HZO 10-Q
Marinemax Inc (HZO)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED |
Commission File Number.
(Exact Name of Registrant as Specified in Its Charter)
(State or Other Jurisdiction of Incorporation or Organization) |
(I.R.S. Employer Identification Number) |
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(Address of Principal Executive Offices) |
(ZIP Code) |
(Registrant’s Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered |
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Accelerated filer |
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Non-accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes
The number of outstanding shares of the registrant’s Common Stock on April 22, 2024 was
MARINEMAX, INC. AND SUBSIDIARIES
Table of Contents
Item No. |
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1. |
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3 |
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Condensed Consolidated Balance Sheets as of September 30, 2023 and March 31, 2024 |
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6 |
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Condensed Consolidated Statements of Cash Flows for the Six Months Ended March 31, 2023 and 2024 |
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8 |
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2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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3. |
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4. |
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1. |
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1A. |
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2. |
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3. |
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4. |
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5. |
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6. |
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2
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
MARINEMAX, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(Amounts in thousands, except share and per share data)
(Unaudited)
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Three Months Ended |
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Six Months Ended |
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March 31, |
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March 31, |
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2023 |
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2024 |
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2023 |
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2024 |
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Revenue |
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$ |
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$ |
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$ |
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$ |
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Cost of sales |
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Gross profit |
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Selling, general, and administrative expenses |
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Income from operations |
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Interest expense |
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Income before income tax provision |
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Income tax provision |
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Net income |
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Less: Net (loss) income attributable to non-controlling interests |
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Net income attributable to MarineMax, Inc. |
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$ |
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$ |
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$ |
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$ |
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Basic net income per common share |
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$ |
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$ |
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$ |
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$ |
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Diluted net income per common share |
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$ |
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$ |
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$ |
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$ |
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Weighted average number of common shares used in computing |
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Basic |
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Diluted |
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See accompanying Notes to Condensed Consolidated Financial Statements.
3
MARINEMAX, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Comprehensive Income
(Amounts in thousands)
(Unaudited)
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Three Months Ended |
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Six Months Ended |
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March 31, |
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March 31, |
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2023 |
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2024 |
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2023 |
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2024 |
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Net income |
$ |
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$ |
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$ |
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$ |
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Other comprehensive income (loss), net of tax: |
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Foreign currency translation adjustments |
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Interest rate swap contract |
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Total other comprehensive income (loss), net of tax |
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Comprehensive income (loss) |
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Less: comprehensive (loss) income attributable to non-controlling interests |
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( |
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Comprehensive income attributable to MarineMax, Inc. |
$ |
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$ |
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$ |
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$ |
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See accompanying Notes to Condensed Consolidated Financial Statements.
4
MARINEMAX, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Amounts in thousands, except share data)
(Unaudited)
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September 30, |
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March 31, |
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2023 |
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2024 |
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ASSETS |
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CURRENT ASSETS: |
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Cash and cash equivalents |
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$ |
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$ |
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Accounts receivable, net |
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Inventories |
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Prepaid expenses and other current assets |
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Total current assets |
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Property and equipment, net of accumulated depreciation of $ |
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Operating lease right-of-use assets, net |
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Goodwill |
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Other intangible assets, net |
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Other long-term assets |
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Total assets |
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$ |
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$ |
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LIABILITIES AND SHAREHOLDERS’ EQUITY |
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CURRENT LIABILITIES: |
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Accounts payable |
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$ |
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$ |
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Contract liabilities (customer deposits) |
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Accrued expenses |
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Short-term borrowings (Floor Plan) |
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Current maturities on long-term debt |
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Current operating lease liabilities |
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Total current liabilities |
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Long-term debt, net of current maturities |
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Noncurrent operating lease liabilities |
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Deferred tax liabilities, net |
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Other long-term liabilities |
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Total liabilities |
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AND CONTINGENCIES |
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SHAREHOLDERS’ EQUITY: |
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Preferred stock, $ |
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Common stock, $ |
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Additional paid-in capital |
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Accumulated other comprehensive income |
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Retained earnings |
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Treasury stock, at cost, |
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( |
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( |
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Total shareholders’ equity attributable to MarineMax, Inc. |
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Non-controlling interests |
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Total shareholders’ equity |
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Total liabilities and shareholders’ equity |
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$ |
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$ |
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See accompanying Notes to Condensed Consolidated Financial Statements.
5
MARINEMAX, INC. AND SUBSIDIARIES
(Amounts in thousands, except share data)
(Unaudited)
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Additional |
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Accumulated |
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Total |
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Common Stock |
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Paid-in |
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Comprehensive |
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Retained |
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Treasury |
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Non-controlling |
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Shareholders’ |
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Shares |
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Amount |
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Capital |
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Income (loss) |
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Earnings |
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Stock |
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Interests |
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Equity |
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BALANCE, September 30, 2023 |
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$ |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
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$ |
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Net income (loss) |
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— |
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— |
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— |
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— |
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— |
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( |
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Non-controlling interests in subsidiaries from acquisitions |
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— |
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— |
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— |
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— |
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— |
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— |
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Distributions to non-controlling interests |
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— |
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— |
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— |
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— |
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— |
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— |
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( |
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( |
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Shares issued pursuant to employee stock purchase plan |
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— |
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— |
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— |
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— |
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— |
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Shares issued upon vesting of equity awards, net of minimum tax withholding |
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— |
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( |
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— |
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— |
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— |
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— |
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( |
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Shares issued upon exercise of stock options |
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— |
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— |
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— |
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— |
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— |
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Stock-based compensation |
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— |
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— |
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— |
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— |
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— |
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Other comprehensive income |
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— |
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— |
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— |
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— |
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— |
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BALANCE, December 31, 2023 |
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$ |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
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$ |
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Net income (loss) |
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— |
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— |
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— |
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— |
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— |
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$ |
( |
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Stock-based compensation |
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— |
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— |
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— |
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— |
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— |
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Other comprehensive loss |
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— |
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— |
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— |
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( |
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— |
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— |
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( |
) |
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( |
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BALANCE, March 31, 2024 |
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$ |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
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$ |
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Additional |
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Accumulated |
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Total |
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Common Stock |
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Paid-in |
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Comprehensive |
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Retained |
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Treasury |
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Non-controlling |
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Shareholders’ |
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Shares |
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Amount |
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Capital |
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Income (loss) |
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Earnings |
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Stock |
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Interests |
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Equity |
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BALANCE, September 30, 2022 |
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$ |
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$ |
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$ |
( |
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$ |
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$ |
( |
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$ |
- |
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$ |
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Net income |
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— |
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— |
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— |
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— |
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— |
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Non-controlling interests in subsidiaries from acquisitions |
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— |
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— |
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— |
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— |
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— |
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— |
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Shares issued pursuant to employee stock purchase plan |
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— |
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— |
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— |
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— |
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— |
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Shares issued upon vesting of equity awards, net of minimum tax withholding |
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— |
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( |
) |
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— |
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— |
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— |
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— |
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( |
) |
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Shares issued upon exercise of stock options |
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— |
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— |
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— |
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— |
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— |
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Stock-based compensation |
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— |
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— |
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— |
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— |
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— |
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Other comprehensive income |
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— |
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— |
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— |
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— |
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— |
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BALANCE, December 31, 2022 |
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$ |
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$ |
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$ |
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$ |
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$ |
( |
) |
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$ |
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$ |
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Net income (loss) |
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— |
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— |
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— |
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— |
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$ |
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— |
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$ |
( |
) |
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Stock-based compensation |
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— |
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— |
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— |
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— |
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— |
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Other comprehensive income |
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— |
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— |
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— |
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— |
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— |
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BALANCE, March 31, 2023 |
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$ |
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$ |
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$ |
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$ |
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$ |
( |
) |
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$ |
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$ |
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|||||||
See accompanying Notes to Condensed Consolidated Financial Statements.
