Good day and welcome to the MarineMax Incorporated First Quarter 2014 Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Shannon Devine. You may begin..

Thank you, operator. Good morning everyone and thank you for joining this discussion of MarineMax's 2014 fiscal first quarter results. 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, and she will then fax or email one to you right away.

I would now like to introduce the management team of MarineMax, Bill McGill, Chairman, President and Chief Executive Officer; and Mike McLamb, Chief Financial Officer. Management will make some comments about the quarter and then be available for your questions.

Mike?.

Thank you, Shannon. Good morning, everyone, and thank you for joining this call. Before I turn the call over to Bill, I'd like to tell you that certain of our comments are forward-looking statements as defined in the Private Securities Litigation Reform Act.

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. To start, I want to congratulate and thank our team for delivering our ninth consecutive quarter of same-store sales growth. The industry data in the quarter showed continued signs of recovery but also some ongoing choppiness especially in our core sectors.

We have learned that this recovery cycle has its ups and downs but generally it keeps trending up.

That said, what encourages us is that is unlike many other traditional retailers who experience challenge traffic and soft holiday season results and cited related weather issues, we actually drove a 9% same-store sales increase on top of the 8% from the prior year quarter. Our overall revenue grew about 11%.

Our solid sales growth came with meaningful improvement in our gross margin and our year-over-year loss per share was reduced by more than 22%. I'm encouraged by the progress we've made but more energized about the future. In particular, I want to provide some perspective on the ongoing recovery the industry is experiencing.

The recovery first started in the aluminum segment around 2010, which is not a material part of our business. After aluminum, the outboard fishing segment started showing industry wide improvements. This is more relevance segment for us than aluminum, but less important than the stern drive and inboard boat segments.

Both the aluminum and the outboard fishing segment continued to experience good growth industry wide although the data in the December's quarter showed some unevenness. In 2013, periodically the key stern drive and inboard boat segments began showing industry wide improvement in certain size categories.

Although the recovery has not been consistent across all categories, it is encouraging to see that's very important part of the industry beginning to find its sea legs. In particular, large inboard boats seem to be showing the best consistency for a sustained improvement.

I wanted you to have this general background of how the industry recovery has been unfolding. It's also important to recall that nine quarters ago we began to see modest units growth on an apples-to-apples basis in the products we sell including the key stern drive and inboard categories.

While our performance has certainly been varied through this latest cycle we believe our strategies, our team, the brands, and our formidable balance sheet have allowed us to stay ahead of the recovery curve.

In particular, we've seen reasonable strength in every category of products we sell when we have relatively new boat models that are innovative and priced about right. In some cases, with new models, we've even had a hard time getting enough boats to meet the demand, even in the stern drive and inboard segments.

It is important to note that the industry's leading manufactures are investing again in R&D. We believe based on our experience and then confirmed by industry data, new innovative and stylish products are selling best.

Well what is most encouraging for us is that our core suppliers have many new models coming over the next 12 months and even more in the foreseeable future. This should help to push demand and drive additional sales and growth. The new product is coming exactly as the industry is gaining stability, which can only help.

Essentially, when manufactures accelerate their efforts to bring innovation and value back to the market, it propels customers back into the new boat market and demand strengthens. Let me spend a few minutes discussing our effective pricing strategy it has contributed to all of our continued consolidated margin expansion.

Our pricing philosophy that we've implemented last year is called One Price. As we have shared previously, the basic premise is that we believe that our customers have the right to our best price, but we are also committed to protecting and enhancing our margin so we are able to deliver the MarineMax experience.

While we do pay incrementally greater commissions to our sales teams, we have expanded our margins. Over time as the One Price program matures we should see even greater margin benefit.

That's while the program is only a few quarters old, we're pleased to have generated additional margin growth and are excited about how well it's been embraced by our customers as they -- as a better way to do business. From a boat show perspective, we're in the beginning of a busy boat show season.

Thus far results validate our belief of a continued industry recovery, which is supported by positive outlooks from our customers and prospects. As is the case each year show performance varies from market-to-market. Weather has also played a factor in some shows with some serious weather impacting certain markets.

Having said this, we believe attendance will continue to soften at shows as we are seeing the Internet playing a bigger and bigger role in new products research and understandings, which lessens the importance of shows in the minds of the consumers.

Thus we have been investing greater in our online presence for past few years, as well as doing more and more on the water with our customers. In the quarter, used boat pricing remained solid at or above pre-recession levels and the supply of late model used boats is low due to weak new boat sales over the past six years.

