Brad Cohen - ICR Mike McLamb - CFO Bill McGill - Chairman, President and CEO.

Jimmy Baker - B. Riley & Company David MacGregor - Longbow Research Steve Dyer - Craig-Hallum Capital Group James Hardiman - Wedbush Securities Joe Altobello - Raymond James Michael Swartz - SunTrust.

Welcome to the MarineMax Fourth Quarter and Full Year Fiscal 2016 Earnings Conference Call. Today’s conference is being recorded. At this time, I would like to turn the conference over to your host, Brad Cohen. Please go ahead..

Thank you, Operator. Good morning, everyone. Thank you for joining this discussion of MarineMax’s 2016 fiscal year-end fourth 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 e-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 and Mr. Mike McLamb, Chief Financial Officer of the Company. Management will make some comments about the quarter and then be available for your questions. With that, let me turn the call over to Mike..

Thank you, Brad. Good morning again 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 by 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. Good morning everyone. I would like to start by thanking our MarineMax team for another year of industry leading revenue and earnings growth.

Our team was able to successfully build upon a strong prior fiscal year and in 2016 produced increased revenue in excess of 25% and for the second consecutive year generated same store sales growth of 22%.

These are very strong results over the past 24 months well what is more exciting is that our pretax earnings for 2016 came in close to doubling for 2015 and we believe we can drive even better earnings performance in the future. Our growth is currently driving meaningful market share gains.

This is partially due to the significant brand and segment expansions we completed over the past several years and the new models that our manufacturing partners that developed which is stimulated demand and our industry leading results.

Importantly the approach and commitment from our team to exceed our customers' expectations is a key driver to our growth. This is fundamental to our core operating philosophy and is ultimately what has and will continue to help sustain our growth and administer leading performance as we move forward.

Specifically our team produced a comparable earnings per share increase of more than 85%, supported by our strong same store sales growth. While overall our results for the year were certainly impressive, in the fourth quarter we work to align our inventories with the most favorable aging and model mix possible to satisfy us up for a strong 2017.

Albeit the inventory focus pressured margins as we made way for the newer models. We're not seeing signs of the industry in a discounting mode, nor do we feel the industry is heavy in inventory.

Arguably it is light in certain categories including larger products which gives us a competitive advantage heading into 2017 as we see strong trends continuing and we have great products coming.

We also had a handful of boat [ph] shows move partially or entirely from October into late September shifting the cost into the fourth quarter without the benefits from all the sales contracted at the show.

Accordingly while we have still produced strong fourth quarter same store sales growth of 12% on top of the 17% we generated the prior year we believe our earnings and cash flow could have been higher. We also know that some larger deals got pushed into the December quarter either due to timing or delay arrival dates on incoming products.

Nonetheless our comparable fourth quarter diluted earnings per share was $0.18.

Gross margins during 2016 were largely weighed down by a mix shift to a larger boats, however on a brand by brand bases new boat gross margins generally did well with back to back years at 22% same store sales growth at higher margin businesses have fallen modestly as a percentage of revenues which is also pressured on consolidated margins.

From a trend perspective in addition to the longstanding strength we have seen in larger boats the other very important element is the ongoing migration to outboard powered product in coastal market it sure seems that it's fast becoming the chosen power for many, obviously the outboard power fishing boat market is seeing strong growth but now more and more recreational bay boats are being built with Outboard Power.

This is making some of the comparisons using the registration data a bit more difficult but rest assured recreational day boating is very popular but many of the boats now have an outboard engine.

Consider that a few short years ago our primary Brand Sea Ray built no boats with Outboard's as we move into 2017 most of the models 35 feet and below now have that option which should help us drive additional demand and growth.

We're also entering the high season for MarineMax vacations our charter business in the British Virgin Islands that we launched a few years ago. We continue to benefit from the private sales of the power catamarans which we contract manufacture.

The revenues from these initiatives is still immaterial to MarineMax on a consolidated bases partially due to incredible growth we've had, but we expect to build on the successes we have created in this business. And with that update I will ask Mike to provide more detailed comments on the quarter.

Mike?.

Thank you, Bill. Good morning again everyone. For the quarter our revenue grew to more than $227 million driven by same store sales growth of 12% which is on top of 17% last year. During the quarter each month produced positive results.

Florida continues to be a leader for us in terms of growth but most markets did well in the quarter with the Midwest standing out as the second strongest. The same store sales growth was about 55% unit driven with a difference coming from an increase in average unit selling price.

We grew gross profit dollars over 8.4% but our gross margin declined to 24.8%. We understand that gross margins remaining a meaningful opportunity to complement the strong same store sales growth our team is delivering. We do believe that we are positioned for future margin expansion given our improved aging levels and incoming new models.