6
MARINEMAX, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Amounts in thousands)
(Unaudited)
|
|
Six Months Ended March 31, |
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|||||
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|
2023 |
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2024 |
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||
CASH FLOWS FROM OPERATING ACTIVITIES: |
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Net income |
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$ |
|
|
$ |
|
||
Adjustments to reconcile net income to net cash used in operating |
|
|
|
|
|
|
||
Depreciation and amortization |
|
|
|
|
|
|
||
Deferred income tax provision, net of effects of acquisitions |
|
|
|
|
|
|
||
Loss (Gain) on sale of property and equipment and assets held for sale |
|
|
|
|
|
( |
) |
|
Gain on previously held equity investment upon acquisition of the entire business |
|
|
( |
) |
|
|
— |
|
Stock-based compensation expense |
|
|
|
|
|
|
||
(Increase) decrease in, net of effects of acquisitions — |
|
|
|
|
|
|
||
Accounts receivable, net |
|
|
( |
) |
|
|
( |
) |
Inventories |
|
|
( |
) |
|
|
( |
) |
Prepaid expenses and other assets |
|
|
|
|
|
|
||
(Decrease) increase in, net of effects of acquisitions — |
|
|
|
|
|
|
||
Accounts payable |
|
|
( |
) |
|
|
( |
) |
Contract liabilities (customer deposits) |
|
|
( |
) |
|
|
( |
) |
Accrued expenses and other liabilities |
|
|
|
|
|
|
||
Net cash used in operating activities |
|
|
( |
) |
|
|
( |
) |
CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
|
|
|
||
Purchases of property and equipment |
|
|
( |
) |
|
|
( |
) |
Cash used in acquisition of businesses, net of cash acquired |
|
|
( |
) |
|
|
( |
) |
Proceeds from insurance settlements |
|
|
|
|
|
|
||
Proceeds from sale of property and equipment and assets held for sale |
|
|
|
|
|
|
||
Net cash used in investing activities |
|
|
( |
) |
|
|
( |
) |
CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
|
|
||
Net borrowings on short-term borrowings (Floor Plan) |
|
|
|
|
|
|
||
Proceeds from long-term debt |
|
|
|
|
|
— |
|
|
Payments of long-term debt |
|
|
( |
) |
|
|
( |
) |
Contingent acquisition consideration payments |
|
|
( |
) |
|
|
( |
) |
Net proceeds from issuance of common stock under incentive compensation and |
|
|
|
|
|
|
||
Payments on tax withholdings for equity awards |
|
|
( |
) |
|
|
( |
) |
Net cash provided by financing activities |
|
|
|
|
|
|
||
Effect of exchange rate changes on cash |
|
|
|
|
|
|
||
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS |
|
|
( |
) |
|
|
|
|
CASH AND CASH EQUIVALENTS, beginning of period |
|
|
|
|
|
|
||
CASH AND CASH EQUIVALENTS, end of period |
|
$ |
|
|
$ |
|
||
Supplemental disclosures of cash flow information: |
|
|
|
|
|
|
||
Cash paid for: |
|
|
|
|
|
|
||
Interest |
|
$ |
|
|
$ |
|
||
Income taxes |
|
$ |
|
|
$ |
|
||
Non-cash items: |
|
|
|
|
|
|
||
Contingent consideration liabilities from acquisitions |
|
$ |
|
|
$ |
|
||
See accompanying Notes to Condensed Consolidated Financial Statements.
7
MARINEMAX, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
We believe we are the world’s largest recreational boat and yacht retailer, selling new and used recreational boats, yachts, and related marine products and services. As of March 31, 2024, we have over
We are the largest retailer of Sea Ray and Boston Whaler recreational boats which are manufactured by Brunswick Corporation (“Brunswick”). Sales of new Brunswick boats accounted for approximately
We have dealership agreements with Sea Ray, Boston Whaler, Harris, and Mercury Marine, all of which are subsidiaries or divisions of Brunswick. We also have dealer agreements with Italy-based Azimut-Benetti Group’s product line for Azimut and Benetti yachts and mega yachts. These agreements allow us to purchase, stock, sell, and service these manufacturers’ boats and products. These agreements also allow us to use these manufacturers’ names, trade symbols, and intellectual properties in our operations. The agreements for Sea Ray and Boston Whaler products, respectively, appoint us as the exclusive dealer of Sea Ray and Boston Whaler boats, respectively, in our geographic markets. In addition, we are the exclusive dealer for Azimut Yachts for the entire United States. Sales of new Azimut yachts accounted for approximately
In 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 created standards for service and quality in nautical tourism. 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. In December 2022, we acquired Midcoast Construction Enterprises, LLC (“Midcoast Marine Group”), a leading full-service marine construction company based on Central Florida’s Gulf Coast. In January 2023, we acquired Boatzon, a boat and marine digital retail platform, through our technology entity, New Wave Innovations. In June 2023, we acquired C&C Boat Works, a full-service boat dealer in Crosslake, Minnesota. In October 2023, we acquired a controlling interest of AGY, a luxury charter management agency based in Athens, Greece. In March 2024, we acquired Williams Tenders USA, a premier distributor and retailer for UK-based Williams Jet Tenders Ltd., the world’s leading manufacturer of rigid inflatable jet tenders for the luxury yacht market.
As is typical in the industry, we deal with most of our manufacturers, other than Sea Ray, Boston Whaler, and Azimut Yachts, under renewable annual dealer agreements, each of which gives us the right to sell various makes and models of boats within a given geographic region. Any change or termination of these agreements, or the agreements discussed above, for any reason, or changes in competitive, regulatory or marketing practices, including rebate or incentive programs, could adversely affect our results of operations. Although there are a limited number of manufacturers of the type of boats and products that we sell, we believe that adequate alternative sources would be available to replace any manufacturer other than Sea Ray, Boston Whaler, and Azimut as a product source. These alternative sources may not be available at the time of any interruption, and alternative products may not be available at comparable terms, which could adversely affect operating results.
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
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
8
levels, even if prevailing economic conditions are favorable. As a result, an economic downturn would likely impact us more than certain of our competitors due to our strategic focus on a higher end of our market. Although we have expanded our operations during periods of stagnant or modestly declining industry trends, the cyclical nature of the recreational boating industry or the lack of industry growth may adversely affect our business, financial condition, and results of operations. Any period of adverse economic conditions or low consumer confidence is likely to have a negative effect on our business.
Historically, in periods of lower consumer spending and depressed economic conditions, we have, among other things, substantially reduced our acquisition program, delayed new store openings, reduced our inventory purchases, engaged in inventory reduction efforts, closed a number of our retail locations, reduced our headcount, and amended and replaced our credit facility. Acquisitions remain an important strategy for us, and, subject to a number of conditions, including macro-economic conditions and finding attractive acquisition targets, we plan to continue to explore opportunities through this strategy.
These Unaudited Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information, the instructions to Quarterly Report on Form 10-Q, and Rule 10-01 of Regulation S-X and should be read in conjunction with our Annual Report on Form 10-K for the fiscal year ended September 30, 2023. Accordingly, these Unaudited Condensed Consolidated Financial Statements do not include all of the information and note disclosures required by accounting principles generally accepted in the United States for complete financial statements. All adjustments, consisting of only normal recurring adjustments considered necessary for fair presentation, have been reflected in these Unaudited Condensed Consolidated Financial Statements. The operating results for the six months ended March 31, 2024, are not necessarily indicative of the results that may be expected in future periods.
The preparation of Unaudited Condensed Consolidated Financial Statements in conformity with accounting principles generally accepted in the United States requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the Unaudited Condensed Consolidated Financial Statements and the reported amounts of revenue and expenses during the reporting periods. Significant estimates made by us in the accompanying Unaudited Condensed Consolidated Financial Statements include valuation allowances, valuation of goodwill and intangible assets, valuation of long-lived assets and valuation of contingent consideration liabilities. Actual results could differ from those estimates.
All references to the “Company,” “we,” “us,” and “our” mean, as a combined company, MarineMax, Inc. and its subsidiaries.
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. Specifically, goodwill was moved into a separate caption on the balance sheets. This reclassification had no impact on net income or retained earnings in either period presented. The Unaudited Condensed Consolidated Financial Statements include our accounts and the accounts of our subsidiaries. All significant intercompany transactions and accounts have been eliminated.
