MarineMax Inc (HZO) 2005 Q3 法說會逐字稿

Good day everyone and welcome to the MarineMax, Inc. third quarter fiscal year 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 with Integrated Corporate Relations. Please go ahead, sir.

Thank you very much operator. Good morning, everyone, and thank you for joining this discussion of MarineMax's fiscal 2005 third quarter results. I'm sure you have all received a copy of the third 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.

With that, I would like to introduce the management team of MarineMax, Mr. Bill McGill, Chairman, CEO and President, and Mike McLamb, Chief Financial Officer of the Company. Management will make some comments about the quarter and then we will be available for your questions. Mike?

Thank you, Brad. Good morning and welcome to MarineMax's fiscal 2005 third quarter earnings conference call, which is also being broadcast simultaneously over the Internet. Before I turn the call over to Bill, I would 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 would like to turn the call over to Bill.

Thank you Mike. Good morning everyone. This morning we announced our results for the third quarter fiscal 2005. We're pleased to report another record quarter with net income increasing 33%, driven by a revenue increase of 39%. For the quarter, we posted diluted earnings per share of $0.74, which was an increase of 21% compared to the third quarter of fiscal 2004.

Once again, we attribute our strong performance to the MarineMax team, who delivered spectacular same-store sales growth of 37%, which was on top of a strong 11% increase in the third quarter last year. We would like to thank our team members for their exceptional efforts and unrelenting commitment to properly executing our customer-centric strategies.

As we have stated before, our results are easier to forecast on an annual basis than on a quarterly basis. Candidly, our fiscal third quarter results exceeded our own expectations. During the third quarter, our business was strong across the board. But our sales of larger boats were stronger than is typical for this time of year.

Usually during the June quarter, the large boat and yacht sales slow and the quarter is dominated by the seasonal rebound of our northern markets. While the northern (ph) markets rebounded except for a comment I will make in a minute or so, the larger boats and yacht segments continued to show strength.

Our third quarter results show the continued success of our strategies, including our move to broaden our product line over the past several years. But to be clear, our same-store sales growth was very substantial without the addition or expansion of the new brands. In fact, our same-store sales growth was unit-driven once again, which is encouraging.

I indicated that our northern markets rebounded as usual. This is generally true. But as you may know, the Midwest and the Northeast were hit with a longer-than-normal winter. They essentially had no spring. Thankfully, our geographic diversity offset the weather effects, but our stores in those markets did not experience the same level of growth as the rest of the country.

Revenue growth was the main driver of our earnings improvement. The third quarter marks the tenth consecutive quarter of positive same-store sales gains. We continue to win new customers and serve our existing customers by offering the broadest premium product selection and providing industry-leading services. This is the key point, as the world we live in is fast-paced with each moment of free time highly valued.

Our customer demographic wants a boating experience that is trouble-free and easy for them and their families. Basically, they want to turn the key and go. Our service and focus on providing this experience continues to bring customers back to our dealerships and drives a very productive marketing campaign through word-of-mouth accolades.

Our gross margins decreased from a year ago, primarily due to product mix. As I said earlier, we had a higher mix of larger boat sales and these boats carry lower gross margins. We're able to offset the majority of the gross margin decline as we leveraged our SG&A expenses during the quarter.

While improved industry condition and growth in our higher margin businesses should drive gross margin improvements, bear in mind sales of our larger boats and yachts continue to cause fluctuations in the gross (indiscernible) margins, especially on a quarter-to-quarter basis.

During the third quarter, we opened three new retail locations -- in Destin, Florida; Baltimore, Maryland; and Chattanooga, Tennessee. Each is situated on the water in active boating communities. Importantly, we selected sites that are attractive markets on a stand-alone basis, but also complement and leverage our existing retail network. We have seen some early successes from each store, including some strong interest coming from the Baltimore market, which is a new market for us.

We now have 71 retail locations in 17 states nationwide, which allows our customers to travel across the country and utilize a MarineMax location to fulfill their boating needs.