Selling general and administrative expenses were $49 million for the quarter with comparable SG&A as a percentage of revenue improving to 21.6% As Bill mentioned during the quarter we had three boat shows move October last year to September this year increasing our costs without the ability to close most of the contracted deals.

We also had elevated compensation costs related to the strong overall year as well as a few other smaller increases and incremental additional cost associated with some of our property investments in 2016 that will yield improved results once fully operational. I will talk more about those investments in a minute.

Lastly adding Russo this year adds to the absolute dollar increase in our SG&A. For the quarter interest expense was up slightly year over year as a result of increased borrowings from additional inventory to support the growth in sales.

Two things occurred in taxes that require mentioning, first as noted in the press release given our strong year in the fourth quarter we reduced our deferred tax asset valuation allowance by another 1.1 million.

Also as all companies are required to do we adopted new accounting rules around equity based awards in essence the new rules require that the difference between book and tax expense for equity compensation be reflected as a change in the tax provision previously these changes ran through equity on the balance sheet in the future this accounting rule can positively or negatively impact companies tax provisions.

Basically a rising stock price would reduce the provision, a falling stock price would increase the provision. The rule added about $0.02 to a reported earnings per share in the quarter and $0.01 for the year. This is a recurring item that will be something that will rise in companies from time to time subject to materiality.

From a broader perspective we do not expect to pay any meaningful taxes until we absorb our remaining NOL's and other deductions of about 21 million. However we are required to provide a tax provision and our ongoing rate should be about 38.5%.

Net income for the quarter excluding the deferred tax asset valuation allowance reversal of $1.1 million or $0.04 per diluted share was $0.18 that compares to a comparable $0.13 for 2015 excluding the allowance reversal of 27.4 million and providing a pro forma tax provision to 2015.

For the year a few key highlights include that our revenue increased over $942 million driven by 22% same store sales growth of which about 55% was driven by an increase in average unit selling price. Pretax earnings were $34.8 million compared to $20.9 million last year which included a $1.6 million gain from a real estate transaction.

Absent that gain the company's pretax earnings grew through more than 80% in fiscal 2016. Comparable net income grew 85% to $0.87 per diluted share. For our balance sheet at fiscal year- end we had over 38 million in cash. As a reminder we had substantial cash in the form of unlevered inventory.

Our inventory at year-end was about 322 million which was up 18% over last year which is lower than our 25% annual revenue growth resulting in continued modest improvements to inventory returns. Increases to property and equipment is primarily related to the Marinas we acquired in Pensacola and St.

Petersburg, Florida along with the continued build out of our Fort Myers Florida Marine that we acquired last year plus the Russo Marine acquisition in the Northeast. Turning to our liabilities our short term borrowings were about 167 million at year-end which was up due to the increased inventory and timing of payments at our line.

While not the best predictor of near term sales customer deposits continue to be up meaningfully year over year with 137% increase to over 30 million which is by far the highest September level we have had in a very long time and it is the third highest of all time regardless of the quarter.

Generally we believe larger boat sale should remain strong for the foreseeable future which tends to be the biggest driver to this line item. We ended the year with a well-positioned balance sheet, our current ratio stands at a $1.69 and our total liability net tangible net worth ratio is up $0.77 which are both great ratios.

Our tangible net worth is the highest we have ever reported at 303 million or $12.19 per diluted share. We also own about half of our locations which are all debt free. We have no additional long term debt. Turning to guidance we are initiating earnings per share guidance for fiscal year 2017.

Our guidance takes into account that we are up against a strong 25% revenue growth and back to back fiscal years of 22% same store sales growth. Generally industry experts expect another year of mid-single digit unit growth in 2017. Our guidance assumes that based on our history we should outperform the industry.

This coupled with some slight contribution from average unit selling price should result in revenue growth of around 10% plus or minus with the potential to realize more.

With the last two fiscal years of earnings flow through in the high single digits as well as other factors we expect diluted after tax earnings per share to be in the range of a $4 to a $14. This would represent earnings per share growth in the high end of the range of over 31% against a comparable $0.87 we earned in fiscal 2016.

This guidance excludes the impact from any potential acquisitions the company may complete the guidance also excludes the impact from any meaningful improvement to the earnings flow through that we realized in the recent past. Let me provide some additional context for fiscal 2017.

Marine dealers including MarineMax most often lose money in the December quarter, we are up against two profitable December quarters with same store sales growth of 8% in 2016 on top of 45% in 2015.

We also have the seasonal acquisition of Russo Marine that will likely deflate our innings in the quarter as they have historically lost money in the December quarter. As such the expectation should be that we will likely report a loss for the upcoming December quarter.