In September 2022, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2022-04 — Liabilities — Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations which is intended to enhance the transparency surrounding the use of supplier finance programs. The guidance requires companies that use supplier finance programs to make annual disclosures about the program’s key terms, the balance sheet presentation of related amounts, the confirmed amount outstanding at the end of the period and associated roll forward information. Only the amount outstanding at the end of the period must be disclosed in interim periods. The guidance does not affect the recognition, measurement or financial statement presentation of supplier finance program obligations. The guidance becomes effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, except for the roll forward information, which is effective for fiscal years beginning after December 15, 2023. We adopted this ASU during the first quarter of fiscal 2024 and the adoption did not have an impact on our consolidated financial statement disclosures.
In November 2023, the FASB issued ASU 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures,” which improves reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The guidance in this update is effective for all public entities for fiscal years beginning after December 15, 2023, which for the Company would be the fiscal year ending September 30, 2025, with early adoption permitted. The Company is currently evaluating the ASU to determine its impact on the Company's disclosures.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which includes amendments that further enhance income tax disclosures, primarily through standardization and disaggregation of rate reconciliation categories and income taxes paid by jurisdiction. The amendments in this ASU are effective for annual periods beginning after December 15, 2024, which for the Company would be the fiscal year ending September 30, 2026. Early adoption is permitted and
9
the amendments should be applied on a prospective basis. Retrospective application is permitted. The Company is currently evaluating the ASU to determine its impact on the Company's disclosures.
The Company uses valuation approaches that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible. The Company determines fair value based on assumptions that market participants would use in pricing an asset or liability in the principal or most advantageous market. When considering market participant assumptions in fair value measurements, the following fair value hierarchy distinguishes between observable and unobservable inputs, which are categorized in one of the following levels:
Level 1 - Unadjusted quoted prices in active markets for identical assets or liabilities accessible to the reporting entity at the measurement date.
Level 2 - Other than quoted prices included in Level 1 inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability.
Level 3 - Unobservable inputs for the asset or liability used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at measurement date.
The following tables summarize the Company’s financial assets and liabilities measured at fair value in the accompanying Unaudited Condensed Consolidated Balance Sheets:
|
|
March 31, 2024 |
|
|||||||||||||
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
||||
|
|
(Amounts in thousands) |
|
|||||||||||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest rate swap contract |
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
||
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Contingent consideration liabilities |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
$ |
|
||
|
|
September 30, 2023 |
|
|||||||||||||
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
||||
|
|
(Amounts in thousands) |
|
|||||||||||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest rate swap contract |
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
||
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Contingent consideration liabilities |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
$ |
|
||
There were
The fair value of the Company's interest rate swap contract is calculated as the present value of expected future cash flows, determined on the basis of forward interest rates and present value factors. The inputs to the fair value measurements reflect Level 2 inputs. The interest rate swap contract balance is included in other long-term assets in the accompanying Unaudited Condensed Consolidated Balance Sheets. The interest rate swap contract is designated as a cash flow hedge with changes in fair value reported in other comprehensive income in the accompanying Unaudited Condensed Consolidated Statements of Comprehensive Income. For the three and six months ended March 31, 2023 and 2024,
The fair value of the Company's contingent consideration liabilities is based on the present value of the expected future payments to be made to the sellers of the acquired entities in accordance with the provisions outlined in the respective purchase agreements, which is a Level 3 fair value measurement. In determining fair value, we estimated the acquired entity’s future performance using financial projections developed by management for the acquired entity and market participant assumptions that were derived for revenue growth and/or profitability. We estimated future payments using the earnout formula and performance targets specified in each purchase agreement and the financial projections just described. The risk associated with the financial projections was evaluated using a Monte Carlo simulation analysis, pursuant to which the projections were discounted to present value using a discount rate that takes into consideration market-based rates of return, and then simulated to reflect the ability of the acquired entity to achieve the earnout targets. Such calculated earnout payments were further discounted at our estimated cost of debt, to account for counterparty risk. We note that changes in financial projections, market participant assumptions for revenue growth and/or profitability, or market risk factors, would result in a change in the fair value of recorded earnout obligations.
10
The following table summarizes ranges for significant quantitative unobservable inputs we utilized in our fair value measurements with respect to contingent consideration liabilities:
Unobservable Input: |
|
March 31, 2024 |
Earnout projected growth (including net operating income) |
|
|
Discount rate |
|
The contingent consideration liabilities balance is included in accrued expenses and other long-term liabilities in the accompanying Unaudited Condensed Consolidated Balance Sheets. Contingent consideration liabilities, recorded in other long-term liabilities, totaled approximately $
The following table sets forth the changes in fair value of our contingent consideration liabilities, which reflect Level 3 inputs, for the six months ended March 31, 2023 and 2024:
|
|
Contingent Consideration Liabilities |
|
|||||
|
|
2023 |
|
|
2024 |
|
||
|
|
(Amounts in thousands) |
|
|||||
Beginning balance - September 30, |
|
$ |
|
|
$ |
|
||
Additions from business acquisitions |
|
|
|
|
|
|
||
Settlement of contingent consideration liabilities |
|
|
( |
) |
|
|
( |
) |
Change in fair value and net present value of contingency |
|
|
|
|
|
|
||
Ending balance - March 31, |
|
$ |
|
|
$ |
|
||
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 and term loan, which are not carried at fair value in the accompanying Unaudited Condensed Consolidated Balance Sheets, was determined using Level 2 inputs based on the discounted cash flow method. We estimate the fair value of our mortgage facilities using a present value technique based on current market interest rates for similar types of financial instruments that reflect Level 2 inputs.
|
|
September 30, 2023 |
|
|
March 31, 2024 |
|
||||||||||
|
|
Fair Value |
|
|
Carrying Value |
|
|
Fair Value |
|
|
Carrying Value |
|
||||
|
|
(Amounts in thousands) |
|
|||||||||||||
Mortgage facility payable to Flagship Bank |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Mortgage facility payable to Seacoast National Bank |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Mortgage facility payable to Hancock Whitney Bank |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Term loan payable to M&T Bank |
|
|
|
|
|
|
|
|
|
|
|
|
||||
The majority of our revenue is from contracts with customers for the sale of boats, motors, and trailers. We recognize revenue from boat, motor, and trailer sales upon transfer of control of the boat, motor, or trailer to the customer, which is generally upon acceptance of the boat, motor, and trailer by the customer and the satisfaction of our performance obligations. The transaction price is determined with the customer at the time of sale. Customers may trade in a used boat to apply toward the purchase of a new or used boat. The trade-in is a type of noncash consideration measured at fair value, based on external and internal observable and unobservable market data and applied as payment to the contract price for the purchased boat. At the time of acceptance, the customer is able to direct the use of, and obtain substantially all of, the benefits of the boat, motor, or trailer. We recognize commissions earned from a brokerage sale when the related brokerage transaction closes upon transfer of control of the boat, motor, or trailer to the customer, which is generally upon acceptance by the customer.
11
We do not directly finance our customers’ boat, motor, or trailer purchases. In many cases, we assist with third-party financing for boat, motor, and trailer sales. We recognize commissions earned by us for placing notes with financial institutions in connection with customer boat financing when we recognize the related boat sales. Pursuant to negotiated agreements with financial institutions, we are charged back for a portion of these fees should the customer terminate or default on the related finance contract before it is outstanding for a stipulated minimum period of time. We base the chargeback allowance, which was not material to the Unaudited Condensed Consolidated Financial Statements taken as a whole as of March 31, 2024, 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 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 performed. Each boat maintenance and repair service is a single performance obligation that includes both the parts and labor associated with the service. Payment for boat maintenance and repairs is typically due upon the completion of the service, which is generally completed within a short period of time from contract inception. We satisfy our performance obligations, transfer control, and recognize revenue over time for parts and service operations because we are creating a contract asset with no alternative use and we have an enforceable right to payment for performance completed to date. Contract assets primarily relate to our right to consideration for work in process not yet billed at the reporting date associated with maintenance and repair services. We use an input method to recognize revenue and measure progress based on labor hours expended to satisfy the performance obligation at average labor rates. We have determined labor hours expended to be the relevant measure of work performed to complete the maintenance and repair service for the customer.
