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MarineMax, Inc. (NYSE:HZO)

F1Q08 Earnings Call

February 7, 2008 10:00 am ET

Executives

Brad Cohen – Integrated Corporation Relations, Inc.

William H. McGill – Chairman of the Board, President & Chief Executive Officer

Michael H. McLamb – Chief Financial Officer, Executive Vice President & Director

Analysts

Edward Aaron – RBC Capital Markets

Hakan Ipekci – Merrill Lynch

Steven Reese – JP Morgan

Laura Richardson – BB&T Capital Markets

John Marlow – [Inaudible]

Dustin Waide – Wedge Capital Management

Anthony Lebiedzinski – Sidoti & Company

Operator

Good day everyone and welcome to the MarineMax Incorporated first quarter fiscal 2008 earnings conference call. Today’s conference is being recorded. At this time for opening remarks and introductions I would now like to turn the call over to Mr. Brad Cohen. Please go ahead sir.

Brad Cohen

Good morning everyone thank you for joining this discussion on MarineMax 2008 fiscal first quarter. I’m sure that you’ve all received a copy of the press release that went out this morning but, if you have not, please call Linda Cameron at 727-531-1700 and she will fax or email one to you immediately.

I would now like to introduce the management team of MarineMax Mr. Bill McGill, Chairman, President & CEO and Mike McLamb, CFO. Management will make some comments and then will be available for your questions.

Michael H. McLamb

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 of 1995. These statements involve certain 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 complete and integrate its acquisitions into existing operations and numerous other factors identified in our Form 10K and other filings with the Securities & Exchange Commission. With that in mind, I’d like to turn the call over to Bill.

William H. McGill

Good morning everyone. Today we reported our December quarter results which reflected a net loss at $0.35 per share and was in line with our pre-announcement on January 16th. I want to thank all of our team members for their extra efforts and their commitments to our customers during a very challenging quarter. Despite the difficult industry environment we anticipate that our long track record of market gains has continued. Available boat registration data available through the month of December suggests that industry unit declined by approximately 25% at retail for the segment and regions in which we operate. Having said that, the data that we have is preliminary and it is also limited to a select number of states and subject to adjustments as the data matures. Regardless, it is the largest quarterly decline the data has shown for quite a while and unfortunately, we experienced a similar decline in units in the December quarter.

The markets that we operate in seem to be among the worst hit in the industry particularly Florida and California but also the northeast reported sizable declines. Through the January boat shows we’re experiencing similar declines in units. With these retail trends we are readdressing our expense structure and our thoughts on future purchases. We recently completed a reduction in workforce whereby we reduced our team members by approximately 10%. While this was a difficult decision, we believe it was necessary to tighten our belts in this environment and become more efficient and effective by lowering our SG&A. We have also reached out to most of our manufacturing partners and are in discussions to further reduce purchases as the year progresses assuming conditions do not improve.

While all this sounds ugly, and it is, it is important to note that the increase softness that has hit us in the slower winter months, we believe that with the Fed rate cuts and the coming of the spring and summer boating seasons many buyers who have delayed their decision to purchase a boat because of the gloomy headlines will come back and purchase but we cannot be certain of how many or when. Our data of over 1,000 MarineMax getaway events over the past 12 months shows that participation in boating is at an all time high. Our customers have not lessened their passion for boating with their families.

While retail conditions in the marine industry have deteriorated and we are disappointed to report a quarter of weak sales performance and increased losses, our 50 foot plus yacht business performed relatively well during the quarter. This is generally consistent with what we have experienced over the past 12 to 18 months. The larger boats while perhaps softer than we would like performed better than our smaller products. Smaller boats which make up the majority of the unit sales were indeed slower and led to the decline in revenue. As we have said, it’s hard to pinpoint exactly what has caused the weakness in the industry but the widely reported real estate market and general consumer uncertainty has clearly impacted our consumers’ appetite although not necessarily their ability to purchase a boat. As a reminder, seasonally Florida has been a bigger percentage of our sales in the winter particularly during the December quarter. The softness is Florida which historically represents over 60% of our sales in this first quarter and an amplified impact on the results. We obviously believe that Florida will continue to be a strong market for us in the long term given its substantial boating community but it may continue to receive pressure in the near term given the housing market turmoil in the state.

