MarineMax Inc (HZO) 2008 Q1 法說會逐字稿

Good day, everyone, and welcome to the MarineMax, Incorporated first quarter fiscal 2008 earnings conference call. Today's conference is being recorded. At this time for opening remarks and introductions, I would now like to turn the call over to Mr. Brad Cohen. Please go ahead, sir.

Thank you, operator. Good morning, everyone, and thank you for joining this discussion of MarineMax's 2008 fiscal first quarter. I'm sure that you've all received a copy of the press release that went out this morning, 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 of MarineMax, Mr. Bill McGill, Chairman, President, and CEO, and Mike McLamb, CFO of the Company. Management will make some comments and then will be available for your questions. Mike?

Thank you, Brad. Good morning, everyone, and thank you for joining this call. 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 & Exchange Commission.

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

Thank you, Mike, and good morning, everyone. Today we reported our December quarter results which reflected a net loss of $0.35 per share and was in line with our preannouncement on January 16. I want to thank all of our team members for your extra efforts and their commitment to our customers during a very challenging quarter.

Despite the difficult industry environment, we anticipate that our long track record of market share gains has continued. Available boat registration data through the month of December suggests that industry units declined by approximately 25% at retail for the segments and regions in which we operate. Having said that, the data that we have is preliminary and it's also limited to a select number of states and subject to adjustments as the data matures. Regardless, it is the largest quarterly decline the data has shown for quite a while, and unfortunately, we experienced a similar decline in units in the December quarter.

The markets that we operate in seem to be among the worst hit in the industry, particularly Florida and California, but also the Northeast reported sizeable declines. Through the January boat shows, we're experiencing similar declines in units. With these retail trends, we are readdressing our expense structure and our thoughts on future purchases.

We recently completed a reduction in workforce whereby we reduced our team members by approximately 10%. While this was a difficult decision, we believe that it was necessary to tighten our belts in this environment and become more efficient and effective by lowering our SG&A. We have also reached out to most of our manufacturing partners and are in discussions to further reduce purchases as the year progresses, assuming conditions do not improve.

While all this sounds ugly, and it is, it's important to note that the increased softness has hit us in the slower winter months. We believe that with the Fed rate cuts and the coming of spring and summer boating season, many buyers who have delayed their decision to purchase a boat because of the gloomy headlines will come back and purchase, but we cannot be certain of how many or when. Our data of over 1,000 MarineMax getaway events over the past 12 months shows that participation in boating is at an all-time high. Our customers have not lessened their passion for boating with their families.

While retail conditions in the marine industry have deteriorated and we are disappointed to report a quarter of weak sales performance and increased losses, our 50-foot-plus yacht business performed relatively well during the quarter. This is generally consistent with what we have experienced over the past 12 to 18 months. The larger boats, while perhaps softer than we would like, performed better than our smaller products. Smaller boats, which make up the majority of the unit sales, were indeed slower and led to the decline in revenue.

As we have said, it's hard to pinpoint exactly what has caused the weakness in the industry, but the widely reported real estate market and general consumer uncertainty has clearly impacted our consumers' appetite, although not necessarily their ability to purchase a boat. As a reminder, seasonally Florida has been a bigger percentage of our sales in the winter, particularly during the December quarter. The softness in Florida, which historically represents over 60% of our sales in this first quarter, had an amplified impact on the results.

We obviously believe that Florida will continue to be at a strong market for us in the long term given its substantial boating community, but it may continue to receive pressure in the near term given the housing market turmoil in the state.

The current environment has certainly impeded our ability to grow our organic revenue. We made improvements, however, in managing these items that we can control in order to improve our current financial position and best prepare us when the market turns, in particular, our improvement in both dollars spent on SG&A and inventory in the December quarter versus a year ago.

The December quarter marked the first time since 2002 that we produced a year-over-year drop in our inventory levels on both a unit and a dollar basis. As we progress through fiscal 2008, we anticipate realizing additional year-over-year reductions in inventory levels, subject to the timing of boat deliveries and the sales environment.

Although we are uncertain when the industry will turn, we are working hard to strengthen our industry leading position in terms of market share and customer service and we will emerge from this period in an even more formidable position when the market recovers. Historically, during difficult times expansion has come at more favorable terms.