We recognize revenue from the sale of our manufactured 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.
We recognize lessor common area charges, utility sales, food and beverage sales and other ancillary goods and services. Performance obligations include performing common area maintenance and providing utilities, food and beverages, and other ancillary goods and services when goods are transferred or services are performed. Payment terms typically align with when the goods and services are provided.
Contract liabilities primarily consist of customer deposits. We recognize contract liabilities (customer deposits) as revenue at the time of acceptance and the transfer of control to the customers.
We recognize revenue from service operations and slip and storage rentals over time on a straight-line basis over the term of the contract as our performance obligations are met. We recognize revenue from the rentals of chartering power yachts over time on a straight-line basis over the term of the contract as our performance obligations are met.
The following table sets forth percentages on the timing of revenue recognition by reportable segment:
|
Retail Operations |
|
|
Product Manufacturing |
|
||||||||||
|
Three Months Ended |
|
|
Three Months Ended |
|
||||||||||
|
March 31, |
|
|
March 31, |
|
||||||||||
|
2023 |
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
||||
Goods and services transferred at a point in time |
|
% |
|
|
% |
|
|
% |
|
|
% |
||||
Goods and services transferred over time |
|
% |
|
|
% |
|
|
— |
|
|
|
— |
|
||
Revenue |
|
% |
|
|
% |
|
|
% |
|
|
% |
||||
|
Retail Operations |
|
|
Product Manufacturing |
|
||||||||||
|
Six Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
March 31, |
|
|
March 31, |
|
||||||||||
|
2023 |
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
||||
Goods and services transferred at a point in time |
|
% |
|
|
% |
|
|
% |
|
|
% |
||||
Goods and services transferred over time |
|
% |
|
|
% |
|
|
— |
|
|
|
— |
|
||
Revenue |
|
% |
|
|
% |
|
|
% |
|
|
% |
||||
12
The following tables set forth our revenue disaggregated into categories that depict the nature, amount, timing, and uncertainty of revenue and cash flows affected by economic factors.
|
|
Three months ended March 31, 2023 |
|
|
Three months ended March 31, 2024 |
|
|
||||||||||||||||||
|
|
Retail Operations |
|
|
Product Manufacturing |
|
|
Total |
|
|
Retail Operations |
|
|
Product Manufacturing |
|
|
Total |
|
|
||||||
New boat sales |
|
|
% |
|
|
% |
|
|
% |
|
|
% |
|
|
% |
|
|
% |
|
||||||
Used boat sales |
|
|
% |
|
|
% |
|
|
% |
|
|
% |
|
|
— |
|
|
|
% |
|
|||||
Maintenance and repair services |
|
|
% |
|
|
— |
|
|
|
% |
|
|
% |
|
|
— |
|
|
|
% |
|
||||
Storage and charter rentals |
|
|
% |
|
|
— |
|
|
|
% |
|
|
% |
|
|
— |
|
|
|
% |
|
||||
Finance and insurance products |
|
|
% |
|
|
— |
|
|
|
% |
|
|
% |
|
|
— |
|
|
|
% |
|
||||
Parts and accessories |
|
|
% |
|
|
% |
|
|
% |
|
|
% |
|
|
% |
|
|
% |
|
||||||
Brokerage sales |
|
|
% |
|
|
% |
|
|
% |
|
|
% |
|
|
— |
|
|
|
% |
|
|||||
Revenue |
|
|
% |
|
|
% |
|
|
% |
|
|
% |
|
|
% |
|
|
% |
|
||||||
|
|
Six months ended March 31, 2023 |
|
|
Six months ended March 31, 2024 |
|
|
||||||||||||||||||
|
|
Retail Operations |
|
|
Product Manufacturing |
|
|
Total |
|
|
Retail Operations |
|
|
Product Manufacturing |
|
|
Total |
|
|
||||||
New boat sales |
|
|
% |
|
|
% |
|
|
% |
|
|
% |
|
|
% |
|
|
% |
|
||||||
Used boat sales |
|
|
% |
|
|
% |
|
|
% |
|
|
% |
|
|
— |
|
|
|
% |
|
|||||
Maintenance and repair services |
|
|
% |
|
|
— |
|
|
|
% |
|
|
% |
|
|
— |
|
|
|
% |
|
||||
Storage and charter rentals |
|
|
% |
|
|
— |
|
|
|
% |
|
|
% |
|
|
— |
|
|
|
% |
|
||||
Finance and insurance products |
|
|
% |
|
|
— |
|
|
|
% |
|
|
% |
|
|
— |
|
|
|
% |
|
||||
Parts and accessories |
|
|
% |
|
|
% |
|
|
% |
|
|
% |
|
|
% |
|
|
% |
|
||||||
Brokerage sales |
|
|
% |
|
|
% |
|
|
% |
|
|
% |
|
|
— |
|
|
|
% |
|
|||||
Revenue |
|
|
% |
|
|
% |
|
|
% |
|
|
% |
|
|
% |
|
|
% |
|
||||||
The following table sets forth our maintenance, repair, storage, rental, charter services and parts and accessories revenue for our Retail Operations by location type.
|
|
Three months ended March 31, 2023 |
|
|
Three months ended March 31, 2024 |
|
||
|
|
(Amounts in thousands) |
|
|||||
Marina/storage locations |
|
$ |
|
|
$ |
|
||
Locations without marina/storage |
|
|
|
|
|
|
||
Maintenance, repair, storage, rental, charter services, parts and accessories revenue |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
|
|
Six months ended March 31, 2023 |
|
|
Six months ended March 31, 2024 |
|
||
|
|
(Amounts in thousands) |
|
|||||
Marina/storage locations |
|
$ |
|
|
$ |
|
||
Locations without marina/storage |
|
|
|
|
|
|
||
Maintenance, repair, storage, rental, charter services, parts and accessories revenue |
|
$ |
|
|
$ |
|
||
Lessee
Substantially all of the leases that we enter into are real estate leases. We lease numerous facilities relating to our operations, including showrooms, display lots, marinas, service facilities, slips, offices, equipment and our corporate headquarters. Leases for real property have terms, including renewal options, ranging from one to in excess of
13
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.
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 March 31, 2024, the weighted-average discount rate used was approximately
As of March 31, 2024, maturities of lease liabilities by fiscal year are summarized as follows:
|
|
(Amounts in thousands) |
|
|
2024 (remaining) |
|
$ |
|
|
2025 |
|
|
|
|
2026 |
|
|
|
|
2027 |
|
|
|
|
2028 |
|
|
|
|
Thereafter |
|
|
|
|
Total lease payments |
|
|
|
|
Less: interest |
|
|
( |
) |
Present value of lease liabilities |
|
$ |
|
|
The following table sets forth supplemental cash flow information related to leases:
|
Six Months Ended |
|
|||||
|
March 31, |
|
|||||
|
2023 |
|
|
2024 |
|
||
|
(Amounts in thousands) |
|
|||||
Cash paid for amounts included in the measurement of lease liabilities: |
|
|
|
|
|
||
Operating cash flows from operating leases |
$ |
|
|
$ |
|
||
Right-of-use assets obtained in exchange for lease obligations: |
|
|
|
|
|
||
Operating leases |
$ |
|
|
$ |
|
||
The Company reports the change in ROU assets and the change in operating lease liabilities on a net basis in accrued expenses and other liabilities in the accompanying Unaudited Condensed Consolidated Statements of Cash Flows.
Lessor
The Company enters into certain agreements as a lessor under which it rents buildings to third parties. Initial terms of our real estate leases are generally three to five years, exclusive of options to renew, which are generally exercisable at our sole discretion for one term of five years. These leases meet all of the criteria of an operating lease and are accordingly recognized straight line over the lease term.