The current environment has certainly impeded our ability to grow our organic revenue. We made improvements however in managing these items that we can control in order to improve our current financial position and best prepare us when the market turns. In particular our improvement on both dollar spend and SG&A and inventory in the December quarter versus a year ago. The December quarter marked the first time since 2002 that we produced a year-over-year drop in our inventory levels on both a unit and a dollar basis. As we progress through fiscal 2008 we anticipate realizing additional year-over-year reductions in inventory levels subject to the timing of boat deliveries and the sales environment. Although we are uncertain when the industry will turn, we are working hard to strengthen our industry leading position in terms of market share and customer service and we will emerge from this period in an even more formidable position when the market recovers.

Historically, during difficult times expansion has come at more favorable terms. We anticipate that opportunities for us to growth through new brand expansion and potential acquisitions will continue to surface as we work through this time period. It is important that we position ourselves for those future opportunities and keep our focus on the long term.

I’ll now ask Mike to provide more detailed comments on the quarter.

Michael H. McLamb

Good morning again everyone. As you saw in the press release, our first quarter revenue decreased to $215 million from $234 million last year. While we saw an increase in our yacht sales greater than 50 feet in the quarter, given the construction lead time a portion of this business was contracted in the prior year. Combined with weaker than expected sales of our core products and the difficult operating environment, our same store sales fell by approximately 9%. Keep in mind the December quarter last year had the highest same store sales growth at 14% of any quarter last year. Gross margin as a percentage of revenue declined approximately 170 basis points to 22.4%. The decline in gross margins was primarily attributable to the shift in product mix towards larger yacht sales which traditionally carry a lower margin than the rest of our products. The gross margin on our core products was only down slightly versus the prior year which is note worthy in this difficult environment.

We were successful in bringing our selling, general and administrative expenses down by over 5% or $3 million in the first quarter but with the decline in revenue our SG&A as a percentage of revenue rose 70 basis points to 24.7%. The decrease in dollars of SG&A expenses is due to lower personnel costs including reductions in commissions and bonuses as well as lower inventory maintenance and marketing costs. Interest expense fell over 10% to $5.9 million as a result of lower borrowings on our inventory financing facility and mortgages coupled with the more favorable interest rate environment. Unfortunately, we did not participate fully in the Fed rate reductions due to the timing of the Fed cuts and the date our interest resets as well as the fact that we have a LIBOR based facility. As you are likely aware LIBOR was out of balance with prime for most of the last four months. We expect interest expense will decrease further with the recent rate cuts and the fact that LIBOR has essentially dropped back in line with its prime relationship not to mention less borrowings due to reduced purchases. Our tax benefit in the quarter was $4.5 million which equated to an approximate 41% tax rate for the quarter which is consistent with the prior year. Finally, our loss for the first quarter was $6.4 million or $0.35 per diluted share compared to a loss of $3.8 million or $0.21 per diluted share for the comparable quarter last year.

Turning to our balance sheet, at quarter end we had approximately $23 million in cash compared to $13 million a year ago. Additionally, we had substantial cash in the form of unleveraged inventory as we utilized excess cash to reduce our inventory financing. We ended the quarter with $533 million in inventory which was down $12.4 million or approximately 2% for the comparable quarter last year. As we said on our September quarter call we entered this model year which began on July 1st buying 20% less in units and 15% less in dollars. The drop in inventory at December 31st is essentially attributable to our same store sales decline being less than our dollar reduction in purchases. We have made adjustments which have further lowered our purchases since we last updated you and are in current discussions with each of our manufacturers to reduce purchases even further than we had originally anticipated. We anticipate realizing additional year-over-year reductions in inventory levels as we progress throughout fiscal 2008. However, due to the lack of visibility, the timing and magnitude of the reductions is difficult to predict with accuracy.

Customer deposits increased approximately 19% year-over-year but as we have said repeatedly in the past, our deposits are lumpy and not necessarily reflective of current business trends. Overall, our balance sheet has gotten stronger year-over-year with book equity exceeding $369 million. Our book value per share now stands at about $20 before giving any credit to the appreciation that has occurred over the years in our real estate which we have previously estimated at $60 million above book value. I will also note that our current ratio improved over the year ago quarter as did our ratio of total liabilities to intangible net worth.