We anticipate that opportunities for us to grow through new brand expansions and potential acquisitions will continue to surface as we work through this time period. It is important that we position ourselves for those future opportunities and keep our focus on the long term.

I'll now ask Mike to provide more detailed comments on the quarter. Mike?

Thank you, Bill, and good morning again, everyone. As you saw on the press release, our first quarter revenue decreased to $215 million from $234 million last year. While we saw an increase in our yacht sales greater than 50 feet in the quarter, given the construction lead time, a portion of this business was contracted in the prior year. Combined with weaker than expected sales of our core products and the difficult operating environment, our same-store sales fell by approximately 9%. Keep in mind that the December quarter last year had the highest same-store sales growth, at 14%, of any quarter last year.

Gross margin as a percentage of revenue declined approximately 170 basis points to 22.4%. The decline in gross margins was primarily attributable to the shift in product mix towards larger yacht sales, which traditionally carry a lower margin than the rest of our products. The gross margin on our core products was only down slightly versus the prior year, which is noteworthy in this difficult environment.

We were successful in bringing our selling, general, and administrative expenses down by over 5%, or $3 million, in the first quarter, but with the decline in revenue, our SG&A as a percentage of revenue rose 70 basis points to 24.7%. The decrease in dollars of SG&A expenses is due to lower personnel costs, including reductions in commissions and bonuses, as well as lower inventory maintenance and marketing costs.

Interest expense fell over 10% to $5.9 million as a result of lower borrowings on our inventory financing facility and mortgages, coupled with the more favorable interest rate environment. Unfortunately, we did not participate fully in the Fed rate reductions due to the timing of the Fed cuts and the date our interest resets, as well as the fact that we have a LIBOR-based facility. As you are likely aware, LIBOR was out of balance with prime for most of the last four months. We expect interest expenses will decrease further with the recent rate cuts and the fact that LIBOR has essentially dropped back in line with its prime relationship, not to mention less borrowings due to reduced purchases.

Our tax benefit in the quarter was $4.5 million, which equated to an approximate 41% tax rate for the quarter, which is consistent with the prior year. Finally, our loss for the first quarter was $6.4 million or $0.35 per diluted share, compared to a loss of $3.8 million or $0.21 per diluted share for the comparable quarter last year.

Turning to our balance sheet, at quarter end we had approximately $23 million in cash compared to $13 million a year ago. Additionally, we have substantial cash in the form of unleveraged inventory as we utilized excess cash to reduce our inventory financing.

We ended the quarter with $533 million in inventory, which was down $12.4 million or approximately 2% for the comparable quarter last year. As we said on our September quarter call, we entered this model year, which began on July 1, buying 20% less in units and 15% less in dollars. The drop in inventory at December 31 is essentially attributable to our same-store sales decline being less than our dollar reduction in purchases.

We have made adjustments which have further lowered our purchases since we last updated you and are in current discussions with each of our manufacturers to reduce purchases even further than we had originally anticipated. We anticipate realizing additional year-over-year reductions in inventory levels as we progress throughout fiscal 2008. However, due to the lack of visibility, the timing and magnitude of the reductions is difficult to predict with accuracy.

Customer deposits increased approximately 19% year-over-year, but as we have said repeatedly in the past, our deposits are lumpy and not necessarily reflective of current business trends. Overall, our balance sheet has gotten stronger year-over-year with book equity exceeding $369 million. Our book value per share now stands at about $20 before giving any credit to the appreciation that has occurred over the years in our real estate, which we have previously estimated at $60 million above book value. I will also note that our current ratio improved over the year ago quarter, as did our ratio of total liabilities to tangible net worth.

Before I turn the call back to Bill, I'd like to remind you that we cannot provide answers to questions regarding forward-looking estimates or specific figures since we have suspended our guidance due to the lack of visibility. So please take this into account when you're asking your questions. Bill?

Thank you, Mike. Despite the uncertainty surrounding the marine retail environment for the remainder of 2008, I am confident that the future of MarineMax is very bright. We have the leading customer-centric business model in the industry and a formidable balance sheet that will benefit us when the industry recovers and we emerge with an even stronger competitive position.

