MarineMax Inc (HZO) 2013 Q4 法說會逐字稿

Good day, and welcome to the MarineMax, Inc. fourth-quarter 2013 earnings conference call. Today's conference is being recorded. At this time, I would like to turn the conference over to Brad Cohen of ICR. You may begin.

Thank you, operator. Good morning, everyone, and thank you for joining this discussion on MarineMax's 2013 fiscal year end and fourth-quarter earnings call. I am sure that you have 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, extension 10100 and she will mail one to you right away. I would now like to introduce the management team of MarineMax, Mr. Bill McGill, Chairman, President, and Chief Executive Officer; Mr. Mike McLamb, Chief Financial Officer. Management will make some comments about the quarter and the year 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 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 in the level of consumer spending, the company's ability to capture 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'd like to turn the call over to Bill.

Thank you, Mike, and good morning, everyone. Our fourth quarter was our eighth consecutive quarter of same-store sales growth. With the close of our fiscal year behind us, more signs are pointing towards the continuation and growing strength in a long-term cycle of recovery for our industry. While some of our most significant segments, such as stern drive and inboard fiberglass boats, have lagged the recovery, we are encouraged that industry data reflects signs of improvement in these key categories. For the September quarter, our same-store sales increased 7%, which was on top of 18% last year. Excluding any discontinued product we have, generally we had growth across all segments that we operate within. Particularly, we saw growth in larger product, which ultimately helps us to drive growth more effectively than smaller products. This has been a consistent theme throughout the recovery thus far for us.

What is even more could encouraging is that our consolidated margins are continuing to improve. While showing steady improvement over the past several quarters, we saw margins generally exceed historical levels during the September quarter. Our increasing margins are largely led by improving new boat margins combined with incremental growth in each of our higher-margin businesses. The growth in both margins reflects many positive trends. It shows the aging of inventory as reasonable and improving, and also shows the products we have available are experiencing increasing demand. Improved margins also reflect a change to our pricing philosophy that we implemented in the June quarter, which we call One Price.

Basically, the change we implemented was acknowledgment to our customers that we respect their right to our best price, but also with industry recovered, we are taking the opportunity to raise our margins. With higher margins, we do pay incrementally greater commissions to our sales team, and we are carefully monitoring this trade-off of commissions in margins. As the One Price program matures, we should see even greater leverage. Excluding the BP recovery, which Mike will discuss in a few minutes, our year-over-year earnings improved reasonably well, though we had some increases in certain expenses, such as insurance and losses associated with Hurricane Sandy claims on our property.

Given that the majority of our new boat revenue is from stern drive and inboard power boats, a return of strength in these segments will prove to be quite beneficial to us, especially when considering the additional brands we have added over the past three or four years that are concentrated in these segments. As the industry recovery expands and gains momentum, the addition of these brands should help to further propel our same-store sales growth and result in greater market share growth. Having said that, we need to see a continuation of improving data in these key segments realize the greatest benefits.

We ended our fiscal year with the appropriate level of inventory, representing a slight increase over -- year-over-year. Used boat inventory increased due to more trades we took as new boats continued to rise. Additionally, our growing charter business also modestly added to our rise in inventory.

For the full year, our biggest cost increases in addition to payroll were large increases in healthcare and general insurance expenses, plus cost and inefficiencies associated with Hurricane Sandy in October 2012. As I have discussed before, we must maintain the level of service that our customers expect to ensure that they are enjoying the boating lifestyle. This is a critical differentiator for our company and one we will continue to maintain. Some of these programs include our Getaways! trips, our mobile service, our educational classes, and captains that teach our customers how to use and enjoy their boats. But we also are very cognizant that we need to get more leverage in our business.

We took steps in the second half of fiscal 2013 to improve the leverage, and while we are not finished, we did start to see some benefits, as compared to the first six months when we experienced a week spring season in our northern markets. As the industry recovery continues, we want to build on our investment for the long-term. And we have focused over the past several years. Our team is it proving that we can succeed in managing the elements that are within our control, as indicated by our improving results. I will now ask Mike to provide more detailed comments on the quarter. Mike?