Of course we will do all we can to overcome that but prudence would suggest otherwise. Turning to current trends as evidenced by our customer deposits, we had a strong backlog to start the quarter and the New Year. October which is wrapping up right now looks to be a positive same store sales growth month.

The Fort Lauderdale Boat Show which starts Thursday is a meaningful contributor to the December quarter and our team is poised and ready for a good show and with that update I will turn the call back over to Bill..

Thank you, Mike. Let me again thank the team for their efforts last year and the continued focus in this upcoming year.

As Mike mentioned tomorrow we are headed to the Fort Lauderdale Boat Show one of the largest boat shows in the world as you would expect we had the largest dealer in over 13 displays with the most impressive new model lineup we have shown today.

It is also the first Fort Lauderdale Boat Show we’re [indiscernible] will be showcased in addition our other brands we expect a good incremental contribution from [indiscernible] as well.

As you can imagine the boat show is a major production, our team is excelled at this show over the years and we expect no less this year especially with the new products on display. We have seen increasing enthusiasm and attendance in the September and October show which is exciting as we enter the show and our show season.

There is no question we make good decisions to expand into new segments and brands over the past year. We’re far more diversified to-date than ever and better able to serve a broader customer base. The accretive acquisition increased our geographic reach on the Eastern Seaboard with the Russo Marine.

Just this past year has also proven to be a smart merger. Culturally it may be one of the smoothest integrations we have ever executed. Our teams operate as if we have been together for many years not just six months.

We remain in discussion with other dealers and we will work to execute additional accretive acquisitions when we believe [ph] the terms the culture and the markets make sense. Our inventories are the healthiest position as it has been since the Great Recession.

This coupled with the continued flow of new models and new technology from our premium brand manufacturers along with our consumer centric approach will help us build upon our already strong market share and ultimately deliver increased earnings and value for all.

With the flow of creative and innovative new products together with positive consumer cost benefits we are positioned top line sales growth. Our customers are actively boating and our getaway events are sold out as our customers seek the boating lifestyle to improve their lives. Furthermore with our team's help an additional initiatives in place.

We expect to increase the flow to increase and enhance our cash flow and earnings per share as we move forward with a balance sheet that is top notch to support our growth and a passionate team determined to provide the Marine new experience to each and every customer.

We believe our efforts to great additional value will continue for the years ahead. And without operator we would like to open the call up for question..

[Operator Instructions]. We will first hear from Jimmy Baker of B. Riley & Company..

Would you look at the backlog vis-à-vis customer deposits at least by our account that’s a highest September level in about a decade and I think you mentioned the third highest on record for any quarter is that purely a function of a higher demand in the larger boat categories or longer lead times playing into that increase and also just wanted to make sure that Russo was in skewing that disproportionately.

.

Yes I can tell you Russo is not skewing disproportionately, they certainly have some deposits in there. I think big picture Jimmy is just fundamentally speaking more to the recovering industry that we're all experiencing.

Our revenue has gone from $450 million to $942 million in five years or four years which is just a fundamental strength of what's going on in the industry.

In our deposits that I am just thinking through what's in there, there is not any unusual lead times or certainly boats that are coming in six months, nine months which is all kind of normal for the boats that they are.

I'd tell you it's more fundamentally just how the industry is recovering and a sign of that more than as much -- there probably is some -- we talk about those three boats shows in September -- we didn't close all those deals there's probably some of those deposits are in that number also but I think even if you strip but that strip out Russo we have a very large backlog in deposit line..

That there were some models Jimmy that were hot models that you know the manufacturers couldn't get to us in time that are deposited that will be delivered later which is part of the customer deposits and many of which we had hoped to receive in some of our northern markets before the fall season so in some cases the customer said I will just wait and do it at a later day..

And then just when you reflect on your fiscal '16 your sales and earnings came in dramatically higher than the initial guidance, are you concerned at all that you had a pretty favorable weather year this year and in much of the country or for 2016 rather and that might have pulled forward some of your sales out of '17 and at least the smaller boat categories and does your 2017 guidance assume any material impact from Matthew?.

Well first of all on '16 to your question, yes the weather was good and we didn't have any major events like Matthew, but at the end of the day '16 was impacted by the fact there were some new hot models especially in the northern markets that we could not get in time to meet 2016 sales.

This year should be much improved and Matthew you know thank [indiscernible] was 50 miles to the west heading up to the Coast of Florida and the Carolinas, but you know that being said the biggest impact it had on us other than deliveries in November that were shut down for over a week was the fact that we incurred significant expenses to prepare for their game.

