craft.
Overall Length
Manufacturer Suggested
Retail Price Range
64 to 100 $ 3,000,000 to $10,000,000 +
1,100,000 to 7,500,000 +
790,000 to 10,600,000 +
46 to 88
43 to 116
50 to 90
36 to 67
32 to 52
17 to 60
35 to 59
11 to 32
18 to 24
2,300,000 to 7,000,000 +
500,000 to 3,500,000 +
450,000 to 1,700,000 +
21,000 to 2,500,000
300,000 to 1,600,000
8,000 to 210,000
25,000 to 55,000
50 to 115
33 to 115
25 to 53
44 to 74
1,600,000 to 13,000,000 +
600,000 to 9,000,000 +
350,000 to 2,000,000 +
1,200,000 to 4,600,000 +
Motor Yachts. Hatteras Yachts, Ferretti Group, and Azimut are three 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. Azimut yachts are known for their Americanized open layout with Italian design,
powerful performance, and accuracy. The luxurious interiors are accented by windows and multiple accommodations
that have been cleverly designed for comfort.
Convertibles. Hatteras Yachts, Bertram Yachts, and Cabo Yachts are three 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. The
Cabo series are known for spacious cockpits and accessibility to essentials, such as bait chests, livewells, bait prep
centers, and tackle lockers. Cabo interiors offer elegance, highlighted by teak woodwork, halogen lighting, and ample
storage areas.
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 cruiser models. Sea Ray sport boat and sport cruiser models are designed for
performance and dependability to meet family recreational needs and include many of the features and
accommodations of Sea Ray’s sport yacht and yacht models. Meridian sport yachts and yachts are known for their
10
Table of Contents
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 and Laguna, 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, 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 2006, used boat sales accounted for approximately 17.0% of
our revenue, and approximately 75% 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.
11
Table of Contents
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 Quicksilver
line); 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
2.9% of our fiscal 2006 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 2006.
This includes warranty and non-warranty services.
F&I Products
At each of our retail locations, we offer our customers the ability to finance new or used boat purchases and to
purchase extended service contracts and arrange insurance coverage, including boat property, credit life, and
accident, disability, and casualty insurance coverage (collectively, “F&I”).
We have relationships with various national marine product lenders under which the lenders purchase retail
installment contracts evidencing retail sales of boats and other marine products that are originated by us in
accordance with existing pre-sale agreements between us and the lenders. These arrangements permit us to receive a
portion of the finance charges expected to be earned on the retail installment contract based on a variety of factors,
including the credit standing of the buyer, the annual percentage rate of the contract charged to the buyer, and the
lender’s then current minimum required annual percentage rate charged to the buyer on the contract. This
12
Table of Contents
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 2006, fee income generated from F&I products accounted for approximately 3.2% 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 2006, brokerage services accounted for approximately 1.1% 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.
Retail Locations
We sell our recreational boats and other marine products and offer our related boat services through 88 retail
locations in Alabama, Arizona, California, Colorado, Connecticut, Delaware, Florida, Georgia, Maryland,
Minnesota, Missouri, Nevada, New Jersey, New York, North Carolina, Ohio, Oklahoma, Rhode Island, South
Carolina, Tennessee, Texas, and Utah. Each retail location generally includes an indoor showroom (including some
13
Table of Contents
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, Newport Harbor, and Mission Bay in California; Norwalk Harbor in Connecticut; multiple
locations on the Intracoastal Waterway, the Atlantic Ocean, Biscayne Bay, Boca Ciega Bay, Naples Bay (next to the
Gulf of Mexico), Tampa Bay, and the Caloosahatchee River in Florida; Lake Lanier and Lake Altoona in Georgia;
Chesapeake Bay in Maryland; Leech Lake and the St. Croix River in Minnesota; Lake of the Ozarks, Table Rock
Lake, and the Mississippi River in Missouri; Barnegat Bay, the Delaware River, the Hudson River, Lake Hopatcong,
Little Egg Harbor, and the Manasquan River in New Jersey; Great Sound Bay, the Hudson River, and Huntington
Harbor in New York; the Intracoastal Waterway in North Carolina; Lake Erie in Ohio; Grand Lake in Oklahoma;
Myrtle Beach in South Carolina; and Clear Lake, Lake Conroe, and Lake Lewisville in Texas. Our waterfront retail
locations, most of which include marina-type facilities and docks at which we display our boats, are easily accessible
to the boating populace, serve as in-water showrooms, and enable the sales force to give 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.
14
Table of Contents
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, Cabo, Hatteras, Princecraft, and
Meridian. We also purchase new boats and other marine related products from other manufacturers, including
Azimut, Bertram, Century, the Ferretti Group, Grady White, Sea Pro, and Tracker Marine. In fiscal 2006, sales of
new Brunswick boats accounted for approximately 59% of our revenue. No other manufacturer accounted for more
than 10% of our revenue in fiscal 2006. We believe our Sea Ray boat purchases represented approximately 40% of
Sea Ray’s new boat sales and in excess of 13% of all Brunswick marine product sales during fiscal 2006.
15
Table of Contents
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 dealer agreement appoints a designated geographical territory for the
dealer, which is exclusive to the dealer as long as the dealer is not in breach of the material obligations and
performance standards under the agreement and Sea Ray’s then current material policies and programs following
notice and the expiration of any applicable cure periods without cure.
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 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.
Upon the completion of the Surfside-3 acquisition, we became the exclusive dealer for Azimut-Benetti Group’s
(Azimut) product line of Azimut. The Azimut dealer agreement provides a geographic territory to promote the
product line and to network with the appropriate clientele through various independent locations designated for
Azimut retail sales.
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, 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. 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.
Our revolving credit facility currently provides us with a line of credit with asset-based borrowing availability of
up to $500 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
16
Table of Contents
us to satisfy certain covenants, including maintaining a tangible net worth ratio. The credit facility currently matures
in May 2011, with two one-year renewal options remaining. The credit facility was last amended in June 2006 to
extend the terms and increase the borrowing availability.
As of September 30, 2006, we owed an aggregate of $321.5 million under our revolving credit facility. As of
September 30, 2006, our revolving credit facility provided us with an additional available borrowing capacity of
approximately $130.0 million. Advances on the facility accrued interest at a rate of 6.8% as of September 30, 2006.
We were in compliance with all covenants in the facility as of September 30, 2006.
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 the Sea Ray Division of Brunswick are parties to an agreement extending through December 2015 that
provides a process for our continued growth through the acquisition of additional Sea Ray boat dealers that desire to
be acquired by us. Under the agreement, acquisitions of Sea Ray dealers will be mutually agreed upon by us and Sea
Ray with reasonable efforts to be made to include a balance of Sea Ray dealers that have been successful and those
that have not been. The agreement provides that Sea Ray will not unreasonably withhold its consent to any proposed
acquisition of a Sea Ray dealer by us, subject to the conditions set forth in the agreement. Among other things, the
agreement provides for us to provide Sea Ray with a business plan for each proposed acquisition, including historical
financial and five-year projected financial information regarding the acquisition candidate; marketing and advertising
plans; service capabilities and managerial and staff personnel; information regarding the ability of the candidate to
achieve performance standards within designated periods; and information regarding the success of our previous
acquisitions of Sea Ray dealers. The agreement also contemplates Sea Ray reaching a good faith determination
whether the acquisition would be in its best interest based on our dedication and focus of resources on the Sea Ray
brand and Sea Ray’s consideration of any adverse effects that the approval would have on the resulting territory
configuration and adjacent or other dealers sales and the absence of any violation of applicable laws or rights granted
by Sea Ray to others.
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 extending through December 2015. Each of these dealer
agreements appoints one of our operating subsidiaries as a dealer for the retail sale, display, and servicing of
designated Sea Ray products, parts, and accessories currently or in the future sold by Sea Ray. Each dealer agreement
designates a designated geographical territory for the dealer, which is exclusive to the dealer as long as the dealer is
not in breach of the material obligations and performance standards under the agreement and Sea Ray’s then current
material policies and programs following notice and the expiration of any applicable cure periods without cure. 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. Each dealer
agreement also restricts the dealer from selling, advertising (other than in recognized and established
17
Table of Contents
marine publications), soliciting for sale, or offering for resale any Sea Ray products outside its territory 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. In addition, each dealer agreement provides for the lowest product prices charged by
Sea Ray from time to time to other domestic Sea Ray dealers, subject to the dealer meeting all the requirements and
conditions of Sea Ray’s applicable programs and the right of Sea Ray 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.
Among other things, each dealer agreement requires the dealer to
• devote its best efforts to promote, display, advertise, and sell Sea Ray products at each of its retail locations in
accordance with the agreement and applicable laws;
• display and utilize at each of its retail locations signs, graphics, and image elements with Sea Ray’s
identification that positively reflect the Sea Ray image and promote the retail sale of Sea Ray products;
• purchase and maintain at all times sufficient inventory of current Sea Ray products to meet the reasonable
demand of customers at each of its locations and to meet Sea Ray’s applicable minimum inventory
requirements;
• maintain at each retail location, or at another acceptable location, a service department that is properly staffed
and equipped to service Sea Ray products promptly and professionally and to maintain parts and supplies to
service Sea Ray products properly on a timely basis;
• perform all necessary product rigging, installation, and inspection services prior to delivery to purchasers in
accordance with Sea Ray’s standards and perform post-sale services of all Sea Ray products sold by the dealer
and brought to the dealer for service;
• provide or arrange for warranty and service work for Sea Ray products regardless of the selling dealer or
condition of sale;
• exercise reasonable efforts to address circumstances in which another dealer has made a sale to an original
retail purchases who permanently resides within the dealer’s territory where such sale is contrary to the selling
dealer’s Sales and Service Agreement;
• provide appropriate instructions to purchasers on how to obtain warranty and service work from the dealer;
• furnish product purchasers with Sea Ray’s limited warranty on new products and with information and
training as to the safe and proper operation and maintenance of the products;
• assist Sea Ray in performing any product defect and recall campaigns;
• achieve sales performance in accordance with fair and reasonable standards and sales levels established by
Sea Ray in consultation with the dealer based on factors such as population, sales potential, market share
percentage of Sea Ray products sold in the territory compared with competitive products sold in the territory,
local economic conditions, competition, past sales history, number of retail locations, and other special
circumstances that may affect the sale of Sea Ray products or the dealer, in each case consistent with
standards established for all domestic Sea Ray dealers selling comparable products;
• provide designated financial information that are truthful and accurate;
• conduct its business in a manner that preserves and enhances the reputation and goodwill of both Sea Ray and
the dealer for providing quality products and services;
• maintain the financial ability to purchase and maintain on hand and display Sea Ray’s current product models;
• maintain customer service ratings in compliance with Sea Ray’s criteria;
• comply with those dealer’s obligations that may be imposed or established by Sea Ray applicable to all
domestic Sea Ray dealers;
18
Table of Contents
• maintain a financial condition that is adequate to satisfy and perform its obligations under the agreement;
• achieve within designated time periods or maintain motor dealer status (which is Sea Ray’s highest
performance status) or other applicable certification requirements as established from time to time by Sea Ray
applicable to all domestic Sea Ray dealers;
• notify Sea Ray of the addition or deletion of any retail locations;
• sell Sea Ray products only on the basis of Sea Ray’s published applicable limited warranty and make no other
warranty or representations concerning the limited warranty, expressed or implied, either verbally or in
writing;
• provide timely warranty service on all Sea Ray products presented to the dealer by purchasers in accordance
with Sea Ray’s then current warranty program applicable to all domestic Sea Ray dealers selling comparable
Sea Ray products; and
• provide Sea Ray with access to the dealer’s books and records and such other information as Sea Ray may
reasonably request to verify the accuracy of the warranty claims submitted to Sea Ray by the dealer with
regard to such warranty claims;
Sea Ray has agreed to indemnify each of our dealers against any losses to third parties resulting from Sea Ray’s
negligent acts or omissions involving the design or manufacture of any of its products or any breach by it of the
agreement. Each of our dealers has agreed to indemnify Sea Ray against any losses to third parties resulting from the
dealer’s negligent acts or omissions involving the dealer’s application, use, or repair of Sea Ray products, statements
or representation not specifically authorized by Sea Ray, the installation of any after market components or any other
modification or alteration of Sea Ray products, and any breach by the dealer of the agreement.
Each dealer agreement may be terminated
• by Sea Ray, upon 60 days prior written notice, if the dealer fails or refuses to place a minimum stocking order
of the next model year’s products in accordance with requirements applicable to all Sea Ray dealers generally
or fails to meet its financial obligations as they become due to Sea Ray or to the dealer’s lenders;
• by Sea Ray or the dealer, upon 60 days written notice to the other, in the event of a breach or default by the
other with any of the of the material obligations, performance standards, covenants, representations,
warranties, or duties imposed by the agreement or the Sea Ray manual that has not been cured within 60 days
of the notice of the claimed deficiency or within a reasonable period when the cure cannot be completed
within a 60-day period, or at the end of the 60-day period without the opportunity to cure when the cause
constitutes bad faith;
• by Sea Ray or the dealer if the other makes a fraudulent misrepresentation that is material to the agreement or
the other engages in an incurable act of 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 15 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; and
• upon the mutual consent of Sea Ray and the dealer.
Employees
As of September 30, 2006, we had 2,182 employees, 2,090 of whom were in store-level operations and 92 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.
19
Table of Contents
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,” “Newcoast Financial Services,” “MarineMax Boating Gear Center,” and “Women
on Water.” We have registered the name “MarineMax” in the European Community. We have a trademark
application pending with the U.S. Patent and Trademark Office for “Value Price.” 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, 2006, the average revenue for the
quarters ended December 31, March 31, June 30, and September 30 represented approximately 18%, 25%, 32%, 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 2005 and 2006 when Florida and other markets were affected by numerous
hurricanes. Although our geographic diversity is likely to reduce the overall impact to us of adverse weather
conditions in any one market area, these conditions will continue to represent potential, material adverse risks to us
and our future financial performance.
Environmental and Other Regulatory Issues
Our operations are subject to extensive regulation, supervision, and licensing under various federal, state, and
local statutes, ordinances, and regulations. While we believe that we maintain all requisite licenses and permits and
are in compliance with all applicable federal, state, and local regulations, there can be no assurance that we will be
able to maintain all requisite licenses and permits. The failure to satisfy those and other regulatory requirements
could have a material adverse effect on our business, financial condition, and results of operations. The adoption of
additional laws, rules, and regulations could also have a material adverse effect on our business. Various federal,
state, and local regulatory agencies, including the Occupational Safety and Health Administration, or OSHA, the
United States Environmental Protection Agency, or EPA, and similar federal and local agencies, have jurisdiction
over the operation of our dealerships, repair facilities, and other operations with respect to matters such as consumer
protection, workers’ safety, and laws regarding protection of the environment, including air, water, and soil.
The EPA has various air emissions regulations for outboard marine engines that impose more strict emissions
standards for two-cycle, gasoline outboard marine engines. Emissions from such engines must be reduced by
approximately 75% over a nine-year period beginning with the 1998 model year. The majority of the outboard
marine engines we sell are manufactured by Mercury Marine. Mercury Marine’s product line of low-emission
engines, including the OptiMax, Verado and other four-stroke outboards, have already achieved the EPA’s mandated
2006 emission levels. Any increased costs of producing engines resulting from EPA standards or the inability of our
manufacturers to comply with EPA requirements, could have a material adverse effect on our business.
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
20
Table of Contents
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.
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.
21
Table of Contents
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.
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
63
41
Position
Chairman of the Board, President, Chief Executive
Officer, and Director
Executive Vice President, Chief Financial Officer,
Secretary, and Director
38 Vice President of Finance and Treasurer
36 Vice President, Chief Accounting Officer, and Controller
46 Vice President of Operations
50 Vice President
39 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
22
Table of Contents
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 Operations since March 2006. Mr. Russell has been a 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
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.
Item 1A.
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, Meridian and Hatteras boat lines,
Ferretti Group’s Ferretti Yachts, Riva, Pershing, and Bertram product lines and Azimut-Benetti Group’s
Azimut and Atlantis products.
Approximately 59% of our revenue in fiscal 2006 resulted from sales of new boats manufactured by Brunswick,
including approximately 45% from Brunswick’s Sea Ray division and approximately 6% from Brunswick’s Hatteras
Yacht division. The remainder of our fiscal 2006 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;
23
Table of Contents
• for unusual and non-ordinary business circumstances; or
• for limited duration promotional programs.
