MarineMax Inc (HZO) 2010 Q3 法說會逐字稿

Good day, everyone and welcome to the MarineMax Incorporated's Third Quarter Fiscal 2010 Earnings Conference Call. Today's call is being recorded. At this time, for opening remarks and introductions, I would like to turn the conference over to Ms. Kate Messmer of ICR. Please go ahead, ma'am.

Thank you, Operator. Good morning everyone and thank you for joining this discussion of MarineMax's 2010 fiscal third-quarter results. 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 e-mail one to you.

I would now like to introduce the management team of MarineMax, 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, Kate. Good morning everyone and thank you for joining this call. 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.

These statements involve 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 capitalize on opportunities or grow its market share, 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 and good morning everyone. I'm pleased to report that MarineMax was profitable for the quarter, albeit a slight profit. Given the continued soft economy and the weak consumer confidence, I am proud of our team for delivering profits on such low volumes.

As a result of the progress we've made over the past year and a half against our key initiatives, we were able to achieve profitability on a lower level of revenue than we have ever experienced in our history. Our focus over the past two years has been centered on three main areas. First, lowering our inventories substantially which has now put us in a position to be able to report higher boat margins.

Second, meaningfully reducing our cost structures through a dramatic store count reduction from 93 to 56 locations and scrutinizing every area of expenditures in our business. And third, our long-standing but increased efforts towards growing our service, parts storage, brokerage and F&I components of our business, all of which generate much higher margins than boat sales.

The increasing margins on our core products, namely boats and the expansion of our higher margin businesses as a result of our sales allowed us to report the highest quarterly margin we have ever reported. This, combined with the expense reductions we have made allowed us to report a slight profit in the quarter.

Our inventory levels now stand at approximately $180 million, which is down from approximately $550 million at our peak. Overall industry levels in the industry are also much better aligned with demand, allowing for a more stable pricing environment supported of improving gross margins.

Our aging has also dramatically improved and we were able to keep our inventory levels very low even with our same-store sales decline. Our inventory did increase modestly on a sequential basis as we wanted to make sure that we keep our inventory fresh by introducing select new models to our product offering.

We have been producing healthy gross margins on sales of newer boats and newer models of boats which is encouraging. While boat margins are still below the levels we typically achieve before the current recession, they have moved steadily up this year.

We have spoken before about the negative impact of repossessed boats and dealer failures on the gross margins. While the industry is still experiencing higher than historic levels for repo boats, the level in the marketplace has improved greatly which has also helped to improve margins.

Another key area of focus for us is expenses. Last year, we took the necessary steps to streamline our store count and remove other expenses from our cost structure in order to lower our overall cost. This in turn, has allowed us to report three quarters in a row of SG&A expenses in the $30 million to $32 million range, excluding the debt write off cost this quarter.

While some of our variable costs will come back as sales return, many of the initiatives that we implemented to reduce our cost structure are sustainable and should allow us to achieve higher margins when sales recover.

We continue to monitor our cost structure very closely, looking for additional opportunities to reduce cost and improve processes, helping to keep our expenses at low levels. I will add that the 56 stores we operate today produced in excess of $1 billion in revenue in the years 2006 and 2007.

This fact, combined with the dealer failures that the industry has experienced and the tough wholesale financing market which is expecting to continue should enable us to grow our business substantially without adding to the store count as revenues increase. The recent economic data has suggested that the recovery may be more bumpy than we had all hoped. During the quarter, our topline results continue to be pressured by weak consumer confidence in spending.

The most recent consumer confidence failure posted one of the most dramatic monthly drops in June that we have seen. Some marine industry sources indicate that the unit sales were down in the 25% to 20% range for the June quarter or even worse, depending on the category or the area of the country.

As an example, early reports indicate that Florida may be off as much as 40% in the quarter. This soft environment was exacerbated by the impact of the BP oil spill in certain of our markets. During the quarter, the oil spill most directly impacted our Northern Gulf of Mexico stores in Orange Beach, Alabama, and Pensacola and Destin, Florida.

The stores in the Florida Panhandle and Orange Beach historically have accounted for less than 5% of our revenue. Our concerns about the oil spill were also felt on the West Coast of Florida, and to a degree, on the East Coast of Florida, causing customers to delay their purchases.

We have had customers stop a boat purchase over concerns related to the oil leak's impact on their businesses, and others telling us they're just going to wait and see. Encouragingly, a study from the National Oceanic and Atmospheric Administration shows that there is a low probability of the oil reaching the West Coast of Florida.

On the East Coast of Florida, experts believe that if any of the oil reaches this area, it would have spent considerable time degrading and dispersing, likely, forming scattered tar balls rather that a large slick of oil which would damage a lot of the marine environment.