When I reflect on our performance, I'm pleased that MarineMax truly seems to be pulling away from most in our industry. Our strategies are working. Our investments in training and in our team, along with our infrastructure and like our systems, are all paying off as we thought they would do.

Consider that last year through June, the Company was up over 25% in same-store sales growth and 51% increase in net income. That was essentially all internal growth. Now this year we are up 22% in same-store sales growth and net income is up over 29% again, essentially all from internal growth. Not too many companies are boasting these types of results in back-to-back years. It makes us very proud of our team and our Company.

We obviously watch the news and see that uncertainty continues to rise from time to time. While our business certainly has its ebbs and flows, we do feel that the next several years should be good ones for the marine industry. We feel this is particularly true for dealers of high-end products that are very service- and experience-focused like we are.

We feel the industry is poised better than ever to continue to make boating an enjoyable lifestyle for those consumers who crave stress relief, relaxation and family time. We obviously feel we're uniquely positioned to capitalize on these macrotrends.

Before I ask Mike to further review the third quarter results and to provide you with more detailed guidance for fiscal 2005, I want to again stress how challenging it is to accurately forecast quarter to quarter. Ours is a business that needs to be viewed annually. That is not to say that we are ignorant of the focus that is put on any public company each quarter, but as an example when we post same-store sales growth to this magnitude, it makes us cautious that business may have been pulled from a future period. And as I said, business trends are positive. Yet I wanted to add this cautionary thought before asking Mike to go over the numbers in more detail. Mike?

Thank you Bill. I would also like to thank our team for delivering another outstanding quarter. Our internal growth has been very strong, which among other things is yielding an ever-strengthening balance sheet which I will comment on in a few minutes.

For the three months ended June 30, 2005, revenue increased over 39% to 306 million. The revenue growth came primarily from same-store sales improvement of 37% and approximately 5.5 million from stores opened or acquired that are not eligible for inclusion in a comp-store base. During the quarter, our gross margin decreased about 200 basis points to 23.1%. The decrease primarily stems from a greater mix of large boat and yacht sales, which generate lower margins.

If you look at our core products like Sea Ray, Meridian, etc., our margins were either equal to or slightly ahead of last year for the quarter. Some of the margin decline was offset by continued growth in our higher margin parts, accessories, service, brokerage, and finance and insurance businesses.

Our selling, general and administrative expenses increased 9.3 million to 46 million. However, SG&A as a percentage of revenue dropped to 15% from 16.7% a year ago, which enabled us to offset some of the gross margin decline. The improvement in SG&A as a percentage of revenue is attributable to our strong same-store sales gains, which allowed us to better leverage our personnel costs, facilities, etc.

Our interest expense was up primarily due to the rising rate environment. And our tax rate was 38.5%, which is about where we expect it to remain. Finally, net income for the third quarter increased 33% to 13.8 million or $0.74 per diluted share, compared to net income of 10.4 million or $0.61 in the year-ago period.

Moving to the nine months ended in June, let me make some brief comments. Revenue is in excess of 718 million, driven by our same-store sales growth of 22.5%, which is very strong in its own right but even stronger considering that last year for the same period our same-store sales growth was 25.3%.

Our gross margin has improved 25 basis points and our SG&A as a percentage of revenue is 18 points lower than a year ago, yielding an improved operating margin. Finally, our net income has increased over 29% versus the same nine-month period last year.

Turning to our balance sheet, at quarter end it showed approximately 22 million in cash. It is important to understand that we use our excess cash to pay down our inventory financing. Therefore, we have substantial cash at quarter end in the form of unleveraged inventory. Let me further clarify this point. The difference between our inventory balance and our short-term borrowings on our June 30 balance sheet is essentially cash.

For the sake of comparison, looking at the publicly traded auto groups, their inventory and their short-term borrowings are one for one. They have no unleveraged inventory like we do. In either scenario we use financing facilities that function as floor plans, but MarineMax has the unique advantage of being able to utilize their excess cash and pay down our financing facility. Accordingly, we have substantial cash available in excess of 175 million at June 30, which further supports how financially strong this Company is.

