MarineMax Inc (HZO) 2006 Q1 法說會逐字稿

Good day, everyone, and welcome to the Marine Max Incorporated, First Quarter Fiscal 2006 Earnings Results Conference Call. Today’s call is being recording. At this time, for opening remarks and introductions, I would like to turn the call over to Mr. Brad Cohen with Integrated Corporation Relations. Please go ahead.

Thank you very much, Operator. Good morning, everyone and thank you for joining this discussion of Marine Max’s fiscal 2006 first quarter results. I’m sure that you’ve all received a copy of the first quarter press release. But, if you have not, please call Linda Cameron at 727-531-1700 and she will fax or email one to you immediately. I would now like to introduce the management team at Marine Max, 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 will be for your questions. Mike?

Thank you, Brad. Good morning and welcome to Marine Max’s Fiscal 2006 First Quarter Earnings Conference Call, which is also being broadcast 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 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. Well, by now you’ve seen our results for our first quarter of 2006. As we mentioned in the earnings release, given the challenges that we faced this last quarter, we are all pleased with the results we delivered.

For the quarter, we posted diluted earnings per share of $0.04. Our results are higher than our earnings guidance, which we revised in October because of the uncertainty created by Hurricane Wilma. Included in our results, are direct costs associated with Hurricane Wilma of approximately $1.2 million on a pretax basis, which equates to $0.04 on the diluted earnings per share basis. Also included in the quarter, are stock based compensation costs of approximately $700,000 on a pretax basis, or $0.03 on the diluted earnings per share.

The quarter ended December of 2005 is the first quarter that we were required to expense stock options. Excluding the direct costs associated with the Hurricane and the stock options, our diluted earnings per share would have been about $0.11, which doesn’t consider the other business interruption effects from the Hurricane.

It is impossible to quantify all the inefficiencies caused by Hurricane Wilma. In some cases, our southern Florida stores were partially or completely non-operational for one to four weeks. And the entire southeast of the United States saw business interruptions due to the lack of insurance availability. We also incurred expenses and inefficiencies relating to the delay of the 2005 Fort Lauderdale International Boat Show, which historically is one of the largest shows in the country. With these delays and lack of productivity, the quarter would have been much better than what you have seen here.

It is a considerable feat that our team was able to overcome all of these hurdles and produce a quarter where our revenue is essentially equal to our record quarter last year. We applaud our team’s great effort and recognize the resiliency of our customers. It is important to also recall the unique circumstances that benefited us during the December quarter in 2004 and we’ve previously communicated this to you.

First, the four hurricanes that hit Florida during August and September of 2004 pushed sales into the December quarter. Second, same-store sales were bolstered by a national rebate program that Sea Ray launched last fall in response to the hurricanes. When factoring in these events, it drove sales last year to record levels; impressive that our teams this year are about equal to last year.

What’s the pipeline look like at General Motors? We heard the General Motors executive talk about some of the new big SUVs.

Something’s happened here. Operator? Operator?

Please go ahead, sir.

When factoring in these events that drove sales last year to record levels, impressive that our sales this year are about equal to last year, especially considering the adverse impact from Hurricane Wilma.

During the quarter, we made some progress on gross margins. This improvement represents the third straight December quarter of year-over-year margin expansion. We’re making headway but we’re not done yet. And margin improvements will continue to be an area of focus for us.

Large yachts, which typically carry a lower gross margin, were a larger percentage of our revenue this year than last year, making our gross margin expansion even more significant. While our higher margin service, parts and accessories and finance and insurance businesses did experience incremental growth, the gross margin expansion is primarily a reflection of the underlying prices we are getting for our products.

Admittedly, on area where we can continue to improve is our operating leverage. However, we will not risk reducing costs at the expense of the services we provide to our customers. Our entire business philosophy revolves around the customer experience. So, we feel it is important to continually invest in improving such elements as training our team, growing our store level management depth and enhancing our customer service. While these types of investments impact SG&A, we are always pursuing ways to improve execution and efficiency to reduce costs. However, this will take time and we will not risk diluting our core differating (ph) competencies that were grounded in service excellence.