We are hopeful that as people gain -- become more confident with the path and likely outcome of the oil situation, our customers should start to feel more comfortable about making purchases. The Company is also seeking advice and counsel as to its legal options relative to the spill.

Amidst these challenging economic and oil spill-related conditions, we were able to successfully secure a new three-year financing facility with GE Finance. This $100 million facility replaced an old facility which was due to expire next May. The new facility has more favorable terms than the old one as Mike will later discuss.

The new facility allows us to operate our business with more flexibility than before and is the only debt we have outstanding. In summary, while we would like to have been able to drive better topline numbers, we are encouraged by our sustained improvement in gross margins, our ability to keep our inventory and expenses at very low levels, and our new credit facility as well as our ability to post a slight profit on deflated revenues. Now, here is Mike to provide more detailed comments on the quarter and the year. Mike?

Thank you, Bill and good morning again, everyone. For the three months ended June 30, 2010, our revenue was $115 million, down from approximately $152 million in the prior year. Our same-store sales declined approximately 17% compared with a 39% decrease in the same quarter last year.

Revenue from store closes that are no longer eligible for inclusion to same-store sales base was about $12 million. Gross profit as a percentage of revenue increased to approximately 30% in the quarter from 21.5% in the prior year quarter.

As Bill mentioned, this is the highest gross margin we have ever reported for a quarter. Much of the increase was due to the mixed shift in our business. When our lower margin boat sales slowed like they have, and service parts and accessories, finance and insurance, and brokerage businesses expand as a percentage of our business, it allows us to have significantly higher margins as long as both margins in general do okay, which they did.

It's nice to see an increase in gross margin dollars, despite the 24% drop in overall revenue. Given the improved aging and levels of our inventories, as well as the industry in general, we believe our margins have the potential to be better than historical averages as we go forward.

Our selling, general, and administrative expensive decreased approximately 14.5% or $5.6 million during the quarter to $33 million. Excluding unusual expenses in both periods, SG&A expenses declined approximately $4.7 million or about 13%.

Part of the reason that expense is pumped up a little this quarter versus the March or the December quarter was due to higher commissions earned on the increased margins as well as higher commissions related to the increased brokerage sales. While we are focused on holding down expenses, increases for these reasons are understandable.

Overall, we have managed to keep our expenses in the $30 million to $32 million range for the past three quarters, which is substantially below our expense levels in fiscal 2009. Interest expense decreased 79% to approximately $700,000 as a result of a reduction in our average borrowings on our line of credit due to the inventory reductions we have made.

Regarding income taxes, we did not recognize any income tax expense and we will likely not do so until we return to sustained annual profitability. Net income for the third quarter of fiscal 2010 was $512,000 or $0.02 per share, much improved from our net loss of $9.2 million or $0.49 per share for the comparable quarter last year. As was previously mentioned, our net loss fourth quarter the quarter included approximately $1 million or $0.04 per share of loan cost written off associated with our recently retired financing facility.

Turning to our balance sheet, at quarter end, we had approximately $24 million in cash but as we have mentioned in the past, our cash is a function of how much we want to leverage our inventory. We have substantial cash in the form of unlevered inventory. Our inventory at quarter end was $181 million which was down more than $158 million or 47% from the comparable period last year. Our inventory reduction was also significant on a unit basis as our total units and inventory as of June 30 were down approximately 46% on a year-over-year basis.

The aging of our inventory is much improved compared to where we stood a year ago, as is evident by the increases we are experiencing in our gross margins. As we have mentioned on past calls, we are now forecasting our purchases with our manufacturers three times a year versus the once a year approach historically used by the industry. This allows us to ensure that what we are ordering is more closely aligned with what we are selling at retail which should result in increased turns, reduced risks, and better margins.

Turning to our liabilities, the cash we have generated through reducing our inventory, lowering our expense structure, raising equity last September and the one-time tax benefit we recognized in December, has allowed us to reduce our related inventory financing by $193 million or 77% on a year-over-year basis bringing the line down to only $57 million or $33 million when you net out the cash.

As Bill mentioned, in late June, we secured a new financing facility with GE, replacing our previous financing facility. The new three-year facility provides up to $100 million of floor plan financing which can be increased to $150 million if needed, and includes two one-year renewal options assuming that GE approves.

This new facility has several terms that are favorable to us. First, interest under the facility occurs at a rate of LIBOR plus 378 basis points which is approximately 110 basis points below what we paid under the previous facility.

