MarineMax Inc (HZO) 2004 Q4 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to the MarineMax, Inc. fourth quarter 2004 fiscal year conference call. At this time, all participants are in a listen-only mode. The floor will be open for questions following the presentation. It is now my pleasure to turn the floor over to your host, Brad Cohen, with Integrated Corporate Relations. Sir, you may begin.

Good morning, everyone, and thank you for joining this discussion of MarineMax's fiscal 2004 fourth quarter and full year results. I'm sure that you all have received a copy of the fourth quarter press release but, if you have not, please call Linda Cameron at 727-531-1700 and she will fax or e-mail one to you immediately. I would now like to introduce the management team of MarineMax with Mr. Bill McGill, Chairman, CEO and President, and Mr. Mike McLamb, Chief Financial Officer of the Company. Management will make some comments about the quarter and will then be available for questions. Mike.

Thank you, Brad. Good morning and welcome to MarineMax's fiscal 2004 fourth quarter earnings conference call, which is also being broadcast simultaneously over the Internet?

Before I turn the call over to Bill I'd like to tell you that certain of our comments are forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. These statements involve certain risks and uncertainties that may cause actual results to differ materially from expectations. These risks include, but are not limited to, the impact of seasonality and weather, general economic conditions and the level of consumer spending, the Company's ability to complete and integrate it's acquisitions into existing operations and numerous other factors identified in our Form 10K and other filings with the Securities and Exchange Commission.

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

Thank you, Mike, and good morning everyone. As most of you know, we usually release earnings on the fourth Thursday after a quarter ends. Since both Mike and I will be heading down to the Ft. Lauderdale boat show later this week, we decided to release a few days earlier. We thank you for accommodating us.

When we last spoke with you on September 7, Francis, the second hurricane to make landfall in Florida, passed only a day before and, at that time, we thought it was prudent to reduce expectations for the fourth quarter given the likely negative impact from the two hurricanes. At that point, we did not know that the State of Florida and other areas of our markets would be adversely affected by two more hurricanes. As you know, from all the news reports, this was a bizarre hurricane season to say the least. The damage and personal losses from the storm has been widely publicized.

As you have seen from our release this morning, despite the storms and, by many accounts, a softer retail environment, we delivered very strong results. In fact, rather surprisingly, for the September quarter, we posted positive same-store sales growth as a company. With Florida, which represents approximately half of our business which was shut down, virtually, for most of the month, the MarineMax team pulled up to speed, far exceeding our expectations and we would like to thank each and every team member for their extraordinary performance. We constantly set high standards and our team continues to raise the bar.

Specifically, we reported fourth quarter EPS of 48 cents, revenue increased over 12 percent to $183 million and same-store sales rose by a solid eight percent. For the full year, as total revenue increased 25 percent and same-store sales surged 21 percent, respectively, resulting in a 34 percent increase in net income and $1.58 in EPS. An important point is that without the additional dilution from stock options, our EPS was $1.69, as compared with our peak EPS in fiscal 2000 of $1.41. Thanks to our team's skill and passion, we were able to achieve results that were in line with our expectations prior to the hurricanes. This is truly a testimony to the strength of MarineMax.

To talk specifically about the storms for a moment, I need to start with how we prepared. Like many companies, we had a disaster plan and, unfortunately, got tested and re-tested this year. We moved boats to safe harbors and, in some cases, to different markets. We pulled product out of the water, secured all our stores, converted our IS systems over to redundant back outs, etc. The great news is that despite most of our Florida, Southeastern and, even, Texas stores feeling hurricane-force winds, our actual damages are rather minimal, all things considered. Our total damages, including the costs to move inventory and prepare, was approximately $600,000. Needless to say, our team did a great job preparing for the storms and protecting our assets.

In the long term, the storms should have no negative impact on us or the industry. In short term, however, their impact is challenging to predict, but let me explain what has happened in the past. When storms are approaching land, insurance companies won't buy any coverage so you can't get insurance on the boat, or a house for that matter. Without insurance, banks won't fund a loan. As such, for about 35 of the last 50 days of the quarter we were not able to deliver boats in Florida and, to a lesser extent, other adjacent markets. Those customers who wanted to buy a boat during that time aren't lost, they are still there and we should get most of this, if not all of it, back.