Currently we are in the beginning of the busy boat show season, with many major industry boat shows between January and March. We already have several boat shows behind us. Traffic seems to have picked up and our sales at the shows are tracking ahead of last year. However, it is still early in the season and there are many more shows to go before we get too excited.

As we look ahead to the rest of the year, I want to remind you of the 23% same store sales growth that we achieved during fiscal 2005. Specifically, in the next three quarters, we are up against a combined com growth of over 24%.

Before turning the call over to Mike, let me comment on our recent acquisition of Port Arrowhead Group. This acquisition has formerly brought together two companies which have had a close relationship for a long time. As such, we share similar philosophies and approaches to the business. Port Arrowhead was one of the Nation’s largest independent boat dealers that successfully operated under the principle of offering quality products at fair prices, to deliver a pleasurable boat ownership experience to the customers. That sounds very similar to what we do. With five locations in Missouri and one in Oklahoma, this acquisition is another important step for our strategic expansion further diversifies our geographic presence and creates opportunities to better serve our customers.

I would now like to turn the call over to Mike to review our first quarter results in more detail and provide you with updated guidance for fiscal 2006. Mike?

Thank you, Bill. I would also like to express my thanks to our team for delivering another strong quarter, especially in light of the challenges brought on by Hurricane Wilma.

For the three months ended December 31st, 2005, revenue decreased 1.6% to $181 million, due to a modest 3.6% decline in same store sales. As Bill said, when you factor in the events that helped to drive last year’s December quarter and the adversity that we faced this December quarter, we are proud of this year’s results. We have been cautious about the first quarter because of the uncertainty surrounding Florida following Hurricane Wilma and the significant same-store sales comparisons that we are up against. Sales trends during the quarter turned out to be stronger than we anticipated in most of our regions. However, as you would expect, Florida was down.

Gross margins increased 52 basis points to 24.5%. This increase is primarily attributable to better industry conditions, which allowed us to generate better margins on our boat sales. This increase is significant, as we were able to produce it during a quarter where growth was driven by sales of larger boats, which typically carry lower margins.

Our selling, general and administrative expenses increased $3.3 million to $40.5 million, or 22% of total revenue, which is about 220 basis points higher than a year ago. Of the increase, approximately $700,000 is attributable to the expensing of stock options and approximately $1.2 million is attributable to expenses directly associated with Hurricane Wilma.

Interest expense was up 16% due to additional borrowings and a rising rate environment. Our tax rate was up modestly to 40.42%. The increase in our tax rate is due to certain amounts of the stock options expense charge being non-deductible for tax purposes.

Finally, net income for the first quarter was about $650,000, or $0.04 per diluted share, compared to net income of $2.8 million or $.17 per diluted share a year ago.

As Bill indicated, adding back the impact of the direct cost associated with Hurricane Wilma and the expensing of the stock options, results in pro forma diluted earnings per share of $0.11. Obviously, we had significant inefficiencies associated with Hurricane Wilma and the delay of the Fort Lauderdale Boat Show, which are not readily quantifiable but they certainly impacted our results.

Turning to our balance sheet, at quarter end we had $10.6 million in cash. But as I’ve said in the past, we utilize excess cash to reduce our inventory financing. So, we have substantial cash in the form of un-leveraged inventory. To reiterate, for most dealers inventory financing and inventory are usually about equal. Our financing is significantly less than our inventory, as we have the ability to pay down our line of credit, unlike most dealers. If our compare our balance sheet and focus on the inventory and inventory financing lines to the publicly traded auto groups, you will see what I mean.

Inventory increased to $388 million from $332 million at the end of December of last year. The 17% increase is primarily the result of us buying our orders earlier this year than last year. As such, our purchases in the coming quarters will be modestly lower, resulting in a more normal increase in inventory as the year progresses. Most of the purchases which are driving the dollar growth are (technical difficulty) products, which frankly represents the strongest segment in the industry. Given the positive state of the industry, we feel it is more important to have the inventory, than to lose a sale. To that end, we are well positioned as we head into the remainder of 2006. I will note that we have not heard of any concerns over inventory levels, industry wide.