Second, the primary collateral that supports the facility as our inventory and related accounts receivable, which means that our real estate is no longer a pledged asset. Third, the facility focuses on balance sheet covenants versus operating covenants. The current ratio is required to be greater than 1.2 and the total liability to tangible net worth ratio can exceed 2.75 to 1.

We ended the quarter with a current ratio of 1.85 and a total liability to tangible net worth ratio of 0.63. Both of these are very healthy balance sheet ratios and are far better than the required covenant levels. This new facility also provides us with financial flexibility that many of our competitors do not have. This facility and the flexibility that it affords was able to be achieved due to the considerable balance sheet that we have built over the years, including our $207 million of tangible net worth.

Our outstanding debt remains among the lowest in our history, and the equity in our inventory, which is a measure of debt to inventory is also at very low levels. We own more than half of our locations which are debt-free. We are pleased with the progress we have made in continuing to manage our inventories, and we continue to believe that we are well-positioned for cash flow generation and profitability as conditions start to improve when we benefit from our lower cost structure. With that said, I will now turn the call back over to Bill for closing comments.

Thank you, Mike. According to some industry sources, over 1,400 dealers have shut their doors in the marine business. This places MarineMax in an excellent position as the largest boating retailer in the country to continue to gain share and capitalize on the opportunities ahead.

We are controlling our inventory and expenses with a greater level of discipline and vigor than we ever have before. We have also significantly strengthened our balance sheet and have considerably more financing flexibility under our new financing facility. I mentioned last quarter that we're reviewing opportunities for growth and I am pleased to say that we have positioned the company to resume a strategy focused on growth. We are continuing to look for opportunities to grow via brand expansion, and other opportunities to further entrench our position as the country's largest and strongest boating retailer.

We have been pleased to see that our customers are boating more this summer, which is evidence that their passion for their boating lifestyle has not waned. In fact, the National Marine Manufacturers Association, shown in a recent report, that boating participation in 2009 was 10% above 2006 levels and 25% above 2008 levels. Our quantity of fuel sales are up in our Marinas substantially this season and participation on our customer events continues to grow.

I was at our Montauk, New York event this past weekend and experienced over 90 families enjoying boating activities. Customers boated from North Carolina, Maryland, Massachusetts, New York, Delaware, and Connecticut to enjoy their friends and families with their Sea Rays, Azimuts, Meridians, Boston Whalers and Hatteras. It was a fun time for all.

While it may not be quick and sharp recovery, we believe we are well-positioned to benefit as the pent-up demand continues to grow. These customers not only have the passion for the boating lifestyle, but have also been reminded during these challenging times about the wonderful benefits that boating provides in terms of relieving stress and maximizing their time with their families.

MarineMax has and will continue to help our customers maximize their enjoyment on the water by teaching them, servicing them, and showing them how to have fun. And with that operator, we will open the call up for questions.

Thank you, sir.

(Operator Instructions)

And we will take our first question from James Hardiman with Longbow Research.

Good morning, thanks for taking my call. A couple of quick questions. It sounds like mix played a pretty significant role in the quarter. I was hoping you can give us an idea, obviously there are some noise, this is an interesting year, but historically, new boats have been say 70% of your sales, used have been say 18% to 20% and the remaining 10% is everything else of all the really high margin stuff.

Last year, new boats were closer to 60%. Can you give us an idea of sort of compared to those historical numbers or compared to 2009, where we were in the June quarter and then realistically, where do we expect, just sort of big picture, those numbers to be longer term?

You know, James, it's difficult to -- and we don't disclose mix on a quarter to quarter basis because it's kind of bumpy and lumpy and jumps around depending on boat sales, but you are right. I mean, historically, you know 90% of our revenue came from new and used boat sales.

If you kind of track the percentages that are disclosed in our Ks from '06 to '09, in '06, 7.7% of our revenue was service and parts and accessories and in '09, it was up to 12.9%and plus some of the other businesses like F&I brokerage and so forth grew incrementally.

So what's happening is as boat sales are moving closer to that 80% overall level, and then depending on which quarter, it could even drop below that. But you're right, that is driving, you know, some of the margin picture as to what is going on here.

Plus we continue to be focused on those other businesses probably more so than ever so that as boat sales do eventually recover, and you start to get maybe boat sales become 83% or 84% or 85%, you know, we certainly hope that incrementally, those other businesses will continue to be a great percentage of our company going forward than they were historically when we were at comparable levels which fought to held margins on a going forward basis as well.

Okay. And so you don't necessarily expect the trend of the last three or four years to continue at that rate? Meaning you know, do you expect new boats to ever be much less than 60% or should I expect that trend to continue?