We remain positive in our expectations and based upon history this would result in customers moving more and more into new products. From an inventory perspective, as we enter our business selling season we are comfortable that our broad product selection in our segment should result in ongoing sales growth.

The new boat categories that we have added since the beginning of this downturn allows us to provide additional boating solutions for a greater number of customers while leveraging our stores. MarineMax Vacation, our charter business that we launched about a year-and-a-half ago, continues to make progress.

The charter portion of the business is building and we expect the sale of products will follow as we move forward in this endeavor. The opportunity to cross-pollinate this offering with our database of customers should lead to additional charters, sales, and greater interactions with our customers.

While it is nice to get some leverage in the business during the quarter we are committed to striving to obtain more. We are a customer-centric customer and we understand the importance of always taking care of the customer and that will never change.

We also need to continue to find ways to leverage the improving sales and drive even greater bottom-line improvement. And with that update, I will ask Mike to provide some more detailed comments on the quarter.

Mike?.

Thank you, Bill. Good morning, again, everyone. For December quarter, our revenue was over $109 million, up about 11% from the prior year. Our same-store sales increased by over 9% following an 8% increase in the same period a year ago. That has been the case off late.

Florida led our growth but interestingly New Jersey had very strong year-over-year growth. This could be a good sign for the northeast as the recovery from Hurricane Sandy has finally begun. We saw growth in other markets as well. Generally, larger products from the inboard boat segment propelled our growth as did outboard fishing product.

For the quarter, we grew gross profit about $3.6 million or about 14%. Gross profit has a percentage of revenue increased to 27.3%, which is among the highest we have ever had in December quarter.

The increase in our margins is worth mentioning because as boat sales rise, consolidated margins has traditionally been pressured since boats carried the lowest margin of all of our business categories.

The increase in gross profit dollars and overall margin expansion was primarily the result of increased margins on boat sales generally across all product segments that we carry. SG&A fell slightly as a percentage on a year-over-year basis but was up in absolute dollars.

As sales and gross profit dollars rise, certain expenses like payroll and commissions typically increase as well as a few other areas. Given the rise in gross margins commissions increased greater than they have historically. The main other item that increased unusually this quarter on a year-over-year basis was insurance.

In this bucket, I will lump all the insurances. We are up about $700,000 on a year-over-year basis. Health insurance, which was tracking much higher for parts of fiscal 2013, was higher year-over-year but much improved from those peak levels.

Going forward, we begin the anniversary expense increases we experienced last year, which means the potential exists for even greater flow through to the bottom line and sales growth.

Nonetheless, we continue to work to attract every expense line item and improve processes that may add to enhanced efficiencies to allow us to continue to grow and improve the performance of our store base. For the December quarter, we had no income tax benefit.

Our effective tax rate will remain essentially zero for the near term primarily due to the availability of substantial net operating loss carryforwards, which are fully offset by valuation reserve. On a year-over-year basis, we reduced our loss per share by just over 22% to $0.14 per share from a net loss of $0.18 per share in the prior year.

Now, on to our balance sheet at quarter end, we had approximately $16 million in cash. However, we had substantial cash and liquidity in the form of unlevered inventory.

Inventories were up about 5%, which is driven by the product expansions we have done over the years as well as growth in our charter fleet and the BBIs, plus we brought an additional product as we prepared for the upcoming selling season.

Turning to our liabilities, our short-term borrowings increased $2.5 million or 2% year-over-year due largely to the increase in inventory and the timing of payment. Sequentially, customer deposits increased 23% from September but fell on a year-over-year basis due to the timing of deposits on large orders.

As we have said, deposit activity can be very lumpy given the size of boats that we sell. But based on our experience and as generally supported by industry data large boat activity continues to be gaining steam.

We are one of the best capitalized companies in the industry and our well-positioned balance sheet is being supported by increasing cash flow from an improving sales environment. We ended the quarter with a current ratio of 1.74 and total liability to tangible network ratio of 0.71. Both of these are very strong ratios.

Our tangible net worth stands at over $220 million. We own more than half of our locations which are debt free and we have no other debt other than our inventory financing.

Before giving a current perspective on our business, I want to remind you that in the March quarter last year, we were able to generate a 12% same-store sales growth which was on top of 26% the year before. So we are now up against two consecutive double-digit comps for the quarter.

