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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED |
Commission File Number.
(Exact Name of Registrant as Specified in Its Charter)
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(State or Other Jurisdiction of Incorporation or Organization) |
(I.R.S. Employer Identification Number) |
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(Address of Principal Executive Offices) |
(ZIP Code) |
(Registrant’s Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered |
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Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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☒ |
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Accelerated filer |
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☐ |
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Non-accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes
The number of outstanding shares of the registrant’s Common Stock on July 25, 2022 was
MARINEMAX, INC. AND SUBSIDIARIES
Table of Contents
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Item No. |
Page |
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1. |
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3 |
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4 |
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Condensed Consolidated Balance Sheets as of September 30, 2021 and June 30, 2022 |
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5 |
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6 |
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Condensed Consolidated Statements of Cash Flows for the Nine Months Ended June 30, 2021 and 2022 |
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9 |
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2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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22 |
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3. |
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4. |
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28 |
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1. |
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28 |
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1A. |
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2. |
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28 |
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3. |
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28 |
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4. |
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5. |
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6. |
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30 |
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EX – 31.1 |
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EX – 31.2 |
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EX – 32.1 |
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EX – 32.2 |
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EX – 101 INSTANCE DOCUMENT |
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EX – 101 SCHEMA DOCUMENT |
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EX – 101 CALCULATION LINKBASE DOCUMENT |
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EX – 101 DEFINITION LINKBASE DOCUMENT |
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EX – 101 LABEL LINKBASE DOCUMENT |
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EX – 101 PRESENTATION LINKBASE DOCUMENT |
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2
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
MARINEMAX, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(Amounts in thousands, except share and per share data)
(Unaudited)
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Three Months Ended |
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Nine Months Ended |
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June 30, |
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June 30, |
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2021 |
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2022 |
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2021 |
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2022 |
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Revenue |
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$ |
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$ |
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$ |
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$ |
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Cost of sales |
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Gross profit |
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Selling, general, and administrative expenses |
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Income from operations |
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Interest expense |
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Income before income tax provision |
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Income tax provision |
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Net income |
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$ |
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$ |
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$ |
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$ |
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Basic net income per common share |
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$ |
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$ |
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$ |
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$ |
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Diluted net income per common share |
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$ |
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$ |
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$ |
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$ |
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Weighted average number of common shares used in computing net income per common share: |
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Basic |
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Diluted |
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See accompanying Notes to Condensed Consolidated Financial Statements.
3
MARINEMAX, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Comprehensive Income
(Amounts in thousands)
(Unaudited)
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Three Months Ended |
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Nine Months Ended |
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June 30, |
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June 30, |
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2021 |
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2022 |
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2021 |
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2022 |
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Net income |
$ |
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$ |
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$ |
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$ |
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Other comprehensive income (loss), net of tax: |
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Foreign currency translation adjustments |
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( |
) |
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( |
) |
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Interest rate swap contract |
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( |
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Total other comprehensive income (loss), net of tax |
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( |
) |
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( |
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Comprehensive income |
$ |
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$ |
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$ |
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$ |
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See accompanying Notes to Condensed Consolidated Financial Statements.
4
MARINEMAX, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Amounts in thousands, except share data)
(Unaudited)
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September 30, |
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June 30, |
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2021 |
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2022 |
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ASSETS |
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CURRENT ASSETS: |
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Cash and cash equivalents |
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$ |
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$ |
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Accounts receivable, net |
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Inventories, net |
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Prepaid expenses and other current assets |
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Total current assets |
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Property and equipment, net of accumulated depreciation of $ |
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Operating lease right-of-use assets, net |
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Goodwill and other intangible assets, net |
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Other long-term assets |
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Total assets |
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$ |
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$ |
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LIABILITIES AND SHAREHOLDERS’ EQUITY |
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CURRENT LIABILITIES: |
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Accounts payable |
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$ |
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$ |
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Contract liabilities (customer deposits) |
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Accrued expenses |
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Short-term borrowings |
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Current maturities on long-term debt |
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Current operating lease liabilities |
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Total current liabilities |
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Long-term debt, net of current maturities |
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Noncurrent operating lease liabilities |
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Deferred tax liabilities, net |
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Other long-term liabilities |
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Total liabilities |
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COMMITMENTS AND CONTINGENCIES |
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SHAREHOLDERS’ EQUITY: |
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Preferred stock, $ as of September 30, 2021 and June 30, 2022 |
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Common stock, $ September 30, 2021 and June 30, 2022, respectively |
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Additional paid-in capital |
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Accumulated other comprehensive income (loss) |
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( |
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Retained earnings |
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Treasury stock, at cost, and June 30, 2022, respectively |
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( |
) |
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( |
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Total shareholders’ equity |
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Total liabilities and shareholders’ equity |
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$ |
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$ |
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|
See accompanying Notes to Condensed Consolidated Financial Statements.
5
MARINEMAX, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Shareholders’ Equity
(Amounts in thousands, except share data)
(Unaudited)
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Additional |
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Accumulated Other |
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Total |
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|||
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Common Stock |
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Paid-in |
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Comprehensive |
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Retained |
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Treasury |
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Shareholders’ |
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||||||||||
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Shares |
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Amount |
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Capital |
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Income (loss) |
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Earnings |
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Stock |
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Equity |
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BALANCE, September 30, 2021 |
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$ |
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$ |
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$ |
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$ |
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$ |
( |
) |
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$ |
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Net income |
|
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— |
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— |
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— |
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— |
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— |
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Shares issued pursuant to employee stock purchase plan |
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— |
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— |
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— |
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— |
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Shares issued upon vesting of equity awards, net of minimum tax withholding |
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— |
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( |
) |
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— |
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— |
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— |
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( |
) |
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Shares issued upon exercise of stock options |
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— |
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— |
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— |
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— |
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Stock-based compensation |
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— |
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— |
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— |
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— |
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Other comprehensive loss |
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— |
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— |
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— |
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( |
) |
|
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— |
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— |
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( |
) |
|
BALANCE, December 31, 2021 |
|
|
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$ |
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$ |
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$ |
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$ |
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$ |
( |
) |
|
$ |
|
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Net income |
|
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— |
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— |
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— |
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— |
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— |
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Purchase of treasury stock |
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— |
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— |
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— |
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— |
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— |
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( |
) |
|
|
( |
) |
|
Shares issued upon vesting of equity awards, net of minimum tax withholding |
|
|
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|
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— |
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( |
) |
|
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— |
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— |
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— |
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( |
) |
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Shares issued upon exercise of stock options |
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— |
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— |
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— |
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— |
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Stock-based compensation |
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— |
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— |
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— |
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— |
|
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Other comprehensive loss |
|
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— |
|
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— |
|
|
|
— |
|
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( |
) |
|
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— |
|
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|
— |
|
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|
( |
) |
|
BALANCE, March 31, 2022 |
|
|
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|
|
$ |
|
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|
$ |
|
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|
$ |
|
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|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
Net income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
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|
|
|
Shares issued pursuant to employee stock purchase plan |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
Purchase of treasury stock |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
Shares issued upon vesting of equity awards, net of minimum tax withholding |
|
|
|
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
Stock-based compensation |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
— |
|
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|
— |
|
|
|
— |
|
|
|
|
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|
Other comprehensive loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
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|
|
|
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|
|
|
|
|
( |
) |
|
BALANCE, June 30, 2022 |
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
See accompanying Notes to Condensed Consolidated Financial Statements.