Another thing that happened was that a lot of boats get damaged or destroyed. We generally see an increase in things like fiberglass repair work, which is fairly specialized, but because of our size, we are the only dealer that can bring additional fiberglass technicians to our southern stores as demand picks up. The destroyed boats will be replaced since most of our customers buy the premium insurance which covers the purchased price of the boat. In many cases, the insurance check is bigger than anticipated. This can result in the purchase of a larger replacement boat. While outsiders may think that the replacement boats will be a windfall, they forget that many customers would have traded up in 2005 anyway. Now we lose the opportunity to sell the trade that we would have taken on the trade-up and the corresponding commission we would have made on the up and out side of our business and also with P&A, etc. So, net-net, we believe the replacement and repair cycle should create a marginally better, not substantially better environment than otherwise would have been the case.

The last thing that has to happen, however, is that the boat docks and marinas need to be repaired and rebuilt so that the replacement boats have a place to stay. This could take some time to accomplish, depending on the extent of the damage. As an example, in Pensacola, they will be rebuilding for over a year, based on our estimates. Accordingly, it is likely that our first two quarters will be a little softer than they otherwise would have been with a stronger growth the second half of the year.

Moving away from the storms, I am happy to report that our first full year with the Grady group of products went about as planned. We have a very solid foundation from which to grow. We have invested a lot of time and energy in training our team. The passion that goes into building these wonderful products is now ingrained in our team which will ensure our success long into the future. If you remember from previous calls, these brands are not cannibalistic to our existing brands. I am very pleased with the products that we are getting from Sea Ray, Boston Whaler and Hatteras. In each case, the products are improved and the customers seem to be very excited about the new models. I think we have the best product line out that we have ever had. With this premium product focus and a stable economy, we feel we can produce solid high single digit same-store sales growth in fiscal 2005.

We have also committed to make strides in the parts and accessory side of our business. We have implemented our strategy of fulfilling the consumerable accessory needs of our customers in about a third of our stores. While this business is still in the early stage of its growth cycle, it is starting to contribute profitably to the Company.

During the quarter we announced the opening of our second retail location in San Diego. The new facility, which opened in late August, is located at the intersection of two very busy highways in San Diego. The new 9,000 square foot store will allow us to better serve our growing Southern California customer base.

With that quick overview, I would now like to ask Mike to review the fourth quarter and full year results in more detail, and provide you with updated guidance for fiscal 2005. Mike?

Thank you, Bill. First, I'd also like to thank our team for their very strong performance during the quarter and, especially, in the month of September. These results are great examples of the strength of our Company and the benefits of being geographically diversified.

For the September quarter, revenue increased over 12 percent to $183 million, driven by same-store sales growth of eight percent and approximately $7 million from stores added that are not eligible for inclusion in the comp store base. As Bill indicated, we produced positive comp growth in September. Since Florida was obviously behind last year, the rest of the country had a pretty good month. I think this is evidence of the resiliency of our customers and the strength of our retailing strategies. Same-store sales growth came about evenly from the new brands added during the year and our existing brands which compliment each other well.

Gross margins increased almost 70 basis points to about 29 percent. The increase stems primarily from better margins on the boats themselves. As we've discussed on past calls, our boat margins have been slowly returning to the levels we enjoyed in 1999 and 2000, although we are still about 100 basis points below those levels today. We feel that when we have a prolonged period of a stable economy, the boat margins will fully recover. We also experienced growth in our finance, insurance, brokerage services and parts businesses which tend to generate higher margins.

Our selling, general and administrative expenses increased 17.5 percent to $38.6 million and amounted to 21 percent of total revenue, which is up from 20.1 percent a year ago. The increase in SG&A as a percentage of revenue resulted primarily from higher commissions and personnel costs, increased margining expenses and expenses related to the hurricanes, including the cost of moving inventory, repairs and damages which amounted to approximately $600,000, as Bill mentioned. These costs, however, exclude the numerous days of inefficiency and downtime that resulted from the storms.

Interest expense was up due to additional borrowings and a less favorable interest rate environment. Our tax rate declined modestly in the quarter to 37.8 percent from 38.5 percent.

Finally, net income for fourth quarter increased five percent to $8 million, or 48 cents per diluted share, with almost 800,000 additional shares in the denominator due to additional outstanding stock options. For the full year ended September 30, 2004, revenue increased over 25 percent to $762 million, which is our highest annual revenue by a large margin. The growth came primarily from a 21 percent same-store sales increase. Of this same-store sales growth, a little less than half was due to the new brands we have added or expanded over the last 12 to 18 months, such as the Ferretti group of products, Meridian and Grady-White. For the year, our gross profit margin of 24.7 percent was up 40 basis points, compared to the same period last year.