Customer deposits are up dramatically. But as I’ve said many times, our deposits are lumpy and it’s hard to get a meaningful business trend read from that single data point, although it is nice that they are up.

Our balance sheet continues to strengthen, with capital exceeding $286 million. Allowing us to take advantage of expansion opportunities as they arise. Speaking of expansion, as Bill said, the Port Arrowhead acquisition is now closed. We paid $27.5 million for the operations, including two highway stores in a very large marina on Lake of the Ozarks in Missouri. Over half of the purchase price was consideration for the real estate. As we have stated in the acquisition press release, expect the acquisition will contribute $0.04 to $0.06 this year. The acquisition will bring additional seasonality to Marine Max. They are usually break-even to a loss in December, slightly profitable in March and have large profits in June and September. June is obviously their biggest quarter. The management team there runs a good business, but it has a lower operating margin than Marine Max. Its gross margins are about the same, but its SG&A is higher. As in past acquisitions, we find it takes about 24 months for the operating margin of an acquired company to approach ours.

Now, let me discuss our guidance for fiscal 2006, which includes the impact of the Port Arrowhead acquisition.

As we stated in the Port Arrowhead release, we raised our previous guidance by the estimated earnings that we expect the acquired stores will contribute this year, resulting in a revised EPS range for fiscal 2006 of $1.89 to $2.01 per diluted share. While our comments today about the industry and the Company are positive, it is still very early in the important boat show season, not to mention our very strong same-store sales comparisons that we are up against. Accordingly, we feel it is prudent to maintain the revised guidance as our 2006 outlook. This guidance excludes the impact from any potential future acquisitions, which we may complete.

The more significant assumptions that we have made to arrive at these estimates are as follows. Currently, we believe that our full year same-store sales growth will be in the low to mid-single digits and we expect much of that to be unit driven. This is on top of the 23% same-store sales growth we generated last year, which is a sign that we feel good about the marine industry. We are enthusiastic about our product line up for this year and the trends we are experiencing.

We expect modest gross margin improvements, but expect our SG&A to be about where it was last year to perhaps modestly higher, given the cost associated with the stock option expensing, the Hurricane costs which we talked about and the SG&A structure at Port Arrowhead. This will result in a very modest increase in our operating margin.

We expect our annual interest expense will track higher than 2005, due to the rising rate environment and the cash we invested to complete the Port Arrowhead transaction. It is likely that our interest will incrementally exceed 1% of revenue.

Lastly, our tax rate should be approximately 39.5%, as we noted on the last call. Additionally, as I just noted, our guidance is net of an estimated $0.10 per diluted share (technical difficulty) adopting the new stock option accounting requirements.

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

Thank you, Mike. Before we take questions, I just want to reiterate that (inaudible) particularly pleased by the results our team continues to deliver. The December quarter has not typically been one where we produced positive earnings per share. The past two years were particularly strong due to external factors. So, against those comps this quarter, it appeared weak. But it was actually a return to more typically and realistic patterns, even with the negative impact from Hurricane Wilma.

Above all, we keep demonstrating that we are really good at marketing the benefits of boating and taking care of our customers. We are able to distinguish ourselves and win these sales by providing our customers with the entire boating experience. We have an unparalleled network of dealerships that allow us to serve our customers and leverage relationships with our product partners. Our end-to-end offerings not only make sense for our customer to get all their needs filled in one place, but it also makes sense for our bottom line.

We are enthusiastic about our business prospects for fiscal 2006 and beyond and we continue to play out our customer centric strategy, that we have outlined to you in the past. Our strong balance sheet allows us to really make a sizeable acquisition of a top-notch dealership that expands our footprint in the important Midwest boating region. And further diversifies our revenue stream. The good news is that there are more acquisition opportunities out ahead of us and we will continue to evaluate and complete them when they make sense for Marine Max.