The following table summarizes the amount of operating lease income and other income included in total revenues in the accompanying unaudited condensed consolidated statements of operations:
14
|
Six Months Ended |
|
|||||
|
March 31, |
|
|||||
|
2023 |
|
|
2024 |
|
||
|
(Amounts in thousands) |
|
|||||
Operating leases: |
|
|
|
|
|
||
Operating lease income |
$ |
|
|
$ |
|
||
Variable lease income |
$ |
|
|
$ |
|
||
$ |
|
|
$ |
|
|||
As of March 31, 2024, future minimum payments to be received during the next five years and thereafter are as follows:
|
|
(Amounts in thousands) |
|
|
2024 (remaining) |
|
$ |
|
|
2025 |
|
|
|
|
2026 |
|
|
|
|
2027 |
|
|
|
|
2028 |
|
|
|
|
Thereafter |
|
|
|
|
Total lease payments |
|
$ |
|
|
Inventories are stated at the lower of cost or net realizable value. The cost of inventories purchased from our vendors consist of the amount paid to acquire the inventory, net of vendor consideration and purchase discounts, the cost of equipment added, reconditioning costs, inventory deposits, and transportation costs relating to acquiring inventory for sale. Trade-in used boats are initially recorded at fair value and adjusted for reconditioning and other costs. The cost of inventories that are manufactured by the Company consist of material, labor, and manufacturing overhead. Unallocated overhead and abnormal costs are expensed as incurred. New and used boats, motors, and trailers inventories are accounted for on a specific identification basis. Raw materials and parts, accessories, and other inventories are accounted for on an average cost basis. We utilize our historical experience, the aging of the inventories, and our consideration of current market trends as the basis for determining a lower of cost or net realizable value. We do not believe there is a reasonable likelihood that there will be a change in the future estimates or assumptions we use to calculate the lower of cost or net realizable value. If events occur and market conditions change, the net realizable value of our inventories could change.
Inventories consisted of the following as of:
|
September 30, 2023 |
|
|
March 31, 2024 |
|
||
|
(Amounts in thousands) |
|
|||||
New and used boats, motors, and trailers |
$ |
|
|
$ |
|
||
In transit inventory and deposits |
|
|
|
|
|
||
Parts, accessories, and other |
|
|
|
|
|
||
Work-in-process |
|
|
|
|
|
||
Raw materials |
|
|
|
|
|
||
Inventories |
$ |
|
|
$ |
|
||
We account for acquisitions in accordance with FASB ASC 805, “Business Combinations” (“ASC 805”), and goodwill in accordance with ASC 350, “Intangibles — Goodwill and Other” (“ASC 350”). For business combinations, the excess of the purchase price over the estimated fair value of net assets acquired in a business combination is recorded as goodwill.
In March 2024, we acquired Williams Tenders USA, a premier distributor and retailer for UK-based Williams Jet Tenders Ltd., the world’s leading manufacturer of rigid inflatable jet tenders for the luxury yacht market.
In October 2023, we acquired a controlling interest of AGY, a luxury charter management agency based in Athens, Greece.
In June 2023, we acquired C&C Boat Works, a full-service boat dealer in Crosslake, Minnesota. In January 2023, we acquired Boatzon, a boat and marine digital retail platform, through our technology entity, New Wave Innovations. In December 2022, we acquired Midcoast Marine Group, a leading full-service marine construction Company based on Central Florida's Gulf Coast. These acquisitions were purchased for an aggregate consideration of approximately $
15
In October 2022, we purchased all of the outstanding equity of IGY Marinas for an aggregate consideration of approximately $
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 total, current and previous acquisitions have resulted in the recording of $
The following table sets forth the changes in carrying amount of goodwill by reportable segment during the six months ended March 31, 2024:
|
|
Retail Operations |
|
|
Product Manufacturing |
|
|
Total |
|
|||
|
|
(Amounts in thousands) |
|
|||||||||
Balance as of September 30, 2023 |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Goodwill acquired |
|
|
|
|
|
— |
|
|
|
|
||
Foreign currency translation |
|
|
|
|
|
— |
|
|
|
|
||
Balance as of March 31, 2024 |
|
$ |
|
|
$ |
|
|
$ |
|
|||
We account for income taxes in accordance with FASB ASC 740, “Income Taxes” (“ASC 740”). Under ASC 740, we recognize deferred tax assets and liabilities for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. We measure deferred tax assets and liabilities using enacted tax rates expected to apply to taxable income in the years in which we expect those temporary differences to be recovered or settled. We record valuation allowances to reduce our deferred tax assets to the amount expected to be realized by considering all available positive and negative evidence.
During the three months ended March 31, 2023 and 2024, we recognized an income tax provision of $
Short-term Borrowings
In July 2023, we executed the Amended Credit Facility with Manufacturers and Traders Trust Company ("M&T Bank") as Administrative Agent, Swingline Lender, and Issuing Bank, Wells Fargo Commercial Distribution Finance, LLC, as Floor Plan Agent, and the lenders party thereto (the “Amended Credit Facility”). The Amended Credit Facility provides the Company short-term borrowing in the form of a line of credit with asset-based borrowing availability (the "Floor Plan") of up to $
16
and 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 Amended Credit Agreement has certain financial covenants as specified in the agreement.
In August 2022, we entered into a Credit Agreement with Manufacturers and Traders Trust Company as Administrative Agent, Swingline Lender, and Issuing Bank, Wells Fargo Commercial Distribution Finance, LLC, as Floor Plan Agent, and the lenders party thereto (the “2022 Credit Agreement”). The 2022 Credit Agreement provided the Company short-term borrowing (the "2022 Floor Plan") in the form of a line of credit with asset based borrowing availability of up to $
As of March 31, 2024, our outstanding short term borrowings under the Floor Plan associated with financing our inventory and working capital needs totaled approximately $
As of March 31, 2023 and 2024, the interest rate on the outstanding short-term borrowings, which solely consisted of the 2022 Floor Plan and the current Floor Plan, was approximately
As is common in our industry, we receive interest assistance directly from boat manufacturers, including Brunswick. The interest assistance programs vary by manufacturer, but generally include periods of free financing or reduced interest rate programs. The interest assistance may be paid directly to us or our lender depending on the arrangements the manufacturer has established. We classify interest assistance received from manufacturers as a reduction of inventory cost and related cost of sales.
The availability and costs of borrowed funds can adversely affect our ability to obtain adequate boat inventory and the holding costs of that inventory as well as the ability and willingness of our customers to finance boat purchases. However, we rely on our Amended Credit Agreement 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 Amended Credit Agreement also depends upon the ability of our lenders to meet their funding commitments, particularly if they experience shortages of capital, experience excessive volumes of borrowing requests from others during a short period of time or otherwise experience liquidity issues of their own as other lending institutions have recently experienced. 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 Amended Credit Agreement to fund our operations. Any inability to utilize our Amended Credit Agreement 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.
17
Long-term Debt
The below table summarizes the Company's long-term debt.
|
|
September 30, 2023 |
|
|
March 31, 2024 |
|
||
|
|
(Amounts in thousands) |
|
|||||
Mortgage facility payable to Flagship Bank bearing interest at |
|
$ |
|
|
$ |
|
||
Mortgage facility payable to Seacoast National Bank bearing interest at |
|
|
|
|
|
|
||
Mortgage facility payable to Hancock Whitney Bank bearing interest at |
|
|
|
|
|
|
||
Revolving mortgage facility with FineMark National Bank & Trust bearing interest at |
|
|
— |
|
|
|
— |
|
Term loan payable to M&T Bank bearing interest at |
|
|
|
|
|
|
||
Loan payable to TRANSPORT S.a.s di Taula Vittorio & C. bearing interest |
|
|
|
|
|
|
||
Total long-term debt |
|
|
|
|
|
|
||
Less: current portion |
|
|
( |
) |
|
|
( |
) |
Less: unamortized portion of debt issuance costs |
|
|
( |
) |
|
|
( |
) |
Long-term debt, net current portion and unamortized debt issuance costs |
|
$ |
|
|
$ |
|
||
We account for our stock-based compensation plans following the provisions of FASB ASC 718, “Compensation — Stock Compensation” (“ASC 718”). In accordance with ASC 718, we use the Black-Scholes valuation model for valuing all options granted (Note 13) and shares purchased under our Amended 2008 Employee Stock Purchase Plan (“Stock Purchase Plan”). We measure compensation for restricted stock awards and restricted stock units (Note 14) at fair value on the grant date based on the number of shares expected to vest and the quoted market price of our common stock. We recognize compensation cost for all awards in operations on a straight-line basis over the requisite service period for each separately vesting portion of the award.