Each dealer agreement designates a designated geographical territory for the dealer, which is exclusive to the dealer as
long as the dealer is not in breach of the material obligations and performance standards under the agreement and Sea Ray’s
then current material policies and programs following notice and the expiration of any applicable cure periods without cure.
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.
Upon the completion of the Surfside-3 acquisition, we became the exclusive dealer for Azimut-Benetti Group’s product
line of Azimut. The Azimut dealer agreement provides a geographic territory to promote the product line and to network with
the appropriate clientele through various independent locations designated for Azimut retail sales.
As is typical in the industry, we deal with manufacturers, other than the Sea Ray division of Brunswick, 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 and competitive factors 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. Economic conditions in areas in which we operate dealerships,
particularly Florida in which we generated 53%, 55%, and 46% of our revenue during fiscal years 2004, 2005 and 2006,
respectively, can have a major impact on our operations. We also 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
24
Table of Contents
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 20 recreational boat dealers, two boat brokerage operations, and two full-service
yacht repair facilities. 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 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
25
Table of Contents
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.
We and the Sea Ray Division of Brunswick have an agreement extending through June 2015 that provides a process for
our continued growth through the acquisition of additional Sea Ray boat dealers that desire to be acquired by us. Under the
agreement, acquisitions of Sea Ray dealers will be mutually agreed upon by us and Sea Ray with reasonable efforts to be made
to include a balance of Sea Ray dealers that have been successful and those that have not been. The agreement provides that
Sea Ray will not unreasonably withhold its consent to any proposed acquisition of a Sea Ray dealer by us, subject to the
conditions set forth in the agreement. Among other things, the agreement provides for us to provide Sea Ray with a business
plan for each proposed acquisition, including historical financial and five-year projected financial information regarding the
acquisition candidate; marketing and advertising plans; service capabilities and managerial and staff personnel; information
regarding the ability of candidate to achieve performance standards within designated periods; and information regarding the
success of our previous acquisitions of Sea Ray dealers. The agreement also contemplates Sea Ray reaching a good faith
determination whether the acquisition would be in its best interest based on our dedication and focus of resources on the Sea
Ray brand and Sea Ray’s consideration of any adverse effects that the approval would have on the resulting territory
configuration and adjacent or other dealers sales and the absence of any violation of applicable laws or rights granted by Sea
Ray to others.
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;
26
Table of Contents
• 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.
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 $500 million
and allows us $20 million in traditional floorplan borrowings. We have pledged various of our assets, including boat
inventories, accounts receivable, equipment, and fixtures, 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;
27
Table of Contents
• our ability to lease or construct suitable facilities at a reasonable cost in existing or new markets;
• our ability to hire, train, and retain qualified personnel;
• the timely integration of new retail locations into existing operations;
• our ability to achieve adequate market penetration at favorable operating margins without the acquisition of existing
dealers; and
• our financial resources.
Our dealer agreements with Brunswick require Brunswick’s consent to open, close, or change retail locations that sell Sea
Ray products, and other dealer agreements generally contain similar provisions. We may not be able to open and operate new
retail locations or introduce new product lines on a timely or profitable basis. Moreover, the costs associated with opening new
retail locations or introducing new product lines may adversely affect our profitability.
As a result of these growth strategies, we expect to expend significant time and effort in opening and acquiring new retail
locations and introducing new products. Our systems, procedures, controls, and financial 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, 2006, the average revenue for the quarterly periods ended December 31,
March 31, June 30, and September 30 represented 18%, 25%, 32%, 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 2005 and 2006 when Florida and other markets were affected by
numerous 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.
28
Table of Contents
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 United States 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.
The availability of boat insurance is critical to our success.
The ability of our customers to secure reasonably affordable boat insurance that is satisfactory to lenders that finance our
customer’s purchase is critical to our success. Historically, affordable boat insurance has been available. With the hurricanes
that have impacted the state of Florida and other markets over the past several years, insurance rates have escalated and
insurance coverage has become more difficult to obtain. Any difficulty of customers to obtain affordable boat insurance could
adversely affect our business.
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 2006, F&I products
accounted for approximately 3.2% 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.
29
Table of Contents
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. The majority of the outboard marine engines we sell are manufactured by
Mercury Marine. Mercury Marine’s product line of low-emission engines, including the OptiMax, Verado and other four-
stroke outboards, have already achieved the EPA’s mandated 2006 emission levels. Any increased costs of producing engines
resulting from EPA standards or the inability of our manufacturers to comply with EPA requirements, could have a material
adverse effect on our business.
Certain of our facilities own and operate USTs for the storage of various petroleum products. USTs are generally subject to
federal, state, and local laws and regulations that require testing and upgrading of USTs and remediation of contaminated soils
and groundwater resulting from leaking USTs. In addition, we may be subject to civil liability to third parties for remediation
costs or other damages if leakage from our owned or operated USTs migrates onto the property of others.
Our business involves the use, handling, storage, and contracting for recycling or disposal of hazardous or toxic substances
or wastes, including environmentally sensitive materials, such as motor oil, waste motor oil and filters, transmission fluid,
antifreeze, freon, waste paint and lacquer thinner, batteries, solvents, lubricants, degreasing agents, gasoline, and diesel fuels.
Accordingly, we are subject to regulation by federal, state, and local authorities establishing investigation and health and
environmental quality standards, and liability related thereto, and providing penalties for violations of those standards.
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
30
Table of Contents
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.
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 that all business combinations initiated after June 30,
2001 be accounted for using the purchase method of accounting and identifiable intangible assets acquired in a business
combination 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. 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 2005, based on financial information as of the third
quarter of fiscal 2005, 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 amounted to $94.1 million and $22.1 million, respectively, as of September 30,
2006.
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.
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;
31
Table of Contents
• 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, 2006, there were outstanding 18,529,524 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, 2006, we had issued options to purchase approximately 2,364,538 shares of common stock under our
1998 incentive stock plan and we issued 446,684 of the 750,000 shares of common stock reserved for issuance under our 1998
employee stock purchase plan. We have filed a registration statement under the securities laws to register the common stock to
be issued under these plans. As a result, shares issued under these plans will be freely tradable without restriction unless
acquired by affiliates of our company, who will be subject to the volume and other limitations of Rule 144.
We may issue additional shares of common stock or preferred stock under the securities laws as part of any acquisition we
may complete in the future. If issued pursuant to an effective registration statement, these shares generally will be freely
tradable after their issuance by persons not affiliated with us or the acquired companies.
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
32
Table of Contents
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. Moreover, financial covenants under certain of our credit
facilities restrict our ability to pay dividends.
Our stockholders’ rights plan may adversely affect existing stockholders.
Our Stockholders’ Rights Plan may have the effect of deterring, delaying, or preventing a change in control that might
otherwise be in the best interests of our stockholders. Under the Rights Plan, we issued a dividend of one Preferred Share
Purchase Right for each share of our common stock held by stockholders of record as of the close of business on September 7,
2001.
In general, subject to certain limited exceptions, the stock purchase rights become exercisable when a person or group
acquires 15% or more of our common stock or a tender offer or exchange offer for 15% or more of our common stock is
announced or commenced. After any such event, our other stockholders may purchase additional shares of our common stock
at 50% of the then-current market price. The rights will cause substantial dilution to a person or group that attempts to acquire
us on terms not approved by our board of directors. The rights may be redeemed by us at $0.01 per stock purchase right at any
time before any person or group acquires 15% or more of our outstanding common stock. The rights should not interfere with
any merger or other business combination approved by our board of directors. The rights expire on August 28, 2011.
Certain provisions of our restated certificate of incorporation and bylaws and Delaware law may make a change in the
control of our company more difficult to complete, even if a change in control were in the stockholders’ interest or might
result in a premium over the market price for the shares held by the stockholders.
Our certificate of incorporation and bylaws divide the board of directors into three classes of directors elected for
staggered three-year terms. The certificate of incorporation also provides that the board of directors may authorize the issuance
of one or more series of preferred stock from time to time and may determine the rights, preferences, privileges, and
restrictions and fix the number of shares of any such series of preferred stock, without any vote or action by our stockholders.
The board of directors may authorize the issuance of preferred stock with voting or conversion rights that could adversely
affect the voting power or other rights of the holders of common stock. The certificate of incorporation also allows our board
of directors to fix the number of directors and to fill vacancies on the board of directors.
We also are subject to the anti-takeover provisions of Section 203 of the Delaware General Corporation Law, which
prohibits us from engaging in a “business combination” with an “interested stockholder” for a period of three years after the
date of the transaction in which the person became an “interested stockholder,” unless the business combination is approved in
a prescribed manner.
Certain of our dealer agreements could also make it difficult for a third party to attempt to acquire a significant ownership
position in our company. In addition, the stockholders’ agreement and governance agreement will have the effect of increasing
the control of our directors, executive officers, and persons associated with them.
Our sales of Ferretti Group and Azimut 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 and Azimut 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. As a result, 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
and Azimut 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
33
Table of Contents
amount of revenue, cost of goods sold, cash flows, and earnings we recognize for the Ferretti Group and Azimut product lines.
The impact of these currency fluctuations could increase, particularly as our revenue from the Ferretti Group and Azimut
products increase as a percentage of our total revenue. We also could incur losses from hedging transactions designed to
reduce our risk to fluctuation in exchange rates. We cannot predict the effects of exchange rate fluctuations or currency rate
hedges on our operating results. Therefore, in certain cases, we have entered into foreign currency cash flow hedges to reduce
the variability of cash flows associated with firm commitments to purchase boats and yachts from Ferretti Group.. We cannot
assure that our strategies will adequately protect our operating results from the effects of exchange rate fluctuations.
Item 1B.
Unresolved Staff Comments
Not applicable.
Item 2.
Properties
We lease our corporate offices in Clearwater, Florida. We also lease 52 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 34 other retail locations and
operate 2 additional locations as noted below.
The following table reflects the status, approximate size, and facilities of our various retail locations as of the date of this
report.
Location
Alabama
Gulf Shores
Arizona
Tempe
California
Location Type
Square
Footage(1) Facilities at Property
Operated
Since(2)
Waterfront
Company owned
4,000 Retail and service
1998 —
Company owned
34,000 Retail and service
1992 —
Newport Beach
Third-party lease
Oakland
Santa Rosa
Sacramento
San Diego
Third-party lease
Company owned
Company owned
Third-party lease
San Diego (Shelter Island)
Third-party lease
Third-party lease
1,900
17,700
Retail only; 16 wet
slips
Retail and service;
20 wet slips
8,100 Retail and service
24,800 Retail and service
9,500 Retail and service
Retail and service;
20 wet slips
Retail only; 15 wet
slips
2,400
930
2005 Newport Bay
Alameda Estuary
(San Francisco Bay)
1985
1990 —
1995 —
2004 —
2005 Mission Bay
1999 Sacramento River
Lodi
Colorado
Denver
Grand Junction
Connecticut
Norwalk
Delaware
Third-party lease
16,400
Third-party lease
9,300
Retail, service, and
storage
Retail, service, and
storage
2003 —
1986 —
Third-party lease
7,000 Retail and service
1994 Norwalk Harbor
Bear
Third-party lease
5,000
Retail and service;
15 wet slips
Between Delaware Bay
and Chesapeake Bay
1995
34
Location Type
Square
Footage(1) Facilities at Property
Operated
Since(2)
Waterfront
Table of Contents
Location
Florida
Cape Haze
Clearwater
Cocoa
Company owned
18,000
Company owned
Company owned
Coconut Grove
Third-party lease
Dania
Destin
Company owned
Third-party lease
Ft Lauderdale (Pier 66)
Third-party lease
Fort Myers
Ft Walton Beach
Key Largo
Jacksonville
Third-party lease
Third-party lease
Third-party brokerage
Company owned
Jacksonville
Third-party lease
Miami
Miami
Naples
North Palm Beach
Pensacola
Company owned
Company owned
Company owned
Company owned
Third-party lease
Pompano Beach
Company owned
Pompano Beach
Company owned
Sarasota
Third-party lease
St, Petersburg(3)
Joint venture
Stuart
Stuart
Tampa
Company owned
Company owned
Company owned
Retail, service, and
storage; 8 wet slips
Retail and service;
20 wet slips
2,400
2,000
2,200
32,000
42,000
15,000 Retail and service
Retail only; 24 wet
slips
Repair and service;
16 wet slips
Retail only; 8 wet
slips
Retail and service;
12 wet slips
Retail and service;
8,000
18 wet slips
4,800 Retail only
750 Retail only
15,000 Retail and service
Retail only; 7 wet
slips
Retail and service; l5
wet slips
Service only; l1 wet
slips
Retail and service;
14 wet slips
Retail and service; 8
wet slips
19,600
1,000
5,000
7,200
5,400
23,000
22,800
24,300 Retail and service
Retail and service;
16 wet slips
Retail and service;
24 wet slips
Retail, service, and
storage; 15 wet slips
Yacht service, 20
wet slips
Retail and service; 6
wet slips
Retail and service;
60 wet slips
15,000
26,500
22,400
6,700
13,100 Retail and service
35
1972 Intracoastal Waterway
1973 Tampa Bay
1968 —
2002 Biscayne Bay
1991 Port Everglades
2005 Destin Harbor
1977 Intracoastal Waterway
1983 Caloosahatchee River
2003 —
2002 —
2004 —
1995 St Johns River
1980 Little River
2005 Little River
1997 Naples Bay
1998 Intracoastal Waterway
1974 —
1990 Intracoastal Waterway
2005 Intracoastal Waterway
1972 Sarasota Bay
2006 Boca Ciega Bay
2002 Intracoastal Waterway
1994 Intracoastal Waterway
1995 —
Table of Contents
Location
Venice
Georgia
Location Type
Company owned
Allatoona
Buford (Atlanta)
Third-party lease
Company owned
Cumming (Atlanta)
Third-party lease
Forest Park (Atlanta)
Maryland
Third-party lease
Square
Footage(1) Facilities at Property
Retail, service, and
storage; 90 wet slips
62,000
Retail and service; 4
wet slips
8,800
13,500 Retail and service
Retail and service;
50 wet slips
Retail, service, and
storage
13,000
47,300
Operated
Since(2)
Waterfront
1972 Intracoastal Waterway
2002 Lake Allatoona
2001 —
1981 Lake Lanier
1973 —
Third-party lease
Company owned
Retail and service;
17 wet slips
8,000
19,800 Retail and service
2005 Baltimore Inner Harbor
1958 —
Baltimore
White Marsh
Joppa
Minnesota
Bayport
Oakdale
Rogers
Walker
Walker
Missouri
Lake Ozark
Laurie
Springfield
Osage Beach
St. Louis
St. Louis
Nevada
Las Vegas
New Jersey
Brick
Company owned
28,400
Retail, service, and
storage; 294 wet
slips
Third-party lease
Third-party lease
Retail only; 10 wet
slips
18,500 Retail and service
450
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
500
60,300
Retail only; 7 wet
slips
Retail and service;
300 wet slips
700 Retail and service
12,200 Retail and service
2,000 Retail and service
12,000 Retail and service
Retail only; 6 wet
slips
500
Company owned
Company owned
Company owned
Company owned
Third-party lease
Third-party lease
1966 Gunpowder River
1996 St Croix River
1997 —
1991 —
1989 —
1977 Leech Lake
2000 Table Rock Lake
1987 Lake of the Ozarks
2006 —
1997 —
1998 —
2003 —
2004 Mississippi River
Company owned
21,600 Retail and service
1990 —
Company owned
20,000
Retail and service;
225 wet slips
Retail and service;
36 wet slips
1977 Manasquan River
1965 Barnegat Bay
Kimberling City
Third-party lease
Brant Beach
Third-party lease
3,800
36
Table of Contents
Location
Greenbrook
Jersey City
Lake Hopatcong
Ship Bottom
Somers Point
New York
Copiague
Huntington
Manhattan
Lindenhurst (Delivery
Center)
Lindenhurst (Highway
Store)
Lindenhurst (Marina)
North Carolina
Wilmington
Wrightsville Beach
Ohio
Port Clinton
Port Clinton
Toledo
Oklahoma
Afton
Rhode Island
Wakefield
South Carolina
Myrtle Beach
Tennessee
Location Type
Third-party lease
Third-party lease
Third-party lease
Third-party lease
Affiliate lease
Square
Footage(1) Facilities at Property
18,500 Retail and service
Retail only; 6 wet
slips
Retail and service;
80 wet slips
4,600
500
19,300 Retail and service
Retail and service;
33 wet slips
31,000
Operated
Since(2)
1995 —
Waterfront
2000 Hudson River
1998 Lake Hopatcong
1972 —
1987 Little Egg Harbor Bay
Third-party lease
15,000 Retail only
1993 —
Third-party lease
Third-party lease
Third-party lease
1,200
1,200 Retail and service
Retail only; 75 wet
slips
Retail, service, and
dry storage
54,000
Huntington Harbor and
Long Island Sound
1995
1996 Hudson River
Neguntatogue Creek to
Great South Bay
1968
Third-party lease
10,000 Retail and service
2004 —
Third-party lease
14,600
Marina and service;
370 wet slips
Neguntatogue Creek to
Great South Bay
1968
Third-party lease
6,000 Retail and service
2006 —
Third-party lease
34,500
Retail, service, and
storage
1996 Intracoastal Waterway
Third-party lease
Third-party lease
Third-party lease
63,700
Retail, service, and
storage; 155 wet
slips
Retail, service, and
93,300
storage
12,200 Retail and service
Third-party lease
3,500
Third-party lease
1,800
Retail and service;
23 wet slips
Retail only; 3 wet
slips
1974 Lake Erie
1997 Lake Erie
1989 —
2003 Grand Lake
2006 Narragansett Bay
Third-party lease
3,500 Retail only
1999 Coquina Harbor
Chattanooga
Third-party lease
3,000
Retail only; 12 wet
slips
2005 Tennessee River
37
Table of Contents
Location
Location Type
Square
Footage(1) Facilities at Property
Operated
Since(2)
Waterfront
Texas
Arlington
Houston
Houston
League City (floating
facility)(5)
Lewisville (Dallas)
Lewisville (Dallas)
(floating facility)
Seabrook
Utah
Salt Lake City
Third-party lease
Third-party lease
Third-party lease
Third-party lease
Company owned
Third-party lease
Company owned
31,000 Retail and service
10,000 Retail only (4)
10,000 Retail and service
Retail and service;
20 wet slips
800
22,000 Retail and service
Retail only; 20 wet
slips (6)
Retail and service;
30 wet slips
32,000
500
1999 —
1987 —
1981 —
1988 Clear Lake
2002 —
1994 Lake Lewisville
2002 Clear Lake
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) Joint venture entered into to with Brunswick to acquire marina and service facility.