So even though it didn't come you know Murphy's Law says if you take a gamble on it it will come and so we didn't take a gamble on it and so the team really did a lot of preparation getting him out of harm's way and preparing him and so as a result even though we had some wins and some high tides and that type of thing we had very insignificant damage but I think for 2017 the availability of some of the new hot models especially from Sea Ray are going to have a good impact upon our company because we've got markets that as an example that depend on the SLX models from Sea Ray as an example and we just weren’t able to get them in time for the season.

That we should be able to get this year and we will have them at the boat shows and so we are optimistic about what to 2017 will hold.

Now one key point and you know this very well Jimmy and that is our customers are boating and people that the upper middle class and people that have a lot of discretionary dollars they're spending it and they're out boating, our getaway events are extremely busy and that's encouraging.

We're not hearing a lot of negatives from any of them, we hear them out in the water is as strong as I've ever seen it. So looks pretty good..

Just last question for me, you made several comments or might did as well on this call about cash flow, I guess I think of reported cash flow for you is largely discretionary given the inter-quarter for planned repayments. Is that going to be more of a focus of yours going forward.

In other words that you might elect to put the cash on the balance sheet rather than reduce the floor plan balance and how should we think about all that as it pertains share repurchases and even acquisitions?.

No, I think while we're at net debt which I think for the foreseeable future as a dealer we will taking our cash and paying down our floor plan to reduce our interest expense but what it does when you really look close is the balance sheet is that it ploughs a lot of capital a lot of liquidity onto the balance sheet that can be used for things like share repurchases and things like acquisitions and even buying accretive nice Marines [ph] is that may come available.

So I think our strategy and our direction around capital and cash allocation really hasn't changed, we’re going -- as our earnings continue to improve, our cash flows going to improve. We're going to buyback some shares, we’re going to make acquisitions and look for other ways to enhance the ongoing earnings of the company..

[Indiscernible], Northcoast Research..

This is for you Mike, but I know historically you’ve talked about the flow through rate and I don’t know maybe in terms of 12% to 15% on an incremental -- we’re looking at high single digit.

I was wondering if you could just think back over the last couple of years because gross margin has been an area where one reason or another you just can't seem to stabilize and just as you think about going forward what is it going to take to get the gross margin rate moving in the right direction aside from all the unique things that have hurt you guys in the past and then what do you need to see to maybe bump up close the rate again or how should we think about that going forward or this the new norm? Thanks..

No I don't think it's an new norm, I think it is in that 12% to 17% range and the biggest issue I think not issue the biggest opportunity is really looking forward as Bill said in his remarks and I said in mine, our inventory is really the cleanest, not that it's ever had really challenges or issues but it's the best well positioned starting a fiscal year that we've had in a long, long time maybe even ever and with all the new models Sea Ray gets a lot of press for all their new models but every one of our manufacturers is coming out with new models.

With Sea Ray in some cases last year we didn't have them going forward to '17 we're going to have them, I think we're best positioned right now to have it know improving margins in 2017.

Our guidance doesn't bake that in yet we want to make sure that we've got the right dials tuned in and that we can actually realize those improved margins the other thing that's weighed on our consolidated margins to a degree has been this mix shift to larger product when I'm looking at our business I think larger product is strong and is doing well plus the underlying margins on the larger product are proving year in and year out and I think as brands like Sea Ray and Boston Whaler and some of our other brands continue to grow like they have a larger product will become a smaller percentage of our overall business allowing us to see margins like we used to have and even beyond.

One last point I will mention is when we have back to back years of 22% same store sales growth it does pressure your higher margin businesses meaning it shrinks them as a percentage of the overall pipe, service and parts and an [indiscernible] businesses like that don't keep up with that type of boat growth and so if you have a more normal same store sales growth let's say 12%, 13%, 14%, 15% those other businesses actually catch up and allow you to have higher margins as well as a company if you follow all the math with that.

So I thought we’re very well positioned today as we're heading into 2017..

We were disappointed we didn't get the leverage, the 12% to 15% leverage but quite frankly I'll accept being in a much better position with clean inventory and that’s fresh is a much better position than having that inventory and delivering greater flow through so.

If you look at the two I'll take where we are against giving you that flow through and have more of an inventory issue as far as freshness and aging is concerned and we just had that we've -- consumer today new [indiscernible] and the consumer today it's about the new products, and what's hot and what's going on and you've got to give them a reason to do it and at the end of the day if you've got product it that you needed because of the sales or if it's got it's aged a little bit it's really impacts the margins significantly and so what we've seen is that margins are doing very, very, very well when it comes to the hot new models but it's the fact that we made a concerted effort to say we're going to get this inventory position in a much, much better position for 2017..

Bill, this might be for you, it sounds like you said October sales it's going to be positively, just can you remind us because I know that this is in a grand scheme of things it's not an overall important quarter from a top line perspective you had strength last year on top of the incredibly strong year prior to that.