(Technical difficulty), we are focused on maximizing the value of our assets, the human capital and improving our efforts to reduce costs. We generate significant cash from operations and are always looking for the best ways to redeploy it to get the optimal return on our investment. We use our financial strength to expand our presence, our product line up and enhance our operation.

Our performance demonstrates, once again, the strength of our core strategies, along with the commitment and the ability of our team to execute. Time and again we have surprised even ourselves on how well we have performed versus the industry. We are now confident that we are unique in our ability to leverage our industry-leading position as conditions improve. We are confident that adhering to these core strategies, we will continue to gain market share and generate long-term shareholder value.

I’d now like to turn the call over to the Operator, who will open up the call for questions.

Thank you. [Caller Instructions]

Maybe that guy from General Motors has a question.

Your first question is from Ed Aaron with RBC Capital Markets.

Thanks. Good morning.

Hi, Ed.

Two questions. First, I was hoping to talk a little bit more about the pricing environment. Bill, you mentioned that you saw nice gains, just in terms of product pricing in the first quarter. Could you give us a sense of how much, on an apples-to-apples basis, just on average product-by-product, kind of where the margins are versus say a year ago?

Well, the margins have improved, Ed. And it should improve pretty well across all the segments of the boats and yachts that we sell. I think the main driver of that is we believe that the economy is getting better. So, people are more favorable as far looking to boating and looking to those expenditures. So, we’ve got a little less pressure. We also believe that inventory levels are health in the industry, so we don’t have that pressure on top of us. But, we continue to believe that it’s going to even get better because more and more we’re seeing that people really like the strategy that we have of customer service and selling this lifestyle of boating, not just the product.

Right. You’ve talked in the past about sort of a range that kind of varies throughout the cycle, just in terms of kind of product pricing. Where do you think you are versus sort of the trough?

Ed, if you go way back and I’ve not actually updated our chart for this quarter, but if you go back to where we were in ’99 and 2000, I’d say for the comparable product that we carried back then that we still carry today, we’re probably down about 100 basis points. I would add to what Bill said. You know, this national promotion that Sea Ray had last year, if you look specifically at the models that that promotion targeted and compare the gross margins on those boats this year to last, they’d be higher last year because there were rebates on them, obviously. But, all the other products and categories, the bigger boats which are the bigger (technical difficulty) of the quarter (technical difficulty), the margins were in good shape.

Great. You guys talked, I think, in the past about like a 200 basis points spread from peak to trough, so (inaudible) maybe margins, on average are up 150 basis points from the lows, but still up 100 from the highs?

That’s very close. If you go back to ’01, I think we were down I think we said 250, on an apples-to-apples basis. And some of that was us being aggressive and we know darn well if we get you in your first boat and we do what we’re supposed to do, which is to take care of you, you’re going to buy your second, third and fourth boat from us, so. And slowly we’ve been recovering that 250 point drop. But I, like I said, did not update it but I would say it’s got to be near 100 basis points down.

Ultimately, the stars aligned, everything should be higher than we were in 2000.

That’s right.

Right. But I guess, just kind of moving on to maybe talk a little bit about what Brunswick is saying this morning. I’m not sure if you had a chance to look at their release. But they’ve got some commentary that seems to be a little bit more cautious than yours, surrounding 2006. I think they’re kind of looking for the boating market to be flat and margins for them to be kind of flat as well. So, in the context of that, I mean it’s just that they’re your biggest supplier and they don’t really anticipate margin gains in 2006. So, I’m trying to figure out how you’re able to continue to kind of take the benefit of increased pricing when maybe there are some signs, at least from Brunswick’s perspective, that the pricing environment might be getting a little bit tougher, just based on industry conditions.

