UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-K
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☑ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended September 30, 20172022
Commission File Number 1-14173
MarineMax, Inc.
(Exact Name of Registrant as Specified in Its Charter)
Florida |
| 59-3496957 |
(State of Incorporation) |
| (I.R.S. Employer Identification No.) |
2600 McCormick Drive
Suite 200,Clearwater, Florida33759
Clearwater, Florida 33759(727) 531-1700
(727) 531-1700
(Address, including zip code, and telephone number, including area code, of principal executive offices)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class | Trading Symbol | Name of Each Exchange on Which Registered |
Common Stock, par value $.001 per share | HZO | New York Stock Exchange |
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐No☑
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐No☑
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. Yes☑ No ☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes☑ No ☐
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.450 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”filer,” “smaller reporting company,” and “smaller reporting“emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer |
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| Accelerated filer |
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Non-accelerated filer | ☐ |
| Smaller reporting company | ☐ |
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| Emerging | ☐ |
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 has filed a report on and attestation to its management’s assessment of
the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C.
7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☑
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☑
The aggregate market value of common stock held by non-affiliates of the registrant (23,083,911(21,095,025 shares) based on the closing price of the registrant’s common stock as reported on the New York Stock Exchange on March 31, 2017,2022, which was the last business day of the registrant’s most recently completed second fiscal quarter, was $499,766,673.$849,285,707. For purposes of this computation, all officers and directors of the registrant are deemed to be affiliates. Such determination should not be deemed to be an admission that such officers and directors are, in fact, affiliates of the registrant.
As of November 30, 2017,14, 2022, there were outstanding 26,500,55721,718,893 shares of the registrant’s common stock, par value $.001 per share.
Documents Incorporated by Reference
Portions of the registrant’s definitive proxy statement for the 20182023 Annual Meeting of Shareholders are incorporated by reference into Part III of this report.
Auditor Firm Id: | 185 | Auditor Name: | KPMG LLP | Auditor Location: | Tampa, Florida |
MARINEMAX, INC.
ANNUAL REPORT ON FORM 10-K
Fiscal Year Ended September 30, 20172022
TABLE OF CONTENTS
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Item 1 |
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Item 1A |
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Item 1B |
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Item 2 |
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Item 3 |
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Item 4 |
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Item 5 |
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Item 6 |
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Item 7 |
| Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Item 7A |
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Item 8 |
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Item 9 |
| Changes in and Disagreements with Accountants on Accounting and Financial Disclosure |
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Item 9A |
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Item 9B |
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Item 9C |
| Disclosure Regarding Foreign Jurisdictions that Prevent Inspections | 49 |
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Item 10 |
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Item 11 |
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Item 12 |
| Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters |
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Item 13 |
| Certain Relationships and Related Transactions, and Director Independence |
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Item 14 |
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Item 15 |
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Statement Regarding Forward-Looking Information
The statements contained in this report on Form 10-K that are not purely historical are forward-looking statements within the meaning of applicable securities laws. Forward-looking statements include statements regarding our “expectations,” “anticipations,” “intentions,” “plans,” “beliefs,” or “strategies” regarding the future. Forward-looking statements also include statements regarding revenue, margins, expenses, and earnings for fiscal 20182023 and thereafter; our belief that our practices enhance our ability to attract more customers, foster an overall enjoyable boating experience, and offer boat manufacturers stable and professional retail distribution and a broad geographic presence; our assessment of our competitive advantages, including our hassle-free sales approach, prime retail locations, premium product offerings, extensive facilities, strong management and team members, and emphasis on customer service and satisfaction before and after a boat sale; our belief that our core values of customer service and satisfaction and our strategies for growth and enhancing our business, including without limitation, our acquisition strategies and pursuit of contract manufacturing and vertical integration, will enable us to achieve success and long-term growth as economic conditions continue to recover; and our belief that our retailing strategies are aligned with the desires of consumers.consumers; and 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, managing growth effectively. All forward-looking statements included in this report are based on information available to us as of the filing date of this report, and we assume no obligation to update any such forward-looking statements. Our actual results could differ materially from the forward-looking statements. Among the factors that could cause actual results to differ materially are the factors discussed under Item 1A, “Risk Factors.”
Unless expressly indicated or the context requires otherwise, the terms “MarineMax,” “Company,” “we,” “us,” and “our” in this document refer to MarineMax, Inc. and its subsidiaries.
PART I
IntroductionItem 1. Business
Introduction
Our Company
We areMarineMax is the world’s largest recreational boat and yacht retailer, selling new and used recreational boats, yachts, and related marine products and services. MarineMax has over 120 locations worldwide, including 78 retail dealership locations, some of which include marinas. Collectively, with the IGY acquisition, MarineMax owns or operates 57 marinas worldwide. Through Fraser Yachts and Northrop & Johnson, the Company also is the largest superyacht services provider, operating locations across the globe. Cruisers Yachts manufactures boats and yachts with sales through our select retail dealership locations and through independent dealers. Intrepid Powerboats manufactures powerboats and sells through a direct-to-consumer model. MarineMax provides finance and insurance services through wholly owned subsidiaries and operates MarineMax Vacations in Tortola, British Virgin Islands. The Company also owns Boatyard, an industry-leading customer experience digital product company.
As of September 30, 2022, the United States. Through 62Retail Operations segment included the activity of 78 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 Texas,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; we offer boat and yacht brokerage sales;sales and we operate a yacht charter business inservices. In the British Virgin Islands.Islands we offer the charter of power 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 September 30, 2022, the Product Manufacturing segment included activity of Cruisers Yachts, a wholly-owned MarineMax subsidiary, manufacturing sport yacht and yachts with sales through our select retail dealership locations and through independent dealers, and Intrepid Powerboats. 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 Powerboats, also a wholly-owned MarineMax subsidiary, is a producer of customized boats, which incorporate the desires of each individual owner. Intrepid Powerboats 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.
In October 2022, we completed the acquisition of IGY Marinas. IGY Marinas maintains a network of strategically positioned luxury marinas situated in yachting and sport fishing destinations around the world. IGY Marinas has created standards for service and quality in nautical tourism around the world. It offers a global network of marinas in the Americas, the Caribbean, and Europe, delivering year-round accommodations. IGY Marinas caters to a wide variety of luxury yachts, while also being exclusive home ports for some of the world’s largest megayachts.
We are the nation’s largest retailer of Sea Ray and Boston Whaler recreational boats and yachts which are manufactured by Brunswick Corporation (“Brunswick”). Sales of new Brunswick boats accounted for approximately 42%23% of our revenue in fiscal 2017.2022. Sales of new Sea Ray and Boston Whaler boats, both divisions of Brunswick, accounted for approximately 23%11% and 17%9%, respectively, of our revenue in fiscal 2017.2022. Brunswick is a world leading manufacturer of marine products and marine engines. We believe our sales represented approximately 11% of all Brunswick marine sales, including approximately 55% of its Sea Ray boat sales, during our fiscal 2017. We have agreements with Brunswick covering Sea Ray products and Boston Whaler products and are the exclusive dealer of Sea Ray and Boston Whaler boats in almost all of our geographic markets. We alsoAdditionally, we are the exclusive dealer for Meridian Yachts, and Harris aluminum boats, both divisionsa division of Brunswick, in mostmany of our geographic markets. We also are the exclusive dealer for Italy-based Azimut-Benetti Group, or Azimut, for Azimut and Benetti mega-yachts, yachts, and other recreational boats for the United States. Sales of new Azimut boats and yachts accounted for approximately 9%8% of our revenue in fiscal 2017.2022. Additionally, we are the exclusive dealer for certain other premium brands that serve certain industry segments in our markets as shown by the table on page four.three.
We commenced operations as a result of the March 1, 1998 acquisition of five previously independent recreational boat dealers. Since that time, we have acquired 27 additional previously independent recreational boat dealers, two boat brokerage operations, and two full-service yacht repair operations. We attempt to capitalize on the experience and success of the acquired companies in order to establish a high national standard of customer service and responsiveness in the highly fragmented retail boating industry. As a result of our emphasis on premium brand boats, our average selling price for a new boat in fiscal 2017 was approximately $195,000, a slight decrease from approximately $198,000 in fiscal 2016, compared with the industry average selling price for calendar 2016 of approximately $43,000 based on industry data published by the National Marine Manufacturers Association. Our stores that operated at least 12 months averaged approximately $18.4 million in annual sales in fiscal 2017. We consider a store to be one or more retail locations that are adjacent or operate as one entity. Our same-store sales increased 22% in each of fiscal 2015 and 2016 and increased 5% in fiscal 2017.
We attempt to adopt the best practices developed by us and our acquired companies as appropriate to enhance our ability to attract and retain more customers, foster an overall enjoyable boating experience, and offer boat manufacturers stable and professional retail distribution and a broad geographic presence. We believe that our full range of services, hassle free approach, prime retail locations, premium product offerings, extensive facilities, strong management and team members, and emphasis on customer service and satisfaction before and after a boat sale are competitive advantages that enable us to be more responsive to the needs of existing and prospective customers. We strive to provide superior customer service and support before, during, and after the sale.
The U.S. recreational boating industry generated approximately $36.0 billion in retail sales in calendar 2016, which is down from the peak of $39.5 billion in calendar 2006. Total powerboats sold in calendar 2016 were approximately 188,800 units as compared to 298,100 units sold in calendar 2006. The retail sales include sales of new and used boats; marine products, such as engines, trailers, equipment, and accessories; and related expenditures, such as fuel, insurance, docking, storage, and repairs. Retail sales of new and used boats, engines, trailers, and accessories accounted for approximately $27.2 billion of these sales in 2016 based on industry data from the National Marine Manufacturers Association. The highly-fragmented retail boating industry generally consists of small dealers that operate in a single market and provide varying degrees of merchandising, professional management, and customer service. We believe that many small dealers are finding it increasingly difficult to make the managerial and capital commitments necessary to achieve higher customer service levels and upgrade systems and facilities as required by boat manufacturers and often demanded by customers. We also believe that many dealers lack an exit strategy for their owners. We believe these factors contribute to our opportunity to gain a competitive advantage in current and future markets, through market expansions and acquisitions.
1
Our goal is to enhance our position as the nation’s leading recreational boat and yacht retailer. Key elements of our operating and growth strategy include the following:
emphasizing customer satisfaction and loyalty by creating an overall enjoyable boating experience, beginning with a hassle-free purchase process, customer training, superior customer service, Company-led events called Getaways! ®, and premier facilities;
achieving efficiencies and synergies among our operations to enhance internal growth and profitability;
promoting national brand name recognition and the MarineMax connection;
offering additional marine products and services, including those with higher profit margins;
expanding our Internet marketing;
pursuing strategic acquisitions to capitalize upon the consolidation opportunities in the highly fragmented recreational boat dealer industry by acquiring additional dealers and related operations and improving their performance and profitability through the implementation of our operating strategies;
opening additional retail facilities in our existing and new territories;
emphasizing employee recruitment and retention through training, motivation, and development;
emphasizing the best practices developed by us and our acquired dealers as appropriate throughout our dealerships;
operating with a decentralized approach to the operational management of our dealerships; and
utilizing common platform information technology throughout operations, which facilitates the interchange of information sharing and enhances cross-selling opportunities throughout our company.
Development of the Company; Expansion of Business
MarineMax was founded in January 1998. MarineMax itself, however, conducted no operations until the acquisition of five independent recreational boat dealers on March 1, 1998, and we completed our initial public offering in June 1998. Since the initial acquisitions in March 1998, we have acquired 27 additional recreational boat dealers, two boat brokerage operations, and two full-service yacht repair operations. Acquired dealers operate under the MarineMax name.
We continually attempt to enhance our business by providing a full range of services, offering extensive and high-quality product lines, maintaining prime retail locations, pursuing the MarineMax One Price hassle-free sales approach, and emphasizing a high level of customer service and satisfaction.
We also from time to time evaluate opportunities to expand our operations by acquiring recreational boat dealers to expand our geographic scope, expanding our product lines, opening new retail locations within or outside our existing territories, and offering new products and services for our customers.
2
Acquisitions of additional recreational boat dealers represent an important strategy in our goal to enhance our position as the nation’s largest retailer of recreational boats. The following table sets forth information regarding the businesses that we have acquired and their geographic regions.
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3
Apart from acquisitions, we have opened 33 new retail locations in existing territories, excluding those opened on a temporary basis for a specific purpose. We also monitor the performance of our retail locations and close retail locations that do not meet our expectations. Based on these factors and previous depressed economic conditions, we have closed 63 retail locations since March 1998, excluding those opened on a temporary basis for a specific purpose, including 26 in fiscal 2009 and a total of four during the last three fiscal years.
As a part of our acquisition strategy, we frequently engage in discussions with various recreational boat dealers regarding their potential acquisition by us. In connection with these discussions, we and each potential acquisition candidate exchange confidential operational and financial information; conduct due diligence inquiries; and consider the structure, terms, and conditions of the potential acquisition. In certain cases, the prospective acquisition candidate agrees not to discuss a potential acquisition with any other party for a specific period of time, grants us an option to purchase the prospective dealer for a designated price during a specific time period, and agrees to take other actions designed to enhance the possibility of the acquisition, such as preparing audited financial information and converting its accounting system to the system specified 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.
In addition to acquiring recreational boat dealers and opening new retail locations, we also add new product lines to expand our operations. The following table sets forth certain of our current product lines that we have added to our existing locations during the years indicated.
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4
We add brands with the intent to either offer a migration path for our existing customer base or fill a gap in our product offerings. As a result, we believe that new brands we offer are generally complementary and do not cannibalize the business generated from our other prominent brands. We also discontinue offering product lines from time to time, primarily based upon customer preferences.
During the nine-year period from the commencement of our operations through our fiscal year ended September 30, 2007, our revenue increased from $291.0 million to more than $1.2 billion. Our revenue and net income increased in seven of those nine years over the prior year revenue and net income. This period was marked by an increase in retail locations from 41 on September 30, 1998 to 88 on September 30, 2007, resulting from acquisitions and opening new stores in existing territories.
Our growth was interrupted during the fiscal year ended September 30, 2007, primarily as a result of factors related to the deteriorating housing market and general economic conditions. The substantially deteriorating economic and financial conditions, reduced consumer confidence and spending, increased fuel prices, reduction of credit availability, financial market declines, and asset value deterioration all contributed to substantially lower financial performance in the fiscal years ended September 30, 2008 and 2009, including significant net losses, followed by pre-tax losses in the fiscal years ended September 30, 2010 and 2011. We returned to profitability in fiscal 2012.
As industry conditions continue to recover, we strive to maintain our core values of high customer service and satisfaction and plan to continue to pursue strategies that we believe will enable us to achieve long-term success and growth. As noted in the earlier table, we have capitalized on a number of brand expansion opportunities in the markets in which we operate. We believe our expanded product offerings have strengthened our same-store sales growth. We plan to further expand our business through both acquisitions in new territories and new store openings in existing territories. In addition, we plan to continue to expand our other traditional and newly offered services, including conducting used boat sales at our retail locations, at offsite locations, and on the Internet; selling related marine products, including engines, trailers, parts, and accessories at our retail locations and at various offsite locations, and through our print catalog; providing maintenance, repair, and storage services at most of our retail locations; offering our customers the ability to finance new or used boats; offering extended service contracts; arranging insurance coverage, including boat property, credit-life, accident, disability, and casualty coverage; offering boat and yacht brokerage sales at most of our retail locations and at various offsite locations; and conducting our yacht charter business. Our expansion plans will depend, in large part, upon economic and industry conditions.
We maintain our executive offices at 2600 McCormick Drive, Suite 200, Clearwater, Florida 33759, and our telephone number is (727) 531-1700. We were incorporated in the state of Delaware in January 1998 and then re-incorporated in Florida in March 2015. Unless the context otherwise requires, all references to “MarineMax” mean MarineMax, Inc. prior to its acquisition of five previously independent recreational boat dealers in March 1998 (including their related real estate companies) and all references to the “Company,” “our company,” “we,” “us,” and “our” mean, as a combined company, MarineMax, Inc. and the 27 recreational boat dealers, two boat brokerage operations, and two full-service yacht repair operations acquired to date (the “acquired dealers,” and together with the brokerage and repair operations, “operating subsidiaries,” or the “acquired companies”).
Our website is located at www.MarineMax.com. Through our website, we make available free of charge our annual report on Form 10-K, our quarterly reports on Form 10-Q, our current reports on Form 8-K, our proxy statements, and any amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934. These reports are available as soon as reasonably practicable after we electronically file those reports with the Securities and Exchange Commission (the “SEC”). We also post on our website the charters of our Audit, Compensation, and Nominating/Corporate Governance Committees; our Corporate Governance Guidelines, Code of Business Conduct and Ethics, and Code of Ethics for the CEO and Senior Financial Officers, and any amendments or waivers thereto; and any other corporate governance materials contemplated by the SEC or the regulations of the New York Stock Exchange, or NYSE. These documents are also available in print to any stockholder requesting a copy from our corporate secretary at our principal executive offices. Because our common stock is listed on the NYSE, our Chief Executive Officer is required to make an annual certification to the NYSE stating that he is not aware of any violation by us of the corporate governance listing standards of the NYSE. Our Chief Executive Officer made his annual certification to that effect to the NYSE on March 1, 2017.
Business
General
We are the largest recreational boat and yacht retailer in the United States. Through 62 retail locations in Alabama, California, Connecticut, Florida, Georgia, Maryland, Massachusetts, Minnesota, Missouri, New Jersey, New York, North Carolina, Ohio, Oklahoma, Rhode Island, South Carolina and Texas, we sell new and used recreational boats, including pleasure boats (such as sport boats, sport cruisers, sport yachts, and yachts), and fishing boats, with a focus on premium brands in each segment. We also offer the charter of power and sailing yachts in the British Virgin Islands.
5
We are the nation’s largest retailer of Sea Ray and Boston Whaler recreational boats and yachts, which are manufactured by Brunswick Corporation, or Brunswick. Sales of new Brunswick boats accounted for approximately 42% of our revenue in fiscal 2017. Sales of new Sea Ray and Boston Whaler boats, both divisions of Brunswick, accounted for approximately 23% and 17%, respectively, of our revenue in fiscal 2017. Brunswick is a world leading manufacturer of marine products and marine engines. We believe our sales represented approximately 11% of all Brunswick marine sales, including approximately 55% of its Sea Ray boat sales, during our fiscal 2017. We have agreements with Brunswick covering Sea Ray products and Boston Whaler products and are the exclusive dealer of Sea Ray and Boston Whaler boats in almost all of our geographic markets. We also are the exclusive dealer for Meridian Yachts and Harris aluminum boats, both divisions of Brunswick, in most of our geographic markets. We also are the exclusive dealer for Italy-based Azimut-Benetti Group, or Azimut, for Azimut mega-yachts, yachts, and other recreational boats for the United States. Sales of new Azimut boats and yachts accounted for approximately 9% of our revenue in fiscal 2017. Additionally, we are the exclusive dealer for certain other premium brands that serve specific industry segments in our markets as shown by the table on page four.
We also are involved in other boating-related activities. We sell used boats at our retail locations, online, and at various third-party marinas and other offsite locations; we sell marine engines and propellers, primarily to our retail customers as replacements for their existing engines and propellers; we sell a broad variety of parts and accessories at our retail locations and at various offsite locations, and through our print catalog; we offer maintenance, repair, and slip and storage services at most of our retail locations; we offer finance and insurance or F&I, products at most of our retail locations and at various offsite locations and to our customers and independent boat dealers and brokers; we offer boat and yacht brokerage sales at most of our retail locations and at various offsite locations; and we conduct a yacht charter business, which is based in the British Virgin Islands, in which we offer customers the opportunity to charter third-party and Company owned power catamarans.
1
MarineMax commenced operations as a result of the March 1, 1998 acquisition of five previously independent recreational boat dealers. Since that time, we have acquired 32 additional previously independent recreational boat dealers, multiple marinas, five boat brokerage operations, two superyacht service companies, two full-service yacht repair operations, and sailing yachtstwo boat and yacht manufacturers. We attempt to capitalize on the experience and success of the acquired companies in exotic locations.order to establish a high standard of customer service and responsiveness in the highly fragmented retail boating industry. As a result of our emphasis on premium brand boats, our average selling price for a new boat in fiscal 2022 was approximately $256,000, an increase from approximately $227,000 in fiscal 2021, compared with the industry average selling price for calendar 2021 of approximately $71,000 based on industry data published by the National Marine Manufacturers Association. We consider a store to be one or more retail locations that are adjacent or operate as one entity or a superyacht services region. Same-store sales include all stores that were open and operated throughout both the current and comparative prior period. Our same-store sales increased 25% in fiscal 2020, increased 13% in fiscal 2021, and increased 5% in fiscal 2022.
U.S. Recreational Boating Industry
The U.S. recreational boating industry generated approximately $36.0$56.7 billion in retail sales in calendar 2016,2021, which is down fromabove the former peak of $39.5$49.4 billion in calendar 2006.2020. The retail sales include sales of new and used boats; marine products, such as engines, trailers, equipment, and accessories; and related expenditures, such as fuel, insurance, docking, storage, and repairs. Retail sales of new and used boats, engines, trailers, and accessories accounted for approximately $45.7 billion of these sales in 2021 based on industry data from the National Marine Manufacturers Association. The highly-fragmented retail boating industry generally consists of small dealers that operate in a single market and provide varying degrees of merchandising, professional management, and customer service. We believe that many small dealers find it increasingly difficult to make the managerial and capital commitments necessary to achieve higher customer service levels and upgrade systems and facilities as required by boat manufacturers and often demanded by customers. We also believe that many dealers lack an exit strategy for their owners. We believe these factors contribute to our opportunity to gain a competitive advantage in current and future markets, through market expansions and acquisitions.
Material Updates to Our Strategy
Since the last discussion of our strategy in our Form 10-K for our fiscal year ended September 30, 2021, our primary goal remains to enhance our position as the leading recreational boat and yacht retailer and preeminent superyacht services company. Pursuant to this strategy, we have completed recent acquisitions including Fraser Yachts Group, Northrop & Johnson, Skipper Marine Holdings, Inc. and certain affiliates (collectively, "SkipperBud’s"), KCS International Holdings, Inc. and certain affiliates ("Cruisers Yachts"), Intrepid Powerboats, Texas MasterCraft, and IGY Marinas. Our acquisitions of Fraser Yachts Group, Northrop & Johnson, SkipperBud’s, and IGY Marinas increases our superyacht brokerage and luxury yacht services and marina/storage services. Additionally, IGY Marinas’ scale and strategic geographic footprint enables it to provide vertically integrated services to superyacht customers as they travel to popular destinations. Our acquisition of IGY Marinas offers a global network of marinas in the Americas, the Caribbean, and Europe, delivering year-round accommodations. IGY Marinas caters to a wide variety of luxury yachts, while also being exclusive home ports for some of the world’s largest megayachts.
In addition, we continue to broaden and strengthen our digital initiatives. Our digital services are always available and offer our full selection of boats, yachts and charters, as well as our expert team to answer customers’ questions and help them find a boat virtually. Additionally, our Boatyard digital platform allows marine businesses effective and customized digital solutions delivering great customer experiences by enabling customers to interact through a personalized experience tailored to their needs.
Development of the Company; Expansion of Business
Since our initial acquisitions in March 1998, we have acquired 32 additional previously independent recreational boat dealers, multiple marinas, five boat brokerage operations, two superyacht service companies, two full-service yacht repair operations, and two boat and yacht manufacturers. Acquired dealers operate under the MarineMax name.
We continually attempt to enhance our business by providing a full range of services, offering extensive and high-quality product lines, maintaining prime retail locations, pursuing the MarineMax One Price hassle-free sales approach, and emphasizing a high level of customer service and satisfaction.
We also from time to time evaluate opportunities to expand our operations by potentially acquiring recreational boat dealers to expand our geographic scope, expanding our product lines, opening new retail locations within or outside our existing territories, and offering new products and services for our customers and by potentially acquiring companies to pursue contract manufacturing or vertical integration strategies.
Apart from acquisitions and our superyacht service locations, we have opened 35 new retail locations in existing territories, excluding those opened on a temporary basis for a specific purpose. We also monitor the performance of our retail locations and close retail locations that do not meet our expectations. Based on these factors and previous depressed economic conditions, we have closed 76 retail locations since March 1998 which includes the 2008 financial crisis, excluding those opened on a temporary basis for a specific purpose and including 4 during the last three fiscal years.
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The following table sets forth information regarding the businesses that we have acquired and their geographic regions since fiscal year 2011.
Acquired Companies | Acquisition Date | Geographic Region | ||
Treasure Island Marina, LLC | February 2011 | Florida Panhandle | ||
Bassett Marine, LLC | September 2012 | Connecticut, Rhode Island and Western Massachusetts | ||
Parker Boat Company | March 2013 | Central Florida | ||
Ocean Alexander Yachts | April 2014 | Eastern United States | ||
Bahia Mar Marina | January 2016 | Florida Panhandle | ||
Russo Marine | April 2016 | Eastern Massachusetts and Rhode Island | ||
Hall Marine Group | January 2017 | North Carolina, South Carolina and Georgia | ||
Island Marine Center | January 2018 | New Jersey | ||
Tera Miranda | April 2018 | Oklahoma | ||
Bay Pointe Marina | September 2018 | Massachusetts | ||
Sail & Ski Center | April 2019 | Texas | ||
Fraser Yachts Group | July 2019 | Worldwide | ||
Boatyard, Inc. | February 2020 | Worldwide | ||
Northrop & Johnson | July 2020 | Worldwide | ||
Private Insurance Services | July 2020 | Worldwide | ||
SkipperBud’s & Silver Seas Yachts | October 2020 | Great Lakes region and West Coast United States | ||
Cruisers Yachts | May 2021 | Worldwide | ||
Nisswa Marine | July 2021 | Minnesota | ||
Intrepid Powerboats | November 2021 | Worldwide | ||
Texas MasterCraft | November 2021 | Texas | ||
Superyacht Management, S.A.R.L. | April 2022 | France | ||
Endeavour Marina | August 2022 | Texas | ||
IGY Marinas | October 2022 | Worldwide |
In addition to acquiring recreational boat dealers, superyacht service companies, boat manufacturers, marinas, and opening new retail locations, we also add new product lines to expand our operations. The following table sets forth certain of our current product lines that we have added to our existing locations during the years indicated.
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Product Line | Fiscal Year | Current Geographic Regions | ||
Boston Whaler | 1998 | West Central Florida, Stuart, Florida, and Dallas, Texas | ||
Grady-White | 2002 | Houston, Texas | ||
Boston Whaler | 2004-2005 | North and South Carolina (2004), Houston, Texas (2005) | ||
Azimut | 2006 | Northeast United States from Maryland to Maine | ||
Boston Whaler | 2006 | New York | ||
Grady-White | 2006-2010 | Pensacola, Florida (2006), Jacksonville, Florida (2010) | ||
Azimut | 2008 | Florida | ||
Boston Whaler | 2009-2012 | Southwest Florida (2009), Pompano Beach, Florida (2012) | ||
Harris | 2010 | Missouri, Minnesota, and New Jersey | ||
Nautique by Correct Craft | 2010 | West Central Florida and Minnesota | ||
Harris | 2011-2012 | West Central Florida (2011), Alabama (2012), North and Southwest Florida (2012), and Texas (2012) | ||
Crest | 2011-2018 | Georgia (2011), Oklahoma (2012), North Carolina and South Carolina (2012), New Jersey (2015), Florida (2018) | ||
Azimut | 2012 | United States other than where previously held | ||
Scout | 2012 | Southeast Florida, Maryland, and New Jersey | ||
Sailfish | 2013 | Connecticut, New Jersey, North Carolina, Ohio, and Rhode Island | ||
Ocean Alexander Yachts | 2014 | Eastern United States | ||
Scout | 2014 | Texas, New York | ||
Aquila | 2014 | Worldwide, excluding China | ||
Galeon | 2015 | North America, Central America, and South America | ||
Grady-White | 2016 | Miami, Florida | ||
Boston Whaler | 2016 | Parts of Massachusetts, Connecticut, and Rhode Island | ||
Yamaha Jet Boats | 2017 | Georgia, North Carolina, and South Carolina | ||
Bennington | 2017 | South Carolina | ||
Mastercraft | 2018-2021 | South Carolina (2018), Wisconsin and Illinois (2021) | ||
NauticStar | 2018 | Panama City, Florida, Oklahoma, Missouri, Minnesota, North Carolina and South Carolina | ||
Tigé | 2018-2019 | Orlando, Florida, Oklahoma, Georgia, and North Carolina | ||
Benetti | 2019 | United States and Canada | ||
Aviara | 2019 | United States | ||
MJM Yachts | 2019 | Florida | ||
ATX Surf Boats | 2020 | Orlando, Florida, Oklahoma, Georgia, and North Carolina | ||
Barletta | 2021 | Wisconsin, Illinois, Detroit, and Michigan | ||
Four Winns | 2021 | Wisconsin, Illinois, Ohio and Detroit, Michigan | ||
Harris | 2021 | Wisconsin, Illinois, Grand Rapids, Michigan and Ohio | ||
Sea Ray | 2021 | Wisconsin, Illinois, Michigan, and Ohio | ||
Starcraft | 2021 | Wisconsin, Illinois & Michigan | ||
Sylvan | 2021 | Wisconsin, Illinois, & Eastern Michigan | ||
Tiara | 2021 | Wisconsin, Illinois, Michigan, California & Ohio | ||
Princess | 2021 | California and Seattle, Washington | ||
Cruisers Yachts (1) | 2021 | Worldwide | ||
Chapparral, Chris-Craft, Moomba | 2021 | Minnesota | ||
Premier, Robalo, Supra | 2021 | Minnesota | ||
Boston Whaler | 2022 | Minnesota | ||
Intrepid Powerboats (1) | 2022 | Worldwide | ||
Mastercraft | 2022 | North Texas | ||
Wider Yachts | 2022 | North America |
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We add brands with the intent to either offer a migration path for our existing customer base or fill a gap in our product offerings. As a result, we believe that new brands we offer are generally complementary and do not negatively impact the business generated from our other prominent brands. We also discontinue offering product lines from time to time, primarily based upon customer preferences.
We strive to maintain our core values of high customer service and satisfaction and plan to continue to pursue strategies that we believe will enable us to achieve long-term success and growth. We believe our expanded product offerings have strengthened our same-store sales growth. We plan to further expand our business through both acquisitions in new territories and new store openings in existing territories. In addition, we plan to continue to expand our other traditional services, including conducting used boat sales at our retail locations, at offsite locations, and digitally; selling related marine products, including engines, trailers, parts, and accessories at our retail locations and at various offsite locations; providing maintenance, repair, and storage services at most of our retail locations; offering our customers the ability to finance new or used boat purchases and to purchase extended service contracts and arrange insurance coverage, including boat property, disability, undercoating, gel sealant, fabric protection, trailer tire and wheel protection, and casualty insurance coverage; offering boat and yacht brokerage sales at most of our retail locations and at various offsite locations; offering boat storage; conducting our yacht charter business; and manufacturing sport yacht and yachts. Our expansion plans will depend, in large part, upon economic and industry conditions.
U.S. Recreational Boating Industry
The U.S. recreational boating industry generated approximately $56.7 billion in retail sales in calendar 2021, which is above the former peak of $49.4 billion in calendar 2020. The retail sales include sales of new and used recreational boats; marine products, such as engines, trailers, parts, and accessories; and related boating expenditures, such as fuel, insurance, docking, storage, and repairs. Retail sales of new and used boats, engines, trailers, equipment, and accessories accounted for approximately $27.2$45.7 billion of such sales in calendar 2016. Total powerboats sold in calendar 2016 were approximately 188,800 units as compared to 298,100 units sold in calendar 2006. Annual2021. To provide historical perspective, annual retail recreational boating sales were $17.9 billion in 1988, but declined to a low of $10.3 billion in 1992 based on industry data published by the National Marine Manufacturers Association. We believe this decline was attributable to several factors, including a recession, the Gulf War, and the imposition throughout 1991 and 1992 of a luxury tax on boats sold at prices in excess of $100,000. The luxury tax was repealed in 1993, and retail boating sales increased each year thereafter except for 1998, 2003, and 2007 through 2010. We believe recreational boating has a natural appeal to consumers, along with other outdoor activities, and will continue to grow in favorable economic conditions absent any unusual industry headwinds (see Risk Factors).
The recreational boat retail market remains highly fragmented with little consolidation having occurred to date and consists of numerous boat retailers, most of which are small companies owned by individuals that operate in a single market and provide varying degrees of merchandising, professional management, and customer service. We believe that many boat retailers are encountering increased pressure from boat manufacturers to improve their levels of service and systems, increased competition from larger national retailers in certain product lines, and, in certain cases, business succession issues.
Strategy
Our goal is to enhance our position as the nation’s leading recreational boat and yacht retailer. Key elements of our operating and growth strategy include the following.
Emphasizing Customer Satisfaction and Loyalty. We seek to achieve a high level of customer satisfaction and establish long-term customer loyalty by creating an overall enjoyable boating experience beginning with a hassle-free purchase process. We seek to further enhance and simplify the purchase process by helping to arrange financing and insurance at our retail locations with competitive terms and streamlined turnaround. We offer the customer a thorough in-water orientation of boat operations where available, as well as ongoing boat safety, maintenance, and use seminars and demonstrations for the customer’s entire family. We also continue our customer service after the sale by leading and sponsoring MarineMax Getaways! group boating trips to various destinations, rendezvous gatherings, and on-the-water organized events to provide our customers with pre-arranged opportunities to enjoy the pleasures of the boating lifestyle. We also endeavor to provide superior maintenance and repair services, often through mobile service at the customer’s wet slip and with extended service department hours and emergency service availability, that minimize the hassles of boat maintenance.
Achieving Operating Efficiencies and Synergies. We strive to increase the operating efficiencies of and achieve certain synergies among our dealerships in order to enhance internal growth and profitability. We centralize various aspects of certain administrative functions at the corporate level, such as accounting, finance, insurance coverage, employee benefits, marketing,
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strategic planning, legal support, purchasing and distribution, and management information systems. Centralization of these functions reduces duplicative expenses and permits the dealerships to benefit from a level of scale and expertise that would otherwise be unavailable to each dealership individually. We also seek to realize cost savings from reduced inventory carrying costs as a result of purchasing boat inventories on a national level and directing boats to dealership locations that can more readily sell such boats; lower financing costs through our credit sources; and volume purchase discounts and rebates for certain marine products, supplies, and advertising. The ability of our retail locations to offer the complementary services of our other retail locations, such as offering customers MarineMax Getaways! excursions, providing maintenance and repair services at the customer’s boat location, and giving access to broader inventory selections, increases the competitiveness of each retail location. By centralizing these types of activities, our general managers have more time to focus on the customer and the development of their teams.
Promoting Brand Name Recognition and the MarineMax Connection. We are promoting our brand name recognition to take advantage of our status as the nation’s only coast-to-coast marine retailer. This strategy also recognizes that many existing and potential customers who reside in Northern markets and vacation for substantial periods in Southern markets will likely prefer to purchase and service their boats from the same well-known company. We refer to this strategy as the “MarineMax Connection.” As a result, our signage emphasizes the MarineMax name at each of our locations, and we conduct national advertising in various print and other media.
Offering Additional Products and Services Including Those Involving Higher Profit Margins. We plan to continue to offer additional product lines and services throughout our dealerships and, when appropriate, online and various offsite locations. We are increasingly offering throughout our dealerships product lines that previously have been offered only at certain of our locations. We also obtain additional product lines through the acquisition of distribution rights directly from manufacturers and the acquisition of dealerships with distribution rights. In either situation, such expansion is typically done through agreements that appoint us as the exclusive dealer for a designated geographic territory. We plan to continue to grow our financing and insurance, parts and accessories, service, and boat storage businesses to better serve our customers and thereby increase revenue and improve profitability of these higher margin businesses. We also have implemented programs to increase the generation of leads and sales of boats over the Internet. In addition, we have established a yacht charter business and are conducting programs to sell used boats, offer F&I products, and sell boating parts and accessories at various offsite locations.
Marketing over the Internet. Our web initiatives span across multiple websites, including our core site, www.MarineMax.com. The websites provide customers with the ability to learn more about our company and our products. Our website generates direct sales and provides our stores with leads to potential customers for new and used boats, brokerage sales, finance and insurance products, and repair and maintenance services. In addition, we utilize various feeder websites and social networking websites to drive additional traffic and leads for our various product and service offerings. As mentioned above, we also maintain multiple online storefronts for customers to submit an inquiry, purchase boats, and purchase a wide variety of boating parts and accessories.
Pursuing Strategic Acquisitions. One of our strategies is to capitalize upon the significant consolidation opportunities available in the highly fragmented recreational boat dealer industry by acquiring independent dealers and improving their performance and profitability through the implementation of our operating strategies. The primary acquisition focus is on well-established, high-end recreational boat dealers in geographic markets not currently served by us, particularly geographic markets with strong boating demographics, such as areas within the coastal states and the Great Lakes region. We also may seek to acquire boat dealers that, while located in attractive geographic markets, have not been able to realize favorable market share or profitability and that can benefit substantially from our systems and operating strategies. We may expand our range of product lines, service offerings, and market penetration by acquiring companies that distribute recreational boat product lines or boating-related services different from those we currently offer. As a result of our considerable industry experience and relationships, we believe we are well positioned to identify and evaluate acquisition candidates and assess their growth prospects, the quality of their management teams, their local reputation with customers, and the suitability of their locations. We believe we are regarded as an attractive acquirer by boat dealers because of: (1) the historical performance and the experience and reputation of our management team within the industry; (2) our decentralized operating strategy, which generally enables the managers of an acquired dealer to continue their involvement in dealership operations; (3) the ability of management and employees of an acquired dealer to participate in our growth and expansion through potential stock ownership and career advancement opportunities; and (4) the ability to offer liquidity to the owners of acquired dealers through the receipt of common stock or cash. We have entered into an agreement regarding acquisitions with the Sea Ray Division of Brunswick. Under the agreement, acquisitions of Sea Ray dealers will be mutually agreed upon by us and Sea Ray with reasonable efforts to be made to include a balance of Sea Ray dealers that have been successful and those that have not been. The agreement provides that Sea Ray will not unreasonably withhold its consent to any proposed acquisition of a Sea Ray dealer by us, subject to the conditions set forth in the agreement, as further described in “Business — Brunswick Agreement Relating to Acquisitions.”
Opening New Facilities. We will continue to establish additional retail facilities in our existing and new markets subject to conditions. We believe that the demographics of our existing geographic territories support the opening of additional facilities, and we have opened 33 new retail facilities, excluding those opened on a temporary basis for a specific purpose, since our formation in January 1998. We continually monitor the performance of our retail locations and close retail locations that do not meet our
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expectations or that were opened for a specific purpose that is no longer relevant. Based on these factors since March 1998, we have closed 63 retail locations, excluding those opened on a temporary basis for a specific purpose, including 26 in fiscal 2009 (and a total of four during the last three fiscal years).
Emphasizing Employee Recruitment and Retention through Training, Motivation, and Development. We devote substantial efforts to recruit employees that we believe to be exceptionally well qualified for their position and to train our employees to understand our core retail philosophies, which focus on making the purchase of a boat and its subsequent use as hassle-free and enjoyable as possible. Through our MarineMax University, or MMU, we teach our retail philosophies to existing and new employees at various locations and online, through MMU-online. MMU is a modularized and instructor-led educational program that focuses on our retailing philosophies and provides instruction on such matters as the sales process, customer service, F&I, accounting, leadership, and human resources.
Emphasizing Best Practices. We emphasize the best practices developed by us and our acquired dealers as appropriate throughout our locations. As an example, we have implemented a hassle-free approach at each of our dealerships. Under the MarineMax One Price hassle-free sales approach, we sell our boats at prices generally representing a discount from the manufacturer’s suggested retail price, thereby eliminating the anxieties of price negotiations that occur in most boat purchases. In addition, we adopt the best practices developed by us and our acquired dealers as applicable, considering location, design, layout, product purchases, maintenance and repair services (including extended service hours and mobile or dockside services), product mix, employee training, and customer education and services.
Operating with Decentralized Management. We maintain a generally decentralized approach to the operational management of our dealerships. The decentralized management approach takes advantage of the extensive experience of local managers, enabling them to implement policies and make decisions, including the appropriate product mix, based on the needs of the local market. Local management authority also fosters responsive customer service and promotes long-term community and customer relationships. In addition, the centralization of certain administrative functions at the corporate level enhances the ability of local managers to focus their efforts on day-to-day dealership operations and the customers.
Utilizing Technology Throughout Operations. We believe that our management information system, which currently is being utilized by each of our dealerships and was developed over a number of years through cooperative efforts with a common vendor, enhances our ability to integrate successfully the operations of our dealerships and future acquired dealers. The system facilitates the interchange of information and enhances cross-selling opportunities throughout our company. The system integrates each level of operations on a Company-wide basis, including but not limited to purchasing, inventory, receivables, payables, financial reporting, budgeting, and sales management. The system also provides sales representatives with prospect and customer information that aids them in tracking the status of their contacts with prospects, automatically generates follow-up correspondence to such prospects, facilitates the availability of boats Company-wide, locates boats needed to satisfy particular customer requests, and monitors the maintenance and service needs of customers’ boats. Our representatives also utilize the computer system to assist in arranging customer financing and insurance packages. Our managers use a web-based tool to access essentially all financial and operational data from anywhere at any time.
Products and Services
We offer new and used recreational boats and related marine products, including engines, trailers, parts, and accessories. While we sell a broad range of new and used boats, we focus on premium brand products. In addition, we assist in arranging related boat financing, insurance, and extended service contracts; provide boat maintenance and repair services; offer slip and storage accommodations; provide boat and yacht brokerage sales; and conduct a yacht charter business.
New Boat Sales
We primarily sell recreational boats, including pleasure boats and fishing boats. A number of the products we offer are manufactured by Brunswick, a leading worldwide manufacturer of recreational boats and yachts, including Sea Ray pleasure boats, Boston Whaler fishing boats, and Harris aluminum boats, and Meridian Yachts.boats. Sales of new Brunswick boats accounted for approximately 42%23% of our revenue in fiscal 2017.2022. Sales of new Sea Ray and Boston Whaler boats both divisions of Brunswick, accounted for approximately 23%11% and 17%9%, respectively, of our revenue in fiscal 2017. We believe our sales represented approximately 11% of all Brunswick marine sales, including approximately 55% of its Sea Ray boat sales, during our fiscal 2017.2022. Certain of our dealerships also sell luxury yachts, fishing boats, and pontoon boats provided by other manufacturers, including Italy-based Azimut. Sales of new Azimut boats and yachts accounted for approximately 9%8% of our revenue in fiscal 2017.2022. Cruisers Yachts, a wholly-owned MarineMax subsidiary, manufactures sport yacht and yachts with sales through our select retail dealership locations and through independent dealers. Intrepid Powerboats, a MarineMax company, manufactures powerboats and sells through a direct-to-consumer model. During fiscal 2017,2022, new boat sales, including sales of Cruisers Yachts and Intrepid Powerboats, accounted for approximately 70.9%73.2% or $747 million$1.689 billion of our revenue.
We offer recreational boats in most market segments, but have a particular focus on premium quality pleasure boats and yachts as reflected by our fiscal 20172022 average new boat sales price of approximately $195,000 a slight decrease$256,000 an increase from approximately $198,000
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$227,000 in fiscal 2016,2021, compared with an estimated industry average selling price for calendar 20162021 of approximately $43,000$71,000 based on industry data published by the National Marine Manufacturers Association. Given our locations in some of the more affluent, offshoreoffshore-oriented boating areas in the United States and emphasis on high levels of customer service, we sell a relatively higher percentage of large recreational boats, such as mega-yachts, yachts, and sport cruisers. We believe that the product lines we offer are among the highest quality within their respective market segments, with well-established trade-name recognition and reputations for quality, performance, and styling.style.
The following table is illustrative of the range and approximate manufacturer suggested retail price range of new boats that we currently offer, but is not all inclusive.
Product Line and Trade Name |
| Overall Length |
| Manufacturer Suggested
|
|
|
|
|
|
|
| 40’ to 120’+ |
|
|
|
|
|
|
|
|
|
|
|
|
|
| 45’ to 155’+ |
| 1,500,000 to 35,000,000+ |
|
|
|
|
|
|
| 35' to 95' |
| 700,000 to 10,000,000 |
|
|
|
|
|
|
|
|
|
|
Aquila |
|
|
|
|
Galeon |
|
|
|
|
|
| 19’ to 28’ |
| 30,000 to 300,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 34' to 53' |
| 400,000 to 2,500,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 19’ to |
|
|
|
|
|
|
|
|
| 17’ to |
|
|
|
| 20' to 28' |
| 60,000 to 250,000 |
Starcraft | 18' to 25' | 25,000 to 100,000 | ||
Sylvan | 18' to 25' | 25,000 to 100,000 | ||
Fishing Boats | ||||
Boston Whaler | 13’ to 42’ | 20,000 to 2,000,000 | ||
Grady White | 18’ to 45’ | 70,000 to 1,800,000 | ||
Scout | 17’ to 53’ | 20,000 to 2,700,000 | ||
Sailfish | 19’ to 36’ | 100,000 to 500,000 | ||
Ski Boats | ||||
Nautique by Correct Craft |
| 20’ to 25’ |
|
|
|
| 20’ to 25’ |
| 150,000 to 220,000 |
|
|
|
|
|
Mastercraft | 20’ to 26’ | 110,000 to 260,000 | ||
Jet Boats | ||||
Yamaha Jet Boats |
| 19’ to 24’ |
|
|
Scarab | 16' to 28' | 40,000 to 150,000 |
E-Power Yachts. Italian-made Wider Yachts manufactures electric yachts with performance and exceptional quality in mind. From its line of superyachts to express cruisers, electric catamarans, and new builds, Wider Yachts offers a number of features.
Motor Yachts. Hatteras Yachts, Ocean Alexander Yachts, Azimut, Benetti, and AzimutPrincess are threefour of the world’s premier yacht builders. The motor yacht product lines typically include state-of-the-art designs with live-aboard luxuries. Hatteras offers a flybridge with extensive guest seating; covered aft deck, which may be fully or partially enclosed, providing the boater with additional living space; an elegant salon; and multiple staterooms for accommodations. Azimut yachts are known for their Americanized
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open layout with Italian design and powerful performance. The luxurious interiors of Azimut yachts are accented by windows and multiple accommodations that have been designed for comfort. Ocean Alexander Yachts are known for their excellent engineering, performance, and functionality combined with luxuries typically found on larger mega yachts. Benetti yachts and mega yachts are known for maintaining high quality standards with excellent aesthetic and functional results as well as combining fine Italian tradition and craftsmanship with technology. Princess yachts are a leading British luxury yacht manufacturer with attention to detail, design, and performance.
Convertibles. Hatteras Yachts is one of the world’s premier convertible yacht builders and offers state-of-the-art designs with live-aboard luxuries. Convertibles are primarily fishing vessels, which are well equipped to meet the needs of even the most serious tournament-class competitor. Hatteras features interiors that offer luxurious salon/galley arrangements, multiple staterooms with private heads, and a cockpit that includes a bait and tackle center, fishbox, and freezer.
Pleasure Boats. Sea Ray pleasure boats target both the luxury and the family recreational boating markets and come in a variety of configurations designed to suit each customer’s particular recreational boating style. Sea Ray sport yachts and yachts serve the luxury segment of the recreational boating market and include top-of-the-line living accommodations with a salon, a fully equipped galley, and multiple staterooms. Sea Ray sport yachts and yachts are available in cabin, bridge cockpit, and cruiser models. Sea Ray sport boat and sport cruiser models are designed for performance and dependability to meet family recreational needs and include many of
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the features and accommodations of Sea Ray’s sport yacht and yacht models. All Sea Ray pleasure boats feature custom instrumentation that may include an electronics package; various hull, deck, and cockpit designs that can include a swim platform; bow pulpit and raised bridge; and various amenities, such as swivel bucket helm seats, lounge seats, sun pads, wet bars, built-in ice chests, and refreshment centers. Most Sea Ray pleasure boats feature Mercury or MerCruiser engines. We believe Atlantis sport cruisers offer a unique-on-the-water experienceGaleon specializes in luxury yacht and motorboats with the Azimut expertise expressed in a design concept that merges sportiness with the comfort and relative easeover thirty years of navigation.experience. Galeon is one of Europe’s leading and premier boat manufacturers. We believe Galeon yachts combine the latest technology, hand crafted excellence, attention to detail, superb performance, and designgreat innovative designs with unparalleled modern styling and convenience. Aquila power catamarans provide form, function, and offer practicality and comfort with trend setting innovation. We believe NauticStar provides sport deck boats that combine comfort, features, economy, and versatility that make NauticStar a popular choice among experienced boaters. MJM Yachts combine speed, performance, greater stability, innovative designs and layouts, along with comforts and space for entertaining in addition to a patent protected MJM signature look. Aviara is the newest brand manufactured by MasterCraft focused on the production of vessels 30-feet and over with the goal of creating an elevated open water experience by fusing progressive style, comfort, and luxury. Cruisers Yachts is owned by MarineMax and is continuously building innovative, quality, hand-crafted, American made sport yacht and yachts with the stylish and luxurious Cantius series of boats as well as sleek and powerful outboard models. Tiara Yachts manufactures handcrafted, American-made luxury yachts designed for performance and comfort. Four Winns manufactures quality runabouts, bowriders, yachts and tow sport boats. Intrepid Powerboats uses advanced composite construction to make each boat unique to its owner as well as stronger, faster and more fuel-efficient to deliver a safe, smooth, dry ride on the water.
Pontoon Boats. Harris is a pontoon industry leader and offers a variety of some of the most innovative, luxurious, and premium pontoon models to fit boaters’ needs. Harris is known for exceptional performance combined with a stable and safe platform. Crest provides a variety of pontoon models that are designed to provide extreme levels of quality, safety, style and comfort to meet family recreational needs. Bennington offers what we believe to be industry leading design, meticulous craftsmanship, and a quiet, smooth, ride. Barletta offers quality construction, simple yet refined models, and customer focused amenities. Starcraft is a leading boat manufacturer with a long history of continuous improvements to fiberglass hull design and a dedication to providing pontoon, runabouts, and deck boat models for families and watersport enthusiasts. Sylvan builds quality, innovative, high performance pontoon boats. With a variety of designs and options, the pontoon boats we offer appeal to a broad audience of pontoon boat enthusiasts and existing customers.
Fishing Boats. The fishing boats we offer, such as Boston Whaler, Grady-White, Scout, Sailfish, Sportsman and Sea Pro,Sailfish, range from entry level models to advanced models designed for fishing and water sports in lakes, bays, and off-shore waters, with cabins with limited live-aboard capability. The fishing boats typically feature livewells, in-deck fishboxes, rodholders, rigging stations, cockpit coaming pads, and fresh and saltwater washdowns.