Before I turn the call back to Bill, I’d like to remind you that we cannot provide answers to questions regarding forward-looking estimates or specific figures since we have suspended our guidance due to the lack of visibility so, please take this into account when you’re asking your questions.

William H. McGill

Despite the uncertainty surrounding the marine retail environment for the remainder of 2008, I am confident that the future of MarineMax is very bright. We have the leading customer centric business model in the industry and a formidable balance sheet that will benefit us when the industry recovers and we emerge with an even stronger competitive position. As I stated earlier, the most encouraging news is that even with the softness in the retail environment, our customers are boating more and are as passionate as ever for the MarineMax boating lifestyle. At the end of the day, our team and customers’ passion for an escape and a family bonding recreation will endure the cyclical nature of our marine industry. In the 34 years that I’ve been in the busy and I’ve seen the gas shortage, multiple recessions, the luxury tax, high interest rates, the presidential elections, 9/11, high employment, high fuel prices and the stock market swings, the housing and banking challenge is a new one but we believe we will recover to an even greater peak in earnings as we continue to educate, service and show our customers how to enjoy the lifestyle of boating as part of the MarineMax family.

We would now like to open the call up for questions.

Question-and-Answer Session

Operator

(Operator Instructions) We will take as many questions as time permits and we’ll take your questions in the order that you signal us. (Operator Instructions) We’ll pause for just one moment to assemble the queue. We’ll take our first question from Ed Aaron with RBC Capital Markets.

Edward Aaron – RBC Capital Markets

A few questions for you and I’ll tread lightly because I know you’re limited on what you can say about anything guidance related but, in terms of the inventory and the right level of inventory can you kind of give us some sense of the inventory turns that you’re going to be managing the business to going forward?

Michael H. McLamb

Our turns have been in the low twos of late, I say of late, the last couple of years 2.3 times or so. We would like to maintain that level of inventory turn or make it better.

William H. McGill

Or make it better but you can’t, Ed as you know, you can’t adjust it over night especially in a decreasing sales environment which we experienced during the quarter.

Edward Aaron – RBC Capital Markets

Have you already made additional changes to your purchase? Or, is that something that you’re talking about and evaluating?

Michael H. McLamb

I said in the prepared remarks that we made some adjustments since we last updated you. When we last updated you we said 20% down in units 15% down in dollars. We are now modestly greater than that in terms of dollars. It’s not a significant amount greater yet, we’re in discussions with each of our manufacturing partners right now. We’re looking at current trends by model, by unit, by type and trying to make sure with our manufacturing partners that we’ve got the right levels of inventory for the marketplace. I think the important thing is and this is really for everybody on the call, you’re going to hear some pretty big unit declines. We put out there 25% in markets that we’re talking about the dollar declines are less than that. I think what is key is to track our same store sales, which again we don’t have a lot of visibility to what that’s going to be for the next couple of quarters here but the 9% decline in same store sales and the 15% reduction in purchases, you get a reduction in inventory. So, the dollars are what’s going to drive the reduction a lot more than units.

William H. McGill

And, we’re still looking for a little better visibility as if this first quarter was really an indicator of the way things are going to be going forward for the selling season and we should get a little greater visibility when we finish a couple of major shows, Atlantic City that just started, Dallas that will be finishing up this weekend and as you know Miami begins next week which is a very major so. Based upon that visibility is some of the actions that we’ll take concerning orders.

Edward Aaron – RBC Capital Markets

How do you think about, if you’re going to make further changes, how do you think about balancing whether or not to do it for the 08 model year or just wait until the model year change over and maybe order more conservatively for the 09 stuff?

William H. McGill

Well, I think that it’s prudent to make the adjustments earlier rather than later you know being that no one seems to have a crystal ball as to when things are going to get better in the short term or even the long term. So, if we need make adjustments now based upon what we are seeing, further adjustments we will do it but to try to do it next year, the problem with that is the carryover will be too great of 2008 models in 09 which we do not want to repeat.

Edward Aaron – RBC Capital Markets

Understandable. Then last one, Mike just the finance environment, any changes there in terms of the approval rates for one and secondly the extent in which the financing rates have come down?

Michael H. McLamb

In our environment, our industry we’ve never had subprime lenders, I think we said that on the last call. We didn’t have people buying deep from a paper perspective, most of the people who are getting financing are very good credit. We haven’t seen really changes in the relationships that the banks are having with our customers at all from what they’re looking for. From a rate perspective, rates have come in about 75 basis points including some recent reductions since last summer. Hopefully, with maybe some additional Fed action we’ll see some additional rate cuts as well.