6
MARINEMAX, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Shareholders’ Equity
(Amounts in thousands, except share data)
(Unaudited)
|
|
|
|
|
|
|
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Additional |
|
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Accumulated Other |
|
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Total |
|
|||
|
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|
Common Stock |
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Paid-in |
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Comprehensive |
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Retained |
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Treasury |
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|
Shareholders’ |
|
||||||||||
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Shares |
|
|
Amount |
|
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Capital |
|
|
Income (loss) |
|
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Earnings |
|
|
Stock |
|
|
Equity |
|
|||||||
|
BALANCE, September 30, 2020 |
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
Net income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
Shares issued pursuant to employee stock purchase plan |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
Shares issued upon vesting of equity awards, net of minimum tax withholding |
|
|
|
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
Shares issued upon exercise of stock options |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
Stock-based compensation |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
Other comprehensive income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
BALANCE, December 31, 2020 |
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
Net income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
Shares issued upon vesting of equity awards, net of minimum tax withholding |
|
|
|
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
Shares issued upon exercise of stock options |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
Stock-based compensation |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
Other comprehensive loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
BALANCE, March 31, 2021 |
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
Net income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
Purchase of treasury stock |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
Shares issued pursuant to employee stock purchase plan |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
Shares issued upon exercise of stock options |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
Stock-based compensation |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
Other comprehensive income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
BALANCE, June 30, 2021 |
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
See accompanying Notes to Condensed Consolidated Financial Statements
7
MARINEMAX, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Amounts in thousands)
(Unaudited)
|
|
|
Nine Months Ended June 30, |
|
|||||
|
|
|
2021 |
|
|
2022 |
|
||
|
CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
|
|
|
$ |
|
|
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
|
|
|
|
|
|
|
Deferred income tax provision, net of effects of acquisitions |
|
|
|
|
|
|
|
|
|
Gain on sale of property and equipment |
|
|
— |
|
|
|
( |
) |
|
Proceeds from insurance settlements |
|
|
|
|
|
|
— |
|
|
Stock-based compensation expense |
|
|
|
|
|
|
|
|
|
(Increase) decrease in, net of effects of acquisitions — |
|
|
|
|
|
|
|
|
|
Accounts receivable, net |
|
|
( |
) |
|
|
( |
) |
|
Inventories |
|
|
|
|
|
|
( |
) |
|
Prepaid expenses and other assets |
|
|
( |
) |
|
|
( |
) |
|
(Decrease) increase in, net of effects of acquisitions — |
|
|
|
|
|
|
|
|
|
Accounts payable |
|
|
( |
) |
|
|
|
|
|
Contract liabilities (customer deposits) |
|
|
|
|
|
|
|
|
|
Accrued expenses and other liabilities |
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities |
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
Purchases of property and equipment |
|
|
( |
) |
|
|
( |
) |
|
Cash used in acquisition of businesses, net of cash acquired |
|
|
( |
) |
|
|
( |
) |
|
Proceeds from investments |
|
|
— |
|
|
|
|
|
|
Purchases of investments |
|
|
( |
) |
|
|
( |
) |
|
Proceeds from insurance settlements |
|
|
|
|
|
|
— |
|
|
Proceeds from sale of property and equipment |
|
|
|
|
|
|
|
|
|
Net cash used in investing activities |
|
|
( |
) |
|
|
( |
) |
|
CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
Net (payments) borrowings on short-term borrowings |
|
|
( |
) |
|
|
|
|
|
Proceeds from long-term debt |
|
|
|
|
|
|
— |
|
|
Payments for long-term debt |
|
|
( |
) |
|
|
( |
) |
|
Payments for debt issuance costs |
|
|
( |
) |
|
|
— |
|
|
Contingent acquisition consideration payments |
|
|
( |
) |
|
|
( |
) |
|
Purchase of treasury stock |
|
|
( |
) |
|
|
( |
) |
|
Net proceeds from issuance of common stock under incentive compensation and employee purchase plans |
|
|
|
|
|
|
|
|
|
Payments on tax withholdings for equity awards |
|
|
( |
) |
|
|
( |
) |
|
Net cash (used in) provided by financing activities |
|
|
( |
) |
|
|
|
|
|
Effect of exchange rate changes on cash |
|
|
|
|
|
|
( |
) |
|
NET INCREASE IN CASH AND CASH EQUIVALENTS |
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS, beginning of period |
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS, end of period |
|
$ |
|
|
|
$ |
|
|
|
Supplemental disclosures of cash flow information: |
|
|
|
|
|
|
|
|
|
Cash paid for: |
|
|
|
|
|
|
|
|
|
Interest |
|
$ |
|
|
|
$ |
|
|
|
Income taxes |
|
|
|
|
|
|
|
|
|
Non-cash items: |
|
|
|
|
|
|
|
|
|
Contingent consideration liabilities from acquisitions |
|
|
|
|
|
|
|
|
See accompanying Notes to Condensed Consolidated Financial Statements.
8
MARINEMAX, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
|
1. |
COMPANY BACKGROUND: |
We believe we are the largest recreational boat and yacht retailer and superyacht services company in the world. We engage primarily in the retail sale, brokerage, and service of new and used boats, motors, trailers, marine parts and accessories and offer slip and storage accommodations in certain locations. In addition, we arrange related boat financing, insurance, and extended service contracts. We also offer the charter of power yachts in the British Virgin Islands. As of June 30, 2022, we operated through
We are the largest retailer of Sea Ray and Boston Whaler recreational boats which are manufactured by Brunswick Corporation (“Brunswick”). Sales of new Brunswick boats accounted for approximately
We have dealership agreements with Sea Ray, Boston Whaler, Harris, and Mercury Marine, all subsidiaries or divisions of Brunswick. We also have dealer agreements with Italy-based Azimut-Benetti Group’s product line for Azimut and Benetti yachts and mega yachts. These agreements allow us to purchase, stock, sell, and service these manufacturers’ boats and products. These agreements also allow us to use these manufacturers’ names, trade symbols, and intellectual properties in our operations. The agreements for Sea Ray and Boston Whaler products, respectively, appoint us as the exclusive dealer of Sea Ray and Boston Whaler boats, respectively, in our geographic markets. In addition, we are the exclusive dealer for Azimut Yachts for the entire United States. Sales of new Azimut yachts accounted for approximately
In November 2021, we acquired Intrepid, a premier manufacturer of powerboats, and Texas Marine Holdings (“Texas MasterCraft”), a premier watersports dealer in Northern Texas. Intrepid is a producer of customized boats. Texas MasterCraft specializes in ski and wakeboard boats. The activity of Intrepid is included in our Product Manufacturing segment. The activity of Texas MasterCraft is included in our Retail Operations segment.
From March 2020 through June 2020, we temporarily closed certain departments or locations based on guidance from local government or health officials as a result of the COVID-19 pandemic. We are following guidelines to ensure we are safely operating as recommended. As the COVID-19 pandemic is complex and evolving rapidly with many unknowns, the Company will continue to monitor ongoing developments and respond accordingly. Management expects its business, across all of its geographies, will be impacted to some degree, but the significance of the impact of the COVID-19 pandemic on the Company’s business and the duration for which it may have an impact cannot be determined at this time.
As is typical in the industry, we deal with most of our manufacturers, other than Sea Ray, Boston Whaler, and Azimut Yachts, under renewable annual dealer agreements, each of which gives us the right to sell various makes and models of boats within a given geographic region. Any change or termination of these agreements, or the agreements discussed above, for any reason, or changes in competitive, regulatory or marketing practices, including rebate or incentive programs, could adversely affect our results of operations. Although there are a limited number of manufacturers of the type of boats and products that we sell, we believe that adequate alternative sources would be available to replace any manufacturer other than Sea Ray, Boston Whaler, and Azimut as a product source. These alternative sources may not be available at the time of any interruption, and alternative products may not be available at comparable terms, which could affect operating results adversely.
General economic conditions and consumer spending patterns can negatively impact our operating results. Unfavorable local, regional, national, or global economic developments or uncertainties regarding future economic prospects could reduce consumer spending in the markets we serve and adversely affect our business. Economic conditions in areas in which we operate locations, particularly Florida in which we generated approximately
9
In an economic downturn, consumer discretionary spending levels generally decline, at times resulting in disproportionately large reductions in the sale of luxury goods. Consumer spending on luxury goods also may decline as a result of lower consumer confidence levels, even if prevailing economic conditions are favorable. As a result, an economic downturn would likely impact us more than certain of our competitors due to our strategic focus on a higher end of our market. Although we have expanded our operations during periods of stagnant or modestly declining industry trends, the cyclical nature of the recreational boating industry or the lack of industry growth may adversely affect our business, financial condition, and results of operations. Any period of adverse economic conditions or low consumer confidence is likely to have a negative effect on our business.
Historically, in periods of lower consumer spending and depressed economic conditions, we have, among other things, substantially reduced our acquisition program, delayed new store openings, reduced our inventory purchases, engaged in inventory reduction efforts, closed a number of our retail locations, reduced our headcount, and amended and replaced our credit facility. Acquisitions remain an important strategy for us, and, subject to a number of conditions, including macro-economic conditions and finding attractive acquisition targets, we plan to continue to explore opportunities through this strategy.
|
2. |
BASIS OF PRESENTATION: |
These Unaudited Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information, the instructions to Quarterly Report on Form 10-Q, and Rule 10-01 of Regulation S-X and should be read in conjunction with our Annual Report on Form 10-K for the fiscal year ended September 30, 2021. Accordingly, these Unaudited Condensed Consolidated Financial Statements do not include all of the information and footnote disclosures required by accounting principles generally accepted in the United States for complete financial statements. All adjustments, consisting of only normal recurring adjustments considered necessary for fair presentation, have been reflected in these Unaudited Condensed Consolidated Financial Statements. The operating results for the nine months ended June 30, 2022, are not necessarily indicative of the results that may be expected in future periods.
The preparation of Unaudited Condensed Consolidated Financial Statements in conformity with accounting principles generally accepted in the United States requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the Unaudited Condensed Consolidated Financial Statements and the reported amounts of revenue and expenses during the reporting periods. Significant estimates made by us in the accompanying Unaudited Condensed Consolidated Financial Statements include valuation allowances, valuation of goodwill and intangible assets, and valuation of long-lived assets. Actual results could differ from those estimates.
Effective May 2, 2021, our reportable segments changed as a result of the Company’s acquisition of Cruisers Yachts, which changed management’s reporting structure and operating activities. We now report our operations through
All references to the “Company,” “our company,” “we,” “us,” and “our” mean, as a combined company, MarineMax, Inc. and the
The Unaudited Condensed Consolidated Financial Statements include our accounts and the accounts of our subsidiaries, all of which are wholly owned. All significant intercompany transactions and accounts have been eliminated.