Ski Boats. The ski boats we offer are Nautique by Correct Craft, Tigé, ATX Surf Boats, and Mastercraft, which range from entry level models to advanced models and all of which are designed to achieve an ultimate wake for increased skierskiing, surfing, and wakeboarderwakeboarding performance and safety. With a variety of designs and options, Nautique, Tigé, ATX Surf Boats, and Mastercraft ski boats appeal to the competitive and recreational user alike.
Jet Boats. Yamaha jet boats are designed to offer a reliable, high performing, internal propulsion system with superior handling. Yamaha is a worldwide leader in jet boats. The Scarab jet boats we offer range from entry level models to advanced models, all of which are designed for performance and with exclusive design elements to meet family recreational needs. Yamaha jet boats are designed to offer a reliable, high performing, internal propulsion system with superior handling. With a variety of designs and options, the jet boats we offer appeal to a broad audience of jet boat enthusiasts and existing customers.
Used Boat Sales
We sell used versions of the new makes and models we offer and, to a lesser extent, used boats of other makes and models generally taken as trade-ins. During fiscal 2017,2022, used boat sales accounted for 14.9%7.3% or approximately $157$169.0 million of our revenue, and 67.3% of the used boats we sold were Brunswick models.revenue.
Our used boat sales depend on our ability to source a supply of high-quality used boats at attractive prices. We acquire substantially all of our used boat inventory through customer trade-ins. We intend to continuestrive to increase our used boat business as a result ofthrough the availability of quality used boatsboat trade-ins generated from our new boat sales efforts, the increasing number of used boats thatwhich are well-maintained through our service initiatives, our ability to market used boats throughout our combined dealership network to match used boat demand, and the experience of our yacht brokerage operations.initiatives. Additionally, substantially all of our used boat inventory is posted on our website,digital properties, which expands the awareness and availability of our products to a large audience of boating enthusiasts. We also sell used boats at various marinas and other offsite locations throughout the country.
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To further enhance our used boat sales, we offer the Brunswick Product Protectionextended warranty planplans generally available for used Brunswick boats less than nine years old. The Brunswick Product Protection plan appliesextended warranty plans apply to each qualifying used boat, which has passed a 48-point inspection, and provides protection against failure of most mechanical parts for up to three years. We believe this type of program enhances our sales of used boats by motivating purchasers of used boats to complete their purchases through our dealerships.
Marine Engines, Related Marine Equipment, and Boating Parts and Accessories
We offer marine engines and equipment, predominantly manufactured by Mercury Marine, a division of Brunswick, and Yamaha. We sell marine engines and propellers primarily to retail customers as replacements for their existing engines or propellers. Mercury Marine and Yamaha have introduced various new engine models that are designed to reduce engine emissions to comply with current United States Environmental Protection Agency (“EPA”) requirements. See “Business — Governmental Regulations, including Environmental and Other Regulatory Issues.Regulations.” Industry leaders, Mercury Marine and Yamaha, specialize in state-of-the-art marine propulsion systems and accessories. Many of our dealerships have been recognized by Mercury Marine as “Premier Service Dealers.”Dealers”. This designation is generally awarded based on meeting certain standards and qualifications.
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We also sell a broad variety of marine parts and accessories at our retail locations, at various offsite locations, and through our print catalog. These marine parts and accessories include marine electronics; dock and anchoring products, such as boat fenders, lines, and anchors; boat covers; trailer parts; water sport accessories, such as tubes, lines, wakeboards, and skis; engine parts; oils; lubricants; steering and control systems; corrosion control products and service products; high-performance accessories, such as propellers and instruments; and a complete line of boating accessories, including life jackets, inflatables, and water sports equipment. We also offer novelty items, such as shirts, caps, and license plates bearing the manufacturer’s or dealer’s logos. In all of our parts and accessories business, we utilize our industry knowledge and experience to offer boating enthusiasts high-quality products with which we have experience.
The sale of marine engines, related marine equipment, and boating parts and accessories, which are all tangible products, accounted for approximately 3.6%3.3% or $38$76.7 million of our fiscal 20172022 revenue.
Maintenance, Repair, and Storage Services
Providing customers with professional, prompt maintenance and repair services is critical to our sales efforts and contributes to our success. We provide maintenance and repair services at most of our retail locations, with extended service hours at certain of our locations. In addition, in many of our markets, we provide mobile maintenance and repair services at the location of the customer’s boat. We believe that this service commitment is a competitive advantage in the markets in which we compete and is critical to our efforts to provide a trouble-free boating experience. To further this commitment, in certain of our markets, we have opened stand-alone maintenance and repair facilities in locations that are more convenient for our customers and that increase the availability of such services. We also believe that our maintenance and repair services contribute to strong customer relationships and that our emphasis on preventative maintenance and quality service increases the potential supply of well-maintained boats for our used boat sales.
We perform both warranty and non-warranty repair services, with the cost of warranty work reimbursed by the manufacturer in accordance with the manufacturer’s warranty reimbursement program. For warranty work, most manufacturers, including Brunswick, reimburse a percentage of the dealer’s posted service labor rates, with the percentage varying depending on the dealer’s customer satisfaction index rating and attendance at service training courses. We derive the majority of our warranty revenue from Brunswick products, as Brunswick products comprise the majoritylargest percentage of our products sold. Certain other manufacturers reimburse warranty work at a fixed amount per repair. Because boat manufacturers permit warranty work to be performed only at authorized dealerships, we receive substantially all of the warranted maintenance and repair work required for the new boats we sell. The third-party extended warranty contracts we offer also result in an ongoing demand for our maintenance and repair services for the duration of the term of the extended warranty contract.
Our maintenance and repair services are performed by manufacturer-trained and certified service technicians. In charging for our mechanics’ labor, many of our dealerships use a variable rate structure designed to reflect the difficulty and sophistication of different types of repairs. The percentage markups on parts are similarly based on manufacturer suggested prices and market conditions for different parts.
At many of our locations, we offer boat storage services, including in-water slip storage and inside and outside land storage. These storage services are offered at competitive market rates and include both in-season and winterout-of-season storage. In October 2022, we completed the acquisition of IGY Marinas. IGY Marinas maintains a network of luxury marinas situated in yachting and sport fishing destinations around the world. IGY Marinas has high standards for service and quality in nautical tourism around the world. It offers a global network of marinas in the Americas, the Caribbean, and Europe, delivering year-round accommodations. IGY Marinas caters to a wide variety of luxury yachts, while also being exclusive home ports for some of the world’s largest megayachts.
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Maintenance, repair, rent, and storage services accounted for approximately 5.7% or $60$130.5 million of our revenue during fiscal 20172022 of which, approximately 3.7%3.3% or $39$77.1 million related to repair services, approximately 0.8% or $9$17.6 million related to parts and accessories for repairs, and approximately 1.2%1.6% or $12$35.8 million related to income from rent and storage service rentals. This includes warranty and non-warranty services.
F&I Products
At each of our retail locations and at various offsite locations where applicable, we offer our customers the ability to finance new or used boat purchases and to purchase extended service contracts and arrange insurance coverage, including boat property, credit life,disability, undercoating, gel sealant, fabric protection, trailer tire and accident, disability, undercoating,wheel protection, and casualty insurance coverage (collectively, “F&I”). We have relationships with various national marine product lenders under which the lenders purchase retail installment contracts evidencing retail sales of boats and other marine products that are originated by us in accordance with existing pre-sale agreements between us and the lenders. These arrangements permit us to receive a portion of the finance charges expected to be earned on the retail installment contract based on a variety of factors, including the credit standing of the buyer, the annual percentage rate of the contract charged to the buyer, and the lender’s then current minimum required annual percentage rate charged to the buyer on the contract. This participation is subject to repayment by us if the buyer prepays the contract or defaults within a designated time period, usually 0 to 180 days. To the extent required by applicable state law, our dealerships are licensed to originate and sell retail installment contracts financing the sale of boats and other marine products.
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We also offer third-party extended service contracts under which, for a predetermined price, we provide all designated services pursuant to the service contract guidelines during the contract term at no additional charge to the customer above a deductible. While we sell all new boats with the boat manufacturer’s standard hull and engine warranty, extended service contracts provide additional coverage beyond the time frame or scope of the manufacturer’s warranty. Purchasers of used boats generally are able to purchase an extended service contract, even if the selected boat is no longer covered by the manufacturer’s warranty. Generally, we receive a fee for arranging an extended service contract. Most required services under the contracts are provided by us and paid for by the third-party contract holder. Beginning in fiscal 2021, we have partnered with a third-party F&I product provider to offer prepaid maintenance plans for select, new models.
We also are able to assist our customers with the opportunity to obtainobtaining property and casualty insurance. Property and casualty insurance which covers loss or damage to the boat.vessel. We do not act asprovide worldwide yacht insurance programs for brokerage houses, yacht management groups, and maritime attorneys. We utilize expertise in complex underwriting, including understanding the exposure of an insurance broker or agent or issue insurance policies on behalf of insurers. We do, however,owner, captain, crew, guests, tenders and navigation to provide marketing activities and other related services to insurance companies and brokers for which we receive marketing fees. One of our strategies is to generate increased marketing fees by offering more competitive insurance products.clients with uniquely designed protection so customers can cruise confidently.
During fiscal 2017,2022, fee income generated from F&I products accounted for approximately 2.4%3.0% or $25$69.0 million of our revenue. We believe that our customers’ ability to obtain competitive financing quickly and easily at our dealerships complements our ability to sell new and used boats. We also believe our ability to provide customer-tailored financing on a “same-day” basis gives us an advantage over many of our competitors, particularly smaller competitors that lack the resources to arrange boat financing at their dealerships or that do not generate sufficient volume to attract the diversity of financing sources that are available to us.
Brokerage Sales
Through employees or subcontractors that are licensed boat or yacht brokers where applicable, we offer boat or yacht brokerage sales at most of our retail locations. For a commission, we offer for sale brokered boats or yachts, listing them digitally on various Internet sites, advising our other retail locations of their availability through our integrated computer system, and posting them on our website, www.MarineMax.com. Often sales are co-brokered, with the commission split between the buying and selling brokers. We believe that our access to potential used boat customers and methods of listing and advertising customers’ brokered boats or yachts is more extensive than is typical among brokers. In addition to generating revenue from brokerage commissions, our brokerage sales also enable us to offer a broad array of used boats or yachts without increasing related inventory costs. Also, through Fraser Yachts Group and Northrop & Johnson, we offer yacht and superyacht brokerage. During fiscal 2017,2022, brokerage sales commissions accounted for approximately 1.9%5.8% or $20$133.1 million of our revenue.
Our brokerage customers generally receive the same high level of customer service as our new and used boat customers. Our waterfront retail locations enable in-water demonstrations of an on-site brokered boat. Our maintenance and repair services, including mobile service, also are generally available to our brokerage customers. TheGenerally, the purchaser of a boat brokered through us also can take advantage of MarineMax Getaways!® weekend and day trips and other rendezvous gatherings and in-water events, as well as boat operation and safety seminars. We believe that the array of services we offer are unique in the brokerage business.
Yacht Charter
In 2011 we launched a yacht charter business in which we offer customers the opportunity to charter power and sailing yachtscatamarans in exotic destinations, starting with our initial location in the British Virgin Islands (BVI).Islands. In this business, we sell specifically designed yachts to third parties for inclusion in our yacht charter fleet; enter into yacht management agreements under which yacht owners enable us to put their
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yachts in our yacht charter program for a period of four to fiveseveral years for a fixed monthly fee payable by us; provide our services in storing, insuring, and maintaining their yachts; and charter these yachts to vacation customers at agreed fees payable to us. The yacht owners will be able to utilize the yachts for personal use for a designated number of weeks during the termterms of the management agreement and take possession of their yachts following the expiration of the yacht management agreements.
In addition to the specific business we launched in the BVI,British Virgin Islands, we also offer yacht charter services. For a fee, we assist yacht owners in the charter of their vessel by third-parties. Additionally, through Fraser Yachts Group and Northrop & Johnson we offer yacht and superyacht chartering, charter management, yacht management, crew placement, new boat build oversight services and other luxury yacht services. During fiscal 2017,2022, the income from rentals of chartering power and sailing yachts, and yacht charter fees, and other charter services accounted for approximately 0.6%1.7% or $6$40.7 million of our revenue. Our facilities in the British Virgin Islands and yacht charter fleet suffered damage from Hurricane Irma in September of 2017. We maintain insurance for inventory damage, subject to deductibles. We are workingBeginning in March 2020, we temporarily closed our facilities in the British Virgin Islands and yacht charters based on repairsguidance from local government and expecthealth officials as a result of the yacht charter business to be operationalCOVID-19 pandemic. Yacht charters resumed during fiscal 2018. 2021, but the impact of the COVID-19 pandemic and the duration for which it may have an impact cannot be determined at this time.
Offsite Sales
We sell used boats, offer F&I products, and sell parts and accessories at various third-party offsite locations, including marinas.
Product Manufacturing
Cruisers Yachts, a wholly-owned MarineMax subsidiary, manufactures 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 Powerboats, also a wholly-owned MarineMax subsidiary, is recognized as a world class producer of customized boats, reflecting the unique desires of each individual owner. Intrepid Powerboats follows a direct-to-consumer distribution model.
Retail Locations
We sell our recreational boats and other marine products and offer our related boat services through 6278 retail locations in Alabama, California, Connecticut, Florida, Georgia, Illinois, Maryland, Massachusetts, Michigan, Minnesota, Missouri, New Jersey, New York, North
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Carolina, Ohio, Oklahoma, Rhode Island, South Carolina, Texas, Washington and Texas.Wisconsin. Each retail location generally includes an indoor showroom (including some of the industry’s largest indoor boat showrooms) and an outside area for displaying boat inventories, a business office to assist customers in arranging financing and insurance, and maintenance and repair facilities.facilities, and at certain retail locations boat storage services, including in-water slip storage and inside and outside land storage.
Many of our retail locations are waterfront properties on some of the nation’s most popular boating locations, including the San Diego Bay in California; Norwalk Harbor and Westbrook Harbor in Connecticut; multiple locations on the Intracoastal Waterway, the Atlantic Ocean, Biscayne Bay, Boca Ciega Bay, Caloosahatchee River, Naples Bay, Tampa Bay, Pensacola Bay, and the Saint Andrews Bay in Florida; Lake Lanier and Wilmington River in Georgia; Chesapeake Bay in Maryland; Lake Minnetonka, and the St. Croix River in Minnesota; Lake of the Ozarks and Table Rock Lake in Missouri; Barnegat Bay, Lake Hopatcong, Little Egg Harbor Bay, and the Manasquan River in New Jersey; Great South Bay, the Hudson River, and Huntington Harbor in New York; Boston Harbor and Weymouth Black River in Massachusetts; Masonboro Inlet in North Carolina; Lake Wylie in South Carolina; Lake Erie in Ohio; Grand Lake in Oklahoma; Newport Harbor and Greenwich Bay in Rhode Island; and Clear Lake, Lake Lewisville, and Lake Conroe in Texas.locations. Our waterfront retail locations, most of which include marina-type facilities and docks at which we display our yachts and boats, are easily accessible to the boating populace, serve as in-water showrooms, and enable the sales force to give customers immediate in-water demonstrations of various boat models. Most of our other locations are in close proximity to water. The following table sets forth certain of our waterfront properties.
Operations
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State | Waterfront properties | |
California | Newport Bay | San Diego Bay |
Richardson Bay | ||
Connecticut | Norwalk Harbor | Westbrook Harbor |
Florida | Intracoastal Waterway | Atlantic Ocean |
Boca Ciega Bay | Caloosahatchee River | |
Naples Bay | Tampa Bay | |
Pensacola Bay | Saint Andrews Bay | |
Georgia | Lake Lanier | Wilmington River |
Illinois | Lake Michigan | Lake Marie |
Maryland | Chesapeake Bay | |
Massachusetts | Town River | |
Michigan | Saginaw River | Lake St. Clair |
Cass Lake | Spring Lake | |
Lake Fenton | ||
Minnesota | Lake Minnetonka | St. Croix River |
Missouri | Lake of the Ozarks | |
New Jersey | Barnegat Bay | Little Egg Harbor Bay |
Little Egg Harbor Bay | Manasquan River | |
New York | Huntington Harbor | |
North Carolina | Masonboro Inlet | |
Ohio | Lake Erie | |
Oklahoma | Grand Lake | |
Rhode Island | Newport Harbor | |
South Carolina | Lake Wylie | |
Texas | Clear Lake | Lake Lewisville |
Washington | Lake Union | |
Wisconsin | Sturgeon Bay | Lake Mendota |
Kinnickinnic River | Lake Butte Des Mortes |
Additionally, through IGY Marinas we own and manage luxury marinas situated around the world. The following table sets forth certain of our owned and managed luxury marinas.
Location | Luxury Marinas | |
Colombia | Marina Santa Marta | |
Costa Rica | Marina Bahia Golfito | |
England | St. Katharine Docks | |
France | IGY Sète Marina | IGY Vieux – Port de Cannes |
Italy, Sardinia | IGY Portisco Marina | Marina Di Porto Cervo |
Mexico | Marina Cabo San Lucas | |
Panama | Red Frog Beach Island Marina | |
Providenciales, Turks & Caicos | Blue Haven Marina | |
Spain | IGY Málaga Marina | Málaga Marina San Andres |
St. Maarten | Simpson Bay Marina | Yacht Club Isle de Sol |
St. Lucia | Rodney Bay Marina | |
United States, Florida | Yacht Haven Grande Miami at Island Gardens, Miami | Maximo Marina, St. Petersburg |
One Island Park Miami Beach | ||
United States, New York & Maine | North Cove Marina at Brookfield Place, New York | Fore Points Marina, Maine |
United States Virgin Islands, Saint Thomas | Yacht Haven Grande USVI | American Yacht Harbor |
Operations
Dealership Operations and Management
We have adopted a generally decentralized approach to the operational management of our dealerships. While certain administrative functions are centralized at the corporate level, local management is primarily responsible for the day-to-day operations of the retail locations. Each retail location is managed by a general manager, who oversees the day-to-day operations, personnel, and
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financial performance of the individual store, subject to the direction of a regional president or district president, who generally has responsibility for the retail locations within a specified geographic region. Typically, each retail location also has a staff consisting of an F&I manager, a parts manager, and a service manager, sales representatives, maintenance and repair technicians, and various support personnel.
We attempt to attract and retain quality employees by providing them with ongoing training to enhance sales professionalism and product knowledge, career advancement opportunities within a larger company, and favorable benefit packages. We maintain a formal training program, called MarineMax University or MMU, which provides training for employees in all aspects of our operations. Training sessions are held at our various regional locations covering a variety of topics. MMU-online offers various modules over the Internet. Highly trained, professional sales representatives are an important factor to our successful sales efforts. These sales representatives are trained at MMU to recognize the importance of fostering an enjoyable sales process, to educate customers on the operation and use of the boats, and to assist customers in making technical and design decisions in boat purchases. The overall focus of MMU is to teach our core retailing values, which focus on customer service.
Sales representatives receive compensation primarily on a commission basis. Each general manager is a salaried employee with incentive bonuses based on the performance of the managed dealership. Maintenance and repair service managers receive compensation on a salary basis with bonuses based on the performance of their departments. Our management information system provides each store and department manager with daily financial and operational information, enabling them to monitor their performance on a daily, weekly, and monthly basis. We have a uniform, fully integrated management information system serving each of our dealerships.
Sales and Marketing
Our sales philosophy focuses on selling the pleasures of the boating lifestyle.lifestyle and creating memories of a lifetime with family and friends. We believe that the critical elements of our sales philosophy include our appealing retail locations, no-hassle sales approach, highly trained sales representatives, high level of customer service, emphasis on educating the customer and the customer’s family on boating, and providing our customers with opportunities for boating through our MarineMax Getaways!®. We strive to provide superiorexceptional customer serviceexperiences through the best services, products, and supporttechnology before, during, and after the sale. Our team and customers are United by Water®.
Each retail location offers the customer the opportunity to evaluate a variety of new and used boats in a comfortable and convenient setting. Our full-service retail locations facilitate a turn-key purchasing process that includes attractive lender financing packages, extended service agreements, and insurance. Many of our retail locations are located on waterfronts and marinas, which attract boating enthusiasts and enable customers to operate various boats prior to making a purchase decision.
The brands we offer are diverse in size and use and are spread across our customer activities of leisure, fishing, watersports, luxury, and vacations. We believe the transformative qualities of the water should be shared by everyone, so we created our boat lineup accordingly. Our promise gives themour brands meaning and reason to exist next to one another on our showroom floor.
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We sell our boats at posted MarineMax “One” Prices“One Price” that generally represent a discount from the manufacturer’s suggested retail price. Our sales approach focuses on the customer serviceexperience by minimizing customer anxiety associated with price negotiation.
As a part of our sales and marketing efforts, our onlinedigital marketing activity is important,capabilities are a competitive advantage, with the majority of leads comingoriginating through our website, www.MarineMax.com, and emails used as the primary marketing tool for our stores to connect with their customers.digital properties, including MarineMax.com. Social media is a growing venue for customer engagement and communication and has become a strong medium for connecting with storesnew customers. Additionally, we hold online experience events including immersive boat tours that allow participants to explore boats and prospecting of new leads.yachts from multiple manufactures, segments, and models from nearly any electronic device including their phone, tablet, or computer.
We also participate in boat shows and in-the-water sales events at area boating locations, typically held in January, February, March, and toward the end of the boating season, in each of our markets and in certain locations in close proximity to our markets. These shows and events are normally held at convention centers or marinas, with area dealers renting space. Boat shows and other offsite promotions are an important venue for generating sales orders.customer engagement. The boat shows also generate a significant amount of interest in our products resulting in boat sales after the show. Online we are always available and can offer our full selection of boats, yachts and charters, as well as our expert team to answer customers’ questions and help them find a boat virtually.
We emphasize customer education through one-on-one education by our sales representatives and, at some locations, our delivery captains, before and after a sale, and through in-house seminars for the entire family on boating safety, the use and operation of boats, and product demonstrations. Typically, one of our delivery captains or the sales representative delivers the customer’s boat to an area boating location and thoroughly instructs the customer about the operation of the boat, including hands-on instructions for docking and trailering the boat. To enhance our customer relationships after the sale, we lead and sponsor MarineMax Getaways!® group boating trips to various destinations, rendezvous gatherings, and on-the-water organized events that promote the pleasuresboating lifestyle and memories of the boating lifestyle.a lifetime. Each Company-sponsored event, planned and led by a Company employee, also provides a favorable medium for acclimating new customers to boating, sharing exciting boating destinations, creating friendships with other boaters, and enabling us to promote new product offerings to boating enthusiasts.
As a result of our relative size, we believe we have a competitive advantage within the industry by being able to conduct an organized and systematic advertising and marketing effort. Part of our marketing effort includes an integratedcapabilities include a customer relationship management system that tracks all customer engagements, evaluates the status of each sales representative’s contacts with a prospect,customers propensity to buy, automatically generates follow-up correspondence,activities, and facilitates Company-wide availability of a particular boat or other marine productproducts and services desired by a customer.
Suppliers and Inventory Management
We purchase substantially alla substantial portion of our new boat inventory directly from manufacturers, which allocate new boats to dealerships based on the amount of boats sold by the dealership and their market share. We manufacture a portion of our new boat inventory from our Product Manufacturing segment. We also exchange new boats with other dealers to accommodate customer demand and to balance inventory.
We purchase new boats and other marine-related products from Brunswick, which is a world leading manufacturer of marine products, including Sea Ray, Boston Whaler, Harris, Meridian, and Mercury Marine. We also purchase new boats and other marine related products from other manufacturers, including but not limited to, Azimut, Hatteras, Grady-White, Scout, Sailfish, and Nautique by Correct Craft. In fiscal 2017,2022, sales of new Brunswick and Azimut boats and yachts accounted for approximately 42%23% and 9%8% of our revenue, respectively. Sales of new Sea Ray and Boston Whaler boats both divisions of Brunswick, accounted for approximately 23%11% and 17%9%, respectively, of our revenue in
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fiscal 2017.2022. No purchases of new boats and other marine related products from any other manufacturer accounted for more than 10% of our revenue in fiscal 2017. We believe our Sea Ray boat purchases represented approximately 55% of Sea Ray’s new boat sales, and approximately 11% of all Brunswick marine product sales during fiscal 2017.2022.
We have entered into multi-year agreements with Brunswick covering Sea Ray and Boston Whaler. We also have a multi-year agreement with Azimut-Benetti Group for its Azimut product line. We typically deal with each of our manufacturers, other than Brunswick and Azimut-Benetti Group, under an annually renewable, non-exclusive dealer agreement.
The dealer agreements do not restrict our right to sell any product lines or competing products provided that we are in compliance with the material obligations of our dealer agreements. The terms of each dealer agreement appoints a designated geographical territory for the dealer, which is exclusive to the dealer provided that the dealer is able to meet the material obligations of its dealer agreement.
Manufacturers generally establish prices on an annual basis, but may change prices at their sole discretion. Manufacturers typically discount the cost of inventory and offer inventory financing assistance during the manufacturers’ slow seasons, generally October through March. To obtain lower cost of inventory, we strive to capitalize on these manufacturer incentives to take product delivery during the manufacturers’ slow seasons. This permits us to gain pricing advantages and better product availability during the selling season. Arrangements with certain other manufacturers may restrict our right to offer some product lines in certain markets.
We transfer individual boats among our retail locations to fill customer orders that otherwise might take substantially longer to fill from the manufacturer. This reduces delays in delivery, helps us maximize inventory turnover, and assists in minimizing potential
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overstock or out-of-stock situations. We actively monitor our inventory levels to maintain levels appropriate to meet current anticipated market demands. We are not bound by contractual agreements governing the amount of inventory that we must purchase in any year from any manufacturer, but the failure to purchase at agreed upon levels may result in the loss of certain manufacturer incentives or dealership rights.
Inventory Financing
Marine manufacturers customarily provide interest assistance programs to retailers. The interest assistance varies by manufacturer and may include periods of free financing or reduced interest rate programs. The interest assistance may be paid directly to the retailer or the financial institution depending on the arrangements the manufacturer has established. We believe that our financing arrangements with manufacturers are standard within the industry.
We account for consideration received from our vendors in accordance with FASBFinancial Accounting Standards Board (“FASB”) Accounting Standards Codification 605-50,(“ASC”) 606, “Revenue Recognition‒Customer Payments and Incentives”from Contracts with Customers” (“ASC 605-50”606”). ASC 605-50606 requires us to classify interest assistance received from manufacturers as a reduction of inventory cost and related cost of sales as opposed to netting the assistance against our interest expense incurred with our lenders. Pursuant to ASC 605-50,606, amounts received by us under our co-op assistance programs from our manufacturers are netted against related advertising expenses.
We are party to an Inventory Financinga Credit Agreement (the “Amended Credit Facility”) led bywith Manufacturers and Traders Trust Company as Administrative Agent, Swingline Lender, and Issuing Bank, Wells Fargo Commercial Distribution Finance, LLC, (formerly GE Commercial Distribution Finance Corporation)as Floor Plan Agent, and the lenders party thereto (the “New Credit Agreement”). The AmendedNew Credit FacilityAgreement provides the Company a floor plan financing commitmentline of credit with asset based borrowing availability of up to $350 million. The Amended Credit Facility matures$750 million and establishes a revolving credit facility in October 2020the maximum amount of $100 million (including a $20 million swingline facility and the Amended Credit Facility includes two additional one-year extension periods, with lender approval.
The interest rate under the Amended Credit Facility is 345 basis points above the one-month London Inter-Bank Offering Rate (“LIBOR”). There is an unused line feea $20 million letter of ten basis points on the unused portion of the line.
The Amended Credit Facility has certain financial covenants. The covenants include provisions that our leverage ratio not exceed 2.75credit sublimit), a delayed draw term loan facility to 1.0 and that our current ratio must be greater than 1.2 to 1.0. As of September 30, 2017, we were in compliance with all the covenants under the Amended Credit Facility.
The initial advance under the Amended Credit Facility was used to pay off our prior credit facility. Subsequent advances have been, and will be, initiated byfinance the acquisition of eligible newIGY Marinas in the maximum amount of $400 million, and used inventory or will be re-advances against eligible new and used inventory that has 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$100 million delayed draw mortgage loan facility. The maturity of each advance on a periodic basis starting after six months. The curtailment schedule varies based on the type of inventory and the value of the inventory.facilities is August 2027. The New Credit Agreement is further discussed in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of this Annual Report on Form 10-K.
The collateral for the Amended Credit Facility is all of our personal property with certain limited exceptions. None of our real estate has been pledged for collateral for the Amended Credit Facility.Technology Platform
As of September 30, 2017, we owed $254.2 million under the Amended Credit Facility. Outstanding short-term borrowings accrued interest at a rate of 4.7% as of September 30, 2017, and the Amended Credit Facility provided us with an additional net borrowing availability of approximately $52.8 million, based upon the outstanding borrowing base availability. We have no indebtedness associated with our real estate holdings.
Management Information System
We believe that our management information system,technology platform, which is utilized by each of our companies and dealerships and wasthat is continually developed over a number of years through cooperative efforts with a common vendor,the latest capabilities, strategically enhances our ability to integrate successfully the operations of our dealershipscompanies and future acquisitions, facilitates the interchange of information, and enhances cross-selling opportunities throughout our company. The systemplatform integrates each level of operations on a Company-wide basis, including but not limited to purchasing, inventory, receivables, payables, financial reporting, budgeting, and sales management. The system enables usWe manage each company’s operations with the platform to monitor each dealership’s operations in orderexecute at the highest level, continually grow, and deliver exceptional customers experiences. Sales representatives use the platform to identify quickly areas requiring additional focus and to manage inventory. The system also provides sales representatives with prospect and customer information that aids them in tracking the status of their contacts with prospects,gain strategic competitive insights, automatically generatesgenerate follow-up correspondence to such prospects, facilitatesactivities, facilitate the availability of a particular boat Company-wide locates boats needed to satisfy a particular customer request,products and monitorsservices and monitor the maintenance and service needs of customers’ boats. Company representatives also utilize the systemplatform to assist in arrangingprovide financing and insurance packages.products, proactively schedule services and continually communicate with customers. We mitigate cybersecurity risks by employing extensive measures, including but not limited to employee training, protective technologies, monitoring and testing, external assessment services and maintenance of protective systems and contingency plans.
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Brunswick Agreement Relating to Acquisitions
We and the Sea Ray Division of Brunswick are parties to an agreement that provides a process for the acquisition of additional Sea Ray boat dealers that we elect to acquire. The agreement extends through August 31, 2019, with automatic annual one-year extensions at each twelve month anniversary of the agreement, provided that our dealer agreements with the Sea Ray Division of Brunswick are still then in effect. Under the agreement, acquisitions of Sea Ray dealers will be mutually agreed upon by us and Sea Ray with reasonable efforts to be made to include a balance of Sea Ray dealers that have been successful and those that have not been. The agreement provides that Sea Ray will not unreasonably withhold its consent to any proposed acquisition of a Sea Ray dealer by us, subject to the conditions set forth in the agreement. Among other things, the agreement provides for us to provide Sea Ray with a business plan for each proposed acquisition, including historical financial and five-year projected financial information regarding the acquisition candidate; marketing and advertising plans; service capabilities and managerial and staff personnel; information regarding the ability of the candidate to achieve performance standards within designated periods; and information regarding the success of our previous acquisitions of Sea Ray dealers. The agreement also contemplates Sea Ray reaching a good faith determination whether the acquisition would be in its best interest based on our dedication and focus of resources on the Sea Ray brand and Sea Ray’s consideration of any adverse effects that the approval would have on the resulting territory configuration of adjacent or other dealers and the absence of any violation of applicable laws or rights granted by Sea Ray to others.Human Capital Resources
Dealer Agreements with Brunswick
We and the Sea Ray Division of Brunswick and Boston Whaler, Inc. are parties to Sales and Service Agreements relating to Sea Ray and Boston Whaler products respectively, effective September 1, 2014 and extending through August 31, 2019 with automatic annual one-year extensions at each twelve-month anniversary of the agreement, provided that we are not in breach of a material term of the agreement, following written notice and expiration of applicable cure periods without cure (certain termination provisions are summarized below).
The agreements appoint certain of our operating subsidiaries as a dealer for the retail sale, display, and servicing of all Sea Ray or Boston Whaler products, parts, and accessories currently or in the future sold by Sea Ray or Boston Whaler, as applicable. The agreements specify a designated geographical territory and dealer region or location for the dealer, which is exclusive to the dealer. The agreement also specifies retail locations, which the dealer may not close, change, or add to without the prior written consent of the relevant manufacturer, provided that such manufacturer may not unreasonably withhold its consent. The manufacturer reserves the right to modify the territory or appoint other dealers to sell, display, and service product from dealer locations within the territory at any time if we close a dealer location without prior written notice to Sea Ray and prior written approval by Sea Ray, which will not be unreasonably withheld or in the case of Boston Whaler, in the event that a dealer location fails to meet performance standards while carrying competitive product following written notice and a period of 60 days to cure or six months for matters for which a cure cannot be completed in 60 days. The agreements also restrict the dealer from selling, advertising (other than in recognized and established marine publications), soliciting for sale, or offering for resale any products outside its territory except as otherwise provided by the relevant manufacturer’s advertising policy or other applicable policy as long as similar restrictions also apply to all domestic dealers selling comparable products. In addition, the agreements provide for the lowest product prices charged by the relevant manufacturer from time to time to other domestic dealers, subject to the dealer meeting all the requirements and conditions of applicable programs and the right of the manufacturer in good faith to charge lesser prices to other dealers to meet existing competitive circumstances, for unusual and non-ordinary business circumstances, or for limited duration promotional programs.
Among other things, the dealer agreements require each dealer to achieve performance standards including inventory stocking levels, provision of annual sales forecasts, submission of orders pursuant to the manufacturer’s current buying program, unit retail sales, customer satisfaction and marketing support. The sales performance will be in accordance with fair and reasonable standards and sales levels established by the manufacturer in collaboration with the dealer based on factors such as population, sales potential, market share percentage of products sold in the territory compared with competitive products sold in the territory, product availability, local economic conditions, competition, past sales history, historical product mix and stocking practices, existing product inventory, number of retail locations, and other special circumstances that may affect the sale of the relevant products or the dealer, in each case established in a manner similar to those applied to domestic dealers selling comparable products.
The dealer is also required to maintain at each retail location, or at another acceptable location, a service department that is properly staffed and equipped to service Sea Ray or Boston Whaler products, as applicable, promptly and professionally and to maintain parts and supplies to service such products properly on a timely basis, to provide or arrange for warranty and service work for such products.
Sea Ray and Boston Whaler respectively have each agreed to indemnify us against any losses to third parties resulting from their respective negligent acts or omissions involving the design or manufacture of any of its products or any breach by it of the agreement. We have agreed to indemnify Sea Ray or Boston Whaler respectively against any losses to third parties resulting from our negligent acts or omissions involving the dealer’s application, use, or repair of Sea Ray or Boston Whaler products respectively, statements or
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representation not specifically authorized by the relevant manufacturer, the installation of any after-market components or any other modification or alteration of the products, and any breach by us of the agreement.
The agreements may be terminated:
by the manufacturer, upon 60 days’ prior written notice, if we do not have an ability to purchase products via floor plan financing or self-financing or fail to meet our financial obligations as they become due to the relevant manufacturer or to our lenders;
as to any dealer region, or in the case of Boston Whaler, any dealer location, if we are failing to meet performance standards and begin selling, displaying or advertising products that are competitive with the products being sold under the agreement (other than products of another Brunswick brand or new products currently carried), if we do not cure our failure within 90 days after written notice, or if we are meeting the performance standards and then start failing to meet performance standards after beginning selling, displaying or advertising products that are competitive with products sold under the agreement (other than products of another Brunswick brand or new products currently carried) and do not cure our failure within six months after written notice, or with respect to Boston Whaler and dealer’s locations in New York, in the event such dealer location fails to meet performance standards and does not cure such failure within 6 months after written notice;
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by Sea Ray or Boston Whaler, as applicable, or us upon 60 days’ written notice if the other makes a fraudulent misrepresentation that is material to the agreement or in the event of the insolvency, bankruptcy, or receivership of the other;
by Sea Ray or Boston Whaler, as applicable, in the event of the assignment of the agreement by the dealer without the prior written consent of Sea Ray or Boston Whaler, as applicable;
by Sea Ray or Boston Whaler, as applicable, upon at least 60 days' prior written notice in the event of the commission by dealer of an act of fraud upon Sea Ray or Boston Whaler, as applicable, or the commission by us or one of our officers of a felony or act of fraud which is materially detrimental to Sea Ray’s or Boston Whaler’s respective reputation or business or which materially impairs our ability to perform our duties under the agreement or we fail to pay any lender financing products under the agreement after the sale of products by us; or
upon the mutual consent of Sea Ray or Boston Whaler, as applicable, and us.
Either party may elect to not extend the term at the expiration of each applicable 12 month period in the event of a material breach or default by the other of any of the material obligations, performance standards, covenants, representations, warranties, or duties imposed by the agreement or the manufacturer’s manual that is not remedied or cured following notice thereof. In the event of a remedy or cure, the additional 12 month period shall be added to the term.
Dealer Agreements with Azimut
We are parties to Dealership Agreements with Azimut Benetti S.P.a. for the retail sale, display, and servicing of designated Azimut products and parts sold by Azimut. The Dealership Agreements automatically renew each year provided that we are able to agree in good faith on acceptable retail sales goals. The dealership agreements grant us the exclusive right to sell the Azimut products and parts in designated geographical areas. Among other things, each dealership agreement requires the applicable dealer to:
display the Azimut products in the most appropriate and effective manner;
maintain an adequate inventory of Azimut products and meet mutually agreed upon minimum purchase requirements;
use commercially reasonable best efforts to establish the best image for Azimut and to promote the sales of the products;
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maintain adequate signage to show Azimut at its offices or service yards;
promote the products at various events and meetings;
advertise and market the products in accordance with agreed upon marketing plans and budgets;
attend boat shows and display a full range of boats;
maintain appropriate and adequate after-sale service;
provide assistance under warranty for all boats in the geographical area;
comply with Azimut’s warranty procedures; and
perform maintenance services for Azimut boats.
Azimut has agreed to indemnify each of our dealers against any losses resulting from an alleged breach of warranty or injury or damage caused by a defect in design, manufacture or assembly of a product. Each of our dealers has agreed to indemnify Azimut against any losses resulting from the dealer’s failure to comply with any material obligation with respect to a product or customer; any actual negligence, errors or omissions in connection with the sale, preparation, repairs, or service of products; any modification of products except as approved by Azimut; a breach of any material agreement; or unauthorized warranties, misleading statements, misrepresentations or deceptive or unfair practices.
Each dealer agreement may be terminated upon 30 days prior written notice in event that the defaulting party has not remedied a default during such period, in the event of any of the following:
by Azimut or dealer, for failure of the other to maintain a necessary license;
by Azimut or dealer, for the change, transfer, or attempted transfer by the other party of the whole or any part of the agreement other than to an affiliate as part of a corporate restructuring or any change in control without the prior consent of Azimut;
by Azimut or dealer, for the knowing submission of an intentional fraudulent statement, application, request, refund, credit, or warranty claim;
by Azimut or dealer, for the knowing use of a deceptive or fraudulent practice in the sale of a product;
by Azimut or dealer, for the indictment for or conviction of a crime or violation of law which will have an adverse and material effect on the other’s reputation or operations;
by Azimut or dealer, for the other entering into an agreement or understanding to fix prices for the products;
by dealer for Azimut’s material and continuous failure to supply product or appointing another dealer in the territory or failure to fulfill warranty obligations;
by Azimut for dealer’s abandonment of operations or failure to maintain business as a going concern;
by Azimut for dealer’s material and continuous failure to represent, promote, sell, or service the products, achieve minimum yearly sales or comply with purchase orders as agreed by the parties considering various factors such as the economy, the Euro impact, product availability, and growth potential;
by Azimut or dealer for the insolvency, bankruptcy, commencement of bankruptcy proceedings, appointment of a receiver or other officer with similar powers, levy under attachment, garnishment or execution, or similar process, which is not vacated or removed within ten days; and
by mutual agreement of the dealer and Azimut.
Upon termination of the dealer agreements by Azimut without cause, termination by dealer with cause and nonrenewal and expiration, Azimut is required to repurchase unsold inventory within sixty days of termination.
Employees
As of September 30, 2017,2022, we had 1,5163,410 employees, 1,4052,301 (67%) of whom were in store-level operations, 933 (28%) of whom were in the yacht manufacturing operations, and 111176 (5%) of whom were in corporate administration and management. We are not a party to any collective bargaining agreements. We consider our relations with our employees to be excellent.
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TrademarksIn managing the business, we devote substantial efforts to recruit employees that we believe to be exceptionally well qualified for their position. We also train our employees to understand our core retail philosophies, which focus on making the purchase of a boat and Service Marksits subsequent use as hassle-free and enjoyable as possible. Through our MarineMax University, or MMU, we teach our retail philosophies to existing and new employees at various locations and online, through MMU-online. MMU is a modularized and instructor-led educational program that focuses on our retailing philosophies and provides instruction on such matters as the sales process, customer service, F&I, accounting, leadership, and human resources. We also have a specialized service training center and program in Clearwater, Florida where we train our service technicians in best practices.
Sales representatives receive compensation primarily on a commission basis. Each general manager is a salaried employee with incentive bonuses based on the performance of the managed dealership. Maintenance and repair service managers receive compensation on a salary basis with bonuses based on the performance of their departments. Our technology platform provides each store and department manager with daily financial and operational information, enabling them to monitor the performance of their personnel on a daily, weekly, and monthly basis. We have a uniform, fully integrated technology platform serving each of our dealerships.
Our philosophy is to pay competitive base salaries to team members at levels that help us to attract, motivate, and retain highly qualified team members and reduce turnover. Cash incentive bonuses are designed to reward individuals based on our Company’s financial results as well as the achievement of personal and corporate objectives designed to contribute to our long-term success in building shareholder value. Grants of stock-based awards under our 2011 Stock-Based Compensation Plan are intended to align compensation with the price performance of our common stock. Total compensation levels reflect corporate positions, responsibilities, and achievement of goals. As a result of our performance-based compensation philosophy, pay levels may vary significantly from year to year and among our various team members. Performance metrics utilized by our cash compensation plans include pretax income performance bonus, aged inventory, district and regional financial performance targets, and net promoter score (customer satisfaction).
Intellectual Property
We have registered trade namestradenames and trademarks, with the U.S. Patent and Trademark Office for various names, including “MarineMax,” “MarineMax Getaways!,” “MarineMax Care,” “Delivering the Dream,” “MarineMax Delivering the Boating Dream,” “Newcoast Financial Services,” “MarineMax Boating Gear Center,” “MarineMax Vacations,” “United by Water” and “Women on Water.” We have registered the nameamong other marks, “MarineMax” in the European Union, China, Australia, Brazil, India, and Cuba; “Maximizing Your Enjoyment on the Water” in the European Union, Cuba, and Australia; and “United by Water” in over 20 countries and territories. Pursuant to agreements with manufacturers and subject to restrictions in those agreements, we have the European Union, China, Australiaright to use and Cuba. We have trade namesdisplay the trademarks and logos of our manufacturer’s brands at our retail stores as well as in our advertising and promotional materials. The current registrations of our tradenames and trademarks registeredare effective for varying periods of time, which we may renew periodically, provided that we comply with all statutory maintenance requirements, including continued use of each trademark in Canada for various names, including “MarineMax,” “Delivering the Dream,” “United by Water,” and “The Water Gene.” We have various trade name and trademark applications including “MarineMax,” “United by Water,” and “Maximizing Your Enjoyment on Water” pending in Brazil, China, European Union, and India. There can be no assurance that any of these applications will be granted.each country.
Seasonality and Weather Conditions
Our business, as well as the entire recreational boating industry, is highly seasonal, with seasonality varying in different geographic markets. Over the three-year period ended September 30, 2017,2022, the average revenue for the quarters ended December 31, March 31, June 30 and September 30 represented approximately 20%, 23%24%, 33%32%, and 24%, respectively, of our average annual revenues. With the exception of Florida, we generally realize significantly lower sales and 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 IrmaHurricane Ian in 2017.2022. 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.
Governmental Regulations, including Environmental and Other Regulatory IssuesRegulations
Our operations are subject to extensive regulation, supervision, and licensing under various foreign, federal, state, and local statutes, ordinances, and regulations. While we believe that we maintain all requisite licenses and permits and are in compliance with
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all applicable federal, state, and local regulations, there can be no assurance that we will be able to maintain all requisite licenses and permits. The failure to satisfy those and other regulatory requirements could have a material adverse effect on our business, financial condition, and results of operations. The adoption of additional laws, rules, and regulations could also have a material adverse effect on our business. Various foreign, federal, state, and local regulatory agencies, including the Occupational Safety and Health Administration or OSHA,(“OSHA”), the United States Environmental Protection Agency, or EPA, and similar foreign, federal, state, and local agencies, have jurisdiction over the operation of our dealerships, repair facilities, and other operations with respect to matters such as consumer protection and privacy, workers’ safety, and laws regarding protection of the environment, including air, water, and soil.
The EPA has various air emissions regulations for outboard marine engines that impose more strict emissions standards for two-cycle, gasoline outboard marine engines. The majority of the outboard marine engines we sell are manufactured by Mercury Marine. Mercury Marine’s product line of low-emission engines, including the OptiMax, Verado, SeaPro, Pro XS, and other four-stroke outboards, have achieved the EPA’s mandated 2006 emission levels. AnyWhile we remain committed to supporting sustainable manufacturing and a sustainable environment for all boaters, any increased costs of producing engines resulting from EPA standards, or the inability of our manufacturers to comply with EPA requirements, could have a material adverse effect on our business.
Certain of our facilities own and operate underground storage tanks or USTs,(“USTs”) and above ground storage tanks or ASTs,(“ASTs”) for the storage of various petroleum products. The USTs and ASTs are generally subject to federal, state, and local laws and regulations that require testing and upgrading of tanks and remediation of contaminated soils and groundwater resulting from leaking tanks. In addition, if leakage from Company-owned or operated tanks migrates onto the property of others, we may be subject to civil liability to third parties for remediation costs or other damages. Based on historical experience, we believe that our liabilities associated with tank testing, upgrades, and remediation are unlikely to have a material adverse effect on our financial condition or operating results.
As with boat dealerships generally, and parts and service operations in particular, our business involves the use, handling, storage, and contracting for recycling or disposal of hazardous or toxic substances or wastes, including environmentally sensitive materials, such as motor oil, waste motor oil and filters, transmission fluid, antifreeze, freon, waste paint and lacquer thinner, batteries, solvents, lubricants, degreasing agents, gasoline, and diesel fuels. Accordingly, we are subject to regulation by federal, state, and local
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authorities establishing requirements for the use, management, handling, and disposal of these materials and health and environmental quality standards, and liability related thereto, and providing penalties for violations of those standards. We are also subject to laws, ordinances, and regulations governing investigation and remediation of contamination at facilities we operate to which we send hazardous or toxic substances or wastes for treatment, recycling, or disposal.
We do not believe we have any material environmental liabilities or that compliance with environmental laws, ordinances, and regulations will, individually or in the aggregate, have a material adverse effect on our business, financial condition, or results of operations. However, soil and groundwater contamination has been known to exist at certain properties owned or leased by us. We have also been required and may in the future be required to remove abovegroundUSTs and underground storage tanksASTs containing hazardous substances or wastes. As to certain of our properties, specific releases of petroleum have been or are in the process of being remedied in accordance with state and federal guidelines. We are monitoring the soil and groundwater as required by applicable state and federal guidelines. In addition, the shareholders of certain of the acquired dealers have indemnified us (and such indemnification is continuing) for specific environmental issues identified on environmental site assessments performed by us as part of the acquisitions. We maintain insurance for pollutant cleanup and removal. The coverage pays for the expenses to extract pollutants from land or water at the insured property, if the discharge, dispersal, seepage, migration, release, or escape of the pollutants is caused by or results from a covered cause of loss. We also have additional storage tank liability insurance and “Superfund”Superfund coverage where applicable. In addition, certain of our retail locations are located on waterways that are subject to federal or state laws regulating navigable waters (including oil pollution prevention), fish and wildlife, and other matters.
Three of the properties we own were historically used as gasoline service stations. Remedial action with respect to prior historical site activities on these properties has been completed or is being completed in accordance with federal and state law. We however, do not believe that any of these environmental issues will result in any material liabilities to us.
Additionally, certain states have required or are considering requiring a license in order to operate a recreational boat. While such licensing requirements are not expected to be unduly restrictive, regulations may discourage potential first-time buyers, thereby limiting future sales, which could adversely affect our business, financial condition, and results of operations.
Environmental Responsibility
We operate many retail locations near or on bodies of water that are acutely susceptible to the risks associated with climate change. Such risks include those related to the physical impacts of climate change, such as possibly more frequent and severe weather events, rising sea levels, and/or long term shifts in climate patterns, and risks related to the transition to a lower-carbon economy, such as reputational, market and/or regulatory risks. Our commitment to environmental responsibility and initiatives to reduce our environmental footprint are outlined in our “Environmental Policy.” Our Environmental Policy can be found on the Investor Relations section of our website at www.MarineMax.com under Governance Documents (for the avoidance of doubt, our Environmental Policy and other information contained on or accessible through our website is not incorporated into, and does not form a part of, this Annual Report or
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any other report or document we file with the Securities and Exchange Commission). Our Environmental Policy and associated climate related risks and opportunities are reviewed by our Board of Directors on an annual basis or more frequently as needed.
We have engaged in many efforts to mitigate and adapt to climate change. For example, we seek out, to the extent feasible, manufacturers committed to the highest levels of sustainability, environmental stewardship, and low-emissions as demonstrated by Mercury Marine. Mercury Marine’s commitment to sustainability and successes are detailed in its 2021 Sustainability Report. Mercury Marine’s accomplishments include winning the 2020 Energy Efficiency Excellence Award from Wisconsin’s Focus on Energy program, 2019 Sustainable Process Award from the Wisconsin Sustainable Business Council for its sustainable use of aluminum, winning the 2018 Sustainable Product of the Year from the Wisconsin Sustainable Business Council for its Active Trim technology, and winning the 2018 Business Friend of the Environment Award for their new V6 and V8 outboard engines. For the 11th consecutive year, the Wisconsin Sustainable Business Council awarded Mercury Marine a “Green Masters” designation, a program measuring a broad range of sustainability issues including energy and water conservation, waste management, community outreach, and education. Mercury Marine has improved energy efficiency by implementing energy‑reducing projects, promoting best practices in energy management and employing new energy technologies, such as using the latest and most energy efficient HVAC systems, LED lighting, top-rated insulation, passive (natural) lighting, weather-stripping around windows and doors, double-door vestibules, automatic and timer-activated doors, and plans to build roof-mounted solar arrays where applicable.