Well, Ed, if you look at last year for the industry, I mean the best estimates that we’re hearing out there is that the marine industry grew at about maybe 4, 5, 6% at the (inaudible). And if you look at Brunswick, on the high-end product group, the boat segment, you can see that they grew quite a bit more than that, into double digits. And if you look at our growth last year, for the fiscal year, you’ll see that we grew in the 20 plus percent. And so, it goes back to what we continually say and that is the premium dealers, including the one we just acquired, are substantially outperforming the rest of the industry. And it goes really back to what customers want today. It’s that basic. And you hear us talk about this all the time. But, it really is the biggest factor in this whole equation is the fact that what people want today is a lifestyle. They don’t want to buy a boat. They don’t want to buy just an engine. They don’t want to buy just a trailer. What they want to do is -- what does it do for them personally? What does it do for their family? And does it provide the stress relief? Is it the recreation they’re looking for and is it hassle free? And do I get the support through the get away trips and everything that we do? And we keep saying it, but it truly is (technical difficulty). And we see it and our market share exceeds the premium dealers’ average across the industry and is substantially better than the rest of the dealers. Our customer is more resilient and our customer also has more discretionary dollars and those dollars are still there and so they’re still spending. But what they want for those dollars is a positive recreation and a lifestyle that fits with the whole family and that’s where we come in. And that’s really what wins. And back to Lake of the Ozarks a little bit, that’s what they do. And it was talk in the Brunswick release about the Midwest being down. Well, I’ve got to tell you they weren’t down last year. Their performance was stellar and it’s just (technical difficulty) it’s what you do to the customer.

Right. Yeah, there’s no question that, I mean, even for the last 20 years, the boating market has been progressing toward premium price points and that you guys have been outperforming even that segment of the market. That being said, just as a final question, how does the cycle play into this? And to the extent that we’re starting to see some profiting in the small, low market which you don’t compete in and that certainly doesn’t impact you directly. But, there is some evidence out there that as small boats start to (technical difficulty) there is still going to be at some point in time a progression toward larger boats, following suit. Can you just comment on that and then I’ll turn it over? Thanks.

Well Ed, I think that there are some cases where entry-level, lower priced, smaller boats, the customers migrate into larger products. But normally, it’s the premium customer that’s buying smaller boats. It’s migrating into the more expensive products. And our small boat business has not softened and it’s a testimony to the people that we are selling the products to are more the premium customer. Not the (inaudible). And so, we’re not as concerned about it because we’re not really in that segment in a big way. And we’re just going to continue to focus on the premium product with the premium experience and the premium customer.

I would add in 2001, with the recession and we ended up being down 9.5% from a sales standpoint. But fully half of that, roughly, was because the month of September with 9/11 was totally lost. It would have only been about 4% down and the big boat sales and even the 30 footers and 40 footers stayed pretty healthy right through that. That’s the nice thing about having the line up of product that we have.

And the Fort Lauderdale Boat Show, we talked about it being delayed and there are different thoughts of what the attendance was. Our estimate is the attendance was less than 50%; maybe even as low as 25% of what it was the year before. The Fort Lauderdale Boat Show really did not have the visitors from the rest of the U.S. and were we impacted? Absolutely. We had to be impacted when attendance is down and we don’t get the business from the northern markets. But, our customers in southeast Florida were still there and they were buying. And we didn’t really see it being down a whole lot, even though a lot of them didn’t have power in their homes and maybe their dock had been blown away or whatever the case may be. And it’s just this lifestyle of boating, for people that have discretionary dollars especially, there’s nothing that gets in the way. And it may mess up the timing and it may slow things down, but they come back with a vengeance. So, that’s just a testimony that we believe our strategies are correct and they’re being validated.

Thanks, guys. Keep up the good work.

Thank you, Ed.

Moving on we’ll hear from BB&T’s Laura Richardson.

Hi, everybody.

Hi, Laura.

A couple miscellaneous questions for you guys. In following up on Ed’s questioning related to Brunswick, can you comment on how your first quarter sales were in the Brunswick products specifically?

I will tell you, as I kind of implied, the December quarter returned to a more normal December quarter, which is one where the larger boats have the strength. So, if you look at units, our units are down but they should be down. We did not have a --

Right. They didn’t’ do the rebates this year.

And where they were down was where we didn’t have a promotion. Everything else was about where you would expect it to be. I will also add, and no one’s asked this question but I’ll go ahead and answer it, if you take out Florida, we had positive same-store sales growth during the December quarter. Which is intuitive, Florida was down. But, I mean, I should tell you that the Brunswick product sales that we had in Minnesota and California, we’re doing fine.