As I stated earlier, the most encouraging news is that, even with the softness in the retail environment, our customers are boating more and are as passionate as ever for the MarineMax boating lifestyle. At the end of the day, our team and customers' passion for an escape and a family bonding recreation will endure the cyclical nature of our marine industry.

In the 34 years that I've been in the business and I've seen the gas shortage, multiple recessions, the luxury tax, high interest rates, the presidential elections, 9/11, high employment, high fuel prices, and stock market swings, the housing and banking challenge is a new one, but we believe we will recover to an even greater peak in earnings as we continue to educate, service, and show our customers how to enjoy the lifestyle of boating as part of the MarineMax family.

We would now like to open the call up for questions. Operator?

Thank you. (OPERATOR INSTRUCTIONS.)

And we'll take our first question from Ed Aaron with RBC Capital Markets.

Thanks. Good morning, guys.

Good morning, Ed.

Good morning, Ed.

A few questions for you and I'll tread lightly because I know you're limited on what you can say about anything guidance related, but in terms of the inventory and the right level of inventory, can you kind of give us some sense of the inventory turns that you're going to be managing the business to going forward?

Yeah, our turns, Ed, have been in the low two's of late. I say of late, the last couple of years, 2.3 times or so. You know, we would like to maintain that level of inventory turn or --

Or make it better.

-- or make it better.

But you can't, Ed, as you know, you can't adjust it overnight, especially in a decreasing sales environment, which we experienced during the quarter.

Okay. Have you already made additional changes to your purchases or is that something that you're just talking about and evaluating?

I said in the prepared remarks that we've made some adjustments since we last updated you. We last updated you -- we said 20% down in units, 15% down in dollars. We are now modestly greater than that in terms of dollars. It's not a significant amount greater yet. We're in discussions with each of our manufacturing partners right now. We're looking at current trends by model, by unit, by type and trying to make sure with our manufacturing partners that we've got the right levels of inventory for the marketplace.

I think the important thing, Ed, and this is really for everybody on the call, you're going to hear some pretty big unit declines. We've put out there 25% in the markets that we're talking about. The dollar declines are less than that, and I think what's key is to track our same-store sales, which again, we don't have a whole lot of visibility of what that's going to be for the next couple of quarters here, but, you know, with the 9% decline in same-stores sales and the 15% reduction in purchases, you get a reduction in inventory. And so, the dollars are what's going to drive the reduction a lot more than units.

And we're still looking for a little better visibility as if this first quarter was really an indicator of the way things are going to be going forward for the selling season. And we should get a little greater visibility when we finish a couple of major shows, Atlantic City that just started, Dallas that'll be finishing up this weekend, and as you know, Miami begins next week, which is a very major show. So, you know, based upon that visibility is some of the actions that we'll take with -- concerning, you know, orders.

How do you think about -- if you're going to make further changes, how do you think about balancing whether or not to do it for the '08 model year or just wait until the model year changeover and maybe order more conservatively for the '09 stuff?

Well, I think that it's prudent to make the adjustments earlier rather than later, you know, being that no one seems to have a crystal ball as to when things are going to get better in the short term or even the long term. So if we need to make adjustments now based upon what we're seeing that other adjustments will do it -- but to try to do it next year, the problem with that is the carryover will be too great of 2008 models into '09, which we do not want to repeat.

Yep, understandable. And then last one, maybe for you, Mike, the -- just the finance environment. Any changes there in terms of the approval rates for one, and then secondly the extent to which the financing rates have come down?

Yeah, Ed. We -- just -- in our environment, our industry, we've never had sub prime lenders. I think we said that on the last call. We didn't have people buying deep from a paper perspective. Most of the people who are getting financing are very good credit, so we haven't seen really changes in the relationships that the banks are having with our customers at all from what they're looking for. From a rate perspective, rates have come in about 75 basis points, including some recent reductions since last summer. Hopefully, with maybe some additional Fed action, we'll see some additional rate cuts, as well.