Thanks you, Bill. And good morning, again, everyone. For the September quarter, our revenue was approximately $150 million, up about 9%, or $12 million, from the prior year. Our same-store sales increased by almost 7%. Geographically, while most of our markets were up, markets outside of Florida led the charge, which seems to be consistent with external industry data. It appears that as weather became less of an issue for the northern markets, boaters came out and purchased. However, it was seasonally later than is typical. From a market perspective, Florida was up, which we expect to be the case going forward. In the greater New York area, we saw strength, but New Jersey was still down. The expectation is that New Jersey will see improved results in 2014 once the infrastructure for boating is repaired from the damage that Sandy caused in late October 2012.

For the quarter, we grew gross profit about $7 million, or just over 21%. Gross profit as a percentage of revenue increased to 26.8% from 24.1% last year. The increase in our margins is noteworthy because as boat sales rise, consolidated margins usually drop since boats carry the lowest margin of all of our business categories. The increase in our margin was also aided by our higher-margin businesses, which did grow as well. Our consolidated margins were the highest of any September quarter since 2007.

In this quarter, like our June quarter, we benefited from a damage recovery received from BP as a result of the Deepwater Horizon oil spill. We, like many Gulf Coast-based businesses, filed claims to recover damages we incurred from the spill. Several of our claims were resolved this quarter, resulting in $4.7 million net recovery being recorded. For the year, we recovered $11.7 million net. The recoveries are significant enough that it meaningfully increased our tangible network that further strengthen our already strong balance sheet. We do have two remaining relatively insignificant claims that are currently on hold, and the absolute resolution of them is not determinable at this time.

Excluding the BP recovery, the largest drivers of the quarterly increase in our SG&A expense comes from the expansion of sales and related margins, which increases commissions and certain compensation and selling-related costs. We also experienced a loss associated with resolving certain Hurricane Sandy property claims of about $350,000. For the last few quarters, we have discussed are increasing insurance costs, and while healthcare and property and casualty costs were much more reasonable than in past quarters, we did have increases in these costs as well. We remain quite focused and continue to challenge ourselves on cost reductions and improvements to processes that may add to improved efficiencies and leverages as we grow. But it is worth noting that, for the quarter, about 19% of the growth in revenue flowed through to the bottom line, which is pretty decent, especially given some of the past quarters this year.

For the September quarter, we have a tax expense of $136,000 compared to a tax benefit of $60,000 last year. As we have said in the past, our effective income tax rate will remain essentially zero for the near-term due to the availability of substantial net operating loss carry forwards, which are fully offset by a valuation reserve. Our team's efforts contributed to the year-over-year quarterly improvement in net income. Excluding the BP recovery, net income was about $500,000, or $0.02 per diluted share, this year, compared with the net loss of $1.6 million, or $0.07 per share last year.

For the year, I will highlight a few items. Revenue increased over 11% to $584 million, which was attributable to an 11% growth in same-store sales. Gross profit grew more than $17 million, or about 13%, which was up as a percentage of revenue to 25.8%, which was due to improving boat margins. Excluding BP and taxes, looking at the first half of the year, our revenue increased about $23 million, or 10%, yet our loss almost doubled, as we experienced costs and inefficiencies associated with Hurricane Sandy as well as meaningful increases in health and other insurance costs, plus our additional promotions that we ran to offset the inclement weather. For the second half of the year our revenue increased about $37 million, or 13%, and our second half profits almost doubled as compared to last year. So while we still have room to improve, progress was made at the year went on. This second half trend provides us with increased confidence as we move into fiscal 2014.

Now on to our balance sheet. At year end, we had approximately $24 million in cash. Keep in mind, we had substantial cash in the form of unlevered inventory. Our inventory at year-end was about $228 million, which was up modestly from last year. The aging of our inventory also continues to be healthy as reflected by our improving margins.

Turning to our liabilities, our short-term borrowings were about $122 million at year end, which was similar to last year. Customer deposits, while not the best indicator of the future, given that they can be lumpy, they do continue to trend positively. Our balance sheet is extremely well-positioned and enhanced by the benefit of the additional cash received from the BP settlement. We ended the year with the current ratio of 1.73 and total liabilities of tangible net worth ratio of 0.72. Both of these are very good ratios. Out tangible net worth stands at over $220 million. We own over half of our locations, which are all debt-free, and we have no additional long-term debt.