Okay. And actually segwaying (ph) from what you just said, the boat shows in the first quarter, I mean, excuse me, the March quarter, how material are they to business and what’s your expectation this year, (inaudible) like Fort Lauderdale? I mean, I’m saying everything wrong this morning. Like Miami, and I’ll leave that question at that, I guess.

Well, they are very material, obviously and it’s not just the sales you make in the quarter. It’s the (inaudible) that you set for future sales, throughout the rest of the year. And it’s hard to predict what Fort Lauderdale was going to be, I mean, Miami is going to be in February. But, we’re having high hopes that some of the delay in business that occurred from Fort Lauderdale will move over to Miami. What we are seeing, as we said in the script, is that shows are up slightly. And we’re seeing -- you know it varies from areas of the country, we’re seeing very positive signs. But also seeing that it’s not true for everyone at the show. And back to the point that I made to Ed a little while ago, that it’s the difference of what you’re delivering to the customer that’s the most important aspect of it.

Right. Yeah, and I’ll just add to the industry intelligence, I guess. The weather in the northeast and the mid-Atlantic is so much better than last year. It sounds like in those regions, the shows are fairing much better than last year and the rest of the country (inaudible) probably better last year but maybe not as strong this year. Is that what you’re hearing?

From a weather standpoint, we’re actually hearing pretty good news everywhere.

Okay.

Yeah, we’re hearing pretty good news everywhere. Every time you call someone, they say it’s 60 degrees outside.

Almost everybody.

So much for those forecasts. And can you help us, like thinking about the March quarter comp and the next few quarters, what do you see the comp progression from the minus 4 in the December quarter being this year?

Normally, you’d think you’d have some upside with this quarter because we had 11% same-store sales growth, which is the smallest. We still aim to be positive same-store sales growth, but the potential for an increase is a little dampened because the infrastructure in Florida may not be rebuilt. But the northern customers, which are down here, the dock may not be done and they can’t get their boat and they’re going to go back up north in late March or early April. But, I think we’ll see some positive comp growth in March and obviously more in the June and the September quarter. Even for those, those are big comps. We feel pretty confident we can do that, to get to the low to mid-single digit for the year.

But there’s still a lot that remains for our last three quarters. That’s our most productive quarters.

Right. Understood. So, now factoring in, Mike, what you just said about the Florida infrastructure, should that affect what we hear coming out of the boat shows?

It could affect some of the Florida shows. It could. Keep in mind, we factored all that in when we brought out guidance down. That’s nothing new.

Right, right, right. You’re saying in the fall, when you did that?

Correct, in October. We are --

And that’s the reason we’re not pushing it up now.

Yeah.

Right.

Because we don’t have that crystal ball.

The industry and everybody is expecting a pretty strong Miami Boat Show, because of what happened at Fort Lauderdale.

Yeah.

Even with the infrastructure issue, we’re still expecting a pretty darn good Miami Boat Show.

And have you all said how material that show is to the March quarter, or all the shows combined in the first quarter?

All our shows combined are very material to the quarter.

But it’s the major portion of the March quarter.

Because we’re in --

Oh, really?

That’s basically between now and March, I don’t have the listing of shows, but we have been boat show after boat show after boat show after boat show, all very major shows across the country. Miami is the biggest and Miami would be the most material (technical difficulty). It’s definitely material for the quarter. It’s not necessarily all that material for the year. But for the quarter, it’s definitely material.

And how about all the shows, are they like over half of the quarter’s sales? Is it that material?

Probably well over half.

Well over half? Okay.

Yeah. It’s very significant, the shows are.

Okay. Well, thanks. Good luck with all shows.

Thank you, Laura.

[Caller Instructions] Next, we’ll hear from Greg McKinley with (inaudible) and Company.

Thank you. Good morning. I’m wondering if you guys could give us a little more color on your inventory positions. How you feel in terms of different sized boat inventories? Are you comfortable throughout your inventory line up or are there portions of it where you feel like you’ve got a little more than you’d like?