But, you know, the consumer is -- our guess is to what's happening a lot right now is it's not the inability of our consumers to really make the purchase. It's -- they're sitting there saying, "Gee, I wonder if it's going to get worse. I wonder if I should wait and, you know, what's really the urgency of doing it this time of year because, you know, there is some inventory. We don't have to do it as quickly as maybe we did in prior years to ensure that we'll get delivery of the boat." But, you know, we're making sales because the passion for boating really hasn't changed. But we believe that there's some customers sitting on the sideline right now and it's not financing that's keeping them from doing it.

I think I would add, just given all the headlines the last couple of months, and I may have said this on a previous call, but, you know, in the marine industry there's only been one securitization of marine retail loans. That was back in 1997, so all of the banks are holding this paper. They like the paper, so I don't think some of the liquidity issues that you see in some other fronts -- at least we're not expecting that now nor are we experiencing that now.

And we're not seeing the loss ratios change, to that point.

Okay. Thanks, guys. Good luck this spring.

Thank you.

Thank you, Ed.

Our next question comes from Hakan Ipekci with Merrill Lynch.

One question. You mentioned the impact of mix on the margins and you said the yachts [order] happen in advance. As you look into the next quarter or so, would you expect a shift in mix or kind of in line with what you saw this quarter?

I tell you, it's so hard, Hakan, to give any comfort into what the mix is going to be for the March quarter given the lack of visibility. My comment that I was trying to make is that some of the business that we closed on in the March quarter was -- excuse me, in the December quarter, was contracted, you know, a year ago, which you could argue would be maybe a better time period a year ago. Who knows? But then at the same time I do point to our customer deposits, which we don't put a whole lot of credibility in, but they're up, as well, so that's somewhat encouraging. But, specifically on the mix, you know, we did indicate that units were down a lot. Most of that's going to be small boats, and I think to Bill's point, it's probably reasonable to assume that the smaller boat buyer may be sitting on the fence with a little more tight grip on the fence than maybe a larger boat buyer.

Okay. And the share count, why is there a drop in the share count in the first quarter?

Because there's no dilution from options. When you have a loss, you can't take the dilution in to lower your loss per share.

Okay. And finally, can you comment on the competitive environment in general, again, in light of the weakness in the market? Have you seen a lot of exits recently given that, you know, we're in the slower period where activity is somewhat limited? Does that change relative to last summer?

I'm not sure I understand the question --

Are you talking about other dealers?

Other dealers, you know, there have been -- other dealers, have there been any dealers that have exited the industry recently?

We're seeing some -- a few that are -- we're seeing some fallout of some dealers, but not at a high level right now. I think perhaps a lot of them are waiting to see what spring brings.

I see. (Inaudible) said that, you know, you would expect more drops in the rest of the slower period like that we're in currently. What do you think is allowing them to stay in or has allowed them to stay in so long into this weakness?

Don't misunderstand. There are dealers that have gone out of business --

Yeah.

-- in the last six months, that are going out of business, you know, every week and every day, unfortunately, with what's going on right now. I think the bigger, better capitalized dealers are through their capital, while it may not be anything compared to ours, but through their capital are getting through the winter time right now.

Okay. Great. Thank you.

Thank you, Hakan.

Thank you, Hakan.

Our next question comes from Steven Rees with J.P. Morgan.

Thank you. I just wanted to ask about the SG&A dollar decline. First time we've seen that in many years and just trying to gauge how much more opportunity you have to further reduce SG&A. I would assume that the headcount reductions didn't help the first quarter. Is that correct in kind of how you were thinking about SG&A going forward?

We had a -- you know, we had some reduction of -- in terms of our team members that is reflected in the December quarter, as it was in the September quarter, but the reduction in force that Bill talked about did not take place until mid-to-late January. And so we're trying to be proactive to ensure our expense structure is in line with what's happening at retail. But also we don't want to reduce the focus on taking care of our customers and then we've got to be very careful dialing -- marketing up and down to make sure that we don't leave something on the table from a unit sales perspective if we cut marketing down too much. So, it's kind of a balance as we go through these next several quarters of the year, depending on what we're seeing at retail.

Okay. But, is there anything that you see on the promotional horizon that would cause SG&A to be up year-over-year in dollars this year?

No. We believe that probably, Steven, that it would -- we've reduced some of the expenses relative to boat shows in order to say, you know, they're not as effective as they have been. You know, sales are down at the boat shows and so we're trying to do a better job but spend a little -- spend less in doing it. And we may take some of that money and put it towards some marketing efforts to bring people into boating and bring them into our family going forward, but we do not anticipate that it'll go up.