Also this quarter is interesting in that the month of March is usually the biggest January and February combined. With that said, January will finish ahead of last year’s January, which is another nice data point. However, we still have the bulk of the quarter in front of us. And with that, I will turn the call back over to Bill..

Thank you, Mike. We continue to be excited by the fact that we are truly well-positioned to benefit from increasing sales of new boats. What is really extraordinary is that we have been able to drive growth in sales and improving cash flow without our core segments all are participating in the industry recovery.

We are entering the boating season that is historically our strongest and we continue to be encouraged by our customers’ enthusiasm and energy about the upcoming boating season. It is our job to work hard and translate this into additional sales and with our new approach to pricing we believe that we can capture additional margin dollars.

With our big selection of new products and our commitment that helping customers and their families realize how boating with MarineMax can positively impact their lives, we know we can provide that one-stop solution for all of our customers' boating needs.

Our retailing strategy completely embraces our customers and helps them enjoy their boating with their family and friends. This approach continues to provide us with a competitive advantage.

We also look to continue growing the business through selective and accretive acquisitions as appropriate to add strong markets to complement our current base of 54 stores.

That said, the terms must be compelling and contributes to the same levels of profitability for the company considering that during 2006 and 2007, 50 of our current 54 stores contributed to over one billion of our sales. MarineMax is the industry leader and it's our intention to continue to build on that position in the coming years.

Again, I would like to thank our team for their efforts during the quarter and their ongoing commitment and passion for our customers. Their commitment is driving our success. And with that operator, we would like to open the call up for questions..

Thank you. (Operator Instructions) And we will go to our first question from Jimmy Baker with B. Riley & Company..

First, just wanted to touch on what you're seeing from your dealers and your customers in the northeast that were so impacted by Sandy. I know you called out improvement in New Jersey. Is the infrastructure impacting your customers their largely repaired.

Anything else you can point to that kind of gives you confidence that region could be more of a tailwind into the spring selling season. I know your same-store sales were pretty severely impacted there last year..

Yes, as you mentioned Jimmy, and as you're very aware the infrastructure was not in place last year and we had hoped that it would even though our stores were back up and running and performing pretty well as far as being able to service our customers and deliver boats, et cetera, a lot of our customers were still rebuilding their homes or rebuilding their business or in some cases they were saying oh my gosh, I'm a little concerned about boating and where do I go that restaurant is now back open et cetera, our destination.

So that being said, we're seeing some very good improvements in that market, we started off with Atlantic City Boat Show in fall and we saw customers returning and we continue to see that.

So I think that this year, even though we won't be capitalizing on all the people that lost their boats or had severe damage to their boats, I don't think it will all happen this year, but I think over the next two to three years we will see a very good market there and a lot of opportunity.

So our team is very excited about what they're hearing from the customers and I think a lot of our customers are involved in the housing industry or construction business in one way shape or perform and as such they're very busy right now, which was part of the challenge last year as well and but also their wallets are getting a little bit better as a result of that business.

So we're encouraged. New York and New Jersey -- I mean, New York and Connecticut that were impacted some, we had a pretty good year with them last year and I expect to see the same thing going forward this year. I will be at the New York Show was not a good indicator with --.

New Year's weather..

Starting on New Years and two of the five days, the Mayor saying you're taking your life in your own hand to get out on the street. So but we still had a fairly decent show given those factors..

Yes, that's helpful. It does see my traffic has been up at most shows so far this year when weather is permitting which is promising.

You've spent a lot of time over the past few years talking about outboards taking share from stern drives early in this recovery and then now it seems like we're seeing some more compelling jet boat product come to market as well.

But I just wanted to ask, and I know you're big here Bill and I was seriously impressed with your birthday, they were putting video you share with customers, but I'm just wondering if you're seeing more customers demanding the tournament tow boat products for wake surfing really exploding sport in our industry that that can be done safely behind stern drives or outboards?.

The -- well, first of all thank you for the complements on the video and I'll try and do a better job next time Jimmy, but we took on the Scarab Jet Boats brands and we're launching that across the country to bring in more entry buyers into the business and well we think that's a very good strategy.

If you look at what's going on for people with their toys behind the boats, where it shifted from free event scheme, which is more what I was involved in over my career installing the boat and then doing it and it's still active out there.