(4) Shares service facility located at the other Houston retail locations.
(5) We own the floating facility, however, the related dock and marina space is leased by us from an unaffiliated third party.
(6) Shares service facility located at the other Lewisville retail location.
Item 3.
Legal Proceedings
We are party to various legal actions arising in the ordinary course of business. With the exception of a single lawsuit
award that we are currently appealing, the ultimate liability, if any, associated with the other matters was not material at
September 30, 2006. However, based on information available at September 30, 2006 surrounding the single lawsuit award,
our litigation accrual approximated $2.0 million. While it is not feasible to determine the actual outcome of these actions as of
September 30, 2006, we do not believe that these matters will have a material adverse effect on our consolidated financial
condition, results of operations, or cash flows.
Item 4.
Submission of Matters to a Vote of Security Holders
Not applicable.
38
Table of Contents
PART II
Item 5.
Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Repurchases of Equity
Securities
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.
2004
First quarter
Second quarter
Third quarter
Fourth quarter
2005
First quarter
Second quarter
Third quarter
Fourth quarter
2006
First quarter
Second quarter
Third quarter
Fourth quarter (through November 30, 2006)
High
Low
$ 28.33 $ 18.10
$ 32.04 $ 23.56
$ 28.59 $ 18.05
$ 30.55 $ 21.50
$ 35.14 $ 27.51
$ 31.77 $ 23.95
$ 35.88 $ 21.50
$ 32.45 $ 22.36
$ 34.24 $ 27.22
$ 36.72 $ 25.39
$ 26.65 $ 19.24
$ 29.46 $ 24.41
On November 30, 2006, the closing sale price of our common stock was $26.86 per share. On November 30, 2006, there
were approximately 100 record holders and approximately 5,300 beneficial owners of our common stock.
In November 2005, our Board of Directors approved a share repurchase plan allowing our company to repurchase up to
1,000,000 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. At September 30, 2006, we have purchased an aggregate of 306,300 shares of common stock under the
plan for an aggregate purchase price of approximately $6.9 million.
39
Table of Contents
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 and statement of operations data
were derived from the consolidated financial statements and notes thereto that have been audited by Ernst & Young LLP, an
independent registered certified public accounting firm. 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.
2002
Fiscal Year Ended September 30,
2004
2003
2005
2006
Statement of Operations Data:
Revenue
Cost of sales
Gross profit
Selling, general, and administrative
expenses(1)
Income from operations
Interest expense, net
Income before income tax provision
Income tax provision
Net income
Net income per share:
Diluted
Weighted average number of shares:
Diluted
Other Data: (as of year-end)
Number of retail locations(2)
Sales per store(3)(5)
Same-store sales growth(4)(5)
$
540,716 $
416,137
124,579
607,501 $
459,729
147,772
762,009 $
573,616
188,393
947,347 $ 1,213,541
906,781
712,843
306,760
234,504
95,567
29,012
1,264
27,748
10,683
17,065 $
113,299
34,473
2,471
32,002
12,321
19,681 $
139,470
48,923
6,499
42,424
16,126
26,298 $
169,975
64,529
9,291
55,238
21,412
33,826 $
222,806
83,954
18,616
65,338
25,956
39,382
1.10 $
1.26 $
1.58 $
1.88 $
2.08
$
$
15,540,973 15,671,470 16,666,107 18,032,533 18,928,735
$
59
12,273 $
3 %
65
11,900 $
6 %
67
12,831 $
21 %
71
16,386 $
23 %
87
17,064
7 %
2002
2003
September 30,
2004
2005
2006
Balance Sheet Data:
Working capital
Total assets
Long-term debt (including current portion)(6)
Total stockholders’ equity
$ 55,426 $ 67,003 $ 88,013 $ 163,431 $ 151,097
801,563
301,146
37,186
21,765
349,887
145,190
474,359
26,237
196,821
539,490
30,085
283,599
329,155
22,343
166,056
(1) As a result of our adoption of SFAS 123R, we recorded compensation expense for stock options of approximately
$3.5 million before tax, or $0.15 per diluted share after-tax in the fiscal year ended September 30, 2006.
(2) Includes only those retail locations open at period end.
(3) Includes only those stores open for the entire preceding 12-month period.
(4) New and acquired stores are included in the comparable base at the end of the store’s thirteenth month of operations.
40
Table of Contents
(5) A store is one or more retail locations that are adjacent or operate as one entity. Sales per store and same-store sales
growth is intended only as supplemental information and is not a substitute for Revenue or Net Income presented in
accordance with generally accepted accounting principles.
(6) 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
The following should be read in conjunction with Part I, including the matters set forth in the “Risk Factors” section of this
Form 10-K, and our Consolidated Financial Statements and notes thereto included elsewhere in this Form 10-K.
Overview
We are the largest recreational boat retailer in the United States with fiscal 2006 revenue exceeding $1.2 billion. Through
our current 88 retail locations in 22 states, we sell new and used recreational boats and related marine products, including
engines, trailers, parts, and accessories. We also arrange related boat financing, insurance, and extended warranty contracts;
provide boat repair and maintenance services; and offer yacht and boat brokerage services, and where available, offer slip and
storage accommodations.
MarineMax was incorporated in January 1998. We commenced operations with the acquisition of five independent
recreational boat dealers on March 1, 1998. Since the initial acquisitions in March 1998, we have significantly expanded our
operations through the acquisition of 20 recreational boat dealers, two boat brokerage operations, and two full-service yacht
repair facilities. As a part of our acquisition strategy, we frequently engage in discussions with various recreational boat
dealers regarding their potential acquisition by us. Potential acquisition discussions frequently take place over a long period of
time and involve difficult business integration and other issues, including in some cases, management succession and related
matters. As a result of these and other factors, a number of potential acquisitions that from time to time appear likely to occur
do not result in binding legal agreements and are not consummated. The following are the acquisitions we have completed
during the fiscal years ending September 30, 2006 and 2004. No significant acquisitions were completed during the fiscal year
ending September 30, 2005.
During the fiscal year ended September 30, 2006, we completed the acquisition of two recreational boat dealers. During
March 2006, we acquired substantially all of the assets and assumed certain liabilities of Surfside-3 Marina, Inc. (Surfside), a
privately held boat dealership with eight locations in New York and Connecticut, for approximately $24.8 million in cash and
665,024 shares of common stock, plus $24.0 million in working capital adjustments including acquisition costs. The shares
were valued at $33.71 per share, which was the average closing market price of our common stock for the five-day period
beginning two days prior to and ending two days subsequent to the acquisition date. Based on the provisions of the asset
purchase agreement, 100,000 shares of common stock are currently held in escrow, subject to the satisfaction of working
capital adjustments and other provisions in the acquisition documents. We and Surfside are in current discussions to resolve
such matters. The acquisition expands our ability to serve consumers in the Northeast boating community and allows us to
capitalize on Surfside’s market position and leverage our inventory management and inventory financing resources over the
acquired locations. Based on our preliminary valuation, the purchase price, including acquisition costs, is anticipated to result
in the recognition of approximately $37.0 million in tax deductible goodwill and approximately $14.7 million in tax deductible
indefinite-lived intangible assets (dealer agreements). We are in the process of finalizing the purchase price allocation and
determining the fair value of acquired intangible assets; accordingly, certain purchase price allocations are subject to change.
Surfside has been included in our consolidated financial statements since the date of acquisition.
During January 2006, we acquired substantially all of the assets, including certain real estate, and assumed certain
liabilities of the Port Arrowhead Group (Port Arrowhead), a privately held boat dealership with locations in Missouri and
Oklahoma, for approximately $27.5 million in cash, plus $5.0 million in working capital adjustments including acquisition
costs. Port Arrowhead operates six retail locations, including a large marina with more than 300 slips. The acquisition expands
our ability to serve consumers in the Midwest boating community, including neighboring boating destinations in Illinois,
Kansas, and Arkansas. The acquisition also allows us to capitalize on Port Arrowhead’s market position and leverage our
inventory management and inventory financing resources over the acquired locations. Based on our preliminary valuation, the
purchase price, including acquisition costs, is anticipated to result in the recognition of approximately $6.1 million in tax
deductible goodwill and approximately
41
Table of Contents
$2.0 million in tax deductible indefinite-lived intangible assets (dealer agreements). We are in the process of finalizing the
purchase price allocation and determining the fair value of acquired intangible assets; accordingly, certain purchase price
allocations are subject to change. Port Arrowhead has been included in our consolidated financial statements since the date of
acquisition.
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. 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 contained an earn out provision based on
the future profits of the location, assuming certain conditions and provisions were met. 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.
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 make a number of estimates and assumptions relating to the reporting of results of
operations and financial condition in the preparation of our financial statements in conformity with accounting principles
generally accepted in the United States. We base our estimates on historical experience and on various other assumptions that
we believe are reasonable under the circumstances. The results form the basis for making judgments about the carrying values
of assets and liabilities that are not readily apparent from other sources. Actual results could differ significantly from those
estimates under different assumptions and conditions. We believe that the following discussion addresses our most critical
accounting policies, which are those that are most important to the portrayal of our financial condition and results of
operations and require our most difficult, subjective, and complex judgments, often as a result of the need to make estimates
about the effect of matters that are inherently uncertain.
Revenue Recognition
We recognize revenue from boat, motor, and trailer sales, and parts and service operations at the time the boat, motor,
trailer, or part is delivered to or accepted by the customer or service is completed. We recognize commissions
42
Table of Contents
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 sales are 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. 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.
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 chargeback allowance that was not material to our financial statements taken as a
whole as of September 30, 2005 or 2006. Should results differ materially from our historical experiences, we would need to
modify our estimate of future chargebacks, which could have a material adverse effect on our operating margins.
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 requires us to classify interest assistance received from manufacturers as a reduction of inventory cost and
related cost of sales. Pursuant to EITF 02-16, amounts received by us under our co-op assistance programs from our
manufacturers, are netted against related advertising expenses.
Inventories
Inventory costs consist of the amount paid to acquire the inventory, net of vendor consideration and purchase discounts,
the cost of equipment added, reconditioning costs, and transportation costs relating to acquiring inventory for 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. If the carrying
amount of our inventory exceeds its fair value, we reduce the carrying amount to reflect fair value. We utilize our historical
experience and current sales trends as the basis for our lower of cost or market analysis. If events occur and market conditions
change, causing the fair value to fall below carrying value, further reductions may be required.
Valuation of Goodwill and Other Intangible Assets
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 that all business combinations initiated after June 30,
2001 be accounted for using the purchase method of accounting and identifiable intangible assets acquired in a business
combination be recognized as assets and reported separately from goodwill. We have determined that our most significant
acquired identifiable intangible assets are 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. If the carrying
amount of goodwill or an identifiable intangible asset 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 our last annual impairment test during the fourth quarter of fiscal 2006, based on financial
information as of the third quarter of fiscal 2006, 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. Net goodwill and identifiable intangible assets amounted to $94.1 million and $22.1 million, respectively, at
September 30, 2006.
43
Table of Contents
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
Gross profit
Selling, general, and administrative Expenses
Income from operations
Interest expense, net
Income before income tax provision
Income tax provision
Net income
2006
2004
Fiscal Year Ended September 30,
2005
(Amount in thousands)
$ 762,009 100.0 % $ 947,347 100.0 % $ 1,213,541 100.0 %
573,616 75.3 % 712,843 75.2 % 906,781 74.7 %
188,393 24.7 % 234,504 24.8 % 306,760 25.3 %
139,470 18.3 % 169,975 17.9 % 222,806 18.4 %
83,954 6.9 %
48,923 6.4 % 64,529 6.9 %
18,616 1.5 %
9,291 1.0 %
65,338 5.4 %
42,424 5.5 % 55,238 5.9 %
25,956 2.2 %
16,126 2.0 % 21,412 2.3 %
39,382 3.2 %
$ 26,298 3.5 % $ 33,826 3.6 % $
6,499 0.9 %
Fiscal Year Ended September 30, 2006 Compared with Fiscal Year Ended September 30, 2005
Revenue. Revenue increased $266.2 million, or 28.1%, to $1.2 billion for the fiscal year ended September 30,
2006 from $947.3 million for the fiscal year ended September 30, 2005. Of this increase, $204.9 million was
attributable to stores opened or acquired that were not eligible for inclusion in the comparable-store base and
$61.3 million was attributable to a 6.5% growth in comparable-store sales in fiscal 2006. The increase in comparable-
store sales in fiscal 2006 resulted primarily from an increase of approximately $45.2 million in boat and yacht sales.
This increase in boat and yacht sales on a comparable-store basis helped generate an increase in revenue from our
parts, service, finance, and insurance products of approximately $16.1 million.
Gross Profit. Gross profit increased $72.3 million, or 30.8%, to $306.8 million for the fiscal year ended
September 30, 2006 from $234.5 million for the fiscal year ended September 30, 2005. Gross profit as a percentage
of revenue increased to 25.3% in fiscal 2006 from 24.8% in fiscal 2005. This increase was primarily attributable to
an increase in service, finance, insurance, parts, and brokerage revenue, which generally yield higher gross margins
than boat sales, and an increase in manufacturer programs in place for the year ended September 30, 2006. The
increase in gross profit was partially offset by a decrease in gross margins on boat sales, coupled with an increase in
yacht sales, which generally yield lower gross margins than boat sales.