Okay. Great. And then, finally, one of the key parts of the story has been attracting, you know, the first-time buyer and then allowing them to trade up over time. Can you talk about how this dynamic has changed, if at all, in the current environment, perhaps what percentage of buyers you did see in the first quarter were previous MarineMax customers versus the first quarter last year?

I think the people that we got into the business, or into our family, last year through all the strong unit growth, they are sitting on the fence just like someone who's not getting into the business right now. So I think the trade-up cycle is taking longer than it used to, but I think the planting of those seeds is going to pay dividends when there's some stability or some positive news out there where -- then you get those people that all come back in and trade, and you get the people who are currently not buying come back in and buy, and you get the unit growth picking up and the same-store sales growth picking up.

We haven't seen a lessening of new customers for MarineMax like at the boat shows. I mean, I think our numbers are pretty close to the same that, you know, the new business that we're experiencing, versus the trade-in business that we experience at boat shows, is holding.

Okay. Great.

So, it's the overall, you know, just general concerns in consumer confidence that's out there today that's impacting both segments.

Okay. Great. Thank you very much.

Thanks, Steve.

Thank you.

Our next question comes from Laura Richardson with BB&T.

Good morning, everybody.

Good morning, Laura.

Good morning.

My questions have been at least addressed at a higher level already, so I just want to probe on a couple more things. And one is from the headcount reductions, what do you think the annual savings will be and is there going to be any cost for that for all the severance and that kind of stuff?

Ultimately, I don't want to put a number out there of what the savings could be because of what -- the lack of visibility and ultimately determining -- is the reduction permanent --

Right.

-- does it get greater, does it get less if we see an uptick in business,? So it's kind of hard to accurately throw a number out there about what the savings are. I think it is fair to say it represents about 10% of our team members. We did have separation packages that we offered to most of the -- to the affected team members, which is obviously going to be reflecting in our March quarter. And that also complicates exactly what the saving's going to be, but I think it's a -- I think it is the largest individual workforce reduction that we've ever done in the Company.

Yeah, there's a lot of that happening in retail these days.

Yeah, you know, unfortunately, as Bill said, it's difficult to do. It's just with the volume dropping, it's the right thing that has to be done, unfortunately. And, you know, we're going to keep looking at other expense line items in, you know, a very detailed level and just try to make sure that we have -- that we can improve our expense structure, at least keep the expenses in line with what the marketplace is dictating.

Okay.

Laura, we really put a focus on trying to make the cuts to, you know, through becoming more efficient and effective in what we do without taking away from the customers' experience. And so we do not believe any of these cuts will lessen anything we're going to be doing for our customers, which we do not want to do because, obviously, that would be very bad because, you know, that's what's keeping people in boating is this whole --

Right.

-- whole recreation and the enjoyment.

Right. Exactly. Okay, and then the other thing I just wanted to follow up on and I think Bill, you've commented a lot about that, especially in the Q&A, but the boat buyer's psychology. It sounds like you're talking about well, if there's uncertainty and people are postponing making a decision. Does that mean -- I guess two little follow-ups on that. Number one, does that mean let's say they come to the store three or four times before they decide, or they just don't come to the store? And when you can probe them on what's holding them back, is it job uncertainty or, you know, expecting a better price somewhere down the road? Or -- it doesn't sound like inability to get financing would be an issue. Any idea like the importance of these macro factors to the boat buyer?

I think it's just, Laura, it's just general uncertainty. You know, we've said for many, many years that, you know, is there something you can put your finger on that impacts our customer the most, whether it's the stock market or interest rates or fuel prices or the housing market now or whatever. And at the end of the day, the thing that gets them slowing down their purchase decision -- they don't lose their passion for boating. And, you know, we've demonstrated that with the magnitude of the getaway events we're doing, and some of them were sold out. I mean, we -- they were full and we had customers wanting to get on some of these trips. But it's more, "Geez, I need to wait and see. I hear all this bad news." And I mean, you know, I think we all forget what a wonderful country we live in and how many wonderful things we have and how great things really are, but, you know, all we hear on the news is how horrible things are and how much worse they can get and you only hear the bad news and --

Right. It's depressing.