10
|
3. |
NEW ACCOUNTING PRONOUNCEMENTS: |
In October 2021, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update 2021-08, “Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers”, which requires contract assets and contract liabilities (i.e., unearned revenue) acquired in a business combination to be recognized and measured in accordance with Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers. The Company has early adopted ASU 2021-08 as of October 1, 2021, on a prospective basis. The impact of the adoption of ASU 2021-08 had an immaterial impact on the Company’s Unaudited Condensed Consolidated Financial Statements as of June 30, 2022.
|
4. |
FAIR VALUE MEASUREMENTS: |
The Company uses valuation approaches that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible. The Company determines fair value based on assumptions that market participants would use in pricing an asset or liability in the principal or most advantageous market. When considering market participant assumptions in fair value measurements, the following fair value hierarchy distinguishes between observable and unobservable inputs, which are categorized in one of the following levels:
Level 1 - Unadjusted quoted prices in active markets for identical assets or liabilities accessible to the reporting entity at the measurement date.
Level 2 - Other than quoted prices included in Level 1 inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability.
Level 3 - Unobservable inputs for the asset or liability used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at measurement date.
The following tables summarize the Company’s financial assets and liabilities measured at fair value in the accompanying Unaudited Condensed Consolidated Balance Sheets:
|
|
|
June 30, 2022 |
|
|||||||||||||
|
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
||||
|
|
|
(Amounts in thousands) |
|
|||||||||||||
|
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swap contract |
|
$ |
— |
|
|
$ |
|
|
|
$ |
— |
|
|
$ |
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contingent consideration liabilities |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
|
$ |
|
|
|
|
|
September 30, 2021 |
|
|||||||||||||
|
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
||||
|
|
|
(Amounts in thousands) |
|
|||||||||||||
|
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swap contract |
|
$ |
— |
|
|
$ |
|
|
|
$ |
— |
|
|
$ |
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contingent consideration liabilities |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
|
$ |
|
|
There were
The fair value of the Company’s interest rate swap contract is calculated as the present value of expected future cash flows, determined on the basis of forward interest rates and present value factors. The inputs to the fair value measurements reflect Level 2 inputs. The interest rate swap contract balance is included in other long-term assets in the accompanying Unaudited Condensed Consolidated Balance Sheets. The interest rate swap contract is designated as a cash flow hedge with changes in fair value reported in other comprehensive income in the accompanying Unaudited Condensed Consolidated Statements of Comprehensive Income.
We estimate the fair value of our contingent consideration liabilities using a probability-weighted discounted cash flow model. The contingent consideration liabilities are estimated based on forecasted pre-tax earnings as a base scenario (among other assumptions) subject to a Monte Carlo simulation. The fair value of the contingent consideration liabilities, which reflect Level 3 inputs, is reassessed on a quarterly basis. The contingent consideration liabilities balance is included in accrued expenses and other long-term liabilities in the accompanying Unaudited Condensed Consolidated Balance Sheets. Changes in fair value and net present value of the contingent consideration liabilities are included in selling, general, and administrative expenses in the accompanying Unaudited Condensed Consolidated Statements of Operations.
The following tables set forth the changes in fair value of our contingent consideration liabilities, which reflect Level 3 inputs, for the nine months ended June 30, 2021 and 2022:
11
|
|
|
Contingent Consideration Liabilities |
|
|
|
|
|
(Amounts in thousands) |
|
|
|
Beginning balance - September 30, 2021 |
|
$ |
|
|
|
Additions from business acquisitions |
|
|
|
|
|
Settlement of contingent consideration liabilities |
|
|
( |
) |
|
Change in fair value and net present value of contingency |
|
|
|
|
|
Ending balance - June 30, 2022 |
|
$ |
|
|
|
|
|
Contingent Consideration Liabilities |
|
|
|
|
|
(Amounts in thousands) |
|
|
|
Beginning balance - September 30, 2020 |
|
$ |
|
|
|
Additions from business acquisitions |
|
|
|
|
|
Settlement of contingent consideration liabilities |
|
|
( |
) |
|
Change in fair value and net present value of contingency |
|
|
|
|
|
Ending balance - June 30, 2021 |
|
$ |
|
|
We determined that the carrying value of cash and cash equivalents, accounts receivable, accounts payable, accrued expenses, short-term borrowings, and the revolving mortgage facility approximate their fair values because of the nature of their terms and current market rates of these instruments. The fair value of our mortgage facilities, which are not carried at fair value in the accompanying Unaudited Condensed Consolidated Balance Sheets, was determined using Level 2 inputs based on the discounted cash flow method. We estimate the fair value of our mortgage facilities using a present value technique based on current market interest rates for similar types of financial instruments that reflect Level 2 inputs.
|
|
|
September 30, 2021 |
|
|
June 30, 2022 |
|
||||||||||
|
|
|
Fair Value |
|
|
Carrying Value |
|
|
Fair Value |
|
|
Carrying Value |
|
||||
|
|
|
(Amounts in thousands) |
|
|||||||||||||
|
Mortgage facility payable to Flagship Bank |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Mortgage facility payable to Seacoast National Bank |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage facility payable to Hancock Whitney Bank |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5. |
REVENUE RECOGNITION: |
The majority of our revenue is from contracts with customers for the sale of boats, motors, and trailers. We recognize revenue from boat, motor, and trailer sales upon transfer of control of the boat, motor, or trailer to the customer, which is generally upon acceptance of the boat, motor, and trailer by the customer and the satisfaction of our performance obligations. The transaction price is determined with the customer at the time of sale. Customers may trade in a used boat to apply toward the purchase of a new or used boat. The trade-in is a type of noncash consideration measured at fair value, based on external and internal observable and unobservable market data and applied as payment to the contract price for the purchased boat. At the time of acceptance, the customer is able to direct the use of, and obtain substantially all of, the benefits of the boat, motor, or trailer. We recognize commissions earned from a brokerage sale when the related brokerage transaction closes upon transfer of control of the boat, motor, or trailer to the customer, which is generally upon acceptance by the customer.
We do not directly finance our customers’ boat, motor, or trailer purchases. In many cases, we assist with third-party financing for boat, motor, and trailer sales. We recognize commissions earned by us for placing notes with financial institutions in connection with customer boat financing when we recognize the related boat sales. Pursuant to negotiated agreements with financial institutions, we are charged back for a portion of these fees should the customer terminate or default on the related finance contract before it is outstanding for a stipulated minimum period of time. We base the chargeback allowance, which was not material to the Unaudited Condensed Consolidated Financial Statements taken as a whole as of June 30, 2022, on our experience with repayments or defaults on the related finance contracts. We recognize variable consideration from commissions earned on extended warranty service contracts sold on behalf of third-party insurance companies at generally the later of customer acceptance of the service contract terms as evidenced by contract execution or recognition of the related boat sale. We also recognize variable consideration from marketing fees earned on insurance products sold by third-party insurance companies at the later of customer acceptance of the insurance product as evidenced by contract execution or when the related boat sale is recognized.
12
We recognize revenue from parts and service operations (boat maintenance and repairs) over time as services are performed. Each boat maintenance and repair service is a single performance obligation that includes both the parts and labor associated with the service. Payment for boat maintenance and repairs is typically due upon the completion of the service, which is generally completed within a short period of time from contract inception. We satisfy our performance obligations, transfer control, and recognize revenue over time for parts and service operations because we are creating a contract asset with no alternative use and we have an enforceable right to payment for performance completed to date. Contract assets primarily relate to our right to consideration for work in process not yet billed at the reporting date associated with maintenance and repair services. We use an input method to recognize revenue and measure progress based on labor hours expended to satisfy the performance obligation at average labor rates. We have determined labor hours expended to be the relevant measure of work performed to complete the maintenance and repair service for the customer.
We recognize revenue from the sale of our manufactured yachts when control of the yacht is transferred to the dealer or customer, which is generally upon acceptance by the dealer or customer. At the time of acceptance, the dealer or customer is able to direct the use of, and obtain substantially all of the benefits of, the yacht. We have elected to record shipping and handling activities that occur after the dealer or customer has obtained control of the yacht as a fulfillment activity.
Contract liabilities primarily consist of customer deposits. We recognize contract liabilities (customer deposits) as revenue at the time of acceptance and the transfer of control to the customers.
We recognize deferred revenue from service operations and slip and storage services over time on a straight-line basis over the term of the contract as our performance obligations are met. We recognize income from the rentals of chartering power yachts over time on a straight-line basis over the term of the contract as our performance obligations are met.