Turning to inventory, at quarter end inventory was up 16% to 298 million from June 2004. During the same 12 months our same-store sales growth is up 19%. The increase in inventory dollars is primarily attributable to brand expansions we have undertaken, additional store openings, and planned inventory in anticipation of sales growth.

Inventories are in good shape, especially in light of our strong sales trends. Remember, when we took on the Grady (ph) group of brands, we indicated their inventory turns would slow given the lead time and sales cycle associated with larger yachts. We are comfortable with where we are from an inventory standpoint and would much rather have a boat in stock than potentially lose a sale.

Customer deposits were up 23% which obviously I would prefer versus being down. But as we have said on many calls, it's difficult to get a meaningful read on our business from the deposit line. Our deposits are lumpy and can relate to a yacht sale that is perhaps 18 months out. Our equity exceeded 271 million at quarter end. Overall our balance sheet remains in great shape and we're committed to strengthening it.

Now, let me discuss our guidance for the remainder of fiscal 2005. First, keep in mind that as Bill said, our business is challenging to predict quarter to quarter, which is one of the reasons we only give annual guidance.

During our March call, we established guidance of $1.75 to $1.80 for fiscal 2005. We are raising our fiscal 2005 guidance to $1.82 to $1.87 to account for the upside in the third quarter. Our guidance excludes the impact from any potential material acquisitions that we may complete.

Our guidance assumes that our fourth-quarter sales same-store sales growth will be in the high single digits. This is on top of 8% last year, which clearly illustrates continued optimism about the marine industry and our enthusiasm about our market position.

When fiscal 2005 ends, we expect as we first advised that we will see modest improvement in gross margins and modest SG&A leverage, which should result in modest improvements in the operating margin for fiscal 2005.

Now, I will provide our initial thoughts for fiscal 2006. We feel the marine industry will continue to grow for the foreseeable future. While we will have posted very strong comps for two consecutive years, we feel it's prudent to model 2006 in the high single digits. We feel most of this growth will again be unit driven.

We expect to continue our ramp of the Grady group of products. The continued sales ramp of Grady products and other lower gross margin yachts will soften the gross margin growth from our higher margin businesses. Nonetheless, we do expect modest growth at the gross margin line and modest leverage at the SG&A line, again yielding a higher operating margin in 2006 than 2005.

We expect our annual interest expense will track proportionally higher due to the rising interest rate environment, but our tax rate should remain constant at about 38.5%. Factoring in these assumptions, you get a pre-stock option expense EPS range of $2.05 to $2.10 for 2006.

As we indicated on past calls and in our press release, statement of financial accounting standards 123(R) share-based payments requires companies to expense stock options. It applies to us beginning in our first quarter of fiscal 2006. Consistent with earlier statements we made on the impact of the standard, given what we know today, we estimate that it will reduce full year earnings by about $0.10. As such, netting the approximate dime out of 2006 yields a stock option adjusted EPS range of $1.95 to $2.

Finally, the last two December quarters have been uncharacteristically strong due to specific reasons. First, the December quarter two years ago coincided with favorable weather across most of the country and a clear rebound for the industry. Certainly, we did much better than the industry when we posted 56% same-store sales growth that quarter. Last year, the four hurricanes in Florida appear to have pushed business into the December quarter, which helped to generate the 17% same-store sales growth we posted, again, which was on top of the 56% in the prior year.

These factors led to two back-to-back December quarters with mid to high teen earnings per share results. We believe it's much more prudent to model the December quarter with single digit EPS results. While this may imply negative same-store sales for that quarter, it also suggests a return to a more traditional seasonal trend.

Now I'll turn the call back to Bill for additional comments.

Thank you Mike. Before we take questions, let me add that I'm particularly pleased by the results we continue to post. Most of the earnings and revenue growth has been from great execution at the operating level. While we acknowledge we have room to tighten our expense structure we'll not do it and sacrifice of the great personal customer services that we provide.