It shifted to wake boarding and now it's moving into wake surfing and there you're behind a boat at 10 to 10.5 miles an hour and it's part of everyone in the boat enjoying the same experience, because they are within 15 feet to 20 feet behind the boat. And so that part of the business is taking off and right now it's only with inboard type boats.

And so therefore the competitive boats that we -- that are out there we sell the NATIQUE and we're selling Malibu in certain of our markets also. And so that market is doing very well and it's doing very well for us as well.

With the stern drive it is an issue; I can tell you we're working on something to address that, but we can say -- continue to see that part of boating growing because it -- there has been a shift during these times to more day boating and more getting the family out there for the day and everyone involved in this boating activity and a lot of our stern drives do exactly that.

And there is a lot of -- there's advantages to outboards, there's advantages to stern drives, there's advantages to jet boats, and in a lot of cases they're buyers. And so, well, we see all of the segments continue to improve..

Just last one for me and I'll get back in the queue. Can you just talk about the lead times you're seeing in some of the larger stern driving work product? Do you see that as a hindrance at all here in '14? And just as a housekeeping item, can you give us the CapEx and D&A expectations for the full year? Thanks..

I can address CapEx and D&A. When you think about maintenance CapEx for us we're around $5 million give or take a little bit every year, and D&A is around $6 million roughly, so $1.5 million a quarter roughly. And that's just maintenance if we end up -- decide we need to buy a store or something like that that'd be above that.

Lead time some of it depends on the demand of the boat how far I tend to be honest --.

No, as an example Sea Ray came out with their new 350 SLX which is a great big, huge, just a fantastically well-designed and engineered product with unbelievable results. And we sold a lot. And quite frankly, the first ones haven't even rolled in yet.

And so as Sea Ray gets them launched into manufacturing in a big way and we'll see some of that sailboats orders getting filled and we will also get inventory into our -- into the field and into that hands of the consumer a little bit quicker. What's good is that Brunswick has responded. Sea Ray has picked up the production on it.

And the one thing that we admire them for is they're going to make sure the boats are right before they give them to it and that's exactly what they're doing. And so they've done their homework and the product is just absolutely incredible. There's other models that are exactly the same way. At the Miami Boat Show we got a new 65.

I saw the boat yesterday. I was over at Sea Ray's product development engineering. I saw the boat and they've run the boat. I've seen shots of it running and it is a game changer. I also saw a lot of new products that blew myself and a couple of my team members away.

And so they truly have their act together and we're going to see a lot of very good product and it starts coming out. And even more competitive products that will fill us some of the needs that we needed for quite a while here, so we remain very encouraged.

One of it as far as inventory level one of the things we were a little aggressive on and I think it was a right strategy well no more after the boat show is that, we're making sure our inventory is such so that as the demand is there and understand we're just really starting into the boating season because coming off the holidays that and that we know we've got a habit, because the manufacturers are not going to be able to respond to big increase in business if it happens.

That being said, we have the ability to adjust orders coming in beginning in March or so and April if we don't get the results out of the shows that we're expecting. So well we feel comfortable with inventory and we're that concerned other than just a couple of models.

But the excitement over some of the new models is so great Jimmy that people are going to wait that's not an issue because they are wild about the product, and they're going to be happy to get it even if it's midsummer..

(Operator Instructions) We will now take our next question from James Hardiman with Longbow Research..

Just a quick follow-up actually to that last conversation, may be you made the point that at times it's been kind of hard of getting enough boats to satisfy demand in some categories.

How much of a drag has that been over the past year? I guess the point you're now making is that meaningfully better, I feel like that's may be was an under told story during calendar '13.

How significant of a benefit is that to you this year if you're able to fill that demand and may be how much of a negative was it for you in '13?.

What I think the bigger picture is what you're hearing from us and I think you're seeing it from others in the industry is new products is selling it's selling well, customers want it and when the products are introduced that have -- that are innovative in some way and they're at about the right price points, the manufactures need to be thinking greater about what’s going to happen to retail sales because the pent-up demand; it's even been surprising to us.

I mean we've been living through this the last six years but you look at our numbers you look at competitive numbers, you come out with new models, you look at what we are talking about the new product that we have coming out.

It’s a real exciting time for the future and I think as the products are launched you probably going to hear similar comments just it takes time to get the products integrated up to speed. I think it’s a real good problem at the end of the day. I mean, this is going to drive margins higher. It’s going to drive sales higher.