Bill will provide some color about the Fort Lauderdale Boat Show, which wrapped up yesterday, but I would like to indicate that October results are ahead of last year. As a reminder, last year we saw over an 8% increase in same-store sales in the December quarter. It is also worth noting that the December quarter is seasonally our smallest quarter of the year. With that, I'll turn the call back over to Bill.

Thank you, Mike. As Mike mentioned, the Fort Lauderdale Boat Show, which is typically one of the largest shows in our industry, started last Thursday and ended yesterday. Crowd size and sales were encouraging. The trend to larger product continued, but we also saw strength generally across all segments that we serve. This show and others that we have attended recently are further indication that the industry recovery is holding and gaining momentum. We all need to be cautious, however, until it becomes clear that meaningful gains are occurring and ultimately reflected in our results.

Our scale, size, and commitment to providing our customers with a unique MarineMax experience continues to entice our customers boating season after boating season. Our Company is positioned to increase its leadership position in the industry. And with our enhanced product offering and the return of innovation by our manufacturers, we expect to provide even greater desire for our customers to step up to a boat or yacht for a life-changing experience with their family or friends as part of the MarineMax family of boaters.

We continue to focus, both on the strength of our team and our customers. These strategies have proved to be the key differentiator for us and have yielded improved sales and share as the industry slowly makes its way towards a stable recovery. We will continue to grow our Company and brands and capture additional opportunity as they arise. We are well-positioned to generate substantial growth for providing a one-stop solution to all our customers boating needs. We expect to benefit from our competitive advantages, which, as we move forward, will aid us in gaining additional market share and enhanced profitability. We thank our team that, who all aided in our efforts towards another profitable quarter. And, with that, operator, we will open the call up for questions.

(Operator Instructions) Jimmy Baker, B. Riley & Company.

Bill, if we can isolate the fiberglass inboard market, your highest priced category, it seems there are just so few dealers willing to stock that product, that the competitive landscape has really changed compared to pre-recession when the market was, let's say, four or five times greater than today. Can you just talk about how you are set up to compete with some of the European or other brands that have elected to go to more of a factory direct model, and just kind of help us understand how you fit into the purchase decision-making process for that high-end buyer?

Well, Jimmy, you are exactly right that a lot of the US dealers and even around the world are not really stepping up and taking risk to stock the larger products. And, to your point, a lot of Europeans -- especially the French and even some Italians -- have come to market and even Chinese that are basically here with more of a factory direct or some representation in the market with a few dealers. But at the end of the day, if you are investing into this lifestyle of boating and so you are purchasing a larger boat, especially, the dealer becomes an extremely important part of the equation.

I mean, as an example, we sell the Italian brand of Azimut, and we are doing very, very well with it. It takes a lot of support for us to support our customers because, you know, the six-hour time difference between here and Italy, getting parts that have to come across ocean, the language differences, et cetera. And, even with us, it is a challenge. Now, just imagine you don't have the dealer, and you are dealing direct. It would become -- it could turn your wonderful experience into a boating nightmare. And we hear that for that some customers that have stepped out of our family and have bought some of the products that have come back to us and said, you know, we never should have left the MarineMax family.

Because at the end of the day, it's not about buying a boat or a yacht. You are buying everything that goes around it, and it is the enjoyment that is what it's all about. And so, we are cognizant that they are out there and we are doing everything we can to demonstrate to prospective buyers and our customers that we are here as MarineMax to do it.

You know, we went to the One Price selling and I talked about that a little bit. And it is working very, very well. And it is -- not only is it helping our margins, but we are also hearing from our customers, thank you. It's all about, I really just want your best price anyway so I can focus on all the other things. And I just got back from the show last night down in Fort Lauderdale and had customers that over and over again, came up to us and said, we love our Azimut; we love our Sea Ray; we love our Meridian; we love our Boston Whaler -- whatever the case may be. But, at the end of the day, we are only buying what you guys sell because that is the rest of the story.