I would anticipate that boat sales as the industry begins to recover will become a greater percentage of our business than they will be like for fiscal 2010 as an example. But I think when you compare us, let us say we get to $850 million again or $900 million, I think at that point in time, if you look at what percentage of service is our revenue, it's going to be greater than the last time we were $850 million or $900 million but you got to remember, average selling price is so high that as boat sales begin to pick up, it's hard for service to keep that same percentage. I mean, it will be higher than it was but it will probably decline from the levels that it is today.

Got you, that's very helpful. And then, from a marketshare perspective, obviously, you know, you've had a couple of quarters now with a smaller overall footprint. Clearly, that helps you focus on some of the key markets and it sounds like you're gaining share in the individual markets in which you are focusing on. Can you speak a little bit towards your ability to get back to the share numbers of the overall US market going forward?

I think the hope, to a certain degree, had been that you'd be able to service a lot of the same areas with fewer stores, but have you been able to do that and do you think we'll be able to get back to the sort of historical share of the overall US market despite the smaller footprint?

James, this is Bill McGill. I would say that it's been a challenge here recently to really make substantial gains and market share because of the repo boats and the dumping that has been going on by banks and even consumer that have decided they need to dispose of their products that were kind of in trouble with them.

And so, you know, that has put some pressure on us but that being said, we have what I think is really a game changer in the industry, and that is we have the ability to give wholesale financing in order to be able to stock the products and divide the products and to do the things that we need to do to really take advantage of the recovery that is going to come one day.

And so the industry is significantly-challenged right now with wholesale financing and we are hearing -- we are getting calls from dealers saying Help we are getting calls from dealers saying I can't buy big boats, the banks won't let me do it. And or the interest rates are very, very high and I think that is a real competitive advantage from us which will further help us with marketing share.

You know, we didn't see the recovery in the economy that we had all hoped and prayed for that would be occurring this summer and perhaps this fall, even though this fall is yet to come. And as a result, with approximately 1,400 dealers that have failed across the country, some sources that we have talked to indicate that that number could be an equal number that fail through the winter months of this coming winter because they didn't get the -- just like we didn't get the revenues on boat sales, most of our competitors did not get it either.

And as a result, it's going to be a greater challenge for them and there will most likely be more failures. As such, you know, dealer -- our customers that are shopping, that are you know, we travel less in the good times, would travel farther in the bad times, and so we believe that our current locations of 56 stores you know, I mentioned is, you know, we can be back at -- and get back to perhaps where we were in '06 and '07 without opening another store.

Not that we aren't looking for opportunities, and so we believe we can better serve those customers and from where we've got and most of the stores we have can do that and so we have a focus on marketshare but at the end of the day, we are -- we've got to let the repos and problem boats work their way through the system and there probably will be some more. But you know, we are making the margin on what we are selling them, and our inventories are in good shape so that is the good news, James.

Very helpful. Thanks, guys.

Thanks, James.

Thank you. Now, we will go next to Joe Hovorka with Raymond James.

Hi, guys, a couple of quick questions. One is do you run over the retail sales numbers? Again, you said for the June quarter and what that specifically covers, is it just --

Are you talking about the 25% to 35% down, Joe?

Yes. Is that a fiberglass 18 or whatever or what does that account for?

It's basically fiberglass, stern drive and inboard boats.

Okay, no foot range just from--

It's 18 feet to 60 feet.

And you said 20% to 25% down in the June quarter?

25% to 30% down.

Sorry, 25% to 30%b in the June quarter. And then there is -- depending on the market, like the data that we have seen on Florida shows it could be down as much as 40% and as you know, the data at this point in time is pretty fresh and it takes some while for it to mature, but that's what we have seen on Florida.

Right, okay. And geographically, any other areas like you know Midwest or something like that that may have shown a significantly better trend than that or no, is it all other than Florida, relatively consistent.

You know, the last couple of calls, I was able to say that Florida is having strength and also the North East is having strength and on this call, I would tell you that Florida, the North-East boars were a little weaker than the rest of the country.

Okay, and any trends in July yet?

July has improved, it's doing better than what June did which July never does better than June, not normally unless last year, when we were liquidating our balance sheet, it did, but July should prove to be better than June by a decent percentage. Still a small amount relative to historical averages but it's nice to see that at least it's better than June.

To a lesser decline is what you're saying?

Yes, correct. I'm sorry. Because remember last year, we had that monster quarter and so we'll still be down from last year but sequentially, for July to be better than June, with decent margins where we're not liquidating products, it's at least a little bit of an encouraging sign.