The following table sets forth percentages on the timing of revenue recognition for the three and nine months ended June 30,
|
|
Retail Operations |
|
|
Product Manufacturing |
|
||||||||||
|
|
Three Months Ended |
|
|
Three Months Ended |
|
||||||||||
|
|
June 30, |
|
|
June 30, |
|
||||||||||
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
||||
|
Goods and services transferred at a point in time |
|
|
% |
|
|
|
% |
|
|
|
% |
|
|
|
% |
|
Goods and services transferred over time |
|
|
% |
|
|
|
% |
|
|
— |
|
|
|
— |
|
|
Revenue |
|
|
% |
|
|
|
% |
|
|
|
% |
|
|
|
% |
|
|
Retail Operations |
|
|
Product Manufacturing |
|
||||||||||
|
|
Nine Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
June 30, |
|
|
June 30, |
|
||||||||||
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
||||
|
Goods and services transferred at a point in time |
|
|
% |
|
|
|
% |
|
|
|
% |
|
|
|
% |
|
Goods and services transferred over time |
|
|
% |
|
|
|
% |
|
|
— |
|
|
|
— |
|
|
Revenue |
|
|
% |
|
|
|
% |
|
|
|
% |
|
|
|
% |
|
6. |
LEASES: |
Substantially all of the leases that we enter into are real estate leases. We lease numerous facilities relating to our operations, including showrooms, display lots, marinas, service facilities, slips, offices, equipment and our corporate headquarters. Leases for real property have terms, including renewal options, ranging from one to in excess of
13
not yet commenced but that create significant rights and obligations for us. We have elected the practical expedient under ASC Topic 842 to not separate lease and nonlease components.
Our real estate and equipment leases often require that we pay maintenance in addition to rent. Additionally, our real estate leases generally require payment of real estate taxes and insurance. Maintenance, real estate taxes, and insurance payments are generally variable and based on actual costs incurred by the lessor. Therefore, these amounts are not included in the consideration of the contract when determining the ROU asset and lease liability, but are reflected as variable lease expenses.
A majority of our lease agreements include fixed rental payments. Certain of our lease agreements include fixed rental payments that are adjusted periodically by a fixed rate or changes in an index. The fixed payments, including the effects of changes in the fixed rate or amount, and renewal options reasonably certain to be exercised, are included in the measurement of the related lease liability. Most of our real estate leases include one or more options to renew, with renewal terms that can extend the lease term from one to five years or more. The exercise of lease renewal options is at our sole discretion. If it is reasonably certain that we will exercise such options, the periods covered by such options are included in the lease term and are recognized as part of our right of use assets and lease liabilities. The depreciable life of assets and leasehold improvements are limited by the expected lease term, which includes renewal options reasonably certain to be exercised.
For our incremental borrowing rate, we generally use a portfolio approach to determine the discount rate for leases with similar characteristics. We determine discount rates based upon our hypothetical credit rating, taking into consideration our short-term borrowing rates, and then adjusting as necessary for the appropriate lease term. As of June 30, 2022, the weighted-average discount rate used was approximately
As of June 30, 2022, maturities of lease liabilities by fiscal year are summarized as follows:
|
|
|
(Amounts in thousands) |
|
|
|
2022 |
|
$ |
|
|
|
2023 |
|
|
|
|
|
2024 |
|
|
|
|
|
2025 |
|
|
|
|
|
2026 |
|
|
|
|
|
Thereafter |
|
|
|
|
|
Total lease payments |
|
|
|
|
|
Less: interest |
|
|
( |
) |
|
Present value of lease liabilities |
|
$ |
|
|
Supplemental cash flow information related to leases was as follows:
|
|
Nine Months Ended |
|
|||||
|
|
June 30, |
|
|||||
|
|
2021 |
|
|
2022 |
|
||
|
|
(Amounts in thousands) |
|
|||||
|
Cash paid for amounts included in the measurement of lease liabilities: |
|
|
|
|
|
|
|
|
Operating cash flows from operating leases |
$ |
|
|
|
$ |
|
|
|
Right-of-use assets obtained in exchange for lease obligations: |
|
|
|
|
|
|
|
|
Operating leases |
$ |
|
|
|
$ |
|
|
14
|
7. |
INVENTORIES: |
Inventories are stated at the lower of cost or net realizable value. The cost of inventories purchased from our vendors consist of the amount paid to acquire the inventory, net of vendor consideration and purchase discounts, the cost of equipment added, reconditioning costs, inventory deposits, and transportation costs relating to acquiring inventory for sale. Trade-in used boats are initially recorded at fair value and adjusted for reconditioning and other costs. The cost of inventories that are manufactured by the Company consist of material, labor, and manufacturing overhead. Unallocated overhead and abnormal costs are expensed as incurred. New and used boats, motors, and trailers inventories are accounted for on a specific identification basis. Raw materials and parts, accessories, and other inventories are accounted for on an average cost basis. We utilize our historical experience, the aging of the inventories, and our consideration of current market trends as the basis for determining a lower of cost or net realizable value. We do not believe there is a reasonable likelihood that there will be a change in the future estimates or assumptions we use to calculate the lower of cost or net realizable value. If events occur and market conditions change, the net realizable value of our inventories could change.
Inventories, net consisted of the following as of:
|
|
September 30, 2021 |
|
|
June 30, 2022 |
|
||
|
|
(Amounts in thousands) |
|
|||||
|
New and used boats, motors, and trailers |
$ |
|
|
|
$ |
|
|
|
In transit inventory and deposits |
|
|
|
|
|
|
|
|
Parts, accessories, and other |
|
|
|
|
|
|
|
|
Work-in-process |
|
|
|
|
|
|
|
|
Raw materials |
|
|
|
|
|
|
|
|
Inventories, net |
$ |
|
|
|
$ |
|
|
|
8. |
GOODWILL: |
We account for acquisitions in accordance with FASB ASC 805, “Business Combinations” (“ASC 805”), and goodwill in accordance with ASC 350, “Intangibles — Goodwill and Other” (“ASC 350”). For business combinations, the excess of the purchase price over the estimated fair value of net assets acquired in a business combination is recorded as goodwill.
In April 2022, through Northrop & Johnson, we acquired Superyacht Management, S.A.R.L., better known as SYM, a superyacht management company based in Golfe-Juan, France.
In November 2021, we completed acquisitions for Intrepid, a premier manufacturer of powerboats, and Texas MasterCraft, a watersports dealer in Northern Texas, for aggregate consideration of approximately $
In July 2021, we purchased Nisswa Marine a full-service dealer located in Nisswa, Minnesota. In May 2021, we purchased Cruisers Yachts, a manufacturer of sport yacht and yachts with sales through our select retail dealership locations and through independent dealers. In October 2020, we purchased SkipperBud’s, one of the largest boat sales, brokerage, service and marina/storage groups in the United States.
15
In total, current and previous acquisitions have resulted in the recording of $
The following table sets forth the changes in carrying amount of goodwill by reportable segment during the nine months ended June 30, 2022:
|
|
|
Retail Operations |
|
|
Product Manufacturing |
|
|
Total |
|
|||
|
|
|
(Amounts in thousands) |
|
|||||||||
|
Balance as of September 30, 2021 |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Goodwill acquired |
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation |
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
Balance as of June 30, 2022 |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
9. |
INCOME TAXES: |
We account for income taxes in accordance with FASB ASC 740, “Income Taxes” (“ASC 740”). Under ASC 740, we recognize deferred tax assets and liabilities for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. We measure deferred tax assets and liabilities using enacted tax rates expected to apply to taxable income in the years in which we expect those temporary differences to be recovered or settled. We record valuation allowances to reduce our deferred tax assets to the amount expected to be realized by considering all available positive and negative evidence.
During the three months ended June 30, 2021 and 2022, we recognized an income tax provision of $
|
10. |
SHORT-TERM BORROWINGS AND LONG-TERM DEBT: |
Short-term Borrowings
In May 2020, we entered into a Loan and Security Agreement, which was subsequently amended in July 2021 (as amended to date, the “Credit Facility”), with Wells Fargo Commercial Distribution Finance LLC, M&T Bank, Bank of the West, and Truist Bank. The Credit Facility provides the Company a line of credit with asset based borrowing availability of up to $
The Credit Facility has certain financial covenants as specified in the agreement.
New inventory borrowing eligibility will generally mature 1,080 days from the original invoice date. Used inventory borrowing eligibility will generally mature
As of June 30, 2022, our indebtedness associated with financing our inventory and working capital needs totaled approximately $
16
As is common in our industry, we receive interest assistance directly from boat manufacturers, including Brunswick. The interest assistance programs vary by manufacturer, but generally include periods of free financing or reduced interest rate programs. The interest assistance may be paid directly to us or our lender depending on the arrangements the manufacturer has established. We classify interest assistance received from manufacturers as a reduction of inventory cost and related cost of sales.
The availability and costs of borrowed funds can adversely affect our ability to obtain adequate boat inventory and the holding costs of that inventory as well as the ability and willingness of our customers to finance boat purchases. However, we rely on our Credit Facility to purchase our inventory of boats. The aging of our inventory limits our borrowing capacity as defined curtailments reduce the allowable advance rate as our inventory ages. Our access to funds under our Credit Facility also depends upon the ability of our lenders to meet their funding commitments, particularly if they experience shortages of capital or experience excessive volumes of borrowing requests from others during a short period of time. Unfavorable economic conditions, weak consumer spending, turmoil in the credit markets, and lender difficulties, among other potential reasons, could interfere with our ability to utilize our Credit Facility to fund our operations. Any inability to utilize our Credit Facility could require us to seek other sources of funding to repay amounts outstanding under the credit agreements or replace or supplement our credit agreements, which may not be possible at all or under commercially reasonable terms.
