UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-K
þ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended September 30, 2015
Commission File Number 1-14173
MarineMax, Inc.
(Exact Name of Registrant as Specified in Its Charter)
Florida
(State of Incorporation)
59-3496957
(I.R.S. Employer Identification No.)
2600 McCormick Drive
Suite 200
Clearwater, Florida 33759
(727) 531-1700
(Address, including zip code, and telephone number, including area code, of principal executive offices)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
Common Stock, par value $.001 per share
Name of Each Exchange on Which Registered
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities act. Yes o
No þ
indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the act. Yes o
No þ
indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities exchange act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the
past 90 days. Yes þ
No o
indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files). Yes þ
No o
indicate by check mark if disclosure of delinquent filers pursuant to item 405 of Regulation S-K (§ 229.450 of this chapter) is not contained herein, and will not
be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part iii of this Form 10-K or any
amendment to this Form 10-K. o
indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the
definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the exchange act. (Check one):
Large accelerated filer
Non-accelerated filer
o
o (Do not check if a smaller reporting company)
accelerated filer
Smaller reporting company
þ
o
indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the act). Yes o
No þ
The aggregate market value of common stock held by non-affiliates of the registrant (23,396,413 shares) based on the closing price of the registrant’s common
stock as reported on the New York Stock exchange on March 31, 2015, which was the last business day of the registrant’s most recently completed second fiscal
quarter, was $620,238,909. For purposes of this computation, all officers and directors of the registrant are deemed to be affiliates. Such determination should not
be deemed to be an admission that such officers and directors are, in fact, affiliates of the registrant.
as of December 1, 2015, there were outstanding 25,617,321 shares of the registrant’s common stock, par value $.001 per share.
Portions of the registrant’s definitive proxy statement for the 2016 annual Meeting of Stockholders are incorporated by reference into Part iii of this report.
Documents Incorporated by Reference
MARINEMAX, INC.
ANNUAL REPORT ON FORM 10-K
Fiscal Year Ended September 30, 2015
TABLE OF CONTENTS
PART I
PART II
business
item 1
item 1a Risk Factors
item 1b Unresolved Staff Comments
item 2
item 3
item 4
Properties
Legal Proceedings
Mine Safety Disclosures
Market for the Registrant’s Common equity, Related Stockholder Matters and issuer Purchases of equity Securities
Management’s Discussion and analysis of Financial Condition and Results of Operations
Selected Financial Data
item 5.
item 6
item 7
item 7a Quantitative and Qualitative Disclosures about Market Risk
item 8
Financial Statements and Supplementary Data
item 9
item 9a Controls and Procedures
item 9b Other information
Changes in and Disagreements with accountants on accounting and Financial Disclosure
PART III
item 10
item 11
item 12
item 13
item 14
Directors, executive Officers and Corporate Governance
executive Compensation
Security Ownership of Certain beneficial Owners and Management and Related Stockholder Matters
Certain Relationships and Related Transactions, and Director independence
Principal accountant Fees and Services
item 15
exhibits, Financial Statement Schedules
PART IV
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Statement Regarding Forward-Looking Information
The statements contained in this report on Form 10-K that are not purely historical are forward-looking statements within the meaning of applicable
securities laws. Forward-looking statements include statements regarding our “expectations,” “anticipations,” “intentions,” “beliefs,” or “strategies” regarding the
future. Forward-looking statements also include statements regarding revenue, margins, expenses, and earnings for fiscal 2016 and thereafter; our belief that our
practices enhance our ability to attract more customers, foster an overall enjoyable boating experience, and offer boat manufacturers stable and professional retail
distribution and a broad geographic presence; our assessment of our competitive advantages, including our hassle-free sales approach, prime retail locations,
premium product offerings, extensive facilities, strong management and team members, and emphasis on customer service and satisfaction before and after a boat
sale; our belief that our core values of customer service and satisfaction and our strategies will enable us to achieve success and long-term growth when economic
conditions improve; and our belief that our retailing strategies are aligned with the desires of consumers. all forward-looking statements included in this report are
based on information available to us as of the filing date of this report, and we assume no obligation to update any such forward-looking statements. Our actual
results could differ materially from the forward-looking statements. among the factors that could cause actual results to differ materially are the factors discussed
under item 1a, “Risk Factors.”
Item 1.
Business
Our Company
PART I
Introduction
We are the largest recreational boat dealer in the United States. Through 53 retail locations in alabama, California, Connecticut, Florida, Georgia,
Maryland, Minnesota, Missouri, New Jersey, New York, North Carolina, Ohio, Oklahoma, Rhode island, and Texas, we sell new and used recreational boats,
including pleasure and fishing boats, with a focus on premium brands in each segment. We also sell related marine products, including engines, trailers, parts, and
accessories. in addition, we provide repair, maintenance, and slip and storage services; we arrange related boat financing, insurance, and extended service
contracts; we offer boat and yacht brokerage sales; and we operate a yacht charter business.