A few things have happened that are impacting the gross margins. First, boat sales are incrementally a larger part of our business this year than last year. Boats carry the lowest gross margins of any product or service we offer. As such, the increase in boat sales works to deflate the gross margin percentage. Additionally, the EITF 0216 Re-Class, which as I have discussed before on previous calls, most significantly requires us to re-classify manufacturers’ interest assistance up against cost of sales, is responsible for about half the gross margin percentage increase during the year. The good news is that we have now anniversaried the adoption of this standard, which means comparability going forward will be easy.

SG&A fell as a percentage of revenue to 18.3 percent from 18.7 percent as our strong comp store sales enabled us to leverage our expense structure. As we have said in other calls, we have consciously expanded our marketing efforts and hired personnel to prepare ourselves for the near-term strength of the industry and the long-term prospects of the Company. Interest expense increased to $6.5 million, primarily due to the impact of the EITF 0216 Re-Class, increased borrowings and a less favorable rate environment. Lastly, and most significantly, net income increased almost 34 percent and earnings per share rose to $1.58 from $1.26.

Turning to our balance sheet, at quarter end we had $13.9 million in cash, compared to $10.5 million at the same time last year. It's important to remember that the cash on our balance sheet is really a function of how much we decide to leverage our current assets, such as inventory. At September 30th, we had over $75 million of total cash available, which is in the equity and the inventory of the balance sheet. Inventory has increased over $100 million due to the product line expansions that we have made, which is the largest contributor to the inventory growth, the sales growth that we have experienced and expect, which requires more inventory, and the acquisitions of Imperial Marine in the Chesapeake area and the Jacksonville, Florida expansion that we completed.

The aging of our products and mix is in very good shape and we feel comfortable with our current levels which positions us well for the coming year. Property and equipment increased due to real estate purchases in Texas and Georgia associated with new store relocation and property and equipment related to the Maryland acquisition. As you may recall, in Maryland, we purchased a highway store and a large full-service marina.

Accounts payable increased $43 million due, primarily, to the timing of when we pay certain manufacturers and the corresponding draw down of the Line of Credit.

Lastly, our capital is approaching $200 million with over $140 million of tangible net worth. This strength affords us great flexibility and allows us to expand opportunistically, whether by acquisition or through new brands like we did this past year. We don't have to issue stock to generate cash to complete our strategies.

Now let me discuss our guidance for fiscal 2005. Back in July we provided preliminary guidance for 2005 and noted the following. Same-store sales should be in the range of seven to nine percent. We continue to believe that the product lineup from our manufacturing partners is outstanding and, as Bill said, maybe the best lineup we've had since MarineMax was formed. However, remember that we'll be up against the significant same-store sales gains of 21 percent this year, a still fluctuating economy and uncertain political landscapes at home and abroad, all which may impact consumer buying habits.

We also expect to gain modest leverage at the SG&A line and gross margins will be down slightly. The gross margin will trend down slightly as we expect continued increases in our larger boat business, which generally carry lower gross margins. Based on a review of the tax jurisdictions where we operate, we expect that our tax rate should be about 38.5 percent for 2005, which is up slightly from where it ended at this year. We remain comfortable with the guidance that we gave in July of $1.75 to $1.80 and the seven to nine percent same-store sales growth. Actually, we're excited about the prospects for the future. However, we expect that results in the first quarter, and possibly the second as well, will be tempered by the lingering effects of the hurricanes. We, therefore, anticipate that our growth will be backend loaded during the year.

Now, I will turn the call back over to Bill for some additional comments.

Thank you, Mike. Before I turn to a few closing comments, I do want to mention that the integration of the Imperial acquisition in the Chesapeake Bay area is going better than expected. Our New Jersey-based management team is doing a great job integrating the acquisition. The Jacksonville expansion is also progressing ahead of schedule. Now that we have the whole Sea Ray line, we really should be able to make some great progress in that very large and growing boating market.

I would like to conclude today's call by reaffirming our commitment to our core strategies. These strategies enable us to take advantage of better business conditions in fiscal 2004 and enhance our market-leading position. By adhering to our strategies, we should continue to gain market share and win customers as the MarineMax brand becomes synonymous with customer centric full-service which means purchasing a boat and enjoying the boating lifestyle. Not only is our brand offering and product lines unparalleled, but no other boating retailer provides one-stop service the way we do. Our customers can select, purchase and finance a boat solely through MarineMax and, at the same time, equip their new boats with spare parts and accessories, while receiving industry-leading service and support. MarineMax remains committed to delivering an easy hassle-free experience to our customers by focusing on the lifestyle of boating, namely, a family binding experience and a stress relieving recreation that can be enjoyed close to home.