Additionally, Azimut Yachts was awarded ISO 14001 certification, for its consistent and effective management system aimed at reducing the environmental impact of its operations. In addition, to maximize the eco-compatible standards of their yachts, Azimut Yachts adopted RINA (an organization specializing in classification, certification, testing, and inspection) principles to achieve RINA Green Plus notation. Also, MasterCraft's manufacturing facilities operate in alignment with the ISO 14001 Environmental Management Systems Standard, the ISO 9001 Quality Management Systems standard, and the OHSAS 18001 International Occupational Health and Safety Management System standard. MasterCraft's largest facility, the MasterCraft brand facility, is certified in all three standards. MasterCraft believes it is the only boat manufacturer to achieve all three of these prestigious ISO certifications across production and product development systems.
Further, as opportunities arise we have made targeted investments to support new technology, innovations, and research in the marine industry to reduce emissions, provide environmental stewardship, and support a sustainable environment for all boaters. The Fraser Yachts Group has become the first yacht company to sign the Pact for Energy Transition with the Monaco Government. The energy transition pact was created by the Monaco government to improve energy efficiency and promote renewable energy sources, with the target to reducing greenhouse gas emissions, by allowing residents, workers, businesses, institutions and associations to contribute to the energy transition effort.
We take pride in maintaining our retail locations and marinas for the benefit of the local communities and boaters we serve. We strive to execute a proactive strategy related to environmental, health, and safety laws and regulations, and environmental stewardship, which includes investing significant resources in maintaining and developing our retail locations and marinas for the long term. Additionally, several of our marinas have been designated as Clean Marinas. The Clean Marina Program recognizes facilities engaging in environmental best practices and exceeding regulatory requirements in and around waterways.
Corporate Social Responsibility
Our commitment to social responsibility is outlined in our “Human Rights Policy.” Our Human Rights Policy can be found on the Investor Relations section of our website at www.MarineMax.com under Governance Documents (for the avoidance of doubt, our Environmental Policy and other information contained on or accessible through our website is not incorporated into, and does not form a part of, this Annual Report or any other report or document we file with the Securities and Exchange Commission). Our Human Rights Policy is reviewed by our Board of Directors on an annual basis or more frequently as needed. We strive to conduct our business in an ethical and socially responsible way, and are sensitive to the needs of the environment, our customers, our shareholders, our team members and our communities. Our ethical and social responsibility is guided by our MarineMax culture and values which are honesty, trust, loyalty, professionalism, consistency, always do what is right, treat others as we want to be treated, and always consider the long term. Our culture, values, and mission are shared and reinforced with our team members through daily stand up meetings, team events, and online communications. We pride ourselves in supporting our local communities both on and off the water. One way in which our presence is felt within the local community is by providing our team members time to volunteer and assist with Habitat for Humanity housing projects in addition to making charitable donations to Habitat for Humanity. In addition, we support humanitarian aid to countries in need through organizations such as the Red Cross. We also partner with the American Cancer Society to support Breast Cancer Awareness Month across all of our retail operations.
Product Liability
The products we sell or service may expose us to potential liabilities for personal injury or property damage claims relating to the use of those products. Historically, the resolution of product liability claims has not materially affected our business. Our manufacturersManufacturers of the products we sell generally maintain product liability insurance, and weinsurance. We also maintain third-party product liability insurance whichthat we
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believe to be adequate. However, weWe may experience legal claims that are not covered by, or that are in excess of, our insurance coverage, and those claims may not be covered by insurance. Furthermore,coverage. The institution of any significant claims against us could adversely affectsubject us to damages, result in higher insurance costs, and harm our business financial condition, and results of operations and result in negative publicity. Excessive insurance claims also could result in increased insurance premiums.reputation with potential customers.
Competition
We operate in a highly competitive environment. In addition to facing competition generally from recreation businesses seeking to attract consumers’ leisure time and discretionary spending dollars, the recreational boat industry itself is highly fragmented, resulting in intense competition for customers, quality products, boat show space, and suitable retail locations. We rely to a certain extent on boat shows to generate sales. Our inability to participate in boat shows in our existing or targeted markets could have a material adverse effect on our business, financial condition, and results of operations.
We compete primarily with single-location boat dealers and, with respect to sales of marine equipment, parts, and accessories, with national specialty marine stores, catalog and online retailers, sporting goods stores, and mass merchants. Competition among boat dealers is generally based on the quality of available products, the price and value of the products, and attention to customer service. There is significant competition both within markets we currently serve and in new markets that we may enter. We compete in each of our markets with retailers of brands of boats and engines we do not sell in that market. In addition, several of our competitors, especially those selling boating accessories, are large national or regional chains that have substantial financial, marketing, and other resources. However, we believe that our integrated corporate infrastructure and marketing and sales capabilities, our cost structure, and our nationwide presence enable us to compete effectively against these companies. Private sales of used boats represent an additional significant source of competition.
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The following table sets forth information concerning each of our executive officers as of November 30, 2017:15, 2022:
Name |
| Age |
| Position |
William H. McGill Jr. |
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| Executive Chairman of the Board
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William Brett McGill |
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| Chief Executive Officer, President and |
Michael H. McLamb |
|
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| Executive Vice President, Chief Financial Officer,
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Charles A. Cashman |
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| Executive Vice President and Chief Revenue Officer |
|
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Anthony E. Cassella, Jr |
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| Vice President and Chief Accounting Officer |
Shawn Berg | 52 | Executive Vice President and Chief Digital Officer | ||
Kyle G. Langbehn | 48 | Executive Vice President and President of Retail Operations |
William H. McGill Jr. has served as the Executive Chairman of the Board since October 2018. Mr. McGill served as Chief Executive Officer of MarineMax sincefrom January 23, 1998 to September 30, 2018 and as the Chairman of the Board and as a directorDirector of our companythe Company since March 6, 1998. Mr. McGill served as the President of our companythe Company from January 23, 1988 until September 8, 2000 and re-assumed the position from July 1, 2002 to October 1, 2017. Mr. McGill was the principal owner and president of Gulfwind USA, Inc., one of our operating subsidiaries, from 1973 until its merger with us in 1998. In December 2016, Mr. McGill joined the Board of Directors of Joi Scientific, Inc., an energy company with which we have a licensing agreement.
William Brett McGill has served as Chief Executive Officer since October 2018, as President since October 2017, and as a Director since February 21, 2019. Mr. McGill served as President and Chief Operating Officer sinceof MarineMax from October 2017.2017 to October 2018. Mr. McGill served as Executive Vice President and Chief Operating Officer from October 2016 to October 2017, Executive Vice President Operations of our companythe Company from October 2015 to September 2016, as Vice President of West Operations of our companythe Company from May 2012 to September 2015, and was appointed as an executive officer by our Board of Directors in November 2012. Mr. McGill served as one of our Regional Presidents from March 2006 to May 2012, as Vice President of Information Technology, Service and Parts of our companythe Company from October 2004 to March 2006, and as Director of Information Services from March 1998. Mr. McGill began his professional career with a software development firm, Integrated Dealer Systems, prior to joining our companyMarineMax in 1996. William Brett McGill is the son of William H. McGill, Jr.
Michael H. McLamb has served as Executive Vice President of our companyMarineMax since October 2002, as Chief Financial Officer since January 23, 1998, as Secretary since April 5, 1998, and as a directorDirector since November 1, 2003. Mr. McLamb served as Vice President and Treasurer of our companythe Company from January 23, 1998 until October 22, 2002. Mr. McLamb, a certified public accountant, was employed by Arthur Andersen LLP from December 1987 to December 1997, serving most recently as a senior manager.Senior Manager.
Charles A. Cashman has served as Executive Vice President and Chief Revenue Officer of our companyMarineMax since October 2016. Mr. Cashman served as Executive Vice President Sales, Marketing, and Manufacturer Relations of our companythe Company from October 2015 to September 2016, served as Vice President of East Operations of our company from May 2012 to September 2015, and was appointed as an executive officer by our Board of Directors in November 2012. Mr. Cashman served as Regional President of East Florida from October 2008 to May 2012, and as District Manager of the East Coast of Florida from March 2007 to October 2008. Mr. Cashman served several other positions of increasing responsibility, including Sales Consultant, Sales Manager, and General Manager, since joining our companyMarineMax in 1992.
Paulee C. Day has served as Executive Vice President and Chief Legal Officer of our company since October 2015. Ms. DayAnthony E. Cassella, Jr. has served as Vice President of our company since February 2009 and as General Counsel and Assistant Secretary since January 2003. Ms. Day, an active member of the Florida Bar, was employed by Maxxim Medical from May 1999 to November 2002, serving as Vice President, General Counsel, and Secretary. Prior to that time, Ms. Day was Corporate Attorney at Eckerd Corporation from June 1997 through May 1999 and a corporate attorney at the law firm Trenam, Kemker, Scharf, Barkin, Frye, O’Neill and Mullis, P.A. from January 1995 through June 1997.
Anthony E. Cassella, Jr. has served as Vice President of our companyMarineMax since February 2016, Chief Accounting Officer of our company since October 2014, and Vice President of Accounting and Shared Services of our company since February 2011. Mr. Cassella served as Director of Shared Services from October 2007 until February 2011 and Regional Controller from March 1999 until October 2007. Mr. Cassella was the Controller of Merit Marine which the Company acquired in March 1999. Mr. Cassella, a certified public accountant, worked in public accounting from June 1991 to February 1998, serving most recently as manager.Manager.
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General economic conditionsShawn Berg has served as Chief Digital Officer since April 2019 overseeing the Company's Technology, Marketing, and consumer spending patterns can negatively impactDigital Business operations. Mr. Berg was appointed as an executive officer of MarineMax by our operating results,Board of Directors in October 2022. Previously he served as Vice President of Technology after joining MarineMax in 2017. Mr. Berg has over 30 years of experience, including multiple officer-level positions, delivering strategic business growth to companies across the marine, auto, and the severe recession that began in late 2007 has adversely affected the boating industry and our company.
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 dealerships, particularly Florida in which we generated approximately 53%, 55%, and 55% of our revenue during fiscal 2015, 2016, and 2017, respectively, can have a major impact on our operations. Local influences, such as corporate downsizing, military base closings, and inclement weather such as hurricanes or 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. As a result, an economic downturn 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 could adversely affect our business, financial condition, or results of operations in the future. Any period of adverse economic conditions or low consumer confidence has a negative effect on our business.
Lower consumer spending resulting from a downturn in the housing market and other economic factors adversely affected our business in fiscal 2007, and continued weakness in consumer spending and depressed economic conditions had a substantial negative effect on our business for several years afterwards. Our revenue decreased from $1.2 billion in fiscal 2007, to $885.4 million in fiscal 2008, to $588.6 million in fiscal 2009, and to $450.3 million in fiscal 2010. Our earnings decreased from a net income of $20.1 million in fiscal 2007 to a net loss of $134.3 million in fiscal 2008 (including a $122.1 million goodwill impairment charge), a net loss of $76.8 million in fiscal 2009, net income of $2.5 million in fiscal 2010 (including a $19.2 million tax refund), and a net loss of $11.5 million in fiscal 2011. These substantially deteriorating economic and financial conditions had a greater impact on many other participants in the boating industry, with certain manufacturers and dealers ceasing business operations or filing for bankruptcy.
These conditions caused us to reduce substantially our acquisition program, delay new store openings, reduce our inventory purchases, engage in inventory reduction efforts, close a number of our retail locations, reduce our headcount, and amend and replace our credit facility. While we believe the steps we took enabled us to emerge from the economic environment of the severe recession as a stronger and more profitable company, we cannot predict whether unfavorable economic, financial, or industry conditions will return or the extent to which they would adversely affect our operating results if they returned nor can we predict the effectiveness of the measures we have taken to address this environment or whether additional measures will be necessary. A return of depressed economic or industry factors would have additional negative effects on our company, including interfering with our supply of certain brands by manufacturers, reduced marketing and other support by manufacturers, decreased revenue, additional pressures on margins, and our failure to satisfy covenants under our credit agreement.
The availability and costs of borrowed funds can adversely affect our ability to obtain adequate boat inventory and the ability and willingness of our customers to finance boat purchases.
The availability and costs of borrowed funds can adversely affect our ability to obtain and maintain adequate boat inventory and the holding costs of that inventory as well as the ability and willingness of our customers to finance boat purchases. As of September 30, 2017, we had no long-term debt. We rely on the Amended Credit Facility led by Wells Fargo Commercial Distribution Finance LLC to purchase and maintain our inventory of boats. The Amended Credit Facility provides a floor plan financing commitment of up to $350.0 million. The collateral for the Amended Credit Facility is all of our personal property with certain limited exceptions. None of our real estate has been pledged as collateral for the Amended Credit Facility. As of September 30, 2017, we were in compliance with all of the covenants under the Amended Credit Facility and our additional available borrowings under the Amended Credit Facility was approximately $52.8 million based upon the outstanding borrowing base availability.
Our ability to borrow under the Amended Credit Facility depends on our ability to continue to satisfy our covenants and other obligations under the Amended Credit Facility. The variable interest rate under our Amended Credit Facility will fluctuate with changing market conditions and, accordingly, our interest expense will increase if interest rates rise. A significant increase in interest rates could have a material adverse effect on our operating results. The aging of our inventory limits our borrowing capacity as defined provisions in the Amended Credit Facility reduce the allowable advance rate as our inventory ages. Our access to funds under the Amended 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. Depressed economic conditions, weak consumer spending, turmoil in the credit markets, and lender difficulties, among other potential
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reasons, could interfere with our ability to maintain compliance with our debt covenants and to utilize the Amended Credit Facility to fund our operations. Accordingly, under such circumstances, it may be necessary for us to close additional stores, further reduce our expense structure, liquidate inventory below cost to free up capital, or modify the covenants with our lenders. Any inability to utilize the Amended Credit Facility or the acceleration of amounts owed, resulting from a covenant violation, insufficient collateral, or lender difficulties, could require us to seek other sources of funding to repay amounts outstanding under the Amended Credit Facility or replace or supplement the Amended Credit Facility, 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. Tight credit conditions during each fiscal year beginning with fiscal 2008 and continuing through fiscal 2011 adversely affected the ability of customers to finance boat purchases, which had a negative effect on our operating results.
Our strategies to enhance our performance may not be successful.
We are increasing our efforts to grow our financing and insurance, parts and accessories, service, yacht charter, brokerage, and boat storage businesses to better serve our customers and thereby increase revenue and improve profitability as a result of these higher margin businesses.industries. In addition, we have implemented programs to increase the lead capture and sale over the Internet of used boats, parts, accessories, and a wide range of boating supplies and products. These efforts and programs are designed to increase our revenue and reduce our dependence on the sale of new boats. These business initiatives have required, and will continue to require, us to add personnel, invest capital, enter businesses in which we do not haveMr. Berg has extensive experience in finance, insurance, distribution, servicing, and encounter substantial competition. As a result,supply chain operations.
Kyle G. Langbehn has served as President of Retail Operations since July 2020, responsible for MarineMax’s retail operations. Mr. Langbehn was appointed as an executive officer of MarineMax by our strategiesBoard of Directors in October 2022. Previously he served as
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Vice President of Operations beginning in October of 2018. Mr. Langbehn has excelled in numerous positions of increasing responsibility including Sales Consultant, Sales Manager, General Sales Manager, General Manager, and Regional President since joining MarineMax in 2002.
Item 1A. Risk Factors
Risks Related to enhance our performance may not be successfulCompetition, Economic, and we may increase our expenses or write off such investments if not successful.Industry Conditions
Our success depends to a significant extent on the well being,well-being, as well as the continued popularity and reputation for quality of the boating products, of our manufacturers, particularly Brunswick’s Sea Ray and Boston Whaler boat lines and Azimut-Benetti Group’s Azimut products. The failure to obtain a high quality and desirable mix of competitively priced products that our customers demand could have a material adverse effect on our business, financial condition, and results of operations.
Approximately 42%23% of our revenue in fiscal 20172022 resulted from sales of new boats manufactured by Brunswick, including approximately 23%11% from Brunswick’s Sea Ray division, 17%9% from Brunswick’s Boston Whaler division, and approximately 2%3% from Brunswick’s other divisions. Additionally, approximately 9%8% of our revenue in fiscal 20172022 resulted from sales of new boats manufactured by Azimut-Benetti Group. The remainder of our fiscal 20172022 revenue from new boat sales resulted from sales of products from a limited number of other manufacturers, none of which accounted for more than 10% of our revenue.
We depend on our manufacturers to provide us with products that compare favorably with competing products in terms of quality, performance, safety, and advanced features, including the latest advances in propulsion and navigation systems. Any adverse change in the production efficiency, product development efforts, technological advancement, expansion of manufacturing footprint, supply chain and third-party suppliers, marketplace acceptance, marketing capabilities, ability to secure adequate access to capital, and financial condition of our manufacturers, particularly Brunswick (including Mercury Marine, a division of Brunswick) and Azimut-Benetti Group, given our reliance on Sea Ray, Boston Whaler, Mercury Marine engines, and Azimut, would have a substantial adverse impact on our business. Any difficulties encountered by any of our manufacturers, particularly Brunswick and Azimut-Benetti Group, resulting from economic, financial, supply chain, or other factors, such as the COVID-19 pandemic, could adversely affect the quality and amount of products that they are able to supply to us and the services and support they provide to us.
TheAny interruption or discontinuance of the operations of Brunswick, Azimut-Benetti Group or other manufacturers could cause us to experience shortfalls, disruptions or delays with respect to needed inventory. Although we believe in our brand, our product diversification and that adequate alternate sources would be available that could replace any manufacturer other than Brunswick and Azimut-Benetti Group as a product source, those alternate sources may not be available at the time of any interruption, and alternative products may not be available at comparable quality and prices.price.
Boat manufacturers exercise substantial control over our business.
We depend on our dealer agreements. We have dealer agreements with Brunswick covering Sea Ray and Boston Whaler products. EachMost of our retail locations have a multi-year dealer agreement has a multi-year term andwhich provides for the lowest product prices charged by the Sea Ray division of Brunswick or Boston Whaler, as applicable, from time to time to other domestic Sea Ray or Boston Whaler dealers, as applicable. These terms are subject to:
the dealer meeting all the requirements and conditions of the manufacturer’s applicable programs; and
the right of Brunswick in good faith to charge lesser prices to other dealers
to meet existing competitive circumstances;
for unusual and non-ordinary business circumstances; or
for limited duration promotional programs.
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Each dealer agreement designates a specific geographical territory for the dealer, which is exclusive to the dealer provided that the dealer is able to meet the material obligations of its dealer agreement.
On December 5, 2017, Brunswick issued a press release announcing that it intends to sell Sea Ray. As of the filing on December 6, 2017 of this Annual Report on Form 10-K, weWe are unsure as to whether such a sale will occur or if it occurs, such a sale’s impact (positive or negative) on us.
In March 2006, we became the exclusive dealer for Azimut-Benetti Group’s Azimut product line for the Northeast United States. Our geographic territory was expanded to include Florida in September 2008 and to the entire United States in July 2012. The Azimut dealer agreement provides a geographic territory to promote the product line and to network with the appropriate clientele through various independent locations designated for Azimut retail sales. Our dealer agreement is a multi-year term but requires us to be in compliance with its terms and conditions.
As is typical in the industry, we generally deal with manufacturers, other than Sea Ray, and Boston Whaler, (both divisions of Brunswick) and Azimut, under renewable annual dealer agreements. These agreements do not contain any contractual provisions concerning product pricing or required
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purchasing levels. Pricing is generally established on a model year basis, but is subject to change in the manufacturer’s sole discretion. Any change or termination of these arrangements for any reason could adversely affect product availability and cost and our financial performance.
Boat manufacturers exercise substantial control over our business.
We depend on our dealer agreements. Through these dealer agreements, boat manufacturers including(particularly Brunswick and Azimut,Azimut) exercise significant control over their dealers, restrict them to specified locations, and retain approval rights over changes in management and ownership, among other things. The continuation of our dealer agreements with most manufacturers, including Brunswick and Azimut, depends upon, among other things, our achieving stated goals for customer satisfaction ratings and market share penetration in the market served by the applicable dealership. Failure to meet the customer satisfaction, market share goals, and other conditions set forth in any dealer agreement could have various consequences, including the following:
the termination of the dealer agreement;
the imposition of additional conditions in subsequent dealer agreements;
limitations on boat inventory allocations;
reductions in reimbursement rates for warranty work performed by the dealer;
loss of certain manufacturer to dealer incentives;
denial of approval of future acquisitions; or
the loss of exclusive rights to sell in the geographic territory.
These events could have a material adverse effect on our competitive position and financial performance.
Our business, as well as the entire recreational boating industry, is highly seasonal, with seasonality varying in different geographic markets.
Over the three-year period ended September 30, 2022, the average revenue for the quarterly periods ended December 31, March 31, June 30 and September 30 represented approximately 20%, 24%, 32%, and 24%, respectively, of our average annual revenue. With the exception of Florida, we generally realize significantly lower sales and 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 typically stimulates boat sales and allows us to reduce our inventory levels and related short-term borrowings throughout the remainder of the fiscal year. Our business could become substantially more seasonal if we acquire dealers that operate in colder regions of the United States, which are generally closed or experience lower volume in the winter months.
The failure to receive rebates and other dealer incentives (interest assistance and co-op assistance) on inventory purchases or retail sales could substantially reduce our margins.
We rely on manufacturers’ programs that provide incentives for dealers to purchase and sell particular boat makes and models or for consumers to buy particular boat makes or models. Any eliminations, reductions, limitations, or other changes relating to rebate or incentive programs that have the effect of reducing the benefits we receive, whether relating to the ability of manufacturers to pay or our ability to qualify for such incentive programs, could increase the effective cost of our boat purchases, reduce our margins and competitive position, and have a material adverse effect on our financial performance.
Fuel prices and supply may affect our business.
All of the recreational boats we sell are powered by diesel or gasoline engines. Consequently, an interruption in the supply, or a significant increase in the price or tax on the sale of fuel on a regional or national basis could have a material adverse effect on our sales and operating results. Increases in fuel prices (such as those that occurred during fiscal 2008) negatively impact boat sales. At various times in the past, diesel or gasoline fuel has been difficult to obtain. The supply of fuels may be interrupted, rationing may be imposed, or the price of or tax on fuels may significantly increase in the future, adversely impacting our business.
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Our sales may be adversely impacted by a material increase in interest rates and adverse changes in fiscal policy or credit market conditions.
Over the past several years, our economy has been positively impacted by historically unprecedented low interest rates. Such interest rates, driven by the policies of the Federal Reserve, are a political issue in the United States. The Federal Reserve continues to be ambiguous concerning the interest rate issues. The Federal Reserve has increased its benchmark interest rate this year and signaled that rates could continue to rise more quickly than previously expected. While it is unclear whether these actions suggest a change in previous monetary policy positions, including but not limited to an elimination of quantitative easing over time, any such change or market expectation of such change may result in significantly higher long-term interest rates.
Given that we sell products that are often financed, a material increase in interest rates and adverse changes in fiscal policy or credit market conditions, may negatively impact our customers’ willingness or desire to purchase our products. In addition, such an increase or adverse change could reduce the availability and/or increase the costs of obtaining new debt and refinancing existing indebtedness or negatively impact the market price of our common stock.
Our sales may be adversely impacted by periods of economic or political instability or uncertainty.
In times of political and economic uncertainty, consumers including high net worth individuals, may elect to defer expenditures for luxury items, which can adversely affect our financial performance. Consumer spending on luxury goods also may decline as a result of political uncertainty and instability, even if prevailing economic conditions are favorable. We cannot predict the timing of periods of political or economic uncertainty or recovery.
The availability of boat insurance is critical to our success.
The ability of our customers to secure reasonably affordable boat insurance that is satisfactory to lenders that finance our customers’ purchases is critical to our success. Historically, affordable boat insurance has been available. In addition, as a severe storm approaches land, insurance providers cease underwriting until the storm has passed. This loss of insurance prevents lenders from lending. As a result, sales of boats can be temporarily halted making our revenue difficult to predict and causing sales to be delayed or potentially cancelled. Any difficulty of customers to obtain affordable boat insurance could impede boat sales and adversely affect our business.
Other recreational activities, poor industry perception, and potential health risks from environmental conditions can adversely affect the levels of boat purchases.
Other recreational activities, poor industry perception, real or perceived health risks, and environmental conditions can adversely affect the levels of boat purchases. Demand for our products can be adversely affected by competition from other activities that occupy consumers’ time, including other forms of recreation as well as religious, cultural and community activities. In addition, real or perceived health risks from engaging in outdoor activities and local environmental conditions in the areas in which we operate dealerships could adversely affect the levels of boat purchases. Further, as a seller of high-end consumer products, we must compete for discretionary spending with a wide variety of other recreational activities and consumer purchases. In addition, perceived hassles of boat ownership and customer service and lack of customer education throughout the retail boat industry, which has traditionally been perceived to be relatively poor, represent impediments to boat purchases.
Adverse federal tax policiesWe face intense competition.
We operate in a highly competitive environment. In addition to facing competition generally from recreation businesses seeking to attract consumers’ leisure time and discretionary spending dollars, the recreational boat industry itself is highly fragmented, resulting in intense competition for customers, quality products, boat show space, and suitable retail locations. We rely to a certain extent on boat shows to generate sales.
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We compete primarily with single-location boat dealers and, with respect to sales of marine parts, accessories, and equipment, with national specialty marine parts and accessories stores, online catalog retailers, sporting goods stores, and mass merchants. Competition among boat dealers is based on the quality of available products, the price and value of the products, and attention to customer service. There is significant competition both within markets we currently serve and in new markets that we may enter. We compete in each of our markets with retailers of brands of boats and engines we do not sell in that market. In addition, several of our competitors, especially those selling marine equipment and accessories, are large national or regional chains that have substantial financial, marketing and other resources. Private sales of used boats represent an additional source of competition.
Due to various matters, including environmental concerns, permitting and zoning requirements, and competition for waterfront real estate, some markets in the United States have experienced an increased waiting list for marina and storage availability. In general, the markets in which we currently operate are not experiencing any unusual difficulties. However, marine retail activity could be adversely affected in markets that do not have sufficient marine and storage availability to satisfy demand.
Timing of large boat and yacht sales and failure to adequately anticipate consumer preference and demand may have an adverse impact on our business.
Forecasting optimal inventory levels is difficult to predict based on, among other things, changes in economic conditions, consumer preferences, delivery of new models from manufacturers, and timing of large boat and yacht sales. Failure to adequately anticipate consumer demand and preferences could negatively impact our inventory management strategies, inventory carrying costs, and our operating margins.
Economic conditions and consumer spending patterns can have a negativematerial adverse effect on us.our business, financial condition, and results of operations.
ChangesGeneral 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 federalthe markets we serve and state tax laws,adversely affect our business. Economic conditions in areas in which we operate dealerships, such as corporate downsizing, military base closings, and inclement weather such as hurricanes or other storms, environmental conditions, and specific events, such as the BP oil spill in the Gulf of Mexico in 2010, or Hurricane Ian in 2022, also could adversely affect, and in certain instances have adversely affected, our operations in certain markets.
In an impositioneconomic downturn, consumer discretionary spending levels generally decline, at times resulting in disproportionately large reductions in the sale of luxury taxesgoods. 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 could impact us more than certain of our competitors due to our strategic focus on a higher end of our market.
Unfavorable economic conditions can cause us to reduce our acquisition program, delay new boatstore openings, reduce our inventory purchases, engage in inventory reduction efforts, close a number of our retail locations, reduce our headcount, and amend and replace our credit facility, and could also interfere with our supply of certain brands by manufacturers, reduce marketing and other support by manufacturers, decrease revenue, put additional pressures on margins, and result in our failure to satisfy covenants under our credit agreement.
More recently, inflation has increased in the United States and throughout the world. This has affected the prices manufacturers charge us, as well as the prices that we charge our customers. To the extent such inflation continues, increases, or both, it may reduce our margins and have a material adverse effect on our financial performance.
Our sales have been, and may further be adversely impacted by recent increases, and likely future increases, in prevailing taxinterest rates and removaladverse changes in fiscal policy or credit market conditions.
Fiscal and monetary policy have had a material adverse impact on worldwide economic conditions, the financial markets, and availability of certaincredit and, consequently, have negatively affected, and may further negatively affect, our industries, businesses, and overall financial condition. Recent changes by the Federal Reserve to raise its benchmark interest deductions, also influence consumers’ decisionsrate has resulted in significantly higher long-term interest rates, which has negatively impacted, and may further negatively impact, our customers’ willingness or desire to purchase products we offerour products. While credit availability is currently adequate to support demand, if credit conditions worsen and adversely affect the ability of customers to finance potential purchases at acceptable terms and interest rates, it could result in a decrease in sales and materially impact our financial condition or results of operations.
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Risks Related to Our Strategies
Failure to implement strategies to enhance our performance or our strategies could have a negativematerial adverse effect on our sales. For example, during 1991business and 1992,financial condition.
We are increasing our efforts to grow our financing and insurance, parts and accessories, service, yacht charter, brokerage, and boat storage businesses to better serve our customers and thereby increase revenue and improve profitability as a result of these higher margin businesses. In addition, we have implemented programs to increase the federal government imposedlead capture and digital sales of used boats, parts, accessories, and a luxury taxwide range of boating supplies and products. These efforts and programs are designed to increase our revenue and reduce our dependence on the sale of new boats. We are also pursuing certain acquisitions as discussed in the immediately following Risk Factors. These business initiatives have required, and will continue to require, us to add personnel, invest capital, enter businesses in which we do not have extensive experience, and encounter substantial competition. As a result, our strategies to enhance our performance may not be successful and we may increase our expenses or write off such investments if not successful.
Our success depends, in part, on our ability to continue to make successful acquisitions at attractive or fair prices and to integrate the operations of acquired dealers and each dealer we acquire in the future.
Since March 1, 1998, we have acquired 32 additional previously independent recreational boatsboat dealers, multiple marinas, five boat brokerage operations, two superyacht service companies, two full-service yacht repair operations, and two boat and yacht manufacturers. Each acquired dealer and entity operated independently prior to its acquisition by us. Our success depends, in part, on our ability to continue to make successful acquisitions at attractive or fair prices that align with salesour culture and focus on customer service and to integrate the operations of acquired dealers, including centralizing certain functions to achieve cost savings and pursuing programs and processes that promote cooperation and the sharing of opportunities and resources among our dealerships. We may not be able to oversee the combined entity efficiently, realize anticipated synergies, or implement effectively our growth and operating strategies. To the extent that we successfully pursue our acquisition strategy, our resulting growth will place significant additional demands on our management and infrastructure. Our failure to pursue successfully our acquisition strategies or operate effectively the combined entity could have a material adverse effect on our rate of growth and operating performance.
We may pursue acquisition strategies in new lines of business.
We have historically pursued strategic acquisitions to capitalize upon the consolidation opportunities in the highly fragmented recreational boat dealer industry by acquiring additional dealers and related operations and improving their performance and profitability through the implementation of our operating strategies. We have also recently pursued, and may continue to pursue, potential contract manufacturing, vertical integration strategies, yacht charter and brokerage, marinas, boat storage, or other acquisitions as opportunities arise. To the extent we are successful in pursuing one or more of these strategies, we will face certain risks in addition to those that exist with acquisitions more closely related to our historical business, including potential inexperience in a line of business that is either new to us or that has become materially more significant to us as a result of a transaction, the potential difficulty of presenting a unified corporate image, greater uncertainties in the financial benefits and potential liabilities associated with this expanded base of acquisitions, different types of legal and operational risks, and different types of applicable financial metrics and goals. Our failure to pursue successfully our acquisition strategies in new lines of business, operate effectively the combined entity, and/or mitigate any potential new risks, could have a material adverse effect on our rate of growth and operating performance.
Unforeseen expenses, difficulties, and delays frequently encountered in connection with expansion through acquisitions could inhibit our growth and negatively impact our profitability.
The acquisition of additional recreational boat dealers, boat storage facilities, yacht brokerage operations, and marinas, which is one of our growth strategies, and vertical integration strategies, all involve significant risks. This strategy entails reviewing and potentially reorganizing acquired business operations, corporate infrastructure and systems, and financial controls. Unforeseen expenses, difficulties and delays frequently encountered in connection with expansion through acquisitions could inhibit our growth and negatively impact our profitability. We may be unable to identify suitable acquisition candidates or to complete the acquisitions of candidates that we identify. Increased competition for acquisition candidates or increased asking prices by acquisition candidates may increase purchase prices for acquisitions to levels beyond our financial capability or to levels that would not result in excessexpected returns required by our acquisition criteria to be in the best interest of $100,000, which coincidedshareholders. Acquisitions also may become more difficult or less attractive in the future as we acquire more of the most attractive dealers that best align with our culture and focus on customer service. In addition, we may encounter difficulties in integrating the operations of acquired dealers with our own operations, difficulties in retaining employees, potential risks of losing customers, suppliers, or other business relationships, and difficulties in managing acquired dealers profitably without substantial costs, delays, or other operational or financial problems.
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Our ability to continue to grow through acquisitions depends upon various factors, including the following:
If we finance future acquisitions in whole or in part through the issuance of common stock or securities convertible into or exercisable for common stock, existing shareholders will experience dilution in the voting power of their common stock and earnings per share could be negatively impacted. Any borrowings made to finance future acquisitions or for operations could make us more than $17.9 billion in 1988vulnerable to a lowdownturn in our operating results, a downturn in economic conditions, or increases in interest rates on borrowings that are subject to interest rate fluctuations.
We may be required to obtain the consent of $10.3 billionBrunswick and various other manufacturers prior to the acquisition of other dealers.
In determining whether to approve acquisitions, manufacturers may consider many factors, including our financial condition and ownership structure. Manufacturers also may impose conditions on granting their approvals for acquisitions, including a limitation on the number of their dealers that we may acquire. Our ability to meet manufacturers’ requirements for approving future acquisitions will have a direct bearing on our ability to complete acquisitions and effect our growth strategy. There can be no assurance that a manufacturer will not terminate its dealer agreement, refuse to renew its dealer agreement, refuse to approve future acquisitions, or take other action that could have a material adverse effect on our acquisition program.
Our internal growth and operating strategies of opening new locations and offering new products involve risk.
In addition to pursuing growth by acquiring boat dealers, we intend to continue to pursue a strategy of growth through opening new retail locations and offering new products in 1992. Any increaseour existing and new territories. This strategy may entail obtaining additional distribution rights from our existing and new manufacturers. We may not be able to secure additional distribution rights or obtain suitable alternative sources of supply if we are unable to obtain such distribution rights. The inability to expand our product lines and geographic scope by obtaining additional distribution rights could have a material adverse effect on the growth and profitability of our business.
Accomplishing these goals for expansion will depend upon a number of factors, including the following:
Our dealer agreements with Brunswick require Brunswick’s consent to open, close, or change retail locations that sell Sea Ray or Boston Whaler products as applicable, and other dealer agreements generally contain similar provisions. We may not be able to open and operate new retail locations or introduce new product lines on capital gains and dividends, particularly those on high-income taxpayers, coulda timely or profitable basis. Moreover, the costs associated with opening new retail locations or introducing new product lines may adversely affect our boat sales.profitability.
As a result of these growth strategies, we expect to continue to expend significant time and effort in opening and acquiring new retail locations, improving existing retail locations in our current markets, and introducing new products. Our systems, procedures, controls, financial resources, and management and staffing levels may not be adequate to support expanding operations. The inability to manage our growth effectively could have a material adverse effect on our business, financial condition, and results of operations.
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In addition to our traditional repeat and referral business in our physical locations, digital channels are increasingly significant in serving our existing customer base and reaching new customers. Our continued expansion and success will be negatively impacted if we are not able to fully exploit these channels.
Our digital channels are subject to a number of risks and uncertainties that are beyond our control, including the following:
changes in technology;
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changes in consumer willingness to conduct business electronically, including increasing concerns with consumer privacy and risk and changing laws, rules, and regulations, such as the imposition of or increase in taxes;
changes in applicable international, federal, state and commercial regulation, such as the Federal Trade Commission Act, the Fair Credit Reporting Act, the Gramm-Leach-Bliley Act, purchasing card industry requirements, Office of Foreign Assets Control regulations and similar types of international laws;
failure of our service providers, suppliers or service partners to perform their services properly and in a timely and efficient manner;
failures in our infrastructure or by third parties, such as telephone or electric power service, resulting in website or application downtime or other problems;
failure to adequately respond to customers, process orders or deliver services, which may negatively impact both future digital and/or in-store purchases by such customers;
inability of our suppliers or service partners to fulfill customer orders, which may negatively impact customer satisfaction;
our failure to assess and evaluate our digital product and service offerings to ensure that our products and services are desired by boating enthusiasts; and
the potential exposure to liability with respect to third-party information, including but not limited to copyright, trademark infringement, or other wrongful acts of third parties; false or erroneous information provided by third parties; or illegal activities by third parties, such as the sale of stolen boats or other goods.
Further, we may also be vulnerable to competitive pressures from the growing electronic commerce activity in our market, both as they may impact our own on-line business, and as they may impact the operating results and investment values of our existing physical locations.
Various operations in multiple countries around the world expose us to international political, economic, foreign currency, and other risks.
Our operations involve certain international activities, including our sales of yachts produced by the Azimut-Benetti Group in Italy, yachts produced by Galeon in Poland, and power catamarans for our charter fleet produced by Sino Eagle in China, as well as our Fraser Yachts Group and Northrop & Johnson operations. These activities in multiple countries around the world expose us to international political, economic, foreign currency, and other risks. Some of our sales and purchases of inventory are denominated in a currency other than the U.S. dollar. Consequently, a strong or weak U.S. dollar may adversely affect reported revenues and our profitability. We may hedge certain foreign currency exposures to lessen and delay, but not to completely eliminate, the effects of foreign currency fluctuations on our financial results. Our future financial results could be significantly affected by the value of the U.S. dollar in relation to the foreign currencies in which we conduct business. The degree to which our financial results are affected for any given time period will depend in part upon the success and extent of our hedging activities.
Furthermore, the geopolitical and economic uncertainty and/or instability that may result from changes in the relationship among the United States, Taiwan and China, may, directly or indirectly, materially harm our business, financial condition and financial performance. For example, certain of our suppliers are dependent on products sourced from Taiwan. Greater restrictions and/or disruptions of our suppliers’ ability to operate facilities and/or do business in and with Taiwan may increase the cost of certain materials and/or limit the supply of products sourced from Taiwan. This may result in deterioration of our profit margins, a potential need to increase our pricing and, in so doing, may decrease demand for our products and thereby adversely impact our financial performance.
Additionally, protectionist trade legislation in the United States, the European Union, Poland, or China, such as a change in current tariff structures, export or import compliance laws, or other trade policies could adversely affect our ability to import yachts from these foreign suppliers under economically favorable terms and conditions. There have been recent changes and additional changes may occur in the future, to United States and foreign trade and tax policies, including heightened import restrictions, import and export licenses, new tariffs, trade embargoes, government sanctions, and trade barriers. Any of these restrictions could prevent or make it difficult or more costly for us to import yachts from foreign suppliers under economically favorable terms and conditions. Increased tariffs could require us to increase our prices which likely could decrease demand for our products. In addition, other countries may limit their trade with the United States or retaliate through their own restrictions and/or increased tariffs which would affect our ability to export products and therefore adversely affect our sales. Many of these challenges, particularly tariffs, are present in commerce with China, a market from which we purchase products. While such tariffs may be delayed or cancelled before coming into effect and we believe we have taken steps to mitigate their potential effects, such tariffs would likely increase our costs for our Chinese suppliers.
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Our international operations create a number of logistical and communications challenges. The economic, political and other risks we face resulting from these operations include the following:
The intended benefits of the IGY Marinas acquisition may not be realized.
The IGY Marinas acquisition poses risks for our ongoing operations, including, among others:
As a result of the foregoing, we cannot assure you that the IGY Marinas acquisition will be accretive to us in the near term or at all. Furthermore, if we fail to realize the intended benefits of the IGY Marinas acquisition, the market price of our common stock could decline to the extent that the market price reflects those benefits.
The Ukraine crisis could have a significant adverse effect on our business, results of operations, financial condition, and cash flow in the future.
The Ukraine crisis raises a host of potential threats and risk factors to consider even though we do not conduct significant business directly in Ukraine or Russia. Sanctions brought against Russia will impact the import, export, sale, and supply of goods and services with companies located in the U.S. and other regions. Many companies have ceased all operations in Russia with significant expected short-term and long-term losses. This has had, will likely continue to have, a negative impact on the global economy and has affected, and will likely continue to affect, economic and capital markets. A downturn in the economy could adversely affect our financial performance.
The ongoing conflict between Russia and Ukraine has impacted global energy markets, particularly in Europe, leading to high volatility and increasing prices for crude oil, natural gas and other energy supplies. Higher energy costs result in increases in operating expenses at our manufacturing facilities, in the expense of shipping raw materials to our facilities, and in the expense of shipping products to our customers. In addition, increases in energy costs may adversely affect the pricing and availability of petroleum-based raw materials, such as resins and foams that are used in manufacturing.
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Risks Related to Our Operations
The availability and costs of borrowed funds can adversely affect our ability to obtain adequate boat inventory and the ability and willingness of our customers to finance boat purchases.
The availability and costs of borrowed funds can adversely affect our ability to obtain and maintain adequate boat inventory and the holding costs of that inventory as well as the ability and willingness of our customers to finance boat purchases. We rely on the New Credit Agreement to purchase and maintain our inventory of boats. The New Credit Agreement provides the Company a line of credit with asset based borrowing availability of up to $750 million and establishes a revolving credit facility in the maximum amount of $100 million, a delayed draw term loan facility to finance the acquisition of IGY Marinas in the maximum amount of $400 million, and a $100 million delayed draw mortgage loan facility. None of our real estate has been pledged for collateral for the New Credit Agreement. As of September 30, 2022, we were in compliance with all of the covenants under the New Credit Agreement and our additional available borrowings under the New Credit Agreement was approximately $65.8 million based upon the outstanding borrowing base availability.
Our ability to borrow under the New Credit Agreement depends on our ability to continue to satisfy our covenants and other obligations under the New Credit Agreement and the ability for our manufacturers to be approved vendors under our New Credit Agreement. The variable interest rate under our New Credit Agreement will fluctuate with changing market conditions and, accordingly, our interest expense will increase as interest rates rise. A significant increase in interest rates could have a material adverse effect on our operating results. The aging of our inventory limits our borrowing capacity as defined provisions in the New Credit Agreement reduce the allowable advance rate as our inventory ages. Depressed economic conditions, weak consumer spending, turmoil in the credit markets, and lender difficulties, among other potential reasons, could interfere with our ability to maintain compliance with our debt covenants and to utilize the New Credit Agreement to fund our operations. Any inability to utilize the New Credit Agreement or the acceleration of amounts owed, resulting from a covenant violation, insufficient collateral, or lender difficulties, could require us to seek other sources of funding to repay amounts outstanding under the New Credit Agreement or replace or supplement the New Credit Agreement, 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.
Higher energy, costs and availability of raw materials, parts, components, and fuel costs along with adequate supply may adversely affect our business.
All of the recreational boats we sell are powered by diesel or gasoline engines. Consequently, an interruption in the supply, or a significant increase in the price or tax on the sale of fuel on a regional or national basis could have a material adverse effect on our sales and operating results. Increases in fuel prices negatively impact boat sales. The supply of fuels may be interrupted, rationing may be imposed, or the price of or tax on fuels may significantly increase in the future, adversely impacting our business. Also, increases in energy costs can adversely affect the pricing and availability of petroleum-based raw materials such as resins and foam that are used in many of the marine products produced by boat manufacturers, including Cruisers Yachts and Intrepid Powerboats, increasing our cost of inventory. Additionally, higher fuel prices may also have an adverse effect on demand for our parts and accessories business because higher fuel prices increase the cost of boat ownership and possibly affect product use.
Boat manufacturers, including Cruisers Yachts and Intrepid Powerboats, rely on third parties to supply raw materials used in the manufacturing process, including oil, aluminum, copper, steel, and resins, as well as product parts and components. The prices for these raw materials, parts, and components fluctuate depending on market conditions and, in some instances, commodity prices or trade policies, including tariffs. Substantial increases in the prices of raw materials, parts, and components would increase our product and operating costs, and could reduce our profitability if we are unable to recoup the increased costs through higher product prices or improved operating efficiencies. Similarly, if a critical supplier were to close its operations, cease manufacturing, or otherwise fail to deliver an essential component necessary to our manufacturing operations, that could detrimentally affect our ability to purchase or manufacture and sell products, resulting in an interruption in business operations and/or a loss of sales.
In addition, some components used in the boat manufacturing processes, including certain engine components, furniture, upholstery, and boat windshields, are available from a sole supplier or a limited number of suppliers. Operational and financial difficulties that these or other suppliers may face in the future could adversely affect their ability to supply us with the parts and components we and our boat manufacturers need, which could significantly disrupt our operations. It may be difficult to find a replacement supplier for a limited or sole source raw material, part, or component without significant delay or on commercially reasonable terms. In addition, an uncorrected defect or supplier's variation in a raw material, part, or component, either unknown to us or incompatible with our manufacturing process, could jeopardize our ability to manufacture products.
Some additional supply risks that could disrupt our operations, impair our ability to deliver products to customers, and negatively affect our financial results include:
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These risks are exacerbated in the case of single-source suppliers, and the exclusive supplier of a key component could potentially exert significant bargaining power over price, quality, warranty claims, or other terms.
Substantially all of our products are powered with outboard engines from Mercury Marine, Yamaha, and inboard engines from Volvo, which makes us reliant on these companies for the supply of engines.
The availability and cost of engines for our boats and yachts is critical. If we are required to replace Mercury Marine, Yamaha, or Volvo as our engine suppliers for any reason, it could cause a decrease in products available for sale or an increase in our cost of sales, either of which could adversely affect our business, financial condition and results of operations. If we experience an interruption to our engine supply, then this could cause a decrease in products available for sale or an increase in our cost of sales, either of which could adversely affect our business, financial condition and results of operations.
The availability of boat insurance is critical to our success.
The ability of our customers to secure reasonably affordable boat insurance that is satisfactory to lenders that finance our customers’ purchases is critical to our success. Any difficulty of customers to obtain affordable boat insurance could impede boat sales and adversely affect our business.
Elements of our yacht charter businessand charter brokerage businesses expose us to certain risks.
Our yacht charter business entails the sale of specifically designed yachts to third parties for inclusion in our yacht charter fleet; a yacht management agreement under which yacht owners enable us to put their yachts in our yacht charter program for a period of four to fiveseveral years for a fixed monthly fee payable by us; our services in storing, insuring, and maintaining their yachts; and the charter by us of these yachts to vacation customers at agreed fees payable to us. Our failure to find purchasers for yachts intended for our charter fleet will increase our boat inventory and related operating costs; lack of sales into our charter fleet may result in increased losses due to market adjustments of our yacht charter inventory; and our failure to generate a sufficient number of vacation charter customers will require us to absorb all the costs of the monthly fees to the yacht owners as well as other operating costs.
Customers consider safety and reliability a primary concern in selecting a yacht charter provider. The yacht charter business may present a number of safety risks including, but not limited to, catastrophic disaster, adverse weather and marine conditions, such as Hurricane Ian in 2022, mechanical failure and collision.collision, and health issues such as the COVID-19 pandemic. If we are unable to maintain acceptable records for safety and reliability, our ability to retain current customers and attract new customers may be adversely affected. Additionally, any safety issue encountered during a yacht charter may result in claims against us as well as negative publicity. These events could have a material adverse effect on the competitive position and financial performance of both our yacht charter business and our core retail sales business.
The yacht charter business is also highly fragmented, consisting primarily of local operators and franchisees. Competition among charter operators is based on location, the type and size of yachts offered, charter rates, destinations serviced, and attention to customer service. Yacht charters also face competition from other travel and leisure options, including, but not limited to, cruises, hotels, resorts, theme parks, organized tours, land-based casino operators, and vacation ownership properties. We therefore risk losing business not only to other charter operators, but also to vacation operators that provide such alternatives.
Our success depends,We depend on income from financing, insurance and extended service contracts.
A portion of our income results from referral fees derived from the placement or marketing of various finance and insurance products, consisting of customer financing, insurance products, and extended service contracts, the most significant component of which is the participation and other fees resulting from our sale of customer financing contracts.
The availability of financing for our boat purchasers and the level of participation and other fees we receive in part,connection with such financing depend on the particular agreement between us and the lender and the current rate environment. Lenders may impose terms in their boat financing arrangements with us that may be unfavorable to us or our customers. Laws or regulations may be enacted
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nationally or locally which could result in fees from lenders being eliminated or reduced, materially impacting our operating results. If customer financing becomes more difficult to secure, it may adversely impact our business.
Changes, including the lengthening of manufacturer warranties, may reduce our ability to offer and sell extended service contracts which may have a material adverse impact on our ability to continue to make successful acquisitions and to integratesell F&I products.
The reduction of profit margins on sales of F&I products or the operationslack of acquired dealers and each dealer we acquire indemand for or the future.
Since March 1, 1998, we have acquired 27 recreational boat dealers, two boat brokerage operations, and two full-service yacht repair facilities. Each acquired dealer operated independently prior to its acquisition by us. Our success depends, in part, on our ability to continue to make successful acquisitions and to integrate the operationsunavailability of acquired dealers, including centralizing certain functions to achieve cost savings and pursuing programs and processes that promote cooperation and the sharing of opportunities and resources among our dealerships. We may not be able to oversee the combined entity efficiently or to implement effectively our growth and operating strategies. To the extent that we successfully pursue our acquisition strategy, our resulting growth will place
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significant additional demands on our management and infrastructure. Our failure to pursue successfully our acquisition strategies or operate effectively the combined entitythese products could have a material adverse effect on our rateoperating margins.
Our continued success is dependent on positive perceptions of growth and operating performance.
Unforeseen expenses, difficulties, and delays frequently encountered in connection with expansion through acquisitions could inhibit our growth and negatively impact our profitability.