William H. McGill

But, the consumer is – what our guess is to what is happening a lot right now is not the inability of our consumers to really make the purchase, it’s they’re sitting there saying, “Geez, I wonder if it’s going to get worse? I wonder if I should wait? And, what’s really the urgency of doing it this time of year? Because, there is some inventory, we don’t have to do it as quick as maybe we did in prior years to ensure we’ll get delivery of the boat.” We’re making sales because the passion for boating really hasn’t changed. We believe that there’s some customers sitting on the sideline right now and it’s not financing keeping it from doing it.

Michael H. McLamb

I think I would add, just seeing all the headlines the last couple of months and I may have said this on a previous call but, you know, in the marine industry there’s only been on securitization of retail loans and that was back in 1997 so all of the banks are holding this paper, they like the paper. So, I don’t think some of the liquidity issues you’ve seen in some other fronts, at least we’re not expecting that now nor are we experiencing it now.

William H. McGill

And, we’re not seeing the loss ratios change to that point.

Operator

Our next question comes from Hakan Ipekci with Merrill Lynch.

Hakan Ipekci – Merrill Lynch

One question, you mentioned the impact of the mix on the margins and you said the yacht orders happen in advance. As you look into the next quarter or so would you expect a shift in mix? Or, kind of in line with what you saw this quarter?

Michael H. McLamb

I tell you, it’s so hard Hakan to give any comfort into what the mixture is going to be for the March quarter given the lack of visibility. My comment that I was trying to make is that some of the business that we closed on in the December quarter was contracted a year ago which you could argue was maybe a better time period a year ago, who knows. But at the same time I do point to our customer deposits which we don’t put a whole lot of credibility in but, they’re up as well so that’s somewhat encouraging. But, specifically on the next – you know, we did indicate units were down a lot, that’s going to be mostly small boats and I think to Bill’s point, it’s probably reasonable to assume that the smaller boat buyer may be sitting on the fence with a little more tight grip on the fence than maybe larger boat buyer.

Hakan Ipekci – Merrill Lynch

And the share count, why is there a drop in the share count in the first quarter?

Michael H. McLamb

Because there’s no dilution from options because when you have a loss you can’t take the dilution in to lower your loss per share.

Hakan Ipekci – Merrill Lynch

Okay. Finally, can you comment on the competitive environment in general again, in light of the weakness in the market, have you seen a lot of exits recently given the slower period where activity is somewhat limited? Does that change relative to last summer?

Michael H. McLamb

I’m not sure I understand the question.

William H. McGill

Are you talking about other dealers?

Hakan Ipekci – Merrill Lynch

Have there been any dealers that have exited the industry recently?

William H. McGill

We’re seeing a few that are experiencing – we’re seeing some fallout of some dealers but not at a high level right now. I think perhaps a lot of them are waiting to see what spring brings.

Hakan Ipekci – Merrill Lynch

Because I thought you had said that you would expect more drops that say in the relatively slower period like that we’re in currently, what do you think is allowing them to stay in? Or, has allowed them to stay in so long into this weakness?

Michael H. McLamb

Don’t misunderstand, there are dealers that have gone out of business in the last six months and that are going out of business every week and every day unfortunately with what’s going on right now. I think the bigger better capitalized dealers are through their capital, while it might not be anything compared to ours but, through their capital are getting through the winter time right now.

Operator

Our next question comes from Steven Rees with JP Morgan.

Steven Reese – JP Morgan

I just wanted to ask about the SG&A dollar decline, first time we’ve seen that in many years. I’m just trying to gage how much more opportunity you have to further reduce SG&A. I would assume the headcount reductions didn’t help the first quarter, is that correct? And, kind of how you’re thinking about SG&A going forward?

Michael H. McLamb

We had some reduction in terms of our team members that is reflected in the December quarter as it was in the September quarter but, the reduction in force that Bill talked about did not take place until mid to late January. So, we’re trying to be proactive to ensure our expense structures in line with what’s happening at retail though also we don’t want to reduce the focus on taking care of our customers. Then, we’ve got to be very careful dialing marketing up and down to make sure that we don’t leave something on the table from a unit sales perspective if we cut marketing down too much. It’s kind of a balance as we go through these next several quarters of the year depending on what we’re seeing from retail.