Selling, General, and Administrative Expenses. Selling, general, and administrative expenses increased
$52.8 million, or 31.1%, to $222.8 million for the fiscal year ended September 30, 2006 from $170.0 million for the
fiscal year ended September 30, 2005. Selling, general, and administrative expenses as a percentage of revenue
increased approximately 50 basis points to 18.4% for the year ended September 30, 2006 from 17.9% for the year
ended September 30, 2005. In fiscal 2006, the increase as a percentage of revenue was attributable to approximately
$3.5 million of stock option compensation expense resulting from the adoption of SFAS 123R and approximately
$1.2 million of hurricane related expenses to move and repair inventory (net of related insurance reimbursements)
and uninsured losses to our locations. Additionally, our selling, general and administrative expenses as a percentage
of revenue increased due to increased marketing and commission expenses associated with achieving our level of
comparable-store sales growth, increased facilities, and other costs associated with new and acquired stores.
44
Table of Contents
Interest Expense. Interest expense increased $9.3 million, or 100.4%, to $18.6 million for the fiscal year ended
September 30, 2006 from $9.3 million for the fiscal year ended September 30, 2005. Interest expense as a percentage of
revenue increased to 1.5% for fiscal 2006 from 1.0% for fiscal 2005. The increase was primarily a result of increased
borrowings associated with our revolving credit facility and mortgages, which accounted for an increase in interest expense of
approximately $5.7 million and a less favorable interest rate environment, which accounted for an increase of approximately
$3.6 million in interest expense.
Income Tax Provision. Income taxes increased $4.5 million, or 21.2%, to $26.0 million for the fiscal year ended
September 30, 2006 from $21.4 million for the fiscal year ended September 30, 2005 as a result of increased earnings. Our
effective tax rate increased to 39.7% for the fiscal year ended September 30, 2006 from 38.8% for the fiscal year ended
September 30, 2005 as a result of the adoption of SFAS 123R.
Fiscal Year Ended September 30, 2005 Compared with Fiscal Year Ended September 30, 2004
Revenue. Revenue increased $185.3 million, or 24.3%, to $947.3 million for the fiscal year ended September 30, 2005
from $762.0 million for the fiscal year ended September 30, 2004. Of this increase, $11.9 million was attributable to stores
opened or acquired that were not eligible for inclusion in the comparable-store base and $173.4 million was attributable to a
22.8% growth in comparable-store sales in fiscal 2005. The increase in comparable-store sales in fiscal 2005 resulted primarily
from an increase of approximately $160.2 million in boat and yacht sales. This increase in boat and yacht sales on a
comparable-store basis helped generate an increase in revenue from our parts, service, finance, and insurance products of
approximately $13.2 million.
Gross Profit. Gross profit increased $46.1 million, or 24.5%, to $234.5 million for the fiscal year ended September 30,
2005 from $188.4 million for the fiscal year ended September 30, 2004. Gross profit as a percentage of revenue increased to
24.8% in fiscal 2005 from 24.7% in fiscal 2004. This increase was primarily attributable to an increase in gross margins on
boat sales and improvements in service, finance, insurance, parts, and brokerage revenues, which generally yield higher gross
margins than boat sales. The increase in gross profit was partially offset by an increase in yacht sales, which generally yield
lower gross margins than boat sales.
Selling, General, and Administrative Expenses. Selling, general, and administrative expenses increased $30.5 million, or
21.9%, to $170.0 million for the fiscal year ended September 30, 2005 from $139.5 million for the fiscal year ended
September 30, 2004. Selling, general, and administrative expenses as a percentage of revenue decreased approximately
35 basis points to 17.9% for the year ended September 30, 2005 from 18.3% for the year ended September 30, 2004. The
decrease as a percentage of revenue was attributable to an approximate 60 basis point decrease in our comparable-stores
selling, general, and administrative expenses. This decrease incurred by our comparable-store locations resulted from the
leveraging of our operating expense structure, which resulted in decreases in personnel costs and fixed expenses as a
percentage of revenue. These decreases were partially offset by an approximate $4.4 million increase in marketing expenses
associated with achieving our level of comparable-store sales growth, the addition and expansion of various product lines,
increases in inventory maintenance costs related to supporting our increase in comparable-store sales and the addition and
expansion of various product lines, and an increase in our accrued litigation expense related to a single lawsuit award that we
are currently appealing. Additionally, the reduction of the comparable-store expenses was partially offset by an increase in
expenses associated with stores opened or acquired that were not eligible for inclusion in the comparable-store base. These
opened or acquired stores generally operate at a higher expense structure than our other locations.
Interest Expense. Interest expense increased $2.8 million, or 43.0%, to $9.3 million for the fiscal year ended
September 30, 2005 from $6.5 million for the fiscal year ended September 30, 2004. Interest expense as a percentage of
revenue increased to 1.0% for fiscal 2005 from 0.9% for fiscal 2004. The increase was primarily a result of a less favorable
interest rate environment, which accounted for approximately $2.2 million of the increase, coupled with an increase in the
average borrowings associated with our revolving credit facility and mortgages, which accounted for approximately $600,000.
Income Tax Provision. Income taxes increased $5.3 million, or 32.8%, to $21.4 million for the fiscal year ended
September 30, 2005 from $16.1 million for the fiscal year ended September 30, 2004 as a result of increased earnings. Our
effective tax rate increased to 38.8% for the fiscal year ended September 30, 2005 from 38.0% for the fiscal year ended
September 30, 2004 as a result of a review of our effective tax rate calculation for the jurisdictions in which we currently
operate.
45
Table of Contents
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.
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 2005 and 2006
when Florida and other markets were affected by numerous hurricanes. Although our geographic diversity is likely to reduce
the overall impact to us of adverse weather conditions in any one market area, these conditions will continue to represent
potential, material adverse risks to us and our future financial performance.
The following table sets forth certain unaudited quarterly financial data for each of our last eight quarters. The information
has been derived from unaudited financial statements that we believe reflect all adjustments, consisting only of normal
recurring adjustments, necessary for the fair presentation of such quarterly financial information.
The operating results for any quarter are not necessarily indicative of the results to be expected for any future period.
Revenue
Cost of sales
Gross profit
Selling, general, and administrative
expenses
Income from operations
Interest expense
Income before income tax provision
Income tax provision
Net income
Net income per share:
Diluted
Weighted average number of shares:
December 31, March 31, June 30,
September 30, December 31, March 31, June 30,
2004
2005
2005
2005
2005
2006
2006
September 30,
2006
(Amounts in thousands except share and per share data)
$
184,188 $
140,064
44,124
228,384 $
173,368
55,016
306,141 $
235,475
70,666
228,634 $
163,936
64,698
181,184 $
136,836
44,348
287,387 $
218,812
68,575
421,348 $
321,089
100,259
323,622
230,044
93,578
37,140
6,984
2,384
4,600
1,771
2,829 $
40,921
14,095
2,704
11,391
4,385
7,006 $
45,903
24,763
2,267
22,496
8,661
13,835 $
46,011
18,687
1,936
16,751
6,595
10,156 $
40,472
3,876
2,761
1,115
451
664 $
50,088
18,487
4,294
14,193
5,605
8,588 $
65,229
35,030
5,900
29,130
11,607
17,523 $
67,017
26,561
5,661
20,900
8,293
12,607
0.17 $
0.39 $
0.74 $
0.54 $
0.04 $
0.46 $
0.90 $
0.66
$
$
Diluted
16,959,020 17,834,520 18,633,251 18,703,958 18,525,849 18,751,417 19,426,294 19,009,231
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. We also use this evaluation 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 and other payments from our consolidated
operating subsidiaries, and our line of
46
Table of Contents
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, 2004 and 2005, cash used in operating activities was approximately $30.0 million
and $13.8 million, respectively. For the fiscal year ended September 30, 2006, cash provided by operating activities
approximated $9.3 million. For the fiscal year ended September 30, 2004, cash used in operating activities was due primarily
to an increase in inventories due to the addition of new product lines, the continued expansion of existing product lines, and to
ensure appropriate inventory levels, partially offset by net income, an increase in accounts payable due to the timing of certain
payments to our manufacturers, and an increase in customer deposits. For the fiscal year ended September 30, 2005, cash used
in operating activities was due primarily to a decrease in accounts payable due to the timing of certain payments to our
manufacturers and an increase in inventories due to the continued expansion of existing product lines and to ensure
appropriate inventory levels, partially offset by net income and an increase in customer deposits. For the fiscal year ended
September 30, 2006, cash provided by operating activities was due primarily to net income, adjusted for non-cash
depreciation, amortization, and stock based compensation charges, and increases in accounts payable and accrued expenses,
partially offset by an increase in accounts receivable due to increased revenues, an increase in inventories to ensure
appropriate inventory levels, and a decrease in customer deposits.
For the fiscal years ended September 30, 2004, 2005, and 2006, cash used in investing activities was approximately
$20.2 million, $17.9 million, and $95.4 million, respectively. For the fiscal years ended September 30, 2004 and 2006, cash
used in investing activities was primarily used in business acquisitions and to purchase property and equipment associated
with opening new retail facilities or improving and relocating existing retail facilities. For the fiscal year ended September 30,
2005 cash used in investing activities was primarily used to purchase property and equipment associated with opening new
retail facilities or improving and relocating existing retail facilities.
For the fiscal years ended September 30, 2004, 2005, and 2006, cash provided by financing activities was approximately
$54.7 million, $43.9 million, and $83.9 million, respectively. For the fiscal year ended September 30, 2004, cash provided by
financing activities was primarily attributable to proceeds from net borrowings on short-term borrowings as a result of
increased inventory levels and borrowings on long-term debt on equipment and real estate acquired, and proceeds from
common shares issued upon the exercise of stock options and under the employee stock purchase plan, partially offset by
repayments of long-term debt. For the fiscal year ended September 30, 2005, cash provided by financing activities was
primarily attributable to proceeds from common shares issued through the February 2005 public offering, upon the exercise of
stock options, and stock purchases under our employee stock purchase plan, partially offset by net repayments on short-term
borrowings as a result of using the proceeds from the issuance of common shares through the February 2005 public offering
and repayments of long-term debt. For the fiscal year ended September 30, 2006, cash provided by financing activities was
primarily attributable to proceeds from net borrowings on short-term borrowings as a result of increased inventory levels and
borrowings on long-term debt on equipment and real estate acquired, and proceeds from common shares issued upon the
exercise of stock options and under the employee stock purchase plan, partially offset by purchases of treasury stock and
repayments of long-term debt.
As of September 30, 2006, our indebtedness totaled approximately $358.7 million, of which approximately $37.2 million
was associated with our real estate holdings and $321.5 million was associated with financing our inventory and working
capital needs.
During June 2006, we entered into a second amended and restated credit and security agreement with eight financial
institutions. The credit facility provides us a line of credit with asset-based borrowing availability of up to $500 million for
working capital and inventory financing, with the amount of permissible borrowings determined pursuant to a borrowing base
formula. The credit facility also permits approved-vendor floorplan borrowings of up to $20 million. The credit facility
accrues interest at LIBOR plus 150 to 260 basis points, with the interest rate based upon the ratio of our net outstanding
borrowings to our tangible net worth. The credit facility is secured by our inventory, accounts receivable, equipment, furniture,
and fixtures. The credit facility requires us to satisfy certain covenants, including maintaining a leverage ratio tied to our
tangible net worth. The other terms and conditions of the new credit facility are generally similar to the previous credit facility.
The credit facility matures in
47
Table of Contents
May 2011, with two one-year renewal options remaining. As of September 30, 2006, we were in compliance with all of the
credit facility covenants.
Prior to the June 2006 second amended and restated credit and security agreement, our credit facility was amended during
March 2006 and February 2006. The March 2006 amendment temporarily increased our asset-based borrowing availability up
to $415 million through July 31, 2006. The February 2006 amendment increased our asset-based borrowing availability up to
$385 million, and extended the maturity of the credit facility to March 1, 2009, with two one-year renewal options. Prior to the
February 2006 amendment, our credit facility provided us with asset-based borrowing availability of up to $340 million,
permitted up to $20 million in approved-vendor floorplan borrowings, accrued interest at a rate of LIBOR plus 150 to
260 basis points, and was scheduled to mature in March 2008, with two one-year renewal options remaining. The other terms
and conditions of the credit facility were generally similar to the new credit facility.
During the fiscal years ended September 30, 2004, 2005, and 2006, we completed the acquisition of five marine retail
operations. We acquired the net assets, related property, and buildings and assumed or retired certain liabilities, including the
outstanding floorplan obligations related to new boat inventories, for approximately $62.8 million in cash, including
acquisition costs and 665,024 shares of common stock valued at $33.71 per share.
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, 2006:
Year Ending September 30,
2007
2008
2009
2010
2011
Thereafter
Total
Line of
Credit
Long-Term
Debt
Operating
Leases
(Amounts in thousands)
$ 321,500
—
—
—
—
—
$ 321,500
$
4,532
4,626
4,720
4,826
4,185
14,297
$ 37,186
$ 10,362
8,300
4,603
3,532
2,426
542
$ 29,765
Total
$ 336,394
12,926
9,323
8,358
6,611
14,839
$ 388,451
Item 7A.
Quantitative and Qualitative Disclosures about Market Risk
At September 30, 2006, approximately 98.0% 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 on certain underlying obligations that
are variable. At September 30, 2006, a hypothetical 100 basis point increase in interest rates on our variable rate obligations
would have resulted in an increase of approximately $3.5 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 and Azimut 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. As a result, 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
and Azimut 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
48
Table of Contents
amount of revenue, cost of goods sold, cash flows, and earnings we recognize for the Ferretti Group and Azimut product lines.
We also could incur losses from hedging transactions designed to reduce our risk to fluctuations in exchange rates. We cannot
predict the effects of exchange rate fluctuations or currency rate hedges on our operating results. Therefore, in certain cases,
we have entered into foreign currency cash flow hedges to reduce the variability of cash flows associated with forecasted
purchases of boats and yachts from Ferretti Group. As of September 30, 2006, these outstanding contracts have a combined
notional amount of approximately $10.4 million and mature at various times through December 2006. As of September 30,
2006 these outstanding contracts had unrealized gains of approximately $571,000, which were recorded in other current assets
on the condensed consolidated balance sheet with approximately $453,000, net of tax, recorded in accumulated other
comprehensive income. The forecasted purchases will settle in Euro dollars. 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
Evaluation of Controls and Procedures
We have evaluated, with the participation of our Chief Executive Officer (CEO) and Chief Financial Officer (CFO), the
effectiveness of our disclosure controls and procedures as of September 30, 2006. Based on this evaluation, our CEO and CFO
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 is 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.
Management’s Report on Internal Control over Financial Reporting
During January 2006, we acquired substantially all of the assets, including certain real estate, and assumed certain
liabilities of Port Arrowhead. During March 2006, we acquired substantially all of the assets and assumed certain liabilities of
Surfside. As permitted by Securities and Exchange Commission guidance, the scope of our Section 404 evaluation for the
fiscal year ended September 30, 2006 does not include the internal controls over financial reporting of the acquired operations
of Port Arrowhead or Surfside. Port Arrowhead and Surfside are included in our consolidated financial statements from the
date of acquisition. Port Arrowhead and Surfside represented approximately $201.8 million and $16.7 million of total assets
and net assets, respectively, as of September 30, 2006 and approximately $192.3 million and $900,000 of revenues and net
income, respectively, for the year then ended. From the acquisition date to September 30, 2006, the processes and systems of
the acquired operations were discrete and did not significantly impact internal controls over financial reporting for our other
consolidated subsidiaries.
Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such
term is defined in Rule 13a-15(f) of the Securities Exchange Act of 1934. Under the supervision and with the participation of
the Company’s management, including its principal executive officer and principal financial officer, the Company conducted
an evaluation of the effectiveness of the Company’s internal control over financial reporting as of September 30, 2005 as
required by the Securities Exchange Act of 1934 Rule 13a-15(c). In making this assessment, the Company used the criteria set
forth by the Committee of Sponsoring Organizations of the
49
Table of Contents
Treadway Commission (COSO) in Internal Control — Integrated Framework. Based on its evaluation, management
concluded that its internal control over financial reporting was effective as of September 30, 2006.
Management’s assessment of the effectiveness of the Company’s internal control over financial reporting as of
September 30, 2006 has been audited by Ernst & Young LLP, an independent registered public accounting firm, as stated in
their report which appears below.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Shareholders of
MarineMax, Inc.
We have audited management’s assessment, included in the accompanying Management’s Report on Internal Control over
Financial Reporting, that MarineMax, Inc. maintained effective internal control over financial reporting as of September 30,
2006, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (the COSO criteria). MarineMax, Inc.’s management is responsible for
maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control
over financial reporting. Our responsibility is to express an opinion on management’s assessment and an opinion on the
effectiveness of the company’s internal control over financial reporting based on our audit.