Let me take a moment to expand upon this view. At the core, we're operators. We know how to select premium boating product lines and deliver a full spectrum of personal services to give our customers a true one-stop shopping experience. We make opportunistic acquisitions when and where they make sense, but not with the mindset to be an industry consolidator. Rather, we seek opportunities where we can improve results with our operational excellence.

Year-to-date, our strong growth has been almost entirely internal. We focus first and foremost on how to improve what we already own. Management is constantly challenging itself to find the right answers to these key questions. How do we drive market share growth? How do we expand service, parts and accessories, and other related businesses? Essentially, how can MarineMax increase its profitability and provide an outstanding experience to our customers while providing a great place to work for our team? It sounds simple, but as you all know it takes execution.

This isn't to imply we aren't still focused on acquisitions. We are. Our pipeline is robust and we have a number of significant opportunities that we are pursuing. We will complete them when they make sense for MarineMax. Remember, we can be selective as there is no other acquiring dealerships.

As you review our progress through the first three quarters of fiscal 2005, our past lack of concern over increases in fuel prices and interest rates is being validated by our results.

Mike gave you the rationale for the guidance in same-store sales growth assumptions. We believe this is a realistic forecast. We're not trying to be overly conservative. Remember, that a few large boat sales can significantly affect quarterly results. Again, this is why we focus on annual versus quarterly forecasts.

Before I conclude, I would like to publicly thank the Florida team for their preparation during hurricane Dennis and the two tropical storms before Dennis. I'm glad to report that all team members are doing okay and we suffered no physical damage to speak of in the panhandle. Hopefully this season will come and go without many surprises.

In conclusion, we remain confident about our business prospects for fiscal 2005 and beyond. The industry is healthy, and as our results bear out we have effective strategies in place to continue to gain market share and create value for our shareholders. The combination of our business model, our people, and our strong financial position is generating market share gains, strong earnings growth, and a significant value for our shareholders.

We look forward to updating you on our next quarterly call, and with that I would like to turn the call over to the operator, who can open the call up for questions.

(OPERATOR INSTRUCTIONS) Ed Aaron, RBC Capital Markets.

Good morning and congratulations on another great quarter. A few questions for you. First, I was hoping you could maybe walk us through a few -- if you were to look at the stores that have been open since the last cycle, approximately what percentage of those stores would you say are at or above the prior cycle peak?

Sorry for the pause. I don't have that data in front of me.

I'd say it's a good portion though.

I would say it's a good portion, too.

Would you say the majority?

Yes.

Yes, I would say the majority are above the previous cycle peak.

Thanks. Secondly in terms of the pricing environment, you commented I think kind of on an apples-to-apples basis that margins were up for most of the product lines?

Equal to or greater than the same quarter last year.

So certainly we haven't seen any deterioration in the pricing environment. At the same time we have been seeing over the past 18 months or so a continued progression upward. Do you think there is still room to go there? Or does maybe some of the leveling off that you saw this quarter suggest it was kind of (multiple speakers) backed out of the pricing benefits?

Ed, we are still not back to the margins we enjoyed in '99 and 2000, and I do not have the exact calculation with me today. But I think on the last call I said 125 basis points, and it's probably not far from that continued upside. I would clarify for everybody, you got to keep in mind the boats are the lowest margin product that we sell. Service is higher, parts is higher, F&I is higher, brokerage, everything we do other than boat sales is a higher gross margin.

When you have same-store sales growth of 37%, that is boat driven. So we had a mix shift not only on larger boats, we had a mix shift in what we do. We sold more boats than we were commissioned to do. And that's going to drive down gross margins also. Just because you're selling more boats.

The transition into the Ferretti group of products, there's learning curves and inventory that we have to perfect how we do things. As a result, there's opportunity for margin improvements there as well.

On the guidance just for the fourth quarter, first of all usually in the first quarter, if memory serves, you get some type of -- I guess it's kind of like a rebate from the manufacturers if you did a good job selling products, which certainly this year you did. Should we expect to see some benefits from that in the fourth quarter?

It's all factored into our guidance.