Similarly, decreases in the availability of credit and increases in the cost of credit adversely affect the ability of our customers to purchase boats from us and thereby adversely affect our ability to sell our products and impact the profitability of our finance and insurance activities.
Long-term Debt
The below table summarizes the Company's long-term debt.
|
|
|
September 30, 2021 |
|
|
June 30, 2022 |
|
||
|
|
|
(Amounts in thousands) |
|
|||||
|
Mortgage facility payable to Flagship Bank bearing interest at 2022 ( and interest payments with a balloon payment of approximately $ . |
|
$ |
|
|
|
$ |
|
|
|
Mortgage facility payable to Seacoast National Bank bearing interest at June 30, 2022 ( monthly interest payments for the first year and then monthly principal and interest payments with a balloon payment of approximately $ |
|
|
|
|
|
|
|
|
|
Mortgage facility payable to Hancock Whitney Bank bearing interest at June 30, 2022 ( monthly principal and interest payments with a balloon payment of approximately $ with an interest rate swap contract with a fixed rate of |
|
|
|
|
|
|
|
|
|
Revolving mortgage facility with FineMark National Bank & Trust bearing interest at Facility matures in . Current available borrowings under the facility were approximately $ |
|
|
— |
|
|
|
— |
|
|
Total long-term debt |
|
|
|
|
|
|
|
|
|
Less: current portion |
|
|
( |
) |
|
|
( |
) |
|
Less: unamortized portion of debt issuance costs |
|
|
( |
) |
|
|
( |
) |
|
Long-term debt, net current portion and unamortized debt issuance costs |
|
$ |
|
|
|
$ |
|
|
|
11. |
STOCK-BASED COMPENSATION: |
We account for our stock-based compensation plans following the provisions of FASB ASC 718, “Compensation — Stock Compensation” (“ASC 718”). In accordance with ASC 718, we use the Black-Scholes valuation model for valuing all options granted (Note 13) and shares purchased under our Amended 2008 Employee Stock Purchase Plan (“Stock Purchase Plan”). We measure compensation for restricted stock awards and restricted stock units (Note 15) at fair value on the grant date based on the number of shares expected to vest and the quoted market price of our common stock. We recognize compensation cost for all awards in operations on a straight-line basis over the requisite service period for each separately vesting portion of the award.
17
During the three months ended June 30, 2021 and 2022, we recognized stock-based compensation expense of approximately $
Cash received from option exercises under all share-based compensation arrangements for the three months ended June 30, 2021 and 2022, was approximately $
|
12. |
THE INCENTIVE STOCK PLANS: |
In February 2022, our shareholders approved a proposal to authorize our 2021 Stock-Based Compensation Plan (“2021 Plan”), which replaced our 2011 Stock-Based Compensation Plan (“2011 Plan”). Our 2021 Plan provides for the grant of stock options, stock appreciation rights, restricted stock, stock units, bonus stock, dividend equivalents, other stock related awards, and performance awards (collectively “awards”), that may be settled in cash, stock, or other property. Our 2021 Plan is designed to attract, motivate, retain, and reward our executives, employees, officers, directors, and independent contractors by providing such persons with annual and long-term performance incentives to expend their maximum efforts in the creation of shareholder value. The total number of shares of our common stock that may be subject to awards under the 2021 Plan is equal to
The following table summarizes activity from our incentive stock plans from September 30, 2021 through June 30, 2022:
|
|
|
Shares Available for Grant |
|
|
Options Outstanding |
|
|
Aggregate Intrinsic Value (Amounts in thousands) |
|
|
Weighted Average Exercise Price |
|
|
Weighted Average Remaining Contractual Life |
|
|||||
|
Balance as of September 30, 2021 |
|
|
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
Shares authorized |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
Options cancelled/forfeited/expired |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Options exercised |
|
|
— |
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted stock awards granted |
|
|
( |
) |
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
Restricted stock awards forfeited |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
Additional shares of stock issued |
|
|
( |
) |
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
Balance as of June 30, 2022 |
|
|
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
Exercisable as of June 30, 2022 |
|
|
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
We used the Black-Scholes model to estimate the fair value of options granted. The expected term of options granted is estimated based on historical experience. Volatility is based on the historical volatility of our common stock. The risk-free rate for periods within the contractual term of the options is based on the U.S. Treasury yield curve in effect at the time of grant.
18
|
13. |
EMPLOYEE STOCK PURCHASE PLAN: |
In February 2019, our shareholders approved a proposal to amend our Stock Purchase Plan to increase the number of shares available under that plan by
We used the Black-Scholes model to estimate the fair value of options granted to purchase shares issued pursuant to the Stock Purchase Plan. Volatility is based on the historical volatility of our common stock. The risk-free rate for periods within the contractual term of the options is based on the U.S. Treasury yield curve in effect at the time of grant.
The following are the weighted average assumptions used for each respective period:
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||
|
|
June 30, |
|
|
June 30, |
|
||||||
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
Dividend yield |
|
|
|
|
|
|
|
|
|
|
|
|
Risk-free interest rate |
|
|
|
|
|
|
|
|
|
|
|
|
Volatility |
|
|
|
|
|
|
|
|
|
|
|
|
Expected life |
|
|
|
|
|
|
|
|
|
|
|
As of June 30, 2022, we have issued
|
14. |
RESTRICTED STOCK AWARDS: |
We have granted non-vested (restricted) stock awards (“restricted stock”) and restricted stock units (“RSUs”) to employees, directors, and officers pursuant to the 2021 Plan, the 2011 Plan and the 2007 Plan. The restricted stock awards and RSUs have varying vesting periods, but generally become fully vested between
The following table summarizes restricted stock award activity from September 30, 2021 through June 30, 2022:
|
|
|
Shares/ Units |
|
|
Weighted Average Grant Date Fair Value |
|
||
|
Non-vested balance as of September 30, 2021 |
|
|
|
|
|
$ |
|
|
|
Changes during the period: |
|
|
|
|
|
|
|
|
|
Awards granted |
|
|
|
|
|
$ |
|
|
|
Awards vested |
|
|
( |
) |
|
$ |
|
|
|
Awards forfeited |
|
|
( |
) |
|
$ |
|
|
|
Non-vested balance as of June 30, 2022 |
|
|
|
|
|
|
|
|
As of June 30, 2022, we had approximately $
|
15. |
NET INCOME PER SHARE: |
The following table presents shares used in the calculation of basic and diluted net income per share:
19
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
June 30, |
|
|
June 30, |
|
||||||||||
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
||||
|
Weighted average common shares outstanding used in calculating basic net income per share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of dilutive options and non-vested restricted stock awards |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common and common equivalent shares used in calculating diluted net income per share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended June 30, 2021 and 2022, there were
|
16. |
COMMITMENTS AND CONTINGENCIES: |
We are party to various legal actions arising in the ordinary course of business. While it is not feasible to determine the actual outcome of these actions as of June 30, 2022, we believe that these matters should not have a material adverse effect on our unaudited condensed consolidated financial condition, results of operations, or cash flows.
|
17. |
SEGMENT INFORMATION: |
|
Change in Reportable Segments |
Effective May 2, 2021, our operating segments changed as a result of the Company’s acquisition of Cruisers Yachts, which changed management’s reporting structure and operating activities. We now report our operations through
|
Reportable Segments |
The Company’s operating segments are defined by management’s reporting structure and operating activities. Our chief operating decision maker (“CODM”) is our Chief Executive Officer. Our CODM reviews operational income statement information by segment for purposes of making operating decisions, assessing financial performance, and allocating resources. The CODM is not provided asset information by segment. The Company’s reportable segments are the following:
Retail Operations. The Retail Operations segment includes the sale of new and used recreational boats, including pleasure and fishing boats, with a focus on premium brands in each segment. We also sell related marine products, including engines, trailers, parts, and accessories. In addition, we provide repair, maintenance, and slip and storage services; we arrange related boat financing, insurance, and extended service contracts; we offer boat and yacht brokerage sales; and we offer yacht charter services. In the British Virgin Islands we offer the charter of catamarans, through MarineMax Vacations. Fraser Yachts Group and Northrop & Johnson, leading superyacht brokerage and luxury yacht services companies with operations in multiple countries, are also included in this segment. The Retail Operations segment includes the majority of all corporate costs.
Product Manufacturing. The Product Manufacturing segment includes activity of Cruisers Yachts and Intrepid. Cruisers Yachts, a wholly-owned MarineMax subsidiary, manufacturing sport yacht and yachts with sales through our select retail dealership locations and through independent dealers. Cruisers Yachts is recognized as one of the world’s premier manufacturers of premium sport yacht and yachts, producing models from
Intersegment revenue represents yachts that were manufactured in our Product Manufacturing segment and were sold to our Retail Operations segment. The Product Manufacturing segment supplies our Retail Operations segment along with various independent dealers.