We conducted our audit 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 effective
internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding
of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and
operating effectiveness of internal control, and performing such other procedures as we considered necessary in the
circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures
that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the
company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
As indicated in the accompanying Management’s Report on Internal Control over Financial Reporting, management’s
assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal
controls of the Port Arrowhead Group or Surfside-3 Marina, Inc., which are included in the 2006 consolidated financial
statements of MarineMax, Inc. and constituted approximately $201.8 million and $16.7 million of total assets and net assets,
respectively, as of September 30, 2006 and approximately $192.3 million and $900,000 of revenues and net income,
respectively, for the year then ended. Our audit of internal control over financial reporting of MarineMax, Inc. also did not
include an evaluation of the internal control over financial reporting of the Port Arrowhead Group and Surfside-3 Marina, Inc.
In our opinion, management’s assessment that MarineMax, Inc. maintained effective internal control over financial
reporting as of September 30, 2006, is fairly stated, in all material respects, based on the COSO criteria.
50
Table of Contents
Also, in our opinion, MarineMax, Inc. maintained, in all material respects, effective internal control over financial reporting as
of September 30, 2006, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States), the consolidated balance sheets of MarineMax, Inc. as of September 30, 2006 and 2005, and the related consolidated
statements of operations, comprehensive income, stockholders’ equity, and cash flows for each of the three years in the period
ended September 30, 2006 of MarineMax, Inc. and our report dated December 14, 2006 expressed an unqualified opinion
thereon.
Ernst & Young LLP
Certified Public Accountants
Tampa, Florida
December 14, 2006
Item 9B.
Other Information
Not applicable.
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 2007 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 2007 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 2007 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 2007 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 2007 Annual Meeting of Stockholders.
51
Table of Contents
PART IV
Item 15.
Exhibits and Financial Statement Schedules
(a) Financial Statements and Financial Statement Schedules
(1) Financial Statements are listed in the Index to Consolidated Financial Statements on page F-1 of this amended 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) Exhibits
Exhibit
Number
3 .1
3 .2
3 .3
4 .1
4 .2
10 .1(k)
Exhibit
Restated Certificate of Incorporation of the Registrant, including all amendments to date(3)
Amended and Restated Bylaws of the Registrant(3)
Certificate of Designation of Series A Junior Participating Preferred Stock(3)
Specimen of Common Stock Certificate(3)
Rights Agreement, dated August 28, 2001 between Registrant and American Stock Transfer & Trust Company, as
Rights Agent(2)
Asset Purchase Agreement between Registrant, Port Arrowhead Marina, Inc., Lake Port Marina, Inc., Port
Arrowhead, Inc., and Lakewood Resort Corporation(9)
10 .1(l) Asset Purchase Agreement between Registrant and Surfside-3 Marina, Inc.(11)
10 .3(h) Employment Agreement dated June 7, 2006 between Registrant and William H. McGill, Jr.(12)
10 .3(i) Employment Agreement dated June 7, 2006 between Registrant and Michael H. McLamb(12)
10 .3(j) Employment Agreement dated June 7, 2006 between Registrant and Edward A. Russell(12)
10 .4
10 .5
10 .11
1998 Incentive Stock Plan, as amended through November 15, 2000(4)
1998 Employee Stock Purchase Plan(1)
10 .12
10 .17
10 .17(a)
10 .18
10 .19
10 .20
10 .20(a)
10 .20(b)
Dealer Agreement dated December 7, 2005 between the Sea Ray Division of Brunswick Corporation and
MarineMax, Inc.(6)
Agreement Relating to Acquisitions dated December 7, 2005 between the Sea Ray Division of Brunswick
Corporation and the Principal Operating Subsidiaries of MarineMax, Inc.(6)
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(4)
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 (5)
Hatteras Sales and Service Agreement, dated July 1, 2003 among the Registrant, MarineMax Motor Yachts, LLC,
and Hatteras Yachts Division of Brunswick Corporation(5)
Dealer Agreement, effective September 30, 2003 among the Registrant, Ferretti Group USA, Inc., and Bertram
Yacht, Inc.(7)
Amended and Restated Credit and Security Agreement executed on February 15, 2005 effective as of February 3,
2005 among the Registrant and its subsidiaries, as Borrowers, Keybank National Association and Bank of
America, N.A., and various other lenders as Lenders(8)
Amendment No. 2 to Amended and Restated Credit and Security Agreement dated February 10, 2006 among the
Registrant and its subsidiaries, as Borrowers, Keybank National Association, Bank of America, N.A., and various
other lenders, as Lenders(10)
Amendment No. 3 to Amended and Restated Credit and Security Agreement dated March 10, 2006 among the
Registrant and its subsidiaries, as Borrowers, Keybank National Association, Bank of America, N.A., and various
other lenders, as Lenders(11)
52
Table of Contents
Exhibit
Number
10 .20(c)
10 .21
Exhibit
Amendment No. 4 to Amended and Restated Credit and Security Agreement dated March 31, 2006 among the
Registrant and its subsidiaries, as Borrowers, Keybank National Association, Bank of America, N.A., and various
other lenders, as Lenders(11)
Second Amended and Restated Credit and Security Agreement dated June 19, 2006 among the Registrant and its
subsidiaries, as Borrowers, and Bank of America, N.A., KeyBank, N.A., General Electric Commercial
Distribution Finance Corporation, Wachovia Bank, N.A., Wells Fargo Bank, N.A., National City Bank, N.A.,
U.S. Bank, N.A., and Branch Banking and Trust Company, as Lenders(13)
21
23 .1
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.
(1) Incorporated by reference to Registration Statement on Form S-1 (Registration 333-47873).
(2) Incorporated by reference to Registrant’s Form 8-K Report dated September 30, 1998, as filed on October 20, 1998.
(3) Incorporated by reference to Registrant’s Form 10-K for the year ended September 30, 2001, as filed on December 20,
2001.
(4) Incorporated by reference to Registrant’s Form 10-Q for the quarterly period ended December 31, 2001, as filed on
February 14, 2002.
(5) Incorporated by reference to Registrant’s Form 10-Q for the quarterly period ended December 31, 2003, as filed on
February 17, 2004.
(6) Incorporated by reference to Registrant’s Form 8-K Report as filed on December 9, 2005.
(7) Incorporated by reference to Registrant’s Form 10-Q for the quarterly period ended December 31, 2004, as filed on
February 9, 2005.
(8) Incorporated by reference to Registrant’s Form 8-K Report dated February 15, 2005, as filed on February 18, 2005.
(9) Incorporated by reference to Registrant’s Form 10-Q for the quarterly period ended December 31, 2005, as filed on
February 9, 2006.
(10) Incorporated by reference to Registrant’s Form 8-K Report dated February 10, 2006, as filed on February 16, 2006.
(11) Incorporated by reference to Registrant’s Form 10-Q for the quarterly period ended March 31, 2006, as filed on
May 10, 2006.
(12) Incorporated by reference to Registrant’s Form 8-K Report as filed on June 13, 2006.
(13) Incorporated by reference to Registrant’s Form 10-Q for the quarterly period ended June 30, 2006, as filed on
August 4, 2006.
(c) Financial Statement Schedules
(1) See Item 15(a) above.
53
Table of Contents
In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
MARINEMAX, INC .
/s/ WILLIAM H. MCGILL JR.
William H. McGill Jr.
Chairman of the Board and Chief Executive Officer
Date: December 14, 2006
In accordance with the Securities Exchange Act of 1934, the following persons on behalf of the registrant and in the
capacities and on the date indicated have signed this report below.
Signature
Capacity
Date
/s/ WILLIAM H. MCGILL JR.
William H. McGill Jr.
Chairman of the Board, President, and Chief
Executive Officer
(Principal Executive Officer)
December 14, 2006
/s/ MICHAEL H. MCLAMB
Michael H. McLamb
Executive Vice President, Chief Financial
Officer, Secretary, and Director
(Principal Accounting and
Financial Officer)
December 14, 2006
/s/ ROBERT D. BASHAM
Director
December 14, 2006
Robert D. Basham
/s/ HILLIARD M. EURE III
Director
December 14, 2006
Hilliard M. Eure III
/s/ JOHN B. FURMAN
Director
December 14, 2006
John B. Furman
/s/ ROBERT S. KANT
Director
December 14, 2006
Robert S. Kant
/s/ JOSEPH A. WATTERS
Director
December 14, 2006
Joseph A. Watters
/s/ DEAN S. WOODMAN
Director
December 14, 2006
Dean S. Woodman
54
Table of Contents
MARINEMAX, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Comprehensive Income
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
F-8
Table of Contents
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Shareholders of
MarineMax, Inc.
We have audited the accompanying consolidated balance sheets of MarineMax, Inc. and subsidiaries as of September 30,
2006 and 2005, and the related consolidated statements of operations, comprehensive income, stockholders’ equity, and cash
flows for each of the three years in the period ended September 30, 2006. 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, 2006 and 2005, and the consolidated results of their operations
and their cash flows for each of the three years in the period ended September 30, 2006 in conformity with U.S. generally
accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States), the effectiveness of MarineMax, Inc.’s internal control over financial reporting as of September 30, 2006, based on
criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission and our report dated December 14, 2006 expressed an unqualified opinion thereon.
As discussed in Note 3 to the consolidated financial statements, as of October 1, 2005, the Company adopted the
provisions of Statement of Financial Accounting Standards No. 123R, “Share-Based Payment”.
Certified Public Accountants
Tampa, Florida
December 14, 2006
/s/ Ernst & Young LLP
F-2
Table of Contents
MARINEMAX, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands except share and per share data)
ASSETS
September 30,
2005
September 30,
2006
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
$
27,271 $
26,235
317,705
6,934
4,956
383,101
99,994
56,184
211
25,113
57,589
462,847
8,445
4,486
558,480
122,215
116,195
4,673
$ 539,490 $ 801,563
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, 2005 and 2006
Common stock, $.001 par value; 24,000,000 shares authorized, 17,678,087 and
18,529,524 shares issued and outstanding at September 30, 2005 and 2006, respectively
Additional paid-in capital
Retained earnings
Deferred stock compensation
Accumulated other comprehensive income
Treasury stock, at cost, 30,000 and 336,300 shares held at September 30, 2005 and 2006,
respectively
Total stockholders’ equity
Total liabilities and stockholders’ equity
See accompanying notes.
F-3
$
18,146 $
25,793
21,096
150,000
4,635
219,670
10,771
25,450
255,891
37,398
17,170
26,783
321,500
4,532
407,383
11,639
32,654
451,676
—
—
18
125,672
160,924
(2,397 )
—
19
156,618
200,306
—
507
(618 )
283,599
(7,563 )
349,887
$ 539,490 $ 801,563
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
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:
$
$
$
$
$
For the Year Ended September 30,
2005
947,347
712,843
234,504
169,975
64,529
9,291
55,238
21,412
33,826
2.01
1.88
2004
762,009
573,616
188,393
139,470
48,923
6,499
42,424
16,126
26,298
1.69
1.58
2006
$ 1,213,541
906,781
306,760
222,806
83,954
18,616
65,338
25,956
39,382
2.18
2.08
$
$
$
$
$
$
Basic
Diluted
15,585,314
16,666,107
16,815,445
18,032,533
18,028,562
18,928,735
See accompanying notes.
F-4
Table of Contents
MARINEMAX, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Amounts in thousands)
Net income
Other comprehensive income:
Change in fair market value of interest rate swap, net of tax of $34
Change in fair market value of foreign currency hedges, net of tax of $284
Comprehensive income
For the Year Ended September 30,
2005
2006
2004
$ 26,298 $ 33,826 $ 39,382
54
—
—
453
$ 26,298 $ 33,826 $ 39,889
—
—
See accompanying notes.
F-5
Table of Contents
MARINEMAX, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Amounts in thousands except share data)
Common Stock
Shares
Additional
Paid-in Retained
Deferred
Stock
Amount Capital
Earnings Compensation
Accumulated
Other
Total
Comprehensive Treasury Stockholders’
Stock
Equity
Income
BALANCE, September 30, 2003
Net income
Purchase of treasury stock
Issuance of treasury stock
Shares issued under employee stock purchase
plan
Shares issued upon exercise of stock options
Stock-based compensation
Tax benefits of options exercised
BALANCE, September 30, 2004
Net income
Shares issued under employee stock purchase
plan
Shares issued upon exercise of stock options
Shares issued through public offering
Stock-based compensation
Amortization of deferred stock compensation
Tax benefits of options exercised
BALANCE, September 30, 2005
Net income
Purchase of treasury stock
Reclassification resulting from adoption of
SFAS 123R
Shares issued under employee stock purchase
plan
Shares issued upon exercise of stock options
Stock-based compensation
Shares issued upon business acquisition
Tax benefits of options exercised
Change in fair market value of derivative
15,401,686 $ 15 $ 65,235 $ 100,806 $
— 26,298
—
—
(6 )
—
— —
(32,000 ) —
2,000 —
64,429 —
1
271,338
3,559 —
— —
636
2,964
80
1,410
—
—
—
—
16 70,325 127,098
— 33,826
— —
15,711,012
51,727 —
379,567 —
1,429,000
106,781 —
— —
— —
17,678,087
1,018
4,268
2 44,201
3,132
—
2,728
—
—
—
—
—
—
18 125,672 160,924
— 39,382
—
—
— —
(306,300 ) —
— $
—
—
—
—
—
—
—
—
—
—
—
—
(3,027 )
630
—
(2,397 )
—
—
— $ — $ 166,056
26,298
— —
(678 )
(678 )
—
54
60
—
— —
— —
— —
— —
—
— —
636
2,965
80
1,410
(618 ) 196,821
33,826
— —
— —
— —
— —
— —
— —
—
— —
— (6,945 )
1,018
4,268
44,203
105
630
2,728
(618 ) 283,599
39,382
(6,945 )
— —
(2,397 )
—
2,397
— —
—
59,197 —
253,353 —
180,163 —
665,024
1,283
2,581
5,567
1 22,417
1,495
— —
—
—
—
—
—
—
—
—
—
—
—
— $
— —
— —
— —
— —
— —
1,283
2,581
5,567
22,418
1,495
507 —
507
507 $ (7,563 ) $ 349,887
instruments, net of tax
BALANCE, September 30, 2006
—
18,529,524 $ 19 $ 156,618 $ 200,306 $
— —
—
See accompanying notes.
F-6
Table of Contents
MARINEMAX, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
For the Year Ended September 30,
2006
2004
2005
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income
Adjustments to reconcile net income to net cash (used in) provided by operating
activities:
Depreciation and amortization
Deferred income tax provision
Loss (gain) on sale of property and equipment
Stock-based compensation expense
Tax benefits of options exercised
Excess tax benefits from stock-based compensation
(Increase) decrease in —
Accounts receivable, net
Inventories, net
Prepaid expenses and other assets
Increase (decrease) in —
Accounts payable
Customer deposits
Accrued expenses
Net cash (used in) provided by operating activities
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment
Net cash invested in joint venture
Net cash used in acquisitions of businesses, net assets, and intangible assets
Proceeds from sale of property and equipment
Net cash used in investing activities
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings of long-term debt
Repayments of long-term debt
Net borrowings (repayments) on short-term borrowings
Purchases of treasury stock
Net proceeds from issuance of common stock through public offering
Excess tax benefits from stock-based compensation
Net proceeds from issuance of common stock under option and employee purchase
plans
Net cash provided by financing activities
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS:
CASH AND CASH EQUIVALENTS, beginning of period
CASH AND CASH EQUIVALENTS, end of period
Supplemental Disclosures of Non-Cash Financing Activities:
Long-term debt assumed for property and equipment purchases
Supplemental Disclosure of Non-Cash Investing Activities:
Common stock issued in connection with business acquisition
See accompanying notes.