Within the quarter was December the month where you had the big boats that came through or am I thinking of two years ago? Just from a cadence perspective as we comp against last year..

Last year, December it kind of all happened right at the end but we mentioned the Fort Lauderdale Boat Show which Mike and I are headed to tomorrow it begins on Thursday and it's showing extremely good sign, it sets the stage for the quarter and beyond and helps when business really has slowed down in those northern markets but October right now is looking pretty good and now we anticipate that it's going to be a little bit of a struggle to be profitable in the December quarter but at the end of the day that's not abnormal.

So this quarter is more about trying to minimize the losses and get ready for the spring selling season..

The big boat push you talk about that actually was two years ago where we had the 45% same store sales growth. Just so that you’ve that cadence right, last year our growth was 8%, same store sales growth -- Bill was right it was an important December last year as well..

David MacGregor of Longbow Research..

Just a couple of quick ones, can you just talk about -- first of all the used boat markets, you’ve talked in the past when they shift towards more used boat, what that does to gross margins, can you talk about the extent to which kind of the new versus used mix was influential in the gross margin this quarter?.

Yes, it wasn’t a main driver one way or another in the quarter, used boat mix was fairly in-line actually I will just double check my memory.

So when this year started I had commented that our used boat inventory was down and then I think from time to time one of you guys asked me a question about how is our used boat inventory, our used boat inventory has been modestly down. It will rise in truck order but it tends to end down so we're down a little bit as this fiscal year ends.

So the drag from the used boats is not quite like what it was two years ago. And the used market is fairly healthy right now, margins on used boats in general is pretty decent..

It's still I will call it suffering maybe it's not the right word but you know the availability of late model used boats is still not there because you know the production and sale of new boats over the last seven or eight years has been down and so you know the desire for people to have a two or three year old used boat just not an avatar you have them out there and there's not for us either..

The second question is just on marine lenders and how would you compare kind of the credit environment year over year, how big a difference is this making to sales growth as well as inventory decisions by some of your smaller competitors..

So if you’re talking on the retail side so you know submarine lending to our customer base continues to get better and better and better. There's more banks coming in that are lending to our industry than six months ago.

I would say it definitely is not an inhibitor of business it's a positive thing, I mean rates are low as we know which is probably a positive thing.

However if you track the marine industry the strongest the industry gets is when there's a rising rate environment which makes sense because you the government raises rates to cool the economy at least in theory and that means our customers are making more money and bonuses are bigger and they are buying more boats.

So on the marine retail side things are fine, on the wholesale side there is not a lot of outlets out there for people to get floor plan facilities, if there's not as many lenders and side I'm not sure it is net-net any easier environment, it probably is not it's probably about a status quo environment for someone to buy inventory or to get more inventory.

The lenders who want to see capital or equity in your inventory you can't borrow dollar for dollar like you could before the downturn and so I think fundamentally it's a healthier environment but there's just not as many lenders..

Last question for me is just on this boat shows and you talk about kind of the excitement level going into Fort Lauderdale. Can you just share with us on the few boat shows Tampa and some of the others Atlantic City, New York some of the ones that happened so far.

Can you just share with us any kind of year over year metrics on orders or sales or anything quantifiable that could give us a sense of just how strong the environments comparing year-over-year?.

David, we’re seeing whether it was Atlantic City or Norwalk or New Port or say Tampa, St. Petersburg boat show we’re seeing increased what looks like increased attendance as well as increased contracts written for us. So we're seeing improvement in boat shows not the other..

Yes the Tamp boat show which is obviously near and dear to where we’re sitting here today had a 25% increase in attendance which is very meaningful and it was very noticeable at the show..

Can you talk about orders or any kind of metrics?.

Orders were up very, very strong at the show as you would sort of infer from the comments we made on our call or with our customer deposit line.

I mean the fundamental premise that we've been operating under for a long time now is that the industry recovery is definitely ongoing and moving forward and we have captured more than our fair share of it today..

Next we will hear from Steve Dyer of Craig-Hallum Capital Group..

Within the quarter I was wondering if you could breakout the sales growth maybe between ASP and unit growth what did you see in the quarter?.

Yes, so 12% same store growth, so 55% I should have probably rounded to 60 or 50, but 55% is unit driven, the rest is AUP driven and for the year so we had 22% for the year and it's the inverse is 55% is a AUP driven because of the really the trends we saw in larger boats and then so 45% units -- so our units roughly were double digit for the year and mid to high single digit for the quarter which both of those track greater than the apical of the registration data in some cases almost double what the registration date is for our segments..

And then did you quantify kind of how much money on OpEx shifted for the boat shows between quarters?.

We did not but I can tell you it was around a 0.5 million..

Okay, got it.