The Company will continue to look for areas to further broaden our product lines and enhance our capabilities. We will continue to invest in the team. We have consistently refused to cut corners on training and bolstering the MarineMax team. As such, we have in place a team that is unparalleled in our industry. As we understand, it is truly about having the right people in the right seats. We will continue to pursue select strategic acquisitions, such as the recent Imperial acquisition and Jacksonville expansion, to compliment our strong presence and enhance the customer's boating experience. We will also seize opportunities to expand internally, as we did with the opening of our second location in San Diego during the fourth quarter. We will continue to maximize and maintain a strong balance sheet. Though we are already self-funding, our cash flow is accelerating, helping to improve upon the Company's already strong balance sheet. We believe that through careful planning and our team's commitment to our strategies, MarineMax is well-positioned to grow its market share, deliver strong earnings results and create shareholder value over the long term.

I would now like to turn the call back to the operator who will open the call up to questions.

The floor is now open for questions. (OPERATOR INSTRUCTIONS) Ed Aaron, RBC Capital Markets.

Congratulations on the good performance in a tough environment. A few questions. First, when you lowered your guidance after Labor Day, you said that your July and August comps where up seven percent. That would mean that September was actually a stronger same-store sales month than either of those previous two months. I'm just trying to figure out - you said you had some strength outside of Florida, but more specifically, how did we get there in September?

I think it just means that September was incrementally stronger than the previous September, which is right for the month of September.

Can you talk a little bit about what happened with Florida and how much of a drag that was in September and how much of it you were able to make up from other markets?

We don't really break down specific regional revenues like that. I think it's very safe to say that Florida was behind last year. It was obviously - Florida actually did a lot better than we had anticipated as a management team, given the storms and the adversity. They got a lot of boats delivered in a limited number of days. But the rest of the country certainly picked it up and had increases which did allow us, as you pointed out, to generate positive same-store sales growth during the month.

Ed, I think the important thing here is, you've heard us say over and over again, the resiliency of the customer and this passion for the lifestyle of boating. If you just look at Florida, here are people without power, people concerned with four hurricanes and were they coming ashore, there were evacuations and there was not a lot going on in our stores. The most important thing that I think that was really salient to the discussions was that we did not have one customer that had a deposit that was waiting on delivery of one of our products that said, "You know what, I'm not going to take it". When the gates did open up and all of a sudden we could get insurance for our customers, they went ahead and consummated their sales and we didn't lose anything there. We did lose some momentum because, obviously, there weren't people visiting our stores to consider the purchases when they were without power or worrying about more hurricanes coming ashore.

Were there any markets outside of Florida that you would point to as being unusually strong or particularly strong in the quarter?

There weren't any that were unusually strong. During this time of year, things begin to slow in some of the northern markets but the coastal regions we’re at, New Jersey to Carolinas. Texas was impacted by some storms and California, all had pretty good results and incrementally better, obviously, than the prior year. There wasn't really anything that stood out as a barn burner. I think that's good. That tells us all that the retail environment is pretty decent and these consumers are pretty resilient and they're out there wanting to enjoy boating.

OK. Could you also just give your read on the replacement business, how that should shake out in terms of timing?

Our best guess is that we'll start seeing - I can tell you we're already starting to see trickles of it right now, but later in the December quarter there will be some and, then, into the March quarter. I would suspect it's over the next six months or so. In the panhandle, it's going to be longer than that only because there's so much in the way of marinas that need to be rebuilt and docks and so forth that need to be rebuilt there. Just as a reference, you all may remember, we acquired the panhandle a little over a year ago and, at that point, we disclosed that we acquired a business which was about $15 million in size. That's about the dollar revenue that we generated in the panhandle this past year.

Just one last question. We've seen some numbers out there that estimate the boating damage at about $700 million. Would you look at that as being a good number and, if so, what portion of that would you consider to be boats that were actually destroyed?