I think you will see the stern drive segment experience greater growth as the products come out. So we have had certainly some challenges in the last 12 months. We are having some challenges now because of the demand and people putting their hands up. But it’s got to be good side of the story..

Correct..

Are you there, James?.

I’m sorry. Had it on mute, sorry guys. Along those same lines just talk about the relevance of innovation, I think a boat is really complex piece of machinery, I think for those of us that aren’t intermittently involved on a daily basis, a lot of this stuff, the new products starts to sound like noise.

But I think Bill you called out the three 350 SLX, you called out 65 Fly.

What it is about these boats that getting people excited about their product over a comparable, I don’t know, you know if it's there -- there would be a comparable, but over a late model used boat?.

We all know the story of Zeus and how it has really made a big difference for consumers with the joystick docking and that type of thing. But if you look at the new products, the entry must start with a 350 SLX. The 350 SLX we did not have a product that competed in that size range of day boat. And but a lot of our competitors did.

So yes, we lost business last year if we didn’t have the product. But that being said, we are absolutely killing it with a new 350 SLX. There is some new 510 Sedan Bridge and also a Sundancer that it is out now. And it was launched -- the 510 Sedan Bridge was launched at Fort Lauderdale Boat Show with great success.

And we followed out with the Yacht Expo down at Southeast Plantation for customers, and really a very high quality product. And I have been in this business for four years. And I can tell you that no one tells a boat is good as Sea Ray does. I mean it is a premium product and for that reason buyers recognize the brand.

It’s the number one brand in the United States and it goes from 20-feet now to 65-feet with the launch in Miami. And so the quality and the support of not only -- the Brunswick dealers but also from the manufacture is second to none. And so as such that’s huge advantage that we have.

So that being said, we are -- there is other products that are coming. And we have wonderful products that are one, two, three, four, five years old as well to sell. So we are going to keep supporting what we are doing there. Now, we also do Azimut and they run from 38-feet all the way up into the hundreds.

And we are very excited about that product and it's Italian. And there is it’s been a very good success for us especially in the larger products. And we are getting the support and everything we need from them as well.

So we are very happy with our manufacturers and the brands that we have added especially in the fishing boat lines, we are doing Sailfish now in a bunch of markets and we are doing Scout and we've had GRADY-WHITE and Boston Whaler.

And Boston Whaler continues to be a real star for us because of the new and innovative products and that’s a perfect example of innovation. I mean the features and things they have done to those boats are continue just to be very, very exciting. And we start seeing the results out of it. I hope I answered your question there, James..

Absolutely. That’s very helpful. And then, Mike, just a couple of housekeeping, you called out last year’s March quarter difficult sales comparison really the last two March quarters. When I look back, if I recall correctly, the gross margins were down, SG&A was up.

Remind me the dynamics of that quarter, were there some higher promotions in that quarter which sort of let to the deterioration of the modern.

I know insurance and some of those other items were an issue but how should I think about the quarter overall as a -- from a comparison basis?.

Yes. You guys remember last year, I think we called at the tale of two geographies really the winter in the Northern -- really the winter everywhere. But we -- when March started last year retail just was not happening as a general rule. Mostly the north because of weather and the prolonged winter moving right into spring.

And so we got pretty aggressive marketing so which is SG&A dollars we got aggressive being promotional and so forth, which pumped up the SG&A a little bit. But then we also got aggressive in certain markets to get deals to happen price wise also. So we had a some margin erosion and then we got some increased expense kind of a double earning.

Now at the end of the day it drove a lot of business and actually if we look at the market share data for MarineMax for that quarter, we had a phenomenal market share quarter in terms of playing the seed for future tradeouts and future growth. And then we had some of the health insurance increases and all that stuff.

So as we look at this quarter, I think we've got a two year double-digit same-store sales growth up ahead of us, although we are in a recovering industry, so that's not as concerning as it otherwise would be, because the industry is recovering.

I think there is an opportunity for us to do a better job in the expense side of the equation and to get more earnings flowing through from the growth in revenue that we are at least planning to obtain in the quarter.

And if the margin trends continue that we have seen really since the June quarter, I think we have an opportunity to even expand our margin in the March quarter..

We will go to our next question from Mike Swartz with SunTrust..

Hey, just wanted to touch on, I know that in the past several quarters you've kind of had a head win in terms of some discontinued product that that was being removed from essentially the market and you didn't have product that kind of fill in. So that had been a drag to same-store sales.

I mean is that still going on, if so what's the magnitude of that right now?.