And we are seeing - I'm hearing from the stores, almost all of them that are saying that actually, the interest has picked up a little bit especially in some of the larger you know, products and you know, it's a little encouraging but you know, there are still a lot of -- there is still a lot of concern about what is going on in our country here that seems to have everybody locked up, Joe, and you know, up in Montauk is an example, I mean, I talked with a good portion of the 90 families that were there and you know, they were all talking about their next boat.

I mean there is absolutely -- none of them that were saying I'm going to stay where I am. I did hear a you know, I got to see things get better before I get that next larger boat but you know, this is large Azimuts, this is large Sea Rays, et cetera, you know, our getaway trips this year to the Bahamas has been packed and so most all of our events are up, AquaPaloozas included and you know, the customers are out on the water, they are talking about their next boat, they want the next boat, but you know, they are struggling with what's going on right now and then the oil spill had a lot of them locked up, Joe, not from the standpoint of boating as much as the impact on every business is, if they own a restaurant or if they own -- if they depended upon the tourist trade in Florida or whatever.

And of course as you know, housing is still an issue in Florida. So we got probably a long road ahead of us, but you know, we are going to look at the opportunities here and we are being presented with many opportunities we are evaluating right now.

And the good news is, we got our bank deal done, that is very good news, we don't have to worry about that next May, and you know, we got a lot of maneuvering room here and we got a great partner in GE and we are very excited about it.

Right. And with regards to the oil spill, do you see anything within Florida where there is a difference in demand? That is you know, along the Gulf and maybe the Panhandle, do you see more of a decline then -- I don't know if you can tell you know? Inland or on the East Coast or--

We heard it all the way to Carolinas. Customers are saying it may come here.

Okay.

And in Florida, there was -- I mean I specifically talked to customers that said, you know, they were in the tourist side business and you know, with the restaurant or with the motel or whatever the case might be that said you know, their occupancy was down on the West Coast of Florida because of the oil spill and the Panhandle, which if you look at the Gulfstream flow, I mean, the chances of it coming to the West Coast of Florida were pretty slim from day one.

Right.

But it still locks people up, you know, the news which we all -- there is good and bad in it, it gets exaggerated, I mean when I was up in New York, I had customers say, they-- you know, all the beaches have problems in Florida, and that's what the news projects out there even though it's just a very few beaches in the Panhandle that had a problem.

Right.

And so, you have to deal with it but the good news is that they are boating, their passion is there for this recreation and they are more focused today, Joe, absolutely more focused on I got to get out and get away from all this stress that's going on and boating does it and so we hear that everywhere.

And just a quick question on your margins in September, in the September quarter. Could -- (inaudible) but your boat margins were depressed in the September quarter more so than the rest of last year because of the inventory reduction, you did like a 5% or 6% gross margins in the quarter.

That's correct.

So, and I know we saw dramatic increases on it, but can we see a larger -- not a year over year increase but maybe relative to where we have historically, you know, reached the peak margins before. I mean, can we repeat 30% in this September quarter?

I know there is -- I know there used to be a hole back there that kind of helped your margins in the September quarter, I don't know if it's still there or--

Yes, that's a good point for bringing that up, Joe, and I think I know I mentioned this one when the programs change -- when we went to this three times a year forecasting that hold back that backend money for the manufacturers that used to be earned an paid in the September quarter and therefore, a lot of it was recognized in the September quarter, is now earned and paid kind of three different -- it's earned, it's not paid, it's earned at three different points throughout the year so that big spike in margins in September where you know, it goes as high as 28.5 or 27.5, that should not happen to that degree from the backend program to your point,

As for where the margins could be, I mean we did 30% this quarter which we're you know, pleased with, we would be pleased, obviously, if we did 30% in the September quarter but so much of it depends on the ultimate mix, you know, what did boat sales do and also to a degree, on product mix. If we are fortunate and deliver, you know, a number of larger products whether they are Hatterases or Azimuts which I think as you know, historically carry a lower margin than our -- than like our SeaRay business does, think that could affect what that outcome would be as well just as real hard to say what September would be.

I think in general, the comment that I made earlier on-- with James' question that if you think on an annual basis, I think our margins for similar revenue levels, have the potential to be higher as we move forward because of the focus we have on the higher margin businesses.

Right.

Okay. Thanks, guys

Thanks.

Thank you, Joe.

Thank you. And we will go on to Greg McKinley with Dougherty.

Thank you. This is actually Pete Mahon for Greg. I just have two questions. You know, one, I'd like to get your thoughts around kind of 2011 and the topline outlook. You know we spent the last few years, you know, year-over-year decreases were kind of the norm, you know, do you think 2011 is kind of the year where we start to see, you know, year-over-year increases in sales and you know, what kind of gives you the confidence for or against that outlook?

