MarineMax Inc (HZO) 2005 Q1 法說會逐字稿

Good day, everyone, and welcome to the MarineMax Incorporated first-quarter fiscal 2005 earnings results conference call. Today's call is being recorded. At this time, for opening remarks, I would like to turn the conference over to Mr. Brad Cohen, Integrated Corporate Relations. Please go ahead, sir.

Thank you, Jessica. Good morning, everyone, and thank you for joining this discussion of MarineMax's fiscal 2005 first-quarter results. I'm sure that you've all received a copy of the fourth-quarter press release but if you have not, please call Linda Cameron (ph) at 727-531-1700 and she will fax or e-mail one to you immediately -- again, 727-531-1700.

With that, I would like to now introduce the management team of MarineMax, 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 then will be available for your questions. Mike?

Good morning and welcome to MarineMax's fiscal 2005 first-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 its acquisitions into existing operations, and numerous other factors identified in our Form 10-K and other filings with the Securities and Exchange Commission.

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

Thank you, Mike and Brad, and good morning, everyone. By now, you have seen our results for our fiscal quarter of 2005, our first quarter. Once again, our team delivered very strong results with first-quarter net income increasing 27 percent, driven by a revenue increase of 18 percent. For the quarter, we posted diluted earnings per share of 17 cents, which was up 22 percent compared to the first quarter of fiscal 2004.

I must express thanks to our team, who delivered same-store sales growth of 17 percent, which was on top of a very strong 56 percent gain achieved in the first quarter of last year. Going into the quarter, we didn't think that positive comp growth would be possible, let alone growth as high as 17 percent. These results are truly incredible and attribute to our team. As expected, the marine industry is doing better, but we believe our performance is stronger and, as such, we're growing market share.

As I said, these results exceeded our own expectations. Let me try and shed some light on how we posted such strong results. First, it is important to note that our business is seasonal and the December quarter really should not be viewed as one in which we will consistently post double-digit earnings per share. This is especially true as our footprint continues to grow outside the state of Florida into colder, Northern markets.

On our last conference call, in addition to seasonality, we also tempered expectations for the first quarter based on uncertainties surrounding Florida following the destruction from the four hurricanes that hit the state during the September quarter. Our caution was heightened by the fact that Florida is our single-largest market and makes a larger contribution to our overall revenue and earnings during the fiscal first and second quarters.

Now, three months past the last hurricane, it is clear that Florida still has a lot of rebuilding to do, but the devastation is largely limited to the areas close to the eye of the four storms, such as Pensacola, Punta Gorda, which is south of Sarasota, and the Stuart/Fort Pierce area. The good news is that the major boating markets in Florida, like Fort Lauderdale, Miami, Palm Beach, Naples, Fort Myers, Jacksonville and the Tampa Bay area, had little damage by comparison. As such, while boaters in these markets had limited ability to buy boats during the last six weeks of the September quarter due to the storms, they came back and purchased product this quarter, which validates their passion for boating as a recreation.

Additionally, we benefited from some mild weather in most of our markets, which extended the boating season. Our partner, Sea Ray, partly in response to the hurricane, launched a fall rebate program, which likely stimulated some sales.

Finally, our same-store sales were helped by the continued expansion of the Ferretti Group and the Meridian line, which contributed approximately half of the same-store sales growth. We believe that the Ferretti Group of products should generate approximately 60 million in revenue this year, and it is progressing on target.

Revenue growth and gross margin improvements were the key drivers of our earnings increase. The first quarter marks the eighth consecutive quarter of positive same-store sales gains. Our first-quarter performance demonstrates once again the strength of our core strategies and the commitment and the ability of our team to execute on these strategies. Our full-service, customer-centric approach to delivering the boating dream to our customers continues to result in market-share gains.