Obviously people are starting to get a little bit concerned about the hurricane season, maybe for good reason. Have you factored in -- given yourselves any latitude for that.

No, we saw the first hurricane roll through the panhandle. Actually before that, as Bill said, there were two tropical storms. It disrupted business as we started July up there. We have so many weeks left in this quarter that we are not baking anything in for that one or for any future ones.

The threat of hurricanes and tropical storms, as long as we don't get major hits, we have factored that in. But we can't predict a storm, what happens if a storm rolls into Miami or Tampa. That is not factored in.

Thank you very much and congratulations again.

Laura Richardson, BB&T.

Just wondering, was there anything incremental you did this year versus last year that you think helped drive the comps, like marketing or promotions or service in the stores?

I think we are doing a much better job marketing than we did before. We've got a lot more events going on as well. We had a big rendezvous in the Bahamas, as an example, where we had I think 155 of our customers' boats there. All of that helped to (multiple speakers) --

You should invite analysts, by the way, and investors.

We need to do that.

That's a good idea.

Yes, it's a very good idea. It was a great event and a lot of people having fun. We have continued to drive this thing we call Passion Days, which is where we basically get our team members in and let them sleep on the boats, run the boats. And the manufacturers of our products actually come in and assist us with the benefits of the various products. And all of that is helping to drive a lot of what we are doing, because this is an emotional purchase. And as such, the team needs to truly understand what it does for potential buyers and their families.

Would you be able to quantify how many people attended the rendezvous last year compared to the 155 this year, or how many employees went through Passion Days in the quarter?

Passion Days, I can. The getaways, we have always been active, but it's an even greater focus this year. We really didn't have Passion Days until late last year. We started with the Ferretti group of products. But this year we had I think 8 different events of probably 20 to 25 team members at each event where they actually spent three days or so sleeping and running the boats. It's very effective.

As an example, the last one was in New Jersey where you could question why two weeks ago. And the week before that with the busy season we would take out some of our key salespeople and lock them up for three or four days. But at the end of the day, you get results because they go back with such a passion and fire in the belly for what this whole boating thing is about that you get dividends on those investments.

Interesting. Okay. You mentioned weather in the North was not favorable. Roughly what was the differential in comps in those stores versus the southern stores?

It kind of changes region by region up there. When you look at Minnesota, Ohio, and New Jersey, they were all positive comps. I believe they were all double-digit comps. I don't recall if Ohio was double-digit. Weather clearly has played a factor, not just for us but I do think for the industry --

Yes, I mean West Marine said that too.

I do want to be clear, we still had growth up there. We were not down. This is not a huge problem for us up there, which frankly when we talk to some other dealers, it does sound like we fared better, which I think as Bill said it's because our team has is properly executing on the strategies we have in place.

Last question is, obviously you had great results this quarter. Is there anything you wish you did better?

Laura you always wish you can do things better. But we're really proud of the team, and I think we wish that maybe back when we took on Ferretti group of product as an example we had been maybe a little better understanding some of the product, and we could have had a little better gross margins.

That is part of the learning curve. That is part of getting in and rolling your sleeves up and really learning how to do it. All in all, we're very pleased with the quarter and we're pleased with the year so far. We're always looking for ways to improve and do better and you learn from your experiences. That is what we do.

Keep up the good work.

Joe Feldman, SG Cowen.

Congratulations on the quarter. I was wondering if you could talk a little about the gross margin for a minute. I know you gave a little color during the prepared remarks. I am curious why shouldn't it erode a little bit going forward. It seems like the mix is shifting towards this kind of -- those larger yachts and the larger boats you are selling, which are slightly lower margin. If you could just give more color on that --?

It's really that we expect our higher margin businesses, service, parts and accessories, finance and insurance, and brokerage, to outstrip the margin pressure that we are going to get by the increase in some of the yacht business. And that is what our expectations are. We think that is realistic. And we are not talking about a huge margin improvement. We are saying incremental margin improvements for '06.