That's helpful. Thanks. So in terms of the drivers of the 9% sales growth in the quarter, can you just speak to trends of unit sales gains versus price or mix? And then you also I think talked about positive trends in October as well. Should we take that to mean units or mix or both?

Yes. Jimmy, this is Mike speaking. The bulk of the same-store sales growth came from the best-selling larger product versus last year. Units -- I mean, technically, if you look at units and if you include the discontinued models -- when I say discontinued, some of our manufacturers purposely stopped building certain sized products although they are going to relaunch that product here this coming summer. And so technically, on a unit perspective, we are down year-over-year. That's because we didn't have the product to sell.

If you kind of look apples to apples, we are probably about flat and so all the rest of the growth is coming from selling the larger product, which we have been talking about. I think, if you go back for probably, I bet you, eight quarters now, we have been talking about growth. And we probably would say above 40 feet, and sometimes we may say about 35 feet above. But that continues to percolate and do well and some of you have heard me say, basically, wherever we have a relatively new boat priced about right, it's selling reasonably well.

On October, I don't have the final data for units versus average unit selling price or size in the month. I'm going to assume that it's going to be, again, driven by larger product. But, we did have a good unit month as well, though. So I just don't have the final answer in front of me for October as we are still putting a bow around that month right now, Jimmy.

Okay. Thanks for that. Just have a couple more and I will pass it off. Just hoping you could talk about margins heading into fiscal 2014. You talked about how much stronger margins have been here in the back half. How should we think about the progression of gross margin should the industry continue as a tailwind into next year? And then I guess the other side of that, can you just speak to SG&A spend in 2014 -- what level of incremental investment you might need to support ongoing growth?

I can comment to that. It is certainly our intention to continue to incrementally grow margins. As you know, that dances around a little bit when it comes to mix of product. If we sell a lot of big product, that can stretch the margins. Last year, with the weather we had in the March quarter, we ended up getting more promotional. But I think, generally, we ought to be expecting incremental improvement -- just little improvements. So if you look at fiscal 2014 versus 2013, I would expect our margins are going to be up incrementally at the gross margin line.

And we also have a lot of new products that are innovative, which will command a higher margin, Jimmy. So some of the new products from Sea Ray and of course the new products from Azimut and Boston Whaler are higher-margin business for us than normally because of the innovation and the inability to get it in some case in a timely manner because of how hot they are.

And generally on the expense side, I think the way that the company has always been modeled from a long time ago to now is that with every dollar of same-store sales growth, you're going to increase your SG&A costs something like 8% to 10%. I have seen models on the sales side even having that higher, but if you just say 10%, it kind of makes sense. Then you get 15% drop at the bottom line, maybe a little bit more, as you begin to leverage the fixed costs a little bit better. The challenge that the Company has asked of itself, is -- we had some unusual increases really in 2013 and, for the most part, in the first six months, although some of those increases continued the second six months; but most of them were in the first six months -- is how do we get those costs out. And so you could, in theory, get even a greater expansion at the expense line in 2014 than you would normally model, just off of 2013. But, what I would caution everybody on the call is, I wouldn't model the business that way yet until management proves that we have found those extra dollars and that we start to produce more leverage in the business.

Okay. Fair enough. Last one for me. It looks like -- did you actually close a location in the quarter. And if so, where was that and when in the quarter did that closure take place?

You got me on that one, Jimmy. Let me just think. You are saying because the count dropped one?

Right. Your lease shows 54 locations.

(multiple speakers). Yes. We had a Tampa store that was a repossession center and repossessions have significantly slowed in our industry, which speaks to used boat margins coming up, and economy getting a little bit better. And so we closed that, and it is actually -- and we got the -- we own the property. It is for sale right now. So that's what happened.

I don't think, just as a general comment, I think our store count is going to remain around this size unless you see us growing geographically or doing acquisitions or something like that.

Fair enough. We will trade repost sales for new sales. Thanks a lot, guys. Great quarter.

Mike Swartz, SunTrust.