So you are talking about there has been some model that some of our core suppliers just stopped building quite frankly. And it's a bigger issue from a unit perspective that it really is from a revenue perspective.

It -- I mean, yes it probably has impacted our top line, but I think the strike in the bigger boats would be, I said it's not fair to say more than offsetting it, but certainly has assisted the company through that period and the model that were discontinued by and large are coming back this summer.

So we won't have them for the March quarter or really for the June quarter, we will start having the fight again in the September quarter..

And then just touching on the Vacation the charters business, I mean I guess in 2013 that that was kind of a negative in terms of profitability as you ramped up and built the boats.

And so I'm just wondering as going into '14, I mean how you look at that from both the contribution to top-line or margin or however I guess you're looking at it internally..

The top line is it's a growing business and we're $585 million last year and growing. So I think in the terms of our top line it's probably not a real material part of the business even in 2014, we will probably start talking about it more as the year is ending.

But it's not going to be a very meaning part it's not going to be a real material part of the top line. Bottom line last year, we did lose money we're projected this year to make the money in the business a little bit money close to breakeven but positive.

As we said in the prepared remarks you see that the charters are going really pretty well and we are expecting the sales of the products to follow after people have been introduced to the business and understand the brand and all that stuff..

We, Mike, we had to build the business and you'll get the fleet sizing up to really justify the operation down in the VVIs and so that's what we were doing last year and that's what we're even continuing to do right now for a while.

The boats are coming there, and as Mike said the charters are going very, very well we're we couldn't -- we're very pleased with response from the customers and many of those customers are our own customers that we sell boats to and we're doing some get away trips down there as well with our customers during the winter months.

So we are very pleased there. But one of the things is a little challenging is if you were going to purchase a boat to put into our fleet yourself for your family and put your name of choice on the back and we're going to maintain it, and we're going to basically make your payments for you for that five years, you're first on a charter.

And so that's been probably the biggest challenge is that people said well, I'm very interested, I love the boat.

We're going to have 48 private merchant at Miami, which we believe there is a good market for here in the States for private individuals and we've got a new 44-3 cabin that first one is off this year and is going to be in the Miami Boat Show as well and those -- so we got a lot of interest, we got a lot of people that are saying I want to do it.

But I need to get down there and experience it.

So I think it will continue to grow, but to Mike's point, I don't think it will be a meaningful contribution to revenues or to bottom-line this year and as he said we're focused on make sure we make a little bit of money it rather than losing some money like we did last year as we invested into the business..

And then if I can just follow-up with one more, you've made some comments about just in terms of some of these new products coming to market just the margin profile as more favorable.

I'm just wondering if that -- does that have more to do with your new one-price strategy or is there something just structurally different about these boats that allows you to get more margins on them?.

Right. It’s a combination of both, Mike. Excitement usually means more margin.

And also with the one-price you get people out of negotiating, and the interesting thing, and I think I said this previously so bear with me just a minute, that we did some consumers focus groups and studies and we asked consumers, do you want to negotiate and if you have provided that question, they will say yes, I want to negotiate.

But then when you drill into it, they really don’t want it. I mean what they want to do is, just get your best price. And so our team is focused on that is our best price. And our sales team knows it. And we relate that to the customers, we go through the process.

And if you have done your homework right and you have created the excitement and you have created the relationship with that customer then it's not about price and its more about the experience. And so -- of ownership and what we do to contribute to that.

So the new products when you are in demand take the 350 SLX that we talked about this morning are you can't get them. We got a bunch of them sold. So it's going to be a while to get them. And so it will command greater margins than products we have in stock as an example. And we price accordingly with our one-price.

So we are anticipating margins to continue to get a little better. As we work our way through it, but as we said, to get this going and get our customers, I mean, our team members focused away from price and more on the experience which is really what it's all about we had to pay extra expense on commissions to do that..

Okay. Now, we will take our last question from Greg McKinley with Dougherty & Company..

Guys I just had a couple of questions on understanding the numbers a little bit better. So this may sound a little simple but why would revenues grow at a higher rate than same-store sales given no change in store count..

It has to do with the timing of what’s been opened and closed year-over-year. And I'd had to go back to look to the store count roll but we have stores that are not in the mix that’s all..

Okay..

Greg, I can look through the more detail and go through it --.

That’s fine. I wasn’t sure there was any -- I wasn’t aware that they were stores that weren’t in the comp base so, okay, that makes sense..