Steven Reese – JP Morgan

Okay. But, is there anything you see on the promotional horizon that would cause SG&A be up year-over-year in dollars this year?

William H. McGill

We believe that probably Steven, we’ve reduced some of the expenses relative to boat shows in order to save. They’re not as effective as they have been, sales are down at the boat shows so we’re trying to do a better job but spend less in doing it and we may take some of that money and put it towards some marketing efforts to bring people into boating and to bring them into our family going forward. But, we did not anticipate that it would go up.

Steven Reese – JP Morgan

Great. Finally, one of the key parts of the story has been attracting the first time buyer and then allowing them to trade up over time. Can you talk about how this dynamic has changed at all in the current environment? And perhaps what percentage of the buyers you did see in the first quarter that were previous MarineMax customers versus the first quarter last year?

Michael H. McLamb

I think that the people we got into our business, or into our family last year through all the strong unit growth, they are sitting on the fence just like somebody who’s not getting into the business right now. I think the trade up cycle is taking longer than it use to but, I think the planting of those seeds is going to pay dividends whether some stability or positive news out there. Then, you get those people that all come back in and trade and you get the people who are currently not buying that come back in and buy and you get the unit growth picking up and the same store sales growth picking up.

William H. McGill

We haven’t seen a lasting of new customers from MarineMax like at the boat shows. I mean, I think our numbers are pretty close to the same. The new business that we’re experiencing versus the trade in business that we experience at boat shows is holding. It’s the overall just general concerns and consumer confidence that’s out there today and it’s impacting both segments.

Operator

Our next question comes from Laura Richardson with BB&T.

Laura Richardson – BB&T Capital Markets

My questions have been at least addressed at a higher level already so I just want to probe on a couple more things and one is from the headcount reductions, like what do you think the annual savings will be and is there going to be any cost for that for all the severance and that kind of stuff?

Michael H. McLamb

Ultimately, I don’t want to put a number out there what the savings could be because of what the lack of visibility and ultimately determining is the reduction permanent? Does it get greater? Does it get less if we see an uptick in business? It’s kind of hard to accurately through a number out there what the savings are. But, I do think it is fair to say it represents about 10% of our team members. We did have separation packages that we offered to most of the affected team members which is obviously going to be reflected in our March quarter and that also complicates exactly what the savings are going to be. But, I think you can say that I think it is the largest individual workforce reduction that we’ve ever done in the company.

Laura Richardson – BB&T Capital Markets

There’s a lot of that happening in retail these days.

Michael H. McLamb

Unfortunately, as Bill said, it’s difficult to do it’s just that with the volume dropping it’s the right thing that has to be done unfortunately. We’re going to keep looking at other expense line items at a very detailed level and just try to make sure that we can improve our expense structure, at least keep expenses in line with what the market place is dictating.

William H. McGill

We really put a focus on trying to make the cuts through becoming more efficient and effective at what we do without taking away from the customers’ experience. We do not believe any of these cuts will lessen anything we’re going to be doing for our customers which we do not want to do because obviously that would be very bad because that’s what’s keeping people in boating [inaudible].

Laura Richardson – BB&T Capital Markets

Right. The other thing I just wanted to follow up on and I think you’ve committed on a lot about this especially in the Q&A but, the boat buyer’s psychology, it sounds like you’re talking about there’s uncertainty and people are postponing making a decision. Does that mean, like I guess two little follow ups on that, number one, does that mean let’s say they come to the store three or four times before they decide? Or, they just don’t come to the store? And when you can probe them on what’s holding them back, is it job uncertainty? Or, expecting a better price somewhere down the road? It doesn’t sound like inability to get financing would be an issue. Any idea the importance of these macro factors to the boat buyer?

William H. McGill

I think it’s just general uncertainty. We’ve said for many, many years is there something you can put your finger on that impacts our customer the most whether it’s the stock market or the interest rates, or fuel prices, or the housing market now or whatever and at the end of the day the thing that gets them slowing down their purchase decision, they don’t lose their passion for boating and we’ve demonstrated that with the magnitude of the getaway events we’re doing. Some of them were sold out, they were full and we had customers wanting to get on some of these trips. But, its more, “Geez, I need to wait and see. I hear all this bad news.” I think we all forget what a wonderful country we live in and how many wonderful things we have and how great things really are. But, all we hear on the news is how horrible things are and how much worse they can get. You only hear the bad news and when you hear that it gets you saying, “Geez, do I want to be the only schmuck out there that’s spending my money when maybe things really are that bad.” But, yes in a lot of cases they aren’t that bad for our customers.