Our growth strategy of acquiring additional recreational boat dealers involves significant risks. This strategy entails reviewing and potentially reorganizing acquired business operations, corporate infrastructure and systems, and financial controls. Unforeseen expenses, difficulties, and delays frequently encountered in connection with rapid expansion through acquisitions could inhibit our growth and negatively impact our profitability. We may be unable to identify suitable acquisition candidates or to complete the acquisitions of candidates that we identify. Increased competition for acquisition candidates or increased asking prices by acquisition candidates may increase purchase prices for acquisitions to levels beyond our financial capability or to levels that would not result in the returns required by our acquisition criteria. Acquisitions also may become more difficult or less attractive in the future as we acquire more of the most attractive dealers. In addition, we may encounter difficulties in integrating the operations of acquired dealers with our own operations, difficulties in retaining employees, create potential risks of losing customers, suppliers, or other business relationships, and encounter difficulties managing acquired dealers profitably without substantial costs, delays, or other operational or financial problems.
We may issue common or preferred stock and incur substantial indebtedness in making future acquisitions. The size, timing, and integration of any future acquisitions may cause substantial fluctuations in operating results from quarter to quarter. Consequently, operating results for any quarter may not be indicative of the results that may be achieved for any subsequent quarter or for a full fiscal year. These fluctuationsMarineMax brand which, if impaired, could adversely affect our sales.
We believe that our MarineMax brand is one of the market pricereasons our customers choose to come to us for their boating needs. To be successful, we must preserve our reputation. Reputational value is based in large part on perceptions, and broad access to social media makes it easy for anyone to provide public feedback that can influence perceptions of us. It may be difficult to control negative publicity, regardless of whether it is accurate. While reputations may take decades to build, any negative incidents can quickly erode trust and confidence, particularly if they result in significant negative mainstream and/or social media publicity, governmental investigations, or litigation. Additionally, an isolated business incident at a single retail location could materially adversely affect our other stores, retail brands, reputation and sales channels, particularly if such incident results in significant adverse publicity, governmental investigations or litigation. Negative incidents, such as quality and safety concerns or incidents related to our manufacturers’ products, could lead to tangible adverse effects on our business, including lost sales or team member retention and recruiting difficulties. In addition, vendors and others with whom we choose to do business may affect our reputation.
Our operations are dependent upon key personnel and team members.
Our success depends, in large part, upon our ability to attract, train and retain, qualified team members and executive officers, as well as the continuing efforts and abilities of team members and executive officers. Although we have employment agreements with certain of our common stock.
Our ability to continue to grow through the acquisition of additional dealers will depend upon various factors, including the following:
the availability of suitable acquisition candidates at attractive purchase prices;
the ability to compete effectively for available acquisition opportunities;
the availability of cash on hand, borrowed funds or common stock with a sufficient market price to complete the acquisitions;
the ability to obtain any requisite manufacturer or governmental approvals;
the ability to obtain approval of our lenders under our current credit agreement;executive officers and
the absence of one or more manufacturers attempting to impose unsatisfactory restrictions on us in connection with their approval of acquisitions.
As a part of our acquisition strategy, we frequently engage in discussions with various recreational boat dealers regarding their potential acquisition by us. In connection with these discussions, we and each potential acquisition candidate exchange confidential operational and financial information, conduct due diligence inquiries, and consider the structure, terms, and conditions of the potential acquisition. In certain cases, the prospective acquisition candidate agrees not to discuss a potential acquisition with any other party for a specific period of time, grants us an option to purchase the prospective dealer for a designated price during a specific time period, and agrees to take other actions designed to enhance the possibility of the acquisition, such as preparing audited financial information and converting its accounting system to the system specified 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 plans, we cannot ensure that these or other executive personnel and related matters.team members will remain with us, or that our succession planning will adequately mitigate the risk associated with key personnel transitions. As a result of theseour decentralized operating strategy, we also rely on the management teams of our businesses. In addition, we likely will depend on the senior management of any significant businesses we acquire in the future.
The products we sell, or services we provide, may expose us to potential liabilities for personal injury or property damage claims relating to the use of those products.
Manufacturers of the products we sell generally maintain product liability insurance. We also maintain third-party product liability insurance that we believe to be adequate. We may experience claims that are not covered by, or that are in excess of, our insurance coverage. The institution of any significant claims against us could subject us to damages, result in higher insurance costs, and harm our business reputation with potential customers.
We manufacture and sell products that create exposure to potential claims and litigation.
Our manufacturing operations and the products we produce could result in product quality, warranty, personal injury, property damage, and other factors,issues, thereby increasing the risk of litigation and potential liability, as well as regulatory fines. Historically, the resolution of such claims has not had a numbermaterially adverse effect on our business, and we maintain what we believe to be adequate insurance coverage to mitigate a portion of potential acquisitionsthese risks. However, we may experience material losses in the future, incur significant costs to defend claims or issue product recalls, experience claims in excess of our insurance coverage or that from time to time appear likely to occur do not result in binding legal agreements and are not consummated.
Wecovered by insurance, or be subjected to fines or penalties. Our reputation may be required to obtainadversely affected by such claims, whether or not successful, including potential negative publicity about our products. We record accruals for known potential liabilities, but there is the consent of Brunswickpossibility that actual losses may exceed these accruals and various other manufacturers prior to the acquisition of other dealers.therefore negatively impact earnings.
In determining whether to approve acquisitions, manufacturers may consider many factors, including our financial condition and ownership structure. Manufacturers also may impose conditions on granting their approvals for acquisitions, including a limitation on the number of their dealers that we may acquire. Our ability to meet manufacturers’ requirements for approving future acquisitions willWe have a direct bearingfixed cost base that can affect our profitability if demand decreases.
The fixed cost levels of operating a boat and yacht manufacturer can put pressure on profit margins when sales and production decline. Our profitability depends, in part, on our ability to complete acquisitionsspread fixed costs over a sufficiently large number of products sold and shipped, and if we make a decision to reduce our rate of production, gross or net margins could be negatively affected. Consequently, decreased demand or the need to reduce production can lower our ability to absorb fixed costs and materially impact our financial condition or results of operations.
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Adverse federal or state tax policies can have a negative effect on us.
Changes in federal and state tax laws, such as an imposition of luxury taxes on new boat purchases, increases in prevailing federal or state tax rates, and removal of certain interest deductions, also influence consumers’ decisions to purchase products we offer and could have a negative effect on our growth strategy. There cansales. For example, during 1991 and 1992, the federal government imposed a luxury tax on new recreational boats with sales prices in excess of $100,000, which coincided with a sharp decline in boating industry sales from a high of more than $17.9 billion in 1988 to a low of $10.3 billion in 1992.
In addition, increases in the United States corporate income tax rates (as currently being contemplated by the legislative and federal branches) would have an adverse effect on our financial performance and financial condition. Further, related increases in capital gains rates, personal income tax rates or both could have an adverse effect on the buying power of potential customers and therefore an adverse effect on our financial performance and financial condition.
Marinas may not be no assurancereadily adaptable to other uses.
Marinas are specific-use properties and may contain features or assets that a manufacturer willhave limited alternative uses. These properties may also have distinct operational functions that involve specific procedures and training. If the operations of any of our marinas become unprofitable due to industry competition, operational execution or otherwise, then it may not terminate its dealer agreement, refusebe feasible to renew its dealer agreement, refuse to approve future acquisitions,operate the property for another use, and the value of certain features or take other action that couldassets used at the property, or the property itself, may be impaired, this would have a material adverse effect on our acquisition program.financial performance.
We and the Sea Ray Division of Brunswick have an agreement extending through August 31, 2019, with automatic annual one-year extensions at each twelve month anniversary of the agreement, provided that our dealer agreements with the Sea Ray Division of
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Brunswick are still then in effect. The agreement provides a process for the acquisition of additional Sea Ray boat dealers that want to be acquired by us. Under the agreement, acquisitions of Sea Ray dealers will be mutually agreed upon by us and Sea Ray with reasonable efforts to be made to include a balance of Sea Ray dealers that have been successful and those that have not been. The agreement provides that Sea Ray will not unreasonably withhold its consent to any proposed acquisition of a Sea Ray dealer by us, subject to the conditions set forth in the agreement. Among other things, the agreement requires us to provide Sea Ray with a business plan for each proposed acquisition, including historical financial and five-year projected financial information regarding the acquisition candidate; marketing and advertising plans; service capabilities and managerial and staff personnel; information regarding the ability of the candidate to achieve performance standards within designated periods; and information regarding the success of our previous acquisitions of Sea Ray dealers. The agreement also contemplates Sea Ray reaching a good faith determination whether the acquisition would be in its best interest based on our dedication and focus of resources on the Sea Ray brand and Sea Ray’s consideration of any adverse effects that the approval would have on the resulting territory configuration and adjacent or other dealers’ sales and the absence of any violation of applicable laws or rights granted by Sea Ray to others.
Our growth strategy also entails expanding our product lines and geographic scope by obtaining additional distribution rights from our existing and new manufacturers. We may not be able to secure additional distribution rights or obtain suitable alternative sources of supply if we are unable to obtain, such distribution rights. The inability to expand our product linesrenew or maintain permits, licenses and geographic scope by obtaining additional distribution rights could have a material adverse effect onapprovals necessary for the growth and profitabilityoperation of our business.marinas.
Our growth strategy may require us to secure significant additional capital,Governmental bodies control much of the amount of which will depend upon the size, timing,land located beneath and structure of future acquisitions and our working capital and general corporate needs.
If we finance future acquisitions in whole or in part through the issuance of common stock or securities convertible into or exercisable for common stock, existing shareholders will experience dilution in the voting power of their common stock and earnings per share could be negatively impacted. The extent to which we will be able and willing to use our common stock for acquisitions will depend on the market valuesurrounding many of our common stockmarinas and lease such land to MarineMax and IGY Marinas under leases that typically range from five to 50 years. As a result, it is unlikely that we can obtain fee-simple title to the willingness of potential sellersland on or near these marinas. If these governmental authorities terminate, fail to accept our common stock as fullrenew, or partial consideration. Our inability to use our common stock as consideration, to generate cash from operations, or to obtain additional funding through debt or equity financingsinterpret in order to pursue our acquisition program could materially limit our growth.
Any borrowings made to finance future acquisitions or for operations could make us more vulnerable to a downturn in our operating results, a downturn in economic conditions, or increases in interest rates on borrowingsways that are subject to interest rate fluctuations. If our cash flow from operations is insufficient to meet our debt service requirements, we could be required to sell additional equity securities, refinance our obligations, or disposematerially less favorable any of assets in order to meet our debt service requirements. In addition, our credit arrangements contain financial covenantsthe permits, licenses and other restrictions with which we must comply, including limitations on the incurrenceapprovals necessary for operation of additional indebtedness. Adequate financing may not be available if and when we need it or may not be available on terms acceptable to us. The failure to obtain sufficient financing on favorable terms and conditions couldthese properties, this would have a material adverse effect on our growth prospectsfinancial performance.
Some marinas must be dredged from time to time to remove silt and our business, financial condition,mud that collect in harbor-areas in order to assure that boat traffic can safely enter the harbor. Dredging and resultsdisposing of operations.
Our internal growththe dredged material can be very costly and operating strategiesrequire permits from various governmental authorities. If the permits necessary to dredge marinas or dispose of opening new locations and offering new products involve risk.
In addition to pursuing growth by acquiring boat dealers, we intend to continue to pursue a strategy of growth through opening new retail locations and offering new products in our existing and new territories. Accomplishing these goals for expansion will depend upon a number of factors, including the following:
our ability to identify new markets in which we can obtain distribution rights to sell our existing or additional product lines;
our ability to lease or construct suitable facilities at a reasonable cost in existing or new markets;
our ability to hire, train, and retain qualified personnel;
thedredged material cannot be timely and effective integration of new retail locations into existing operations;
our ability to achieve adequate market penetration at favorable operating margins withoutobtained after the acquisition of existing dealers; and
our financial resources.
Our dealer agreements with Brunswick require Brunswick’s consent to open, close,a marina, or change retail locations that sell Sea Rayif dredging is not practical or Boston Whaler products as applicable, and other dealer agreements generally contain similar provisions. We may not be able to open and operate new retail locations or introduce new product lines on a timely or profitable basis. Moreover, the costs associated with opening new retail locations or introducing new product lines may adversely affect our profitability.
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As a result of these growth strategies, we expect to continue to expend significant time and effort in opening and acquiring new retail locations and introducing new products. Our systems, procedures, controls, and financial resources may not be adequate to support expanding operations. The inability to manage our growth effectively couldis exceedingly expensive, this would have a material adverse effect on our business, financial condition,performance.
Risks Related to the Environment and results of operations.Geography
Our planned growth also will impose significant added responsibilities on members of senior management and require us to identify, recruit, and integrate additional senior level managers. We may not be able to identify, hire, or train suitable additions to management.
Our business, as well as the entire recreational boating industry, is highly seasonal, with seasonality varying in different geographic markets.
Over the three-year period ended September 30, 2017, the average revenue for the quarterly periods ended December 31, March 31, June 30, and September 30 represented approximately 20%, 23%, 33%, and 24%, respectively, of our average annual revenue. With the exception of Florida, we generally realize significantly lower sales and 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 stimulates boat sales and allows us to reduce our inventory levels and related short-term borrowings throughout the remainder of the fiscal year. Our business could become substantially more seasonal if we acquire dealers that operate in colder regions of the United States.
Weather and environmental conditions may adversely impact our business.
Weather and environmental conditions may adversely impact our operating results. For example, drought conditions, reduced rainfall levels, excessive rain and environmental conditions, such as the BP oil spill in the Gulf of Mexico in 2010 or recentand hurricanes in the Gulf of Mexico and Atlantic Ocean, may force boating areas to close or render boating dangerous or inconvenient, thereby curtailing customer demand for our products. While we traditionally maintain a full range of insurance coverage for any such events, there can be no assurance that such insurance coverage is adequate to cover losses that we sustain as a result of such disasters. In addition, unseasonably cool weather and prolonged winter conditions may lead to shorter selling seasons in certain locations. Many of our dealerships sell boats to customers for use on reservoirs, thereby subjecting our business to the continued viability of these reservoirs for boating use. Although our geographic diversity and any future geographic expansion should reduce the overall impact on us of adverse weather and environmental conditions in any one market area, weather and environmental conditions will continue to represent potential material adverse risks to us and our future operating performance.
In addition, hurricanesDemand for wet slip storage increases during the summer months in our northern markets as customers contract for the summer boating season. Demand for dry storage increases during the winter season as seasonal weather patterns in certain geographies require boat owners to store their vessels on dry docks and other stormswithin covered racks. Our results on a quarterly basis can fluctuate due to this cyclicality and seasonality.
Additionally, to the extent unfavorable weather conditions are exacerbated by global climate change, regardless of the cause, resulting in environmental changes including, but not limited to, severe weather, changing sea levels, poor water conditions, or reduced access to water, which could disrupt or negatively affect our business.
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Environmental and climate changes could affect our business.
We operate many retail locations near or on bodies of water that are acutely susceptible to the risks associated with climate change. Such risks include those related to the physical impacts of climate change, such as more frequent and severe weather events, rising sea levels, and/or long term shifts in climate patterns, and risks related to the transition to a lower-carbon economy, such as reputational, market and/or regulatory risks. Climate change and climate events could result in social, cultural and economic disruptions in these areas, including supply chain disruptions, the disruption of local infrastructure and transportation systems that could limit the ability of our operations and/or supply chain, including boat deliveries from manufacturers, or damageteam members and our customers to access our boat inventoriesretail locations. These events could also compound adverse economic conditions and facilities as has been the case when Florida and other markets have been affected by hurricanes. While we traditionally maintain property and casualty insurance coverage for damage caused by hurricanes and other storms, there can be no assurance that such insurance coverage is adequate to cover losses that we may sustain as a result of hurricanes and other storms such as damage from Hurricane Sandy in 2012 or Hurricanes Harvey and Irma in 2017. We maintain insurance for property damage and business interruption, subject to deductibles.
We face intense competition.
We operate in a highly competitive environment. In addition to facing competition generally from recreation businesses seeking to attract consumers’ leisure timeimpact consumer confidence and discretionary spending dollars, the recreational boat industry itself is highly fragmented, resulting in intense competition for customers, quality products, boat show space, and suitable retail locations. We rely to a certain extent on boat shows to generate sales. Our inability to participate in boat shows in our existing or targeted markets could have a material adverse effect on our business, financial condition, and results of operations.spending.
We compete primarily with single-location boat dealers and, with respect to sales of marine parts, accessories, and equipment, with national specialty marine parts and accessories stores, online catalog retailers, sporting goods stores, and mass merchants. Competition among boat dealers is based on the quality of available products, the price and value of the products, and attention to customer service. There is significant competition both within markets we currently serve and in new markets that we may enter. We compete in each of our markets with retailers of brands of boats and engines we do not sell in that market. In addition, several of our competitors, especially those selling marine equipment and accessories, are large national or regional chains that have substantial financial, marketing, and other resources. Private sales of used boats represent an additional source of competition.
Due to various matters, including environmental concerns, permitting and zoning requirements, and competition for waterfront real estate, some markets in the United States have experienced an increased waiting list for marina and storage availability. In general, the markets in which we currently operate are not experiencing any unusual difficulties. However, marine retail activity could be adversely affected in markets that do not have sufficient marine and storage availability to satisfy demand.
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A significant amount of our boat sales are from the State of Florida.
Economic conditions, weather and environmental conditions, competition, market conditions, and any other adverse conditions impacting the State of Florida in which we generated approximately 53%54%, 55%,50% and 55%51% of our dealership revenue during fiscal 2015, 2016,2020, 2021, and 2017,2022, respectively, could have a major impact on our operations.
We depend on income from financing, insurance, and extended service contracts.
A portion of our income results from referral fees derived from the placement or marketing of various finance and insurance, or F&I products, consisting of customer financing, insurance products, and extended service contracts, the most significant component of which is the participation and other fees resulting from our sale of customer financing contracts.
The availability of financing for our boat purchasers and the level of participation and other fees we receive in connection with such financing depend on the particular agreement between us and the lender and the current rate environment. Lenders may impose terms in their boat financing arrangements with us that may be unfavorable to us or our customers, resulting in reduced demand for our customer financing programs and lower participation and other fees. Laws or regulations may be enacted nationally or locally which could result in fees from lenders being eliminated or reduced, materially impacting our operating results. Customer financing became more difficult to secure during fiscal 2008, which continued in each subsequent fiscal year through fiscal 2011.
Changes, including the lengthening of manufacturer warranties, may reduce our ability to offer and sell extended service contracts which may have a material adverse impact on our ability to sell F&I products.
The Dodd-Frank Act established a new consumer financial protection agency with broad regulatory powers. Although boat dealers are generally excluded, the Dodd-Frank Act could lead to additional, indirect regulation of boat dealers through its regulation of other financial institutions which provide such financing to our customers.
The reduction of profit margins on sales of F&I products or the lack of demand for or the unavailability of these products could have a material adverse effect on our operating margins.
Our operations are dependent upon key personnel and team members.
Our success depends, in large part, upon our ability to attract, train, and retain, qualified team members and executive officers, as well as the continuing efforts and abilities of team members and executive officers. Although we have employment agreements with certain of our executive officers and management succession plans, we cannot ensure that these or other executive personnel and team members will remain with us, or that our succession planning will adequately mitigate the risk associated with key personnel transitions. Expanding our operations may require us to add additional executive personnel and team members in the future. As a result of our decentralized operating strategy, we also rely on the management teams of our dealerships. In addition, we likely will depend on the senior management of any significant businesses we acquire in the future. The loss of the services of one or more key employees before we are able to attract and retain qualified replacement personnel could adversely affect our business. Additionally, our ability to manage our personnel costs and operating expenses is subject to external factors such as unemployment levels, prevailing wage rates, healthcare and other benefit costs, changing demographics, and our reputation and relevance within the labor markets where we are located.
The products we sell or service may expose us to potential liability for personal injury or property damage claims relating to the use of those products.
Manufacturers of the products we sell generally maintain product liability insurance. We also maintain third-party product liability insurance that we believe to be adequate. We may experience claims that are not covered by or that are in excess of our insurance coverage. The institution of any significant claims against us could subject us to damages, result in higher insurance costs, and harm our business reputation with potential customers.
Environmental and other regulatory issues may impact our operations.
Our operations are subject to extensive regulation, supervision, and licensing under various federal, state and local statutes, ordinances and regulations, such as those relating to finance and insurance, consumer protection, consumer privacy, escheatment, anti-money laundering, environmental, emissions, health or safety, U.S. trade sanctions, the U.S. Foreign Corrupt Practices Act and employment practices. With respect to employment practices, we are subject to various laws and regulations, including complex federal, state and local wage and hour and anti-discrimination laws. The failure to satisfy those and other regulatory requirements could have a material adverse effect on our business, financial condition, and results of operations. In addition, failure to comply with U.S. trade sanctions, the U.S. Foreign Corrupt Practices Act and other applicable laws or regulations could result inoperations, as well as potentially the assessment of damages, the imposition of penalties, changes to our processes, or a
30
cessation of our operations, as well asand/or damage to our image and reputation, all of which could have a material adverse effect on our business.reputation.
Various federal, state, and local regulatory agencies, including the Occupational Safety and Health Administration, or OSHA, the United States Environmental Protection Agency, or EPA, and similar federal and local agencies, have jurisdiction over the operation of our dealerships, repair facilities, and other operations, with respect to matters such as consumer protection, workers’ safety, and laws regarding protection of the environment, including air, water, and soil. The EPA promulgated emissions regulations for outboard marine engines that impose stricter emissions standards for two-cycle, gasoline outboard marine engines. The majority of the outboard marine engines we sell are manufactured by Mercury Marine. Mercury Marine’s product line of low-emission engines, including the OptiMax, Verado, and other four-stroke outboards, have achieved the EPA’s mandated 2006 emission levels. It is possible that environmental regulatory bodies (including state regulatory bodies) may impose higher emissions standards in the future for these and other marine engines. Any increased costs of producing engines resulting from current or potentially higher EPA or state standards in the future could be passed on to our company, or could result in the inability or potential unforeseen delays of our manufacturers to comply with current and future EPA or state requirements, and these potential consequences could have a material adverse effect on our business.
Certain of our facilities own and operate underground storage tanks, or USTs, and ASTs for the storage of various petroleum products. USTs and ASTs are generally subject to federal, state and local laws and regulations that require testing and upgrading of USTstanks and remediation of contaminated soils and groundwater resulting from leaking USTs.tanks. In addition, we may be subject to civil liability to third parties for remediation costs or other damages if leakage from our owned or operated USTstanks migrates onto the property of others.
Our business involves the use, handling, storage, and contracting for recycling or disposal of hazardous or toxic substances or wastes, including environmentally sensitive materials, such as motor oil, waste motor oil and filters, transmission fluid, antifreeze, freon, waste paint and lacquer thinner, batteries, solvents, lubricants, degreasing agents, gasoline and diesel fuels. Accordingly, we are subject to regulation by federal, state and local authorities establishing investigation and health and environmental quality standards, and liability related thereto, and providing penalties for violations of those standards.
Our Product Manufacturing segment is regulated by federal, state and local environmental laws governing our use, transport and disposal of substances and control of emissions. While we are unaware of any failure to comply with these laws or any contamination at our facilities, the costs of compliance, including remediations of any discovered issues and any changes to our operations mandated by new or amended laws, may be significant, and any failures to comply could result in material expenses, delays or fines.
We also are subject to laws, ordinances, and regulations governing investigation and remediation of contamination at facilities we operate or to which we send hazardous or toxic substances or wastes for treatment, recycling or disposal. In particular, the Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA” or CERCLA or “Superfund,”“Superfund”) imposes joint, strict, and several liability on:
owners or operators of facilities at, from, or to which a release of hazardous substances has occurred;
parties that generated hazardous substances that were released at such facilities; and
parties that transported or arranged for the transportation of hazardous substances to such facilities.
29
A majority of states have adopted Superfund statutes comparable to and, in some cases, more stringent than CERCLA. If we were to be found to be a responsible party under CERCLA or a similar state statute, we could be held liable for all investigative and remedial costs associated with addressing such contamination. In addition, claims alleging personal injury or property damage may be brought against us as a result of alleged exposure to hazardous substances resulting from our operations. In addition, certain of our retail locations are located on waterways that are subject to federal or state laws regulating navigable waters (including oil pollution prevention), fish and wildlife, and other matters.
Soil and groundwater contamination has been known to exist at certain properties owned or leased by us. We have also been required and may in the future be required to remove abovegroundUSTs and underground storage tanksASTs containing hazardous substances or wastes. As to certain of our properties, specific releases of petroleum have been or are in the process of being remediated in accordance with state and federal guidelines. We are monitoring the soil and groundwater as required by applicable state and federal guidelines. We also may have additional storage tank liability insurance and Superfund coverage where applicable. Environmental laws and regulations are complex and subject to frequent change. Compliance with amended, new or more stringent laws or regulations, more strict interpretations of existing laws, or the future discovery of environmental conditions may require additional expenditures by us, and such expenditures may be material.
Three of the properties we own were historically used as gasoline service stations. Remedial action with respect to prior historical site activities on these properties has been completed in accordance with federal and state law. While we do not believe that these environmental issues will result in any material liabilities to us, we cannot provide assurances that no such material liabilities will occur.
Additionally, certain states have required or are considering requiring a license in order to operate a recreational boat. These regulations could discourage potential buyers, thereby limiting future sales and adversely affecting our business, financial condition, and results of operations.
31
Furthermore, the Patient Protection and Affordable Care Act, increased our annual employee health care costs that we fund, and significantly increased our cost of compliance and compliance risk relatedRisks Related to offering health care benefits.Cybersecurity
Finally, new laws and regulations, particularly at the federal level, in other areas may be enacted, which could also materially adversely impact our business. Adverse changes in labor policy could lead to increased unionization efforts, which could lead to higher labor costs, disrupt our store operations, and adversely affect our operating results.
The market price of our common stock could be subject to wide fluctuations as a result of many factors.
Factors that could affect the trading price of our common stock include the following:
variations in our operating results;
the thin trading volume and relatively small public float of our common stock;
our ability to continue to secure adequate levels of financing;
variations in same-store sales;
general economic, political, and market conditions;
changes in earnings estimates published by analysts;
changes in earnings estimates or management’s failure to provide earnings estimates;
the level and success of our acquisition program and new store openings;
the success of dealership integration;
relationships with manufacturers;
seasonality and weather conditions;
governmental policies and regulations;
the performance of the recreational boat industry in general; and
factors relating to suppliers and competitors.
In addition, market demand for small-capitalization stocks, and price and volume fluctuations in the stock market unrelated to our performance could result in significant fluctuations in the market price of our common stock.
The performance of our common stock could adversely affect our ability to raise equity in the public markets and adversely affect our acquisition program.
The issuance of additional capital stock in the future, including shares that we may issue pursuant to stock-based grants, including grants of stock options, restricted stock awards and restricted stock units, and future acquisitions, may result in dilution in the net tangible book value per share of our common stock.
Our board of directors has the legal power and authority to determine the terms of an offering of shares of our capital stock, or securities convertible into or exchangeable for these shares, to the extent of our shares of authorized and unissued capital stock. The issuance of additional common stock in the future, including shares that we may issue pursuant to stock-based grants, including grants of stock options, restricted stock awards and restricted stock units, and future acquisitions, may result in dilution in the net tangible book value per share of our common stock.
The timing and amount of our share repurchases are subject to a number of uncertainties.
In August 2017, the Board of Directors approved a new stock repurchase plan authorizing the Company to purchase up to 2.0 million shares of its commons stock through September 30, 2019. There is no guarantee that our stock repurchase plans will be able to successfully mitigate the dilutive effect of stock options and stock-based grants. The success of our stock repurchase plans is based upon a number of factors, including the price and availability of the Company’s stock, general market conditions, the nature of other investment opportunities available to us from time to time, and the availability of cash.
32
A substantial number of shares are eligible for future sale.
As of September 30, 2017, there were 21,887,579 shares of our common stock outstanding. Substantially all of these shares are freely tradable without restriction or further registration under the securities laws, unless held by an “affiliate” of our company, as that term is defined in Rule 144 under the securities laws. Shares held by affiliates of our company, which generally include our directors, officers, and certain principal shareholders, are subject to the resale limitations of Rule 144. Outstanding shares of common stock issued in connection with the acquisition of any acquired dealers are available for resale beginning six months after the respective dates of the acquisitions, subject to compliance with the provisions of Rule 144 under the securities laws.
Through September 30, 2017, we have issued options to purchase approximately 5,006,549 shares of common stock and 1,606,890 restricted stock awards, net of forfeitures and expirations, under our incentive stock plans, and we issued 793,348 shares of common stock under our employee stock purchase plan. We have filed a registration statement under the securities laws to register the common stock to be issued under these plans. As a result, shares issued under these plans will be freely tradable without restriction unless acquired by affiliates of our company, who will be subject to the volume and other limitations of Rule 144.
We may issue additional shares of common stock or preferred stock under the securities laws as part of any acquisition we may complete in the future. If issued pursuant to an effective registration statement, these shares generally will be freely tradable after their issuance by persons not affiliated with us or the acquired companies.
We do not pay cash dividends.
We have never paid cash dividends on our common stock and we have no current intention to do so for the foreseeable future.
Certain provisions of our restated articles of incorporation and bylaws and Florida law may make a change in the control of our company more difficult to complete, even if a change in control were in the shareholders’ interest or might result in a premium over the market price for the shares held by the shareholders.
Our articles of incorporation and bylaws divide our board of directors into three classes of directors elected for staggered three-year terms. The articles of incorporation also provide that the board of directors may authorize the issuance of one or more series of preferred stock from time to time and may determine the rights, preferences, privileges, and restrictions and fix the number of shares of any such series of preferred stock, without any vote or action by our shareholders. The board of directors may authorize the issuance of preferred stock with voting or conversion rights that could adversely affect the voting power or other rights of the holders of common stock. The articles of incorporation also allow our board of directors to fix the number of directors and to fill vacancies on the board of directors.
Our articles of incorporation contain provisions that adopt substantially all of the protections afforded under Florida's affiliated transactions statute (which provides that, with certain exceptions, a transaction with an "interested shareholder" must generally be approved by the affirmative vote of the holders of two-thirds of the voting shares (other than the shares owned by the interested shareholder)), except that our articles of incorporation define an "interested shareholder" as any person who holds 15% or more of our outstanding stock (rather than 10% as set forth in the statute). Certain of our dealer agreements could also make it difficult for a third party to attempt to acquire a significant ownership position in our company.
Our sales of yachts produced by the Azimut-Benetti Group in Italy, yachts produced by Galeon in Poland, and motor and sailing yachts produced by Sino Eagle in China expose us to international political, economic, and other risks.
Our sales of yachts produced by the Azimut-Benetti Group in Italy, yachts produced by Galeon in Poland, and yachts for our yacht charter fleet produced by Sino Eagle in China expose us to international political, economic, and other risks. Protectionist trade legislation in the United States, the European Union, Italy, Poland, or China, such as a change in current tariff structures, export or import compliance laws, or other trade policies could adversely affect our ability to import yachts from these foreign suppliers under economically favorable terms and conditions.
Due in part to the new U.S. Presidential administration, some are expecting substantial changes to United States trade and tax policies, including heightened import restrictions or tariffs. Restrictions could prevent or make it difficult for us to import yachts from foreign suppliers under economically favorable terms and conditions. Increased tariffs could require us to increase our prices which likely could decrease demand for our products. In addition, other countries may retaliate through their own restrictions and/or increased tariffs which would affect our ability to export products and therefore adversely affect our sales.
Our foreign purchase of yachts creates a number of logistical and communications challenges. The economic, political, and other risks we face resulting from these foreign purchases include the following:
33
|
|
transportation delays or interruptions and other effects of less developed infrastructures;
effects from the voter-approved exit of the United Kingdom from the European Union (often referred to as Brexit), including any resulting deterioration in economic conditions, volatility in currency exchange rates, or adverse regulatory changes;
limitations on imports and exports;
foreign exchange rate fluctuations;
imposition of restrictions on currency conversion or the transfer of funds;
tariffs and duties and other trade barrier restrictions;
maintenance of quality standards;
unexpected changes in regulatory requirements;
differing labor regulations;
potentially adverse tax consequences;
possible employee turnover or labor unrest;
the burdens and costs of compliance with a variety of foreign laws; and
political or economic instability.
Increased cybersecurity requirements, vulnerabilities, threats and more sophisticated and targeted computer crime could pose a risk to our systems, networks, data and data.our third-party service providers. Our business operations could be negatively impacted by an outage or breach of our informational technology systems or a cybersecurity event.
Our business is dependent upon the efficient operation of our information systems.technology platform. The systems facilitateplatform facilitates the interchange of information and enhances cross-selling opportunities throughout our company. The systems integrateplatform integrates each level of operations on a Company-wide basis, including but not limited to purchasing, inventory, receivables, payables, financial reporting, budgeting, marketing, sales management, as well as to prepare our consolidated financial and operating data. The failure of our information systemstechnology platform to perform as designed or the failure to maintain and enhance or protect the integrity of these systemsour technology platform and those of our third-party service providers, could disrupt our business operations, impact sales and the results of operations, expose us to customer or third-party claims, or result in adverse publicity.
Increased global cybersecurity vulnerabilities, threats and more sophisticated and targeted cyber-related attacks (including ransomware) pose a risk to the security of our and our customers’, suppliers’ and third-party service providers’ products, systems and networks and the confidentiality, availability and integrity of our data. Unauthorized parties may also attempt to gain access to our systems or facilities, or those of third parties with whom we do business, through fraud, trickery or other forms of deceiving our team members, contractors, vendors, and temporary staff. While we attempt to mitigate these risks by employing a number ofextensive measures, including employee training, systems, monitoring and testing, and maintenance of protective systems and contingency plans, we remain potentially vulnerable to additional known or unknown threats.
We may also have access to sensitive, confidential or personal data or information that is subject to privacy, security laws, and regulations. Despite our efforts to protect sensitive, confidential or personal data or information, we and our third-party service providers may be vulnerable to security breaches, theft, misplaced or lost data, programming errors, employee errors and/or malfeasance that could potentially lead to the compromising of sensitive, confidential or personal data or information, improper use of our systems, unauthorized access, use, disclosure, modification or destruction of information, and operational disruptions.
It is possible that we or our third-party service providers might not be aware of a successful cyber-related attack on our systems until well after the incident. In addition, a cyber-related attack could result in other negative consequences, including damage to our reputation or competitiveness, remediation or increased protection costs, litigation or regulatory action.
Changes in the assumptions used to calculateaction, and could adversely affect our acquisition related contingent consideration liabilities could have a material adverse impact on ourbusiness, financial results.
Our recent acquisitions included contingent consideration liabilities relating to payments based on the future performance of the operations acquired. Under generally accepted accounting principles, we are required to estimate the fair value of any contingent consideration. Our estimates of fair value are based upon assumptions believed to be reasonable but which are uncertaincondition, and involve significant judgments. Changes in business conditions or other events could materially change the projection of future earnings used in the fair value calculations of contingent consideration liabilities. We reassess the fair value quarterly, and increases or decreases based
34
on the actual or expected future performance of the acquired operations will be recorded in our results of operations. These quarterly adjustmentsDepending on the nature of the information compromised, we may have obligations to notify customers and/or employees about the incident, and we may need to provide some form of remedy, such as a subscription to a credit monitoring service, for the individuals affected by the incident, which could haveresult in material reputational damage to us. While we traditionally maintain a material effect onfull range of insurance coverage for any such events, there can be no assurance that such insurance coverage is adequate to cover losses that we sustain as a result of an outage or breach of our results of operations.technology platform or a cybersecurity event.
An impairmentWe are also subject to laws and regulations in the carrying valueUnited States and other countries concerning the handling of long-lived assets and goodwill could negatively impact our financial results and net worth.
Our long-lived assets, such as property and equipment, are required to be reviewed for impairment whenever events or changes in circumstance indicatepersonal information, including laws that the carrying value of an asset may not be recoverable. As of September 30, 2017, we have approximately $127 million of property and equipment, net of accumulated depreciation recorded on our consolidated balance sheet. Recoverability of an asset is measured by comparison of its carrying amount to undiscounted future net cash flows the asset is expected to generate. If such assets are considered to be impaired, the impairment to be recognized is measured as the amount by which the carrying amount of the asset exceeds its fair market value. Estimates of expected future cash flows represent our best estimate based on currently available information and reasonable and supportable assumptions. Our impairment loss calculations contain uncertainties because they require us to make assumptionsnotify governmental authorities and/or affected individuals of data breaches involving certain personal information. These laws and regulations include, for example, the European General Data Protection Regulation,
30
effective May 2018, and the California Consumer Privacy Act, effective January 2020. Regulatory actions or litigation seeking to apply judgmentimpose significant penalties could be brought against us in orderthe event of a data breach or alleged non-compliance with such laws and regulations.
Risks Related to estimate expected future cash flows.Our Common Stock
Additionally,The timing and amount of our goodwillshare repurchases are subject to a number of uncertainties.
The Company maintains a stock repurchase plan authorizing the Company to purchase up to 10 million shares of its commons stock through March 2024. There is recorded at fair value at the time of acquisition and are not amortized, but reviewed for impairment at least annually or more frequently if impairment indicators arise. In evaluating the potential for impairment of goodwill, we make assumptions regarding industry conditions,no guarantee that our future financial performance, and other factors. Uncertainties are inherent in evaluating and applying these factors to the assessment of goodwill. While we do not believe there is a reasonable likelihood that therestock repurchase plans will be a change inable to successfully mitigate the judgmentsdilutive effect of stock options and assumptions used in our assessments of goodwill and long-lived assets which would result in a material effect on our operating results, we cannot predict whether events or circumstances will change in the future that could result in non-cash impairment charges that could adversely impact our financial results and net worth.
Our business could be negatively affected by the actions of activist shareholders
Certainstock-based grants. The success of our shareholders maystock repurchase plans is based upon a number of factors, including the price and availability of the Company’s stock, general market conditions, the nature of other investment opportunities available to us from time to time, advanceand the availability of cash.
We do not pay cash dividends.
We have never paid cash dividends on our common stock and we have no current intention to do so for the foreseeable future.
If securities analysts do not publish research or reports about our company, or if they issue unfavorable commentary about us or our industry or downgrade our common stock, the price of our common stock could decline.
The trading market for our common stock depends in part on the research and reports that third-party securities analysts publish about our company and our industry. We may be unable or slow to attract research coverage and if one or more analysts cease coverage of our company, we could lose visibility in the market. In addition, one or more of these analysts could downgrade our common stock or issue other negative commentary about our company or our industry. As a result of one or more of these factors, the trading price of our common stock could decline.
Certain activist shareholder proposals or otherwise attemptactions could cause us to effect changes or acquire control overincur expense and hinder execution of our business. Such proposals or attempts are sometimes led by investors seeking to increase short-termstrategies.
We actively engage in discussions with our shareholders regarding further strengthening our Company and creating long-term shareholder value by advocating corporate actionsvalue. This ongoing dialogue can include certain divisive activist tactics, which can take many forms. Some shareholder activism, including potential proxy contests, could result in substantial costs, such as financial restructuring, increased borrowing, special dividends,legal fees and expenses, and divert management's and our Board's attention and resources from our business and strategic plans. Additionally, public shareholder activism could give rise to perceived uncertainties as to our future, adversely affect our relationships with suppliers or customers, make it more difficult to attract and retain qualified personnel, and cause our stock repurchasesprice to fluctuate based on temporary or even sales of assetsspeculative market perceptions or other factors that do not necessarily reflect the entire company. Such an action focused on the short-term may be to the long-term detrimentunderlying fundamentals and prospects of our shareholders. If faced with actions by activist shareholders, we may not be able to respond effectively to such actions, whichbusinesses. These risks could be disruptive toadversely affect our business.financial performance.
Not applicable.Item 1B. Unresolved Staff Comments
None.
Item 2. Properties
We leaseThe Retail Operations segment includes our leased corporate offices in Clearwater, Florida. We also lease 39 of our retail locations48 properties under leases in the United States and British Virgin Islands, many of which contain multi-year renewal options and some of which grant us a first right of first refusal to purchase the property at fair value. In most cases, we pay a fixed rent at negotiated rates. In substantially all of the leased locations, we are responsible for taxes, utilities, insurance, and routine repairs and maintenance. We own the property36 properties associated with 28 otherthe retail locations we operate. Additionally, we own fivefour retail locations that are currently closedleased to a third-party or available for lease as noted below. A store is considered one or more retail locations that are adjacent or operate as one entity. Fraser Yachts Group and Northrop & Johnson lease offices in the United States and Europe.
35
The following table reflects the status, approximate size, and facilities of the various retail locations in the United States and British Virgin Islands we operate as of the date of this report.