F-7
$ 26,298 $ 33,826 $ 39,382
5,273
180
1
80
1,410
—
6,118
363
(136 )
735
2,728
—
8,607
1,338
(42 )
5,567
1,495
(1,127 )
(3,220 )
(110,369 )
(1,640 )
(1,258 )
(31,143 )
(659 )
(21,385 )
(25,334 )
(1,411 )
43,439
5,989
2,608
(29,951 )
(37,720 )
9,876
3,471
(13,799 )
20,196
(21,988 )
4,104
9,402
(10,174 )
—
(10,232 )
235
(20,171 )
(17,795 )
—
(650 )
571
(17,874 )
(10,164 )
(4,007 )
(81,369 )
105
(95,435 )
3,200
(2,426 )
50,939
(678 )
—
—
3,271
(3,463 )
(5,429 )
—
44,203
—
12,240
(5,140 )
78,729
(6,945 )
—
1,127
3,864
3,655
83,875
54,690
(2,158 )
4,568
10,508
27,271
$ 15,076 $ 27,271 $ 25,113
5,286
43,868
12,195
15,076
$
3,120 $ 4,040 $ —
$
— $ — $ 22,418
Table of Contents
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 slip and storage accommodations in certain locations. In addition, we arrange
related boat financing, insurance, and extended service contracts. As of September 30, 2006, we operated through 87
retail locations in 22 states, consisting of Alabama, Arizona, California, Colorado, Connecticut, Delaware, Florida,
Georgia, Maryland, Minnesota, Missouri, Nevada, New Jersey, New York, North Carolina, Ohio, Oklahoma, Rhode
Island, South Carolina, Tennessee, 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 60%, 60%, and 59% of our revenue in fiscal 2004, 2005, and
2006, respectively. We believe we represented approximately 10%, 10%, and 13% of all Brunswick marine product
sales during fiscal 2004, 2005, and 2006, respectively.
We have 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, Bertram and Azimut. 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 party to a multi-year dealer
agreement with Brunswick covering Sea Ray products and is the exclusive dealer of Sea Ray boats in its geographic
markets. Our subsidiary, MarineMax Motor Yachts, LLC, is a party to a dealer agreement with Hatteras Yachts. The
agreement gives us the right to sell Hatteras Yachts throughout the state of Florida (excluding the Florida Panhandle)
and the state of Texas, as well as the U.S. distribution rights for Hatteras products over 82 feet. 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, and Mochi Craft 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.
Upon the completion of the Surfside-3 acquisition, we became the exclusive dealer for Azimut-Benetti Group’s
product lines Azimut and Atlantis. The Azimut dealer agreement provides a geographic territory to promote the
product line and to network with the appropriate clientele through various independent locations designated for
Azimut retail sales.
As is typical in the industry, we deal with manufacturers, other than the Sea Ray division of Brunswick, under
renewable annual dealer agreements, each of which gives us the right to sell various makes and models of boats
within a given geographic region. Any change or termination of these agreements for any reason, including changes
in competitive, regulatory, or marketing practices, including rebate or incentive programs, could adversely affect our
results of operations. Although there are a limited number of manufacturers of the type of boats and products that we
sell, we believe that adequate alternative sources would be available to replace any manufacturer other than
Brunswick as a product source. These alternative sources may not be available at the time of any interruption, and
alternative products may not be available at comparable terms, which could affect operating results adversely.
Additionally, a change in suppliers could cause a loss of revenue, which would affect operating results adversely.
The consolidated financial statements include our accounts and the accounts of our subsidiaries, all of which are
wholly owned. All significant intercompany transactions and accounts have been eliminated.
F-8
Table of Contents
MARINEMAX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
2. ACQUISITIONS:
We commenced operations with the acquisition of five independent recreational boat dealers on March 1, 1998. Since the
initial acquisitions, we have acquired 20 recreational boat dealers, two boat brokerage operations, and two full-service yacht
repair facilities. As a part of our acquisition strategy, we frequently engage in discussions with various recreational boat
dealers regarding their potential acquisition by us. Potential acquisition discussions frequently take place over a long period of
time and involve difficult business integration and other issues, including, in some cases, management succession and related
matters. As a result of these and other factors, a number of potential acquisitions that from time to time appear likely to occur
do not result in binding legal agreements and are not consummated. The following describes the acquisitions we completed
during the fiscal years ended September 30, 2004 and 2006. No significant acquisitions were completed during the fiscal year
ended September 30, 2005.
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 provided us with an established retail location to sell the newly offered Ferretti Group
products in the southeast Florida boating community. The asset purchase agreement contained an earn out provision based on
the future profits of the location, assuming certain conditions and provisions were met. 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.
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. The acquisition expanded our ability to serve consumers in the Mid-Atlantic United States
boating community. Additionally, the acquisition allowed 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.
During January 2006, we acquired substantially all of the assets, including certain real estate, and assumed certain
liabilities of the Port Arrowhead Group (Port Arrowhead), a privately held boat dealership with locations in Missouri and
Oklahoma, for approximately $27.5 million in cash, plus $5.0 million in working capital adjustments including acquisition
costs. Port Arrowhead operates six retail locations, including a large marina with more than 300 slips. The acquisition expands
our ability to serve consumers in the Midwest boating community, including neighboring boating destinations in Illinois,
Kansas, and Arkansas. The acquisition also allows us to capitalize on Port Arrowhead’s market position and leverage our
inventory management and inventory financing resources over the acquired locations. Based on our preliminary valuation, the
purchase price, including acquisition costs, is anticipated to result in the recognition of approximately $6.1 million in tax
deductible goodwill and approximately
F-9
Table of Contents
MARINEMAX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
$2.0 million in tax deductible indefinite-lived intangible assets (dealer agreements). We are in the process of finalizing the
purchase price allocation and determining the fair value of acquired intangible assets; accordingly, certain purchase price
allocations are subject to change. Port Arrowhead has been included in our consolidated financial statements since the date of
acquisition.
Pro forma results of operations have not been presented with respect to any of the above acquisitions, as the effects of
those acquisitions were not significant on either an individual or an aggregate basis in the related acquisition year.
During March 2006, we acquired substantially all of the assets and assumed certain liabilities of Surfside-3 Marina, Inc.
(Surfside), a privately held boat dealership with eight locations in New York and Connecticut, for approximately $24.8 million
in cash and 665,024 shares of common stock, plus $24.0 million in working capital adjustments including acquisition costs.
The shares were valued at $33.71 per share, which was the average closing market price of our common stock for the five day-
period beginning two days prior to and ending two days subsequent to the acquisition date. Based on the provisions of the
asset purchase agreement, 100,000 shares of common stock are currently held in escrow, subject to the satisfaction of working
capital adjustments and other provisions in the acquisition documents. We and Surfside are in current discussions to resolve
such matters. The acquisition expands our ability to serve consumers in the Northeast boating community and allows us to
capitalize on Surfside’s market position and leverage our inventory management and inventory financing resources over the
acquired locations. Based on our preliminary valuation, the purchase price, including acquisition costs, is anticipated to result
in the recognition of approximately $37.0 million in tax deductible goodwill and approximately $14.7 million in tax deductible
indefinite-lived intangible assets (dealer agreements). We are in the process of finalizing the purchase price allocation and
determining the fair value of acquired intangible assets and determining the ultimate resolution of certain matters related to
purchase price adjustments with the owners of Surfside; accordingly, certain purchase price allocations are subject to change.
Surfside has been included in our consolidated financial statements since the date of acquisition.
The following table summarizes the estimated fair values of the assets acquired and liabilities assumed in the acquisitions
of Port Arrowhead and Surfside during 2006 (amounts in thousands):
Receivables
Inventories
Other current assets
Property and equipment
Goodwill
Other identifiable intangible assets
Total assets acquired
Short term borrowings
Other current liabilities
Total current liabilities assumed
Net assets acquired
F-10
$
9,969
119,808
392
20,383
43,074
16,815
$ 210,441
$ (92,770 )
(14,004 )
(106,774 )
$ 103,667
Table of Contents
MARINEMAX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The following unaudited pro forma financial information presents the combined results of operations of our company with
the operations of Surfside as if the acquisition had occurred as of the beginning of fiscal 2005 and 2006 (amounts in
thousands, except per share data):
Revenue
Net income
Net income per common share
Basic
Dilutive
For the Fiscal Year Ended
September 30,
2005
(Unaudited)
$ 1,095,410
36,455
$
2006
(Unaudited)
$ 1,264,854
37,678
$
$
$
2.09
1.95
$
$
2.05
1.96
This unaudited pro forma financial information is presented for informational purposes only. The unaudited pro forma
financial information includes an adjustment to record income taxes as if Surfside were taxed as a C corporation, interest for
cash paid to acquire the business and depreciation and amortization as if we acquired them from the beginning of the periods
presented until its acquisition date. The unaudited pro forma financial information does not include adjustments to remove
certain private company expenses, which may not be incurred in future periods. Similarly, the unaudited pro forma financial
information from the beginning of the periods presented until Surfside’s acquisition date does not include adjustments for
additional expenses, such as rent, insurance and other expenses that would have been incurred subsequent to the acquisition
date. The unaudited pro forma financial information may not necessarily reflect our future results of operations or what the
results of operations would have been had we owned and operated Surfside as of the beginning of the periods presented.
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 $6.5 million, $9.0 million, and $17.2 million for the fiscal years ended
September 30, 2004, 2005, and 2006, respectively, including interest on debt to finance our real estate holdings and new boat
inventory. We made income tax payments of approximately $16.2 million, $15.3 million, and $8.9 million for the fiscal years
ended September 30, 2004, 2005, and 2006, respectively.
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. Pursuant to EITF 02-16, amounts received by us under our co-op assistance programs from our manufacturers, are
netted against related advertising expenses.
Inventories
Inventory costs consist of the amount paid to acquire the inventory, net of vendor consideration and purchase discounts,
the cost of equipment added, reconditioning costs, and transportation costs relating to acquiring inventory for 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
F-11
Table of Contents
MARINEMAX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
trends, we maintain a lower of cost or market valuation allowance, which was not material to the consolidated financial
statements taken as a whole as of September 30, 2005 or 2006.
Property and Equipment
We record property and equipment at cost, net of accumulated depreciation, and depreciate over their estimated useful
lives using the straight-line method. We capitalize and amortize leasehold improvements over the lesser of the life of the lease
or the estimated useful life of the asset. 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
3-5
We remove the cost of property and equipment sold or retired and the related accumulated depreciation from the accounts
at the time of disposition, and include any resulting gain or loss in the consolidated statements of operations. We charge
maintenance, repairs, and minor replacements to operations as incurred; we capitalize and amortize major replacements and
improvements over their useful lives.
Valuation of 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 that all business combinations initiated after June 30,
2001 be accounted for using the purchase method of accounting and identifiable intangible assets acquired in a business
combination 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. If the
carrying amount of goodwill or an identifiable intangible asset 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 2006, based on financial
information as of the third quarter of fiscal 2006, 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, 2004, 2005, and 2006. Accumulated
amortization of goodwill was approximately $2.6 million at September 30, 2005 and 2006.
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.
F-12
Table of Contents
MARINEMAX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
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. 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 liability for incurred but not
reported losses using our historical loss experience, our judgment, and industry information.
Derivative Instruments
We account for derivative instruments in accordance with Statement of Financial Accounting Standards No. 133,
“Accounting for Derivative Instruments and Certain Hedging Activities” (SFAS 133), as amended by Statement of Financial
Accounting Standards No. 138, “Accounting for Certain Derivative Instruments and Certain Hedging Activity, an Amendment
of SFAS 133” (SFAS 138) and Statement of Financial Accounting Standards No. 149, “Amendment of Statement 133 on
Derivative Instruments and Hedging Activities” (SFAS 149), (collectively SFAS 133). Under these standards, all derivative
instruments are recorded on the balance sheet at their respective fair values.
We utilize certain derivative instruments, from time to time, including interest rate swaps and forward contracts to manage
variability in cash flows associated with interest rates and forecasted purchases of boats and yachts from certain of our foreign
suppliers in Euro dollars.
The accounting for changes in the fair value (i.e., gains or losses) of a derivative instrument depends on whether it has
been designated and qualifies as part of a hedging relationship based on its effectiveness in hedging against the exposure and
further, on the type of hedging relationship. For those derivative instruments that are designated and qualify as hedging
instruments, we designate the hedging instrument, based upon the exposure being hedged, as a fair value hedge or a cash flow
hedge.
Our forward contracts and interest rate swap are designated and accounted for as cash flow hedges (i.e., hedging the
exposure to variability in expected future cash flows that is attributable to a particular risk). SFAS No. 133 provides that the
effective portion of the gain or loss on a derivative instrument designated and qualifying as a cash flow hedging instrument be
reported as a component of other comprehensive income and be reclassified into earnings in the same line item in the income
statement as the hedged item in the same period or periods during which the transaction affects earnings. The ineffective
portion of the gain or loss on these derivative instruments, if any, is recognized in other income/expense in current earnings
during the period of change.
For derivative instruments not designated as hedging instruments, the gain or loss is recognized in other income/expense in
current earnings during the period of change. When a cash flow hedge is terminated, if the forecasted hedged transaction is
still probable of occurrence, amounts previously recorded in other comprehensive
F-13
Table of Contents
MARINEMAX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
income remain in other comprehensive income and are recognized in earnings in the period in which the hedged transaction
affects earnings.
Additional information with regard to accounting policies associated with derivative instruments is contained in Note 9,
“Derivative Instruments and Hedging Activity.”
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. We recognize commissions earned by us for placing notes
with financial institutions in connection with customer boat financing when we recognize the related boat sales. 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
we recognize the related boat sale. 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, 2005 or 2006, is based on our experience with repayments or
defaults on the related finance or insurance contracts.
We also recognize commissions earned on extended warranty service contracts sold on behalf of third-party insurance
companies at the later of customer acceptance of the service contract terms as evidenced by contract execution, or recognition
of the related boat sale. We are charged back for a portion of these commissions should the customer terminate or default on
the service contract prior to its scheduled maturity. The chargeback allowance, which was not material to the consolidated
financial statements taken as a whole as of September 30, 2005 or 2006, is based upon our experience with repayments or
defaults on the service contracts.
Stock-Based Compensation
Prior to October 1, 2005 we accounted for our share-based compensation plans under the recognition and measurement
provisions of Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” (APB 25) and
related interpretations and disclosure requirements established by Statement of Financial Accounting Standards No. 123,
“Accounting for Stock-Based Compensation” (SFAS 123), as amended by Statement of Financial Accounting Standards
No. 148, “Accounting for Stock-Based Compensation — Transition and Disclosure” (SFAS 148). Under APB 25, because the
grant price was equal to or greater than the fair value no compensation expense was recorded in earnings for our stock options
and awards granted under our employee stock purchase plan (ESPP). The pro forma effects on net income and earnings per
share for stock options and ESPP awards were disclosed in a footnote to the financial statements. Compensation expense was
recorded in earnings for non-vested common stock awards (restricted stock awards) and Board of Director fees.
Effective October 1, 2005, we adopted the provisions of Statement of Financial Accounting Standards No. 123R, “Share-
Based Payment” (SFAS 123R) for our share-based compensation plans. We adopted SFAS 123R using the modified
prospective transition method. Under this transition method, compensation cost recognized in fiscal 2006 includes (a) the
compensation cost for all share-based awards granted prior to, but not yet vested as of October 1, 2005, based on the grant-
date fair value estimated in accordance with the original provisions of SFAS 123 and (b) the compensation cost for all share-
based awards granted subsequent to September 30, 2005, based on the grant-date fair value estimated in accordance with the
provisions of SFAS 123R. Results for prior periods have not been restated. As a result of our adoption of SFAS 123R, we
recorded compensation expense for stock options of approximately $3.5 million before tax, or $0.15 per diluted share after-tax
in the fiscal year ended September 30, 2006.
