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MarineMax Inc. (HZO)
F1Q10 (Qtr End 12/31/09) Earnings Call
February 2, 2010 10:00 am ET
Kate Messme - IR
Michael McLamb - EVP and CFO
William McGill - Chairman, President and CEO
Hayley Wolff - Rochdale Securities
Joe Hovorka - Raymond James
Greg McKinley - Dougherty
Previous Statements by HZO
» MarineMax Inc. F4Q09 (Qtr End 09/30/09) Earnings Call Transcript
» MarineMax F3Q09 (Qtr End 6/30/09) Earnings Transcript
» MarineMax F1Q09 (Qtr End 12/31/08) Earnings Call Transcript
Thank you, Operator. Good morning, everyone, and thank you for joining this discussion of MarineMax's 2010 fiscal first 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. 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 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. The considerable progress we made during fiscal 2009 in reducing our inventory, streamlining our expenses and optimizing our store count allowed us to report significantly improved results for the December quarter, compared to the prior year.
During the quarter, we generated sales that were consistent with the prior year despite operating with over 20 fewer stores, and facing the continued headwind resulting from the difficult economic environment. We believe that our sales in the quarter were aided by our competitive advantages coupled with the failure or struggles of other dealers or brands.
As we have said in the past, our competitive advantages created by our solid balance sheet position and customer-centric approach should continue to yield market share benefits as the industry works its way through these historically challenging times. Our strategy of optimizing our store count clearly worked in the December quarter as we generated the same level of sales as last year, resulting in double-digit same-store sales growth.
Going forward, we are committed to optimizing our store count, while maximizing revenue and market share. It is important to also note that we were able to generate the 13% increase in same-store sales by implementing a less aggressive pricing strategy that we have been operating under for most of fiscal 2009.
As such, our gross margins rebounded dramatically from the levels we had been experiencing. With our aging much improved a larger portion of our sales were from fresher and more current products, which yield higher gross margins. The increase in same-store sales along with our strict inventory management allowed us to continue to reduce our inventory levels.
We managed our inventory down 57% or 250 million from the prior year. Inventories also dropped sequentially from the September quarter, which is only the second time this has happened in the company's history.
Normally due to seasonality inventory builds in the December quarter and March quarter, we believed our inventory reduction sales trends continue to lead the industry, however it is also important to note that we believe inventory levels are in much better shape across the industry which should help us to lay the groundwork for a more stable pricing and sales environment in the future.
Along with reducing our inventory levels, another key element in our strategy for weathering the downturn and positioning MarineMax for future profitability was to significantly reduce our operating cost structure. Historic closures that I previously mentioned were a large part of this strategy and removed a considerable portion of expenses from our cost base.
We took actions in nearly every area of our business over the past two years to reduce our costs. While some of these costs that are more variable in nature, and will come back as sales return, many of the reductions that we implemented are sustainable, and should lead to improved operating margins in the future as sales recover. The strategic actions we have taken on inventories and expenses have allowed us to right size our balance sheet, improve our cash flow generation, and reduce our outstanding borrowings.
We generated over 200 million in cash from operations during fiscal 2009, and generated over 27 million in the December quarter, which combined with our equity offerings in September allowed us to reduce our outstanding borrowings by 227 million on a year-over-year basis, to 102 million, as of December 31. As a reminder, the only debt we have is the inventory financing through our line of credit. We have no long-term debt, and our own properties are all debt-free.
Let me add a few more details about the quarter and update you on current trends. The December quarter is typically a small quarter and one that is fueled by generally larger boat sales. The units sold in the quarter are usually very low for the industry. This year is no exception, and most reports show the industry is down in excess of 30%.