Hey, Pete, if you look at the predictions of the future for the economy, I think you might be strengthened to say that the economy would be flat for next year, I don't know, because there's a lot of predictions that it will be worse.

So -- but if you look at you know, fall out, in our industry, 1,400 dealers thus far and perhaps this is a 1,000 or 1,400 through the winter months, then you know, even though the economy hasn't -- may not recover in 2011, our chances of perhaps seeing an uptick is you know, is there. however, you know, hope is not a strategy and so you know, we are going to continue to run our business from an expense line inventory level assuming that things are flat or perhaps even down a little bit for '11 but we are still working our way through it and we are in discussions with our board as to what our best guess is with our very cloudy crystal balls could be for what 2011 is going to hold. So it's anybody's guess at this point as to what it could be is probably another way to say it.

The industry reports I think for the remainder of this calendar year at that the industry for calendar 2010 are -- it's going to be down 10% or 20% overall, that includes aluminum, fiber glass, everything -- and there are -- a couple of people are saying 10% or 20%, a couple are 10% or 15%, something like that for all of them.

And we don't give guidance anymore specifically what we think next year is going to be but I think there will probably be some industry forecast coming out for 2011 probably pretty darn quick because the year 2011 is upon us right now, this is starting soon.

Okay. Fair enough. Great. Thanks for the colors. One other question is, you know, we talked about how SG&A, you know, sequentially was up a little bit due to higher commissions relating to the higher margin boats and the broker sales. You know, do you think that as we think about -- you know, the September quarter in 2011, that you'd probably become you know, more the norm as opposed to the exception?

Well, I think if we have the same trend on margins, then you are going to get a little bit of a bump up from where we were tracking from a sense perspective which I'll take all day long, I'll take $12 million or $13 million of gross margin dollars for the additional commission expenses that we paid all day long.

So that would be great if that is the case, if it is for some reason, the margins don't -- aren't delivered the way that our cost structure is, you know, across the company would have our expenses come back down into that you know, roughly $30 million range, maybe a little bit below that.

For the quarter.

For the quarter, sorry.

Got it. Okay, great. Thanks a lot, guys.

Thanks, Pete.

Thank you.

Thank you. And we will continue on to Tim Conder with Wells Fargo.

Thank you. Bill, you've already commented that the difficulty in making these types of projections here just given the economy and the volatile nature of everything here but the repo and the driveway -- the driveway used market, do you get a sense or are we kind of reaching, in your opinion, the peak downside intensity of that or do you see that leveling off?

And then again, from the non-current product that appears to making some very good progress year-over-year, but I guess if you restrict those availabilities of both of those two buckets, then the alternative then is our new boats. So I guess the more critical one here would be the repo and the driveway to driveway used market.

I'd say, Tim, that the repos are decreasing, and so it's not something that I think is leveled off, I think it continues to decrease albeit there will be -- if there is more dealer failures, there will be more repos, but that being said, the used boat pricing that we are seeing, in other words, the retail pricing that is occurring with used and repo is increasing.

And the reason is that it is -- the quantity is decreasing and so the unbelievable deals that were out there at one point in time that you couldn't compete with are becoming more realistic to what the usual market should be today.

And so that's some good news but we will continue to you know, have to work our way through it, some, because you know, consumers today are still looking for the deal. I mean it's hard to get them off of that considering all the news that we hear on what's going on in the economy and you know, boating, as you know, the passion hasn't gone away, but it's not as high on the list as some of the other things like buying a new car or whatever the case maybe that people see as a necessity.

Okay. And then gentlemen, just any commentary, thoughts on the ones announced, I'm just hitting the tape here in the last hour, the sale of Triton and looking for alternatives on Trophy, and then one other kind of big picture item, any guesstimate and I know that is probably the key word there, but any guesstimate, your insight on looking on the next year and the impact of the Obama Care items kicking in the next couple of years? The expiration of the Bush tax especially on the $200,000 to $250,000 plus crowd customer that buys that larger 35-foot plus boat.

Well the Triton and Trophy, we do not do any business with Triton, we do very little business with Trophy and so we can't really speak as to you know, the reasons, that they were sold, but I'm sure they were very good reasons or they would not have done what they have done, but it will have no impact on us.. As far as the Obama Care and everything else is concerned, you don't want to give any (inaudible) and Mike is holding on my shoulders and head right here but--

You shouldn't have asked the question.

You know, I believe, and this is -- so you asked, I'm going to do it, okay? But I believe that November, if we can get some of this control taken away, that our consumers will start to be more confident and start buying.