Our gross margins increased from a year ago, indicating that better industry conditions are enabling us to realize increases in the margins of the boats that we sell. We are still not back to levels that we enjoyed in the late '90s, but we're getting closer. Keep in mind that larger products, such as Hatteras and the Ferretti Group of products generally carry a lower gross margin, but we have been able to supplement the gross margins through the continued growth of our higher-margin businesses, such as finance, insurance, parts, accessories, service and brokerage. As we discussed before, we've been implementing systems and structure to capitalize on the opportunities in parts and accessories and are beginning to see the benefits of these efforts with more incremental upside potential to be realized going forward.

Since our last conference call, we have participated in several boat shows. Though it is early in the boat shows season, we are encouraged by the early results. The early results support our expectations that same-store sales for 2005 should be in the high single digits. (indiscernible) we are quite happy with our first-quarter results and excited about our prospects for fiscal 2005 and beyond, we want to point out that we believe we benefited from a shift in business from the fourth quarter of fiscal 2004 into the December quarter. Also due to the milder weather and the rebate program, we likely shifted some business out of future quarters into the December quarter as well. It is very hard to quantify the dollar impact of these events. We are seeing no negative impact on our business from fuel prices or interest rates, as our customers are those with the discretionary dollars and are really less sensitive to shifts in pricing of fuel and interest rates.

We're very confident about our business. However, we caution against extrapolating first-quarter results into the rest of the year. Remember that we are up against strong comparisons for the balance of this year. Many of you will remember that comparable-store sales in the second, third and fourth quarters of fiscal 2004 rose 23 percent, 11 percent and 8 percent respectively, which implies that the year will be back-end loaded.

Now, I'd like to ask Mike to review the first-quarter results in more detail and provide you with updated guidance for fiscal 2005. Mike?

I'd also like to express by gratitude to our team for delivering another exceptional quarter, with most of our geographic regions contributing to the overall growth.

For the three months ended December 31, 2004, revenue increased 18 percent to 184 million. The revenue growth primarily came from same-store sales improvement of 17 percent and approximately 1.6 million from stores added that are not eligible for inclusion in the comp-store base.

Our quarterly revenue came in higher than our expectations. As Bill said, were cautious about the first quarter for several reasons, including the significant same-store sales comparisons that we were up against, the expected return to more seasonal or a normal December quarter, and the uncertainties surrounding Florida. Sales trends during the quarter turned out to be stronger than we anticipated with Florida leading the charge for the reasons Bill discussed.

Gross margins increased 155 basis points to 24 percent. The increase stems primarily from better margins in the boats that we sold and a better mix of smaller, higher-margin boat sales as compared to last December quarter. While the boat margins are getting better, we're still approximately 100 basis points below the boat gross margins we enjoyed in 1999 and 2000.

Our Selling, General & Administrative expenses increased 7 million to 37.1 million or about 20 percent of total revenue, which is about 100 basis points higher than a year ago. The increase in SG&A is due to several factors, including the addition of the new brands and the related marketing and training, the Chesapeake acquisition that we completed in June, which operates at a lower operating margin than the rest of MarineMax, increased marketing to try and grow share in Florida after the storms and in some cases additional team members associated with the product expansion. We also have made other infrastructure investments, mainly in personnel, for the future that will help sustain our growth.

Interest expense was up due to additional borrowings and a rising-rate environment. Our tax rate was flat at 38.5 percent, where we expect it to remain. Finally, net income for the first quarter increased 27 percent to 2.8 million, or 17 cents per diluted share, compared to net income of 2.2 million or 14 cents in the year-ago quarter.

Turning to our balance sheet, at quarter end, we had approximately 9.5 million in cash. But as I've said on past calls, we take our excess cash and pay down our inventory financing. As such, we actually had substantial cash at the end of the quarter. Inventory increased to 332 million from 273 million at the end of December last year. The 22 percent increase is lower than recent quarters and in line with our sales growth in the quarter. The increase in inventory from last December is mostly attributable to the Imperial and Jacksonville expansions that we completed in June of 2004, the product line expansions that we have made, and normal increases associated with the same-store sales growth. We feel comfortable with our inventory levels and believe that we're well positioned to capitalize on improving industry conditions.