20
The following table sets forth revenue and income from operations for each of the Company’s reportable segments for the three and nine months ended June 30,
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
|
June 30, |
|
|
June 30, |
|
||||||||||
|
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
||||
|
|
|
(Amounts in thousands) |
|
|||||||||||||
|
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail Operations |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Product Manufacturing |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Elimination of intersegment revenue |
|
|
( |
) |
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|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Revenue |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Income from operations: |
|
|
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|
|
|
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|
|
|
|
|
|
|
|
|
|
Retail Operations |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Product Manufacturing |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Elimination of intersegment income from operations |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Income from operations |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
21
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This Management’s Discussion and Analysis of Financial Condition and Results of Operations contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements include statements regarding our “expectations,” “anticipations,” “intentions,” “plans,” “beliefs,” or “strategies” regarding the future. These forward-looking statements include statements relating to market risks such as interest rate risk and foreign currency exchange rate risk; economic and industry conditions and corresponding effects on consumer behavior and operating results; environmental conditions; inclement weather; certain specific and isolated events; our future estimates, assumptions and judgments, including statements regarding whether such estimates, assumptions and judgments could have a material adverse effect on our operating results; the impact of changes in accounting policy and standards; our plans to accelerate our growth through acquisitions and new store openings; our belief that our existing capital resources will be sufficient to finance our operations for at least the next 12 months, except for possible significant acquisitions; the seasonality and cyclicality of our business and the effect of such seasonality and cyclicality on our business, financial results and inventory levels; the scope and duration of the COVID-19 pandemic and its impact on global economic systems, our employees, sites, operations, customers, suppliers and supply chain; and the Company’s ability to manage growth effectively. Actual results could differ materially from those currently anticipated as a result of a number of factors, including those set forth under “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended September 30, 2021.
General
In March 2020, the outbreak of COVID-19 caused by a novel strain of the coronavirus was recognized as a pandemic by the World Health Organization, and the outbreak is widespread throughout the United States (including Florida in which we generated approximately 54% and 50% of our revenue during fiscal 2020 and 2021, respectively), and in other countries in which we operate. As a result, from March 2020 through June 2020, we temporarily closed certain departments or locations based on guidance from local government or health officials. Currently, all of our stores are fully operational, but the effects of COVID-19 (including the related international, federal, state, and local governmental actions and regulations) remain unpredictable. We are following guidelines to ensure we are safely operating as recommended. Where possible, we are offering private personal showings as well as virtual appointments. Our digital platform is serving as an effective solution in this environment with robust online activity. Our experienced teams continue to engage with customers virtually and in our stores to help customers select their boats and obtain appropriate services.
We believe we are the largest recreational boat and yacht retailer and superyacht services company in the world. Through our current 79 retail locations in 21 states, we sell new and used recreational boats and related marine products, including engines, trailers, parts, and accessories. We also arrange related boat financing, insurance, and extended service contracts; provide boat repair and maintenance services; offer yacht and boat brokerage sales; and, where available, offer slip and storage accommodations. In the British Virgin Islands we offer the charter of catamarans, through MarineMax Vacations. We also own Fraser Yachts Group, a leading superyacht brokerage and luxury yacht services company with operations in multiple countries. In July 2020, we acquired Northrop & Johnson, another leading superyacht brokerage and services company with operations in multiple countries. In October 2020, we purchased all of the outstanding equity of SkipperBud’s. SkipperBud’s is one of the largest boat sales, brokerage, service and marina/storage groups in the United States. In May 2021, we purchased all of the outstanding equity of Cruisers Yachts. Cruisers Yachts, a wholly-owned MarineMax subsidiary, manufactures sport yacht and yachts with sales through our select retail dealership locations and through independent dealers, and is recognized as one of the world’s premier manufacturers of premium sport yacht and yachts. In July 2021, we acquired Nisswa Marine, a full-service dealer located in Minnesota. In November 2021, we acquired Intrepid, a premier manufacturer of powerboats, and Texas MasterCraft, a premier watersports dealer in Northern Texas. In April 2022, through Northrop & Johnson, we acquired Superyacht Management, S.A.R.L., better known as SYM, a superyacht management company based in Golfe-Juan, France.
MarineMax was incorporated in January 1998 (and reincorporated in Florida in March 2015). We commenced operations with the acquisition of five independent recreational boat dealers on March 1, 1998. Since the initial acquisitions in March 1998, we have acquired 32 recreational boat dealers, five boat brokerage operations, two full-service yacht repair operations, and two boat and yacht manufacturers. As a part of our acquisition strategy, we frequently engage in discussions with various potential acquisition targets regarding their potential acquisition by us. Potential acquisition discussions frequently take place over a long period of time and involve difficult business integration and other issues, including, in some cases, management succession and related matters. As a result of these and other factors, a number of potential acquisitions that from time to time appear likely to occur do not result in binding legal agreements and are not consummated. We completed three acquisitions in the fiscal year ended September 30, 2021 and three acquisitions to date in fiscal 2022.
22
General economic conditions and consumer spending patterns can negatively impact our operating results. Unfavorable local, regional, national or global economic developments or uncertainties regarding future economic prospects could reduce consumer spending in the markets we serve and adversely affect our business. Economic conditions in areas in which we operate locations, particularly Florida in which we generated approximately 54% and 50% of our revenue during fiscal 2020 and 2021, respectively, can have a major impact on our operations. Local influences, such as corporate downsizing, military base closings, and inclement weather such as hurricanes and other storms, environmental conditions, and specific events, such as the BP oil spill in the Gulf of Mexico in 2010, also could adversely affect, and in certain instances have adversely affected, our operations in certain markets.
In an economic downturn, consumer discretionary spending levels generally decline, at times resulting in disproportionately large reductions in the sale of luxury goods. Consumer spending on luxury goods also may decline as a result of lower consumer confidence levels, even if prevailing economic conditions are favorable. Additionally, the Federal Reserve's increases of its benchmark interest rate, along with potential future increases and/or market expectations of such increases, may result in significantly higher long-term interest rates, which may negatively impact our customers’ willingness or desire to purchase our products. As a result, an economic downturn or inflation could impact us more than certain of our competitors due to our strategic focus on a higher end of our market. Although we have expanded our operations during periods of stagnant or modestly declining industry trends, the cyclical nature of the recreational boating industry or the lack of industry growth may adversely affect our business, financial condition, and results of operations. Any period of adverse economic conditions, low consumer confidence or inflation is likely to have a negative effect on our business.
Historically, in periods of lower consumer spending and depressed economic conditions, we have, among other things, substantially reduced our acquisition program, delayed new store openings, reduced our inventory purchases, engaged in inventory reduction efforts, closed a number of our retail locations, reduced our headcount, and amended and replaced our credit facility.
Although past economic conditions have adversely affected our operating results, we believe during and after such conditions we have capitalized on our core strengths to substantially outperform the industry, resulting in market share gains. Our ability to capture such market share supports the alignment of our retailing strategies with the desires of consumers. We believe the steps we have taken to address weak market conditions in the past have yielded, and we believe are likely to yield in the future, an increase in revenue. Acquisitions remain an important strategy for us, and, subject to a number of conditions, including macro-economic conditions and finding attractive acquisition targets, we plan to explore opportunities through this strategy. We expect our core strengths and retailing strategies including our digital platform, will position us to capitalize on growth opportunities as they occur and will allow us to emerge with greater earnings potential.
Effective May 2, 2021, our reportable segments changed as a result of the Company’s acquisition of Cruisers Yachts, which changed management’s reporting structure and operating activities. We now report our operations through two reportable segments: Retail Operations and Product Manufacturing. See Note 18 of the Notes to Unaudited Consolidated Financial Statements.
As of June 30, 2022, the Retail Operations segment includes the activity of 79 retail locations in Alabama, California, Connecticut, Florida, Georgia, Illinois, Maryland, Massachusetts, Michigan, Minnesota, Missouri, New Jersey, New York, North Carolina, Ohio, Oklahoma, Rhode Island, South Carolina, Texas, Washington and Wisconsin, where we sell new and used recreational boats, including pleasure and fishing boats, with a focus on premium brands in each segment. We also sell related marine products, including engines, trailers, parts, and accessories. In addition, we provide repair, maintenance, and slip and storage services; we arrange related boat financing, insurance, and extended service contracts; and we offer boat and yacht brokerage sales; and yacht charter services. In the British Virgin Islands we offer the charter of catamarans, through MarineMax Vacations. Fraser Yachts Group and Northrop & Johnson, leading superyacht brokerage and luxury yacht services companies with operations in multiple countries, are also included in this segment.
As of June 30, 2022, the Product Manufacturing segment includes activity of Cruisers Yachts and Intrepid. Cruisers Yachts, a wholly-owned MarineMax subsidiary, manufacturing sport yacht and yachts with sales through our select retail dealership locations and through independent dealers. Cruisers Yachts is recognized as one of the world’s premier manufacturers of premium sport yacht and yachts, producing models from 33’ to 60’ feet. Intrepid, also a wholly-owned MarineMax subsidiary, is a producer of customized boats. Intrepid follows a direct-to-consumer distribution model and has received many awards and accolades for its innovations and high-quality craftsmanship that create industry leading products in their categories.
Application of Critical Accounting Policies
See Part II, Item 7, “Application of Critical Accounting Policies” in our Annual Report on Form 10-K for the fiscal year ended September 30, 2021. There have been no material changes to our critical accounting policies since our Annual Report on Form 10-K for the fiscal year ended September 30, 2021.