Bill, I know you touched on some broader commentary with regards to Fort Lauderdale, but maybe you can provide just a little bit more color in terms of maybe what you saw in terms of early-season order activity, just qualitatively, and just touching on some of the brands or new products that you think are doing better in the market than others.

Well, Mike, first of all, it has been quite a while since we had a Fort Lauderdale Boat Show that didn't have a hurricane or election going on. And so the weather was just about perfect except, I think, for the first three days was maybe a little on the warm side for a few customers. The attitudes of customers was definitely improved over a year ago or two or three years, for sure. And so, we heard a lot more positive responses and indications from customers and our business activity there, I understand, that at the show you may agree on the purchase of a boat, and then they have got to go for a ride and get it finance, et cetera. But indications are it is an improved environment over what has been historically. New products continue to do very, very, very well. Sea Ray's new 350-SLX, I mean, I think we have got 14 of them sold. This is a hot new boat that they have. Maybe it is more than that.

I think it's more than that.

16 or 17 now after the show. And the first boat has not arrived. Sea Ray launched their new 510 Sedan Bridge at the show and it was a big hit. They actually had it in an air-conditioned tent, floating, along with the 350-SLX. Azimut, very, very good show. Lots of new product, which they have continued to do, and lots of activity there. Boston Whaler continues to be a very, very strong brand with a lot of innovation, and it was a very good show for us. And we -- Hatteras, with the new owners, that seemed to go real well and lots of activity going on, understanding these are -- in the both convertibles and motor yacht market -- are expensive boats and that they take a while to happen, but we feel excited about it.

We also launched their the new Scarab jet boat. And even though it was kind of hidden among the larger products in the water, the indications are it is going to be a winner. So we are excited about that as we entered the jet boat market to get people into boating and take them out of their Sea Doo's and Yamaha personal watercraft, et cetera, and get them into boating where they have got a excitement about jets. So all in all, I would say it was a very good indicator.

We also saw that at the Atlantic City Boat Show where there was a very good indication. And we talked about the drain that we had from New Jersey, due to Hurricane Sandy. I think 2014 we will start to see some of the 65,000 boats that were either damaged or lost coming to add to our business. And, albeit, it won't all happen in 2014 because there is still some infrastructure going on there.

So we are feeling better this year than we did last year about boat shows and the market.

Great. Thanks for the color on that. And then just touching on -- I think you had mentioned in the back half of fiscal 2013 you took some actions to really improve the operating leverage of the business. Could you maybe flesh out what exactly you did? And are those kind of repeatable as we go into 2014?

Yes. I will tell you it was just something that we have done over the years through this downturn. We just took a fresh look at every cost, renegotiated everything that we can renegotiate, and looked at things as basic as even compensation structures and things of that nature just to try to really offset and find improvements for the increasing health insurance costs and property and casualty insurance costs that we were experiencing. And we are beginning to see some benefits from those efforts. We continue to do that again, just -- we are always looking for that, as every company does, for opportunities. But as we have started 2014, we have dug even a little deeper looking for opportunities, again, nothing that would take anything away from what we do to our customers, which is what Bill has said constantly for the last four or five years. But no real silver bullet, Mike. Just basic blocking and tackling, and getting more out of each of our processes and each dollar spent.

And, you know, MarineMax Vacations was a drain on us last year. You have to get the size of the business at a certain point to justify the investments we have made into the facilities and team, et cetera. And we are starting to see that. The bookings for charters are up significantly and are looking very positive for 2014 as well as a sale of the yachts for the charter fleet, and a real additional benefit is that we have a lot of interest from a retail perspective on some of the boats that we are building for the charter fleet. At the boat show, as an example, we have got a 484; it is a four cabin, four-head, huge boat for a 48-foot boat, that we have for charter, and we are building a private version of it. And it was one of the most active boats at the show. And not only from a charter perspective, but also from the standpoint of, oh, my gosh, this would be one heck of a boat to have personally. So we should start to see some benefit from that as we go forward into 2014 here.

James Hardiman, Longbow Research.