Property and equipment increased due to real estate purchases in Texas and Georgia associated with new store relocations and property and equipment related to the Maryland acquisition. Remember, we have substantial real estate value on the balance sheet that, in addition to being undervalued, is largely unleveraged.

Our balance sheet continues to strengthen, allowing us to take advantage of expansion opportunities as they arise. I am sure you have seen that the Company filed a shelf registration statement, where we are prepared to help Brunswick sell their ownership in MarineMax. As noted in the filing, Brunswick has indicated to us that their desire to sell the stock is not an indication of a change in our business relationship. In fact, we are exploring ways to expand our business relationship. We believe that getting Brunswick stock into the hands of institutions will further help our float and increase the average days trading in our stock and will allow more investors in. We also added shares to the shelf and indicated the proceeds are for general corporate purposes. Until the proceeds are deployed, the cash will be used to pay down the inventory line of credit, which currently bears a rate of approximately 4 percent. I will note that when and if the Company completes the transaction, it would be the first primary stock issuance since June of 1998. Unfortunately, since the shelf was just filed, we will not be able to comment further at this time.

Now let me discuss our guidance for fiscal 2005. We are raising our earnings per share guidance for fiscal 2005 from the range of $1.75 to $1.80 to the range of $1.80 to $1.85 per diluted share. This guidance excludes the impact from any potential acquisitions that we may complete. The more significant assumptions that we've made to arrive at these estimates are as follows -- we believe that our full-year same-store sales growth will be in the high single digits, 8 to 9 percent. This is on top of 21 percent last year, which is obviously a sign that we feel very good about the marine industry. We are enthusiastic about our product lineup for this year and believe we are poised to capitalize on improving conditions. Gross margins will likely be about flat to slightly down. Our gross margins will be down due to expected continued increases in our larger boat businesses, which generally carry lower grosses, partly offset by the continued expansion of our higher-margin businesses. We anticipate gaining modest leverage at the SG&A line and our tax rate should be approximately 38.5 percent, as I noted earlier.

Additionally, as you all aware, the Financial Accounting Standards Board issued the new stock option accounting statement, SFAS 123-R. We are required to adopt the standard in our September quarter. We currently estimate that the impact in that quarter is a reduction of diluted earnings per share by approximately 3 cents. For a full year such as 2006, the estimated impact for MarineMax is about 9 to 11 cents reduction in earnings per share.

While we don't usually provide quarterly guidance, we want to emphasize a few points. December has always been a breakeven quarter at best for MarineMax, as outside of Florida and neighboring markets, boat sales slow during the winter time. As we expand in markets outside of Florida, like our recent acquisition in the Chesapeake area, this will be even more apparent. Over the past two years, our fiscal first quarter ended in December has produced midteens earnings per share results. We think it's prudent to model the Company closer to breakeven than to double-digit earnings per share in this first quarter.

Separately, for modeling purposes, I want to remind you that, due to the shifting of revenue into the December quarter and the same-store sales that we are up against, the growth in earnings will be back ended this year.

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

We are enthusiastic about our business prospects for fiscal 2005 and beyond. Our performance quarter after quarter reaffirms the strength of our core strategies and we believe that by adhering to these strategies, we will continue to gain market share and generate long-term shareholder value.

I'd like to conclude today's call by reiterating these core strategies. We will provide our customers with the entire boating experience. Not only is our brand offering in product lines unparalleled, but no other boating retailer provides one-stop service like 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.