Now, there are customers that are impacted with the fuel prices and with what’s going on with the equity on their balance sheets that are saying, “Geez, maybe I just can’t afford it right now.” But, that’s more the smaller boats, the entry level boats that type of things. But, in the 34 years that I have been in the business, I have seen all these different cycles and at the end of the day the passion for boating has not changed. So, it’s not people abandoning our recreation it’s, “Geez I’ve got to wait and see.” Some of it is to your point of you know, I wonder if there’s going to be a better deal down the road? I wonder if interest rates are going to come down a little more because in a decline interest rate market that gets in the customer’s head, “If I wait a little bit longer maybe I can get it for less.” But, that will generate some refinancing opportunities for us also for some of our customers.

Michael H. McLamb

Laura, just on that point about the psychology of the boat buyer and Bill’s got far more years of doing this and has gone through different cycles but the one cycle I went through was 9/11 and MarineMax basically didn’t sell a boat from September 12th until let’s say mid to late October. And if you remember that time period with the anthrax letters being sent and we started the war in the middle east and so forth. The news got much better the second half of October. Well into December quarter we had an 18% sales increase in same store sales growth. All these people that were on the fence jumped back into boating when they felt better about things. At later dates, the news got worse and sales slowed again but I think so much of it when you pick up the Tampa Tribune or the Saint Pete Times or the Miami Herald or pick another city and look at the headlines, they’re not real good right now.

Laura Richardson – BB&T Capital Markets

Yeah. I read the news, I’m totally with you on how negative it is. Just last question on that, when the person is on the fence are they not coming to the boat shows? Not coming to your showrooms? Or, are they coming and wishing and dreaming and just not pulling the trigger?

Michael H. McLamb

A lot of them are still coming and wishing and dreaming and when you talk to them you don’t even hear their concerns. They talk about their next boat and what they need to do to get into that boat and their families getting excited about it but yet we spoke of the fallout at some of the boat shows. Lauderdale was over 50% fallout is the way it looks right now and that doesn’t mean that the people went away, it means they delayed their purchase decision. In most cases that’s what happens. So, they get home, they turn on the boob tube and listen to or read the newspaper or whatever the case may be and they say, “Ahh, maybe I just need to wait right now.”

Operator

Our next question comes from John Marlow with [inaudible].

John Marlow – [Inaudible]

I’ve got a couple of questions but first would you repeat what you just said about the Fort Lauderdale boat show?

Michael H. McLamb

Fort Lauderdale or Miami boat show?

William H. McGill

I said the Fort Lauderdale boat show, all the sales that we made at the show, about 50% of them had fallen out. They delayed their decision, they haven’t taken delivery in some cases.

John Marlow – [Inaudible]

They didn’t close. They said they would buy it and then they didn’t close.

William H. McGill

That’s correct, did not close

Michael H. McLamb

They contracted and then backed out of the contract if you will.

John Marlow – [Inaudible]

What was that close ratio last year?

Michael H. McLamb

The same thing.

William H. McGill

We experienced it last year as well.

Michael H. McLamb

We were hoping it was going to be better this year but it is about the same as it was last year.

John Marlow – [Inaudible]

I wanted to talk about your accounts receivables turn, it really looked skewed for some reason.

Michael H. McLamb

Our receivables are almost entirely contracts in transit from banks on boat deals and it turns pretty rapidly. I don’t have the detail of what was in front of me right at the end of 12/31. There could be some manufacturer payments in there that were due. But, that stuff turns very quickly.

John Marlow – [Inaudible]

Can you talk about what the severance charges or restructuring charges are going to be next quarter now?

Michael H. McLamb

We’re not going to have separate severance or restructuring charges that we’re going to talk about in the quarter.

John Marlow – [Inaudible]

You’re not going to disclose what that is when you report to market?

Michael H. McLamb

It’s not material to the SG&A or the company.