Let me give you an example. So we bought the two -- Daytona and Orlando last year we bought that March 1, that will not be in the same-store sales count, which we must have closed two small stores sometime during the last 12 months because I'm sure we did -- I don't remember which quarters they were to tell you exactly which ones..

And then on accrued expenses those looked like they're just a lot lower sequentially or lot more than they had been.

Anything notable there?.

Timing of payroll accrual which can be very meaningful is probably the single biggest item as well as insurance payable. So a lot of it is just the timing of when those items were paid this year versus the last and when payroll sell are the biggest items that were in there that changed year-over-year..

And then just getting back to a topic you guys addressed earlier and that is the variability of operating expenses as you ramped revenues and gross profits in the business, I guess I've worked that in a couple of different ways how are those revenues -- how are those expenses varying with revenue growth and then how are those expenses behaving seasonally as the year progresses.

I sense from -- there's been high variability in those expenses last a couple of quarters, so maybe profit delivery even with the strong revenue growth profit delivery hasn't been as strong. My sense is that that there may be an opportunity for that to change.

Just given your comments and maybe some more or call it easier comparisons, if you will, can you address should we expect a changing cadence of the way those expenses are growing as seasonal sales ramp this year?.

The answer is that we should that as once you get through like a breakeven level covering your cost and then start adding meaningfully adding revenue or expenses we ought to get considerable leverage back in the business.

Last year, when did not in the March quarter was due to some specific items, health insurance and marketing and some other items, and health insurance and some other continued throughout last year. And today sitting here we don't know for sure how this year is going to play out. We're in a new year.

The actuaries have looked at things, again there -- last year they say was an abnormality, things look a lot better projected for the current year. We're three weeks into the New Year, so time will tell.

Historically, the company just as a rule of thumb for every dollar revenue that we would add beyond break even $0.15 or really more would drop to the bottom line and that did not happen last year. It happened reasonable well in 2012, did not in '13.

I think we had one quarter when we had 22% flow through I think in the September quarter which was again we had some improvements and expenses versus increases in expenses.

So we're very focused and bent, if you will, on getting the company's traditional flow through back in place and pretty confident we will get there with the one caveat being health insurance. But again we start a new year and the actuaries tell us that things should be okay this year, so time will tell..

We'll take a follow-up question from Jimmy Baker with B. Riley & Company..

Just wanted to get a little bit of clarification on the new verse used mix heading into '14 here. So if I dig through the 10-K filed last month you showed really strong used boat sales growth, actually much stronger than new boat sales growth.

I don't know, I mean, I know you don't break that out on a quarter to quarter basis, but how should we expect your used boat sales to track relative to new and in 2014 given that's largely a trading driven business for you?.

I think it's going to be about a same percentage of our business as it always is.

I think as sales ring up right so that you're taking on more trades so like technically the sales were ramping in '12 we're taking trades that sold in '13 and then as sales ramped in '13 we were selling those, you kind of get a compound you get going on, which is going to continue to happen as we move through this recovery.

When you're a dealer and you just say you take trades and roughly the boats you take a trade on really don't change much from year to year, what percentage of new sales have a trade don't change that much from year to year.

And so on a prolonged basis your used revenue is typically about the same percentage of your overall revenue except for in a recovery market like we have now, it should keep going..

But what's good about the times right now, Jimmy, is that it's easier to take those trades because the value of used boats has improved for two reasons, one is there is not repos and that type of thing going on and the dealer failures are flooding the market than we had going back then, and also the fact that there weren't that many new boats sold over the last six years or so.

So that's encouraging..

And then just lastly, are you taking deposits yet on the 580 or 650, and when would you expect to be actually delivering those new offerings?.

We are in the sales process selling the boats right now. As an example on the 650 we had a customer over a couple of days ago to look at one. And so we are taking orders but the 650 is out there a bit before we will be delivering and it will be towards the latter part of this fiscal year before we get the first one..

I'm sorry, the 580?.

The 580 really comes after that, but the answer is yes. We had interest from customers and are showing the boats and taking deposits on those..

And that does conclude today's question-and-answer session. I will now turn the call back to Bill McGill for any additional or closing remarks..

In closing, I would like thank all of you for your continued interest and supporting MarineMax. And Mike and I are available today, if you have any additional questions and I think we're off to the boat shows and events to making it happen. Thank you..

And that does conclude today's conference. Thank you for your participation..