We remain committed to delivering a hassle free experience to our customers by focusing on the lifestyle of boating. That lifestyle of boating is that it's a family bonding experience and a stress-relieving recreation that can be enjoyed close to home. We will look for areas to further broaden our brands and product lines and enhance our capabilities. We will invest in the team. Our people are the most valuable asset, and we refuse to cut corners on training and bolstering the MarineMax team, because it's about the people. As such, we have in place a passionate team working in unison that is unparalleled in our industry. We will pursue select, strategic acquisitions to complement our strong presence and enhance the customers' boating experience. Our acquisition strategy has been and will continue to be long-term-focused. We will maximize and maintain a strong balance sheet. This will enable us to seize opportunities on the acquisition front as they make strategic steps for the long term.

We believe that through our team's commitment to our strategies, our customers and our company, MarineMax is positioned to benefit disproportionately from a sustained industry upturn and to deliver strong earning results and returns for our shareholders.

Now, I'd like to turn the call back over to the operator, who will open the call up to questions.

(OPERATOR INSTRUCTIONS). Ed Aaron, RBC Capital Markets.

Good morning and congratulations on the quarter. I actually wanted to ask you a question with respect to some of the opportunities created by the hurricanes, both in terms of their insurance checks coming in -- I'm under the impression that for the most part that still hasn't happened yet. Is that a fair assumption to make?

Yes, Ed, there are still some opportunities for these checks to come in. To give you some examples there, there's some boats in a couple of the markets, more particularly in Pensacola and even down in Stuart, that they haven't found the boat and insurance companies are not willing to release the checks until they do their due diligence to give enough time to make sure that everything is on the up and up. So there is some opportunities (sic) for checks to be coming in, but as we stated in some previous discussions, you know, we will be missing some opportunities -- (technical difficulty) -- customers would have traded their products in anyway, in some cases, so we won't have the used boat sale that accompanies the new boat sale. (technical difficulty) -- that is the model of our business.

The growth that we saw Ed, that we commented on in the December quarter really wasn't replacement business. It just was the resilient customers who enjoy boating.

Sure, okay. Can you talk about what type of service business you saw in the quarter?

An increase in our fiberglass repair business, as you would expect. It's hard to kind of quantify that other than to say that we did have an increase in that business and we expect to continue to have that certainly into the March quarter and perhaps even beyond. There's a lot more damaged boats than there are lost boats. A lot of boats have some repairs that still need to be done.

But it's important to understand that we're not interested in significantly damaged products, because that's not a winning proposition for anyone, if the boats has been sunk and been in salt water for a significant period of time. So we're not purchasing boats that have been sunk; we're really not repairing boats that have had significant damage, because we just can't win doing that.

Okay. Also, with respect to your shelf filing, should we take that as maybe an indication that we should possibly see some more acquisition activity in the near future?

Ed, I think the best way to answer that question is we've -- you know, every year in our existence we've acquired a couple of companies, and as noted in the shelf, there isn't an acquisition that's imminent that the cash is to be raised to generate to complete the acquisition, so I wouldn't (ph) assume that it's going to speed up and that there is an imminent acquisition (indiscernible).

Okay. One last question and I will open it up -- can you maybe just comment on how floor traffic is tracking right now?

I think the best way to comment on that -- because during this time period, it's so boat show-heavy across the country, that what we're seeing in boat shows, from a sales standpoint, supports our expectations of the high single digit same-store sales growth, which -- let me interpret that by saying that the marine industry is doing well right now because obviously, 8 or 9 percent up on top of 21 percent is pretty darn good, so things are progressing. We see the industry continuing to recover into the future.

Scott Barry, Credit Suisse First Boston.

It's Ed Lowe (ph) for Scott. Very nice quarter. A couple of quick ones for you -- can you talk a little bit about the timing impact of the replacement cycle? Is it a multi-quarter event versus a multi-year tailwind?

I would tell you it's certainly multi-quarter and that you've got to remember, the state has never lived through four storms in a six-week period. It could very well go into next fiscal year. I think the main thing to emphasize is we don't see it as a very significant driver of business up or down. We see it as being rather neutral.

If you go to Pensacola, you see more blue tarps on roofs than anything else, and there's estimations that it will be a couple of years getting the roofs repaired in that market, and of course obviously marinas have to be rebuilt as well.