Another question I think you guys had talked about in the past at times, your order backlog. I was wondering if you could give us an update on how things stood. I recall last quarter you said it was quite strong, and just was wondering how it was looking at this point?

I think the comments we made last quarter were related to our customer deposits, which I think last quarter as a percentage they were up a little bit higher than they are this quarter. It is so hard to get a meaningful read from our deposit line, only because of the time it takes to build a boat. Most of those dollars on our balance sheet, the big dollars relate to yachts that are being built that could take 18 months or even longer.

And that backlog is strong.

That backlog is strong. We have got a lot on there. But in general, things are positive.

Two more quick things. One was -- any new product lines or product launches we should look to see in the next six months to a year?

If you look at the majority of the products that we have, we pretty well have it covered. The exception of that would be perhaps improving some ski boat lines, the inboard weight board/ski boat type product lines. And the other would be in the fishing boat arena, which we are investigating right now.

You're not going to see us go and take on competitive lines of products. And we pretty well have it covered in the family cruising type business from -- and even the high-end fishing segment from 18 feet all the way up to 200 feet. So nothing major, but if we do something it will be to fill in some of the white spaces that are some opportunities in fishing and maybe skiing.

The one final thing was, I know it's only been a few weeks so far in July, but any color -- have things been trending kind of in-line with what you feel how things have been, or more in-line with the guidance I guess or --?

Business is trending fairly well. The challenge we have is we don't have a ton of visibility beyond a couple of weeks.

The interesting thing is, and as we said on the call here, is that there is increasing fuel prices and that doesn't appear to be affecting us at all. And the same with rising interest rate environment. So, that is the good news. We are kind of immune to those issues that some people appear to be experiencing.

That's good, thanks very much. Good luck on the quarter guys.

Sean MacDaniel (ph), S&M Research (ph).

A couple of questions. Can you give us unit same-store sales growth for the quarter?

Sean, we don't disclose unit growth. And I can tell you as we said on the call that the same-store sales growth was primarily unit driven. Well over the majority of the growth was unit driven.

Okay, why don't we do it -- look at it this way. Maybe this will help me to understanding things a little better. Can you provide us with pro forma revenue for last year for the Ferretti lines? I would assume you have that. What did the lines you picked up from Ferretti do last year in revenues?

For all of last year? 30 million and it's going to do 60 million this year.

No, for the third quarter. I am trying to get an understanding of -- you put up a really strong comp. I am trying to make -- I want to understand to what extent that benefited from the (technical difficulty) pickup.

Here is what I can tell you. If you take out the, let's say our yacht business, Hatteras, Ferretti, the big boats, that probably drove our comps in the neighborhood of 25 to 30%. And I don't mean -- I need to be clear about -- that is a quarter or one-third of the growth. In other words, our comps would have been 25, 28, 27% without it.

What about -- can you exclude sort of the bigger Sea Rays as well?

You can't because you have got that both periods.

Were there any extraordinary deliveries or unusually large yachts delivered during the quarter?

No.

Next, just on the income statement. Do you break out your sales between financial services? And if not, can you give us a percentage of financial services?

We don't break it out. Let's see, it's probably in the neighborhood of -- hold on a minute. It's probably around 3% or 2.5% for the quarter (multiple speakers). It is about 3% for the quarter.

It runs about 3% of sales.

When you have a mix shift in larger boats it will actually drive that down.

Joe Havorka, Raymond James.

Actually just to clarify one of the answers from the previous caller. The new yacht business accounted for 25% to 30% of the comp growth, does that mean Ferretti and Meridian?

And I guess I should be clear there. I don't have a hard fast calculation of that, but I know roughly what the numbers are, and that is about right.

Could you give us the number for the amount of revenue in the quarter that came from stores not included in the comp base?

It's 5.5 million, and that is basically the Chesapeake acquisition that we made last June.

Did the non boats revenues service, F&I (ph) and all that stuff, did that keep pace with your revenue growth, or did the mix shift more towards boats in the quarter?