And then lastly wondering if you could sort of touch on M&A what you're seeing maybe initially how Russo has gone in and how you would expect that to maybe play out over the next year?.

As I’ve shared it's gone very, very the cultures are -- what I'd call perfectly aligned the way they treat their customers, the way they do business with their customers the way they treat their team members is almost identical.

There's been a real synergy between our companies, there's things we picked up from them that are beneficial to our whole company and there's -- the opposite has been true for them as well.

They're very happy, we're very happy and their team is excited about being part of the MarineMax family and the ability to be able to leverage our inventory and to work together as a team in not only deals but also in strategies and that type of thing, it's like a perfect fit.

So this was a very, very, very good addition to our family and we're very excited about the upcoming years and they enter a very difficult season in the Boston market up there this time of the year because Boston boating pretty well seizes [ph] but you know the ability to be in Lauderdale as part of MarineMax should be a plus for this year as well as Miami and then lots of opportunities to leverage additional products from [indiscernible] Ocean Alexander are all opportunities that they didn't have prior to MarineMax.

So it's going very, very well Steve..

Next we will hear from James Hardiman of Wedbush Securities..

I had a couple of follow-ups here on questions that were already asked. I guess to the deposit number, it was such a big increase how should we think about when that number levels off on a year-over-year basis.

It sounds like you don’t expect it to be even by the end of the December quarter, I think you spoke to some of the northern markets maybe missing the season there with some of the Sea Ray SLX boats and you spoke to October being up but maybe not commensurate with that huge deposit number.

So how should we think about the timing of when that evens out and which quarter is ultimately going to be the biggest beneficiary there?.

Well I guess I can answer that by saying I hope it never evens out, James I will tell you haven't really mapped out what's in there specifically to when it's due to sell recently, what's going to happen is when we get out of Fort Lauderdale this week we're going to add to that deposit line meaningfully and then we'll peel some off so it's kind of hard to answer that.

I think the fundamental takeaway that I read and I do often put the caveat around deposits that you got to be a little careful with the number.

It can be lumpy although it's nice to see it trending up but I think it just fundamentally keep speaking towards the increased backlog that we talk about the recovering industry, the health of the industry that I know you've heard from other public companies as well as us it's hard to get specifics and do exactly when those lines turn but we're -- it would be nice if it keeps building, I guess the short answer is yes..

And let me ask this then, to the extent that I think you mentioned it a couple times the whole Northern region deposit growth and maybe having missed the season.

So is there a significant number of people that have already put deposits on boats that they're not going to get until spring or summer summertime, is there any risk that they would get some of that deposit money back if it was if the non-delivery was sort of a result of just a delayed shipment..

So there are definitely are deposits going all the way out to probably all the way into the June quarter that would be for us specific boat usually it's going to be a bigger boat like when I say bigger 50, 60, something like that and -- but all of our contracts are written with nonrefundable deposits, so if we were ever to give back a deposit which we sometimes do it would be it up to our local management's decision as to what they're going to do with the deposit but there are you know certainly today as we're you know contracting deals in Boston or New York and New Jersey we’re also selling boats and delivering boats today in Boston, New York and New Jersey.

There are some that will get extended into the February, March, April timeframe..

Okay.

And then as we think about the December quarter obviously you had some unusual weather last year in November and December as you lap that can you help us understand if you got if you saw much of a benefit from that unusual weather I don't know if it's warm on the East Coast in November or December, if people are really buying boats as a result of that but as we think about lapping that how should we handicap that?.

Yes I would acknowledge that, I know that on I think Christmas Day in New York City last year I mean people were on the Hudson in kayaks. So yes, it's hard to quantify what the benefit that we receive from that, I would I would assume that we've got some benefit in December quarter from the nicer weather around the country.

We give our guidance, we always put that clause in there other factors. Certainly, I don't think we're assuming that we're going to have quite as favorable as a weather pattern again.

Although you never know it's beautiful around most of the country right now, I think, but that all goes into our caveats around the December quarter and the prudent expectation for a loss for that quarter..

Great, and then just finally, obviously this boat industry just continues to plug away here in pretty stark contrast to some other high ticket discretionary markets. You guys are closer to the consumer than anybody.

Are you seeing evidence of a replacement cycle underway here as boats come to the end of their useful lives? Do you think that's having a role end? Do you have much exposure to consumers in energy heavy markets? Obviously, those are the consumers that may be struggling the most energy and/or you know farm egg-type consumers.

Can you speak to what type of exposure you have to that struggling customer?.

We're in Houston, specifically and Houston has been a good market for us. I think fundamentally a big difference for us versus if you compare to some of the other ATV manufacturers, or motorcycles, or other people that we sometimes get compared to, is the cycle that our industry is in.