Right. Secondarily, you guys have obviously done very, very well with the Ferretti product extension. Can you talk about any brand within that family that has done particularly well or has it been more broad-based?

It has been rather broad-based, Ed, as we expected it would be. The brands are all kind of unique and they kind of appeal to different consumers. As such, we are seeing a pretty good broad approach to the Ferretti Group.

Okay. Finally just an update on sort of the acquisition pipeline. Have the storms created any outside opportunities that's worthy of discussion?

The storms really haven't created any significant opportunities, but you know, as we've stated before, we are always in discussion with potential acquisitions, and some of those could be in Florida as well.

Thanks, guys. Very nice.

Sean McDaniel (ph) of S&M Research (ph).

Can you give us a breakdown on the inventory balance of what is new and what is used boats and perhaps give us some sort of trend on that?

Sean, I don't actually have that number at my fingertips. I can tell you that the trend has not shifted much from the way it always is, which means that it is predominantly new. There's been no shift in the industry one way or another dramatically to new verses used or used versus new.

Okay. Then also can you give us the Imperial sales for the December, '03 quarter? I'm trying to reconcile the difference between the comp increase and the total sales growth.

What I said, actually, when I started off my talk, I said that, in addition to the 17 percent, we had 1.6 million of revenue that's not in the comp base, and I can tell you the only thing not in the comp base is Imperial.

Right. Do you have a number for last year for the December quarter for Imperial?

I do not have the number for last year. (multiple speakers) -- for us it was 0 but for them as a private company, I don't know what that number was. I would suspect it was a little bit less than that.

Finally, back to the inventory part, I guess I'm trying to understand. It looks like I see a pretty consistent build in inventories and I understand there's been several quarters where there's discussion about the comfort level with the inventory balances. I'm trying to understand. It looks like there's about a 35 day increase in inventory day this quarter year-over-year.

If you go back and kind of go way back a year ago when we took on the Ferretti Group of products, we had a very large ramp up in inventory as we expanded with all of those brands. I believe there's 8 brands that make up the Ferretti Group. We also have been expanding with Meridian, Boston Whaler and a couple of other brands in certain markets, and that started the inventory increase. What happens when you move -- when you shift business to some larger products, like whether it's Hatteras or Ferretti or that type of product, the turn cycle on those boats is a longer turn cycle. So our business, I think as we've said last year, whereas we used to be more like an inventory turn company of around 3, maybe a little bit more than 3, the expansion with Ferretti should take us down in the 2.5 range, a little bit lower and then we can grow it from there as we become more familiar with the product, as our sales team becomes more familiar and as the marketing ramps up and quite frankly as the product becomes better known in the United States.

Actually, one other quick one -- on the acquisition front, it looks like you haven't done an acquisition (indiscernible) a year now since Imperial. If we were to look at the market for sort of dealers that would make attractive acquisitions for MarineMax, which I would assume would mean dealers that do pretty good Sea Ray business, how many are there? How many are left or what's the total market domestically, perhaps?

If you look at Sea Ray dealers, there's probably 15 to 20 that we could have interest in. We know them all and have had discussions with most all of them, so it's really just more of when it makes the best sense for our shareholders and also for them. You know, obviously we don't model in acquisitions into our growth, because we look at it from a long-term perspective and we will make that decision when it occurs. If there's 5000 marine retailers out there today, there's probably 250 that perhaps we would be interested in, which are the more premier lifestyle-type focused, premier type dealers. Most we would not, that are the mom-and-pop and are less focused on the luxury segment of our industry.

Right. The same-store sales increase, I was looking at that this morning thinking about sort of what the -- is there a point when that becomes less of a relevant metric? Because is MarineMax really more of a rollup of the boat -- (multiple speakers)?