And I'm hearing it from the customers, we are hearing it from the customers, everybody is scared to death if the Bush cuts are going to go away, everybody is scared to death about the healthcare, everybody is scared to death about what we are doing to our great country and so we all need to go back and look at the basis that this country was founded on and see what we can do to get it back there versus where the damn thing is headed. Sorry about that, Tim.

No, no, no. I appreciate the commentary. Okay, so the question has been posed to Brunswick last quarter but I just wanted to get your perspective so -- a difficult question to answer, I know, but thank you very much.

Thank you, Tim.

Thank you. And we will continue on to [Steve Baughman] with [Diversar Capital].

Good morning, guys. Thanks for taking the call. I'm not sure if I missed this. You mentioned that you had a write off of some financing cost in the quarter? Where was that on the income statement?

SG&A.

It's in SG&A and not in interest expense?

No, it's not. It's about $1 million that went through SG&A, it's treated amortization expense, that was the -- we had a credit facility that was due to expire in May -- coming up May 2011 and we went out and replaced that with a new facility, GE Capital, and so that caused us to write off whatever loan costs were still hung up on our balance sheet that we were amortizing.

Okay, and that was $1.0 million. Okay. That is -- okay, I think, Mike, you said before that SG&A kind of have been running in the $30 million to $32 million range, so really the right SG&A number to think about is kind of $32.3 million on this level of gross profit and sales?

That's correct. Yes.

Okay. And so you guys actually do compensate based on gross profit, I thought that was last year when you guys had that big blowout quarter with very poor margins, you had talked about the fact that you needed to pay commissions on those sales.

What we did last year -- I mean, throughout our 13 years as a public company, we -- our commission structure for 12 years and -- 75% of last year was based on gross profit dollars. And gross profit percentages in the September quarter, we moved to a cash flow commission structure for our team to reward them even though the company wasn't going to make much money on the boats and which was the right thing to do to get our balance sheet down.

And it works. We got our balance sheet down. But that was just that one quarter, and then starting in October, we went back to the typical commissions that we have had for many, many years which is what we are operating under now, and so the greater the gross margin, the greater the commission for the sales team.

Okay, I appreciate that color. And then, you know, kind of piggybacking off some of the earlier questions and understand that the outlook kind of changes week by week here but you know, looking at last year, obviously, you grew sales sequentially from the June to the September quarter by very healthy amounts, with 40% or something?

That seems to be kind of anomalous seasonality to me as I look back over previous years, you know, normally, your June quarter is much higher than your September quarter, kind of would you agree with that characterization and is it reasonable to think that September could be up over June?

I'd tell you, I think last year was the only year I think that it was up, if you take that acquisition. Sometimes, we may have completed an acquisition in the quarter so the absolute dollars may have been up in September but normally, the June quarter is the seasonally largest quarter and then September would be the second biggest, and so that would be correct.

And last year, when we were rightsizing the balance sheet, we you know, we had a very strong growth. I think at this point, with you know, kind of how the industry has dramatically dropped because the industry is much, much smaller than it used to be, I think a little news events or even big news events can have a more exasperated impact on a quarter like I think we have experienced in the June quarter. I think, you know, whatever caused consumer confidence to drop as far as it did; it's reflected on our business. Our June was much weaker than we would have liked, it's nice to see July picking up here, you know, we obviously will do everything we can to make the September quarter bigger than the June quarter, but it's -- you know, it's a day by day battle as you can probably imagine.

Yes. Can you talk a little bit more about kind of that day by day battle? You know, it seems like there has been quite a bit better news on the oil spill in the last couple of weeks than we have had, you know, certainly in the prior three months. Do you guys see that filtering in to consumer behavior or have you had sales that were deferred that have now picked up?

I think it's too quick to directly tie them back and forth, right now, I will tell you, just living here in Florida, whether you're at a dinner party or you're out at your son's football practice or something like that, people feel a lot better that that well is capped.

I mean, definitely, people feel better about it and whereas three weeks ago, you know, people talked a lot about this, it's been front-page news down here, you know, some stated leaking, so we are optimistic and I guess Bill said in his remarks that some of these folks have deferred their purchases perhaps in the June quarter, maybe they will come back and buy now in the September quarter but only time will tell ultimately.

We just -- we need some positive news you know, in our economy and one of the most positive news that needs to be heard by our customers is that everything is going to be okay is the way we run our country. And I'm very serious when I say that I hear it with almost every customer I talk to and our team here, it's the same thing, we're all scared to death and that's what having our customers locked up right now.

Okay, and my final question is kind of I wonder if you guys can talk a little bit more about the pace of business through the quarter? If you talked about this already, I missed it, but it sounds like June was the weakest month, is that right?