It took our industry years longer to really start investing at new models and new product and design and where you could argue maybe we're getting close to halfway through that product revamp although we don't have all those products in our stores to sell.

So I think a big difference between us and other industries is just the life cycle coming out of the recession that has taken our manufacturers much longer as we get these models we're seeing demand unlike anything we've ever seen. We've never seen the demand for models like we're seeing today.

It's extremely strong and that's what's driving our growth today and the industry's growth. It's not so much an end of life boat. A thirty-year-old boat that's being replaced, I don't think that person is coming in our store very often.

It's someone who's been on the sidelines since '05 and '06 when the when the boats didn't change for eight or nine years and now the new models are coming out and they're seeing them, they're buying the new boat.

So I think big picture, comparing our industry versus others and then the type of customers that we're interacting with are people that waited for a little while and the other buy their product. They love it. They want all the bells and whistles on it. They don't want to strip down both. They want it loaded..

And most of our customers are the upper middle class or those with a lot of discretionary dollars. They've got it and in most cases they have more than they had a few years back and so they're spending it and they're spending it on their recreation with their family.

We scratch our head and say, 'Why the right retailers not be seeing what we're seeing?' But our average in excel [ph] and prices substantially differ? I think the demographics are different as well..

That's really good color. I appreciate it. Thanks, guys..

Next we'll hear from Joe Altobello of Raymond James..

Thank you. Hey, guys, good morning. First question, I want to back to the fourth quarter cost you guys mentioned. I guess you did break out the higher boat show cost, $0.5 million.

How much was the increase in compensation expense this quarter versus last year?.

It was up $800,000 to $1 million-ish in that range which is really we have bonus targets, we have unit targets, there's a bunch of different targets in the plans. Through June, the targets aren't achieved.

Through September, they were achieved because ultimately, we had a very good year, which resulted in some additional compensation from the quarterly perspective..

Okay, that's helpful.

And I guess in terms of the quarter just so I'm clear, the $0.18 you said included $0.02 benefit from the change in equity compensation accounting?.

Yes. It rounds up the $0.02, yes..

Okay.

And what's the impact for next year?.

It's really hard to tell. For the whole year it was only one penny. I would expect it will be a penny or two one way or another next year. It's all factored into our guidance numbers.

I don't know if you understand how I explained it but as stock prices rise and team members exercise options or exercise RSUs, the issuing company gets a tax deduction at a higher price which reduces your tax provision now. It used to be that way; it used to go through capital.

Likewise, if stock prices fall, which means your book expense is higher than your tax deduction, that actually will increase your provision -- not reduce it. If you tell me where our stock price will be twelve months from now, I can answer that question well the better..

So if your stock price falls, you have to actually incur a higher tax expense effectively?.

Yes. They beat you up on the way down. That's right..

Okay. And then looking at the next year, you mentioned 10% revenue growth. Obviously Russo is in that number for a full year this show. I think Russo added a little bit over a point.

So I guess from that we should assume comps roughly kind of 8% or 9%-ish?.

No. Joe, thank you very much for bringing that up. The 10% you would add to that, the remainder of the Russo revenue that we don't have, which is about $12 million -- I should have clarified that in my remarks. The 10% is effectively as same-store sales number..

Okay.

So it's 10% comps plus Russo?.

Correct..

Okay. Just one last one. I guess if you look at your business today, the last couple years, the flow-through has been high singles. I think before that, coming out of the financial crisis your flow-through was your more traditional kind of mid-teens.

Other than the shift toward kind of big boats, what's really been the biggest challenge you guys have confronted in terms of getting that flow-through higher?.

I'll speak for Bill and Bill could chime in. I think part of it is us setting the right dials in an unprecedented new product development life cycle.

You would think with everything we've said about the new models coming in, that it would be pretty easy to set the dials and have margins going up, but I think with so many models being replaced and kind of finding that balance between the replaced models and our desires, Bill said, to not have those replaced, those boats that are already being replaced or to be replaced hanging around for a long time, it's finding that balance for me, either the right price point of the new stuff and the right price of the stuff going out.

And from an industry perspective, no one has ever lived through the replacement cycle that we're seeing as an industry. It's extremely significant to all of us right now..

Okay, got you. Thanks, guys..

Thank you..

Next we'll hear from Michael Swartz of SunTrust..

Hey, good morning, guys..

Good morning, Mike..

Hey, just maybe jumping, piggy backing on one of James's questions, just broader.

Looking at your consumer base, is there any sense that you guys have, maybe what percentage of your consumer base is still underwater on prior purchases and maybe if you do have a sense of that, where they are in terms of maybe returning to the market for a new purchase?.