Recent Accounting Pronouncements
See Note 3 of the Notes to Unaudited Condensed Consolidated Financial Statements.
23
Consolidated Results of Operations
The following discussion compares the three and nine months ended June 30, 2022, with the three and nine months ended June 30, 2021 and should be read in conjunction with the Unaudited Condensed Consolidated Financial Statements, including the related notes thereto, appearing elsewhere in this report.
Three Months Ended June 30, 2022 Compared with Three Months Ended June 30, 2021
Revenue. Revenue increased $22.2 million, or 3.3%, to $688.5 million for the three months ended June 30, 2022, from $666.3 million for three months ended June 30, 2021. Of this increase, $52.3 million was related to stores opened, including those acquired, that were not eligible for inclusion in the comparable-store base, as well as Intrepid and Cruisers Yachts manufacturing revenue which were not included in comparable retail store sales, partially offset by a decrease of $30.1 million or 4.6% in comparable-store sales (comparable-store sales increased 5.7% for the three months ended June 30, 3021 and 36.7% for the three months ended June 30, 2020). The decrease in our comparable-store revenue was primarily due to leaner inventory caused by supply chain challenges.
Gross Profit. Gross profit increased $31.8 million, or 15.5%, to $236.5 million for the three months ended June 30, 2022, from $204.7 million for the three months ended June 30, 2021. Gross profit as a percentage of revenue increased to 34.3% for the three months ended June 30, 2022, from 30.7% for the three months ended June 30, 2021. The increase in gross profit as a percentage of revenue was primarily the result of demand driven increases in boat margins and increases in our higher margin businesses as a percentage of sales. The increase in gross profit dollars was primarily attributable to increases in our margins and recently acquired operations.
Selling, General, and Administrative Expenses. Selling, general, and administrative expenses increased $17.4 million, or 14.1%, to $141.2 million for the three months ended June 30, 2022, from $123.8 million for the three months ended June 30, 2021. The increase in selling, general, and administrative expenses was driven by an increase in mix to our higher margin businesses, which typically carry a higher expense structure, increased gross profit which increased commissions, and recently acquired operations.
Interest Expense. Interest expense increased $0.4 million, or 66.7%, to $1.0 million for the three months ended June 30, 2022, from $0.6 million for the three months ended June 30, 2021. Interest expense as a percentage of revenue remained consistent at 0.1% for the three months ended June 30, 2022, and for the three months ended June 30, 2021. The increase in interest expense was primarily the result of increased interest rates and increased borrowings.
Income Taxes. Income tax expense increased $3.4 million, or 16.4%, to $24.1 million for the three months ended June 30, 2022, from $20.7 million for the three months ended June 30, 2021. Our effective income tax rate decreased to 25.6% for the nine months ended June 30, 2022, from 25.7% for nine months ended June 30, 2021. The decrease in the effective income tax rate was not significant.
Nine Months Ended June 30, 2022 Compared with Nine Months Ended June 30, 2021
Revenue. Revenue increased $170.4 million, or 10.6%, to $1.771 billion for the nine months ended June 30, 2022, from $1.601 billion for nine months ended June 30, 2021. Of this increase, $126.4 million was attributable to stores opened, including those acquired, or closed that were not eligible for inclusion in the comparable-store base, as well as Intrepid and Cruisers Yachts manufacturing revenue which were not included in comparable retail store sales, and an increase of $44.0 million, or 2.8%, in comparable-store sales. The increase in our comparable-store sales was primarily due to demand driven increases in new boat revenue and growth in our higher margin finance, insurance, brokerage, parts, service, storage services, and superyacht services revenue.
Gross Profit. Gross profit increased $124.1 million, or 25.6%, to $609.0 million for the nine months ended June 30, 2022, from $484.9 million for the nine months ended June 30, 2021. Gross profit as a percentage of revenue increased to 34.4% for the nine months ended June 30, 2022, from 30.3% for the nine months ended June 30, 2021. The increase in gross profit as a percentage of revenue was primarily the result of demand driven increases in boat margins and increases in our higher margin revenue as a percentage of sales. The increase in gross profit dollars was primarily attributable to increased new boat sales, our higher margin businesses, and recently acquired operations.
Selling, General, and Administrative Expenses. Selling, general, and administrative expenses increased $75.6 million, or 23.7%, to $394.7 million for the nine months ended June 30, 2022, from $319.1 million for the nine months ended June 30, 2021. The increase in selling, general, and administrative expenses was driven by an increase in mix to our higher margin businesses, which typically carry a higher expense structure, increased gross profit which increased commissions, and recently acquired operations.
Interest Expense. Interest expense decreased $0.7 million, or 23.3%, to $2.3 million for the nine months ended June 30, 2022, from $3.0 million for the nine months ended June 30, 2021. Interest expense as a percentage of revenue decreased to 0.1% for the nine months ended June 30, 2022, from 0.2% for the nine months ended June 30, 2021. The decrease in interest expense was primarily the result of decreased borrowings, partially offset by increasing interest rates.
24
Income Taxes. Income tax expense increased $11.8 million, or 29.1%, to $52.4 million for the nine months ended June 30, 2022, from $40.6 million for the nine months ended June 30, 2021. Our effective income tax rate decreased to 24.7% for the nine months ended June 30, 2022, from 24.9% for nine months ended June 30, 2021. The decrease in the effective income tax rate was not significant.
Liquidity and Capital Resources
Our cash needs are primarily for working capital to support operations, including new and used boat and related parts inventories, off-season liquidity, and growth through acquisitions. Acquisitions remain an important strategy for us, and we plan to continue our growth through this strategy in appropriate circumstances. However, we cannot predict the length of favorable economic or financial conditions. We regularly monitor the aging of our inventories and current market trends (including supply chain issues) to evaluate our current and future inventory needs. We also use this evaluation in conjunction with our review of our current and expected operating performance and expected business levels to determine the extent of our financing needs.
These cash needs historically have been financed with cash generated from operations and borrowings under the Credit Facility (described below). Our ability to utilize the Credit Facility to fund operations depends upon the collateral levels and compliance with the covenants of the Credit Facility. Any turmoil in the credit markets and weakness in the retail markets may interfere with our ability to remain in compliance with the covenants of the Credit Facility and therefore our ability to utilize the Credit Facility to fund operations. As of June 30, 2022, we were in compliance with all covenants under the Credit Facility. We currently depend upon dividends and other payments from our locations and the Credit Facility to fund our current operations and meet our cash needs. As 100% owner of each of our locations, we determine the amounts of such distributions subject to applicable law, and currently, no agreements exist that restrict this flow of funds from our locations.
For the nine months ended June 30, 2022 and 2021, cash provided by operating activities was approximately $123.0 million and $329.6 million, respectively. For the nine months ended June 30, 2022, cash provided by operating activities was primarily related to increases in contract liabilities (customer deposits), increases in accrued expenses and other liabilities, increases in accounts payable, and our net income adjusted for non-cash expenses such as depreciation and amortization expense and stock-based compensation expense, partially offset by increases in inventory (excluding acquired operations) and increases in accounts receivable. For the nine months ended June 30, 2021, cash provided by operating activities was primarily related to decreases in inventory (excluding acquired operations), increases in contract liabilities (customer deposits), increases in accrued expenses and other liabilities, and our net income adjusted for non-cash expenses such as depreciation and amortization expense, stock-based compensation expense, and deferred income tax provision, partially offset by increases in accounts receivable, decreases in accounts payable, and increases in prepaid expenses and other assets.
For the nine months ended June 30, 2022 and 2021, cash used in investing activities was approximately $113.2 million and $131.1 million, respectively. For the nine months ended June 30, 2022, cash used in investing activities was primarily used for acquisitions, to purchase property and equipment associated with improving existing retail facilities, to purchase property and equipment from locations formerly leased, and to purchase investments, partially offset by proceeds from investments. For the nine months ended June 30, 2021, cash used in investing activities was primarily used for acquisitions, to purchase property and equipment associated with improving existing retail facilities, and to purchase investments, partially offset by proceeds from insurance settlements.
For the nine months ended June 30, 2022, cash provided by financing activities was approximately $50.9 million. For the nine months ended June 30, 2021, cash used in financing activities was approximately $154.1 million. For the nine months ended June 30, 2022, cash provided by financing activities was primarily attributable to net increases in short-term borrowings and net proceeds from issuance of common stock under incentive compensation and employee purchase plans, partially offset by purchase of treasury stock, payments on tax withholdings for equity awards, and contingent acquisition consideration payments. For the nine months ended June 30, 2021, cash used in financing activities was primarily attributable to net payments for short-term borrowings, purchase of treasury stock, payments on tax withholdings for equity awards, payments for long-term debt, and contingent acquisition consideration payments, partially offset by proceeds from long-term debt and net proceeds from issuance of common stock under incentive compensation and employee purchase plans.
In May 2020, we entered into a Loan and Security Agreement, which was subsequently amended in July 2021, with Wells Fargo Commercial Distribution Finance LLC, M&T Bank, Bank of the West, and Truist Bank. The Credit Facility provides the Company a line of credit with asset based borrowing availability of up to $500.0 million for working capital and inventory financing, with the amount permissible pursuant to a borrowing base formula. The Credit Facility expires in July 2024, subject to extension for two one-year periods, with lender approval.