Greg, we feel comfortable with our inventory and we did a little early buying this year. And that can be very strategic, if we turn out having a year like we had last year, with growth as an example, which we’re not saying that, but it could happen. Then if you have that excess inventory, it gives you the ability to open the valve a little bit more and get additional inventory that you need. But in the same breath, if we see a downward trend, due to external factors, we can work our way through this inventory very easily because the mix is right. The products, we feel very good about. So, the products that we have ramped up on are good selling models and so therefore we feel very comfortable with it or we would not have taken them in advance.

Yeah. Okay. And then, regarding sort of where we are with recovery of Florida infrastructure to support boat sales, can you just give us a little up date on the stores that you experienced physical damage at? Where are those at, at this point in time? And then maybe more broadly, where do you see recovery of overall marinas? In other words, is this going to be something that it’s reasonably expected to get repaired and stabilize in the next couple or months? Or can it take a little longer?

Well Greg, as far as our stores were concerned, we had pretty significant damage in our Pompano store, but a testimony to the team, they too after the storm, our team was on the phone with the rest of our team across the country, ordering air conditioners and roofing suppliers and etcetera. And within a matter of, I believe, three of four weeks, we were pretty well back to normal at that store. And most of our other stores, even though we sustained a little damage, I mean, we’re back at normal. But the bigger issue is that there were a lot of businesses that were damaged. Even high-rise office buildings were (inaudible) out and people at home with their roofs and docks that were destroyed. There was not as much boat loss, in this hurricane as it could have been if it had been a much more severe hurricane or as an example, the four that we had in 2004, there was a lot of boat loss as a percentage for the markets that they hit, because they were more intense hurricanes.

Okay.

So, it’s really about getting the infrastructure back and docks and people’s businesses back to normal, more than any other single thing.

Okay. thank you.

Thank you, Greg.

Next we’ll hear from Chris Washington at McLaughlin.

Hey, guys. Congratulations again, on the same-store sales. You mentioned the comp of 17% (inaudible) sales from last quarter. But it was (inaudible) the year before that, that you’re also coming up against, isn’t it?

Thanks for remember that, Mike. I mean that last December quarter, if everybody remembers, we had actually anticipated a negative comp before the quarter started. And because of the Sea Ray promotion and the push in the hurricanes, we had double digit, which was very good. And which is why I think with the hurricane in the middle of this quarter, for us essentially to be flat, I think everybody should just step back and say that that’s a reflection of the strength of the industry, the segment, Marine Max, our team and hats off to our team for delivering results like that. Very strong, with increasing gross margins. It’s one thing if margins were down, but margins are up.

(Inaudible). I’ve been to a couple of west coast boat shows recently and I just wondered if you have any comment. I was actually surprised to see various folks offering 5.75% loans, 20 year -- let’s say 12 year loans with a 20 year amortization. Is that what you’re seeing at the major shows on the east coast, as well? I mean because that’s fantastic financing.

That’s normal.

That’s been there forever, Mike.

That’s normal.

Our customers have been able to get 15, 20 year financing on the larger products. And even the smaller products, 7 to 12 an d15 years is possible on boats less than $100,000. So, it is very -- and the good news is, as I’m sure you know, you can write the interest off as a second home, as long as you don’t have another second home.

Okay. Thanks.

Thank you, Mike.

Our next question will come from Justin Bathough (ph) with GH Capital.

Can you hear me?

I hear you.

Something wrong with our connection. I just wanted to make sure I understood you right when you mentioned the interest expense for the year. Did you say it will be up incrementally, 1% of revenue over what it was last year?

No. Thank you for allowing me to clarify that. It will be just over 1% of revenue.

Okay.

Last year it was like .97%, or so. It’s going to be like 1 point something, barely over 1%.

Okay. And then what was the Cap Ex during the quarter?

Cap Ex during the quarter, of all things (inaudible), I don’t have that in front of me. I’m going to make an educated guess that it’s a couple million dollars.

Okay. And do you happen to have cash flow from Ops for the quarter?