31
Location |
| Location Type |
| Square |
|
| Facilities at Property |
| Operated |
|
| Waterfront |
| |||
Alabama |
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Gulf Shores |
| Company owned |
|
| 4,000 |
|
| Retail and service |
| 1998 |
|
|
| — |
| |
California |
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Newport Beach |
| Third-party lease |
|
| 1,000 |
|
| Retail only, 4 wet slips |
| 2020 |
|
| Newport Bay |
| ||
San Diego |
| Third-party lease |
|
| 1,400 |
|
| Retail only, 12 wet slips |
| 2020 |
|
| San Diego Bay |
| ||
Sausalito |
| Third-party lease |
|
| 2,000 |
|
| Retail and service; 6 wet slips |
| 2020 |
|
| Richardson Bay |
| ||
Connecticut |
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Norwalk |
| Third-party lease |
|
| 9,000 |
|
| Retail and service; 56 wet slips |
| 1994 |
|
| Norwalk Harbor |
| ||
Westbrook |
| Third-party lease |
|
| 4,200 |
|
| Retail and service |
| 1998 |
|
| Westbrook Harbor |
| ||
Florida |
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Cape Haze |
| Company owned |
|
| 18,000 |
|
| Retail only, 8 wet slips |
|
| — |
|
| Intracoastal Waterway |
| |
Clearwater |
| Company owned |
|
| 42,000 |
|
| Retail and service; 20 wet slips |
| 1973 |
|
| Tampa Bay |
| ||
Cocoa |
| Company owned |
|
| 15,000 |
|
| Retail and service |
| 1968 |
|
|
| — |
| |
Dania |
| Company owned |
|
| 32,000 |
|
| Repair and service; 16 wet slips |
| 1991 |
|
| Port Everglades |
| ||
Fort Walton Beach |
| Company owned |
|
| 3,000 |
|
| Repair and service; 83 wet slips |
| 2019 |
|
| Choctawhatchee Bay |
| ||
Fort Myers |
| Company owned |
|
| 60,000 |
|
| Retail, service, and storage; 64 wet slips |
| 1983 |
|
| Caloosahatchee River |
| ||
Jacksonville |
| Third-party lease |
|
| 9,000 |
|
| Retail and service |
| 2016 |
|
| Intracoastal Waterway |
| ||
Key Largo |
| Third-party lease |
|
| 8,900 |
|
| Retail and service; 6 wet slips |
| 2002 |
|
| Card Sound |
| ||
Miami |
| Company owned |
|
| 7,200 |
|
| Retail and service; 15 wet slips |
| 1980 |
|
| Little River |
| ||
Miami |
| Company owned |
|
| 5,000 |
|
| Service only; 11 wet slips |
| 2005 |
|
| Little River |
| ||
Naples |
| Company owned |
|
| 19,600 |
|
| Retail and service; 14 wet slips |
| 1997 |
|
| Naples Bay |
| ||
North Palm Beach |
| Third-party lease |
|
| 1,000 |
|
| Retail only |
| 2016 |
|
| Intracoastal Waterway |
| ||
Orlando |
| Third-party lease |
|
| 18,400 |
|
| Retail and service |
| 1984 |
|
|
| — |
| |
Panama City |
| Third-party lease |
|
| 10,500 |
|
| Retail only; 8 wet slips |
| 2011 |
|
| Saint Andrews Bay |
| ||
Pensacola |
| Company owned |
|
| 52,800 |
|
| Retail, service, and storage; 60 wet slips |
| 2016 |
|
| Pensacola Bay |
| ||
Pompano Beach |
| Company owned |
|
| 23,000 |
|
| Retail and service; 16 wet slips |
| 1990 |
|
| Intracoastal Waterway |
| ||
Pompano Beach |
| Company owned |
|
| 5,400 |
|
| Retail and service; 24 wet slips |
| 2005 |
|
| Intracoastal Waterway |
| ||
Sarasota |
| Third-party lease |
|
| 26,500 |
|
| Retail, service, and storage; 15 wet slips |
| 1972 |
|
| Sarasota Bay |
| ||
St. Petersburg |
| Company owned |
|
| 15,000 |
|
| Retail and service; 20 wet slips |
| 2006 |
|
| Boca Ciega Bay |
| ||
Stuart |
| Company owned |
|
| 29,100 |
|
| Retail and service; 66 wet slips |
| 2002 |
|
| Intracoastal Waterway |
| ||
Venice |
| Company owned |
|
| 62,000 |
|
| Retail, service, and storage; 90 wet slips |
| 1972 |
|
| Intracoastal Waterway |
| ||
Georgia |
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Buford (Atlanta) (3) |
| Company owned |
|
| 13,500 |
|
| Retail and service |
| 2001 |
|
|
| — |
| |
Cumming (Atlanta) |
| Third-party lease |
|
| 13,000 |
|
| Retail and service; 50 wet slips |
| 1981 |
|
| Lake Lanier |
| ||
Savannah |
| Third-party lease |
|
| 50,600 |
|
| Retail, marina, service and storage; 36 wet slips |
| 2017 |
|
| Wilmington River |
| ||
Illinois |
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Praire Harbor |
| Third-party lease |
|
| 3,500 |
|
| Marina, 140 wet slips |
| 2020 |
|
| Lake Michigan |
|
32
Sequoit Harbor Antioch |
| Third-party lease |
|
| 85,300 |
|
| Retail, marina, service and storage; 208 wet slips |
| 2020 |
|
| Lake Marie |
| ||
Winthrop Harbor |
| Third-party lease |
|
| 319,100 |
|
| Retail, marina, service and storage; 53 wet slips |
| 2020 |
|
| Lake Michigan |
| ||
Maryland |
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Baltimore |
| Third-party lease |
|
| 7,600 |
|
| Retail and service; 17 wet slips |
| 2005 |
|
| Baltimore Inner Harbor |
| ||
Kent Island |
| Third-party lease |
|
| 30,500 |
|
| Retail, service, and storage |
| 2021 |
|
| Kent Narrows |
| ||
Joppa (3) |
| Company owned |
|
| 28,400 |
|
| Retail, service, and storage; 294 wet slips |
| 1966 |
|
| Gunpowder River |
| ||
Massachusetts |
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Danvers |
| Third-party lease |
|
| 32,000 |
|
| Retail and service |
| 2016 |
|
|
| — |
| |
Quincy |
| Company owned |
|
| 14,700 |
|
| Retail, service, and storage; 247 wet slips |
| 2018 |
|
| Town River |
| ||
Michigan |
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Bay City |
| Third-party lease |
|
| 195,800 |
|
| Retail, marina, service and storage; 59 wet slips |
| 2020 |
|
| Saginaw River |
| ||
Bele Mear Harbor |
| Third-party lease |
|
| 8,500 |
|
| Retail and service, 4 wet slips |
| 2020 |
|
| Lake St. Clair |
| ||
Cass Lake |
| Third-party lease |
|
| 31,600 |
|
| Retail, marina, service and storage; 124 wet slips |
| 2020 |
|
| Cass Lake |
| ||
Grand Haven |
| Third-party lease |
|
| 32,000 |
|
| Retail, service, and storage; 6 wet slips |
| 2020 |
|
| Spring Lake |
| ||
Lake Fenton |
| Third-party lease |
|
| 57,900 |
|
| Retail, marina, service and storage; 123 wet slips |
| 2020 |
|
| Lake Fenton |
| ||
Mac Ray Harbor |
| Third-party lease |
|
| 300 |
|
| Retail only, 4 wet slips |
| 2020 |
|
| Lake St. Clair |
| ||
Minnesota |
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Bayport |
| Third-party lease |
|
| 500 |
|
| Retail only; 10 wet slips |
| 1996 |
|
| St. Croix River |
| ||
Excelsior |
| Third-party lease |
|
| 2,500 |
|
| Retail only; 14 wet slips |
| 2013 |
|
| Lake Minnetonka |
| ||
Rogers |
| Company owned |
|
| 70,000 |
|
| Retail, service, and storage |
| 1991 |
|
|
| — |
| |
Nisswa |
| Company owned |
|
| 108,400 |
|
| Retail, service, and storage |
| 2021 |
|
| Nisswa Lake |
| ||
Missouri |
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Lake Ozark |
| Company owned |
|
| 60,300 |
|
| Retail, service, and storage; 300 wet slips |
| 1987 |
|
| Lake of the Ozarks |
| ||
Laurie (3) |
| Company owned |
|
| 700 |
|
| Retail and service |
|
| — |
|
|
| — |
|
Osage Beach |
| Company owned |
|
| 2,000 |
|
| Retail and service |
| 1987 |
|
|
| — |
| |
New Jersey |
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Brant Beach |
| Company owned |
|
| 3,800 |
|
| Retail, service, and storage; 36 wet slips |
| 1965 |
|
| Barnegat Bay |
| ||
Brick |
| Company owned |
|
| 20,000 |
|
| Retail, service, and storage; 225 wet slips |
| 1977 |
|
| Manasquan River |
| ||
Lake Hopatcong |
| Company owned |
|
| 4,600 |
|
| Retail and service; 80 wet slips |
| 1998 |
|
| Lake Hopatcong |
| ||
Ship Bottom |
| Company owned |
|
| 19,300 |
|
| Retail and service |
| 1972 |
|
|
| — |
| |
Somers Point |
| Company owned |
|
| 31,000 |
|
| Retail, service, and storage; 33 wet slips |
| 1987 |
|
| Little Egg Harbor Bay |
| ||
Ocean View |
| Company owned |
|
| 13,800 |
|
| Retail, service, and storage |
| 2018 |
|
|
| — |
| |
New York |
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Huntington |
| Third-party lease |
|
| 1,200 |
|
| Retail and service |
| 1995 |
|
| Huntington Harbor and Long Island Sound |
| ||
North Carolina |
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Lake Norman |
| Third-party lease |
|
| 10,300 |
|
| Retail only |
| 2017 |
|
|
| — |
| |
Southport |
| Third-party lease |
|
| 1,600 |
|
| Retail only |
| 2008 |
|
| Cape Fear River |
| ||
Wrightsville Beach |
| Third-party lease |
|
| 34,500 |
|
| Retail, service, and storage |
| 1996 |
|
| Masonboro Inlet |
| ||
Ohio |
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Marina Del Isle |
| Third-party lease |
|
| 163,800 |
|
| Retail, marina, service and storage; 189 wet slips |
| 2020 |
|
| Lake Erie |
| ||
Port Clinton |
| Company owned |
|
| 80,000 |
|
| Retail, service and storage; 8 wet slips |
| 1997 |
|
| Lake Erie |
|
33
Oklahoma |
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Grand Lake |
| Company owned |
|
| 3,500 |
|
| Retail and service; 23 wet slips |
| 2019 |
|
| Grand Lake |
| ||
Rhode Island |
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Newport |
| Third-party lease |
|
| 700 |
|
| Retail only |
| 2011 |
|
| Newport Harbor |
| ||
South Carolina |
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Charleston |
| Third-party lease |
|
| 14,800 |
|
| Retail, service, and storage |
| 2017 |
|
|
| — |
| |
Greenville |
| Third-party lease |
|
| 24,500 |
|
| Retail, service, and storage |
| 2017 |
|
|
| — |
| |
Lake Wylie |
| Third-party lease |
|
| 76,400 |
|
| Retail, marina, service and storage; 82 wet slips |
| 2017 |
|
| Lake Wylie |
| ||
Texas |
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Austin |
| Third-party lease |
|
| 26,000 |
|
| Retail and service |
| 2019 |
|
|
| — |
| |
San Antonio |
| Third-party lease |
|
| 14,100 |
|
| Retail and service |
| 2019 |
|
|
| — |
| |
Lakeway |
| Third-party lease |
|
| 10,000 |
|
| Retail only |
| 2019 |
|
|
| — |
| |
Lewisville (Dallas) |
| Company owned |
|
| 22,000 |
|
| Retail and service |
| 2002 |
|
|
| — |
| |
Seabrook |
| Company owned |
|
| 88,480 |
|
| Retail, service, and storage; 30 wet slips |
| 2002 |
|
| Clear Lake |
| ||
Aubrey (3) |
| Company owned |
|
| 15,000 |
|
| Retail and service |
|
| — |
|
|
| — |
|
Fort Worth |
| Company owned |
|
| 30,000 |
|
| Retail and service |
| 2021 |
|
|
| — |
| |
Washington |
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Seattle |
| Third-party lease |
|
| 400 |
|
| Retail only, 6 wet slips |
| 2020 |
|
| Lake Union |
| ||
Wisconsin |
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Harbor Club Marina |
| Third-party lease |
|
| 1,000 |
|
| Marina, 140 wet slips |
| 2020 |
|
| Sturgeon Bay |
| ||
Lake Geneva |
| Third-party lease |
|
| 114,900 |
|
| Retail, service and storage; 2 wet slips |
| 2020 |
|
|
| — |
| |
Madison |
| Third-party lease |
|
| 138,300 |
|
| Retail, marina, service and storage; 135 wet slips |
| 2020 |
|
| Lake Mendota |
| ||
Milwaukee |
| Third-party lease |
|
| 68,100 |
|
| Retail, service and storage; 11 wet slips |
| 2020 |
|
| Kinnickinnic River |
| ||
Oshkosh |
| Third-party lease |
|
| 98,300 |
|
| Retail, marina, service and storage; 98 wet slips |
| 2020 |
|
| Lake Butte Des Mortes |
| ||
Pewaukee |
| Third-party lease |
|
| 157,200 |
|
| Retail, service and storage; |
| 2020 |
|
|
| — |
| |
Sturgeon Bay |
| Third-party lease |
|
| 222,200 |
|
| Retail, marina, service and storage; 260 wet slips |
| 2020 |
|
| Sturgeon Bay |
| ||
British Virgin |
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Tortola |
| Third-party lease |
|
| 2,600 |
|
| Vacation charters; 45 wet slips |
| 2011 |
|
| Caribbean Sea |
|
Location |
| Location Type |
| Square Footage(1) |
|
| Facilities at Property |
| Operated Since(2) |
|
| Waterfront |
| |||
Alabama |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gulf Shores |
| Company owned |
|
| 4,000 |
|
| Retail and service |
| 1998 |
|
|
| — |
| |
California |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
San Diego |
| Third-party lease |
|
| 700 |
|
| Retail only |
| 2011 |
|
| San Diego Bay |
| ||
Connecticut |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Norwalk |
| Third-party lease |
|
| 9,000 |
|
| Retail and service; 56 wet slips |
| 1994 |
|
| Norwalk Harbor |
| ||
Westbrook |
| Third-party lease |
|
| 4,200 |
|
| Retail and service |
| 1998 |
|
| Westbrook Harbor |
| ||
Florida |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cape Haze |
| Company owned |
|
| 18,000 |
|
| Retail, 8 wet slips |
|
| — |
|
| Intracoastal Waterway |
| |
Clearwater |
| Company owned |
|
| 42,000 |
|
| Retail and service; 20 wet slips |
| 1973 |
|
| Tampa Bay |
| ||
Cocoa |
| Company owned |
|
| 15,000 |
|
| Retail and service |
| 1968 |
|
|
| — |
| |
Dania |
| Company owned |
|
| 32,000 |
|
| Repair and service; 16 wet slips |
| 1991 |
|
| Port Everglades |
| ||
Fort Lauderdale |
| Third-party lease |
|
| 2,400 |
|
| Retail only |
| 1977 |
|
| Intracoastal Waterway |
| ||
Fort Myers |
| Company owned |
|
| 60,000 |
|
| Retail, service, and storage; 64 wet slips |
| 1983 |
|
| Caloosahatchee River |
| ||
Jacksonville |
| Third-party lease |
|
| 9,000 |
|
| Retail and service |
| 2016 |
|
| Intracoastal Waterway |
| ||
Key Largo |
| Third-party lease |
|
| 8,900 |
|
| Retail and service; 6 wet slips |
| 2002 |
|
| Card Sound |
| ||
Miami |
| Company owned |
|
| 7,200 |
|
| Retail and service; 15 wet slips |
| 1980 |
|
| Little River |
| ||
Miami |
| Company owned |
|
| 5,000 |
|
| Service only; 11 wet slips |
| 2005 |
|
| Little River |
| ||
Naples |
| Company owned |
|
| 19,600 |
|
| Retail and service; 14 wet slips |
| 1997 |
|
| Naples Bay |
| ||
North Palm Beach |
| Third-party lease |
|
| 960 |
|
| Retail only |
| 2016 |
|
| Intracoastal Waterway |
| ||
Orlando |
| Third-party lease |
|
| 18,389 |
|
| Retail and service |
| 1984 |
|
|
| — |
| |
Panama City |
| Third-party lease |
|
| 10,500 |
|
| Retail only; 8 wet slips |
| 2011 |
|
| Saint Andrews Bay |
| ||
Pensacola |
| Company owned |
|
| 52,750 |
|
| Retail, service, and storage; 60 wet slips |
| 2016 |
|
| Pensacola Bay |
| ||
Pompano Beach |
| Company owned |
|
| 23,000 |
|
| Retail and service; 16 wet slips |
| 1990 |
|
| Intracoastal Waterway |
| ||
Pompano Beach |
| Company owned |
|
| 5,400 |
|
| Retail and service; 24 wet slips |
| 2005 |
|
| Intracoastal Waterway |
| ||
Sarasota |
| Third-party lease |
|
| 26,500 |
|
| Retail, service, and storage; 15 wet slips |
| 1972 |
|
| Sarasota Bay |
| ||
St. Petersburg(3) |
| Company owned |
|
| 15,000 |
|
| Retail and service; 20 wet slips |
| 2006 |
|
| Boca Ciega Bay |
| ||
Stuart |
| Company owned |
|
| 29,100 |
|
| Retail and service; 66 wet slips |
| 2002 |
|
| Intracoastal Waterway |
| ||
Tampa(4) |
| Company owned |
|
| 13,100 |
|
| Retail and service |
|
| — |
|
|
| — |
|
Venice |
| Company owned |
|
| 62,000 |
|
| Retail, service, and storage; 90 wet slips |
| 1972 |
|
| Intracoastal Waterway |
| ||
Georgia |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Buford (Atlanta) |
| Company owned |
|
| 13,500 |
|
| Retail and service |
| 2001 |
|
|
| — |
| |
Cumming (Atlanta) |
| Third-party lease |
|
| 13,000 |
|
| Retail and service; 50 wet slips |
| 1981 |
|
| Lake Lanier |
| ||
Savannah |
| Third-party lease |
|
| 50,600 |
|
| Retail, marina, service and storage; 36 wet slips |
| 2017 |
|
| Wilmington River |
| ||
Maryland |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Baltimore |
| Third-party lease |
|
| 7,600 |
|
| Retail and service; 17 wet slips |
| 2005 |
|
| Baltimore Inner Harbor |
|
36
34
| Company owned |
|
| 28,400 |
|
| Retail, service, and storage; 294 wet slips |
| 1966 |
|
| Gunpowder River |
| |||
Kent Island |
| Third-party lease |
|
| 8,300 |
|
| Retail only |
| 2013 |
|
| Kent Narrows |
| ||
White Marsh(4) |
| Company owned |
|
| 19,800 |
|
| Retail and service |
|
| — |
|
|
| — |
|
Massachusetts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Boston |
| Third-party lease |
|
| 60,950 |
|
| Retail, service, and storage; 65 wet slips |
| 2016 |
|
| Boston Harbor |
| ||
Danvers |
| Third-party lease |
|
| 32,000 |
|
| Retail and service |
| 2016 |
|
|
| — |
| |
Hingham |
| Third-party lease |
|
| 2,000 |
|
| Retail only |
| 2016 |
|
| Weymouth Black River |
| ||
Minnesota |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bayport |
| Third-party lease |
|
| 450 |
|
| Retail only; 10 wet slips |
| 1996 |
|
| St Croix River |
| ||
Excelsior |
| Third-party lease |
|
| 2,500 |
|
| Retail only; 14 wet slips |
| 2013 |
|
| Lake Minnetonka |
| ||
Rogers |
| Company owned |
|
| 70,000 |
|
| Retail, service, and storage |
| 1991 |
|
|
| — |
| |
Missouri |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Branson |
| Third-party lease |
|
| 1,500 |
|
| Retail only; 6 wet slips |
| 2000 |
|
| Table Rock Lake |
| ||
Lake Ozark |
| Company owned |
|
| 60,300 |
|
| Retail, service, and storage; 300 wet slips |
| 1987 |
|
| Lake of the Ozarks |
| ||
Laurie(4) |
| Company owned |
|
| 700 |
|
| Retail and service |
|
| — |
|
|
| — |
|
Osage Beach |
| Company owned |
|
| 2,000 |
|
| Retail and service |
| 1987 |
|
|
| — |
| |
New Jersey |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brant Beach |
| Third-party lease |
|
| 3,800 |
|
| Retail, service, and storage; 36 wet slips |
| 1965 |
|
| Barnegat Bay |
| ||
Brick |
| Company owned |
|
| 20,000 |
|
| Retail, service, and storage; 225 wet slips |
| 1977 |
|
| Manasquan River |
| ||
Lake Hopatcong |
| Company owned |
|
| 4,600 |
|
| Retail and service; 80 wet slips |
| 1998 |
|
| Lake Hopatcong |
| ||
Ship Bottom |
| Third-party lease |
|
| 19,300 |
|
| Retail and service |
| 1972 |
|
|
| — |
| |
Somers Point |
| Third-party lease |
|
| 31,000 |
|
| Retail, service, and storage; 33 wet slips |
| 1987 |
|
| Little Egg Harbor Bay |
| ||
New York |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Copiague |
| Third-party lease |
|
| 15,000 |
|
| Retail only |
| 1993 |
|
|
| — |
| |
Huntington |
| Third-party lease |
|
| 1,200 |
|
| Retail and service |
| 1995 |
|
| Huntington Harbor and Long Island Sound |
| ||
Lindenhurst |
| Third-party lease |
|
| 14,600 |
|
| Retail, marina, service, and storage; 370 wet slips |
| 1968 |
|
| Neguntatogue Creek to Great South Bay |
| ||
Manhattan |
| Third-party lease |
|
| 1,200 |
|
| Retail only; 75 wet slips |
| 1996 |
|
| Hudson River |
| ||
North Carolina |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lake Norman |
| Third-party lease |
|
| 10,300 |
|
| Retail only |
| 2017 |
|
|
| — |
| |
Southport |
| Third-party lease |
|
| 1,600 |
|
| Retail only |
| 2008 |
|
| Cape Fear River |
| ||
Wrightsville Beach |
| Third-party lease |
|
| 34,500 |
|
| Retail, service, and storage |
| 1996 |
|
| Masonboro Inlet |
| ||
Ohio |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Port Clinton |
| Company owned |
|
| 80,000 |
|
| Retail, service and storage; 8 wet slips |
| 1997 |
|
| Lake Erie |
| ||
Oklahoma |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Afton |
| Third-party lease |
|
| 3,500 |
|
| Retail and service; 23 wet slips |
| 2003 |
|
| Grand Lake |
| ||
Rhode Island |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Newport |
| Third-party lease |
|
| 700 |
|
| Retail only |
| 2011 |
|
| Newport Harbor |
| ||
Warwick |
| Third-party lease |
|
| 4,400 |
|
| Retail and service |
| 1998 |
|
| Greenwich Bay |
| ||
South Carolina |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charleston |
| Third-party lease |
|
| 14,800 |
|
| Retail, service, and storage |
| 2017 |
|
|
| — |
| |
Columbia |
| Third-party lease |
|
| 7,200 |
|
| Retail, service, and storage |
| 2017 |
|
|
| — |
| |
Greenville |
| Third-party lease |
|
| 24,500 |
|
| Retail, service, and storage |
| 2017 |
|
|
| — |
| |
Lake Wylie |
| Third-party lease |
|
| 76,400 |
|
| Retail, marina, service, and storage; 82 wet slips |
| 2017 |
|
| Lake Wylie |
| ||
Texas |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lake Conroe |
| Third-party lease |
|
| 5,000 |
|
| Retail only; 4 wet slips |
| 2015 |
|
| Lake Conroe |
|
37
| Company owned |
|
| 22,000 |
|
| Retail and service |
| 2002 |
|
|
| — |
| ||
Seabrook |
| Company owned |
|
| 32,000 |
|
| Retail and service; 30 wet slips |
| 2002 |
|
| Clear Lake |
| ||
British Virgin Islands |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tortola |
| Third-party lease |
|
| 1,050 |
|
| Vacation Charters; 12 wet slips |
| 2011 |
|
| Maya Cove |
|
IGY Marinas offers a global network of marinas in the Americas, the Caribbean, and Europe. The following table reflects the location and status of the various IGY Marinas.
|
| Location Type |
Colombia | ||
Marina Santa Marta | Marketed (1) | |
Costa Rica | ||
Marina Bahia Golfito | Marketed (1) | |
England | ||
St. Katharine Docks | Managed (2) | |
France | ||
IGY Sète Marina | Third-party lease | |
IGY Vieux – Port de Cannes | Joint venture | |
Italy, Sardinia | ||
IGY Portisco Marina | Company owned and | |
Marina Di Porto Cervo (Marina & Shipyard) | Managed (2) | |
Mexico | ||
Marina Cabo San Lucas | Company owned and third-party lease (3) | |
Panama | ||
Red Frog Beach Island Marina | Third-party lease | |
Providenciales, Turks & Caicos | ||
Blue Haven Marina | Marketed (1) | |
Spain | ||
IGY Málaga Marina | Joint venture | |
Málaga Marina San Andres | Managed (2) | |
St. Maarten | ||
Simpson Bay Marina | Third-party lease | |
Yacht Club Isle de Sol | Third-party lease | |
St. Lucia | ||
Rodney Bay Marina | Company owned | |
United States, Florida | ||
Yacht Haven Grande Miami at Island Gardens, Miami | Third-party lease | |
Maximo Marina, St. Petersburg | Managed (2) | |
One Island Park Miami Beach | Managed (2) | |
United States, New York & Maine | ||
North Cove Marina at Brookfield Place, New York | Managed (2) | |
Fore Points Marina, Maine | Managed (2) | |
United States Virgin Islands, Saint Thomas | ||
Yacht Haven Grande USVI | Company owned and third-party lease (3) | |
American Yacht Harbor | Company owned and third-party lease (3) |
|
|
|
|
|
|
We have leased offices in the United States through the Fraser Yachts Group and Northrop & Johnson in Ft. Lauderdale, Florida and San Diego, California as well as leased offices outside the United States in Monaco, France, Italy, Spain, Qatar, Greece and the United Kingdom.
The Product Manufacturing segment operates out of four owned manufacturing properties, three in the Green Bay, Wisconsin metropolitan area, and one in Largo, Florida. We also own a manufacturing property in Swansboro, North Carolina that is currently being leased to third-parties. Additionally, we have one leased office in Dania, Florida.
We believe that our properties are suitable and adequate for our current needs. We believe that our manufacturing facilities have adequate capacity to meet our current and anticipated demand. We believe that our properties are well maintained and in good operating condition.
35
Item 3. 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 September 30, 2017,2022, we do not believe that these matters will have a material adverse effect on our consolidated financial condition, results of operations or cash flows.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
|
|
Market Information, Holders
Our common stock is listed on the New York Stock Exchange under the symbol HZO.“HZO”. The following table sets forth high and low sale prices of the common stock for each calendar quarter indicated as reported on the New York Stock Exchange.
|
| High |
|
| Low |
| ||||||||||
2015 |
|
|
|
|
|
|
|
| ||||||||
|
| High |
|
| Low |
| ||||||||||
2020 |
|
|
|
|
|
| ||||||||||
Fourth quarter |
| $ | 19.92 |
|
| $ | 13.93 |
|
| $ | 39.96 |
|
| $ | 25.54 |
|
2016 |
|
|
|
|
|
|
|
| ||||||||
2021 |
|
|
|
|
|
| ||||||||||
First quarter |
| $ | 20.05 |
|
| $ | 13.56 |
|
| $ | 63.99 |
|
| $ | 34.14 |
|
Second quarter |
| $ | 20.50 |
|
| $ | 15.49 |
|
| $ | 70.89 |
|
| $ | 44.06 |
|
Third quarter |
| $ | 22.03 |
|
| $ | 16.88 |
|
| $ | 56.00 |
|
| $ | 43.75 |
|
Fourth quarter |
| $ | 22.05 |
|
| $ | 15.10 |
|
| $ | 59.58 |
|
| $ | 46.10 |
|
2017 |
|
|
|
|
|
|
|
| ||||||||
2022 |
|
|
|
|
|
| ||||||||||
First quarter |
| $ | 23.50 |
|
| $ | 17.70 |
|
| $ | 61.06 |
|
| $ | 40.06 |
|
Second quarter |
| $ | 23.65 |
|
| $ | 17.60 |
|
| $ | 45.84 |
|
| $ | 35.10 |
|
Third quarter |
| $ | 20.02 |
|
| $ | 13.80 |
|
| $ | 44.03 |
|
| $ | 28.86 |
|
Fourth quarter (through November 30, 2017) |
| $ | 22.05 |
|
| $ | 15.05 |
| ||||||||
Fourth quarter (through November 14, 2022) |
| $ | 35.33 |
|
| $ | 27.40 |
|
On November 30, 2017,14, 2022, the closing sale price of our common stock was $21.35$33.85 per share. On November 30, 2017,14, 2022, there were approximately 10050 record holders and approximately 8,70022,000 beneficial owners of our common stock.
Dividends
We have never declared or paid cash dividends on our common stock. We currently plan to retain any earnings to finance the growth of our business rather than to pay cash dividends. Payments of any cash dividends in the future will depend on our financial condition, results of operations, statutory restrictions, loan covenants and capital requirements as well as other factors deemed relevant by our boardBoard of directorsDirectors (such as market expectations).
3836
Purchases of Equity Securities by the Issuer
The following table presents information with respect to our repurchases of our common stock during the three months ended September 30, 2017.2022.
Period |
| Total |
|
| Average |
|
| Total Number |
|
| Maximum Number of Shares that may be Purchased Under the Plans or Programs |
| ||||
July 1, 2022 to July 31, 2022 |
|
| — |
|
| $ | — |
|
|
| — |
|
|
| 8,919,764 |
|
August 1, 2022 to August 31, 2022 |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 8,919,764 |
|
September 1, 2022 to September 30, 2022 |
|
| 63,884 |
|
|
| 29.79 |
|
|
| — |
|
|
| 8,919,764 |
|
Total |
|
| 63,884 |
|
| $ | 29.79 |
|
|
| — |
|
|
| 8,919,764 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period |
| Total Number of Shares Purchased (1)(2) |
|
| 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 |
| ||||
July 1, 2017 to July 31, 2017 |
|
| 544,380 |
|
| $ | 14.64 |
|
|
| 544,380 |
|
|
| 290,445 |
|
August 1, 2017 to August 31, 2017 |
|
| 1,650,899 |
|
| $ | 15.67 |
|
|
| 1,650,899 |
|
|
| 639,546 |
|
September 1, 2017 to September 30, 2017 |
|
| 276,151 |
|
| $ | 15.80 |
|
|
| 252,417 |
|
|
| 387,129 |
|
Total |
|
| 2,471,430 |
|
| $ | 15.37 |
|
|
| 2,447,696 |
|
|
| 387,129 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3937
Performance Graph
The following line graph compares cumulative total stockholdershareholder returns for the five years ended September 30, 20172022 for (i) our common stock, (ii) the Russell 2000 Index, and (iii) the Nasdaq Retail Trade Index. The graph assumes an investment of $100 on September 30, 2012.2017. The calculations of cumulative stockholdershareholder return on the Russell 2000 Index and the Nasdaq Retail Trade Index include reinvestment of dividends. The calculation of cumulative stockholdershareholder return on our common stock does not include reinvestment of dividends because we did not pay any dividends during the measurement period. The historical performance shown is not necessarily indicative of future performance.
The performance graph above shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or Exchange Act, or otherwise subject to the liability of that section. The performance graph above will not be deemed incorporated by reference into any filing of our company under the Exchange Act or the Securities Act of 1933, as amended.
Item 6. Selected Financial Data
Not applicable.
4038
The following table contains certain financial and operating data and is qualified by the more detailed consolidated financial statements and notes thereto included elsewhere in this report. The balance sheet and statement of operations data were derived from the consolidated financial statements and notes thereto that have been audited by KPMG LLP. The financial data shown below should be read in conjunction with the consolidated financial statements and the related notes thereto and "Management's
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" included elsewhere in this report.Operations
|
| Fiscal Year Ended September 30, |
| |||||||||||||||||
|
| 2013 |
|
| 2014 |
|
| 2015 |
|
| 2016 |
|
| 2017 |
| |||||
|
| (Amounts in thousands except share, per share, and retail location data) |
| |||||||||||||||||
Statement of Operations Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
| $ | 584,497 |
|
| $ | 624,692 |
|
| $ | 751,370 |
|
| $ | 942,050 |
|
| $ | 1,052,320 |
|
Cost of sales |
|
| 433,644 |
|
|
| 462,872 |
|
|
| 566,603 |
|
|
| 716,022 |
|
|
| 787,005 |
|
Gross profit |
|
| 150,853 |
|
|
| 161,820 |
|
|
| 184,767 |
|
|
| 226,028 |
|
|
| 265,315 |
|
Selling, general, and administrative expenses |
| 132,505 |
|
| 146,433 |
|
|
| 159,435 |
|
|
| 185,776 |
|
|
| 220,026 |
| ||
Income from operations |
|
| 18,348 |
|
|
| 15,387 |
|
|
| 25,332 |
|
|
| 40,252 |
|
|
| 45,289 |
|
Interest expense, net |
|
| 4,218 |
|
|
| 4,024 |
|
|
| 4,454 |
|
|
| 5,462 |
|
|
| 7,481 |
|
Income before income tax provision (benefit) |
|
| 14,130 |
|
|
| 11,363 |
|
|
| 20,878 |
|
|
| 34,790 |
|
|
| 37,808 |
|
Income tax provision (benefit) |
|
| (894 | ) |
|
| 91 |
|
|
| (27,414 | ) |
|
| 12,208 |
|
|
| 14,261 |
|
Net income |
| $ | 15,024 |
|
| $ | 11,272 |
|
| $ | 48,292 |
|
| $ | 22,582 |
|
| $ | 23,547 |
|
Net income per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted |
| $ | 0.63 |
|
| $ | 0.46 |
|
| $ | 1.92 |
|
| $ | 0.91 |
|
| $ | 0.95 |
|
Weighted average number of shares: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted |
|
| 24,003,728 |
|
|
| 24,655,262 |
|
|
| 25,102,289 |
|
|
| 24,820,847 |
|
|
| 24,678,800 |
|
Other Data (as of year-end): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of retail locations (1) |
|
| 54 |
|
|
| 54 |
|
|
| 53 |
|
|
| 56 |
|
|
| 62 |
|
Sales per store (2) (4) |
| $ | 12,757 |
|
| $ | 12,658 |
|
| $ | 15,320 |
|
| $ | 18,539 |
|
| $ | 18,364 |
|
Same-store sales growth (3) (4) |
|
| 11 | % |
|
| 6 | % |
|
| 22 | % |
|
| 22 | % |
|
| 5 | % |
|
| September 30, |
| |||||||||||||||||||
|
| 2013 |
|
| 2014 |
|
| 2015 |
|
| 2016 |
|
|
|
| 2017 |
| |||||
Balance Sheet Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Working capital |
| $ | 116,439 |
|
| $ | 126,126 |
|
| $ | 152,414 |
|
| $ | 159,232 |
|
|
|
| $ | 139,069 |
|
Total assets |
|
| 381,902 |
|
|
| 402,681 |
|
|
| 467,622 |
|
|
| 546,688 |
|
|
|
|
| 639,990 |
|
Goodwill |
|
| 802 |
|
|
| 802 |
|
|
| 802 |
|
|
| 9,947 |
|
|
|
|
| 25,942 |
|
Total shareholders' equity |
|
| 221,812 |
|
|
| 239,295 |
|
|
| 283,645 |
|
|
| 312,473 |
|
|
|
|
| 302,198 |
|
|
|
|
|
|
|
|
|
41
The following should be read in conjunction with Part I, including the matters set forth in the “Risk Factors” section of this report, and our Consolidated Financial Statementsconsolidated financial statements and notes thereto included elsewhere in this report. This section of this Form 10-K generally discusses fiscal 2022 and 2021 items and year-to-year comparisons between fiscal 2022 and 2021. Discussions of fiscal 2020 items and year-to-year comparisons between fiscal 2021 and 2020 that are not included in this Form 10-K can be found in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2021.
Overview
We believe we are the largest recreational boat and yacht retailer and superyacht services company in the United States with fiscal 2017 revenue in excess of $1 billion.world. Through our current 6078 retail locations in 1621 states, (as of the filing of this Annual Report on 10-K), 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, as well asaccommodations. In the British Virgin Islands we offer the charter of powercatamarans, through MarineMax Vacations. We also own Fraser Yachts Group, a leading superyacht brokerage and sailing yachtsluxury yacht services company with operations in multiple countries, Northrop & Johnson, another leading superyacht brokerage and services company with operations in multiple countries, SkipperBud’s, one of the largest boat sales, brokerage, service and marina/storage groups in the British Virgin Islands.United States, Cruisers Yachts, a manufacturer of sport yacht and yachts with sales through our select retail dealership locations and through independent dealers. In November 2021, we acquired Intrepid Powerboats, a manufacturer of powerboats, and Texas MasterCraft, a 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. In August 2022, we expanded our presence in Texas by acquiring Endeavour Marina in Seabrook. In October 2022, we completed the acquisition of IGY Marinas.
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, as of the filing of this Annual Report on Form 10-K, acquired 2732 recreational boat dealers, twofive boat brokerage operations, and two full-service yacht repair facilities.operations, and two boat and yacht manufacturers. As a part of our acquisition strategy, we frequently engage in discussions with various recreational boat dealers 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 notwo acquisitions in the fiscal year ended September 30, 2015,2020, three acquisitions in the fiscal year ended September 30, 2016,2021, and one acquisitionfour acquisitions in the fiscal year ending September 30, 2017.2022.
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 dealerships, particularly Florida in which we generated approximately 53%54%, 55%50%, and 55%51% of our dealership revenue during fiscal 2015, 2016,2020, 2021, and 2017,2022, 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, has resulted in, and may further 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, or low consumer confidence or inflation is likely to have a negative effect on our business.
Lower consumer spending resulting from a downturnHistorically, in the housing market and other economic factors adversely affected our business in fiscal 2007, and continued weakness inperiods of lower consumer spending and depressed economic conditions, had a substantial negative effect on our business and industry for several years after fiscal 2007. These conditions caused us towe have, among other things, substantially reducereduced our acquisition program, delaydelayed new store openings, reducereduced our inventory purchases, engageengaged in inventory reduction efforts, closeclosed a number of our retail locations, reducereduced our headcount, and amendamended and replacereplaced our credit facility. Acquisitions and new store openings remain important strategies to our company, and we plan to accelerate our growth through these strategies as economic conditions continue to improve. However, we cannot predict the length of unfavorable economic or industry conditions or the extent to which they will continue to adversely affect our operating results nor can we predict the effectiveness of the measures we have taken to address this environment.
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
39
to address weak market conditions in the past have yielded, and willwe believe are likely to yield in the future, an increase in revenue. If general economic trends continueAcquisitions remain an important strategy for us, and, subject to improve,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 from the current economic environment with greater earnings potential.
42Effective 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 new reportable segments: Retail Operations and Product Manufacturing. See Note 21 of the Notes to Consolidated Financial Statements.
As of September 30, 2022, the Retail Operations segment includes the activity of 78 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 September 30, 2022, the Product Manufacturing segment includes activity of Cruisers Yachts and Intrepid Powerboats. 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 Powerboats, also a wholly-owned MarineMax subsidiary, is a producer of customized boats. Intrepid Powerboats 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
We have identified the policies below as critical to our business operations and the understanding of our results of operations. The impact and risks related to these policies on our business operations isare discussed throughout Management's“Management’s Discussion and Analysis of Financial Condition and Results of OperationsOperations” when such policies affect our reported and expected financial results.
In the ordinary course of business, we make a number of estimates and assumptions relating to the reporting of results of operations and financial condition in the preparation of our consolidated financial statements in conformity with accounting principles generally accepted in the United States. We base our estimates on historical experiences and on various other assumptions (including future earnings) that we believe are reasonable under the circumstances. The results of these assumptions form the basis for making judgments about the carrying values of assets and liabilities, including contingent assets and liabilities such as contingent consideration liabilities from acquisitions, which are not readily apparent from other sources. Actual results could differ significantly from those estimates under different assumptions and conditions. We believe that the following discussion addresses our most critical accounting policies, which are those that are most important to the portrayal of our financial condition and results of operations and require our most difficult, subjective, and complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain.
Revenue Recognition
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 partstrailer by the customer and service operationsthe 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, trailer, or part is delivered to or accepted by the customer or the service is completed. We recognize deferred revenue from service operations and slip and storage services on a straight-line basis over the term of the contract as services are completed.trailer. We recognize commissions earned from a brokerage sale at the timewhen the related brokerage transaction closes.closes upon transfer of control of the boat, motor, or trailer to the customer, which is generally upon acceptance by the customer.
40
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 consolidated financial statements taken as a whole as of September 30, 2021 and 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 marketing fees earned on credit, life, accident, disability, gap, and hull insurance products sold byon behalf of 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.
We recognize incomerevenue 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 rentalsparts and labor associated with the service. Payment for boat maintenance and repairs is typically due upon the completion of chartering powerthe service, which is generally completed within a short period of time from contract inception. We satisfy our performance obligations, transfer control, and sailing yachtsrecognize 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. Contract assets, recorded in prepaid expenses and other current assets, totaled approximately $5.7 million and $5.9 million as of September 30, 2021 and September 30, 2022, respectively.
We recognize revenue from service operations and slip and storage services over time on a straight-line basis over the term of the contract as servicesour performance obligations are completed.met. We also recognize commissions earnedrevenue from the rentals of chartering power yachts over time on extended warranty service contracts sold on behalfa straight-line basis over the term of third-party insurance companiesthe contract as our performance obligations are met.
Inventories
Inventories are stated at the laterlower of customer acceptancecost or net realizable value. The cost of the service contract terms as evidenced by contract execution or recognition of the related boat sale.
Certain finance and extended warranty commissions and marketing fees on insurance products may be charged back if a customer terminates or defaults on the underlying contract within a specified period of time. Based upon our experience of terminations and defaults, we maintain a chargeback allowance that was not material to our financial statements taken as a whole as of September 30, 2017. Should results differ materiallyinventories purchased from our historical experiences, we would need to modify our estimate of future chargebacks, which could have a material adverse effect on our operating margins. 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 our estimate of future chargebacks which would result in a material effect on our operating results.
Vendor Consideration Received
We account for consideration received from our vendors in accordance with FASB Accounting Standards Codification 605-50, “Revenue Recognition - Customer Payments and Incentives” (“ASC 605-50”). ASC 605-50 requires us to classify interest assistance received from manufacturers as a reduction of inventory cost and related cost of sales as opposed to netting the assistance against our interest expense incurred with our lenders. Pursuant to ASC 605-50, amounts received by us under our co-op assistance programs from our manufacturers are netted against related advertising expenses. Our consideration received from our vendors contains uncertainties because the calculation requires management to make assumptions and to apply judgment regarding a number of factors, including our ability to collect amounts due from vendors and the ability to meet certain criteria stipulated by our vendors. 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 our vendor considerations which would result in a material effect on our operating results.
43
Inventory costs 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. We state newTrade-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 boat, motor,boats, motors, and trailertrailers inventories at the lower of cost, determinedare accounted for on a specific-identification basis, or net realizable value. We statespecific identification basis. Raw materials and parts, accessories, and accessories at the lower of cost, determinedother inventories are accounted for on an average cost basis, or net realizable value.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 valuation allowance. Our lower of cost or net realizable value valuation allowance contains uncertainties because the calculation requires management to make assumptions and to apply judgment regarding the amount at which the inventory will ultimately be sold which considers forecasted market trends, model changes, and new product introductions. With the exception of inventory of $7.6 million in the British Virgin Islands damaged as a result of Hurricane Irma, wevalue. 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 ourthe lower of cost or net realizable value valuation allowance which would result in a material effect on our operating results. With respect to the inventory in the British Virgin Islands, given the damage from Hurricane Irma, we have estimated the net realizable value of the inventory as of September 30, 2017, however, we cannot be certain we have quantified the complete negative effects of the damage sustained, nor can we be certain that further damage will not be incurred upon the passage of time as repair work is performed. As of September 30, 2016 and September 30, 2017, our lower of cost or net realizable value valuation allowance for new and used boat, motor, and trailer inventories was $1.0 million and $1.8 million, respectively.value. If events occur and market conditions change, causing the fair value to fall below carrying value, the lower of cost or net realizable value valuation allowanceof our inventories could increase.change.
Goodwill
We account for acquisitions in accordance with FASB ASC 805, “Business Combinations” (“ASC 805”), and goodwill in accordance with FASB Accounting Standards CodificationASC 350, “Intangibles -— Goodwill and Other” (“ASC 350”), which provides that. For business combinations, the excess of costthe purchase price over the estimated fair value of net assets of businesses acquired in a business combination is recorded as goodwill. In April 2016 we purchased Russo Marine, a privately owned boat dealer in the Northeast United States with locations in Massachusetts and Rhode Island, resulting in the recording of $8.8 million in goodwill. In January 2017, we purchased Hall Marine Group, a privately owned boat dealer in the Southeast United States with locations in North Carolina, South Carolina, and Georgia, resulting in the recording of $16.0 million in goodwill. In total, current and previous acquisitions have resulted in the recording of $25.9 million in goodwill. In accordance with ASC 350, we reviewtest goodwill for impairment at least annually and whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Our annual impairment test is performed during the fourththird fiscal quarter. If the carrying amount of a reporting unit’s goodwill exceeds its fair value we would recognize an impairment loss in accordance with ASC 350. As of September 30, 2017, and basedBased upon our most recent analysis, we determined through our qualitative assessment that it is not “more likely than not” that the fair values of our reporting units are less than their carrying values. As a result, we weredid not required to perform the two-stepa quantitative goodwill impairment test. The qualitative assessment requires us to make judgments and assumptions regarding macroeconomic and industry conditions, our financial performance, and other factors. We do not believe there is a reasonable likelihood that there will be a change in the judgments and assumptions used in our qualitative assessment which would result in a material effect on our operating results.
Impairment of Long-Lived AssetsRecent Accounting Pronouncements
FASB Accounting Standards Codification 360-10-40, “Property, Plant, and Equipment - Impairment or Disposal of Long-Lived Assets” (“ASC 360-10-40”), requires that long-lived assets, such as property and equipment and purchased intangibles subject to amortization, be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. RecoverabilitySee Note 3 of the asset is measured by comparison of its carrying amountNotes to undiscounted future net cash flows the asset is expected to generate. If such assets are considered to be impaired, the impairment to be recognized is measured as the amount by which the carrying amount of the asset exceeds its fair market value. Estimates of expected future cash flows represent our best estimate based on currently available information and reasonable and supportable assumptions. Our impairment loss calculations contain uncertainties because they require us to make assumptions and to apply judgment in order to estimate expected future cash flows. Any impairment recognized in accordance with ASC 360-10-40 is permanent and may not be restored. The analysis is performed at a regional level for indicators of permanent impairment given the geographical interdependencies among our locations. Based upon our most recent analysis, which excludes fixed assets classified as held for sale which are recorded at fair value, we believe no impairment of long-lived assets existed as of September 30, 2017. We do not believe there is a reasonable likelihood that there will be a change in the future estimates or assumptions used to test for recoverability which would result in a material effect on our operating results.Consolidated Financial Statements.
4441
We account for our stock-based compensation plans following the provisions of FASB Accounting Standards Codification 718, “Compensation — Stock Compensation” (“ASC 718”). In accordance with ASC 718, we use the Black-Scholes valuation model for valuing all stock-based compensation and shares purchased under our Employee Stock Purchase Plan. We measure compensation for restricted stock awards and restricted stock units 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, net of estimated forfeitures, on a straight-line basis over the requisite service period for each separately vesting portion of the award. Our valuation models and generally accepted valuation techniques require us to make assumptions and to apply judgment to determine the fair value of our awards. These assumptions and judgments include estimating the volatility of our stock price, expected dividend yield, employee turnover rates and employee stock option exercise behaviors. 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 our stock-based compensation which would result in a material effect on our operating results.
Income Taxes
We account for income taxes in accordance with FASB Accounting Standards Codification 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.
Pursuant to ASC 740, we must consider all positive and negative evidence regarding the realization of deferred tax assets. ASC 740 provides for four possible sources of taxable income to realize deferred tax assets: 1) taxable income in prior carryback years, 2) reversals of existing deferred tax liabilities, 3) tax planning strategies and 4) projected future taxable income. As of September 30, 2017, we have no available taxable income in prior carryback years, limited reversals of existing deferred tax liabilities or prudent and feasible tax planning strategies. Therefore, the recoverability of our deferred tax assets is dependent upon generating future taxable income.
The determination of releasing valuation allowances against deferred tax assets is made, in part, pursuant to our assessment as to whether it is more likely than not that we will generate sufficient future taxable income against which benefits of the deferred tax assets may or may not be realized. Significant judgment is required in making estimates regarding our ability to generate income in future periods.
In the fourth quarter of fiscal 2016, we reached the conclusion that it was appropriate to release the majority of our valuation allowance against our state net operating loss deferred tax assets due to our operating performance in fiscal 2016 being greater than projected at fiscal 2015 year end. We considered forecasts of future operating results and the utilization of net operating losses within the statutory mandated carryforward periods and determined it was more likely than not that the majority of our state net operating loss deferred tax assets would be realized. As a result of the release of a portion of our deferred tax asset valuation allowance, we recorded an approximately $1.1 million reduction in our income tax provision. A portion of the valuation allowance was retained based on particular jurisdictions. Specifically, the valuation allowance was retained for states with a shorter statutory carryforward periods and states where our economic presence, as defined by the jurisdiction’s tax laws, has been reduced.
During the fourth quarter of fiscal 2017, the Company recorded a net tax benefit of $1.8 million primarily pertaining to a worthless stock deduction. The tax benefit of this deduction was primarily based on the write-off of the Company’s investment in its British Virgin Islands subsidiary for US tax purposes.
The application of income tax law is inherently complex. Laws and regulations in this area are voluminous and are often ambiguous. Under ASC 740, the impact of uncertain tax positions taken or expected to be taken on an income tax return must be recognized in the financial statements at the largest amount that is more likely than not to be sustained upon audit by the relevant taxing authority. An uncertain income tax position will not be recognized in the financial statements unless it is more likely than not of being sustained. As such, we are required to make subjective assumptions and judgments regarding our effective tax rate and our income tax exposure. Our effective income tax rate is affected by changes in tax law in the jurisdictions in which we currently operate, tax jurisdictions of new retail locations, our earnings, and the results of tax audits. We believe that the judgments and estimates discussed herein are reasonable.
45
Recent Accounting Pronouncements
In May 2014, the FASB issued Accounting Standards Update No. 2014-09, “Revenue from Contracts with Customers (Topic 606)” (“ASU 2014-09”), a converged standard on revenue recognition. The new pronouncement requires revenue recognition to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance also specifies the accounting for some costs to obtain or fulfill a contract with a customer, as well as enhanced disclosure requirements. ASU 2014-09 is effective for annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. Early adoption is permitted for annual reporting periods beginning after December 15, 2016. While we are continuing to evaluate the impact the adoption of ASU 2014-09 will have on our consolidated financial statements, we currently do not believe the adoption of this standard will have a material impact on our consolidated financial statements, or will cause a significant change to our current accounting policies or internal control over financial reporting for revenue recognition on boat, motor, and trailer sales, parts and service operations, brokerage commissions, slip and storage services, charter rentals, and fee income generated from finance and insurance products. We plan to adopt ASU 2014-09 in fiscal 2019.
In July 2015, the FASB issued ASU No. 2015-11, “Inventory (Topic 330)” (“ASU 2015-11”). The pronouncement was issued to simplify the measurement of inventory and change the measurement from lower of cost or market to lower of cost and net realizable value. This pronouncement is effective for reporting periods beginning after December 15, 2016. We elected to early adopt the new guidance in the first quarter of fiscal 2017. The adoption of ASU 2015-11 did not have an impact on the Company’s consolidated financial position, results of operations, or internal controls.
In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842)” (“ASU 2016-02”). This update requires organizations to recognize lease assets and lease liabilities on the balance sheet and also disclose key information about leasing arrangements. ASU 2016-02 is effective for annual reporting periods beginning on or after December 15, 2018, and interim periods within those annual periods. Earlier application is permitted for all entities as of the beginning of an interim or annual period. While we are continuing to evaluate the impact of the adoption of ASU 2016-02 on our consolidated financial statements, we believe the adoption of ASU 2016-02 may have a significant and material impact to our consolidated balance sheet given our current lease agreements for our leased retail locations. We are currently evaluating the impact the adoption of ASU 2016-02 will have on our other consolidated financial statements. Based on a preliminary assessment, we expect that most of our operating lease commitments will be subject to the new guidance and recognized as operating lease liabilities and right-of-use assets upon adoption, resulting in a material increase in the assets and liabilities recorded on our consolidated balance sheet. We are continuing our assessment, which may identify additional impacts this standard will have on our consolidated financial statements and related disclosures and internal control over financial reporting. We plan to adopt ASU 2016-02 in fiscal 2020.
In March 2016, the FASB issued ASU 2016-09, “Compensation – Stock Compensation (Topic 718)”, (ASU “2016-09”). This update was issued as part of the FASB’s simplification initiative and affects all entities that issue share-based payment awards to their employees. The amendments in this update cover such areas as the recognition of excess tax benefits and deficiencies, the classification of those excess tax benefits on the statement of cash flows, an accounting policy election for forfeitures, the amount an employer can withhold to cover income taxes and still qualify for equity classification and the classification of those taxes paid on the statement of cash flows. This update is effective for annual and interim periods beginning after December 15, 2016. We elected to early adopt the new guidance in the fourth quarter of fiscal year 2016 which required us to reflect any adjustments as of October 1, 2015, the beginning of the annual period that includes the interim period of adoption. The primary effect of adoption was the recognition of excess tax benefits in our provision for income taxes rather than paid-in capital for all periods in fiscal year 2016. This early adoption resulted in an approximately $5.2 million increase in deferred tax assets and retained earnings as of October 1, 2015, the beginning of fiscal year 2016. The recognition of excess tax benefits in our provision for income taxes rather than paid-in capital resulted in an income tax benefit of $257,000 for the fiscal year ended September 30, 2016.
In January 2017, the FASB issued ASU 2017-04, “Simplifying the Test for Goodwill Impairment (Topic 350)” (“ASU 2017-04”). This update removes the requirement to compare the implied fair value of goodwill with its carrying amount as part of step 2 of the goodwill impairment test. As a result, under ASU 2017-04, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount and should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the impairment loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. This guidance is effective prospectively for fiscal years beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed after January 1, 2017. The adoption of ASU 2017-04 is not expected to have a significant impact on the Company’s consolidated financial statements or internal control over financial reporting.
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The following table sets forth certain financial data as a percentage of revenue for the periods indicated:
|
| Fiscal Year Ended September 30, |
|
| Fiscal Year Ended September 30, |
| ||||||||||||||||||||||||||||||||||||||||||
|
| 2015 |
|
| 2016 |
|
| 2017 |
|
| 2020 |
|
| 2021 |
|
| 2022 |
| ||||||||||||||||||||||||||||||
|
| (Amounts in thousands) |
|
| (Amounts in thousands) |
| ||||||||||||||||||||||||||||||||||||||||||
Revenue |
| $ | 751,370 |
|
|
| 100.0 | % |
| $ | 942,050 |
|
|
| 100.0 | % |
| $ | 1,052,320 |
|
|
| 100.0 | % |
| $ | 1,509,713 |
|
|
| 100.0 | % |
| $ | 2,063,257 |
|
|
| 100.0 | % |
| $ | 2,308,098 |
|
|
| 100.0 | % |
Cost of sales |
|
| 566,603 |
|
|
| 75.4 | % |
|
| 716,022 |
|
|
| 76.0 | % |
|
| 787,005 |
|
|
| 74.8 | % |
|
| 1,111,000 |
|
|
| 73.6 | % |
|
| 1,403,824 |
|
|
| 68.0 | % |
|
| 1,502,344 |
|
|
| 65.1 | % |
Gross profit |
|
| 184,767 |
|
|
| 24.6 | % |
|
| 226,028 |
|
|
| 24.0 | % |
|
| 265,315 |
|
|
| 25.2 | % |
|
| 398,713 |
|
|
| 26.4 | % |
|
| 659,433 |
|
|
| 32.0 | % |
|
| 805,754 |
|
|
| 34.9 | % |
Selling, general, and administrative expenses |
|
| 159,435 |
|
|
| 21.2 | % |
|
| 185,776 |
|
|
| 19.7 | % |
|
| 220,026 |
|
|
| 20.9 | % | ||||||||||||||||||||||||
Selling, general and administrative expenses |
|
| 291,998 |
|
|
| 19.3 | % |
|
| 449,974 |
|
|
| 21.8 | % |
|
| 540,550 |
|
|
| 23.4 | % | ||||||||||||||||||||||||
Income from operations |
|
| 25,332 |
|
|
| 3.4 | % |
|
| 40,252 |
|
|
| 4.3 | % |
|
| 45,289 |
|
|
| 4.3 | % |
|
| 106,715 |
|
|
| 7.1 | % |
|
| 209,459 |
|
|
| 10.2 | % |
|
| 265,204 |
|
|
| 11.5 | % |
Interest expense |
|
| 4,454 |
|
|
| 0.6 | % |
|
| 5,462 |
|
|
| 0.6 | % |
|
| 7,481 |
|
|
| 0.7 | % |
|
| 9,275 |
|
|
| 0.6 | % |
|
| 3,665 |
|
|
| 0.2 | % |
|
| 3,283 |
|
|
| 0.2 | % |
Income before income taxes |
|
| 20,878 |
|
|
| 2.8 | % |
|
| 34,790 |
|
|
| 3.7 | % |
|
| 37,808 |
|
|
| 3.6 | % |
|
| 97,440 |
|
|
| 6.5 | % |
|
| 205,794 |
|
|
| 10.0 | % |
|
| 261,921 |
|
|
| 11.3 | % |
Income tax provision (benefit) |
|
| (27,414 | ) |
|
| -3.6 | % |
|
| 12,208 |
|
|
| 1.3 | % |
|
| 14,261 |
|
|
| 1.4 | % | ||||||||||||||||||||||||
Income tax provision |
|
| 22,806 |
|
|
| 1.5 | % |
|
| 50,815 |
|
|
| 2.5 | % |
|
| 63,932 |
|
|
| 2.7 | % | ||||||||||||||||||||||||
Net income |
| $ | 48,292 |
|
|
| 6.4 | % |
| $ | 22,582 |
|
|
| 2.4 | % |
| $ | 23,547 |
|
|
| 2.2 | % |
| $ | 74,634 |
|
|
| 5.0 | % |
| $ | 154,979 |
|
|
| 7.5 | % |
| $ | 197,989 |
|
|
| 8.6 | % |
Fiscal Year Ended September 30, 20172022, Compared with Fiscal Year Ended September 30, 20162021
Revenue. Revenue increased $110.3$244.8 million, or 11.7%11.9%, to $1.052approximately $2.308 billion for the fiscal year ended September 30, 20172022 from $942.1 million$2.063 billion for the fiscal year ended September 30, 2016.2021. Of this increase, $50.2$94.7 million was attributable to a 5% increase in comparable-store sales and an approximate $60.1$150.1 million net increase was related to stores opened, including acquired, or closed that were not eligible for inclusion in the comparable-store base.base, as well as Intrepid Powerboats and Cruisers Yachts manufacturing revenue which are not included in comparable retail store sales. The increase in our comparable-store sales was primarily due to incrementaldemand driven increases in new boat salesrevenue and incremental increases in brokerage sales, storage services,our higher margin finance and insurance products, brokerage, parts, service, revenue, parts revenue, and charter rentals. Improving industry conditions resulting from improved economic conditions contributed to our comparable-store sales growth.storage services.
Gross Profit. Gross profit increased $39.3$146.3 million, or 17.4%22.2%, to $265.3$805.8 million for the fiscal year ended September 30, 20172022 from $226.0$659.4 million for the fiscal year ended September 30, 2016.2021. Gross profit as a percentage of revenue increased to 25.2%34.9% for the fiscal year ended September 30, 20172022 from 24.0%32.0% for the fiscal year ended September 30, 2016.2021. The increase in gross profit as a percentage of revenue was primarily the result of improved margins ondemand driven price increases resulting in greater new and used boat margins and increases in our higher margin businesses, including our superyacht-services companies, as a percentage of sales. The increase in gross profit dollars was primarily attributable to the increase in our gross margins and increased new boat sales. Additionally, our higher margin service, parts and accessories products, storage, and charter services increased as a percentage of revenue, contributing to our overall margins increasing accordingly.