Couple quick housekeeping questions, and then I have some bigger picture questions. The delta between same-store sales and total sales, they have been roughly the same the last few quarters. 2% delta this time around. Should we assume that they are the same next year or is there going to be a gap? And then, just real quickly, the Deepwater settlement, that is one hundred percent SG&A, right? None of that is in cost of goods sold?

Yes. It is 100% offset to SG&A. None is in cost of goods sold and then, really, the same-store sales number in our normal number should be pretty close to one another unless we are opening or closing a lot of stores, which we don't plan on doing.

Okay. But what drove that in the quarter -- the 9% total versus the 7% same-store sales?

It's got to be closures of stores last year, James. I don't have the numbers in front of me right now, but it's got a be something that we had opened in the September quarter last year, which is not includable in the data this year.

Got it. And I was hoping we could dig a little bit deeper in terms of just availability of boats, the discontinuation of boats. You talked about units being, I guess, down year-over-year, maybe flat on an apples-to-apples basis. You talked about getting away from certain segments. You know, Brunswick has also talked about drawing down inventories in that stern drive, inboard category, at least in the short term. I guess we have seen that industry numbers, I think, are up pretty much across the board. I guess I could spin that in a couple of different ways. I could say that you are losing share and that if you are not in the categories that people are buying, they are going to look elsewhere. I guess I could also look at that as potentially some pent up demand, which opens the door to even better sales as we move forward. How do I think about all that?

I will take a stab at it, and Bill may jump in. If you look at the key categories that we are at, I have actually got the Statistical Surveys data for the September quarter front of me. And it breaks down the stern drive category in various different segments, but still through the September quarter, most of the key stern drive categories were down. There was improvement in sport yachts. There was improvement in large cruisers. Again, small numbers. The deck boats looked promising, if you break it apart between I/O and outboard, the stern drive deck boat business was down slightly, but now, having said all that, the decreases are shrinking. So they are not as great as they once were.

I would also say that, when a manufacturer decides to stop building certain size product because of the reasons that they had, which seemed to make sense back at the time, and you don't have the product, yes, by definition, you're going to lose some share down in that category. It's probably not the most critical category to us or to the manufacturer, but we would rather have the business, which is why the manufacturer is coming back with a smaller product. But, if you look at where dollars can -- where sales are driven and where the big dollars are, whether it is larger sport boats, the larger cruisers, the sport yachts, the Azimut business, for us, I mean, we have been saying for, I think, probably eight quarters now, we were probably the first ones coming out -- I have to go back; it may have been the December quarter. It may have been 2010 even, but a while, that we started seeing unit growth year-over-year in these categories.

So we are very pleased to see the industry data begin to stabilize and to start to turn green. We are pretty confident we will keep our momentum going and our trends going. We will have a quarter down or a quarter up or a quarter flat, but year-over-year, we are going to keep growing our share and getting more than our fair share. Part of that is because we have the inventory; we have the competitive balance sheet that we have -- competitive advantage of the balance sheet, and all the strategies Bill talked about. But, yes, we probably did lose a little share in the small product, but I think we have done well on all the larger products.

But we have been growing substantially better than the rest of the industry. And so when you do that, you're not going to show as big an increase as the industry starts to increase. So improve. And stern drives are still down and smaller inboards, the same way. So at the end of the day, we are not concerned about it because we have got the lion's share of it anyway in our markets.

Very helpful, guys. And I guess just last question as a follow-up to some of the SG&A related questions. As I think about modeling that for next year, obviously I am going to back out the, call it, $12 million. I'm sorry; that is the Deepwater settlement. But, yes, I guess ongoing to back out that settlement for next year. As I think about some of the increases, can you help us maybe put an order of magnitude around some of these items? Obviously, insurance played a big role. It sounds like compensation plays a role in SG&A. Can we just think about the size of some of those factors as I try to model this next year? What is going to be fixed; what is going to be variable, those types of things?

I think modeling the business, James, what I would do is kind of model it the way that you have modeled it in the past, which I think, for the most part, I don't know your specific model, but most people tend to -- if sales grow by $50 million, they end up adding roughly -- anywhere between 8% to 12% to expenses. And the rest of the delta drops to the bottom line, which would be, if you start with a gross margin, around 25; the difference drops to the bottom line. Something like that. I would model it off of our 2013 actuals after you add back the BP dollars. That would be, I think, a reasonably prudent, maybe safe, way to do it and not take into account the benefits that management is trying to achieve in the expense structure of the Company.