-- if you hear that, it gets you saying, "Well, geez, do I want to be the only schmuck out there that's spending my money when maybe things really are that bad?" But, yet, you know, in a lot of cases they aren't that bad for our customers.

Yeah.

Now, there are customers that, you know, are impacted with the fuel prices and with what's going on with the equity on their balance sheets that are saying, "Geez, maybe I just can't afford it right now." And, so, you know, but that's more the smaller boats, the entry level boats, that type of thing. But in the 34 years that I've been in the business, I've seen all these different cycles and at the end of the day the passion for boating has not changed. So it's not people abandoning our recreation. It's, "Geez, I've got to wait and see." --

Right.

And some of it is to your point of, you know, "I wonder if there's going to be a better deal down the road. I wonder if, you know, interest rates are going to come down a little more," because in a declining interest rate market, that gets in the customer's head. "If I wait a little bit longer maybe I can get it for less." But that'll generate some refinancing opportunities for us also for some of our customers.

Yeah.

Laura, just on that point about the psychology of a boat buyer, and Bill's got far more years of doing this and gone through different cycles, but the one cycle I went through, which was 9/11, you know, MarineMax basically didn't sell a boat from September 12 until, let's say, mid-to-late October. And if you remember that time period with the anthrax letters being sent --

Right.

-- and we started the war in the Middle East and so forth --

Right.

-- the news got much better in the second half of October. Well, in the December quarter, we had an 18% increase in same-store sales growth. All these people that were on the fence jumped back into boating when they felt better about things.

Right.

Now, at later dates, the news got worse and sales slowed again, but I think so much of it, you know, when you pick up the Tampa Tribune or the St. Pete Times or the Miami Herald or, you know, pick another city and look at the headlines --

Yeah.

-- it's not real good right now.

Yeah. No, I read the news. I'm totally with you on how negative it is. Just the last question on that. So, when the person is on the fence are they not coming to the boat show, not coming to your showrooms? Or are they coming and wishing and dreaming and just not pulling the trigger?

A lot of them are still coming, wishing, and dreaming, and when you talk to them you don't even hear their concerns. They talk about the next boat and what they need to do to get into that boat and their family getting excited about it. But yet, you know, we spoke of the fallout at some of the boat shows. You know, Lauderdale was over 50% fallout is the way it looks right now, and that doesn't mean that the people went away. It means they delayed their purchase decision. In most cases, that's what happened. And so it's -- they get home and they turn on the boob tube and listen to the -- or read the newspaper, or whatever the case may be, and they say, "Maybe I just need to wait right now."

Yeah. Okay. Thanks. Great. Didn't mean to cut you off, Bill.

That's okay.

Okay. Thanks. Good luck, guys.

Thank you, Laura.

Thank you, Laura.

Our next question comes from John Harloe with Barrow and Hanley.

I've got a couple questions, but first, would you repeat what you just said about the Fort Lauderdale boat show? Fort Lauderdale or Miami boat show, I don't know --

I said the Fort Lauderdale boat show, all the sales that we made at the show, about 50% of them had fallen out. They delayed their decision. They haven't taken delivery in some cases, they didn't -

They didn't close. They said that we'll buy it and then it didn't close?

That's correct. It did not close.

They contracted and then backed out of the contract, if you will.

What was that close ratio last year?

Same thing.

Yeah, we --

Okay. I remember --

-- last year, as well.

-- you were talking about this the last quarter, I just --

Yeah, we were hoping it was going to be better this year and it's about the same as it was last year.

I wanted to talk about your accounts receivables turn. It really looks skewed for some reason. Why?

Our receivables are, you know, almost entirely contracts in transit from banks on boat deals and it turns pretty rapidly. I don't have it detailed what was in front of me right at the end of 12/31. There could be some manufacturer payments in there that were due, but that stuff turns pretty quickly.

Okay. Would you -- can you talk about what the severance charges or restructuring charges are going to be next quarter now?

We're not going to have any separate severance or restructuring charges that we're going to talk about in the quarter.

You're not going to disclose what that is when you report your March quarter?

It's not material to the SG&A or to the Company.