Selling, General and Administrative Expenses. Selling, general and administrative expenses increased $34.3$90.6 million, or 18.4%20.1%, to $220.0$540.6 million for the fiscal year ended September 30, 20172022 from $185.8$450.0 million for the fiscal year ended September 30, 2016.2021. Selling, general and administrative expenses for the fiscal year ended September 30, 20172022, included $2.9$4.8 million of expenses as a result of losses from Hurricane Irma.hurricane expenses. Excluding this item and making both years comparable,hurricane expenses, selling, general and administrative expenses increased $31.4 million, or 16.9%, to $217.1 million and as a percentage of revenue increased to 20.6%23.2% for the fiscal year ended September 30, 20172022 from 19.7%21.8% for the fiscal year ended September 30, 2016.2022. The increase in selling, general, and administrative expenses was primarily attributabledriven by an increase in mix to recentour higher margin businesses, which typically carry a higher expense structure, and acquisitions.
Interest Expense. Interest expense increased $2.0decreased $0.4 million, or 37.0%10.8%, to $7.5$3.3 million for the fiscal year ended September 30, 20172022, from $5.5$3.7 million for the fiscal year ended September 30, 2016. Interest expense as a percentage of revenue increased to 0.7% for the fiscal year ended September 30, 2017 from 0.6% for the fiscal year ended September 30, 2016. The increase in interest expense was primarily the result of increased borrowings and increases in interest rates.
Income Taxes. Income tax expense increased $2.1 million, or 16.8%, to $14.3 million for the fiscal year ended September 30, 2017 from $12.2 million for the fiscal year ended September 30, 2016. Our effective income tax rate was 37.7% for the fiscal year ended September 30, 2017, which included a net benefit of $1.8 million primarily pertaining to a worthless stock deduction. Our effective income tax rate was 35.1% for the fiscal year ended September 30, 2016, which included a deferred tax asset valuation allowance reversal of $1.1 million.
Fiscal Year Ended September 30, 2016 Compared with Fiscal Year Ended September 30, 2015
Revenue. Revenue increased $190.7 million, or 25.4%, to $942.1 million for the fiscal year ended September 30, 2016 from $751.4 million for the fiscal year ended September 30, 2015. Of this increase, $163.7 million was attributable to a 22% increase in comparable-store sales and an approximate $27.0 million net increase related to stores opened and closed that were not eligible for inclusion in the comparable-store base. The increase in our comparable-store sales was due to incremental increases in new and used
47
boat sales and incremental increases in brokerage sales, storage services, finance and insurance products, service revenue, and charter rentals. Improving industry conditions resulting from improved economic conditions contributed to our comparable-store sales growth.
Gross Profit. Gross profit increased $41.3 million, or 22.3%, to $226.0 million for the fiscal year ended September 30, 2016 from $184.8 million for the fiscal year ended September 30, 2015. Gross profit as a percentage of revenue decreased to 24.0% for the fiscal year ended September 30, 2016 from 24.6% for the fiscal year ended September 30, 2015. The strong growth in gross profit dollars was driven by increased boat sales. The increase in boat sales relative to our overall revenue caused our higher margin brokerage, finance and insurance products, service, parts and accessories products, and storage services to decrease as a percentage of revenue, contributing to our overall margins decreasing. We further saw an increase in larger boat sales which also generally carry lower gross margins. The increase in gross profit dollars was also primarily attributable to the increase in comparable-store sales.
Selling, General, and Administrative Expenses. Selling, general, and administrative expenses increased $26.3 million, or 16.5%, to $185.8 million for the fiscal year ended September 30, 2016 from $159.4 million for the fiscal year ended September 30, 2015. However, selling, general, and administrative expenses for the fiscal year ended September 30, 2015 were reduced by a $1.6 million gain on the sale of real estate. Selling, general, and administrative expenses as a percentage of revenue decreased to 19.7% for the fiscal year ended September 30, 2016 from 21.2% for the fiscal year ended September 30, 2015. The overall increase in selling, general, and administrative expenses was primarily attributable to increased personnel expenses as well as increased commissions resulting from increased boat sales. The decrease in selling, general, and administrative expenses as a percentage of revenue was primarily driven by improved expense leverage with increasing revenue.
Interest Expense. Interest expense increased $1.0 million, or 22.6%, to $5.5 million for the fiscal year ended September 30, 2016 from $4.5 million for the fiscal year ended September 30, 2015.2021. Interest expense as a percentage of revenue remained consistent at 0.6%0.2% for the fiscal year ended September 30, 20152022 and 2016. for the fiscal year ended September 30, 2021. The increasedecrease in interest expense was primarily the result of increased borrowings.decreased borrowings on average throughout the fiscal year.
Income Taxes. We had incomeIncome tax expense of $12.2increased $13.1 million, or 25.8%, to $63.9 million for the fiscal year ended September 30, 2016 compared with an income tax benefit of $27.42022 from $50.8 million for the fiscal year ended September 30, 2015. 2021. Our effective income tax rate was 35.1%decreased to 24.4% for the fiscal year ended September 30, 2016, which included a deferred tax asset valuation allowance reversal of $1.1 million.2022, from 24.7% for fiscal year ended September 30, 2021. The decrease in the effective income tax benefit in fiscal 2015 is the result of the reversal of substantially all of our deferred tax asset valuation allowance after determining itrate was more likely than not that certain deferred tax assets would be realized.primarily attributed to benefits from stock-based compensation.
Quarterly Data and Seasonality
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 and 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 business could become substantially more seasonal if we acquire additional dealers that operate in colder regions of the United States or close retail locations in warm climates.
42
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 and services.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.hurricanes, such as Hurricanes Harvey and Irma in 2017 and Hurricane Ian in 2022. Although we believe 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.
48
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 and new store openings.acquisitions. Acquisitions and new store openings remain an important strategies to our company,strategy for us, and we plan to acceleratecontinue our growth through these strategies as more robust economic conditions return.this strategy in appropriate circumstances. However, we cannot predict the length of unfavorablefavorable economic or financial conditions. We regularly monitor the aging of our inventories and current market trends 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 adequacy of our financing needs.
These cash needs historically have historically been financed with cash generated from operations and borrowings under the AmendedNew Credit Facility.Agreement (described below). Our ability to utilize the AmendedNew Credit FacilityAgreement to fund operations depends upon the collateral levels and compliance with the covenants of the AmendedNew Credit Facility. TurmoilAgreement. 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 AmendedNew Credit FacilityAgreement and therefore our ability to utilize the AmendedNew Credit FacilityAgreement to fund operations. As of September 30, 2017,2022, we were in compliance with all covenants under the AmendedNew Credit Facility.Agreement. We currently depend upon cash flows from operations, dividends and other payments from our dealerships, and the AmendedNew Credit FacilityAgreement to fund our current operations and meet our cash needs. As 100% owner of each of our dealerships, we determine the amounts of such distributions subject to applicable law, and currently, no agreements exist that restrict this flow of funds from our dealerships.
For the fiscal years ended September 30, 2017, 2016,2022, 2021 and 2015,2020, cash provided by operating activities approximated $4.7was approximately $76.6 million, $22.9$373.9 million, and $3.1$304.7 million, respectively. For the fiscal year ended September 30, 2017,2022, cash provided by operating activities was primarily related to increases in contract liabilities (customer deposits), accounts payable, accrued expenses and other liabilities, and our net income adjusted for non-cash expenses and gains such as depreciation and amortization expense, deferred income tax expense, stock basedprovision, and stock-based compensation expense, increases in accounts payable and accrued expenses, partially offset by an increaseincreases in inventory driven by the expansion of current and new brands, and decreases in customer deposits.inventory. For the fiscal year ended September 30, 2016,2021, cash provided by operating activities was primarily related to decreases in inventory, increases in contract liabilities (customer deposits), accrued expenses and other liabilities, and our net income adjusted for non-cash expenses and gains such as depreciation and amortization expense, deferred income tax expense, stock basedprovision, and stock-based compensation expense, increases in customer deposits and accrued expenses, partially offset by an increase in inventory driven by the expansion of current and new brands, decreases in accounts payable, and increases in accounts receivable.expense. For the fiscal year ended September 30, 2015,2020, cash provided by operating activities was primarily related to net incomedecreases in inventory, accounts receivable, increases in accrued expenses and an increaseother liabilities, increases in accounts payable, partially offset by an increase in inventory driven by the expansion of current and new brandsour net income adjusted for non-cash expenses and increases in accounts receivable.gains such as depreciation and amortization expense, deferred income tax provision, stock-based compensation expense, and insurance proceeds received.
For the fiscal years ended September 30, 2017, 2016,2022, 2021, and 2015,2020, cash used in investing activities was approximately $32.1$140.5 million, $29.7$161.1 million, and $3.8$30.1 million, respectively. For the fiscal year ended September 30, 2017,2022, cash used in investing activities was primarily used for acquisitions, to purchase property and equipment associated with business acquisitions and property and equipment associated with improving existing retail facilities.facilities, and to purchase investments, partially offset by proceeds from the sale of investments and property and equipment. For the fiscal year ended September 30, 2016,2021, cash used in investing activities was primarily used for acquisitions, to purchase property and equipment associated with business acquisitions and property and equipment associated with improving existing retail facilities.facilities, and to purchase investments, partially offset by proceeds from insurance settlements. For the fiscal year ended September 30, 2015,2020, cash used in investing activities was primarily used to purchase property and equipment associated with improving existing retail facilities and purchase property and equipment and other assets associated with business acquisitions.
For the fiscal year ended September 30, 2022, cash provided by financing activities was partially offset by the proceeds from the sale of real estate.
approximately $73.1 million. For the fiscal years ended September 30, 2017, 20162021 and 2015,2020, cash provided byused in financing activities was approximately $30.7 million, $12.9$145.7 million and $5.5$158.1 million, respectively. For the fiscal year ended September 30, 2017,2022, cash provided by financing activities was primarily attributable to increased 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, payments for long-term debt, payments for debt issuance costs, and contingent acquisition consideration payments. For the fiscal year ended September 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. For the fiscal year ended September 30, 2020, cash used in financing activities was primarily attributable to a decrease in net short-term borrowings as a result of increaseddecreased inventory levels, andrepurchase of common stock under the share repurchase program,
43
payments on tax withholdings for equity awards, partially offset by proceeds from the issuance of common stock from our stock basedstock-based compensation plans partially offset by the repurchase of common stock under the share repurchase program. For the fiscal year ended September 30, 2016, cash provided by financing activities was primarily attributable to net short-term borrowings as a result of increased inventory levels and proceeds from the issuance of common stock from our stock based compensation plans, partially offset by the repurchase of common stock under the share repurchase program. For the fiscal year ended September 30, 2015, cash provided by financing activities was primarily attributable to net short-term borrowings as a result of increased inventory levels and proceeds from the issuance of common stock from our stock based compensation plans, partially offset by the repurchase of common stock under the share repurchase program. long- term debt.
In May 2017,August 2022, we amended and restated our Inventory Financing Agreement (the “Amended Credit Facility”), originally entered into in June 2010,to a Credit Agreement with Manufacturers and Traders Trust Company as subsequently amended, withAdministrative Agent, Swingline Lender, and Issuing Bank, Wells Fargo Commercial Distribution Finance, LLC, (formerly GE Commercial Distribution Finance Corporation)as Floor Plan Agent, and the lenders party thereto (the “New Credit Agreement”). The May 2017 amendment and restatement extendedNew Credit Agreement provides the maturity dateCompany a line of the Credit Facility to October 2020, and the Amended Credit Facility includes two additional one-year extension periods,credit with lender approval. The May 2017 amendment and restatement, among other things, modified the amount ofasset based borrowing availability and maturity date of the Credit Facility. The Amended Credit Facility provides a floor plan financing commitment of up to $350.0$750 million an increase from the previous limit of $300.0 million, subject to borrowing base availability resulting from the amount and aging of our inventory.
49
The Amended Credit Facility has certain financial covenants as specifiedestablishes a revolving credit facility in the agreement.maximum amount of $100 million (including a $20 million swingline facility and a $20 million letter of credit sublimit), a delayed draw term loan facility to finance the acquisition of IGY Marinas in the maximum amount of $400 million, and a $100 million delayed draw mortgage loan facility. 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. maturity of each of the facilities is August 2027.
The interest rate is (a) for amounts outstanding under the Amended Credit Facility is 345 basis pointsfloor plan facility, 3.45% above the one-month London Inter-Bank Offering Rateone month secured term rate as administered by the CME Group Benchmark Administration Limited (CBA) (“LIBOR”SOFR”). There is an unused line fee, (b) for amounts outstanding under the revolving credit facility or the term loan facility, a range of ten basis points1.50% to 2.0%, depending on the unused portion oftotal net leverage ratio, above the Amended Credit Facility.
Advancesone month, three month, or six month term SOFR rate, and (c) for amounts outstanding under the Amended Credit Facility are initiated bymortgage loan facility, 2.20% above the acquisition of eligible newone month, three month, or six month term SOFR rate. The alternate base rate with a margin is available for amounts outstanding under the revolving credit, term, and used inventorymortgage loan facilities and the Euro Interbank Offered Rate plus a margin is available for borrowings in Euro 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 fromother currencies other than dollars under 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 Amended Credit Facility is all of our personal property with certain limited exceptions. None of our real estate has been pledged for collateral for the Amended Credit Facility.revolving credit facility.
As of September 30, 2017,2022, our indebtedness associated with financing our inventoryshort-term borrowings and working capital needsour long-term debt totaled approximately $254.2 million. As of September 30, 2016$135.1 million and 2017, the interest rate on the outstanding short-term borrowings was approximately 3.9% and 4.7%,$48.7 million, respectively. As of September 30, 2017, our additional available2022, short-term borrowings under our Amended Credit Facility wereand long-term debt recorded on the Consolidated Balance Sheets included unamortized debt issuance costs of approximately $52.8$3.1 million based uponand $0.5 million, respectively. Refer to Note 11 and 22 of the outstandingNotes to Consolidated Financial Statements for disclosure of borrowing base availability. The agingavailability, interest rates, terms of our inventory limits our borrowing capacity as defined curtailments reduceshort-term borrowings and long-term debt, and closing of the allowable advance rate as our inventory ages.IGY Marinas transaction in October 2022.
Except as specified in this "Management's“Management’s Discussion and Analysis of Financial Condition and Results of Operations"Operations” and in the attached condensed consolidated financial statements, we have no material commitments for capital for the next 12 months. WeBased on the information currently available to us, the COVID-19 pandemic’s impact on consumer demand is uncertain, however, we believe that the cash generated from sales and our existing capital resources will be sufficientadequate to financemeet our operationsliquidity and capital requirements for at least the next 12 months, except for possible significant acquisitions.
Commitments and Commercial Commitments
The following table sets forth a summary of our material contractual obligations and commercial commitments as of September 30, 2017:2022:
Year Ending September 30, |
| Short-Term Borrowings (1) |
|
| Other Liabilities (2) |
|
| Operating Leases (3) |
|
| Total |
| ||||
|
| (Amounts in thousands) |
| |||||||||||||
2018 |
| $ | 254,177 |
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| 4,603 |
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| 7,637 |
|
| $ | 266,417 |
|
2019 |
|
| — |
|
|
| 1,551 |
|
|
| 7,057 |
|
|
| 8,608 |
|
2020 |
|
| — |
|
|
| 1,351 |
|
|
| 7,069 |
|
|
| 8,420 |
|
2021 |
|
| — |
|
|
| — |
|
|
| 6,365 |
|
|
| 6,365 |
|
2022 |
|
| — |
|
|
| — |
|
|
| 5,264 |
|
|
| 5,264 |
|
Thereafter |
|
| — |
|
|
| — |
|
|
| 34,069 |
|
|
| 34,069 |
|
Total |
| $ | 254,177 |
|
| $ | 7,505 |
|
| $ | 67,461 |
|
| $ | 329,143 |
|
|
| Payments Due by Period Ending September 30, |
| |||||||||||||||||
|
| Total |
|
| Less Than 1 Year (2023) |
|
| 1-3 Years (2024 and 2025) |
|
| 3-5 Years (2026 and 2027) |
|
| More Than 5 Years (2028 and thereafter) |
| |||||
|
| (Amounts in thousands) |
| |||||||||||||||||
Short-term borrowings (1) |
| $ | 135,066 |
|
| $ | 135,066 |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
Long-term debt (2) |
|
| 48,693 |
|
|
| 2,882 |
|
|
| 5,764 |
|
|
| 9,764 |
|
|
| 30,283 |
|
Other liabilities (3) |
|
| 16,156 |
|
|
| 9,300 |
|
|
| 6,416 |
|
|
| 440 |
|
|
| — |
|
Operating leases (4) |
|
| 138,764 |
|
|
| 14,715 |
|
|
| 24,916 |
|
|
| 20,216 |
|
|
| 78,917 |
|
Total |
| $ | 338,679 |
|
| $ | 161,963 |
|
| $ | 37,096 |
|
| $ | 30,420 |
|
| $ | 109,200 |
|
| (1) Estimates of future interest payments for short-term borrowings have been excluded |
|
|
|
|
Off-Balance Sheet Arrangements
We do not have any transactions, arrangements, or other relationships with unconsolidated entities that are reasonably likely to affect our financial condition, liquidity, or capital resources. We have no special purpose or limited purpose entities that provide off-balance sheet financing, liquidity, or market or credit risk support; we do not engage in hedging, or research and development services; and we do not have other relationships that expose us to liability that is not reflected in the financial statements.
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Interest Rate Risk
Astabular presentation. Amounts due are contingent upon the outstanding balances and the variable interest rates. Refer to Note 11 of September 30, 2017, allthe Notes to Consolidated Financial Statements for disclosure of borrowing availability, interest rates, and terms of our short-term borrowings.
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Item 7A. Quantitative and Qualitative Disclosures about Market Risk
Interest Rate Risk
We are exposed to LIBOR as a reference rate.risk from changes in interest rates on our outstanding indebtedness. Changes in the underlying LIBOR interest raterates 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 on our short-term debt would result in an increase of approximately $2.5$1.7 million, $3.4 million, or $5.1 million in annual pre-tax interest expense. ThisThese estimated increase isincreases are based upon the outstanding balance of our short-term borrowings and long-term debt as of September 30, 20172022 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 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 2022.
Item 8. Financial Statements and Supplementary Data
Reference is made to the financial statements, the notes thereto, and the report thereon, commencing on page F-1 of this report, which financial statements, notes, and report are incorporated herein by reference.
Not applicable.Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A. 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 Securities and Exchange Commission’sSEC’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 September 30, 2017,2022, 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.reporting, except as described in the following sentence. On November 1, 2021, we acquired Intrepid Powerboats. As we proceed with integration, we are implementing various accounting processes and internal controls over financial reporting for this reporting subsidiary.
45
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
51
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.
Management’s Report on Internal Control over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) of the Securities Exchange Act of 1934. Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of the Company’s internal control over financial reporting as of September 30, 20172022 as required by the Securities Exchange Act of 1934 Rule 13a-15(c). In making this assessment, we used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control — Integrated Framework (2013). Based on its evaluation, our management concluded that its internal control over financial reporting was effective as of September 30, 2017.2022. The Company acquired JDG Undaunted, LLC ("Intrepid Powerboats"), during 2022. Management excluded from its assessment of the effectiveness of the Company’s internal control over financial reporting as of September 30, 2022 Intrepid Powerboats' internal control over financial reporting, which represented approximately 2% of total assets and 3% of total revenues included in the Company’s consolidated financial statements as of and for the year ended September 30, 2022.
Our internal control over financial reporting as of September 30, 20172022, has been audited by KPMG LLP, an independent registered public accounting firm, as stated in their report which appears herein.
5246
Report of Independent Registered Public Accounting Firm
TheTo the Shareholders and Board of Directors and Shareholders
MarineMax, Inc.:
Opinion on Internal Control Over Financial Reporting
We have audited MarineMax, Inc.’s and subsidiaries' (the Company) internal control over financial reporting as of September 30, 2017,2022, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). MarineMax, Inc.’sCommission. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of September 30, 2022, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of September 30, 2022 and 2021, the related consolidated statements of operations, comprehensive income, shareholders’ equity, and cash flows for each of the years in the three-year period ended September 30, 2022, and the related notes (collectively, the consolidated financial statements), and our report dated November 18, 2022 expressed an unqualified opinion on those consolidated financial statements.
The Company acquired JDG Undaunted, LLC (Intrepid Powerboats) during 2022. Management excluded from its assessment of the effectiveness of the Company’s internal control over financial reporting as of September 30, 2022, Intrepid Powerboats’ internal control over financial reporting associated with 2% of total assets and 3% of total revenues included in the consolidated financial statements of the Company as of and for the year ended September 30, 2022. Our audit of internal control over financial reporting of the Company also excluded an evaluation of the internal control over financial reporting of Intrepid Powerboats.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying management’s reportManagement’s Report on internal controlInternal Control over financial reporting.Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States).PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
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Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, MarineMax, Inc. maintained, in all material respects, effective internal control over financial reporting as of September 30, 2017, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of MarineMax, Inc. and subsidiaries as of September 30, 2016 and 2017, and the related consolidated statements of operations, shareholders’ equity, and cash flows for each of the years in the three-year period ended September 30, 2017, and our report dated December 6, 2017 expressed an unqualified opinion on those consolidated financial statements.
/s/ KPMG LLP
Tampa, Florida
November 18, 2022
December 6, 201748
Certified Public AccountantsItem 9B. Other Information
None.
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None.Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.
Not applicable.
Item 10. Directors, Executive Officers and Corporate Governance
The information required by this Item relating to our directors and corporate governance is incorporated herein by reference to the definitive Proxy Statement (particularly under the caption “Corporate Governance”) to be filed pursuant to Regulation 14A of the Exchange Act for our 20182023 Annual Meeting of Shareholders (the “2018“2023 Proxy Statement”). The information required by this Item relating to our executive officers is included in “Business — Executive Officers.”
We have adopted a code of ethics that applies to our principal executive officer, principal financial officer, and other senior accounting personnel. The “Code of Ethics for the CEO and Senior Financial Officers” is located on our website at www.MarineMax.com in the Investor Relations section under Corporate Governance.
We intend to satisfy the disclosure requirement under Item 5.05(c) of Form 8-K regarding any amendment to, or waiver from, a provision of this code of ethics by posting such information on our website, at the address and location specified above.
Item 11. Executive Compensation
The information required by this Item is incorporated herein by reference to the 20182023 Proxy Statement (particularly under the caption “Executive Compensation”).
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
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The information required by this Item is incorporated herein by reference to the 20182023 Proxy Statement (particularly under the caption “Security Ownership of Principal Shareholders, Directors, and Officers”).
The information required by this Item is incorporated herein by reference to the 20182023 Proxy Statement (particularly under the caption “Certain Relationships and Related Transactions”).
Item 14. Principal Accountant Fees and Services
The information required by this Item is incorporated herein by reference to the 20182023 Proxy Statement (particularly under the caption “Ratification of Appointment of Independent Auditor”).
49
Item 15. Exhibits, Financial Statement Schedules
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10.1* | ||
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10.1(e)* | ||
10.2* | Amended 2008 Employee Stock Purchase | |
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10.3(b)* | Form Restricted Stock Unit Award Agreement for 2011 Stock-Based Compensation Plan. (9) | |
10.4* | ||
10.5 | Sales and Service Agreement, dated October 30, 2020, between Registrant and Boston Whaler, Inc. (18) | |
10.6 | ||
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10.9 |
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101.INS |
| Inline XBRL Instance |
101.SCH |
| Inline XBRL Taxonomy Extension Schema Document. |
101.CAL |
| Inline XBRL Taxonomy Extension Calculation Linkbase Document. |
101.DEF |
| Inline XBRL Taxonomy Extension Definition Linkbase Document. |
101.LAB |
| Inline XBRL Taxonomy Extension Label Linkbase Document. |
101.PRE |
| Inline XBRL Taxonomy Extension Presentation Linkbase Document. |
104 | Cover Page Interactive Data File (embedded within the Inline XBRL document). |
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(c)Financial Statements Schedules
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† Certain information in this exhibit has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions where applicable.
* Management contract or compensatory plan or arrangement.
(1) Incorporated by reference to Registrant’s Form 8-K as filed February 26, 2015.
(2) Incorporated by reference to Registrant’s Form 8-K as filed March 20, 2015.
(3) Incorporated by reference to Registrant’s Form 10-K for the year ended September 30, 2021, as filed on November 19, 2021.
(4) Incorporated by reference to Registrant’s Form 10-K for the year ended September 30, 2019, as filed on November 29, 2018.
(5) Incorporated by reference to Registrant’s Form 10-Q for the quarterly period ended March 31, 2021, as filed on April 27,
5752
2021.
(6) Incorporated by reference to Registrant’s Form S-8 (File No. 333-236618) as filed February 25, 2020.
(7) Incorporated by reference to Registrant’s Form S-8 (File No. 333-236617) as filed February 25, 2020.
(8) Incorporated by reference to Registrant’s Form 8-K as filed on January 25, 2011.
(9) Incorporated by reference to Registrant’s Form 8-K as filed on December 9, 2005.
(10) Incorporated by reference to Registrant’s Form S-8 (File No. 333-264637) as filed May 3, 2022.
(11) Incorporated by reference to Registrant’s Form 10-K for the year ended September 30, 2014, as filed on December 11, 2014.
(12) Incorporated by reference to Registrant’s Form 10-Q for the quarterly period ended December 31, 2014, as filed on February 5,
2015.
(13) Incorporated by reference to Registrant’s Form 10-Q for the quarterly period ended June 30, 2020, as filed on July 28, 2020.
(14) Incorporated by reference to Registrant’s Form 10-Q for the quarterly period ended December 31, 2021, as filed on February 1,
2022.
(15) Incorporated by reference to Registrant’s Form S-8 (File No. 333-141657) as filed March 29, 2007.
(16) Incorporated by reference to Registrant’s Form 8-K as filed on November 27, 2012.
(17) Incorporated by reference to Registrant’s Form 10-K for the year ended September 30, 2013, as filed on December 6, 2013.
(18) Incorporated by reference to Registrant’s Form 10-K for the year ended September 30, 2020, as filed on December 2, 2020.
(19) Incorporated by reference to Registrant’s Form 10-Q for the quarterly period ended June 30, 2021, as filed on July 27, 2021.
(c) Financial Statement Schedules
(1) See Item 15(a) above.
53
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
| MARINEMAX, INC. |
|
|
| /s/ |
|
|
|
|
Date: December 6, 2017November 18, 2022
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature |
| Capacity |
| Date |
/s/ |
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/s/ Michael H. McLamb |
| Executive Vice President, Chief Financial Officer, Secretary and Director |
|
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Michael H. McLamb |
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| Executive Chairman of the Board, |
| November 18, 2022 |
William H. McGill Jr. |
| Director |
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|
/s/ Clint Moore |
| Lead Independent Director |
| |
Clint Moore |
|
| November 18, 2022 | |
/s/ George E. Borst | Director | November 18, 2022 | ||
George E. Borst | ||||
/s/ Hilliard M. Eure III |
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Hilliard M. Eure III |
| Director |
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/s/ |
|
Director |
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/s/ |
|
Director |
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/s/ |
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Director |
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/s/ Joseph A. Watters | Director | November 18, 2022 | ||
Joseph A. Watters | ||||
/s/ Rebecca White | ||||
Rebecca White | Director | November 18, 2022 | ||
/s/ Mercedes Romero | Director | November 18, 2022 | ||
Mercedes Romero | ||||
58
54
MARINEMAX, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
|
| Page |
CONSOLIDATED FINANCIAL STATEMENTS |
|
|
| F-2 | |
|
| |
|
| |
F-6 | ||
|
| |
|
| |
|
|
Report of Independent RegisteredRegistered Public Accounting Firm
TheTo the Shareholders and Board of Directors and Shareholders
MarineMax, Inc.:
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of MarineMax, Inc. and subsidiaries (the Company) as of September 30, 20172022 and 2016, and2021, the related consolidated statements of operations, comprehensive income, shareholders’ equity, and cash flows for each of the years in the three‑yearthree-year period ended September 30, 2017. 2022, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of September 30, 2022 and 2021, and the results of its operations and its cash flows for each of the years in the three-year period ended September 30, 2022, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of September 30, 2022, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated November 18, 2022 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includesmisstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence supportingregarding the amounts and disclosures in the consolidated financial statements. An auditOur audits also includes assessingincluded evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statement presentation.statements. We believe that our audits provide a reasonable basis for our opinion.
In our opinion,
F-2
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements referredthat was communicated or required to above present fairly,be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in all material respects, the financial position of MarineMax, Inc. and subsidiaries as of September 30, 2017 and 2016, and the results of their operations and their cash flows for each of the years in the three‑year period ended September 30, 2017, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), MarineMax, Inc.’s internal control over financial reporting as of September 30, 2017, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), andany way our report dated December 6, 2017, expressed an unqualified opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Fair Value of Trade-in Used Boats
As discussed in Note 2 to the consolidated financial statements, trade-in used boat inventory is initially measured at fair value and represents a form of noncash consideration applied to the contract price of a purchased boat. Management estimates the initial fair value of the trade-in used boat considering industry data sources; internal transactional data; and other external market data for comparable boats.
We identified the assessment of the initial fair value of the trade-in used boat inventory as a critical audit matter because a high degree of subjective auditor judgment was required to evaluate the external market data and internal transactional data. The external market data used in the estimation of the initial fair value is based on limited publicly available transactional and market data.
The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls related to the Company’s measurement of the initial fair value of trade-in used boats, including controls over the determination of the appropriate external market data and internal control over financial reporting.transactional data for comparable used boat sales. We compared publicly available external market data and internal transactional data to management’s determination of the fair value of trade-in used boats. We assessed management’s fair value estimation process by evaluating the relevance and reliability of the publicly available external market data and internal transactional data. We also performed an analysis of subsequent sales proceeds and margins from the third-party sale of the trade-in used boats.
/s/ KPMG LLP
We have served as the Company’s auditor since 2013.
Tampa, Florida
December 6, 2017November 18, 2022
Certified Public Accountants
F-2F-3
MARINEMAX, INC. AND SUBSIDIARIES
(Amounts in thousands except share and per share data)
|
| September 30, 2016 |
|
| September 30, 2017 |
|
| September 30, 2021 |
|
| September 30, 2022 |
| ||||
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
| |||
CURRENT ASSETS: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Cash and cash equivalents |
| $ | 38,585 |
|
| $ | 41,952 |
|
| $ | 222,192 |
|
| $ | 228,274 |
|
Accounts receivable, net |
|
| 24,583 |
|
|
| 24,661 |
|
|
| 47,651 |
|
|
| 50,287 |
|
Inventories, net |
|
| 321,978 |
|
|
| 401,301 |
|
|
| 230,984 |
|
|
| 454,359 |
|
Prepaid expenses and other current assets |
|
| 5,965 |
|
|
| 5,842 |
|
|
| 16,692 |
|
|
| 21,077 |
|
Total current assets |
|
| 391,111 |
|
|
| 473,756 |
|
|
| 517,519 |
|
|
| 753,997 |
|
Property and equipment, net |
|
| 121,353 |
|
|
| 127,160 |
|
|
| 175,463 |
|
|
| 246,011 |
|
Goodwill and other long-term assets, net |
|
| 13,149 |
|
|
| 30,305 |
| ||||||||
Deferred tax assets, net |
|
| 21,075 |
|
|
| 8,769 |
| ||||||||
Operating lease right-of-use assets, net |
|
| 104,901 |
|
|
| 96,837 |
| ||||||||
Goodwill |
|
| 195,563 |
|
|
| 235,585 |
| ||||||||
Other intangible assets, net |
|
| 5,559 |
|
|
| 10,886 |
| ||||||||
Other long-term assets |
|
| 8,818 |
|
|
| 9,455 |
| ||||||||
Total assets |
| $ | 546,688 |
|
| $ | 639,990 |
|
| $ | 1,007,823 |
|
| $ | 1,352,771 |
|
LIABILITIES AND SHAREHOLDERS' EQUITY |
|
|
|
|
|
|
|
| ||||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY |
|
|
|
|
| |||||||||||
CURRENT LIABILITIES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Accounts payable |
| $ | 9,597 |
|
| $ | 26,432 |
|
| $ | 25,739 |
|
| $ | 34,342 |
|
Customer deposits |
|
| 30,129 |
|
|
| 21,032 |
| ||||||||
Contract liabilities (customer deposits) |
|
| 100,660 |
|
|
| 144,427 |
| ||||||||
Accrued expenses |
|
| 25,603 |
|
|
| 33,046 |
|
|
| 86,594 |
|
|
| 89,402 |
|
Short-term borrowings |
|
| 166,550 |
|
|
| 254,177 |
|
|
| 23,943 |
|
|
| 132,026 |
|
Current maturities on long-term debt |
|
| 3,587 |
|
|
| 2,882 |
| ||||||||
Current operating lease liabilities |
|
| 10,570 |
|
|
| 9,693 |
| ||||||||
Total current liabilities |
|
| 231,879 |
|
|
| 334,687 |
|
|
| 251,093 |
|
|
| 412,772 |
|
Long-term liabilities |
|
| 2,336 |
|
|
| 3,105 |
| ||||||||
Long-term debt, net of current maturities |
|
| 47,498 |
|
|
| 45,301 |
| ||||||||
Noncurrent operating lease liabilities |
|
| 96,956 |
|
|
| 89,657 |
| ||||||||
Deferred tax liabilities, net |
|
| 9,268 |
|
|
| 15,401 |
| ||||||||
Other long-term liabilities |
|
| 8,116 |
|
|
| 6,974 |
| ||||||||
Total liabilities |
|
| 234,215 |
|
|
| 337,792 |
|
|
| 412,931 |
|
|
| 570,105 |
|
COMMITMENTS AND CONTINGENCIES |
|
|
|
|
|
|
|
| ||||||||
SHAREHOLDERS' EQUITY: |
|
|
|
|
|
|
|
| ||||||||
Preferred stock, $.001 par value, 1,000,000 shares authorized, none issued or outstanding as of September 30, 2016 and 2017 |
|
| — |
|
|
| — |
| ||||||||
Common stock, $.001 par value; 40,000,000 shares authorized, 25,977,632 and 26,314,066 shares issued and 24,285,616 and 21,887,579 shares outstanding as of September 30, 2016 and 2017, respectively |
|
| 26 |
|
|
| 26 |
| ||||||||
COMMITMENTS AND CONTINGENCIES (Note 19) |
|
|
|
|
|
| ||||||||||
SHAREHOLDERS’ EQUITY: |
|
|
|
|
|
| ||||||||||
Preferred stock, $.001 par value, 1,000,000 shares authorized, |
|
| — |
|
|
| — |
| ||||||||
Common stock, $.001 par value; 40,000,000 shares authorized, 28,588,863 |
|
| 29 |
|
|
| 29 |
| ||||||||
Additional paid-in capital |
|
| 241,058 |
|
|
| 249,974 |
|
|
| 288,901 |
|
|
| 303,432 |
|
Accumulated other comprehensive income (loss) |
|
| 648 |
|
|
| (2,806 | ) | ||||||||
Retained earnings |
|
| 103,212 |
|
|
| 126,759 |
|
|
| 432,678 |
|
|
| 630,667 |
|
Treasury stock, at cost, 1,692,016 and 4,426,487 shares held as of September 30, 2016 and 2017, respectively |
|
| (31,823 | ) |
|
| (74,561 | ) | ||||||||
Total shareholders' equity |
|
| 312,473 |
|
|
| 302,198 |
| ||||||||
Total liabilities and shareholders' equity |
| $ | 546,688 |
|
| $ | 639,990 |
| ||||||||
Treasury stock, at cost, 6,767,021 and 7,267,021 shares held as of |
|
| (127,364 | ) |
|
| (148,656 | ) | ||||||||
Total shareholders’ equity |
|
| 594,892 |
|
|
| 782,666 |
| ||||||||
Total liabilities and shareholders’ equity |
| $ | 1,007,823 |
|
| $ | 1,352,771 |
|
See accompanying notes to consolidated financial statements.
F-3F-4
MARINEMAX, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands except share and per share data)
|
| For the Year Ended September 30, |
|
| For the Year Ended September 30, |
| ||||||||||||||||||
|
| 2015 |
|
| 2016 |
|
| 2017 |
|
| 2020 |
|
| 2021 |
|
| 2022 |
| ||||||
Revenue |
| $ | 751,370 |
|
| $ | 942,050 |
|
| $ | 1,052,320 |
|
| $ | 1,509,713 |
|
| $ | 2,063,257 |
|
| $ | 2,308,098 |
|
Cost of sales |
|
| 566,603 |
|
|
| 716,022 |
|
|
| 787,005 |
|
|
| 1,111,000 |
|
|
| 1,403,824 |
|
|
| 1,502,344 |
|
Gross profit |
|
| 184,767 |
|
|
| 226,028 |
|
|
| 265,315 |
|
|
| 398,713 |
|
|
| 659,433 |
|
|
| 805,754 |
|
Selling, general, and administrative expenses |
|
| 159,435 |
|
|
| 185,776 |
|
|
| 220,026 |
| ||||||||||||
Selling, general and administrative expenses |
|
| 291,998 |
|
|
| 449,974 |
|
|
| 540,550 |
| ||||||||||||
Income from operations |
|
| 25,332 |
|
|
| 40,252 |
|
|
| 45,289 |
|
|
| 106,715 |
|
|
| 209,459 |
|
|
| 265,204 |
|
Interest expense |
|
| 4,454 |
|
|
| 5,462 |
|
|
| 7,481 |
|
|
| 9,275 |
|
|
| 3,665 |
|
|
| 3,283 |
|
Income before income tax provision (benefit) |
|
| 20,878 |
|
|
| 34,790 |
|
|
| 37,808 |
| ||||||||||||
Income tax provision (benefit) |
|
| (27,414 | ) |
|
| 12,208 |
|
|
| 14,261 |
| ||||||||||||
Income before income tax provision |
|
| 97,440 |
|
|
| 205,794 |
|
|
| 261,921 |
| ||||||||||||
Income tax provision |
|
| 22,806 |
|
|
| 50,815 |
|
|
| 63,932 |
| ||||||||||||
Net income |
| $ | 48,292 |
|
| $ | 22,582 |
|
| $ | 23,547 |
|
| $ | 74,634 |
|
| $ | 154,979 |
|
| $ | 197,989 |
|
Basic net income per common share |
| $ | 1.97 |
|
| $ | 0.93 |
|
|
| 0.98 |
|
| $ | 3.46 |
|
| $ | 7.04 |
|
| $ | 9.12 |
|
Diluted net income per common share |
| $ | 1.92 |
|
| $ | 0.91 |
|
| $ | 0.95 |
|
| $ | 3.37 |
|
| $ | 6.78 |
|
| $ | 8.84 |
|
Weighted average number of common shares used in computing net income per common share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Basic |
|
| 24,466,243 |
|
|
| 24,203,947 |
|
|
| 23,966,611 |
|
|
| 21,547,665 |
|
|
| 22,010,130 |
|
|
| 21,706,225 |
|
Diluted |
|
| 25,102,289 |
|
|
| 24,820,847 |
|
|
| 24,678,800 |
|
|
| 22,125,338 |
|
|
| 22,859,498 |
|
| �� | 22,399,209 |
|
See accompanying notes to consolidated financial statements.
F-4F-5
MARINEMAX, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITYCOMPREHENSIVE INCOME
(Amounts in thousands except share data)thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Additional |
|
|
|
|
|
|
|
|
|
| Total |
| ||
|
| Common Stock |
|
| Paid-in |
|
| Retained |
|
| Treasury |
|
| Shareholders’ |
| |||||||||
|
| Shares |
|
| Amount |
|
| Capital |
|
| Earnings |
|
| Stock |
|
| Equity |
| ||||||
BALANCE, September 30, 2014 |
|
| 25,002,807 |
|
| $ | 25 |
|
| $ | 227,939 |
|
| $ | 27,141 |
|
| $ | (15,810 | ) |
| $ | 239,295 |
|
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 48,292 |
|
|
| — |
|
|
| 48,292 |
|
Purchase of treasury stock |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (10,482 | ) |
|
| (10,482 | ) |
Shares issued pursuant to employee stock purchase plan |
|
| 48,987 |
|
|
| — |
|
|
| 669 |
|
|
| — |
|
|
| — |
|
|
| 669 |
|
Shares issued upon vesting of equity awards, net of minimum tax withholding |
|
| 3,340 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| - |
|
Shares issued upon exercise of stock options |
|
| 477,631 |
|
|
| 1 |
|
|
| 3,045 |
|
|
| — |
|
|
| — |
|
|
| 3,046 |
|
Stock-based compensation |
|
| 30,229 |
|
|
| — |
|
|
| 3,018 |
|
|
| — |
|
|
| — |
|
|
| 3,018 |
|
Stock option tax benefit, net of shortfalls |
|
| — |
|
|
| — |
|
|
| (193 | ) |
|
| — |
|
|
| — |
|
|
| (193 | ) |
BALANCE, September 30, 2015 |
|
| 25,562,994 |
|
| $ | 26 |
|
| $ | 234,478 |
|
| $ | 75,433 |
|
| $ | (26,292 | ) |
| $ | 283,645 |
|
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 22,582 |
|
|
| — |
|
|
| 22,582 |
|
Adjustment to adopt ASU 2016-09 |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 5,197 |
|
|
| — |
|
|
| 5,197 |
|
Purchase of treasury stock |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (5,531 | ) |
|
| (5,531 | ) |
Shares issued pursuant to employee stock purchase plan |
|
| 68,495 |
|
|
| — |
|
|
| 823 |
|
|
| — |
|
|
| — |
|
|
| 823 |
|
Shares issued upon vesting of equity awards, net of minimum tax withholding |
|
| 36,546 |
|
|
| — |
|
|
| (362 | ) |
|
| — |
|
|
| — |
|
|
| (362 | ) |
Shares issued upon exercise of stock options |
|
| 272,510 |
|
|
| — |
|
|
| 1,878 |
|
|
| — |
|
|
| — |
|
|
| 1,878 |
|
Stock-based compensation |
|
| 37,087 |
|
|
| — |
|
|
| 4,241 |
|
|
| — |
|
|
| — |
|
|
| 4,241 |
|
BALANCE, September 30, 2016 |
|
| 25,977,632 |
|
| $ | 26 |
|
| $ | 241,058 |
|
| $ | 103,212 |
|
| $ | (31,823 | ) |
| $ | 312,473 |
|
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 23,547 |
|
|
| — |
|
|
| 23,547 |
|
Purchase of treasury stock |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (42,738 | ) |
|
| (42,738 | ) |
Shares issued pursuant to employee stock purchase plan |
|
| 51,697 |
|
|
| — |
|
|
| 887 |
|
|
| — |
|
|
| — |
|
|
| 887 |
|
Shares issued upon vesting of equity awards, net of minimum tax withholding |
|
| 56,539 |
|
|
| — |
|
|
| (479 | ) |
|
| — |
|
|
| — |
|
|
| (479 | ) |
Shares issued upon exercise of stock options |
|
| 184,931 |
|
|
| — |
|
|
| 2,271 |
|
|
| — |
|
|
| — |
|
|
| 2,271 |
|
Stock-based compensation |
|
| 43,267 |
|
|
| — |
|
|
| 6,237 |
|
|
| — |
|
|
| — |
|
|
| 6,237 |
|
BALANCE, September 30, 2017 |
|
| 26,314,066 |
|
| $ | 26 |
|
| $ | 249,974 |
|
| $ | 126,759 |
|
| $ | (74,561 | ) |
| $ | 302,198 |
|
|
| For the Year Ended September 30, |
| |||||||||
|
| 2020 |
|
| 2021 |
|
| 2022 |
| |||
Net income |
| $ | 74,634 |
|
| $ | 154,979 |
|
| $ | 197,989 |
|
|
|
|
|
|
|
|
|
|
| |||
Other comprehensive income (loss), net of tax: |
|
|
|
|
|
|
|
|
| |||
Foreign currency translation adjustments |
|
| 1,498 |
|
|
| (300 | ) |
|
| (4,476 | ) |
Interest rate swap contract |
|
| — |
|
|
| 119 |
|
|
| 1,022 |
|
Total other comprehensive income (loss), net of tax |
|
| 1,498 |
|
|
| (181 | ) |
|
| (3,454 | ) |
|
|
|
|
|
|
|
|
|
| |||
Comprehensive income |
| $ | 76,132 |
|
| $ | 154,798 |
|
| $ | 194,535 |
|
See accompanying notes to consolidated financial statements.
F-5F-6
MARINEMAX, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(Amounts in thousands except share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
|
|
|
|
|
|
| Accumulated |
|
|
|
|
|
|
|
|
|
| ||||||||||
|
|
|
|
|
|
|
| Additional |
|
| Other |
|
|
|
|
|
|
|
| Total |
| |||||||
|
| Common Stock Issued |
|
| Paid-in |
|
| Comprehensive |
|
| Retained |
|
| Treasury |
|
| Shareholders’ |
| ||||||||||
|
| Shares |
|
| Amount |
|
| Capital |
|
| (Loss) Income |
|
| Earnings |
|
| Stock |
|
| Equity |
| |||||||
BALANCE, September 30, 2019 |
|
| 27,508,473 |
|
| $ | 28 |
|
| $ | 269,969 |
|
| $ | (669 | ) |
| $ | 202,455 |
|
| $ | (102,964 | ) |
| $ | 368,819 |
|
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 74,634 |
|
|
| — |
|
|
| 74,634 |
|
Purchase of treasury stock |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (631 | ) |
|
| (631 | ) |
Shares issued pursuant to employee stock |
|
| 94,741 |
|
|
| — |
|
|
| 1,004 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1,004 |
|
Shares issued upon vesting of equity awards, |
|
| 228,304 |
|
|
| — |
|
|
| (1,659 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (1,659 | ) |
Shares issued upon exercise of stock options |
|
| 286,702 |
|
|
| — |
|
|
| 3,625 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 3,625 |
|
Stock-based compensation |
|
| 12,092 |
|
|
| — |
|
|
| 7,497 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 7,497 |
|
Other comprehensive income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1,498 |
|
|
| — |
|
|
| — |
|
|
| 1,498 |
|
Cumulative effect of change in accounting |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 610 |
|
|
| — |
|
|
| 610 |
|
BALANCE, September 30, 2020 |
|
| 28,130,312 |
|
| $ | 28 |
|
| $ | 280,436 |
|
| $ | 829 |
|
| $ | 277,699 |
|
| $ | (103,595 | ) |
| $ | 455,397 |
|
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 154,979 |
|
|
| — |
|
|
| 154,979 |
|
Purchase of treasury stock |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (23,769 | ) |
|
| (23,769 | ) |
Shares issued pursuant to employee stock |
|
| 121,984 |
|
|
| — |
|
|
| 1,578 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1,578 |
|
Shares issued upon vesting of equity awards, |
|
| 254,521 |
|
|
| 1 |
|
|
| (3,910 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (3,909 | ) |
Shares issued upon exercise of stock options |
|
| 77,079 |
|
|
| — |
|
|
| 1,048 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1,048 |
|
Stock-based compensation |
|
| 4,967 |
|
|
| — |
|
|
| 9,749 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 9,749 |
|
Other comprehensive loss |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (181 | ) |
|
| — |
|
|
| — |
|
|
| (181 | ) |
BALANCE, September 30, 2021 |
|
| 28,588,863 |
|
| $ | 29 |
|
| $ | 288,901 |
|
| $ | 648 |
|
| $ | 432,678 |
|
| $ | (127,364 | ) |
| $ | 594,892 |
|
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 197,989 |
|
|
| — |
|
|
| 197,989 |
|
Purchase of treasury stock |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (21,292 | ) |
|
| (21,292 | ) |
Shares issued pursuant to employee stock |
|
| 52,232 |
|
|
| — |
|
|
| 1,945 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1,945 |
|
Shares issued upon vesting of equity awards, |
|
| 262,449 |
|
|
| — |
|
|
| (3,681 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (3,681 | ) |
Shares issued upon exercise of stock options |
|
| 32,500 |
|
|
| — |
|
|
| 254 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 254 |
|
Stock-based compensation |
|
| 3,802 |
|
|
| — |
|
|
| 16,013 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 16,013 |
|
Other comprehensive loss |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (3,454 | ) |
|
| — |
|
|
| — |
|
|
| (3,454 | ) |
BALANCE, September 30, 2022 |
|
| 28,939,846 |
|
| $ | 29 |
|
| $ | 303,432 |
|
| $ | (2,806 | ) |
| $ | 630,667 |
|
| $ | (148,656 | ) |
| $ | 782,666 |
|
See accompanying notes to consolidated financial statements.