During the three months ended March 31, 2023 and 2024, we recognized stock-based compensation expense of approximately $
Cash received from option exercises under all share-based compensation arrangements for the six months ended March 31, 2023 and 2024, was approximately $
In February 2023, our shareholders approved a proposal to amend our 2021 Plan, to increase the total number of available shares by
18
the 2021 Plan, the 2011 Plan or 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 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 2021 Plan terminates in February 2032, and awards may be granted at any time during the life of the 2021 Plan. The dates 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 2021 Plan may not exceed ten 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.
The following table summarizes activity from our incentive stock plans from September 30, 2023 through March 31, 2024:
|
|
Shares |
|
|
Options Outstanding |
|
|
Aggregate |
|
|
Weighted |
|
|
Weighted |
|
|||||
Balance as of September 30, 2023 |
|
|
|
|
|
|
|
$ |
|
|
$ |
|
|
|
|
|||||
Options cancelled/forfeited/expired |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
||||
Options exercised |
|
|
— |
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|||
Restricted stock awards granted |
|
|
( |
) |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Restricted stock awards forfeited |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|||
Additional shares of stock issued |
|
|
( |
) |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Balance as of March 31, 2024 |
|
|
|
|
|
|
|
$ |
|
|
$ |
|
|
|
|
|||||
Exercisable as of March 31, 2024 |
|
|
|
|
|
|
|
$ |
|
|
$ |
|
|
|
|
|||||
During the six months ended March 31, 2024,
We used the Black-Scholes model to estimate the fair value of options granted. The expected term of options granted is estimated based on historical experience. Volatility is based on the historical volatility of our common stock. The risk-free rate for periods within the contractual term of the options is based on the U.S. Treasury yield curve in effect at the time of grant.
In February 2019, our shareholders approved a proposal to amend our Stock Purchase Plan to increase the number of shares available under that plan by
We used the Black-Scholes model to estimate the fair value of options granted to purchase shares issued pursuant to the Stock Purchase Plan. Volatility is based on the historical volatility of our common stock. The risk-free rate for periods within the contractual term of the options is based on the U.S. Treasury yield curve in effect at the time of grant.
The following are the weighted average assumptions used for each respective period:
|
Three Months Ended |
|
Six Months Ended |
||||
|
March 31, |
|
March 31, |
||||
|
2023 |
|
2024 |
|
2023 |
|
2024 |
Dividend yield |
|
|
|
||||
Risk-free interest rate |
|
|
|
||||
Volatility |
|
|
|
||||
Expected life |
|
|
|
||||
As of March 31, 2024, we have issued
19
We have granted non-vested (restricted) stock awards (“restricted stock”) and restricted stock units (“RSUs”) to employees, directors, and officers pursuant to the 2021 Plan, the 2011 Plan, and the 2007 Plan. The restricted stock awards and RSUs have varying vesting periods, but generally become fully vested between and
The following table summarizes restricted stock award activity from September 30, 2023 through March 31, 2024:
|
|
Shares/ Units |
|
|
Weighted |
|
||
Non-vested balance as of September 30, 2023 |
|
|
|
|
$ |
|
||
Changes during the period: |
|
|
|
|
|
|
||
Awards granted |
|
|
|
|
$ |
|
||
Awards vested |
|
|
( |
) |
|
$ |
|
|
Awards forfeited |
|
|
( |
) |
|
$ |
|
|
Non-vested balance as of March 31, 2024 |
|
|
|
|
|
|
||
As of March 31, 2024, we had approximately $
The following table presents shares used in the calculation of basic and diluted net income per share:
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
March 31, |
|
|
March 31, |
|
||||||||||
|
2023 |
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
||||
Weighted average common shares outstanding used in |
|
|
|
|
|
|
|
|
|
|
|
||||
Effect of dilutive options and non-vested restricted stock |
|
|
|
|
|
|
|
|
|
|
|
||||
Weighted average common and common equivalent shares |
|
|
|
|
|
|
|
|
|
|
|
||||
For the three months ended March 31, 2023 and 2024, there were
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 March 31, 2024, we believe that these matters should not have a material adverse effect on our unaudited condensed consolidated financial condition, results of operations, or cash flows.
Reportable Segments
20
The Company’s reportable 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 rentals; 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. We also maintain a network of strategically positioned luxury marinas situated in yachting and sport fishing destinations around the world through IGY Marinas, which is 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
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.
21
The following table sets forth revenue and income from operations for each of the Company’s reportable segments:
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
|
March 31, |
|
|
March 31, |
|
||||||||||
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
||||
|
|
(Amounts in thousands) |
|
|
(Amounts in thousands) |
|
||||||||||
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Retail Operations |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Product Manufacturing |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Elimination of intersegment revenue |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Revenue |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Income from operations: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Retail Operations |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Product Manufacturing |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|||
Intersegment adjustments |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
||
Income from operations |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
18. SUBSEQUENT EVENTS:
On April 11, 2024, without warning or notice, the General Directorate of Ports of Mexico seized the assets of Cabo Marina, S. de R.L. de C.V (“Cabo Marina”), a subsidiary of IGY Marinas, a wholly owned subsidiary of MarineMax, Inc. (the “Company”) and initiated a sanctioning procedure. On the same day, the Administration of the National Port System for Los Cabos (“ASIPONA”) rejected Cabo Marina’s application (filed on March 21, 2024) for a new concession for the Port of Cabo San Lucas. The General Directorate of Ports and ASIPONA subsequently forced Cabo Marina to cease operations and the ASIPONA took control of the Port of Cabo San Lucas.
Cabo Marina has operated the marina in Cabo San Lucas for more than 20 years and was actively processing a new concession agreement in good faith when ASIPONA and the Mexican Navy took possession of the port. The Company believes that the takeover of Cabo Marina’s facilities is illegal and that the alleged violations underlying the sanction proceedings against Cabo Marina are illegitimate. The Company has engaged Mexican and U.S. Government officials to resolve the dispute and may resort to legal action to enforce its rights if diplomatic efforts fail. The Cabo Marina was associated with less than
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This Management’s Discussion and Analysis of Financial Condition and Results of Operations contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements include statements regarding our “expectations,” “anticipations,” “intentions,” “plans,” “beliefs,” or “strategies” regarding the future. These forward-looking statements include statements relating to market risks such as interest rate risk and foreign currency exchange rate risk; economic and industry conditions and corresponding effects on consumer behavior and our operating results; environmental conditions; inclement weather; certain specific and isolated events; our future estimates, assumptions and judgments, including statements regarding whether such estimates, assumptions and judgments could have a material adverse effect on our operating results; the impact of changes in accounting policy and standards; the impact of our core strengths and retailing strategies on our growth and earnings potential; our plans to accelerate our growth through acquisitions and new store openings; our belief that our existing capital resources will be sufficient to finance our operations for at least the next 12 months and thereafter for the foreseeable future, except for possible significant acquisitions; the seasonality and cyclicality of our business and the effect of such seasonality and cyclicality on our business, financial results and inventory levels; and the Company’s ability to manage growth effectively. Actual results could differ materially from those currently anticipated as a result of a number of factors, including those set forth under “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended September 30, 2023.