I'd say that I spoke to that the upper-middle class and that market is still very strong. But the lot of the middle class is still struggling and in some cases they may still be a little under with the boat that they have or in a lot of cases they just -- they're willing to go ahead and pull the trigger and move to the next boat.

That part of the market is still all for us, but its being more than offset by those that do have discretionary dollars and with the financing that's available today, it's pretty attractive to most of them.

But yes, there's customers today that still aren't willing because their business or their job pays is such that they're concerned about it, or healthcare cost or whatever it may happen to say, that caused them a little uncertainty or axed but the people that have discretionary dollars is very active and it's probably the strongest I think I've ever seen it and continuous to be building on it..

Okay, great. And then just, Mike, I think you have mentioned a couple of investments you guys are currently undertaking and I think you noted three different locations, either stores in Marinas in the State of Florida.

I guess where are you in the process? Are those locations currently generating revenue? If not, when would you expect to see that?.

Yes. They're all generating revenue today, they're just not fully operational either because slips are under construction or there's permits that we'll pulling to add something to a facility. They're all fantastic facilities and we're very happy about the additions that we've made to them. The one in St.

Petersburg is a little bit of a unique animal, that was the -- we had a joint venture with Brunswick.

And so that entire facility a year ago was treated as an investment on our balance sheet, So the SG&A was not in our books at all as an example, and we bought out the joint venture in I think it was April or March, and so now we have the expense of the facility which we're very happy to have.

And it's going through a complete remodel which is probably not far from being done. But while it's going through that remodel it is selling some boats and doing some service and recognize revenue. .

Are most of those investments capitalized, or most of those flowing through the P&L. .

Now it's well. So most of the repairs and remodeling that we're doing has all been capitalized, the expense comments were around it's there are more expensive facility that's not fully operational. .

And when will most of those be fully operational. .

March quarter..

In the March quarter, okay. That's great that's, that's all from me. .

Thank you, Michael. .

And our final question is a follow-up, will come from Jimmy Baker at B. Riley & Company..

I appreciate you taking the follow up here. I was just hoping you could talk a little bit about what you're seeing regionally in the in the segments that really drive your business.

You're obviously gaining share but the industry wide registrations for Texas and Florida have been underperforming the industry to sure those are such big markets for you and I think investors are just trying to make sense of that with each company that has reported so far seeing gains from those states despite the SSI data. .

Obviously Texas -- I mean obviously Florida has been a strong state for us. Really outboard powered, recreational day bodes, outward powered fishing boats, larger yatch [ph] and larger product has all been very strong in Florida. I think one of the things that certainly causes a lot of confusing, is the stern drive registration data.

In coastal markets and Bill, commented on this really from Houston to you could say Boston, but certainly the coastal markets it sure seems like consumers are desiring outboard power more and more, doesn't mean we're not selling, we do; but that may give it a little bit of the cause some confusion to people looking at the data.

Texas I just looked at our data, I mean we were up in Texas and again I'm going to tribute that to a; a good team.

B, new models coming from our suppliers which I think is helping and so I'm having a harder time than ever Jimmy, reconciling the SSI data with our own results, and I believe the SSI data is right because it's been accurate for five years now or longer, and then, been pretty reliable.

So, I think it's a very important number, which comes out monthly for everybody to watch, who's invested in the Marine business.

But we're certainly seeing good strength and I know that other sea rate dealers are seeing some good strength that other dealers that we that we interact with -- I will say that our results are better than just about anybody's we interact with on a unit level, which take my head up to build the strategies that the company has in place, which is what's driving that winning strategy.

.

Okay, understood. And then just a housekeeping item, were you able to quantify the costs associated with Matthew that hit in the December quarter, or if you have sort of the total impact to given the presumed loss [ph] a business or small loss of business.

Do you have that?.

I don't have it, I would estimate at a couple hundred thousand dollars, to stop the top, but I don't know about the lost business, I think..

I doubt if we lost business. .

I don't think we would have lost business..

We differed is what we did..

Our stores from Ocean Reef which is just south of Miami all the way up to Wrightsville Beach, pretty much we're in lockdown mode, maybe as far north as Baltimore. So, you secure the store but it goes on for a couple days, you get the inventory to a safe location, knock on wood.

We had very little damage to our facilities and really most of our team members that are right as well. A couple and right still had some challenges with all the flooding up there, but we made it through pretty well..

Okay, understood. Appreciate the follow-ups. .

Thank you, Jimmy. .

That concludes our question and answer session for today, at this time I would like to call back over to Mr. McGill for any additional closing comments. .

In closing, I would like to thank all of you for your continued support and interest in MarineMax. Mike and I are available today if you have any additional questions and we're at the Lartadel [ph] Boat Show and hope to see you there. Thank you. .

That has come to safe conference thank you all for your participation. You may now disconnect..