F-14
Table of Contents
MARINEMAX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The following table illustrates the effect on net income and earnings per share as if we had applied the fair-value
recognition provisions of SFAS 123 to all of our share-based compensation awards for periods prior to the adoption of
SFAS 123R, and the actual effect on net income and earnings per share for periods subsequent to the adoption of SFAS 123R
(amounts in thousands, except per share data):
Net income as reported
Add: Stock-based employee compensation expense, included in reported net income, net
of related tax effects of $31, $283, and $1,464 for the fiscal year ended September 30,
2004, 2005, and 2006, respectively
Deduct: Total stock-based employee compensation expense determined under the fair
value based method for all awards, net of related tax effects of $339, $663, and $1,464
for the fiscal year ended September 30, 2004, 2005, and 2006, respectively
Pro forma net income
Basic earnings per share:
As reported
Pro forma
Diluted earnings per share:
As reported
Pro forma
Advertising and Promotional Costs
For the Fiscal Year Ended
September 30,
2005
$ 26,298 $ 33,826 $ 39,382
2006
2004
49
452
4,103
(2,218 )
(4,103 )
$ 24,129 $ 31,325 $ 39,382
(2,953 )
$ 1.69 $ 2.01 $ 2.18
$ 1.55 $ 1.86 $ 2.18
$ 1.58 $ 1.88 $ 2.08
$ 1.48 $ 1.77 $ 2.08
We expense advertising and promotional costs as incurred and include them in selling, general, and administrative
expenses in the accompanying consolidated statements of operations. Pursuant to EITF 02-16, amounts received by us under
our co-op assistance programs from our manufacturers, are netted against the related advertising expenses. Total advertising
and promotional expenses approximated $10.0 million, $14.5 million and $16.5 million, net of related co-op assistance of
approximately $1.8 million, $1.6 million and $1.3 million, for the fiscal years ended September 30, 2004, 2005, and 2006,
respectively.
Income Taxes
We account for income taxes in accordance with Statement of Financial Accounting Standards No. 109, “Accounting for
Income Taxes” (SFAS 109). Under SFAS 109, we recognize deferred tax assets and liabilities 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. We measure deferred tax assets and liabilities 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.
We operate in multiple states with varying tax laws and are subject to both federal and state audits of our tax filings. We
make estimates to determine that our tax reserves are adequate to cover audit adjustments, if any. Actual audit results could
vary from the estimates recorded by us. As the number of years that are open for tax audits vary depending on tax jurisdiction,
a number of years may elapse before a particular matter is audited and finally resolved. While it is often difficult to predict the
final outcome or timing of resolution of a particular tax matter, we believe that our consolidated financial statements reflect the
appropriate outcome of known tax contingencies.
New Accounting Pronouncements
During March 2005, the Financial Accounting Standards Board (FASB) issued Interpretation No. 47, “Accounting for
Conditional Asset Retirement Obligations — an Interpretation of FASB Statement No. 143”
F-15
Table of Contents
MARINEMAX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(FIN 47), which clarifies the timing of liability recognition for legal obligations associated with an asset retirement when the
timing and (or) method of settling obligations are conditional on a future event that may or may not be within the control of
the entity. FIN 47 is effective no later than the end of fiscal years ending after December 15, 2005. The adoption of FIN 47 did
not have an effect on our consolidated financial statements.
During May 2005, the FASB issued Statement of Financial Accounting Standard No. 154, “Accounting Changes and Error
Corrections” (SFAS 154) which replaces Accounting Principles Board Opinion No. 20, “Accounting Changes,” (APB 20) and
SFAS No. 3, “Reporting Accounting Changes in Interim Financial Statements-An Amendment of APB Opinion
No. 28” (SFAS 3). SFAS 154 provides guidance on the accounting for and reporting of accounting changes and error
corrections. SFAS 154 is effective for accounting changes and correction of errors made in fiscal years beginning after
December 15, 2005. SFAS 154 is effective for the first quarter of our fiscal year 2007 and we are currently assessing the
implications of this standard and the impact it will have on our consolidated financial statements.
During June 2006, the Emerging Issues Task Force (EITF) of the Financial Accounting Standards Board (FASB) reached a
consensus on Issue No. 06-3, “How Taxes Collected from Customers and Remitted to Governmental Authorities Should Be
Presented in the Income Statement (That Is, Gross versus Net Presentation)” (EITF 06-3). The consensus determined that the
scope of EITF 06-3 includes any tax assessed by a governmental authority that is imposed concurrently on a specific revenue-
producing transaction between a seller and a customer, and may include, but is not limited to, sales, use, value added, and
some excise taxes. EITF 06-3 also determined that the presentation of taxes on either a gross basis or a net basis within the
scope of EITF 06-3 is an accounting policy decision that should be disclosed pursuant to APB Opinion No. 22, “Disclosure of
Accounting Policies” (APB 22). EITF 06-3 does not require a company to reevaluate its existing policies related to taxes
assessed by a governmental authority that are directly imposed on a revenue-producing transaction between a seller and a
customer. EITF 06-3 is effective for interim and annual financial statements beginning after December 15, 2006, with early
adoption permitted. We will adopt EITF 06-3 in the first quarter of fiscal year 2007 and do not expect the implementation of
this standard to have a material impact on our consolidated financial statements as taxes collected from customers and remitted
to governmental authorities are presented net in our consolidated statements of operations.
During June 2006, the FASB issued Interpretation No. 48, “Accounting for Uncertainty in Income Taxes” (FIN 48), an
interpretation of FASB Statement No. 109, “Accounting for Income Taxes” (SFAS 109). FIN 48 clarifies the accounting for
uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with SFAS 109. FIN 48
prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax
position taken or expected to be taken in a tax return. FIN 48 also provides guidance on derecognition, classification, interest
and penalties, accounting in interim periods, disclosure, and transition. FIN 48 is effective for fiscal years beginning after
December 15, 2006. FIN 48 is effective for the first quarter of our 2008 fiscal year, and we are currently assessing the
implications of this standard and the impact it will have on our consolidated financial statements.
During September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (SFAS 157). SFAS 157 defines fair
value, applies to other accounting pronouncements that require or permit fair value measurements and expands disclosures
about fair value measurements. SFAS 157 is effective for fiscal years beginning after November 15, 2007 and interim periods
within those fiscal years. We are currently assessing the implications of this standard and the impact it will have on our
consolidated financial statements.
During September 2006, the SEC issued Staff Accounting Bulletin No. 108 “Considering the Effects of Prior Year
Misstatements when Quantifying Misstatements in Current Year Financial Statements” (SAB 108), to address diversity in
practice in quantifying financial statement misstatements and the potential for the build up of improper amounts on the balance
sheet. SAB 108 identifies the approach that registrants should take when evaluating the effects of unadjusted misstatements on
each financial statement, the circumstances under which corrections of misstatements should result in a revision to financial
statements, and disclosures related to the correction of
F-16
Table of Contents
MARINEMAX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
misstatements. SAB 108 is effective for any report for an interim period of the first fiscal year ending after November 16,
2006. We are currently assessing the implications of this standard and the impact it will have 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 our cash and cash equivalents are limited
primarily to amounts held with financial institutions. Concentrations of credit risk arising from our receivables are limited
primarily to amounts due from manufacturers and financial institutions.
Fair Value of Financial Instruments
The carrying amount of our financial instruments approximates fair value due either to length to 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. Significant 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. We normally
collect these receivables 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. At September 30, 2006, other receivables
consists primarily of amounts we believe are due related to certain unresolved matters associated to the terms and conditions
of the asset purchase agreement with Surfside (see footnote 2. Acquisitions). We do not believe the ultimate resolution of these
matters will have a material adverse effect on our consolidated financial condition, results of operations or cash flows.
The allowance for uncollectible receivables, which was not material to the consolidated financial statements taken as a
whole as of September 30, 2005 or 2006, was based on our consideration of customer payment practices, past transaction
history with customers, and economic conditions. We review the allowance for uncollectible receivables when an event or
other change in circumstances results in a change in the estimate of the ultimate collectibility of a specific account.
The accounts receivable balances consisted of the following at September 30,
Trade receivables
Amounts due from manufacturers
Other receivables
F-17
2005
2006
(Amounts in thousands)
$ 22,125
26,087
9,377
$ 57,589
$ 14,570
10,374
1,291
$ 26,235
Table of Contents
MARINEMAX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
5. INVENTORIES:
Inventories, net consisted of the following at 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 at September 30,
Land
Buildings and improvements
Machinery and equipment
Furniture and fixtures
Vehicles
Less — Accumulated depreciation
2005
2006
(Amounts in thousands)
$ 265,954 $ 382,077
69,729
43,193
11,041
8,558
$ 317,705 $ 462,847
2005
2006
(Amounts in thousands)
$ 33,223 $ 43,142
71,991
58,082
32,311
27,524
7,099
6,311
6,205
5,513
160,748
130,653
(30,659 )
(38,533 )
$ 99,994 $ 122,215
Depreciation expense totaled approximately $5.3 million, $5.9 million, and $8.3 million for the fiscal years ended
September 30, 2004, 2005, and 2006, respectively.
7. GOODWILL AND OTHER INTANGIBLE ASSETS:
The changes in the carrying amounts of net goodwill and identifiable intangible assets for the fiscal years ended
September 30, were as follows:
Balance, September 30, 2004
Changes during the period
Balance, September 30, 2005
Changes during the period
Balance, September 30, 2006
8. OTHER LONG-TERM ASSETS:
Goodwill
Identifiable
Intangible
Assets
(Amounts in thousands)
Total
$ 50,322
199
50,521
43,546
$ 94,068
$
5,540
123
5,663
16,464
$ 22,127
$ 55,862
322
56,184
60,011
$ 116,195
During February 2006, we became party to a joint venture with Brunswick that acquired certain real estate and assets of
Great American Marina for an aggregate purchase price of approximately $11.0 million, of which we contributed
approximately $4.0 million and Brunswick contributed approximately $7.0 million. The terms of the agreement specify that
we operate and maintain the service business, and Brunswick operates and maintains the marina business. Simultaneously with
the closing, the acquired entity became Gulfport Marina, LLC (Gulfport). We account for our investment in Gulfport in
accordance with Accounting Principles Board Opinion No. 18, “The
F-18
Table of Contents
MARINEMAX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Equity Method of Accounting for Investments in Common Stock”. Accordingly, we adjust the carrying amount of our
investment in Gulfport to recognize our share of earnings or losses.
9. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITY:
We have entered into foreign currency cash flow hedges to reduce the variability of cash flows associated with forecasted
purchases of boats and yachts from certain of our foreign suppliers in Euro dollars. These cash flow hedges are designed to
offset changes in expected cash flows due to fluctuations in the Euro dollar from the time the contracts are entered into until
actual delivery of the inventory and corresponding payments are made. At September 30, 2006, there were outstanding
contracts, which had a combined notional amount of approximately $10.4 million and mature at various times through
December 2006. These contracts are designated as cash flow hedges since they are expected to be highly effective in offsetting
changes in the cash flows attributable to forecasted purchases of yachts and boats from certain of our foreign suppliers in Euro
dollars. Because the critical terms of the forward contracts and the forecasted transactions coincide (i.e., the currency, notional
amount, and timing), changes in cash flows attributable to the risks being hedged are expected to be completely offset by the
forward contract. However, if we become aware of a forecasted purchase that will not occur as planned and there are no
extenuating circumstances, we will write-off the related amount in other comprehensive income in current earnings.
Outstanding contracts at September 30, 2006 had unrealized gains of approximately $571,000, which were recorded in other
current assets on the consolidated balance sheet and qualify as highly effective for reporting purposes. Effectiveness of yacht
and boat forward contracts is determined by comparing the change in the fair value of the forward contract to the change in the
expected cash to be paid for the hedged item. During the year ended September 30, 2006, the ineffective portion of the
hedging instruments was not significant. For closed contracts related to inventory on hand at September 30, 2006, we recorded
approximately $92,000 of unrealized gains as a contra inventory on the consolidated balance sheet. These unrealized gains will
be recognized as a reduction to the cost of sales when the related boat is sold. At September 30, 2006, the net unrealized gains
related to open and closed contracts recorded in accumulated other comprehensive income were approximately $453,000, net
of tax. All of the existing gains are expected to be reclassified into earnings within the next 12 months as the related boats are
sold. We had no significant foreign currency cash flow hedges outstanding at September 30, 2005.
We have entered into an interest rate swap agreement with a notional amount of $4.0 million, that matures in June 2015,
and is designated as a cash flow hedge to convert a portion of the floating rate debt to a fixed rate of 5.67%. Since all of the
critical terms of the swap exactly match those of the hedged debt, no ineffectiveness has been identified in the hedging
relationship. Consequently, all changes in fair value are recorded as a component of other comprehensive income. We
periodically determine the effectiveness of the swap by determining that the critical terms still match, determining that the
future interest payments are still probable of occurrence, and evaluating the likelihood of the counterparty’s compliance with
the terms of the swap. At September 30, 2006, the swap agreement had a fair value of approximately $88,000, which was
recorded in other long-term assets on the consolidated balance sheet. We had no significant interest rate swap agreements
outstanding at September 30, 2005.
10. SHORT-TERM BORROWINGS:
During June 2006, we entered into a second amended and restated credit and security agreement with eight financial
institutions. The credit facility provides us a line of credit with asset-based borrowing availability of up to $500 million for
working capital and inventory financing, with the amount of permissible borrowings determined pursuant to a borrowing base
formula. The credit facility also permits approved-vendor floorplan borrowings of up to $20 million. The credit facility
accrues interest at the London Interbank Offered Rate (LIBOR) plus 150 to 260 basis points, with the interest rate based upon
the ratio of our net outstanding borrowings to our tangible net worth. The credit facility is secured by our inventory, accounts
receivable, equipment, furniture, and fixtures. The credit facility requires us to satisfy certain covenants, including maintaining
a leverage ratio tied to our tangible net worth. The other terms and conditions of the new credit facility are generally similar to
the previous credit facility.
F-19
Table of Contents
MARINEMAX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The credit facility matures in May 2011, with two one-year renewal options remaining. At September 30, 2006, we were in
compliance with all of the credit facility covenants.
Prior to the June 2006 second amended and restated credit and security agreement, our credit facility was amended during
March 2006 and February 2006. The March 2006 amendment temporarily increased our asset-based borrowing availability up
to $415 million through July 31, 2006. The February 2006 amendment increased our asset-based borrowing availability up to
$385 million, and extended the maturity of the credit facility to March 1, 2009, with two one-year renewal options.
Prior to the February 2006 amendment, our credit facility provided us with asset-based borrowing availability of up to
$340 million, permitted up to $20 million in approved-vendor floorplan borrowings, accrued interest at a rate of LIBOR plus
150 to 260 basis points, and was scheduled to mature in March 2008, with two one-year renewal options remaining. The other
terms and conditions of the credit facility were generally similar to the new credit facility.
Short-term borrowings as of September 30, 2005 and 2006 were $150.0 million and $321.5 million, respectively. The
additional available borrowings under the credit facility at September 30, 2005 and 2006 were $180.0 million and
$130.0 million, respectively. At September 30, 2005 and 2006, the interest rate on the outstanding short-term borrowings was
5.2% and 6.8%, respectively.
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 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.
11. LONG-TERM DEBT:
Long-term debt consisted of the following at September 30,
Various mortgage notes payable to financial institutions, due in monthly installments ranging from
$16,924 to $37,500, bearing interest at rates ranging from 6.82% to 7.18%, maturing September
2012 through July 2014, collateralized by machinery and equipment
Various mortgage notes payable to financial institutions, due in monthly installments ranging from
$22,605 to $102,000, bearing interest at rates ranging from 5.67% to 7.75%, maturing September
2010 through June 2016, collateralized by machinery and equipment
Less — Current maturities
2005
2006
(Amounts in thousands)
12,593
9,669
17,492
30,085
(4,635 )
$ 25,450
27,517
37,186
(4,532 )
$ 32,654
F-20
Table of Contents
MARINEMAX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The aggregate maturities of long-term debt were as follows at September 30, 2006:
2007
2008
2009
2010
2011
Thereafter
Total
12. INCOME TAXES:
(Amounts in thousands)
$
$
4,532
4,625
4,720
4,826
4,185
14,298
37,186
The components of our provision for income taxes consisted of the following for the fiscal years ended September 30,
Current provision:
Federal
State
Total current provision
Deferred provision:
Federal
State
Total deferred provision
Total income tax provision
2004
2005
(Amounts in thousands)
2006
$ 14,310 $ 18,871 $ 22,091
2,845
1,636
24,936
15,946
2,178
21,049
164
16
180
927
93
1,020
$ 16,126 $ 21,412 $ 25,956
330
33
363
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
2004
2006
2005
35.0 % 35.0 % 35.0 %
2.8 % 3.6 % 3.6 %
0.2 % 0.2 % 1.1 %
38.0 % 38.8 % 39.7 %
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 tax effects
F-21
Table of Contents
MARINEMAX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
of these temporary differences representing the components of deferred tax assets (liabilities) at September 30 were as follows:
Current deferred tax assets (liabilities):
Inventories
Accrued expenses
Foreign currency hedges
Net current deferred tax assets
Long-term deferred tax (liabilities) assets:
Depreciation and amortization
Stock based compensation
Other
Net long-term deferred tax liabilities
2005
2006
(Amounts in thousands)
$ 2,759
2,197
—
$ 4,956
$ 2,312
2,458
(284 )
$ 4,486
$ (11,121 )
243
107
$ (10,771 )
$ (13,355 )
1,650
66
$ (11,639 )
At September 30, 2005 and 2006, 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.