You know, April, we commented on our last call that April had started off slow and kind of was building on our last call which it did. I mean, and obviously, I believe April was down over the prior year although I don't have that data right in front of me. May was you know, softer than we expected but was, I guess acceptable, June was certainly softer than we were expecting so June would be probably, of all the three months, would have been the greatest letdown in the quarter from a revenue generation standpoint.

A lot of that is because of historically how big June has been. June is normally -- everybody gets their boats before July 4 so it's usually a pretty big month, and it just didn't materialize into the month that we thought it would. So that is kind of how we look at the quarter, keeping in mind that you know, everything is relatively low compared to, you know, historical levels.

Got you. Thanks very much. That's it for me.

Thanks, Steve.

Thank you, gentlemen. We will take our final question from [Dan Mendoza] from Prospect Capital Advisors.

I want to kind of triangulate a bunch of different data points, I don't know if you had a change to go through them -- run the numbers in detail but it looks like the domestic boat revenues were up something like 160%?

So just kind of trying to square that with your inventories being down where they were year-over-year and kind of your commentaries about availability of wholesale financing to other folks? I mean, because obviously those boats are going someplace. So I was hoping to get your thoughts that and helping to understand that and then also just to kind of try to understand where the inventory levels are for the industry on a broader basis with that kind of number from Brunswick.

I think -- I believe, and I again, I have not actually read all of Brunswick's release, I saw some of it when it came out but you know, what you're seeing in '09, production was taken pretty far down in 2010, you are seeing and I think this is what a lot of manufacturers have said is they are kind of filling some of the channels back up to a reasonable level but they are very -- the manufacturers are very carefully watching the inventory just like the dealers are.

So I think what you are seeing with the manufacturers in the industry is just kind of the restocking of the dealers and the dealer that in 2008, he may have had a $10,000 or $10 million line of credit, he's only got a $2.5 million line of credit now or $3 million line of credit so I think that's Bill's comments relative to -- back to where it used to be, the lines have all been brought down or they were gone because the dealer went out of business.

And your question on inventory levels, from our perspective, industry inventory levels continue to improve and they are in pretty darn good shape right now but they continue to improve, the aging is getting very good, it's harder to find you know, a 2008 non-current at dealerships, obviously we don't have any but it is hard to find that type of product, it's even the 2009s are getting lean out there so the industry is, you know, greatly improved from where it was 18 months ago and I know our margins on our products have done quite well and I believe other dealers are probably doing better than they had last year in margins also because of that. So it's a much healthier industry overall than it had been.

Okay. I guess trying to -- maybe it's a better question for Brunswick but trying to square up 160% with an industry that was down 25% to 30%.

It's refilling the pipeline is what it's doing.

I think -- yes, I think it's all relative to how far down they took it last year probably.

Okay, okay. And then I guess your commentary about the potential for additional dealer closures. I mean you guys have been in the industry for a long time, are those numbers out there that some people are projective for winter closures, numbers that you sort of agree with or--

It it's based upon demand and if it's based upon the calls that we seem to be getting and the -- because we've had quite a few calls from dealers saying how - I'd have to say that that number could be a realistic number for further closures, you know, of dealerships, however a lot of it depends on what happens, you know, for the rest of this year, because if it doesn't improve, I'd say that it's probably a realistic number, if it improves on, maybe it's too high a number.

Okay.

But there are issues out there and you know, cash is king and if the financing sources have cut down the availability of cash, I mean, you know, if you don't have cash, you're done, and that is what's happening to a lot of dealers.

It's a shame because some of them are very good dealers.

Okay.

But it's a fact of these times.

Okay. And as you said so, that relative to the other 1,400 dealers that the inventory that they are carrying is a little bit fresher and that -- can you give us a sense of how long it would take for the industry to kind of clear that inventory out?

Well, I think it's pretty low anyway and so I don't think it would take a long time to clear it out and so it's not going to be nearly the issue that we saw, you know--

Leaving 2008.

Leaving 2008 and '09.

Right.

So that is the good news, it's much less of a problem and it's helped by the fact that you know, values have gone up and so a repo boat is -- we're selling for 50 six months ago may be selling for 60 today, and that helps the whole picture -- this less supply.

Very good, thanks, guys.

Thank you, Dan.

Thank you. That does conclude our question and answer session today. I'll turn things back over to Mr. Bill McGill for any additional or closing remarks.

Well, thank you, everyone for your continued interest and support of MarineMax. I'd also like to thank again, our team members for their hard work and passion for our business. It's truly due to their efforts that we can call ourselves the leading boating retailer in the country. Mike and I are available today if you have any additional questions. Thank you.

Thank you. Ladies and gentlemen, that does conclude today's presentation. Thank you for your participation and have a great afternoon.