John Marlow – [Inaudible]

Okay. Is there a way you can give us sort of an indication about what the average markdowns are obviously, by some footage category maybe 30 and less than 30, between 30 and 40 from list price? What the average markdowns have been now versus a year ago?

Michael H. McLamb

I can tell you that the way we go to market from a pricing perspective is most of the products that we have what’s called a 40% MSRP margin or a 30% MSRP margin and then the price we display in the back of the boats usually has someplace between a 5 and 15% discount. That pricing philosophy has not changed in the 10 years that we’ve been around. The negotiated price and the transaction prices change during time periods like this and that’s reflected in gross margins which get compressed. But, our go to market pricing has not changed at all.

John Marlow – [Inaudible]

Okay. So, what you show at a boat show is still the same discount as a year ago and a year before that?

William H. McGill

With some exceptions John with products that we feel like we need to put an additional discount on. [Inaudible] historical years or if the manufacturers have assisted us then we might pass that right no down into the pricing.

John Marlow – [Inaudible]

Your depreciation and amortization for the quarter?

Michael H. McLamb

$2.5 million roughly it runs each quarter.

Operator

Our next question comes from Dustin Waide with Wedge Capital Management.

Dustin Waide – Wedge Capital Management

Can you please talk to me about the fundamentals of the used boat market? Are the buyers there that otherwise may have wanted a new boat looking at a used boat? What does the supply look like? Are repossessions up and affecting that?

William H. McGill

The last question first, we don’t see repossessions being up, the banks are in about the same position as they’ve been in as far as the loan qualities are concerned, or defaults or whatever. The used boat business really hasn’t changed a whole lot and I think it speaks to what we’ve said many times before over all the years I’ve been in the business almost, is people that want used want used. People that want new are not going to buy used so we haven’t seen a spike up in our used boat business during this time, it’s pretty well held its own. But, the buyers are almost different buyers.

Operator

Our next question comes from Anthony Lebiedzinski with Sidoti & Company.

Anthony Lebiedzinski – Sidoti & Company

I was hoping that you guys could quantify the same store sales by region?

Michael H. McLamb

I actually don’t have same store sales by region in front of me Anthony. I can tell you, as I think the prepared remarks said, in Florida would be softest, California would be second, northeast would be third. I don’t believe, we may have had some – we have regions in districts and we may have had some pockets where we actually saw some increases during the quarter but for the most part everyplace was down with Florida being the worst.

Anthony Lebiedzinski – Sidoti & Company

Also, can you guys quantify how your sales are tracking this quarter to date?

Michael H. McLamb

I think what we tried to say is that the December quarter was down 25% in units and we’re seeing a similar decline at boat shows which is really through the month of January.

William H. McGill

Which is most of the business during this time of year.

Anthony Lebiedzinski – Sidoti & Company

Also, in response to one of the earlier questions, you said that some of the business that you booked in the December quarter you had already signed contracts about a year ago. Can you quantify how much of that was?

Michael H. McLamb

I don’t have that in front of my Anthony. I can say that it wasn’t the driver the of quarter by any means, I just think prudent to say that in our business when you’re selling larger products in a smaller quarter, like the December quarter, its important I think to tell investors and to tell you guys that some of that business was contracted when times were perhaps more robust. That’s why that comment was in our prepared remarks.

Operator

We’ll take our next question from Greg McKinley with Dougherty & Company.

Gregory McKinley – Dougherty & Company

Regarding your headcount reduction, can you give us a sense for how much of that occurred at retail versus corporate or other parts of the organization? How much of that actually impacts how the company appears to the customer?

Michael H. McLamb

Well purely if you look at our number of team members we have 2,200 team members which is basically all store focus. We have, in our corporate and admin offices here but they are by far the minority of how our headcount breaks down and we did add a good percentage reduction here which actually would be greater than the overall reduction of the company. So, we reduced from a percentage perspective greater here than we did in our stores. I don’t know if that answers your question or not.

Operator

It appears that we have no further questions at this time. I would like to turn the call back over to your presenters for any additional or closing remarks.

William H. McGill

Thank you everyone for your continued support has we navigate through this storm. I also want to again thank all of our team members for their hard work, their focus and their passion for our customers because at the end of the day that’s what it is all about. Thank you.

Operator

That does conclude today’s conference call. You may now disconnect.

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Source: MarineMax F1Q08 (Qtr End 12/31/07) Earnings Call Transcript
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