General
We believe we are the largest recreational boat and yacht retailer and superyacht services company in the world. Through our current 83 retail locations in 21 states, we sell new and used recreational boats and related marine products, including engines, trailers, parts, and accessories. We also arrange related boat financing, insurance, and extended service contracts; provide boat repair and
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maintenance services; offer yacht and boat brokerage sales; and, where available, offer slip and storage accommodations. In the British Virgin Islands we offer the charter of catamarans, through MarineMax Vacations. We also own Fraser Yachts Group, a leading superyacht brokerage and luxury yacht services company with operations in multiple countries, 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 United States, and 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. IGY Marinas maintains a network of luxury marinas situated in yachting and sport fishing destinations around the world. IGY Marinas has created standards for service and quality in nautical tourism. It offers a global network of marinas in the Americas, the Caribbean, Europe, and Asia, 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 December 2022, we acquired Midcoast Marine Group, a leading full-service marine construction company based on Central Florida's Gulf Coast. In January 2023, we acquired Boatzon, a boat and marine digital retail platform, through our technology entity, New Wave Innovations. In June 2023, we acquired C&C Boat Works, a full-service boat dealer in Crosslake, Minnesota. In October 2023, we acquired a controlling interest of AGY, a luxury charter management agency based in Athens, Greece. In March 2024, we acquired Williams Tenders USA, a premier distributor and retailer for UK-based Williams Jet Tenders Ltd., the world’s leading manufacturer of rigid inflatable jet tenders for the luxury yacht market.
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 Quarterly Report on Form 10-Q, acquired 33 recreational boat dealers, five boat brokerage operations, two full-service yacht repair operations, five boat brokerage 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 four acquisitions in the fiscal year ending September 30, 2023, and three acquisitions to date in fiscal 2024.
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 50%, 51%, and 53% of our dealership revenue during fiscal 2021, 2022, and 2023, 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, have resulted in, and may further result in, significantly higher long-term interest rates and a downturn in the overall economy, each of which has negatively impacted our customers’ willingness or desire to purchase our products. As a result, an economic downturn or inflation could impact us more than certain of our competitors due to our strategic focus on a higher end of our market. Although we have expanded our operations during periods of stagnant or modestly declining industry trends, the cyclical nature of the recreational boating industry or the lack of industry growth may adversely affect our business, financial condition, and results of operations. Any period of adverse economic conditions, low consumer confidence or inflation is likely to have a negative effect on our business.
Historically, in periods of lower consumer spending and depressed economic conditions, we have, among other things, substantially reduced our acquisition program, delayed new store openings, reduced our inventory purchases, engaged in inventory reduction efforts, closed a number of our retail locations, reduced our headcount, and amended and replaced our credit facility.
Although past economic conditions have adversely affected our operating results, we believe during and after such conditions we have capitalized on our core strengths to substantially outperform the industry, resulting in market share gains. Our ability to capture such market share supports the alignment of our retailing strategies with the desires of consumers. We believe the steps we have taken to address weak market conditions in the past have yielded, and we believe are likely to yield in the future, an increase in revenue. Acquisitions remain an important strategy for us, and, subject to a number of conditions, including macro-economic conditions and finding attractive acquisition targets, we plan to explore opportunities through this strategy. We expect that our core strengths and retailing strategies, including our digital platform, will position us to capitalize on growth opportunities as they occur and will allow us to emerge with greater earnings potential.
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As of March 31, 2024, the Retail Operations segment includes the activity of 83 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 rentals; 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. Through IGY Marinas, which is also included in this segment, we maintain a network of strategically positioned luxury marinas situated in yachting and sport fishing destinations around the world. The Retail Operations segment includes the majority of all corporate costs.
As of March 31, 2024, the Product Manufacturing segment includes activity of Cruisers Yachts and Intrepid Powerboats, both wholly-owned MarineMax subsidiaries. Cruisers Yachts 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 produces 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
See Part II, Item 7, “Application of Critical Accounting Policies” in our Annual Report on Form 10-K for the fiscal year ended September 30, 2023. There have been no material changes to our critical accounting policies since our Annual Report on Form 10-K for the fiscal year ended September 30, 2023.
Recent Accounting Pronouncements
See Note 3 of the Notes to Unaudited Condensed Consolidated Financial Statements.
Consolidated Results of Operations
The following discussion compares the three and six months ended March 31, 2024, with the three and six months ended March 31, 2023 and should be read in conjunction with the Unaudited Condensed Consolidated Financial Statements, including the related notes thereto, appearing elsewhere in this report.
Three Months Ended March 31, 2024 Compared with Three Months Ended March 31, 2023
Revenue. Revenue increased $12.6 million, or 2.2%, to $582.9 million for the three months ended March 31, 2024, from $570.3 million for three months ended March 31, 2023. The increase was due to an increase of $12.5 million, or 2%, in comparable-store sales, in addition to a $0.1 million net increase from acquisitions (AGY and C&C) that are not eligible for inclusion in comparable-store sales as well as a decrease in manufacturing revenue, which is not included in comparable retail store sales. The comparable-store increase came primarily from increases in new and used boat revenue along with contributions from our other higher margin businesses.
Gross Profit. Gross profit decreased $10.5 million, or 5.2%, to $190.4 million for the three months ended March 31, 2024, from $200.9 million for the three months ended March 31, 2023. Gross profit as a percentage of revenue decreased to 32.7% for the three months ended March 31, 2024, from 35.2% for the three months ended March 31, 2023. The decrease in gross profit as a percentage of revenue was primarily the result of lower new and used boat margins as we aggressively drove sales during a softer retail environment.
Selling, General, and Administrative Expenses. Selling, general, and administrative expenses increased $23.5 million, or 16.2%, to $169.0 million for the three months ended March 31, 2024, from $145.5 million for the three months ended March 31, 2023. The increase in selling, general, and administrative expenses was primarily the result of inflation and recent acquisitions.
Interest Expense. Interest expense increased $6.1 million to $19.4 million for the three months ended March 31, 2024, from $13.3 million for the three months ended March 31, 2023. The increase in interest expense was primarily the result of increased interest rates and increased borrowings due primarily to higher inventory levels.
Income Taxes. Income tax expense decreased $11.6 million to $0.6 million, for the three months ended March 31, 2024, from $12.2 million for the three months ended March 31, 2023. The effective income tax rate for the three months ended March 31, 2023 and 2024 was 29.0% and 28.5%, respectively.
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Six Months Ended March 31, 2024 Compared with Six Months Ended March 31, 2023
Revenue. Revenue increased $32.0 million, or 3.0%, to $1.110 billion for the six months ended March 31, 2024, from $1.078 billion for six months ended March 31, 2023. The increase is due to a $31.6 million, or 3%, increase in comparable-store sales in addition to a $0.4 million net increase from acquisitions (AGY and C&C) that are not eligible for inclusion in comparable-store sales as well as a decrease in manufacturing revenue, which is not included in comparable retail store sales. The comparable-store increase came primarily from increases in new and used boat revenue along with contributions from our other higher margin businesses.
Gross Profit. Gross profit decreased $21.9 million, or 5.6%, to $365.9 million for the six months ended March 31, 2024, from $387.8 million for the six months ended March 31, 2023. Gross profit as a percentage of revenue decreased to 33.0% for the six months ended March 31, 2024, from 36.0% for the six months ended March 31, 2023. The decrease in gross profit was primarily the result of lower new and used boat margins, as we aggressively drove sales during a softer retail environment.
Selling, General, and Administrative Expenses. Selling, general, and administrative expenses increased $29.6 million, or 10.0% to $325.5 million for the six months ended March 31, 2024, from $295.9 million for the six months ended March 31, 2023. The increase in selling, general, and administrative expenses was primarily the result of inflation and recent acquisitions.
Interest Expense. Interest expense increased $14.9 million to $37.7 million for the six months ended March 31, 2024, from $22.8 million for the six months ended March 31, 2023. The increase in interest expense was primarily the result of increased interest rates and increased borrowings due primarily to higher inventory levels.
Income Taxes. Income tax expense decreased $18.8 million, to $0.4 million for the six months ended March 31, 2024, from $19.2 million for the six months ended March 31, 2023. The effective income tax rate for the six months ended March 31, 2023 and 2024 before discrete items was 27.9%.
Liquidity and Capital Resources
Our cash needs are primarily for working capital to support operations, including new and used boat and related parts inventories, off-season liquidity, and growth through acquisitions. Acquisitions remain an important strategy for us, and we plan to continue our growth through this strategy in appropriate circumstances. We cannot predict the length of prevailing economic or financial conditions. We regularly monitor the aging of our inventories and current market trends (including supply chain issues) to evaluate our current and future inventory needs. We also use this evaluation in conjunction with our review of our current and expected operating performance and expected business levels to determine the extent of our financing needs.