F-7
MARINEMAX, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
|
| For the Year Ended September 30, |
|
| For the Year Ended September 30, |
| ||||||||||||||||||
|
| 2015 |
|
| 2016 |
|
| 2017 |
|
| 2020 |
|
| 2021 |
|
| 2022 |
| ||||||
CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Net income |
| $ | 48,292 |
|
| $ | 22,582 |
|
| $ | 23,547 |
|
| $ | 74,634 |
|
| $ | 154,979 |
|
| $ | 197,989 |
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Adjustments to reconcile net income to net cash (used in) provided by |
|
|
|
|
|
|
|
|
| |||||||||||||||
Depreciation and amortization |
|
| 7,858 |
|
|
| 7,964 |
|
|
| 9,364 |
|
|
| 12,772 |
|
|
| 15,606 |
|
|
| 19,418 |
|
Deferred income tax provision (benefit) |
|
| (27,710 | ) |
|
| 11,639 |
|
|
| 12,306 |
| ||||||||||||
(Gain) loss on sale of property and equipment and assets held for sale |
|
| (1,846 | ) |
|
| 51 |
|
|
| 306 |
| ||||||||||||
Stock-based compensation expense, net |
|
| 3,018 |
|
|
| 4,241 |
|
|
| 6,237 |
| ||||||||||||
(Increase) Decrease in — |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Deferred income tax provision, net of effects of acquisitions |
|
| 3,157 |
|
|
| 4,759 |
|
|
| 2,149 |
| ||||||||||||
Loss from hurricane |
|
| — |
|
|
| — |
|
|
| 4,800 |
| ||||||||||||
Loss (gain) on sale of property and equipment |
|
| 366 |
|
|
| — |
|
|
| (108 | ) | ||||||||||||
Proceeds from insurance settlements |
|
| 703 |
|
|
| 941 |
|
|
| — |
| ||||||||||||
Stock-based compensation expense |
|
| 7,497 |
|
|
| 9,749 |
|
|
| 16,013 |
| ||||||||||||
(Increase) decrease in, net of effects of acquisitions — |
|
|
|
|
|
|
|
|
| |||||||||||||||
Accounts receivable, net |
|
| (5,927 | ) |
|
| (5,436 | ) |
|
| 266 |
|
|
| 2,584 |
|
|
| (627 | ) |
|
| (563 | ) |
Inventories, net |
|
| (29,724 | ) |
|
| (32,417 | ) |
|
| (57,107 | ) |
|
| 179,466 |
|
|
| 139,833 |
|
|
| (198,018 | ) |
Prepaid expenses and other assets |
|
| 738 |
|
|
| (1,517 | ) |
|
| (1,710 | ) |
|
| 101 |
|
|
| (1,862 | ) |
|
| (4,259 | ) |
(Decrease) Increase in — |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
(Decrease) increase in, net of effects of acquisitions — |
|
|
|
|
|
|
|
|
| |||||||||||||||
Accounts payable |
|
| 5,687 |
|
|
| (4,278 | ) |
|
| 16,835 |
|
|
| 2,887 |
|
|
| (16,128 | ) |
|
| 7,358 |
|
Customer deposits |
|
| 1,752 |
|
|
| 16,625 |
|
|
| (9,341 | ) | ||||||||||||
Accrued expenses and long-term liabilities |
|
| 931 |
|
|
| 3,409 |
|
|
| 4,042 |
| ||||||||||||
Contract liabilities (customer deposits) |
|
| 7,411 |
|
|
| 60,960 |
|
|
| 26,273 |
| ||||||||||||
Accrued expenses and other liabilities |
|
| 13,097 |
|
|
| 5,671 |
|
|
| 5,543 |
| ||||||||||||
Net cash provided by operating activities |
|
| 3,069 |
|
|
| 22,863 |
|
|
| 4,745 |
|
|
| 304,675 |
|
|
| 373,881 |
|
|
| 76,595 |
|
CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Purchases of property and equipment |
|
| (9,746 | ) |
|
| (12,913 | ) |
|
| (14,367 | ) |
|
| (12,807 | ) |
|
| (26,125 | ) |
|
| (58,456 | ) |
Net cash used in acquisition of businesses |
|
| — |
|
|
| (17,062 | ) |
|
| (18,725 | ) | ||||||||||||
Proceeds from sale of property and equipment and assets held for sale |
|
| 5,995 |
|
|
| 228 |
|
|
| 994 |
| ||||||||||||
Proceeds from insurance settlements |
|
| — |
|
|
| 1,099 |
|
|
| — |
| ||||||||||||
Cash used in acquisition of businesses, net of cash acquired |
|
| (19,766 | ) |
|
| (134,205 | ) |
|
| (83,198 | ) | ||||||||||||
Proceeds from investments |
|
| — |
|
|
| — |
|
|
| 2,250 |
| ||||||||||||
Purchases of investments |
|
| — |
|
|
| (2,250 | ) |
|
| (1,750 | ) | ||||||||||||
Proceeds from sale of property and equipment |
|
| 2,464 |
|
|
| 350 |
|
|
| 703 |
| ||||||||||||
Net cash used in investing activities |
|
| (3,751 | ) |
|
| (29,747 | ) |
|
| (32,098 | ) |
|
| (30,109 | ) |
|
| (161,131 | ) |
|
| (140,451 | ) |
CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Net borrowings on short-term borrowings |
|
| 12,762 |
|
|
| 15,768 |
|
|
| 70,819 |
| ||||||||||||
Net borrowings (payments) on short-term borrowings |
|
| (167,672 | ) |
|
| (162,655 | ) |
|
| 107,798 |
| ||||||||||||
Proceeds from long-term debt |
|
| 7,437 |
|
|
| 46,375 |
|
|
| — |
| ||||||||||||
Payments for long-term debt |
|
| (41 | ) |
|
| (2,404 | ) |
|
| (2,902 | ) | ||||||||||||
Payments for debt issuance costs |
|
| — |
|
|
| (1,081 | ) |
|
| (3,145 | ) | ||||||||||||
Net proceeds from issuance of common stock under incentive compensation, and employee purchase plans |
|
| 3,715 |
|
|
| 2,701 |
|
|
| 3,158 |
|
|
| 4,629 |
|
|
| 2,626 |
|
|
| 2,199 |
|
Contingent acquisition consideration payments |
|
| — |
|
|
| — |
|
|
| (150 | ) |
|
| (148 | ) |
|
| (2,640 | ) |
|
| (4,950 | ) |
Payments on tax withholdings for equity awards |
|
| (541 | ) |
|
| (80 | ) |
|
| (369 | ) |
|
| (1,703 | ) |
|
| (2,196 | ) |
|
| (4,644 | ) |
Purchase of treasury stock |
|
| (10,482 | ) |
|
| (5,531 | ) |
|
| (42,738 | ) |
|
| (631 | ) |
|
| (23,769 | ) |
|
| (21,292 | ) |
Net cash provided by financing activities |
|
| 5,454 |
|
|
| 12,858 |
|
|
| 30,720 |
| ||||||||||||
Net cash (used in) provided by financing activities |
|
| (158,129 | ) |
|
| (145,744 | ) |
|
| 73,064 |
| ||||||||||||
Effect of exchange rate changes on cash |
|
| 545 |
|
|
| (307 | ) |
|
| (3,126 | ) | ||||||||||||
NET INCREASE IN CASH AND CASH EQUIVALENTS: |
|
| 4,772 |
|
|
| 5,974 |
|
|
| 3,367 |
|
|
| 116,982 |
|
|
| 66,699 |
|
|
| 6,082 |
|
CASH AND CASH EQUIVALENTS, beginning of period |
|
| 27,839 |
|
|
| 32,611 |
|
|
| 38,585 |
| ||||||||||||
CASH AND CASH EQUIVALENTS, end of period |
| $ | 32,611 |
|
| $ | 38,585 |
|
| $ | 41,952 |
| ||||||||||||
Supplemental Disclosures of Cash Flow Information: |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
CASH AND CASH EQUIVALENTS, beginning of year |
|
| 38,511 |
|
|
| 155,493 |
|
|
| 222,192 |
| ||||||||||||
CASH AND CASH EQUIVALENTS, end of year |
| $ | 155,493 |
|
| $ | 222,192 |
|
| $ | 228,274 |
| ||||||||||||
Supplemental disclosures of cash flow information: |
|
|
|
|
|
|
|
|
| |||||||||||||||
Cash paid for: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Interest |
| $ | 4,516 |
|
| $ | 6,002 |
|
| $ | 8,482 |
|
| $ | 13,082 |
|
| $ | 4,452 |
|
| $ | 2,592 |
|
Income taxes |
|
| 88 |
|
|
| 855 |
|
|
| 457 |
|
|
| 18,930 |
|
|
| 53,356 |
|
|
| 64,843 |
|
Non-cash items: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Exchange of note receivable for property and equipment |
|
| 6,020 |
|
|
| — |
|
|
| — |
| ||||||||||||
Real estate assets classified as held for sale |
|
| 6,650 |
|
|
| — |
|
|
| — |
| ||||||||||||
Held for sale assets classified as property and equipment |
|
| — |
|
|
| 3,800 |
|
|
| — |
| ||||||||||||
Initial operating lease right-of-use assets for adoption of ASU 2016-02 |
|
| 42,070 |
|
|
| — |
|
|
| — |
| ||||||||||||
Initial current and noncurrent operating lease liabilities for adoption of |
|
| 43,953 |
|
|
| — |
|
|
| — |
| ||||||||||||
Accrued tax withholdings upon vesting of equity awards |
|
| — |
|
|
| 282 |
|
|
| 392 |
|
|
| 1,153 |
|
|
| 2,866 |
|
|
| 1,903 |
|
Contingent consideration liabilities from acquisitions |
|
| — |
|
|
| 3,307 |
|
|
| 3,720 |
|
|
| 2,270 |
|
|
| 10,640 |
|
|
| 7,350 |
|
Adjustment to retained earnings and deferred tax assets to adopt ASU 2016-09 |
|
| — |
|
|
| 5,197 |
|
|
| — |
| ||||||||||||
Accrued acquisition of property and equipment |
|
| — |
|
|
| — |
|
|
| 300 |
|
|
| 491 |
|
|
| — |
|
|
| — |
|
Exchange of equity interest for controlling interest |
|
| — |
|
|
| 2,860 |
|
|
| — |
|
See accompanying notes to consolidated financial statements
F-6F-8
MARINEMAX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. COMPANY BACKGROUND AND BASIS OF PRESENTATION:
We believe we are the world’s largest recreational boat and yacht retailer, in the United States. We engage primarily in the retail sale, brokerage, and service ofselling new and used recreational boats, motors, trailers,yachts, and related marine partsproducts 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 and sailing yachts in the British Virgin Islands.services. As of September 30, 2017,2022, we operatedhave over 100 locations worldwide, including 78 retail dealership locations, some of which include marinas. Also, as of September 30, 2022, we own or operate 34 marinas worldwide. Through Fraser Yachts and Northrop & Johnson, we believe we are the largest superyacht services provider, operating locations across the globe. Cruisers Yachts, a MarineMax company, manufactures boats and yachts with sales through 62our select retail dealership locations in 17 states, consisting of Alabama, California, Connecticut, Florida, Georgia, Maryland, Massachusetts, Minnesota, Missouri, New Jersey, New York, North Carolina, Ohio, Oklahoma, Rhode Island, South Carolina, and Texas. Ourthrough independent dealers. Intrepid Powerboats, a MarineMax company, manufactures powerboats and sells through a direct-to-consumer model. MarineMax provides finance and insurance services through wholly owned subsidiaries and operates MarineMax Vacations operations maintain a facility in Tortola, British Virgin Islands. We also own Boatyard, an industry-leading customer experience digital product company.
We are the nation’s largest retailer of Sea Ray and Boston Whaler recreational boats and yachts which are manufactured by Brunswick Corporation (“Brunswick”). Sales of new Brunswick boats accounted for approximately 42%23% of our revenue in fiscal 2017.2022. Sales of new Sea Ray and Boston Whaler boats, both divisions of Brunswick, accounted for approximately 23%11% and 17%9%, respectively, of our revenue in fiscal 2017.2022. Brunswick is a world leading manufacturer of marine products and marine engines. We believe we represented approximately 55% of Brunswick’s Sea Ray boat sales, during our fiscal 2017.
We have dealership agreements with Sea Ray, Boston Whaler, Harris, Meridian, 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 Yachts.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.
We have multi-year dealer The agreements with Brunswick coveringfor Sea Ray and Boston Whaler products, thatrespectively, appoint us as the exclusive dealer of Sea Ray boats in our geographic markets. We are the exclusive dealer forand Boston Whaler through multi-year dealer agreements for many ofboats, respectively, in our geographic markets. In addition, we are the exclusive dealer for Azimut Yachts for the entire United States through a multi-year dealer agreement.States. Sales of new Azimut boats and yachts accounted for approximately 9%8% of our revenue in fiscal 2017.2022. We believe non-Brunswick brands offer a migration for our existing customer base or fill a void in our product offerings, and accordingly, do not compete with the business generated from our other prominent brands.
As is typical in the industry, we deal with most of our manufacturers, other than Sea Ray, Boston Whaler, Meridian, 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 dealerships, particularly Florida in which we generated approximately 53%54%, 55%,50% and 55%51% of our dealership revenue during fiscal 2015, 2016,2020, 2021, and 2017,2022, respectively, can have a major impact on our operations. Local influences, such as corporate downsizing, military base closings, inclement weather such as Hurricane Sandy in 2012 or Hurricanes Harvey and Irma in 2017 and Hurricane Ian in 2022, 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. As a result, an economic downturn couldwould 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 hasis likely to have a negative effect on our business.
F-7F-9
MARINEMAX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Lower consumer spending resulting from a downturnHistorically, in the housing market and other economic factors adversely affected our business in fiscal 2007, and continued weakness inperiods of lower consumer spending and depressed economic conditions, had a substantial negative effect on our business and industry for several years after fiscal 2007. These conditions caused us towe have, among other things, substantially reducereduced our acquisition program, delaydelayed new store openings, reducereduced our inventory purchases, engageengaged in inventory reduction efforts, closeclosed a number of our retail locations, reducereduced our headcount, and amendamended and replacereplaced our credit facility. Acquisitions remain an important strategy for us, and, new store openings remain important strategiessubject to our company,a number of conditions, including macro-economic conditions and finding attractive acquisition targets, we plan to accelerate our growth through these strategies as economic conditions continue to improve. However, we cannot predict the length of unfavorable economic or industry conditions or the extent to which they will continue to adversely affect our operating results nor can we predict the effectiveness of the measures we have taken to addressexplore opportunities through this environment.strategy.
In order to provide comparability between periods presented, certain amounts have been reclassified from the previously reported consolidated financial statements to conform to the consolidated financial statement presentation of the current period. The 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.
2. SIGNIFICANT ACCOUNTING POLICIES:
Cash and Cash Equivalents
We consider all highly liquid investments with an original maturity of three months or less to be cash equivalents.
Vendor Consideration Received
We account for consideration received from our vendors in accordance with FASB Accounting Standards Codification 605-50, “Revenue Recognition - Customer Payments and Incentives” (“ASC 605-50”). ASC 605-50 requires us to classify interest assistance received from manufacturers as a reduction of inventory cost and related cost of sales as opposed to netting the assistance against our interest expense incurred with our lenders. Pursuant to ASC 605-50, amountssales. Amounts received by us under our co-op assistance programs from our manufacturers are netted against related advertising expenses. Further pursuantOur consideration received from our vendors contains uncertainties because the calculation requires management to ASC 605-50, manufacturer incentives based upon cumulative volumemake assumptions and to apply judgment regarding a number of salesfactors, including our ability to collect amounts due from vendors and purchasesthe ability to meet certain criteria stipulated by our vendors. 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 our vendor considerations which would result in a material effect on our operating results.
Inventories
Inventories are recorded whenstated at the amounts are probable and reasonably estimable.
Inventories
Inventory costslower 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. We state newTrade-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 boat, motor,boats, motors, and trailertrailers inventories at the lower of cost, determinedare accounted for on a specific-identification basis, or net realizable value. We statespecific identification basis. Raw materials and parts, accessories, and accessories at the lower of cost, determinedother inventories are accounted for on an average cost basis, or net realizable value.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 valuation allowance. With the exception of inventory of $7.6 million in the British Virgin Islands damaged as a result of Hurricane Irma, wevalue. 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 ourthe lower of cost or net realizable value valuation allowance which would result in a material effect on our operating results. With respect to the inventory in the British Virgin Islands, given the damage from Hurricane Irma, we have estimated the net realizable value of the inventory as of September 30, 2017, however, we cannot be certain we have quantified the complete negative effects of the damage sustained, nor can we be certain that further damage will not be incurred upon the passage of time as repair work is performed. As of September 30, 2016 and 2017, our lower of cost or net realizable value valuation allowance for new and used boat, motor, and trailer inventories was $1.0 million and $1.8 million, respectively.value. If events occur and market conditions change, causing the fair value to fall below carrying value, the lower of cost or net realizable value valuation allowanceof our inventories could increase.change.
F-8
MARINEMAX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
We record property and equipment at cost, net of accumulated depreciation, and depreciate property and equipment over their estimated useful lives using the straight-line method. We capitalize and amortize leasehold improvements over the lesser of the life of the lease or the estimated useful life of the asset. Useful lives for purposes of computing depreciation are as follows:
|
| Years |
Buildings and improvements |
|
|
Machinery and equipment |
|
|
Furniture and fixtures |
|
|
Vehicles |
|
|
We remove the cost of property and equipment sold or retired and the related accumulated depreciation from the accounts at the time of disposition and include any resulting gain or loss in the consolidated statementsaccompanying Consolidated Statements of operations.Operations. We charge maintenance, repairs, and minor replacements to operations as incurred, and we capitalize and amortize major replacements and improvements over their useful lives.
F-10
MARINEMAX, INC. AND SUBSIDIARIES
GoodwillNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Goodwill
We account for acquisitions in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 805, “Business Combinations” (“ASC 805”), and goodwill in accordance with FASB Accounting Standards CodificationASC 350, “Intangibles -— Goodwill and Other” (“ASC 350”), which provides that. For business combinations, the excess of costthe purchase price over the estimated fair value of net assets of businesses acquired in a business combination is recorded as goodwill. In April 2016 we purchased Russo Marine, a privately owned boat dealer in the Northeast United States with locations in Massachusetts and Rhode Island, resulting in the recording of $8.8 million in goodwill. In January 2017, we purchased Hall Marine Group, a privately owned boat dealer in the Southeast United States with locations in North Carolina, South Carolina, and Georgia, resulting in the recording of $16.0 million in goodwill. In total, current and previous acquisitions have resulted in the recording of $25.9 million in goodwill. In accordance with ASC 350, we reviewtest goodwill for impairment at least annually and whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Our annual impairment test is performed during the fourththird fiscal quarter. If the carrying amount of a reporting unit’s goodwill exceeds its fair value we would recognize an impairment loss in accordance with ASC 350. As of September 30, 2017, and basedBased upon our most recent analysis, we determined through our qualitative assessment that it is not “more likely than not” that the fair values of our reporting units are less than their carrying values. As a result, we were not required to perform the two-stepa quantitative goodwill impairment test.test.
Impairment of Long-Lived Assets
FASB Accounting Standards CodificationASC 360-10-40, “Property, Plant, and Equipment -— Impairment or Disposal of Long-Lived Assets” (“ASC 360-10-40”), requires that long-lived assets, such as property and equipment and purchased intangibles subject to amortization, be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of the asset (or asset group) is measured by comparison of its carrying amount to undiscounted future net cash flows the asset (or asset group) is expected to generate.generate over the remaining life of the asset (or asset group). If such assets are considered to be impaired, the impairment to be recognized is measured as the amount by which the carrying amount of the asset (or asset group) exceeds its fair market value. Estimates of expected future cash flows represent our best estimate based on currently available information and reasonable and supportable assumptions. Our impairment loss calculations contain uncertainties because they require us to make assumptions and to apply judgment in order to estimate expected future cash flows. Any impairment recognized in accordance with ASC 360-10-40 is permanent and may not be restored. The analysis is performed at a regional level for indicators of permanent impairment given the geographical interdependencies amongst our locations. Based upon our most recent analysis, which excludes fixed assets classified as held for sale which are recorded at fair value, we believe no further impairment of long-lived assets existed as of September 30, 2017.2022.
Insurance
Customer Deposits
Customer deposits primarily include amounts received from customers toward the purchase of boats. We recognize these deposits as revenue at the time of delivery or acceptance by the customers.
Insurance
We retain varying levels of risk relating to the insurance policies we maintain, most significantly, workers’ compensation insurance and employee medical benefits. We are responsible for the claims and losses incurred under these programs, limited by per occurrence deductibles and paid claims or losses up to pre-determined maximum exposure limits. Our third-party insurance carriers
F-9
MARINEMAX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
pay any losses above the pre-determined exposure limits. We estimate our liability for incurred but not reported losses using our historical loss experience, our judgment, and industry information.
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 partstrailer by the customer and service operationsthe 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, trailer, or part is delivered to or accepted by the customer or the service is completed. We recognize deferred revenue from service operations and slip and storage services on a straight-line basis over the term of the contract as services are completed.trailer. We recognize commissions earned from a brokerage sale at the timewhen the related brokerage transaction closes. We recognize income from the rentalscloses upon transfer of chartering power and sailing yachts on a straight-line basis over the termcontrol of the contract as services are completed.boat, motor, or trailer to the customer, which is generally upon acceptance by the customer.
F-11
MARINEMAX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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. We recognize marketing fees earned on credit, life, accident, disability, gap, and hull 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. Pursuant to negotiated agreements with financial and insurance institutions, we are charged back for a portion of these fees should the customer terminate or default on the related finance or insurance contract before it is outstanding for a stipulated minimum period of time. We base the chargeback allowance, which was not material to the consolidated financial statements taken as a whole as of September 30, 2017,2021 and 2022, on our experience with repayments or defaults on the related finance or insurance contracts.
We also 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 marketing fees earned on insurance products sold on behalf of 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.
We recognize revenue from parts and service operations (boat maintenance and repairs) over time as services are charged backperformed. Each boat maintenance and repair service is a single performance obligation that includes both the parts and labor associated with the service. Payment for a portionboat maintenance and repairs is typically due upon the completion of these commissions should the customer terminate or default on the service, which is generally completed within a short period of time from contract priorinception. 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 its scheduled maturity.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 chargeback allowance, which wasrelevant measure of work performed to complete the maintenance and repair service for the customer. As a practical expedient, because repair and maintenance service contracts have an original duration of one year or less, we do not materialconsider the time value of money, and we do not disclose estimated revenue expected to be recognized in the consolidated financial statements taken as a wholefuture for performance obligations that are unsatisfied (or partially unsatisfied) at the end of the reporting period or when we expect to recognize such revenue. Contract assets, recorded in prepaid expenses and other current assets, totaled approximately $5.7 million and $5.9 million as of September 30, 2017, based2021 and September 30, 2022, respectively.
We recognize revenue from the sale of our manufactured boats and yachts when control of the boat or 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 boat or yacht. We have elected to record shipping and handling activities that occur after the dealer or customer has obtained control of the boat or 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. Total contract liabilities of approximately $31.8 million recorded as of September 30, 2020 were recognized in revenue during the fiscal year ended September 30, 2021. Total contract liabilities of approximately $94.9 million recorded as of September 30, 2021 were recognized in revenue during the fiscal year ended September 30, 2022.
We recognize revenue from service operations and slip and storage services over time on a straight-line basis over the term of the contract as our experience with terminations or defaultsperformance obligations are met. We recognize revenue from the rentals of chartering power yachts over time on a straight-line basis over the service contracts.term of the contract as our performance obligations are met.
The following table sets forth percentages on the timing of revenue recognition by reportable segment for the fiscal years ended September 30,
| Retail Operations |
|
| Product Manufacturing |
| ||||||||||||||||||
| 2020 |
|
| 2021 |
|
|
| 2022 |
|
| 2020 |
|
| 2021 |
|
|
| 2022 |
| ||||
Goods and services transferred at a point in time |
| 92.7 | % |
|
| 91.6 | % |
|
| 90.9 | % |
|
| — |
|
|
| 100.0 | % |
|
| 100.0 | % |
Goods and services transferred over time |
| 7.3 | % |
|
| 8.4 | % |
|
| 9.1 | % |
|
| — |
|
|
| — |
|
|
| — |
|
Revenue |
| 100.0 | % |
|
| 100.0 | % |
|
| 100.0 | % |
|
| — |
|
|
| 100.0 | % |
|
| 100.0 | % |
F-12
MARINEMAX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following tables set forth our revenue generateddisaggregated into categories that depict the nature, amount, timing, and uncertainty of revenue and cash flows affected by certaineconomic factors for the fiscal years ended September 30,
|
| 2022 |
| |||||||||
|
| Retail Operations |
|
| Product Manufacturing |
|
| Total |
| |||
New boat sales |
|
| 71.9 | % |
|
| 100.0 | % |
|
| 73.2 | % |
Used boat sales |
|
| 7.7 | % |
|
| — |
|
|
| 7.3 | % |
Maintenance, repair, storage, rental, and charter services |
|
| 7.7 | % |
|
| — |
|
|
| 7.4 | % |
Finance and insurance products |
|
| 3.1 | % |
|
| — |
|
|
| 3.0 | % |
Parts and accessories |
|
| 3.5 | % |
|
| — |
|
|
| 3.3 | % |
Brokerage sales |
|
| 6.1 | % |
|
| — |
|
|
| 5.8 | % |
Revenue |
|
| 100.0 | % |
|
| 100.0 | % |
|
| 100.0 | % |
|
| 2021 |
| |||||||||
|
| Retail Operations |
|
| Product Manufacturing |
|
| Total |
| |||
New boat sales |
|
| 70.3 | % |
|
| 100.0 | % |
|
| 70.5 | % |
Used boat sales |
|
| 11.0 | % |
|
| — |
|
|
| 10.9 | % |
Maintenance, repair, storage, rental, and charter services |
|
| 7.1 | % |
|
| — |
|
|
| 7.1 | % |
Finance and insurance products |
|
| 2.7 | % |
|
| — |
|
|
| 2.7 | % |
Parts and accessories |
|
| 3.2 | % |
|
| — |
|
|
| 3.2 | % |
Brokerage sales |
|
| 5.7 | % |
|
| — |
|
|
| 5.6 | % |
Revenue |
|
| 100.0 | % |
|
| 100.0 | % |
|
| 100.0 | % |
|
| 2020 |
| |||||||||
|
| Retail Operations |
|
| Product Manufacturing |
|
| Total |
| |||
New boat sales |
|
| 70.2 | % |
|
| — |
|
|
| 70.2 | % |
Used boat sales |
|
| 15.1 | % |
|
| — |
|
|
| 15.1 | % |
Maintenance, repair, storage, rental, and charter services |
|
| 6.4 | % |
|
| — |
|
|
| 6.4 | % |
Finance and insurance products |
|
| 2.7 | % |
|
| — |
|
|
| 2.7 | % |
Parts and accessories |
|
| 3.0 | % |
|
| — |
|
|
| 3.0 | % |
Brokerage sales |
|
| 2.6 | % |
|
| — |
|
|
| 2.6 | % |
Revenue |
|
| 100.0 | % |
|
| — |
|
|
| 100.0 | % |
Cost of Sales
Cost of sales primarily includes cost of products sold, transportation costs from manufacturers to our retail stores, and services, for eachvendor consideration. Cost of last three fiscal years.sales includes depreciation of property and equipment from our product manufacturing segment (manufacturing overhead).
Selling, General, and Administrative expenses
Selling, general, and administrative expenses primarily include salaries and incentive-based compensation, sales commissions, brokerage commissions, advertising, insurance, utilities, depreciation and amortization, and other customary operating expenses.
|
| 2015 |
|
| 2016 |
| �� | 2017 |
| |||
New boat sales |
|
| 64.3 | % |
|
| 68.5 | % |
|
| 70.9 | % |
Used boat sales |
|
| 19.9 | % |
|
| 17.5 | % |
|
| 14.9 | % |
Maintenance, repair, storage, and charter services |
|
| 6.9 | % |
|
| 6.0 | % |
|
| 6.3 | % |
Finance and insurance products |
|
| 2.5 | % |
|
| 2.5 | % |
|
| 2.4 | % |
Parts and accessories |
|
| 4.1 | % |
|
| 3.5 | % |
|
| 3.6 | % |
Brokerage sales |
|
| 2.3 | % |
|
| 2.0 | % |
|
| 1.9 | % |
Total revenue |
|
| 100.0 | % |
|
| 100.0 | % |
|
| 100.0 | % |
Stock-Based Compensation
We account for our stock-based compensation plans following the provisions of FASB Accounting Standards CodificationASC 718, “Compensation — Stock Compensation” (“ASC 718”). In accordance with ASC 718, we use the Black-Scholes valuation model for valuing all stock-based compensationestimating the fair value of stock option grants and shares purchased under our Employee Stock Purchase Plan. We measure compensation for restricted stock awards and restricted stock units at fair value on the grant date based on the number of shares expected to vest and the quoted market
F-13
MARINEMAX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
price of our common stock.stock on the grant date. We recognize compensation cost for all awards in operations, net of estimated forfeitures, on a straight-line basis over the requisite service period for each separately vesting portion of the award.
Foreign Currency Transactions
For the Company’s foreign subsidiaries that use a currency other than the U.S. dollar as their functional currency, the assets and liabilities are translated at exchange rates in effect at the balance sheet date, and revenues and expenses are translated at the weighted average exchange rate for the period. The effects of these translation adjustments are reported in accumulated other comprehensive income. Gains and losses arising from transactions denominated in a currency other than the functional currency of the entity involved are included in operating income. No amounts were reclassified out of accumulated other comprehensive income in fiscal 2022.
Advertising and Promotional Cost
We expense advertising and promotional costs as incurred and include them in selling, general and administrative expenses in the accompanying consolidated statementsConsolidated Statements of operations. Pursuant to ASC 605-50, weOperations. We net amounts received by us under our co-op assistance programs from our manufacturers against the related advertising expenses. Total advertising and promotional expenses approximated $10.5$14.0 million, $13.5$14.8 million and $16.2$25.8 million, net of related co-op assistance, of approximately $737,000, $730,000, and $779,000,which was not material to the consolidated financial statements, for the fiscal years ended September 30, 2015, 2016,2020, 2021, and 2017,2022, respectively.
F-10
MARINEMAX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
We account for income taxes in accordance with FASB Accounting Standards CodificationASC 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 basis.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.
Concentrations of Credit Risk
Financial instruments, which potentially subject us to concentrations of credit risk, consist principally of cash and cash equivalents and accounts receivable. Concentrations of credit risk with respect to our cash and cash equivalents are limited primarily to amounts held with financial institutions. Concentrations of credit risk arising from our receivables are limited primarily to amounts due from manufacturers and financial institutions.
Fair Value of Financial Instruments
The carrying amount of our financial instruments approximates fair value resulting from either length to maturity or existence of interest rates that approximate prevailing market rates unless otherwise disclosed in these consolidated financial statements.
Use of Estimates and Assumptions
The preparation of 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 at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Significant estimates made by us in the accompanying consolidated financial statements relate toinclude valuation allowances, valuation of goodwill and intangible assets, valuation of long-lived assets, and valuation of contingent consideration and valuation of accruals.liabilities. Actual results could differ materially from those estimates.
Segment Reporting
We operateEffective May 2, 2021, our reportable segments changed as one reporting segment in accordance with the FASB Accounting Standards Codification 280, “Segment Reporting”. The metrics used by our Chief Executive Officer (asa result of the Company’s chiefacquisition of Cruisers Yachts, which changed management’s reporting structure and operating decision maker or the “CODM”) to assess the performance of the Company are focused on viewing the business as a single integrated business.
3. NEW ACCOUNTING PRONOUNCEMENTS:
In May 2014, the FASB issued Accounting Standards Update No. 2014-09, “Revenue from Contracts with Customers (Topic 606)” (“ASU 2014-09”), a converged standard on revenue recognition.activities. We now report our operations through two reportable segments: Retail Operations and Product Manufacturing. The new pronouncement requires revenue recognition to depict the transfer of promised goods or services to customerschange in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance also specifies the accounting for some costs to obtain or fulfill a contract with a customer, as well as enhanced disclosure requirements. ASU 2014-09 is effective for annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. Early adoption is permitted for annual reporting periods beginning after December 15, 2016. While we are continuing to evaluate the impact the adoption of ASU 2014-09 will have on our consolidated financial statements, we currently do not believe the adoption of this standard will have a material impact on our consolidated financial statements, or will cause a significant change to our current accounting policies or internal control over financial reporting for revenue recognition on boat, motor, and trailer sales, parts and service operations, brokerage commissions, slip and storage services, charter rentals, and fee income generated from finance and insurance products. We plan to adopt ASU 2014-09 in fiscal 2019.
In July 2015, the FASB issued ASU No. 2015-11, “Inventory (Topic 330)” (“ASU 2015-11”). The pronouncement was issued to simplify the measurement of inventory and change the measurement from lower of cost or market to lower of cost and net realizable value. This pronouncement is effective for reporting periods beginning after December 15, 2016. We elected to early adopt the new guidance in the first quarter of fiscal 2017. The adoption of ASU 2015-11 did not have anreportable segments had no impact on the Company’s previously reported historical consolidated financial position, results of operations, or internal controls.statements. Where applicable, all prior periods presented have been revised to conform to the change in reportable segments. See Note 21.
F-11F-14
MARINEMAX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In February 2016, the FASB issued ASU3. NEW ACCOUNTING PRONOUNCEMENTS:
We adopted Accounting Standards Update (“ASU”) 2016-02, “Leases (Topic 842)” (“ASU 2016-02”). This update requires organizations effective October 1, 2019 the first day of fiscal 2020. We elected the package of practical expedients available under the transition guidance within the new standard, which among other things, allowed us to recognizecarry forward the historical lease assets andclassification of our existing leases. Consequently, on adoption, we recognized additional operating lease liabilities onof $44.0 million and right-of-use (“ROU”) assets of $42.1 million. The new standard also provides practical expedients for an entity’s ongoing accounting. We elected the balance sheet and also disclose key information about leasing arrangements. ASU 2016-02 is effective for annual reporting periods beginning on or after December 15, 2018, and interim periods within those annual periods. Earlier application is permittedshort-term lease recognition exemption for all entitiesleases that qualify. As a result, for those leases that qualify, we will not recognize ROU assets or lease liabilities, and we did not recognize ROU assets or lease liabilities for existing short-term leases of those assets in transition. We also elected the practical expedient to not separate lease and non-lease components. We recognized a net after-tax cumulative effect adjustment to retained earnings of $0.6 million as of the beginningdate of an interim or annual period. While we are continuingadoption. See Note 8 for additional information on our leases.
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 evaluate thebe 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 2016-02 on our consolidated financial statements, we believe the adoption of ASU 2016-02 may have a significant and material impact to our consolidated balance sheet given our current lease agreements for our leased retail locations. We are currently evaluating the impact the adoption of ASU 2016-02 will have on our other consolidated financial statements. Based on a preliminary assessment, we expect that most of our operating lease commitments will be subject to the new guidance and recognized as operating lease liabilities and right-of-use assets upon adoption, resulting in a material increase in the assets and liabilities recorded on our consolidated balance sheet. We are continuing our assessment, which may identify additional impacts this standard will have on our consolidated financial statements and related disclosures and internal control over financial reporting. We plan to adopt ASU 2016-02 in fiscal 2020.
In March 2016, the FASB issued ASU 2016-09, “Compensation – Stock Compensation (Topic 718)”, (ASU “2016-09”). This update was issued as part of the FASB’s simplification initiative and affects all entities that issue share-based payment awards to their employees. The amendments in this update cover such areas as the recognition of excess tax benefits and deficiencies, the classification of those excess tax benefits on the statement of cash flows,2021-08 had an accounting policy election for forfeitures, the amount an employer can withhold to cover income taxes and still qualify for equity classification and the classification of those taxes paid on the statement of cash flows. This update is effective for annual and interim periods beginning after December 15, 2016. We elected to early adopt the new guidance in the fourth quarter of fiscal year 2016 which required us to reflect any adjustments as of October 1, 2015, the beginning of the annual period that includes the interim period of adoption. The primary effect of adoption was the recognition of excess tax benefits in our provision for income taxes rather than paid-in capital for all periods in fiscal year 2016. This early adoption resulted in an approximately $5.2 million increase in deferred tax assets and retained earnings as of October 1, 2015, the beginning of fiscal year 2016. The recognition of excess tax benefits in our provision for income taxes rather than paid-in capital resulted in an income tax benefit of $257,000 for the fiscal year ended September 30, 2016.
In January 2017, the FASB issued ASU 2017-04, “Simplifying the Test for Goodwill Impairment (Topic 350)” (“ASU 2017-04”). This update removes the requirement to compare the implied fair value of goodwill with its carrying amount as part of step 2 of the goodwill impairment test. As a result, under ASU 2017-04, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount and should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the impairment loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. This guidance is effective prospectively for fiscal years beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed after January 1, 2017. The adoption of ASU 2017-04 is not expected to have a significantimmaterial impact on the Company’s consolidated financial statementsstatements.
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 internal control overliability 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 reporting.assets and liabilities measured at fair value in the accompanying Consolidated Balance Sheets as of September 30,
|
| 2022 |
| |||||||||||||
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Total |
| ||||
|
| (Amounts in thousands) |
| |||||||||||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Interest rate swap contract |
| $ | — |
|
| $ | 1,528 |
|
| $ | — |
|
| $ | 1,528 |
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Contingent consideration liabilities |
| $ | — |
|
| $ | — |
|
| $ | 15,207 |
|
| $ | 15,207 |
|
|
| 2021 |
| |||||||||||||
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Total |
| ||||
|
| (Amounts in thousands) |
| |||||||||||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Interest rate swap contract |
| $ | — |
|
| $ | 150 |
|
| $ | — |
|
| $ | 150 |
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Contingent consideration liabilities |
| $ | — |
|
| $ | — |
|
| $ | 12,364 |
|
| $ | 12,364 |
|
There were no transfers between the valuation hierarchy Levels 1, 2, and 3 for the fiscal years ended September 30, 2021, and 2022.
4.F-15
MARINEMAX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 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 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 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 Consolidated Statements of Operations.
The following table sets forth the changes in fair value of our contingent consideration liabilities, which reflect Level 3 inputs, for the fiscal the years ended September 30, 2021 and 2022:
|
| Contingent Consideration Liabilities |
| |
|
| (Amounts in thousands) |
| |
Balance as of September 30, 2020 |
| $ | 2,960 |
|
Additions from business acquisitions |
|
| 10,640 |
|
Settlement of contingent consideration liabilities |
|
| (3,000 | ) |
Change in fair value and net present value of contingency |
|
| 1,764 |
|
Balance as of September 30, 2021 |
| $ | 12,364 |
|
Additions from business acquisitions |
|
| 7,350 |
|
Settlement of contingent consideration liabilities |
|
| (5,500 | ) |
Change in fair value and net present value of contingency |
|
| 993 |
|
Balance as of September 30, 2022 |
| $ | 15,207 |
|
We determined 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 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. The following table summarizes the carrying value and fair value of our mortgage facilities as of September 30,
|
| 2021 |
|
| 2022 |
| ||||||||||
|
| Fair Value |
|
| Carrying Value |
|
| Fair Value |
|
| Carrying Value |
| ||||
|
| (Amounts in thousands) |
| |||||||||||||
Mortgage facility payable to Flagship Bank |
| $ | 6,872 |
|
| $ | 6,899 |
|
| $ | 6,355 |
|
| $ | 6,403 |
|
Mortgage facility payable to Seacoast National Bank |
|
| 17,529 |
|
|
| 17,675 |
|
|
| 16,681 |
|
|
| 17,098 |
|
Mortgage facility payable to Hancock Whitney Bank |
|
| 27,089 |
|
|
| 27,106 |
|
|
| 24,977 |
|
|
| 25,192 |
|
5. ACCOUNTS RECEIVABLE:
Trade receivables consist primarily of receivables from financial institutions, which provide funding for customer boat financing and amounts due from financial institutions earned from arranging financing with our customers. We normally collect these receivables within 30 days of the sale. Trade receivables also include amounts due from customers on the sale of boats, parts, service, and storage. Amounts due from manufacturers represent receivables for various manufacturer programs and parts and service work performed pursuant to the manufacturers’ warranties.
Accounts receivable are presented net of an allowance for expected credit losses. The allowance for uncollectible receivables,expected credit losses, which was not material to the consolidated financial statements as of September 30, 20162021 or 2017,2022, was based on our consideration of customer payment practices, past transaction history with customers,collection experience, current information, and economic conditions. When an account becomes uncollectable, we expense it as a bad debtreasonable and we credit payments subsequently received to the bad debt expense account. We review the allowance for uncollectible receivables when an event or other change in circumstances results in a change in the estimate of the ultimate collectability of a specific account.supportable forecasts.
F-12F-16
MARINEMAX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Accounts receivable, net consisted of the following as of September 30,
|
| 2016 |
|
| 2017 |
|
| 2021 |
|
| 2022 |
| ||||
|
| (Amounts in thousands) |
|
| (Amounts in thousands) |
| ||||||||||
Trade receivables, net |
| $ | 16,296 |
|
| $ | 15,860 |
|
| $ | 38,953 |
|
| $ | 41,215 |
|
Amounts due from manufacturers |
|
| 7,386 |
|
|
| 8,192 |
|
|
| 7,344 |
|
|
| 7,826 |
|
Other receivables |
|
| 901 |
|
|
| 609 |
|
|
| 1,354 |
|
|
| 1,246 |
|
|
| $ | 24,583 |
|
| $ | 24,661 |
| ||||||||
Accounts receivable, net |
| $ | 47,651 |
|
| $ | 50,287 |
|
6. INVENTORIES:
Inventories consisted of the following as of September 30,
5. INVENTORIES:
|
| 2021 |
|
| 2022 |
| ||
|
| (Amounts in thousands) |
| |||||
New and used boats, motors, and trailers |
| $ | 143,267 |
|
| $ | 272,422 |
|
In transit inventory and deposits |
|
| 50,621 |
|
|
| 117,268 |
|
Parts, accessories, and other |
|
| 13,779 |
|
|
| 17,143 |
|
Work-in-process |
|
| 11,358 |
|
|
| 21,691 |
|
Raw materials |
|
| 11,959 |
|
|
| 25,835 |
|
Inventories |
| $ | 230,984 |
|
| $ | 454,359 |
|
Inventories,
7. PROPERTY AND EQUIPMENT:
Property and equipment, net consisted of the following as of September 30,
|
| 2016 |
|
| 2017 |
| ||
|
| (Amounts in thousands) |
| |||||
New boats, motors, and trailers |
| $ | 276,786 |
|
| $ | 357,957 |
|
Used boats, motors, and trailers |
|
| 37,591 |
|
|
| 35,211 |
|
Parts, accessories, and other |
|
| 7,601 |
|
|
| 8,133 |
|
|
| $ | 321,978 |
|
| $ | 401,301 |
|
|
| 2021 |
|
| 2022 |
| ||
|
| (Amounts in thousands) |
| |||||
Land |
| $ | 57,330 |
|
| $ | 80,312 |
|
Buildings and improvements |
|
| 137,271 |
|
|
| 179,162 |
|
Machinery and equipment |
|
| 54,510 |
|
|
| 70,445 |
|
Furniture and fixtures |
|
| 5,897 |
|
|
| 6,523 |
|
Vehicles |
|
| 18,269 |
|
|
| 20,843 |
|
Gross property and equipment |
|
| 273,277 |
|
|
| 357,285 |
|
Less: accumulated depreciation and amortization |
|
| (97,814 | ) |
|
| (111,274 | ) |
Property and equipment, net |
| $ | 175,463 |
|
| $ | 246,011 |
|
6. PROPERTY AND EQUIPMENT:
Property and equipment consisted of the following as of September 30,
|
| 2016 |
|
| 2017 |
| ||
|
| (Amounts in thousands) |
| |||||
Land |
| $ | 50,568 |
|
| $ | 51,283 |
|
Buildings and improvements |
|
| 93,175 |
|
|
| 100,284 |
|
Machinery and equipment |
|
| 27,634 |
|
|
| 33,278 |
|
Furniture and fixtures |
|
| 3,678 |
|
|
| 3,938 |
|
Vehicles |
|
| 7,301 |
|
|
| 7,862 |
|
|
|
| 182,356 |
|
|
| 196,645 |
|
Accumulated depreciation and amortization |
|
| (61,003 | ) |
|
| (69,485 | ) |
|
| $ | 121,353 |
|
| $ | 127,160 |
|
Depreciation and amortization expense on property and equipment totaled approximately $7.9$12.8 million, $8.0$13.9 million, and $9.4$16.7 million, for the fiscal years ended September 30, 2015, 2016,2020, 2021, and 2017,2022, respectively.
8. 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 twenty-five years. In addition, we lease certain charter boats for our yacht charter business. As of September 30, 2022, the weighted-average remaining lease term for our leases was approximately 12 years. All of our leases are classified as operating leases, which are included as right-of-use ("ROU") assets and operating lease liabilities in the accompanying Consolidated Balance Sheets. For the fiscal years ended September 30, 2020, 2021, and 2022, operating lease expenses recorded in selling, general, and administrative expenses were approximately $13.9 million, $24.1 million, and $23.5 million, of which approximately $0.5 million, $0.7 million, and $0.6 million, related to variable lease expenses, respectively. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants. We do not have any significant leases that have 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.
7.F-17
MARINEMAX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Substantially all 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 September 30, 2022, the weighted-average discount rate used was approximately 5.5%.
As of September 30, 2022, maturities of lease liabilities by fiscal year are summarized as follows:
|
| (Amounts in thousands) |
| |
2023 |
| $ | 14,715 |
|
2024 |
|
| 13,744 |
|
2025 |
|
| 11,172 |
|
2026 |
|
| 10,311 |
|
2027 |
|
| 9,905 |
|
Thereafter |
|
| 78,917 |
|
Total lease payments |
|
| 138,764 |
|
Less: interest |
|
| (39,414 | ) |
Present value of lease liabilities |
| $ | 99,350 |
|
The following table sets forth supplemental cash flow information related to leases for the fiscal years ended September 30,
| 2020 |
|
| 2021 |
|
| 2022 |
| |||
| (Amounts in thousands) |
| |||||||||
Cash paid for amounts included in the measurement of |
|
|
|
|
|
|
|
| |||
Operating cash flows from operating leases | $ | 10,209 |
|
| $ | 16,917 |
|
| $ | 16,039 |
|
Right-of-use assets obtained in exchange for lease |
|
|
|
|
|
|
|
| |||
Operating leases | $ | 3,811 |
|
| $ | 74,097 |
|
| $ | 4,588 |
|
The Company reports the amortization of ROU assets and the change in operating lease liabilities on a net basis in accrued expenses and other liabilities in the accompanying Consolidated Statements of Cash Flows.
9. GOODWILL, OTHER INTANGIBLE ASSETS, AND OTHER LONG-TERM ASSETS:
In August 2022, we expanded our presence in Texas by acquiring Endeavour Marina in Seabrook. 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 Powerboats, a premier manufacturer of powerboats, and Texas MasterCraft, a watersports dealer in Northern Texas, for aggregate consideration of approximately $67.2 million (net of cash acquired of $9.4 million), including estimated contingent consideration of $6.0 million. Tangible assets acquired, net of liabilities assumed and cash acquired, totaled approximately $20.3 million; intangible assets acquired totaled $7.3 million; and total goodwill recognized was approximately $39.6 million. The goodwill represents the assembled workforce, acquired capabilities, and future economic benefits resulting from the acquisitions. Approximately $10.7 million of goodwill related to the acquisitions, wholly attributable to Texas MasterCraft, is deductible for tax purposes.
In July 2021 we purchased Nisswa Marine, Inc. a full-service dealer located in Nisswa, Minnesota. Goodwill and other intangible assets associated with the Nisswa Marine acquisition was approximately $15.3 million.
F-18
MARINEMAX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In May 2021, we purchased all of the outstanding equity of KCS International Holdings, Inc., and certain affiliates (“Cruisers Yachts”) for an aggregate purchase price of $62.7 million, subject to certain customary closing and post-closing adjustments, and net working capital adjustments including certain holdbacks. The former owners of Cruisers Yachts are subject to certain customary post-closing covenants and indemnities.
The following table summarizes the consideration paid for Cruisers Yachts and the allocation of the purchase consideration to the estimated fair value of the assets acquired and liabilities assumed at the acquisition date.
|
| (Amounts in thousands) |
| |
Consideration: |
|
|
| |
Cash purchase price and net working capital adjustments, net of cash acquired of $5,993 |
| $ | 61,448 |
|
|
|
|
| |
Recognized amounts of identifiable assets acquired and liabilities assumed: |
|
|
| |
Current assets, net of cash acquired of $5,993 |
| $ | 29,869 |
|
Property and equipment |
|
| 12,126 |
|
Intangible assets |
|
| 4,602 |
|
Current liabilities |
|
| (25,283 | ) |
Total identifiable net assets acquired: |
|
| 21,314 |
|
Goodwill |
| $ | 40,134 |
|
Total |
| $ | 61,448 |
|
The fair value of current assets acquired includes accounts receivable and inventory of approximately $3.1 million and $26.2 million, respectively. The fair value of current liabilities assumed includes short-term borrowings of approximately $11.7 million, accrued expenses of approximately $10.3 million, and accounts payable of approximately $3.0 million. The intangible assets acquired include the trade name and customer relationships. The goodwill represents the assembled workforce, acquired capabilities, and future economic benefits resulting from the acquisition. The majority of the goodwill is expected to be deductible for tax purposes. The customer relationships have a weighted average useful life of approximately 2.0 years. The tradename has an indefinite life. Our results for fiscal 2021 include results from Cruisers Yachts between May 2, 2021 and September 30, 2021. Refer to Note 21 for disclosure of the revenues and income from operations. We have not disclosed the pro forma effect of Cruisers Yachts’ financial information for fiscal 2020 and prior to acquisition on May 2, 2021, because Cruisers Yachts’ historical monthly internal accounting and reporting processes and practices would not provide complete information sufficient for the purposes of this pro forma disclosure.
In October 2020, we purchased all of the outstanding equity of Skipper Marine Holdings, Inc., and certain affiliates (“SkipperBud’s”) for an aggregate purchase price of $55.0 million, subject to certain customary closing and post-closing adjustments, and net working capital adjustments including certain holdbacks. In addition, the former equity owners of SkipperBud’s (“Skippers Sellers”), have the opportunity to earn additional consideration as part of an contingent consideration liability subject to the achievement of certain pre-tax earnings levels. The maximum amount of consideration that can be paid under the contingent consideration liability is approximately $9.3 million. The fair value of $8.2 million of the contingent consideration liability arrangement was estimated by a third party valuation expert by applying an income valuation approach. The contingent consideration liability was estimated based on forecasted pre-tax earnings as a base scenario (among other assumptions) subject to a Monte Carlo simulation. The Skippers Sellers are subject to certain customary post-closing covenants and indemnities. The acquisition of SkipperBud’s enhances our sales, brokerage, service and marina/storage presence in the Great Lakes region and West Coast of the Unites States.
The following table summarizes the consideration paid for SkipperBud’s and the allocation of the purchase consideration to the estimated fair value of the assets acquired and liabilities assumed at the acquisition date.
F-19
MARINEMAX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
| (Amounts in thousands) |
| |
Consideration: |
|
|
| |
Cash purchase price and net working capital adjustments, net of cash acquired of $30,615 |
| $ | 50,261 |
|
Contingent consideration liability |
|
| 8,200 |
|
Fair value of total consideration transferred |
| $ | 58,461 |
|
|
|
|
| |
Recognized amounts of identifiable assets acquired and liabilities assumed: |
|
|
| |
Current assets, net of cash acquired of $30,615 |
| $ | 50,688 |
|
Property and equipment |
|
| 4,859 |
|
Intangible assets |
|
| 1,978 |
|
Current liabilities |
|
| (55,427 | ) |
Total identifiable net assets acquired: |
|
| 2,098 |
|
Goodwill |
| $ | 56,363 |
|
Total |
| $ | 58,461 |
|
The fair value of current assets acquired includes accounts receivable and inventory of approximately $5.4 million and $42.3 million, respectively. The fair value of current liabilities assumed includes short-term borrowings of approximately $30.5 million, accrued expenses of approximately $14.6 million, and customer deposits of approximately $7.5 million. We recorded approximately $56.4 million in goodwill and approximately $2.0 million of other identifiable intangibles (trade name and customer relationships) in connection with the SkipperBud’s acquisition. The goodwill represents our enhanced geographic reach and brand infrastructure in the Great Lakes region and West Coast of the Unites States. The majority of the goodwill is expected to be deductible for tax purposes. The intangible assets have a weighted average useful life of approximately 3.3 years. For fiscal 2021, SkipperBud’s revenue was approximately $302.6 million and income before taxes was approximately $31.3 million. We have not disclosed the pro forma effect of SkipperBud’s financial information for fiscal 2020 because it is not practical to obtain for comparative purposes and as such is not presented because SkipperBud’s historical monthly internal accounting and reporting processes and practices would not provide complete information sufficient for the purposes of this pro forma disclosure.