Health insurance, specifically, that we talked about, I think if I add up my comments from the first three quarters of the year, it is probably a $3 million increase, maybe a little bit more than that just through the June quarter on a year-over-year basis. And that was above what actuaries had anticipated. That was above what we had anticipated, and that was above last year. We don't think that is going to continue, but we don't know if it will or if it won't. So there could be some upside there. We did have some additional programs to incent our team in really most of the March quarter, I think the magnitude of that from memory was maybe around $1 million-something from that. I think I cited on the call. Again, I don't think that specific program will have to continue again going forward unless we see weather patterns really ugly, and we may try something little bit differently. But that is how I would model the business. Bill, do you want to add anything?

Yes. We did additional marketing to try to offset the lack of spring. And nobody can forecast the weather for spring for 2014, but, hopefully, we won't have the lack of spring like we had up north that we threw extra dollars at to try to not get our customers to defer the decision.

Perfect. Very helpful. Thanks, guys.

(Operator Instructions) Greg McKinley, Dougherty.

Sorry to keep revisiting the operating expense question, but I was just looking at -- if we look at year-over-year changes in gross profit dollars, and then we look at year-over-year changes in operating expense dollars, so there was a rather significant delta there much more than maybe that 10% variability that you have referred to. And I understand what you are saying about sales incentives and insurance premiums. Are there any significant cost-cutting opportunities available to the Company or would you describe it as a large number of small things in the aggregate can add up? And I just -- was wondering if you could just give us some confidence that, I think, if it had been, call it, 10% variable costs excluding the Deepwater fund, our G&A probably would have been $134 million, but instead it was maybe $144 million. And I just want some confidence that, as we look at that, that we will get back to 10% variability.

Yes. I would say it is -- the current year was kind of an accumulation of a lot of, I wouldn't call them, small things. $3 million on the insurance side is not small to me, but it was the accumulation of a lot of things hitting us that we were not obviously expecting or planning. The weather in the March quarter, the health insurance, are two of the biggest. Hurricane Sandy cost caused a lot of it efficiencies. If you step back -- if you go all the way back to 2012, just to kind of walk through from there. So 2011, the company lost a fair amount of money. 2012 we gave $50 million in revenue, and we really didn't add any expenses, and the company basically broke even, made a little bit of profit. This year we added roughly another $50 million. And I think our earnings -- if you do the math and have 10% expense increased like you would normally model it, I think our earnings should be something like $8.8 million and we are at $3 million. So we are $5 million off of what you would theoretically model the business on or what normally people had modeled the business on. And if you think about it, okay, we have got a $5 million delta -- well, $3 million of it is insurance. And we just talked about $1 million of it being the compensation that we did to help drive additional businesses. And I just mentioned that $350,000 loss with Hurricane Sandy in this quarter alone. You start working your way up to that $5 million pretty quickly if you model business the way it traditionally has been modeled. And I think that model kind of makes sense. We think there is upside to that model. We are not pleased with the leverage. Greg, one of the things that I did is I looked at the second half of the year and the first half of the year, which is why a put those comments into my prepared remarks. The second half of the year, while it is not perfect, it is a lot better than the first half of the year. The first half of the year, we increased revenue, and we lost a lot more dollars. The second half of the year, we increased revenue, and we made a lot more dollars. And so back to your confidence point, you could see it if you just look at the June and September quarters combined, it is not going to be quite back to the way we used to operate the Company, but it is a lot better than the first half.

It appears there are no further questions. At this time, I'd like to turn it back to our speakers for any additional or closing remarks.

Thank you, everyone, for your continued interest and support in MarineMax. As always, I would like to again thank our team members for their hard work and passion for our business and our customers. Due to their solid efforts, we are the leading boat retailer in the country. Mike and I are available today if you have any additional questions. Thank you.

And this concludes today's conference. Thank you for your participation.