Ed, I think getting an exact number is pretty difficult to ascertain. Maybe, half of those boats were total losses. As an example, in the panhandle there were complete marinas that were destroyed and boats as well. The Stewart area got hit pretty hard. It's really hard to say what the net effect is going to be upon our business. I mentioned in the call that we are concerned because we lost some of that used boat trade-ups business, which one of the most valuable pieces of inventory we have is the two or three year old product that we sold two or three years ago. There's a big demand for that and we won't have those because, obviously, we're not going to resell boats that were substantially damaged because of the liability extent of that. When you deal with salt water, you must repair those boats almost immediately and we couldn't because the infrastructure was not in place to do that, the power lines were down, the roads and bridges and that type of thing. It's hard to say. Net effect, I would say that we believe that everything will be fine but we don't believe there is going to be a big windfall for us out of replacement boats.

Great. Thanks.

Tim Conder, AG Edwards

Let me also offer my congratulations, gentlemen. Could you discuss, in the fourth quarter your mix of boats, small, medium, large, also the mix of new and used? Then, given the little bit better than you anticipated quarter and your statement, Mike, earlier that your inventory that you feel comfortable with, where do you stand? I think you mentioned back in September 7th that you could see some push back of expected deliveries from manufacturers for a month or so, could you kind of give us an update on that?

I can tell you, Tim, maybe the best way to answer the question on the mix is we don't typically have an average unit selling price by quarter, but it is virtually the same last quarter to this quarter in terms of the mix. That would tell you that the mix was virtually the same. I don't have specifically right in front of me large versus small. This quarter generally tends to be more bigger boat focused as we get towards September as Florida begins to pick up a little bit, which was true also this year.

Your second question on inventory, I think what we had alluded to was just with the storms and depending on what would happen is we may see some delays in the timing of receipts of shipments and so forth from the manufacturers. That's not the case. Everything is coming as planned. I'd say right around the early part of September when we did that call some of our manufacturing partners rerouted product away from the state of Florida which is now coming back into the state of Florida. We don't anticipate that there's going to need to be any required changes to the forecasted purchases for the year. I don't know if that addresses it, but that's kind of roughly.

Then, it sounds like, also, that given your guidance on gross margins next year, you are anticipating a little bit of a shift to the larger size boats that you'd typically sell?

Some of that is just the expansion of the Ferretti business, which we just took on this past year and now will be moving into our second full year of that. Those larger products generally have a little lower margins.

OK. Great. Thank you.

Joe Hovorka, Raymond James

A couple of questions. I missed the number from sales from acquisitions in the quarter. Could you give that again?

Sales, about $7 million combined, which would be - those stores are not eligible for inclusion in the same-store sales base which would be the Imperial acquisition and the Killinger Marine acquisition from last year. Those two, combined, were about $7 million.

OK. Can you give a number on what your Ferretti sales were for the full year?

I can tell you that when we set out last year with taking on Ferretti I believe we estimated that it would be $20 to $30 million in its first full year. It is on the high-end of that range for this past fiscal year.

So, 30 is a good number to use?

Yes.

Last question, your customer deposits at the quarter were up about a little bit better than 60 percent, is that related - is that all Florida deposits that just have not been closed or are there other - -?

As we've said before, Joe, it's real hard to predict business off of our deposits. We could have one or two boats in there that make our deposits look pretty lumpy. That actually relates to a couple of boats and then, obviously, it does relate to some kind of demand, which I think is a positive thing. The bigger increase is just some lumpiness of the deposits.

So, it is a couple of larger boats in there is what you're saying?

Correct. Yes.

OK. Great. Thank you.

(OPERATOR INSTRUCTIONS) Mike Lafferon (ph), Robins Group

Again, great quarter given the challenges you faced. Can you give any other guidance on the infrastructure losses and how many marinas, how many slips, and when you think the majority of that will be repaired? For most folks, is that a three to six month process? Any idea as to will this be a bottleneck for some sales?

Mike, our estimation is that it will be a six month to nine month project, depending on where it is in Florida. If you look at the panhandle, it will be nine months to a year, I'd say, in some cases in rebuilding these marinas because they're still just trying to get the infrastructure back in place up there, bridges and power lines and there were a lot of people that were damaged. That's a small part of our business. In other markets the marina construction dock companies are very, very busy right now rebuilding it. We do not see it as a big hindrance to our business as we will assist our customers, in some cases, maybe permitting them to keep it at one of our stores while they're personal dock is being rebuilt or whatever the case may be. You're probably right, it's anywhere from three to nine months to get it back to normal.

Thanks. I'm sorry I missed your revenue guidance. The same-store sales piece for next year, again.

Very high single digit, Mike, seven, eight, nine percent.

Thanks.