13. STOCKHOLDERS’ EQUITY:
In November 2005, our Board of Directors approved a share repurchase plan allowing our company to repurchase up to
1,000,000 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. At September 30, 2006, we have purchased an aggregate of 306,300 shares of common stock under the
plan for an aggregate purchase price of approximately $6.9 million.
14. STOCK-BASED COMPENSATION:
Upon adoption of SFAS 123R, we continued to use the Black-Scholes valuation model for valuing all stock options and
shares granted under the ESPP. Compensation for restricted stock awards is measured at fair value on the grant date based on
the number of shares expected to vest and the quoted market price of our common stock. Compensation cost for all awards is
recognized in earnings, net of estimated forfeitures, on a straight-line basis over the requisite service period for each separately
vesting portion of the award.
Cash received from option exercises under all share-based payment arrangements for the fiscal year ended September 30,
2004, 2005, and 2006 was approximately $3.7 million, $5.3 million, and $3.9 million, respectively. Tax benefits realized for
tax deductions from option exercises for the fiscal year ended September 30, 2004, 2005, and 2006 was approximately
$1.4 million, $2.7 million, and $1.5 million, respectively. We currently expect to satisfy share-based awards with registered
shares available to be issued.
15. 1998 INCENTIVE STOCK PLAN (THE INCENTIVE STOCK PLAN):
Our 1998 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. The maximum number of shares
of common stock that may be issued pursuant to the Incentive Stock Plan is the lesser of 4,000,000 shares or the sum of
(1) 20% of the then-outstanding shares of our common stock plus (2) the number of shares exercised with respect to any
awards granted 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.
F-22
Table of Contents
MARINEMAX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
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 exercise price of options granted under the Incentive Stock Plan is to be at least equal to the fair market value of
shares of common stock on the date of grant. The term of options under the Incentive Stock Plan may not exceed ten years.
The options granted have varying vesting periods, but generally become fully vested at either the end of year five or the end of
year seven, depending on the specific grant.
The following table summarizes option activity from September 30, 2005 through September 30, 2006:
Shares
Available Options
for Grant Outstanding
Aggregate
Intrinsic
Value
(In thousands)
Weighted
Average
Remaining
Weighted Average Contractual
Exercise Price
Life
Balance at September 30, 2005
929,488 2,258,131
$
13.57
6.0
Options authorized
Options expired
Options granted
Options cancelled
Restricted stock awards
Options exercised
Balance at September 30, 2006
Exercisable at September 30, 2006
(483,545 ) 483,545
123,785 (123,785 )
(175,000 )
(253,353 )
394,728 2,364,538 $
— 868,076 $
$
$
$
22,583 $
11,817 $
29.15
17.95
10.19
16.80
12.08
5.9
3.5
The weighted-average grant date fair value of options granted during the fiscal years ended September 30, 2004, 2005, and
2006 was $9.39, $12.35, and $12.53, respectively. The total intrinsic value of options exercised during the fiscal years ended
September 30, 2004, 2005, and 2006 was approximately $3.9 million, $7.5 million, and $5.2 million, respectively.
As of September 30, 2006, there was approximately $6.6 million of unrecognized compensation costs related to non-
vested options that is expected to be recognized over a weighted average period of 3.9 years. The total fair value of options
vested during the fiscal years ended September 30, 2004, 2005, and 2006 was approximately $1.1 million, $1.5 million, and
$1.4 million, respectively.
We continued using the Black-Scholes model to estimate the fair value of options granted during fiscal 2006. The expected
term of options granted is derived from the output of the option pricing model and represents the period of time that options
granted are expected to be outstanding. Volatility is based on the historical volatility of our common stock. The risk-free rate
for periods within the contractual term of the options is based on the U.S. Treasury yield curve in effect at the time of grant.
The following are the weighted-average assumptions used for the fiscal years ended September 30:
Dividend yield
Risk-free interest rate
Volatility
Expected life
2004
0.0%
5.0%
41.9%
5.4 years
2005
0.0%
5.0%
42.1%
5.4 years
2006
0.0%
4.6%
44.5%
4.6 years
F-23
Table of Contents
MARINEMAX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
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.
16. EMPLOYEE STOCK PURCHASE PLAN (THE STOCK PURCHASE PLAN):
Our Employee Stock Purchase Plan, provides for up to 750,000 shares of common stock to be available for purchase by
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.
We continued using the Black-Scholes model to estimate the fair value of options granted during fiscal 2006. The expected
term of options granted is derived from the output of the option pricing model and represents the period of time that options
granted are expected to be outstanding. Volatility is based on the historical volatility of our common stock. The risk-free rate
for periods within the contractual term of the options is based on the U.S. Treasury yield curve in effect at the time of grant.
The following are the weighted-average assumptions used for the fiscal years ended September 30:
Dividend yield
Risk-free interest rate
Volatility
Expected life
2004
0.0%
1.3%
50.3%
six-months
2005
0.0%
3.0%
41.5%
six-months
2006
0.0%
4.8%
37.1%
six-months
As of September 30, 2006, we had issued 446,684 of the 750,000 shares of common stock reserved for issuance under our
1998 employee stock purchase plan.
17. RESTRICTED STOCK AWARDS:
During the first quarter of fiscal 2005 and 2006, we granted non-vested (restricted) stock awards to certain key employees
pursuant to the 1998 Incentive Stock Plan. The restricted stock awards have varying vesting periods, but generally become
fully vested at either the end of year four or the end of year five, depending on the specific award.
We accounted for the restricted stock awards granted in fiscal 2005 using the measurement and recognition provisions of
APB 25. Accordingly, we measured compensation cost at the grant date using the intrinsic value method and will recognize
compensation cost in earnings over the requisite service period. We accounted for the restricted stock awards granted
subsequent to September 30, 2005 using the measurement and recognition provisions of SFAS 123R. Accordingly, the fair
value of the restricted stock awards is measured on the grant date and recognized in earnings over the requisite service period
for each separately vesting portion of the award.
F-24
Table of Contents
MARINEMAX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The following table summarizes restricted stock activity from September 30, 2005 through September 30, 2006:
Non-vested balance at September 30, 2005
Changes during the period
Shares granted
Shares vested
Shares forfeited
Non-vested balance at September 30, 2006
Weighted
Average
Grant Date
Shares
Fair Value
103,000 $ 29.39
175,000 $ 27.47
—
— $
—
— $
278,000 $ 28.18
As of September 30, 2006, we had approximately $5.3 million of total unrecognized compensation cost related to
restricted stock awards granted under the Plan. We expect to recognize that cost over a weighted-average period of 3.5 years.
Pursuant to SFAS 123R, the approximate $2.4 million of deferred stock compensation recorded as a reduction to stockholders’
equity as of September 30, 2005 is no longer reported as a separate component of stockholders’ equity and is instead recorded
in additional paid-in capital.
18. 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,
2004
2005
2006
Weighted average common shares outstanding used in calculating basic net
income per share
Effect of dilutive options
Weighted average common and common equivalent shares used in calculating
15,585,314
1,080,793
16,815,445
1,217,088
18,028,562
900,173
diluted net income per share
16,666,107
18,032,533
18,928,735
Options to purchase 17,460, 53,000 and 699,500 shares of common stock were outstanding at September 30, 2004, 2005,
and 2006, 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, and therefore, their effect would be anti-dilutive.
19. 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 expense, including month-to-month rentals, were approximately $8.9 million, $9.4 million, and
$10.9 million for the fiscal years ended September 30, 2004, 2005, and 2006, respectively. Rental expense to related parties
under both cancelable and non-cancelable operating leases approximated $385,000 for each of the fiscal years ended
September 30, 2004, 2005, and 2006.
The rental payments to related parties, under both cancelable and non-cancelable operating leases during fiscal 2004, 2005,
and 2006, 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.
F-25
Table of Contents
MARINEMAX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Future minimum lease payments under non-cancelable operating leases at September 30, 2006, were as follows:
2007
2008
2009
2010
2011
Thereafter
Total
(Amounts in thousands)
$
$
10,362
8,300
4,603
3,532
2,426
542
29,765
Other Commitments and Contingencies
We are party to various legal actions arising in the ordinary course of business. With the exception of a single lawsuit
award that we are currently appealing, the ultimate liability, if any, associated with the other matters was not material at
September 30, 2006. However, based on information available at September 30, 2006 surrounding the single lawsuit award,
our litigation accrual approximated $2.0 million. While it is not feasible to determine the actual outcome of these actions as of
September 30, 2006, 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.
20. EMPLOYEE 401(k) PROFIT SHARING PLANS:
Employees are eligible to participate in our 401(k) Profit Sharing Plan (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 participant’s compensation. We contributed, under the Plan, or
pursuant to previous similar plans, approximately $1.1 million , $1.3 million, and $1.7 million for the fiscal years ended
September 30, 2004, 2005, and 2006, respectively.
21. 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.
F-26
Table of Contents
MARINEMAX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
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.
F-27
Table of Contents
Exhibit
Number
3 .1
3 .2
3 .3
4 .1
4 .2
10 .1(k)
EXHIBIT INDEX
Exhibit
Restated Certificate of Incorporation of the Registrant, including all amendments to date(3)
Amended and Restated Bylaws of the Registrant(3)
Certificate of Designation of Series A Junior Participating Preferred Stock(3)
Specimen of Common Stock Certificate(3)
Rights Agreement, dated August 28, 2001 between Registrant and American Stock Transfer & Trust Company, as
Rights Agent(2)
Asset Purchase Agreement between Registrant, Port Arrowhead Marina, Inc., Lake Port Marina, Inc., Port
Arrowhead, Inc., and Lakewood Resort Corporation(9)
10 .1(l) Asset Purchase Agreement between Registrant and Surfside-3 Marina, Inc.(11)
10 .3(h) Employment Agreement dated June 7, 2006 between Registrant and William H. McGill, Jr.(12)
10 .3(i) Employment Agreement dated June 7, 2006 between Registrant and Michael H. McLamb(12)
10 .3(j) Employment Agreement dated June 7, 2006 between Registrant and Edward A. Russell(12)
10 .4
10 .5
10 .11
1998 Incentive Stock Plan, as amended through November 15, 2000(4)
1998 Employee Stock Purchase Plan(1)
10 .12
10 .17
10 .17(a)
10 .18
10 .19
10 .20
10 .20(a)
10 .20(b)
10 .20(c)
10 .21
Dealer Agreement dated December 7, 2005 between the Sea Ray Division of Brunswick Corporation and
MarineMax, Inc.(6)
Agreement Relating to Acquisitions dated December 7, 2005 between the Sea Ray Division of Brunswick
Corporation and the Principal Operating Subsidiaries of MarineMax, Inc.(6)
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(4)
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(5)
Hatteras Sales and Service Agreement, dated July 1, 2003 among the Registrant, MarineMax Motor Yachts, LLC,
and Hatteras Yachts Division of Brunswick Corporation(5)
Dealer Agreement, effective September 30, 2003 among the Registrant, Ferretti Group USA, Inc., and Bertram
Yacht, Inc.(7)
Amended and Restated Credit and Security Agreement executed on February 15, 2005 effective as of February 3,
2005 among the Registrant and its subsidiaries, as Borrowers, Keybank National Association and Bank of
America, N.A., and various other lenders, as Lenders(8)
Amendment No. 2 to Amended and Restated Credit and Security Agreement dated February 10, 2006 among the
Registrant and its subsidiaries, as Borrowers, Keybank National Association, Bank of America, N.A., and various
other lenders, as Lenders(10)
Amendment No. 3 to Amended and Restated Credit and Security Agreement dated March 10, 2006 among the
Registrant and its subsidiaries, as Borrowers, Keybank National Association, Bank of America, N.A., and various
other lenders, as Lenders(11)
Amendment No. 4 to Amended and Restated Credit and Security Agreement dated March 31, 2006 among the
Registrant and its subsidiaries, as Borrowers, Keybank National Association, Bank of America, N.A., and various
other lenders, as Lenders(11)
Second Amended and Restated Credit and Security Agreement dated June 19, 2006 among the Registrant and its
subsidiaries, as Borrowers, and Bank of America, N.A., KeyBank, N.A., General Electric Commercial
Distribution Finance Corporation, Wachovia Bank, N.A., Wells Fargo Bank, N.A., National City Bank, N.A.,
U.S. Bank, N.A., and Branch Banking and Trust Company, as Lenders(13)
21
23 .1
31 .1
31 .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.
Table of Contents
Exhibit
Number
32 .1
32 .2
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.
Exhibit
(1) Incorporated by reference to Registration Statement on Form S-1 (Registration 333-47873).
(2) Incorporated by reference to Registrant’s Form 8-K Report dated September 30, 1998, as filed on October 20, 1998.
(3) Incorporated by reference to Registrant’s Form 10-K for the year ended September 30, 2001, as filed on December 20,
2001.
(4) Incorporated by reference to Registrant’s Form 10-Q for the quarterly period ended December 31, 2001, as filed on
February 14, 2002.
(5) Incorporated by reference to Registrant’s Form 10-Q for the quarterly period ended December 31, 2003, as filed on
February 17, 2004.
(6) Incorporated by reference to Registrant’s Form 8-K Report as filed on December 9, 2005.
(7) Incorporated by reference to Registrant’s Form 10-Q for the quarterly period ended December 31, 2004, as filed on
February 9, 2005.
(8) Incorporated by reference to Registrant’s Form 8-K Report dated February 15, 2005, as filed on February 18, 2005.
(9) Incorporated by reference to Registrant’s Form 10-Q for the quarterly period ended December 31, 2005, as filed on
February 9, 2006.
(10) Incorporated by reference to Registrant’s Form 8-K Report dated February 10, 2006, as filed on February 16, 2006.
(11) Incorporated by reference to Registrant’s Form 10-Q for the quarterly period ended March 31, 2006, as filed on
May 10, 2006.
(12) Incorporated by reference to Registrant’s Form 8-K Report as filed on June 13, 2006.
(13) Incorporated by reference to Registrant’s Form 10-Q for the quarterly period ended June 30, 2006, as filed on
August 4, 2006.
Exhibit 23.1
We consent to the incorporation by reference in the following Registration Statements:
1) Registration Statement (Form S-8 No. 333-83332) pertaining to the 1998 Incentive Stock Plan of MarineMax, Inc.,
Consent of Independent Registered Public Accounting Firm
2) Registration Statement (Form S-8 No. 333-63307) pertaining to the 1998 Incentive Stock Plan and the 1998 Employee Stock Purchase Plan
of MarineMax, Inc.,
3) Registration Statement (Form S-3 No. 333-122091) of MarineMax, Inc.;
of our reports dated December 14, 2006, with respect to the consolidated financial statements of MarineMax, Inc., MarineMax, Inc.
management’s assessment of the effectiveness of internal control over financial reporting, and the effectiveness of internal control over
financial reporting of MarineMax, Inc., included in the Annual Report (Form 10-K) for the year ended September 30, 2006.
/s/ Ernst & Young LLP
Tampa, Florida
December 14, 2006
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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-
15(f) and 15d-15(f) 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) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed
under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles;
c) 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
d) 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 14, 2006
/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 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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-
15(f) and 15d-15(f) 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) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed
under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles;
c) 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
d) 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 14, 2006
/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 year ended September 30, 2006, as filed
with the Securities and Exchange Commission on the date hereof (the “Report”), I, William H. McGill Jr., Chief Executive Officer of the
Company, certify, to my best knowledge and belief, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of
2002, that:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(a)
or 78o(d)); and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the
Company.
December 14, 2006
/s/ WILLIAM H. MCGILL JR.
William H. McGill Jr.
Chief Executive Officer
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 year ended September 30, 2006, 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:
(3) 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
(4) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the
Company.
December 14, 2006
/s/ MICHAEL H. MCLAMB
Michael H. McLamb
Chief Financial Officer