No, I can tell you if you were to sit in one of our management meetings, the number one thing that we've constantly talk about is probably the number two, number three, number four thing is improving the operations that we already own, driving same-store sales growth, driving improvements in the P&A business, driving improvements in service and the finance and insurance business. We believe, if we look across the country at where we are at and -- the market share in some of our markets is not where we want it to be, actually in a number of our markets. Certainly the service, P&A and our other businesses are not there yet, all of which provides very great earnings potential. Then really the acquisitions are really just the gravy on top. As the only consolidator in the industry, I think a lot of people say you guys are the consolidator but we only do 2 to 3 a year. We focus most on internal operations.

(Multiple Speakers) -- we're going to continue to run this business that internal growth and the blocking and tackling and having the right people and the leveraging the higher-margin businesses is our opportunity, and so you know, acquisitions are not how we are going to plan on the future. So we believe we can continue to grow and deliver into the future without making another acquisition. But if they come, that will be wonderful.

That sort of goes to my point, is the relevance of the same-store number -- I mean same-store (indiscernible) you are adding a lot of stores but if you're sort of -- you have reached the steady-state plateau. You are the industry now. Is there a reason to -- I'm just curious what your thought process is and maybe to help understand sort of how management is focused. Is there a purpose to the same-store reporting?

Is there a purpose do it?

Yes.

I think it reflects how our strategies are being accepted and it reflects the successes of those strategies. (Multiple Speakers).

For the internal growth.

We think it's pretty important from an internal growth standpoint.

Scott Blumenthal (ph), Emerald Advisors.

Congratulations on a fine quarter, gentlemen. I was wondering what indicators other than the weather, Bill, lead you to believe that you are kind of borrowing from future quarters.

Well, Sea Ray did not have a program at this last quarter, as they did this year. Our team, coupled with the weather, really kind of drove some sales, we believe, that perhaps maybe would have occurred the quarter that we are in, our second quarter. So we believe that probably we did rob a little business, (indiscernible) we had an early incentive program and we had some milder weather in the northern markets.

Okay. Can you comment on the contribution that you got from the brokerage side of the business? Do you see customers moving more towards brokering rather than trading in?

No, there really hasn't been a shift there, Scott. Brokerage has continued to grow a little bit in our company, but it really hasn't been cannibalizing new or used sales. It's just been additional growth, you know, where we put the buyer and the seller together. A lot of it has been more on the higher-end products. But you know, there hasn't really been a shift. It has been us being a little more aggressive and doing a little better job in the brokerage arena.

Okay. One last question -- I've been looking at a couple of competitors that seem to -- accessories competitors who seem to be struggling a bit. Do you see market share gains for MarineMax? Have you rolled that program out to all locations?

To answer your second question first, we haven't really launched it totally throughout all of our operations. We are in a little better than a third of our operations, and part of the accessories there are the lifestyle-focused as well, so when you walk into one of our showrooms, you see the tubes and the wakeboards and the skis and the life jackets and that type of thing, and it helps keep you in the emotional right side of the brain as to what boating is.

But you know, I think what's going on more than anything, Scott, is that we are not really a marine hardware store and we don't really position ourselves as doing that. Others are kind of more marine hardware. What's happening is we are going after the soft goods for our customers in order to offer it as a service and obviously capitalize on the higher-margin businesses that's there, but at the end of the day, our boats come pretty well complete. So our customers don't (indiscernible) really go and buy a GPS and a compass and a horn and a battery switch and the things that a lot of people put on their boat. Our customers are the more "I want you to do it for me" versus "I will do it for myself." If you are a marine hardware store, I think it's more focused on, we will sell you things so you can do it yourself. So I think that's what's going on, and ours is more the luxury end, the top, the white-collar worker, the people who more and more every day are saying, I want this to be a very positive experience; I don't want to mess with this. Do I need this? Do I need that, and I'm going to take care of putting it on my boat or getting somebody to do it. I want you to do it all for me. That's really what's occurring.