The Credit Facility has certain financial covenants as specified in the agreement. The covenants include provisions that our leverage ratio must not exceed 2.75 to 1.0 and that our current ratio must be greater than 1.2 to 1.0. The interest rate for amounts outstanding under the Credit Facility is 345 basis points plus the greater of 75 basis points or the one-month LIBOR. The Credit Facility allows for the transition of the benchmark interest rate used from LIBOR to SOFR. There is an unused line fee of ten basis
25
points on the unused portion of the Credit Facility. As of June 30, 2022, we were in compliance with all covenants under the Credit Facility.
Advances under the Credit Facility are initiated by the acquisition of eligible new and used inventory or are re-advances against eligible new and used inventory that have been partially paid-off. Advances on new inventory will generally mature 1,080 days from the original invoice date. Advances on used inventory will mature 361 days from the date we acquire the used inventory. Each advance is subject to a curtailment schedule, which requires that we pay down the balance of each advance on a periodic basis starting after six months. The curtailment schedule varies based on the type and value of the inventory. The collateral for the Credit Facility is primarily the Company’s inventory that is financed through the Credit Facility and related accounts receivable. None of our real estate has been pledged for collateral for the Credit Facility.
As of June 30, 2022, our indebtedness associated with our short-term borrowings and our long-term debt totaled approximately $107.5 million and $49.4 million, respectively. As of June 30, 2022, short-term borrowings and long-term debt recorded on the Unaudited Condensed Consolidated Balance Sheets included unamortized debt issuance costs of approximately $0.3 million and $0.5 million, respectively. Refer to Note 11 of the Notes to Unaudited Condensed Consolidated Financial Statements for disclosure of borrowing availability, interest rates, and terms of our short-term borrowings and long-term debt.
Except as specified in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and in the Unaudited Condensed Consolidated Financial Statements in the “Financial Statements (Unaudited)”, we have no material commitments for capital for the next 12 months. Based on the information currently available to us (including the impacts of the COVID-19 pandemic, current supply chain and inventory challenges and inflation on consumer demand, all of which are uncertain), we believe that the cash generated from sales and our existing capital resources will be adequate to meet our liquidity and capital requirements for at least the next 12 months, except for possible significant acquisitions.
Impact of Seasonality and Weather on Operations
Our business, as well as the entire recreational boating industry, is highly seasonal, with seasonality varying in different geographic markets. With the exception of Florida, we generally realize significantly lower sales, higher levels of inventories, and related short-term borrowings, in the quarterly periods ending December 31 and March 31. The onset of the public boat and recreation shows in January generally stimulates boat sales and typically allows us to reduce our inventory levels and related short-term borrowings throughout the remainder of the fiscal year. Our expansion into boat storage may act to reduce our seasonality and cyclicality.
Our business is also subject to weather patterns, which may adversely affect our results of operations. For example, prolonged winter conditions, drought conditions (or merely reduced rainfall levels) or excessive rain, may limit access to area boating locations or render boating dangerous or inconvenient, thereby curtailing customer demand for our products. In addition, unseasonably cool weather and prolonged winter conditions may lead to a shorter selling season in certain locations. Hurricanes and other storms could result in disruptions of our operations or damage to our boat inventories and facilities, as has been the case when Florida and other markets were affected by hurricanes, such as Hurricanes Harvey and Irma in 2017. Although our geographic diversity is likely to reduce the overall impact to us of adverse weather conditions in any one market area, these conditions will continue to represent potential, material adverse risks to us and our future financial performance.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Interest Rate Risk
We are exposed to risk from changes in interest rates on our outstanding indebtedness. Changes in the underlying interest rates on our short-term borrowings and long-term debt, which have variable interest rates, could affect our earnings. For example, a hypothetical 100 basis point, 200 basis point, or 300 basis point increase in the interest rate would result in an increase of approximately $1.4 million, $2.9 million, or $4.3 million in annual pre-tax interest expense. These estimated increases are based upon the outstanding balance of our short-term borrowings and long-term debt as of June 30, 2022 and assumes no mitigating changes by us to reduce the outstanding balances and no additional interest assistance that could be received from vendors due to the interest rate increase.
Foreign Currency Exchange Rate Risk
Products purchased from European-based and Chinese-based manufacturers are transacted in U.S. dollars. Fluctuations in the U.S. dollar exchange rate may impact the retail price at which we can sell foreign products. Accordingly, fluctuations in the value of other currencies compared with the U.S. dollar may impact the price points at which we can profitably sell such foreign products, and such price points may not be competitive with other products in the United States. Thus, such fluctuations in exchange rates ultimately may impact the amount of revenue, cost of goods sold, cash flows and earnings we recognize for such foreign products. We cannot
26
predict the effects of exchange rate fluctuations on our operating results. In certain cases, we may enter into foreign currency cash flow hedges to reduce the variability of cash flows associated with forecasted purchases of boats and yachts from European-based and Chinese-based manufacturers. We are not currently engaged in foreign currency exchange hedging transactions to manage our foreign currency exposure. If and when we do engage in foreign currency exchange hedging transactions, there can be no assurance that our strategies will adequately protect our operating results from the effects of exchange rate fluctuations.
Additionally, the Fraser Yachts Group and Northrop & Johnson have transactions and balances denominated in currencies other than the U.S. dollar. Most of the transactions or balances for Fraser Yachts Group are denominated in euros. Net revenues recognized whose functional currency was not the U.S. dollar were less than 2% of our total revenues in fiscal 2021.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that material information required to be disclosed by us in Securities Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
Our Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) as of the end of the period covered by this report. Based on such evaluation, such officers have concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were effective at the reasonable assurance level.
Changes in Internal Controls
During the quarter ended June 30, 2022, there were no changes in our internal control over financial reporting that materially affected, or were reasonably likely to materially affect, our internal control over financial reporting, except as described in the following sentence. On November 1, 2021, we acquired Intrepid. As we proceed with integration, we are implementing various accounting processes and internal controls over financial reporting for this reporting subsidiary.
Limitations on the Effectiveness of Controls
Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures and internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Although our disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, a control may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
CEO and CFO Certifications
Exhibits 31.1 and 31.2 are the Certifications of the Chief Executive Officer and Chief Financial Officer, respectively. The Certifications are required in accordance with Section 302 of the Sarbanes-Oxley Act of 2002 (the “Section 302 Certifications”). This Item of this report, which you are currently reading is the information concerning the Evaluation referred to in the Section 302 Certifications and this information should be read in conjunction with the Section 302 Certifications for a more complete understanding of the topics presented.
27
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We are party to various legal actions arising in the ordinary course of business. While it is not feasible to determine the actual outcome of these actions as of June 30, 2022, we do not believe that these matters will have a material adverse effect on our unaudited condensed consolidated financial condition, result of operations, or cash flows.
ITEM 1A. RISK FACTORS
None.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
The following table presents information with respect to our repurchases of our common stock during the three months ended June 30, 2022.
|
Period |
|
Total Number of Shares Purchased (1) |
|
|
Average Price Paid per Share |
|
|
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs |
|
|
Maximum Number of Shares that may be Purchased Under the Plans or Programs |
|
||||
|
April 1, 2022 - April 30, 2022 |
|
|
127,079 |
|
|
$ |
39.52 |
|
|
|
127,079 |
|
|
|
8,919,764 |
|
|
May 1, 2022 - May 31, 2022 |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
June 1, 2022 - June 30, 2022 |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
Total |
|
|
127,079 |
|
|
$ |
39.52 |
|
|
|
127,079 |
|
|
|
8,919,764 |
|
|
(1) |
Under the terms of the share repurchase program announced on March 16, 2020 and subsequently extended on March 1, 2022, the Company is authorized to purchase up to 10 million shares of its common stock through March 31, 2024. |
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
None.
28
ITEM 6. EXHIBITS
|
3.1 |
|
Articles of Incorporation of MarineMax, Inc., a Florida corporation. (1) |
|
|
|
|
|
3.2 |
|
|
|
|
|
|
|
4.1 |
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31.1 |
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31.2 |
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32.1 |
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32.2 |
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101.INS |
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Inline XBRL Instance Document - The instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document |
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101.SCH |
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Inline XBRL Taxonomy Extension Schema Document |
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101.CAL |
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Inline XBRL Taxonomy Extension Calculation Linkbase Document |
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101.DEF |
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Inline XBRL Taxonomy Extension Definition Linkbase Document |
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101.LAB |
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Inline XBRL Taxonomy Extension Label Linkbase Document |
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101.PRE |
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Inline XBRL Taxonomy Extension Presentation Linkbase Document |
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104 |
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Cover Page Interactive Data File (embedded within the Inline XBRL document) |
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(1) |
Incorporated by reference to Registrant’s Form 8-K as filed March 20, 2015. |
29
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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MARINEMAX, INC. |
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July 28, 2022 |
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By: |
/s/ Michael H. McLamb |
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Michael H. McLamb |
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Executive Vice President, |
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Chief Financial Officer, Secretary, and Director |
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(Principal Accounting and Financial Officer) |
30