In total, currentgoodwill and other intangible assets increased, primarily due to acquisitions, by $116.8 million and $45.3 million, for the fiscal years ended September 30, 2021 and 2022, respectively. These acquisitions have resulted in the recording of goodwill for tax purposes of $110.8 million and $10.5 million, for the fiscal years ended September 30, 2021 and 2022, respectively. Current and previous acquisitions have resulted in the recording of $9.9$195.6 million and $25.9$235.6 million in goodwill and $5.6 million and $10.9 million in other intangible assets as of September 30, 2021 and 2022, respectively.
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 new reportable segments: Retail Operations and Product Manufacturing. As a result, the Company allocated goodwill to its reporting units within the Company’s two reportable segments.
The following table sets forth the changes in carrying amount of goodwill by reportable segment for the fiscal years ended September 30, 20162021 and 2017, respectively.2022:
|
| Retail Operations |
|
| Product Manufacturing |
|
| Total |
| |||
|
| (Amounts in thousands) |
| |||||||||
Balance as of September 30, 2020 |
| $ | 84,240 |
|
| $ | — |
|
| $ | 84,240 |
|
Goodwill acquired |
|
| 71,306 |
|
|
| 40,134 |
|
|
| 111,440 |
|
Foreign currency translation |
|
| (117 | ) |
|
| — |
|
|
| (117 | ) |
Balance as of September 30, 2021 |
| $ | 155,429 |
|
| $ | 40,134 |
|
| $ | 195,563 |
|
Goodwill acquired |
|
| 14,035 |
|
|
| 28,900 |
|
|
| 42,935 |
|
Foreign currency translation |
|
| (2,913 | ) |
|
| — |
|
|
| (2,913 | ) |
Balance as of September 30, 2022 |
| $ | 166,551 |
|
| $ | 69,034 |
|
| $ | 235,585 |
|
During February 2006, we became party to a joint venture with Brunswick that acquired certain real estate andOther intangible assets, of Great American Marina for an aggregate purchase price of approximately $11.0 million, of which we contributed approximately $4.0 million and Brunswick contributed approximately $7.0 million. The termsnet, at September 30, consisted of the agreement specified that we were to operate and maintain the service business and that Brunswick was to operate and maintain the marina business. Simultaneously with the closing, the acquired entity became Gulfport Marina, LLC (“Gulfport”). We accounted for our investment in Gulfport in accordance with FASB Accounting Standards Codification 323, “Investment – Equity Method and Joint Venture”. Accordingly, we adjusted the carrying amount of our investment in Gulfport to recognize our share of earnings or losses, based on the service business we operated. During February 2016, we acquired Brunswick’s interest in the Gulfport joint venture. After the acquisition of Brunswick’s interest, we reported the complete operations of Gulfport in our consolidated balance sheet as of September 30, 2016 and 2017, and consolidated statement of operations for the remainder of fiscal year 2016 and fiscal year 2017 subsequent to the acquisition in accordance with FASB Accounting Standards Codification 805, “Business Combinations”.following:
F-13F-20
MARINEMAX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
| 2021 |
|
| 2022 |
| ||
|
| (Amounts in thousands) |
| |||||
Trade names - indefinite-lived |
| $ | 3,051 |
|
| $ | 7,736 |
|
Other intangible assets, primarily customer relationships |
|
| 3,970 |
|
|
| 5,948 |
|
|
|
| 7,021 |
|
|
| 13,684 |
|
Less: accumulated amortization |
|
| (1,462 | ) |
|
| (2,798 | ) |
Intangible assets, net |
| $ | 5,559 |
|
| $ | 10,886 |
|
10. ACCRUED EXPENSES:
Accrued expenses consisted of certain real estate assets were classified as held for sale and were included in prepaid expenses and other current assets on the consolidated balance sheetfollowing as of September 30, 2016 and September 30, 2017, respectively.
|
| 2021 |
|
| 2022 |
| ||
|
| (Amounts in thousands) |
| |||||
Payroll accruals |
| $ | 42,138 |
|
| $ | 41,413 |
|
Customer and storage accruals |
|
| 17,390 |
|
|
| 18,095 |
|
Sales and other taxes payable |
|
| 8,462 |
|
|
| 5,930 |
|
Other accruals |
|
| 18,604 |
|
|
| 23,964 |
|
Accrued expenses |
| $ | 86,594 |
|
| $ | 89,402 |
|
8.
11. SHORT-TERM BORROWINGS:BORROWINGS AND LONG-TERM DEBT:
In May 2017,August 2022, we amended and restated our Inventory Financing Agreement (the “Amended Credit Facility”), originally entered into in June 2010,a Credit Agreement with Manufacturers and Traders Trust Company as subsequently amended, withAdministrative Agent, Swingline Lender, and Issuing Bank, Wells Fargo Commercial Distribution Finance, LLC, (formerly GE Commercial Distribution Finance Corporation)as Floor Plan Agent, and the lenders party thereto (the “New Credit Agreement”). The May 2017 amendment and restatement extendedNew Credit Agreement provides the maturity dateCompany short-term borrowing in the form of the Credit Facility to October 2020, and the Amended Credit Facility includes two additional one-year extension periods,a line of credit with lender approval. The May 2017 amendment and restatement, among other things, modified the amount ofasset based borrowing availability and maturity date of the Credit Facility. The Amended Credit Facility provides a floor plan financing commitment of up to $350.0$750 million an increase fromand establishes a revolving credit facility in the previous limitmaximum amount of $300.0$100 million subject(including a $20 million swingline facility and a $20 million letter of credit sublimit). The New Credit Agreement also provides long-term debt in the form of a delayed draw term loan facility to borrowingfinance the acquisition of IGY Marinas in the maximum amount of $400 million, and a $100 million delayed draw mortgage loan facility. The maturity of each of the facilities is August 2027.
The interest rate is (a) for amounts outstanding under the floor plan facility, 3.45% above the one month secured term rate as administered by the CME Group Benchmark Administration Limited (CBA) (“SOFR”), (b) for amounts outstanding under the revolving credit facility or the term loan facility, a range of 1.50% to 2.0%, depending on the total net leverage ratio, above the one month, three month, or six month term SOFR rate, and (c) for amounts outstanding under the mortgage loan facility, 2.20% above the one month, three month, or six month term SOFR rate. The alternate base availability resulting fromrate with a margin is available for amounts outstanding under the amountrevolving credit, term, and aging of our inventory.mortgage loan facilities and the Euro Interbank Offered Rate plus a margin is available for borrowings in Euro or other currencies other than dollars under the revolving credit facility.
The AmendedNew Credit FacilityAgreement has certain financial covenants as specified in the agreement. The covenants include provisions that our leverage ratio must not exceed 2.753.35 to 1.0 and that our currentconsolidated fixed charge coverage ratio must be greater than 1.21.10 to 1.0. The interest rate for amounts outstanding under the Amended Credit Facility is 345 basis points above the one-month London Inter-Bank Offering Rate (“LIBOR”). There is an unused line fee of ten basis points on the unused portion of the Amended Credit Facility.
Advances under the Amended 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 Amended Credit Facility is all of our personal property with certain limited exceptions. None of our real estate has been pledged for collateral for the Amended Credit Facility.
As of September 30, 20162022, we were in compliance with all covenants under the New Credit Agreement. The New Credit Agreement is secured by the Company’s personal property assets, including inventory and 2017,related accounts receivable. The mortgage loans will also be secured by the real estate pledged as collateral for such loans.
In May 2020, we entered into a Loan and Security Agreement (the “Credit Facility”), with Wells Fargo Commercial Distribution Finance LLC, M&T Bank, Bank of the West, and Truist Bank. In July 2021, we amended the Credit Facility to increase the borrowing availability to $500 million, extend the term to expire by one year to July 2024, with two one-year options to renew, subject to lender approval, and modify certain provisions to provide additional liquidity to the Company. The Credit Facility provided the Company a line of credit with asset based borrowing availability of up to $500 million for working capital and inventory financing, with the amount permissible pursuant to a borrowing base formula. The Credit Facility was set to expire in July 2024, subject to extension for two one-year periods, with lender approval. The Credit Facility was replaced by the New Credit Agreement.
As of September 30, 2022, our indebtedness associated with financing our inventory and working capital needs totaled approximately $166.6 million and $254.2 million, respectively.$135.1 million. As of September 30, 20162022, short-term borrowings included unamortized debt issuance costs of
F-21
MARINEMAX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
approximately $3.1 million. As of September 30, 2021, our indebtedness associated with financing our inventory and 2017,working capital needs totaled approximately $24.1 million, and included unamortized debt issuance costs of approximately $0.2 million.
As of September 30, 2021 and 2022, the interest rate on the outstanding short-term borrowings was approximately 3.9%4.20% and 4.7%6.0%, respectively. As of September 30, 2017,2022, our additional available borrowings under our Amended Credit Facility were approximately $52.8$65.8 million based upon the outstanding borrowing base availability. As of September 30, 2022, no amounts were withdrawn on the delayed draw term loan facility to finance the acquisition of IGY Marinas or the delayed draw mortgage loan facility. Refer to Note 22 for the closing of the IGY Marinas acquisition in October 2022.
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 as opposed to netting the assistance against our interest expense incurred with our lenders.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. As of September 30, 2017, we had no long-term debt. However, we rely on our AmendedNew Credit FacilityAgreement 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 AmendedNew Credit FacilityAgreement 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 AmendedNew Credit FacilityAgreement to fund our operations. Any inability to utilize our AmendedNew Credit FacilityAgreement 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. Tight credit conditions during fiscal 2009, 2010, and 2011 adversely affected
Long-term Debt
The below table summarizes the ability of customers to finance boat purchases, which had a negative effect on our operating results.Company's long-term debt.
|
| September 30, 2022 |
| |
|
| (Amounts in thousands) |
| |
Mortgage facility payable to Flagship Bank bearing interest at 5.25% (prime minus 100 basis points with a floor of 2.00%). Requires monthly principal and interest payments with a balloon payment of approximately $4.0 million due August 2027. |
| $ | 6,403 |
|
Mortgage facility payable to Seacoast National Bank bearing interest at 5.63% (greater of 3.00% or prime minus 62.5 basis points). Requires monthly interest payments for the first year and then monthly principal and interest payments with a balloon payment of approximately $6.0 million due September 2031. |
|
| 17,098 |
|
Mortgage facility payable to Hancock Whitney Bank bearing interest at 5.63% (prime minus 62.5 basis points with a floor of 2.25%). Requires monthly principal and interest payments with a balloon payment of approximately $15.5 million due November 2027. 50% of the outstanding borrowings are hedged with an interest rate swap contract with a fixed rate of 3.20%. |
|
| 25,192 |
|
Revolving mortgage facility with FineMark National Bank & Trust bearing interest at 6.00% (prime minus 25 basis points with a floor of 3.00%). Facility matures in October 2027. Current available borrowings under the facility were approximately $24.5 million at September 30, 2022. |
|
| — |
|
Total long-term debt |
|
| 48,693 |
|
Less: current portion |
|
| (2,882 | ) |
Less: unamortized portion of debt issuance costs |
|
| (510 | ) |
Long-term debt, net current portion and unamortized debt issuance costs |
| $ | 45,301 |
|
F-14
F-22
MARINEMAX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
| September 30, 2021 |
| |
|
| (Amounts in thousands) |
| |
Mortgage facility payable to Flagship Bank bearing interest at 2.25% (prime minus 100 basis points with a floor of 2.00%). Requires monthly principal and interest payments with a balloon payment of approximately $4.0 million due August 2027. |
| $ | 6,899 |
|
Mortgage facility payable to Seacoast National Bank bearing interest at 3.00% (greater of 3.00% or prime minus 62.5 basis points). Requires monthly interest payments for the first year and then monthly principal and interest payments with a balloon payment of approximately $6.0 million due September 2031. |
|
| 17,675 |
|
Mortgage facility payable to Hancock Whitney Bank bearing interest at 2.63% (prime minus 62.5 basis points with a floor of 2.25%). Requires monthly principal and interest payments with a balloon payment of approximately $15.5 million due November 2027. 50% of the outstanding borrowings are hedged with an interest rate swap contract with a fixed rate of 3.20%. |
|
| 27,106 |
|
Revolving mortgage facility with FineMark National Bank & Trust bearing interest at 3.00% (prime minus 25 basis points with a floor of 3.00%). Facility matures in October 2027. Current available borrowings under the facility were approximately $26.1 million at September 30, 2021. |
|
| — |
|
Total long-term debt |
|
| 51,680 |
|
Less: current portion |
|
| (3,587 | ) |
Less: unamortized portion of debt issuance costs |
|
| (595 | ) |
Long-term debt, net current portion and unamortized debt issuance costs |
| $ | 47,498 |
|
As of September 30, 2022, the aggregate maturities of long-term debt by fiscal year are summarized as follows:
|
| (Amounts in thousands) |
| |
2023 |
| $ | 2,882 |
|
2024 |
|
| 2,882 |
|
2025 |
|
| 2,882 |
|
2026 |
|
| 2,882 |
|
2027 |
|
| 6,882 |
|
Thereafter |
|
| 30,283 |
|
Total long-term debt |
| $ | 48,693 |
|
12. INCOME TAXES:
Income before income tax provision consisted of the following components for the fiscal years ended September 30,
|
| 2020 |
|
| 2021 |
|
| 2022 |
| |||
|
| (Amounts in thousands) |
| |||||||||
Income before income tax provision: |
|
|
|
|
|
|
|
|
| |||
United States |
| $ | 94,854 |
|
| $ | 202,643 |
|
| $ | 254,052 |
|
Other |
|
| 2,586 |
|
|
| 3,151 |
|
|
| 7,869 |
|
Total |
| $ | 97,440 |
|
| $ | 205,794 |
|
| $ | 261,921 |
|
F-23
MARINEMAX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The components of our provision (benefit) from income taxes consisted of the following for the fiscal years ended September 30,
|
| 2015 |
|
| 2016 |
|
| 2017 |
|
| 2020 |
|
| 2021 |
|
| 2022 |
| ||||||
|
| (Amounts in thousands) |
|
| (Amounts in thousands) |
| ||||||||||||||||||
Current provision: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Federal |
| $ | 209 |
|
| $ | 496 |
|
| $ | 2,321 |
|
| $ | 17,654 |
|
| $ | 38,028 |
|
| $ | 49,380 |
|
Foreign |
|
| 654 |
|
|
| 1,516 |
|
|
| 1,739 |
| ||||||||||||
State |
|
| 87 |
|
|
| 73 |
|
|
| (366 | ) |
|
| 1,365 |
|
|
| 6,527 |
|
|
| 11,004 |
|
Total current provision |
| $ | 296 |
|
| $ | 569 |
|
| $ | 1,955 |
|
| $ | 19,673 |
|
| $ | 46,071 |
|
| $ | 62,123 |
|
Deferred provision (benefit): |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Deferred provision: |
|
|
|
|
|
|
|
|
| |||||||||||||||
Federal |
|
| (22,056 | ) |
|
| 11,691 |
|
|
| 10,190 |
|
| $ | 2,262 |
|
| $ | 4,201 |
|
| $ | 1,650 |
|
Foreign |
|
| — |
|
|
| — |
|
|
| — |
| ||||||||||||
State |
|
| (5,654 | ) |
|
| (52 | ) |
|
| 2,116 |
|
|
| 871 |
|
|
| 543 |
|
|
| 159 |
|
Total deferred provision (benefit) |
|
| (27,710 | ) |
|
| 11,639 |
|
|
| 12,306 |
| ||||||||||||
Total income tax provision (benefit) |
| $ | (27,414 | ) |
| $ | 12,208 |
|
| $ | 14,261 |
| ||||||||||||
Total deferred provision |
|
| 3,133 |
|
|
| 4,744 |
|
|
| 1,809 |
| ||||||||||||
Total income tax provision |
| $ | 22,806 |
|
| $ | 50,815 |
|
| $ | 63,932 |
|
During the fourth quarter of fiscal 2017, the Company recorded a net tax benefit of $1.8 million primarily pertaining to a worthless stock deduction. The tax benefit of this deduction was primarily based on the write-off of the Company’s investment in its British Virgin Islands subsidiary for US tax purposes.
Below is a reconciliation of the statutory federal income tax rate to our effective tax rate for the fiscal years ended September 30,
|
| 2015 |
|
| 2016 |
|
| 2017 |
| |||||||||||||||
Federal tax provision (benefit) |
|
| 35.0 | % |
|
| 35.0 | % |
|
| 35.0 | % | ||||||||||||
State taxes, net of federal effect |
|
| 3.2 | % |
|
| 3.6 | % |
|
| 4.4 | % | ||||||||||||
Worthless stock deduction |
|
| — |
|
|
| — |
|
|
| (4.8 | )% | ||||||||||||
Stock based compensation |
|
| 0.4 | % |
|
| (0.5 | )% |
|
| 0.2 | % | ||||||||||||
|
| 2020 |
|
| 2021 |
|
| 2022 |
| |||||||||||||||
Federal tax provision |
|
| 21.0 | % |
|
| 21.0 | % |
|
| 21.0 | % | ||||||||||||
State taxes, net of federal benefit |
|
| 3.1 | % |
|
| 3.7 | % |
|
| 3.4 | % | ||||||||||||
Stock-based compensation |
|
| (0.5 | )% |
|
| (0.7 | )% |
|
| (0.6 | )% | ||||||||||||
Valuation allowance |
|
| (171.5 | )% |
|
| (3.2 | )% |
|
| (0.1 | )% |
|
| (0.2 | )% |
|
| — |
|
|
| — |
|
Foreign rate differential |
|
| 0.3 | % |
|
| 0.5 | % |
|
| 2.4 | % |
|
| 0.1 | % |
|
| 0.1 | % |
|
| — |
|
Other |
|
| 1.3 | % |
|
| (0.3 | )% |
|
| 0.6 | % |
|
| (0.1 | )% |
|
| 0.6 | % |
|
| 0.6 | % |
Effective tax rate |
|
| (131.3 | )% |
|
| 35.1 | % |
|
| 37.7 | % |
|
| 23.4 | % |
|
| 24.7 | % |
|
| 24.4 | % |
Deferred income taxes reflect the impact of temporary differences between the amount of assets and liabilities recognized for financial reporting purposes and such amounts recognized for income tax purposes. The tax effects of these temporary differences representing the components of deferred tax assets as of September 30,
|
| 2016 |
|
| 2017 |
|
| 2021 |
|
| 2022 |
| ||||
|
| (Amounts in thousands) |
|
| (Amounts in thousands) |
| ||||||||||
Deferred tax assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Inventories |
| $ | 1,095 |
|
| $ | 1,028 |
|
| $ | 771 |
|
| $ | 831 |
|
Operating lease liabilities |
|
| 25,924 |
|
|
| 23,323 |
| ||||||||
Accrued expenses |
|
| 919 |
|
|
| 521 |
|
|
| 1,225 |
|
|
| 889 |
|
Depreciation and amortization |
|
| 1,497 |
|
|
| — |
| ||||||||
Stock based compensation |
|
| 3,566 |
|
|
| 4,121 |
| ||||||||
Stock-based compensation |
|
| 2,810 |
|
|
| 4,147 |
| ||||||||
Tax loss carryforwards |
|
| 13,879 |
|
|
| 3,901 |
|
|
| 667 |
|
|
| 599 |
|
Other |
|
| 573 |
|
|
| 593 |
|
|
| 852 |
|
|
| 1,154 |
|
Valuation allowance |
|
| (454 | ) |
|
| (246 | ) | ||||||||
Total Long-term deferred tax assets |
|
| 21,075 |
|
|
| 9,918 |
| ||||||||
Total long-term deferred tax assets |
| $ | 32,249 |
|
| $ | 30,943 |
| ||||||||
Deferred tax liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Depreciation and amortization |
|
| — |
|
|
| (1,149 | ) |
|
| (16,226 | ) |
|
| (22,369 | ) |
Operating lease right-of-use assets |
|
| (25,291 | ) |
|
| (22,733 | ) | ||||||||
Other |
|
| — |
|
|
| (1,242 | ) | ||||||||
Total long-term deferred tax liabilities |
| $ | — |
|
| $ | (1,149 | ) |
| $ | (41,517 | ) |
| $ | (46,344 | ) |
Net deferred tax assets |
| $ | 21,075 |
|
| $ | 8,769 |
| ||||||||
Net deferred tax liabilities |
| $ | (9,268 | ) |
| $ | (15,401 | ) |
F-15
MARINEMAX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Pursuant to ASC 740, we must consider all positive and negative evidence regarding the realization of deferred tax assets. ASC 740 provides for four possible sources of taxable income to realize deferred tax assets: 1) taxable income in prior carryback years, 2) reversals of existing deferred tax liabilities, 3) tax planning strategies and 4) projected future taxable income. As of September 30, 2017,2022, we have no available taxable income in prior carryback years limited reversals of existing deferred tax liabilities orand have not identified prudent and feasible tax planning strategies. Therefore, the recoverability of our deferred tax assets is dependent upon the reversal of existing deferred tax liabilities and generating
F-24
MARINEMAX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
future taxable income.
Since the fourth quarter of fiscal 2008, the Company had maintained a full valuation allowance against its deferred tax assets, having determined it was more likely than not that the deferred tax assets would not be realized. The determination of releasing valuation allowances against deferred tax assets is made, in part, pursuant to our assessment as to whether it It is more likely than not that we will generate sufficient future taxable income against which benefits ofto realize the deferred tax assets may or mayasset not be realized. Significant judgment is required in making estimates regarding our ability to generate income in future periods.
In the fourth quarter of fiscal 2016, we reached the conclusion that it was appropriate to release the majority of our valuation allowance against our state net operating lossoffset by reversing deferred tax assets due to our operating performance in fiscal 2016 being greater than projected at fiscal 2015 year end. We considered forecasts of future operating results and the utilization of net operating losses within the statutory mandated carryforward periods and determined it was more likely than not that the majority of our state net operating loss deferred tax assets would be realized. As a result of the release of a portion of our deferred tax asset valuation allowance, we recorded approximately $1.1 million reduction in our income tax provision. A portion of the valuation allowance was retained based on particular jurisdictions. Specifically, states with a shorter statutory carryforward periods and states where our economic presence, as defined by the jurisdiction’s tax laws, has been reduced.liabilities.
As of September 30, 2016, we had federal net operating loss (NOL)2022, the Company has NOL carryforwards for federal income tax purposes of $21.0approximately $9.5 million that will begin to expire in 2031 which excludes benefits for share based payments of $14.6 million. As of September 30, 2017, we no longer had federal net operating loss (NOL) carryforwards for federal income tax purposes. State NOL carryforwards for state income tax purposes, willwhich resulted in a deferred tax asset of $0.6 million, and expire at various dates from 2029through 2032. 2032.
Significant judgment is also required in evaluating our uncertain tax positions. Although we believe our tax return positions are sustainable, we recognize tax benefits from uncertain tax positions in the consolidated financial statements only when it is more likely than not that the positions will not be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits and a consideration of the relevant taxing authority'sauthority’s administrative practices and precedents. To the extent that the final tax outcome of these matters is different than the amounts recorded, such differences will impact the provision for income taxes in the period in which such determination is made. The provision for income taxes includes the impact of reserve provisions and changes to reserves that are considered appropriate, as well as the related net interest and penalties.
In the fourth quarter of fiscal 2017, the Company released a reserve for an uncertain tax position based on administrative practice in the applicable jurisdiction in the amount of $264,000 of which approximately $177,000 impacted the effective tax rate. As of September 30, 2016 and 2017, we had approximately $254,000 and $0, respectively, of gross unrecognized tax benefits, of which approximately $154,000 and $0, respectively, if recognized, would impact the effective tax rate before considering a change in valuation allowance.
The reconciliation of the total amount recorded for unrecognized tax benefits at the beginning and end of the fiscal years ended September 30, 2016 and 2017 is as follows:
|
| 2016 |
|
| 2017 |
| ||
|
| (Amounts in thousands) |
| |||||
Unrecognized tax benefits at the beginning of the year |
| $ | 244 |
|
| $ | 254 |
|
Increases in tax positions for prior years |
| $ | 10 |
|
| $ | 10 |
|
Decreases in tax positions for prior years |
|
| - |
|
|
| (264 | ) |
Unrecognized tax benefits at the end of the year |
| $ | 254 |
|
| $ | - |
|
Consistent with our prior practices, we recognize interest and penalties related to uncertain tax positions as a component of income tax expense. As of September 30, 2016 and 2017, interest and penalties represented approximately $130,000 and $0, respectively, of the gross unrecognized tax benefits.
F-16
MARINEMAX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
We are subject to tax by both federal, state, and stateforeign taxing authorities. Until the respective statutes of limitations expire, we are subject to income tax audits in the jurisdictions in which we operate. We are no longer subject to U.S. Federalfederal tax assessments for fiscal years prior to 2013,2019, we are not subject to assessments prior to the 2016 fiscal year for the majority of the State jurisdictions and we are not subject to assessments prior to the 2012 fiscal2017 calendar year for the majority of the Stateforeign jurisdictions.
10.13. SHAREHOLDERS’ EQUITY:
In August 2017,March 2020, our Board of Directors approved a new share repurchase plan allowing our companythe Company to repurchase up to 2.010 million shares of our common stock through September 30, 2019.March 2022. The share repurchase plan was subsequently extended in March 2022 through March 2024. Under the plan, we may buy back common stock from time to time in the open market or in privately negotiated blocks, dependent upon various factors, including price and availability of the shares, and general market conditions. Through September 30, 20172022 we had purchased an aggregate of 4,426,4877,267,021 shares of common stock under the current and historical share repurchase plans for an aggregate purchase price of approximately $74.6$148.7 million. As of September 30, 2017,2022, approximately 387,1298.9 million shares remained available for future purchases under the share repurchase program.
11.14. STOCK-BASED COMPENSATION:
We account for our stock-based compensation plans following the provisions of FASB Accounting Standards CodificationASC 718, “Compensation — Stock Compensation” (“ASC 718”). In accordance with ASC 718, we use the Black-Scholes valuation model for valuing all stock-based compensationoptions granted (Note 16) and shares purchased under our Amended 2008 Employee Stock Purchase Plan.Plan (“Stock Purchase Plan”). We measure compensation for restricted stock awards and restricted stock units (Note 17) 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 net of estimated forfeitures, on a straight-line basis over the requisite service period for each separately vesting portion of the award.
Stock-based compensation expense recorded in selling, general, and administrative expenses was approximately $7.5 million, $9.7 million, and $16.0 million, for the fiscal years ended September 30, 2020, 2021, and 2022, respectively.
Cash received from option exercises under all share-based compensation arrangements for the fiscal years ended September 30, 2015, 2016,2020, 2021 and 20172022 was approximately $3.7$4.6 million, $2.7$2.6 million, and $3.2$2.2 million, respectively. We currently expect to satisfy share-based awards with registered shares available to be issued.issued from the Stock Purchase Plan.
12.15. THE INCENTIVE STOCK PLANS:
During
In February 2017, our shareholders approved a proposal to amend the 2011 Stock-Based Compensation Plan (“2011 Plan”) to increase the 2,200,456 share threshold by 1,000,000 shares to 3,200,456 shares. During January 2011,2022, our shareholders approved a proposal to authorize our 20112021 Stock-Based Compensation Plan (“2021 Plan”), which replaced our 2007 Incentive2011 Stock-Based Compensation Plan (“20072011 Plan”). Our 20112021 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 20112021 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 stockholdershareholder value. Subsequent to the February 2013 and the February 2017 amendment described above, theThe total number of shares of our common stock that may be subject to awards under the 20112021 Plan is equal to 3,000,0001,000,000 shares, plus: (i) any shares available for issuance and not subject to an award under the 2007 Plan or the 2011 Plan, which was 200,456 shares545,729 in aggregate at the time of the approval of the 20112021 Plan; (ii) the number of shares with respect to which awards granted under the 2021 Plan, the 2011 Plan andor the 2007 Plan terminate without the issuance of the shares or where the shares are forfeited or repurchased; (iii) with respect to awards granted under the 2021 Plan, the 2011 Plan and the 2007 Plan, the number of shares that are not issued as a result of the award being settled for cash or otherwise not issued in connection with the exercise or payment of the award; and (iv) the number of shares that are surrendered or withheld in payment
F-25
MARINEMAX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
of the exercise price of any award or any tax withholding requirements in connection with any award granted under the 2021 Plan, the 2011 Plan or the 2007 Plan. The 20112021 Plan terminates in January 2021,February 2032, and awards may be granted at any time during the life of the 20112021 Plan. The datedates on which awards vest are determined by the Board of Directors or the Plan Administrator. The Board of Directors has appointed the Compensation Committee as the Plan Administrator. The exercise prices of options are determined by the Board of Directors or the Plan Administrator and are at least equal to the fair market value of shares of common stock on the date of grant. The term of options under the 20112021 Plan may not exceed ten years.years. The options granted have varying vesting periods. To date, we have not settled or been under any obligation to settle any awards in cash.
F-17
MARINEMAX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table summarizes option activity from our incentive stock plans from September 30, 20162021 through September 30, 2017:2022:
|
| Shares Available for Grant |
|
| Options Outstanding |
|
| Aggregate Intrinsic Value (in thousands) |
|
| Weighted Average Exercise Price |
|
| Weighted Average Remaining Contractual Life |
| |||||||||||||||||||||||||
Balance as of September 30, 2016 |
|
| 732,103 |
|
|
| 1,451,102 |
|
| $ | 12,397 |
|
| $ | 12.33 |
|
|
| 6.0 |
| ||||||||||||||||||||
Options authorized |
|
| 1,000,000 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
|
|
| ||||||||||||||||||||
|
| Shares |
|
| Options |
|
| Aggregate |
|
| Weighted |
|
| Weighted |
| |||||||||||||||||||||||||
Balance as of September 30, 2021 |
|
| 918,061 |
|
|
| 115,250 |
|
| $ | 4,085 |
|
| $ | 13.08 |
|
|
| 1.9 |
| ||||||||||||||||||||
Shares authorized |
|
| 1,000,000 |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Options granted |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
|
|
|
|
| - |
|
|
| — |
|
|
|
|
|
| — |
|
|
|
| ||
Options cancelled/forfeited/expired |
|
| 58,667 |
|
|
| (58,667 | ) |
|
| — |
|
|
| 23.00 |
|
|
|
|
|
|
| 20,000 |
|
|
| (20,000 | ) |
|
|
|
|
| 7.39 |
|
|
|
| ||
Options exercised |
|
| — |
|
|
| (184,931 | ) |
|
| — |
|
|
| 12.28 |
|
|
|
|
|
|
| - |
|
|
| (32,500 | ) |
|
|
|
|
| 7.81 |
|
|
|
| ||
Restricted stock awards granted |
|
| (358,342 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
|
|
|
|
| (391,208 | ) |
|
| — |
|
|
|
|
|
| — |
|
|
|
| ||
Restricted stock awards forfeited |
|
| 8,000 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
|
|
|
|
| 13,684 |
|
|
| — |
|
|
|
|
|
| — |
|
|
|
| ||
Additional shares of stock issued |
|
| (53,867 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
|
|
|
|
| (24,443 | ) |
|
| — |
|
|
|
|
|
| — |
|
|
|
| ||
Balance as of September 30, 2017 |
|
| 1,386,561 |
|
|
| 1,207,504 |
|
| $ | 5,737 |
|
| $ | 11.81 |
|
|
| 5.3 |
| ||||||||||||||||||||
Exercisable as of September 30, 2017 |
|
|
|
|
|
| 961,837 |
|
| $ | 5,566 |
|
| $ | 10.78 |
|
|
| 4.9 |
| ||||||||||||||||||||
Balance as of September 30, 2022 |
|
| 1,536,094 |
|
|
| 62,750 |
|
| $ | 893 |
|
| $ | 17.62 |
|
|
| 2.3 |
| ||||||||||||||||||||
Exercisable as of September 30, 2022 |
|
|
|
|
| 60,083 |
|
| $ | 870 |
|
| $ | 16.93 |
|
|
| 2.2 |
|
No options were granted during the fiscal yearyears ended September 30, 2017.2020, and 2022. The weighted-average grant date fair value of options granted during the fiscal yearsyear ended September 30, 2015 and September 30, 20162021 was $5.80 and $6.88, respectively.$25.29. The total intrinsic value of options exercised during the fiscal years ended September 30, 2015, 2016,2020, 2021 and 20172022 was approximately $8.5$3.8 million, $3.6$1.8 million, and $1.6$1.4 million, respectively.
As of September 30, 2016 and 2017, there were approximately $1.0 million and $0.2 million, respectively, of unrecognized compensation costs related to non-vested options that are expected to be recognized over a weighted average period of 0.1 years. The total fair value of options vested during the fiscal years ended September 30, 2015, 2016, and 2017 was approximately $766,000, $163,000, and $2.5 million, respectively.
We used the Black-Scholes model to estimate the fair value of options granted. The expected term of options granted is derived from the output of the option pricing model and represents the period of time that options granted are expected to be outstanding.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.
Below are the weighted-average assumptions used for the fiscal years ended September 30, 2015 and 2016. No options were granted for the fiscal year ended September 30, 2017.
|
| 2015 |
|
| 2016 |
| ||
Dividend yield |
|
| 0.0% |
|
|
| 0.0% |
|
Risk-free interest rate |
|
| 0.9% |
|
|
| 1.0% |
|
Volatility |
|
| 47.4% |
|
|
| 48.2% |
|
Expected life |
| 3.1 years |
|
| 5.0 years |
|
13.16. EMPLOYEE STOCK PURCHASE PLAN:
DuringIn February 2012,2019, our shareholders approved a proposal to amend our 2008 Employee Stock Purchase Plan (“Stock Purchase Plan”) to increase the number of shares available under that plan by 500,000 shares. The Stock Purchase Plan as amended provides for up to 1,000,0001,500,000 shares of common stock to be available for purchase by our regular employees who have completed at least one year of continuous service. In addition, there were 52,837 shares of common stock available under our 1998 Employee Stock Purchase Plan, which have been made available for issuance under our Stock Purchase Plan. The Stock Purchase Plan provides for implementation of up to 10 annual offerings beginning on the first day of October starting in each of the years 2008 through 2027, with each offering terminating on September 30 of the following year. Each annual offering may be divided into two six-month offerings. For each offering, the purchase price per share will be the lower ofof: (i) 85% of the closing price of the common stock on the first day of the offering or (ii) 85%85% of the closing price of the common stock on the last day of the offering. The purchase price is paid through periodic payroll deductions not to exceed 10%10% of the participant’s earnings during each offering period. However, no participant may purchase more than $25,000$25,000 worth of common stock annually.
F-18
MARINEMAX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
We used the Black-Scholes model to estimate the fair value of options granted to purchase shares issued pursuant to the Stock Purchase Plan. The expected term of options granted is derived from the output of the option pricing model and represents the period of time that options granted are expected to be outstanding. 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 the fiscal years ended September 30,
|
| 2015 |
|
| 2016 |
|
| 2017 |
|
| 2020 |
| 2021 |
| 2022 | |||
Dividend yield |
|
| 0.0% |
|
|
| 0.0% |
|
|
| 0.0% |
|
| 0.0% |
| 0.0% |
| 0.0% |
Risk-free interest rate |
|
| 0.1% |
|
|
| 0.2% |
|
|
| 0.7% |
|
| 0.8% |
| 0.1% |
| 0.7% |
Volatility |
|
| 36.1% |
|
|
| 50.9% |
|
|
| 40.9% |
|
| 69.7% |
| 69.6% |
| 49.0% |
Expected life |
| Six months |
|
| Six months |
|
| Six months |
|
| Six months |
| Six months |
| Six months |
F-26
MARINEMAX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of September 30, 2017,2022, we had issued 793,3481,191,779 shares of common stock under our Stock Purchase Plan.
14.17. RESTRICTED STOCK AWARDS:
We have granted non-vested (restricted) stock awards (“restricted stock”) and restricted stock units (“RSUs”) to employees, directors, and Officersofficers pursuant to the 2021 Plan, 2011 Plan, and the 2007 Plan. The restricted stock awards and RSUs have varying vesting periods, but generally become fully vested between two and four years after the grant date, depending on the specific award, performance targets met for performance basedperformance-based awards granted to Officers,officers, and vesting period for time basedtime-based awards. Officer performance basedperformance-based awards are granted at the target amount of shares that may be earned and the actual amount of the award earned generally could range from 0%0% to 200%175% of the target number of shares based on the actual specified performance target met. We accounted for the restricted stock awards granted using the measurement and recognition provisions of ASC 718. Accordingly, the fair value of the restricted stock awards, including performance basedperformance-based awards, is measured on the grant date and recognized in earnings over the requisite service period for each separately vesting portion of the award.
The following table summarizes restricted stock award activity from September 30, 20162021 through September 30, 2017:2022:
|
| Shares/ Units |
|
| Weighted Average Grant Date Fair Value |
| ||||||||||
Non-vested balance as of September 30, 2016 |
|
| 330,905 |
|
| $ | 16.07 |
| ||||||||
Changes during the period |
|
|
|
|
|
|
|
| ||||||||
|
| Shares/ |
|
| Weighted |
| ||||||||||
Non-vested balance as of September 30, 2021 |
|
| 911,429 |
|
| $ | 22.33 |
| ||||||||
Changes during the period: |
|
|
|
|
|
| ||||||||||
Awards granted |
|
| 358,342 |
|
| $ | 17.30 |
|
|
| 391,208 |
|
| $ | 52.52 |
|
Awards vested |
|
| (74,704 | ) |
| $ | 17.90 |
|
|
| (354,436 | ) |
| $ | 21.49 |
|
Awards forfeited |
|
| (8,000 | ) |
| $ | 15.86 |
|
|
| (13,684 | ) |
| $ | 26.05 |
|
Non-vested balance as of September 30, 2017 |
|
| 606,543 |
|
| $ | 16.53 |
| ||||||||
Non-vested balance as of September 30, 2022 |
|
| 934,517 |
|
| $ | 35.23 |
|
As of September 30, 2017,2022, we had approximately $6.8$19.4 million of total unrecognized compensation cost, assuming applicable performance conditions are met, related to non-vested restricted stock awards. We expect to recognize that cost over a weighted-average period of 2.22.1 years.
F-19
MARINEMAX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following is a reconciliation of thetable presents shares used in the denominator for calculatingcalculation of basic and diluted net income per share for the fiscal years ended September 30,
|
| 2015 |
|
| 2016 |
|
| 2017 |
| |||
Weighted average common shares outstanding used in calculating basic income per share |
|
| 24,466,243 |
|
|
| 24,203,947 |
|
|
| 23,966,611 |
|
Effect of dilutive options and non-vested restricted stock awards |
|
| 636,046 |
|
|
| 616,900 |
|
|
| 712,189 |
|
Weighted average common and common equivalent shares used in calculating diluted income per share |
|
| 25,102,289 |
|
|
| 24,820,847 |
|
|
| 24,678,800 |
|
|
| 2020 |
|
| 2021 |
|
| 2022 |
| |||
Weighted average common shares outstanding used in |
|
| 21,547,665 |
|
|
| 22,010,130 |
|
|
| 21,706,225 |
|
Effect of dilutive options and non-vested restricted |
|
| 577,673 |
|
|
| 849,368 |
|
|
| 692,984 |
|
Weighted average common and common equivalent |
|
| 22,125,338 |
|
|
| 22,859,498 |
|
|
| 22,399,209 |
|
DuringFor the fiscal years ended September 30, 2015, 2016,2020, 2021, and 20172022 there were 1,553,207, 140,521,9,650, 1,619, and 18,52671,976 weighted average shares of options outstanding and non-vested restricted stock outstanding, respectively, that were not included in the computation of diluted net income per share because the options’ exercise prices or non-vested restricted stock prices were greater than the average market price of our common stock, and therefore, their effect would be anti-dilutive.
16.19. COMMITMENTS AND CONTINGENCIES:
Lease Commitments
We lease certain land, buildings, wet slips, machinery, equipment, and vehicles related to our dealerships under non-cancelable third-party operating leases. Certain of our leases include options for renewal periods and provisions for escalation. Rental expenses, including month-to-month rentals, were approximately $6.0 million, $7.1 million, and $8.3 million for the fiscal years ended September 30, 2015, 2016, and 2017, respectively.
Future minimum lease payments under non-cancelable operating leases as of September 30, 2017, were as follows:
| (Amounts in thousands) |
| |
2018 |
| 7,637 |
|
2019 |
| 7,057 |
|
2020 |
| 7,069 |
|
2021 |
| 6,365 |
|
2022 |
| 5,264 |
|
Thereafter |
| 34,069 |
|
Total | $ | 67,461 |
|
Other Commitments and Contingencies
We are party to various legal actions arising in the ordinary course of business. WeWhile it is not feasible to determine the actual outcome of these actions as of September 30, 2022, we believe that these matters should not have a material adverse effect on our consolidated financial condition, results of operations or cash flows.
During the fiscal yearsyear ended September 30, 2015, 2016, and 2017,2020, we incurred costs associated with store closings and lease terminations of approximately $581,000, $0,$1.7 million. During the fiscal years ended September 30, 2021, and $88,000, respectively. These2022, we incurred no costs primarily related to the future minimum operating lease payments of the closed locations. Theassociated with store closings were a key component in our effort to better match our fixed costs with the decline in retail business caused by the soft economic conditions.and lease terminations. The store closing costs have been included in selling, general, and administrative expenses in the consolidated statementsaccompanying Consolidated Statements of operations during the fiscal years ended September 30, 2015, 2016, and 2017.Operations.
F-27
MARINEMAX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In connection with certain of our workers’ compensation insurance policies, we maintain standby letters of credit and surety bonds for our insurance carriers in the amount of $1.1$2.0 million relating primarily to retained risk on our workers compensation claims.
We are subject to federal and state environmental regulations, including rules relating to air and water pollution and the storage and disposal of gasoline, oil, other chemicals and waste. We believe that we are in compliance with such regulations.
F-20
MARINEMAX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Certain of our facilities in Florida and the British Virgin Islands suffered damage from Hurricane Irma. In addition, our yacht charter fleet in the British Virgin Islands suffered inventory damage. With the exception of the British Virgin Islands, the damage to these facilities resulted in only minor interruptions of sales and service activities at those facilities. We maintain insurance for property damage, inventory damage, and business interruption, subject to deductibles. Total expenses as a result of damage caused by Hurricane Irma of approximately $2.9 million were recorded in selling, general, and administrative expenses in the consolidated statement of operations for the fiscal year ended September 30, 2017. We cannot currently quantify the complete negative effects of inventory or property damage incurred, nor the potential amount of insurance proceeds we will receive as a result of damage to our facilities and inventory.
17.20. EMPLOYEE 401(k) PROFIT SHARING PLANS:
Employees are eligible to participate in our 401(k) Profit Sharing Plan (the “Plan”) following their 90-day90-day introductory period starting either April 1 or October 1, provided that they are 21 years of age. Under the Plan, we match 25%matched 50% of participants’ contributions, up to a maximum of 5%6% of each participant’s compensation. We contributed, under the Plan, or pursuant to previous similar plans, approximately $605,000, $713,000,$2.7 million, $5.0 million, and $765,000$6.1 million for the fiscal years ended September 30, 2015, 2016,2020, 2021 and 2017,2022, respectively.
21. SEGMENT INFORMATION:
Change in Reportable Segments
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 operating segments, which are also reportable segments: Retail Operations and Product Manufacturing.
18. QUARTERLY FINANCIAL DATA (UNAUDITED):Reportable Segments
The Company’s 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 Powerboats. 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 Powerboats, also a wholly-owned MarineMax subsidiary, produces customized boats. Intrepid Powerboats follows a direct-to-consumer distribution model.
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.
The following table sets forth certain unaudited quarterly financial datadepreciation and amortization for each of our last eight quarters. The information has been derived from unaudited financial statements that we believe reflect all adjustments, consisting only of normal recurring adjustments, necessarythe Company’s reportable segments for the fair presentationfiscal years ended September 30,
F-28
MARINEMAX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
| 2020 |
|
| 2021 |
|
| 2022 |
| |||
|
| (Amounts in thousands) |
| |||||||||
Depreciation: |
|
|
|
|
|
|
|
|
| |||
Retail Operations |
| $ | 12,756 |
|
| $ | 13,821 |
|
| $ | 16,577 |
|
Product Manufacturing |
|
| — |
|
|
| 32 |
|
|
| 131 |
|
Depreciation |
| $ | 12,756 |
|
| $ | 13,853 |
|
| $ | 16,708 |
|
Amortization: |
|
|
|
|
|
|
|
|
| |||
Retail Operations |
| $ | 16 |
|
| $ | 1,429 |
|
| $ | 857 |
|
Product Manufacturing |
|
| — |
|
|
| 324 |
|
|
| 1,853 |
|
Amortization |
| $ | 16 |
|
| $ | 1,753 |
|
| $ | 2,710 |
|
The following table sets forth revenue and income from operations for each of such quarterly financial information.the Company’s reportable segments for the fiscal years ended September 30,
|
| December 31, 2015 |
|
| March 31, 2016 |
|
| June 30, 2016 |
|
| September 30, 2016 |
|
| December 31, 2016 |
|
| March 31, 2017 |
|
| June 30, 2017 |
|
| September 30, 2017 |
| ||||||||
|
| (Amounts in thousands except share and per share data) |
| |||||||||||||||||||||||||||||
Revenue |
| $ | 169,537 |
|
| $ | 199,566 |
|
| $ | 345,592 |
|
| $ | 227,355 |
|
| $ | 226,875 |
|
| $ | 245,018 |
|
| $ | 329,809 |
|
| $ | 250,618 |
|
Cost of sales |
|
| 127,923 |
|
|
| 150,539 |
|
|
| 266,690 |
|
|
| 170,870 |
|
|
| 173,737 |
|
|
| 183,959 |
|
|
| 245,017 |
|
|
| 184,292 |
|
Gross profit |
|
| 41,614 |
|
|
| 49,027 |
|
|
| 78,902 |
|
|
| 56,485 |
|
|
| 53,138 |
|
|
| 61,059 |
|
|
| 84,792 |
|
|
| 66,326 |
|
Selling, general, and administrative expenses |
|
| 38,951 |
|
|
| 43,459 |
|
|
| 54,325 |
|
|
| 49,041 |
|
|
| 47,095 |
|
|
| 54,781 |
|
|
| 59,557 |
|
|
| 58,593 |
|
Income from operations |
|
| 2,663 |
|
|
| 5,568 |
|
|
| 24,577 |
|
|
| 7,444 |
|
|
| 6,043 |
|
|
| 6,278 |
|
|
| 25,235 |
|
|
| 7,733 |
|
Interest expense |
|
| 1,227 |
|
|
| 1,582 |
|
|
| 1,473 |
|
|
| 1,180 |
|
|
| 1,569 |
|
|
| 2,045 |
|
|
| 1,897 |
|
|
| 1,970 |
|
Income before income income tax provision |
|
| 1,436 |
|
|
| 3,986 |
|
|
| 23,104 |
|
|
| 6,264 |
|
|
| 4,474 |
|
|
| 4,233 |
|
|
| 23,338 |
|
|
| 5,763 |
|
Income tax provision |
|
| 748 |
|
|
| 1,497 |
|
|
| 9,285 |
|
|
| 678 |
|
|
| 1,831 |
|
|
| 1,484 |
|
|
| 9,094 |
|
|
| 1,852 |
|
Net income |
| $ | 688 |
|
| $ | 2,489 |
|
| $ | 13,819 |
|
| $ | 5,586 |
|
| $ | 2,643 |
|
| $ | 2,749 |
|
| $ | 14,244 |
|
| $ | 3,911 |
|
Net income per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted |
| $ | 0.03 |
|
| $ | 0.10 |
|
| $ | 0.56 |
|
| $ | 0.22 |
|
| $ | 0.11 |
|
| $ | 0.11 |
|
|
| 0.57 |
|
|
| 0.17 |
|
Weighted average number of shares: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted |
|
| 24,742,330 |
|
|
| 24,758,826 |
|
|
| 24,770,980 |
|
|
| 25,010,193 |
|
|
| 24,923,125 |
|
|
| 25,116,359 |
|
|
| 25,095,398 |
|
|
| 23,591,854 |
|
|
| 2020 |
|
| 2021 |
|
| 2022 |
| |||
|
| (Amounts in thousands) |
| |||||||||
Revenue: |
|
|
|
|
|
|
|
|
| |||
Retail Operations |
| $ | 1,509,713 |
|
| $ | 2,043,613 |
|
| $ | 2,199,026 |
|
Product Manufacturing |
|
| — |
|
|
| 44,000 |
|
|
| 176,273 |
|
Elimination of intersegment revenue |
|
| — |
|
|
| (24,356 | ) |
|
| (67,201 | ) |
Revenue |
| $ | 1,509,713 |
|
| $ | 2,063,257 |
|
| $ | 2,308,098 |
|
Income from operations: |
|
|
|
|
|
|
|
|
| |||
Retail Operations |
| $ | 106,715 |
|
| $ | 207,034 |
|
| $ | 249,186 |
|
Product Manufacturing |
|
| — |
|
|
| 6,940 |
|
|
| 20,258 |
|
Elimination of intersegment income from operations |
|
| — |
|
|
| (4,515 | ) |
|
| (4,240 | ) |
Income from operations |
| $ | 106,715 |
|
| $ | 209,459 |
|
| $ | 265,204 |
|
22. SUBSEQUENT EVENTS:
F-21On October 3, 2022, the Company and its wholly-owned subsidiary, MarineMax East, Inc., a Delaware corporation, completed the purchase of all of the outstanding membership interest units of Island Global Yachting LLC, a Delaware limited liability company, pursuant to the terms of a Securities Purchase Agreement (the “Purchase Agreement”) with Island Marina Holdings LLC, a Delaware limited liability company, and Island Marinas Subsidiary Corp., a Delaware corporation, dated August 8, 2022 (the “Transaction”). The Transaction was consummated for an aggregate cash purchase price of $480 million in cash, subject to customary purchase price adjustments set forth in the Purchase Agreement, with an additional potential payment of up to $100 million in cash two years after closing, subject to the achievement of certain performance metrics set forth in the Purchase Agreement. The Transaction was financed through MarineMax’s New Credit Agreement which included drawing $400 million from the term loan facility and cash on hand.
F-29