Yes, it did not keep pace. It was stronger in boat sales. Boat sales was the strongest segment we had. And that was another reason, as I mentioned on the call, that gave us margin pressure, because boats are the lowest gross margin product that we sell.

Last question here. I know you don't give comps by quarter, or I mean rather by month within the quarter. But can you give us an idea of what the trend was through April, May, June? Was it roughly equal comp growth, was it strengthening or weakening?

You know what, we said on the April call that we were having a pretty darn good April, if you guys remember. And we had a pretty darn good April, May and June. We had pretty good three months.

Tim Conder, AG Edwards.

Let me also offer my congratulations on excellent execution, gentlemen. A couple of things. Bill, in answer to a prior question you mentioned that you may look at some fishing boats, sort of maybe round out a little bit of the white space. Would it be concentrated in fresh or saltwater?

It would be a combination of both, Tim. We would look at it from both perspectives. But obviously a lot of the fishing boat market is saltwater, however we have expanded -- which is mostly fresh water -- with the Princecraft line, fishing and pontoon boats, which is mostly fresh water.

And how is that going on Princecraft specifically?

It is on target. And I could probably say it's even exceeding what we kind of thought it would do. It's a very premium product. We are making good margins on it. It's being very well accepted by the customers. It is a great product.

You tend to dance around the subject a little bit, but any way gentlemen to quantify -- and you mentioned that it had benefited your December quarter last year -- but any way to quantify or guesstimate, or however you want to phrase it, the positive impact this calendar year or fiscal year of the hurricanes last August and September?

Internally in our own management meetings we ask those same types of questions. It's just impossible to determine why somebody bought the boat. It's just from a business standpoint we understand and expect -- and being prudent it would appear that some business shifted into the December quarter. But I can't quantify it for any meaningful exactness for this call.

Would you expect, Mike, that any of that fell into the March or June quarters? And again, maybe this is just the only thing you can get out of this is a gut call here. But what would that be the on any guidance as to how much maybe left carryover from last year's hurricanes -- just to be had business for the industry?

You know what people often ask about the replacement boat business. And how many boats are being replaced and so forth. And we still think there are boats to be replaced because, like in Stuart and also Pensacola, there is infrastructure damage where if you have a house with a dock, you probably don't have your dock right now, which means you don't have a boat. So that is still to come.

I have seen estimates that are pretty large, but we are not subscribing to all of that yet. We have got to wait see it flow through. But in terms of us having any meaningful estimate that we can use for it, we don't have that.

Two other questions, if I may. Number one, what is your outlook for the industry as a whole, dollar and/or unit growth this year, and any guestimate on next year, number one. And I guess obviously that would be on a calendar year basis.

And then the second question would be, Bill, you're always in the market for acquisitions. How would you characterize your focus here versus maybe planting the flag a little bit more across the pond?

First of all on your -- the industry growth question, the numbers that are out there is the industry is going to be 3, 4, 5% growth. It's kind of what we are hearing. We're doing much better than that obviously, which speaks to the strategies.

As far as next year, I think there will be for the industry single digit growth again. I think it is kind of what is happening, and a lot of people getting caught in this. And some are adjusting, like we have, and that is customers are more and more about the experience and more about (indiscernible) an experience that you will do for me a lot of it versus as far as to support versus I doing it myself. It is becoming -- people with discretionary dollars are spending more for recreation. So that is good.

As far as acquisitions. At some time we may look to go across the pond, but there are so many opportunities here in the United States, we haven't seen the need to really fire that up in a big way. But obviously we have had some discussions, and we will continue to. And at the point in time that it makes good sense, we will do that. You know, our focus is premium products, the premium experience for the customers. And there is a huge opportunity still remaining for us to grow in the United States without having to get out of our current models.

Greg McKinley, Dougherty & Company.

Guys, I wonder if you could give us a little more color on your sales performance by product category, I guess? You said one-quarter of your comp came from more of your yacht line which would imply the fishing and sport performance boats performed just as strong. Can give us a sense for which product categories had the best performance for you?