These cash needs historically have been financed with cash generated from operations and borrowings under the Amended Credit Facility (described below). Our ability to utilize the Amended Credit Facility to fund operations depends upon the collateral levels and compliance with the covenants of the Amended Credit Facility. Any turmoil in the credit markets and weakness in the retail markets may interfere with our ability to remain in compliance with the covenants of the Amended Credit Facility and therefore affect our ability to utilize the Amended Credit Facility to fund operations. As of March 31, 2024, we were in compliance with all covenants under the Amended Credit Facility. We currently depend upon dividends and other payments from our businesses and the Amended Credit Facility to fund our current operations and meet our cash needs. As the majority owner of each of our businesses, we determine the amounts of such distributions subject to applicable law, and currently, no agreements exist that restrict this flow of funds from our businesses.
For the six months ended March 31, 2024 and 2023, cash used in operating activities was approximately $111.2 million and $250.5 million, respectively. For the six months ended March 31, 2024, cash used in operating activities was primarily related to increases in inventory, increases in accounts receivable, decreases in accounts payable, decreases in in contract liabilities (customer deposits), partially offset by our net income adjusted for non-cash expenses and gains such as depreciation and amortization expense, deferred income tax provision, and stock-based compensation expense. For the six months ended March 31, 2023, cash used in operating activities was primarily related to increases in inventory, increases in accounts receivable, and increases in accrued expenses and other liabilities, partially offset by decreases in customer deposits and our net income adjusted for non-cash expenses and gains such as depreciation and amortization expense, deferred income tax provision, stock-based compensation expense, and gain on acquisition of previously held equity investment.
For the six months ended March 31, 2024 and 2023, cash used in investing activities was approximately $49.9 million and $524.2 million, respectively. For the six months ended March 31, 2024, cash used in investing activities was primarily used to purchase property and equipment associated with improving existing retail facilities, partially offset by proceeds from insurance settlements. For the six months ended March 31, 2023, cash used in investing activities was primarily used for the IGY Marinas acquisition and to purchase property and equipment associated with improving existing retail facilities.
For the six months ended March 31, 2024 and 2023, cash provided by financing activities was approximately $175.4 million and $748.9 million, respectively. For the six months ended March 31, 2024, cash provided by financing activities was primarily attributable to net increases in short-term borrowings, which solely consisted of the Floor Plan, and net proceeds from issuance of common stock under incentive compensation and employee purchase plans, partially offset by payments on long-term debt, contingent acquisition
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consideration payments and payments on tax withholdings for equity awards. For the six months ended March 31, 2023, cash provided by financing activities was primarily attributable to proceeds from long term debt and net increases in short-term borrowings, partially offset by payments on long-term debt, contingent acquisition consideration payments and payments on tax withholdings for equity awards.
We are party to the Amended Credit Facility with Manufacturers and Traders Trust Company as Administrative Agent, Swingline Lender, and Issuing Bank, Wells Fargo Commercial Distribution Finance, LLC, as Floor Plan Agent, and the lenders party thereto. The Amended Credit Facility provides the Company a line of credit with asset based borrowing availability (the "Floor Plan") of up to $950 million and establishes a revolving credit facility in the 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 maturity of each of the facilities is August 2027.
The interest rate is (a) for amounts outstanding under the Floor Plan, 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 rate with a margin is available for amounts outstanding under the revolving credit, term, and 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.
Advances under the Floor Plan are initiated by the acquisition of eligible new and used inventory or are re-advanced 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 six months after receiving such advance. The curtailment schedule varies based on the type and value of the inventory. The collateral for the Amended Credit Agreement is primarily the Company’s inventory that is financed through the Amended Credit Agreement and related accounts receivable. None of our real estate has been pledged for collateral for the Amended Credit Agreement.
As of March 31, 2024, our indebtedness associated with our short-term borrowings, which solely consisted of the Floor Plan, and our long-term debt including the current portion totaled approximately $736.7 million and $406.4 million, respectively. As of March 31, 2024, short-term borrowings, which solely consisted of the Floor Plan, and long-term debt recorded on the Unaudited Condensed Consolidated Balance Sheets included unamortized debt issuance costs of approximately $1.4 million and $1.7 million, respectively. Refer to Note 10 of the Notes to the Consolidated Financial Statements for disclosure of borrowing availability, interest rates, and terms of our short-term borrowings (Floor Plan) and long-term debt.
Except as specified in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and in the Unaudited Condensed Consolidated Financial Statements in the “Financial Statements (Unaudited)”, we have no material commitments for capital for the next 12 months. Based on the information currently available to us (including the impacts on consumer demand of the current supply chain and inventory challenges, inflation, higher interest rates, and potential recession, all of which are uncertain), we believe that the cash generated from sales and our existing capital resources will be adequate to meet our liquidity and capital requirements for at least the next 12 months and thereafter for the foreseeable future, except in the case of possible significant acquisitions.
Impact of Seasonality and Weather on Operations
Our business, as well as the entire recreational boating industry, is highly seasonal, with seasonality varying in different geographic markets. With the exception of Florida, we generally realize significantly lower sales, higher levels of inventories, and related short-term borrowings, which solely consisted of the Floor Plan, 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, which solely consisted of the Floor Plan, throughout the remainder of the fiscal year. Our expansion into boat storage may act to reduce our seasonality and cyclicality.
Our business is also subject to weather patterns, which may adversely affect our results of operations. For example, prolonged winter conditions, drought conditions (or merely reduced rainfall levels) or excessive rain, may limit access to area boating locations or render boating dangerous or inconvenient, thereby curtailing customer demand for our products. In addition, unseasonably cool weather and prolonged winter conditions may lead to a shorter selling season in certain locations. Hurricanes and other storms could result in disruptions of our operations or damage to our boat inventories and facilities, as has been the case when Florida and other markets were affected by hurricanes, such as Hurricanes Harvey and Irma in 2017 and Hurricane Ian in 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.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Interest Rate Risk
We are exposed to risk from changes in interest rates on our outstanding indebtedness. Changes in the underlying interest rates on our short-term borrowings and long-term debt, which have variable interest rates, could affect our earnings. For example, a hypothetical 100 basis point, 200 basis point, or 300 basis point increase in the interest rate would result in an increase of approximately $11.0 million, $22.0 million, or $33.0 million, respectively, in annual pre-tax interest expense. These estimated increases are based upon the outstanding balance of our short-term borrowings and long-term debt as of March 31, 2024 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, Northrop & Johnson and IGY Marinas have transactions and balances denominated in currencies other than the U.S. dollar. Most of the transactions not denominated in U.S. dollars are denominated in euros. Net revenues recognized whose functional currency was not the U.S. dollar were approximately 3% of our total revenues in fiscal 2023.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that material information required to be disclosed by us in Securities Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
Our Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) as of the end of the period covered by this report. Based on such evaluation, such officers have concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were effective at the reasonable assurance level.
Changes in Internal Controls
During the quarter ended March 31, 2024, 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.
Limitations on the Effectiveness of Controls
Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures and internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Although our disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, a control may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may
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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.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We are party to various legal actions arising in the ordinary course of business. While it is not feasible to determine the actual outcome of these actions as of March 31, 2024, we do not believe that these matters will have a material adverse effect on our unaudited condensed consolidated financial condition, result of operations, or cash flows.
ITEM 1A. RISK FACTORS
None.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
Insider trading arrangements and policies. During the three months ended March 31, 2024, none of the Company’s officers or directors
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ITEM 6. EXHIBITS
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Articles of Incorporation of MarineMax, Inc., a Florida corporation. (1) |
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Inline XBRL Instance Document - The instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document |
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101.SCH |
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Inline XBRL Taxonomy Extension Schema With Embedded Linkbase Documents |
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104 |
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Cover page formatted as Inline XBRL and contained in Exhibit 101 |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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MARINEMAX, INC. |
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April 25, 2024 |
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/s/ Michael H. McLamb |
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Michael H. McLamb |
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Executive Vice President, |
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Chief Financial Officer, Secretary, and Director |
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(Principal Accounting and Financial Officer) |
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