So we're not out to compete with others in a huge way, but you know, we are going to provide that service and we're going to capitalize on that small percentage of accessories that we know our customers need. But you're not going to see us doing a big thrust to go after the battery switch and cleats and things that people put on their boats, even though we offer some of those through our parts department.

Okay, very good. Thank you.

Gary Vineer (ph) of First Allied Securities.

Nice going, guys. My question is revolving around dock space and so forth. Out here in California, we've talked about this many times, Mike. You know, it's virtually impossible to get dock space, especially for larger boats; we're talking anywhere of waiting for a year. I know, with your setups out here, that you do have some type of capabilities, but I was wondering, with the hurricanes and everything, obviously I guess you're not seeing any impact on getting dock space back.

I think the best way to answer that question is just in the numbers. We had 21 percent same-store sales growth last year, which was almost all unit growth, as we said on our October call. Those boats need a home someplace. 17 percent this quarter and those boats need a home. Our customers are the type of customers that marina owners want. They pay for their supplies, they buy their gas there, they are not generally live-aboards in the marina. Even in California, actually Bill and I were just out there recently and having discussions with marinas and so forth. We're not finding a very difficult time out there finding slips. Probably the only market in the country that has been a challenge from time to time, although it doesn't seem to stop our sales that badly, is the Naples, Florida market. We certainly read about some of the slip issues in certain markets. I will say, though, there are some initiatives underway, in the state of Florida we've noticed anyhow, a couple of municipalities have passed legislation to earmark funds and also to change zoning and restrictions to keep the waterways -- (technical difficulty) -- which is very important in markets like Florida and California and Michigan and some of these other states. So I think finally the municipalities are stepping up to help address the problem. You know, we're keeping our eyes open and our ears open for marina opportunities where it makes sense, like the Chesapeake acquisition that we did, but thus far, it has not been a major impediment to our sales.

Mike, I had an associate that was out in Florida, and he was telling me about these sites where there will be like three or four-story storage facilities.

Yes, the rack storage buildings.

Right. First of all, would you guys ever think about getting in that type of business? I would assume that that's pretty lucrative or -- (Multiple Speakers).

We are already in that business in several of our locations, but you know, if opportunities come up, we will pounce on them, but we also at the same time are looking at all opportunities, not only in dealer acquisitions but also marina opportunities.

Is that a pretty lucrative business segment right there, that type of rack storage?

It's a nice cash flow business. It doesn't necessarily look the best from a flat GAAP P&L, because of the depreciation and amortization that comes with the improvements on the property, but it's a good business to be in and we are in it. Especially if you're a boat dealer like we are, it's certainly something that we need to be looking at.

Nice going, guys.

(OPERATOR INSTRUCTIONS). Mike Lauren (ph), the Robbins Group.

Great quarter. Brunswick has been expanding brand significantly through acquisitions. Is there r any incremental (ph) business or do you see in a certain of your markets for some of those brands that they are bringing on?

We would say that the answer to that question is most assuredly and we've been in discussions with them concerning that, and we will continue to do so. But if you look at our product portfolio, there's probably two areas that we could expand to a greater extent, and one is the outboard fishing part of our business, which is their latest acquisition of SeaPro. The other is in the inboard ski-boat business. So those two we are looking at in a serious way. But if you look at the rest of our portfolio, our strategy is not to have competitive products in the same market, so we've pretty well got you covered from 11-foot aluminum (indiscernible) or tracker all the way up through the 200-foot steel (ph) CRN. So we feel good with our portfolio but those are some opportunities, Mike.

Thanks much.

(OPERATOR INSTRUCTIONS). Gentlemen, at this time ,I have no other questions standing by. I'd like to turn the conference back for any additional or closing remarks.

I'd like to thank everyone for participating in our first-quarter conference call and the Web broadcast this morning. Mike and I are available after this call to answer any questions you may have. So thank you for your continued support and belief in our great company, MarineMax. Thank you.

Ladies and gentlemen, this will conclude today's teleconference. We do thank you for your participation, and you may disconnect at this time.