Obviously our core product, which is in all of our stores, Greg, is SeaRay. I think you can interpret from our numbers that we sold a lot of SeaRays in the June quarter, and you would be correct.

And Meridian did very well.

All of the core brands really did well.

Boston Whaler is doing very well, especially in the larger product.

Okay you made a comment that you are seeing even better strength in the boats over 50 feet than you had expected. Can you give me a sense for how large is the typical boat you are selling now, and maybe a little context for where that has been in the past?

With the exception of the Ferretti Group what we are selling now is consistent with what we've been selling for the most part for seven years, or for six years. We took on Ferretti about 18 months ago. And right now the average retail price point on a Ferretti boat is about $2 million, which is obviously a lot bigger than the rest of our average, although it's not too much different than what Hatteras average retail price point is.

And Bertram is doing well.

And Bertram, which is part of the Ferretti Group, is in there. But if you look at our '04 numbers, our average unit selling price that we disclosed in our K did not significantly change from '03. And when this year wraps up, I doubt we will get a material change in our average unit selling price. It is probably going to go up, and it is not like -- it's not going to go up I don't think 30% or anything like that.

Okay, I'm wondering if you can help me better understand what the forward outlook would be around expense structure? Obviously you guys have generated tremendous topline growth, but you have invested to do that as well. Are there ways we can quantify some of those expenses in terms of helping you launch your new product extensions that may not be recurring as we look forward?

Not in a meaningful way. What we said on the call is to expect some modest leverage at the SG&A line. And that is before the stock option expensing. When you get that $0.10 hit the SG&A line, that will probably have a deteriorating effect. But before the stock option expensing we will have a modest leveraging at the SG&A line. And when I say modest, it is modest like 25 or 30 basis points.

(OPERATOR INSTRUCTIONS) Tom Lightcap (ph) at Value Holding (ph).

I was wondering if you could provide a little more color about the geographic sales growth, specifically if you could maybe peg a state for us that was the biggest gainer as far as sales?

We don't have it broken down by region right now. Tom, I think the best we can do is to say that the Midwest, which is Minnesota, Ohio, and New Jersey, had less growth than the overall Company, but they still had growth. And in some cases it was double-digit same-store sales growth.

But we had good growth in the rest of the areas.

Certainly.

Would you say -- that leaves pretty much I guess the West Texas and Florida. Can you pick out of those three, which one was superior in the region?

It depends on the way you look at it as far as dollar volume. Dollar volume obviously would be Florida, but we have had -- we made great strides in California, as an example.

Those regions, California, Texas, Georgia, North Carolina, and Florida all had very strong growth.

I was wondering also about the non-boat sales. Can you describe which of those sales come from what customer base? Is it the yacht buyers or the SeaRay buyers who spend more on F&I and maintenance or what have you?

All of them are buyers of those services. Certainly, service -- everyone needs their boats serviced. And we are very aggressive at trying to take care of our customers and provide a hassle free experience, whether they are buying 100 foot boat or an 18 foot boat. Parts and accessories is the same way.

Obviously, you almost tend to buy more stuff the bigger the boat you get, but even the small boats you want weight boards and tow ropes and life jackets and everything else. F&I is -- everyone needs their boat financed. I would tell you when you start getting into the larger product that is a pretty sophisticated person who is buying a couple of million dollar vessel. And they often, at least believe, they can finance the boat better themselves, which they are often wrong at. But it sometimes is a little more challenging to let us finance their boat, but we are successful sometimes.

One more thing about the acquisitions this quarter. Are those dealerships going to be leased or are they owned?

You mean the acquisitions that we may make?

No, the Baltimore, Destin, and (multiple speakers)

Those were stores that we leased. Those are all three leased stores we went into.

(OPERATOR INSTRUCTIONS) With no other questions holding, I would like to turn the conference back for any additional or closing remarks.

Well, we would like to thank everyone for participating in our third-quarter conference call this morning and the Web broadcast. Mike and I are available after this call to answer any questions you may have. And we really want to thank you for your continued support and belief in our great Company, MarineMax. Thank you.

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