Greg Greenberg, Verron (ph) Capital

Congratulations. A couple of things, just as you look into rolling Ferretti out this year, any sense on how they can grow off that $30 million rate? Are you putting it into more outlets and more on your experience, also, on why you feel comfortable that that can grow dramatically off of this level? Also, a little more on your plans to grow the parts and accessories business this year, too?

We believe that the parts and accessory business in year two will probably double. We mentioned that, roughly, in a third of our stores we've launched the accessory components actually into our showrooms and ship stores. As you know, what we're trying to do there, Greg, is we're trying to leverage the fact that it is relationship selling so, therefore, the customers give us the permission to really own those accessory dollars. It's just that we haven't gone after them in the past because we didn't have the infrastructure in place to do that, but we would say that we believe it can be doubled for next year from what we did this year as we grow it to a larger extent. Anything beyond that will just be better news.

And how about Ferretti?

Ferretti, equally, we believe that that business can be doubled. We spent this last year really learning the product and getting our team to become even more passionate about it. We did a lot of things towards that effort. One of them, which I think is kind of unique for our industry, is we did what we called a "passion day" because it is about the passion. We went down to the pier in Ft. Lauderdale, where we have a location, and we actually put 14 Ferretti group products in a marina and we brought in about 50 of our team members in for six nights and five days. We had them sleep on the products, run the products. They were moving from one boat to the next, as far as the brand, so that they could experience it. We had our Ferretti partners actually come over and do some training and to give our team the passion as well. We're starting to see some real positive results of that because, at the end of the day, its understanding the product and the passion behind it. We believe that that business can double for sure next year and we've got the team to do it. We've invested the resources to build for that.

Great. Thank you.

Ed Aaron, RBC Capital

Just a couple of follow-up questions. First, you, typically, if memory serves, receive an adjustment from your vendors in the fourth quarter that benefits gross margin, I'm just wondering how much that played a role in this quarter versus last? Also, your prepaid expenses on your balance sheet were up somewhat in the quarter, what might that relate to?

I'll answer the first question pretty easily. Every year, which is commonplace in the industry, the manufacturers pay the year-end bonuses, which are based on various measures, in the September quarter that are actually earned in the September quarter, and it had no impact, no different impact this quarter than it has had in past quarters. It does make this quarter the highest margin quarter that we have had. The prepaid, from my best memory, I think is just simply some prepaid insurance that we have this year that we did not have last year, just taking advantage of some discounts and so forth.

OK. Thanks.

(OPERATOR INSTRUCTIONS) Gary Vinay (ph), First Allied

I don't whether this has been discussed, I got on a little bit late on this call, but on the manufacturing side there's been a pretty phenomenal increase in commodity prices and I was just wondering whether we should be looking for some price increases from your manufacturers and what impact you see on that?

So far, we've been in constant dialogue with the manufacturers as we always are, and we are not expecting any unusual price increases mid-year, which is normally when they would do a price increase, like the January time period. It's going to be higher than it has been in the last several years because of the commodity prices, but it's probably going to be two, three percent, something like that. On custom-built products, some larger product that has more steel involved in it, there will be some price increases to the end consumers of those boats. To what we're stocking and to what we're carrying in inventory, we're being told that it's not going to impact us significantly this year.

The manufacturers have been very good partners and, in some cases, understanding the economy and the state of affairs with elections and the world that they've been, I think, absorbing some of the numbers.

I'll tell you the other thing to that point, the industry continues to get more sophisticated every week and every month and every year and the industry is doing a much better job sourcing it's supplies for it's products, also, in finding better alternative products and, in some cases, even a little bit cheaper.

And manufacturing efficiencies.

That's correct. That's playing into it as well, Gary.

OK. Thank you.

(OPERATOR INSTRUCTIONS) Joe Hovorka, Raymond James

Just a quick follow-up, your accounts payable at the end of the year went from $12 million last year to $56 million this year, can you just talk a little bit about that, what is that?

That is really just a timing, Joe, of when we pay certain of our boat manufacturers. We paid them in early October, so what you would see is the Line of Credit would have spiked up in early October and accounts payable would have gone back down. It's just a timing of when we pay people.

Last year, you had paid them in September?

Last year we paid them in September.

Great. Thanks.

Sir, there are no further questions. I'd like to turn the floor back over to you for any closing comments.

I'd like to thank everyone for participating in this conference call and Web broadcast this morning. Mike and I are available after the call to answer any questions you may have. Thank you for your continued support and belief in MarineMax and we'll see you next call.

This does conclude today's teleconference. You may disconnect your lines at this time and have a great day. Thank you.