Okay. Is there a way you can give us sort of an indication about what the average markdowns are, like obviously by some footage category, maybe 30 and less and 30 -- between 30 and 40 -- from list price what the average markdowns have been now versus a year ago?

I can tell you the way that we go to market from a pricing perspective is most of the products that we have have what's called a 40% MSRP margin, or a 30% MSRP margin, and then the price that we display in the back of the boats usually has someplace between a 5 and a 15% discount. That pricing philosophy has not changed in the ten years that we've been around. The negotiated price and the transaction prices change during time periods like this and that's reflected in gross margins, which get compressed. But our go-to-market pricing has not changed at all.

Okay. So, what you show at a boat show is still the same discount as a year ago and a year before that?

With some exceptions, John, with products that we feel like we need to put an additional discount on, which --

(Inaudible).

-- which we've done in historical years, or that the manufacturers have assisted us and we may pass that right on down into the pricing.

Okay. Your depreciation and amortization for the quarter?

It's $2.5 million roughly, it runs each quarter.

Okay. Thank you.

Thank you, John.

Thank you.

And our next question comes from Dustin Waide with WEDGE Capital Management.

Can you please talk to me about the fundamentals of the used boat market? Are the buyers there that otherwise might've wanted a new boat maybe looking at a used boat? What does the supply look like? Are repossessions up and affecting that?

The last question first. We don't see repossessions being up. The banks are about in the same position they've been in as far as the loan qualities are concerned, or defaults, or whatever. The used boat business really hasn't changed a whole lot and I think it speaks to what we've said many times before over the -- all the years I've been in the business almost, and that is people that want used, want used. People that want new are not going to buy used.

Okay.

And so, we haven't seen a spike up in our used boat business during this time. It's pretty well held its own, but the buyers are almost different buyers.

Okay. Thank you.

Thank you.

Thank you.

And our next question comes from Anthony Lebiedzinski with Sidoti & Company.

Yes, good morning. I was hoping that you guys could quantify the same-store sales by region?

I actually don't have same-store sales by region in front of me, Anthony. I can tell you, as I think the prepared remarks said, I mean, Florida would be softest, California would be second, Northeast would be third. I don't believe -- we may have had some -- we have regions in districts and we may have had some pockets where we saw actually some increases in the quarter, but for the most part, every place was down with Florida being the worst.

And also, can you guys quantify how your sales are tracking this quarter to date?

I think as the -- what we tried to say was that the December quarter was down 25% in units and we're seeing a similar decline at boat shows, which is really through the month of January.

Which is most of the business during this time of year.

Right.

And also in response to one of the earlier questions, you said that some of the business that you booked in the December quarter you had already signed contracts about a year ago. Can you quantify how much of that was?

I don't have that in front of me, Anthony. It wasn't -- I can say that it wasn't the driver of the quarter by any means. I just think it's prudent to say that in our business, when you're selling larger products in a smaller quarter like the December quarter, it's important, I think, to tell investors and to tell you guys that, you know, some of that business was contracted when times were perhaps more robust. That's why that comment was in our prepared remarks.

Okay. Thanks.

Thank you, Anthony.

Thank you, Anthony.

And we'll take our next question from Greg McKinley with Dougherty & Company.

Yes, thank you. Regarding your headcount reduction, can you give us a sense for how much of that occurred at retail versus corporate or other parts of the organization? How much of it actually impacts how the Company appears to the customer?

Well, purely, if you look at our number of team members, we have 2,200 team members which are basically all store focused. We have a, you know, our corporate and admin offices here, but they're by far the minority of how our headcount breaks down and we did have a good percentage reduction here, which actually would be greater than the overall reduction of the Company. So, we reduced from a percentage perspective greater here than we did in our stores. I don't know if that answers your question or not, Greg.

Yeah. Yeah, it does. Thank you.

Yep.

And it appears we have no further questions in the queue at this time. I would like to turn the conference back over to your presenters for any additional or closing remarks.

Thank you, everyone, for your continued support as we navigate through this storm. And I also want to again thank all of our team members for their hard work, for their focus, and their passion for our customers because at the end of the day that's what it's all about. Thank you.

That does conclude today's conference call. You may now disconnect.