Our cash flow from Ops is essentially our net income plus depreciation and depreciation was about $2 million.

Okay. Thanks.

Thank you.

Our next question comes from Jeff Ellen with (inaudible) Asset Management.

-- store sales were positive, excluding the Florida markets. I was wondering if you could put a little more clarity on that number. And also, could you please remind us how much -- what percentage of sales are in Florida, normally?

On an annual basis, Florida accounts for a little over half of our business. During the December quarter, it’s generally more like 60, 65% of the year, because the rest of the regions slow down. We don’t traditionally breakdown regional same-store sales. I think given the importance of Florida and the hurricane, I can tell you that outside Florida, same-store sales were low double digits, positive. And in Florida, obviously it was negative.

Okay. Thank you.

We’ll take a follow up from Ed Aaron.

Thank you. A couple other follow-up questions. First, with regard to Florida, have your costs there returned to positive levels yet?

Ed, we don’t track mid-month comps. So, I could tell you through the December quarter they did not. And (inaudible) following the hurricane they were not.

Okay.

Yeah.

And then, this is going back to the inventory on the balance sheet. It looks like you made quite a bit of purchases in the December quarter. I would suspect that some of your competitors were not as much in a position to do so, just because their performance isn’t what yours is. Does that mean that you were able to get a better deal on those products, by buying them when you did, than you ordinarily would have been able to?

Well, yeah, we always get subsidized interest. So, we get free interest for six to nine months, depending on the manufacturer. I can feel pretty comfortable in telling you that we got, I’m sure, the right mix of products that we wanted to get, which is one of the reasons why we stepped up and bought the boats.

That was the big driver of doing it.

And that was the big driver of getting the hot models. I can’t comment on what the competitors’ positions were. I think because of the strength of our balance sheet, it’s always given that we can do things like this and make it make more sense. But in terms of meaningful purchase discounts and things like that, there’s nothing real meaningful to entice us to do it. There’s how we feel about the market place and then having a product and there are some benefits of buying it. But nothing really different than in years pass when we’ve done it also.

Okay. And then just one last quick follow up. There’s three quarters left in the year. The June quarter, do you expect (technical difficulty) positively that quarter? You just, I mean, your comparison there was just off the charts.

I will tell you we expect to (inaudible) of every single quarter. But we believe we can even do a better job than June. And to get to where we need to be, where we -- on an annual basis, we need to be slightly positive in the June quarter because it’s such a big quarter for us. Otherwise, it’s going to be hard to get there.

Thanks.

thank you, Ed.

Next we’ll hear from Tim Allen with Jefferies & Company.

Thanks. I just had a question. I think last fall Brunswick bought a plant to expand Hatteras production in 2006. I don’t know if some of that is related to like sport fishing line or convertibles. I’m just wondering if you could remind us of what the average price range of some of these Hatteras boats are? And if you can comment on your sports fishing business, as it is today or what trends might be in that?

They’re a very important business to it. The average selling price for the Hatteras for us is probably $2.5 million. And them buying a plant in order to increase production, the backlog is strong with Hatteras. And so we can use additional products, earlier. In addition, we can also use some smaller products. I think it’s very strategic on their part. But, we haven’t seen the results of that, as of yet, by the plant. They just got it.

I would say that move to buy the plant also speaks volumes to what Bill was saying earlier about the high end. I mean, you don’t go buy a plant if things aren’t going well.

Well, and that’s what was interesting because it was pretty much a week or so after they pre-announced an earnings or warned on an earnings, where they were cutting production volumes. And then they go and buy a plant, geared toward higher end demands. So, I just kind of wanted to follow up with that. But that’s all I had. Thank you.

Thank you.

Gentleman, I’ll turn things back over to you for any additional or closing remarks.

We’d like to thank everyone for participating in our first quarter conference call and web broadcast this morning. Mike and I are available after this call to answer any questions you may have. And we thank you for your continued support and belief in our great Company. Thank you.

That does (technical difficulty) the conference. Thank you for your participation and you may now disconnect at this time.