We are the nation’s largest retailer of Sea Ray, boston Whaler, and Meridian recreational boats and yachts, all of which are manufactured by brunswick
Corporation (“brunswick”). Sales of new brunswick boats accounted for approximately 40% of our revenue in fiscal 2015. Sales of new Sea Ray and boston
Whaler boats, both divisions of brunswick, accounted for approximately 25% and 12%, respectively, of our revenue in fiscal 2015. brunswick is a world leading
manufacturer of marine products and marine engines. We believe our sales represented approximately 8% of all brunswick marine sales, including approximately
45% of its Sea Ray boat sales, during our fiscal 2015. We have agreements with brunswick covering Sea Ray products and boston Whaler products and are the
exclusive dealer of Sea Ray and boston Whaler boats in almost all of our geographic markets. We also are the exclusive dealer for Meridian Yachts in most of our
geographic markets. We also are the exclusive dealer for italy-based azimut-benetti Group, or azimut, for azimut mega-yachts, yachts, and other recreational
boats for the United States. Sales of new azimut boats accounted for approximately 12% of our revenue in fiscal 2015. additionally, we are the exclusive dealer
for certain other premium brands that serve certain industry segments in our markets as shown by the table on page four.
We commenced operations as a result of the March 1, 1998 acquisition of five previously independent recreational boat dealers. Since that time, we have
acquired 24 additional previously independent recreational boat dealers, two boat brokerage operations, and two full-service yacht repair operations. We attempt to
capitalize on the experience and success of the acquired companies in order to establish a high national standard of customer service and responsiveness in the
highly fragmented retail boating industry. as a result of our emphasis on premium brand boats, our average selling price for a new boat in fiscal 2015 was
approximately $171,000, an increase of approximately 2% from approximately $167,000 in fiscal 2014, compared with the industry average selling price for
calendar 2014 of approximately $43,000 based on industry data published by the National Marine Manufacturers association. Our stores, which operated at least
12 months, averaged approximately $15.3 million in annual sales in fiscal 2015. We consider a store to be one or more retail locations that are adjacent or operate
as one entity. Our same-store sales increased 11% in fiscal 2013, increased 6% in fiscal 2014, and increased 22% in fiscal 2015.
We attempt to adopt the best practices developed by us and our acquired companies as appropriate to enhance our ability to attract and retain more
customers, foster an overall enjoyable boating experience, and offer boat manufacturers stable and professional retail distribution and a broad geographic
presence. We believe that our full range of services, hassle free approach, prime retail locations, premium product offerings, extensive facilities, strong
management and team members, and emphasis on customer service and satisfaction before and after a boat sale are competitive advantages that enable us to be
more responsive to the needs of existing and prospective customers. We strive to provide superior customer service and support before, during, and after the sale.
The U.S. recreational boating industry generated approximately $35.4 billion in retail sales in calendar 2014, which is down from the peak of $39.5 billion
in calendar 2006. Total powerboats sold in calendar 2014 were approximately 171,500 units as compared to 298,100 units sold in 2006. The retail sales include
sales of new and used boats; marine products, such as engines, trailers, equipment, and accessories; and related expenditures, such as fuel, insurance, docking,
storage, and repairs. Retail sales of new and used boats, engines, trailers, and accessories accounted for approximately $25.6 billion of these sales in 2014 based on
industry data from the National Marine Manufacturers association. The highly fragmented retail boating industry generally consists of small dealers that operate in
a single market and provide varying degrees of merchandising, professional management, and customer service. We believe that many small dealers are finding it
increasingly difficult to make the managerial and capital commitments necessary to achieve higher customer service levels and upgrade systems and facilities as
required by boat manufacturers and often demanded by customers. We also believe that many dealers lack an exit strategy for their owners. We believe these
factors contribute to our opportunity to gain a competitive advantage in current and future markets, through market expansions and acquisitions.
Strategy
Our goal is to enhance our position as the nation’s leading recreational boat dealer. Key elements of our operating and growth strategy include the
following:
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·
·
·
·
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emphasizing customer satisfaction and loyalty by creating an overall enjoyable boating experience, beginning with a hassle-free purchase process,
customer training, superior customer service, company-led events called Getaways! ®, and premier facilities;
achieving efficiencies and synergies among our operations to enhance internal growth and profitability;
promoting national brand name recognition and the MarineMax connection;
offering additional marine products and services, including those with higher profit margins;
expanding our internet marketing;
pursuing strategic acquisitions to capitalize upon the consolidation opportunities in the highly fragmented recreational boat dealer industry by
acquiring additional dealers and related operations and improving their performance and profitability through the implementation of our operating
strategies;
opening additional retail facilities in our existing and new territories;
emphasizing employee recruitment and retention through training, motivation, and development;
emphasizing the best practices developed by us and our acquired dealers as appropriate throughout our dealerships;
operating with a decentralized approach to the operational management of our dealerships; and
utilizing common platform information technology throughout operations, which facilitates the interchange of information sharing and enhances
cross-selling opportunities throughout our company.
Development of the Company; Expansion of Business
MarineMax was founded in January 1998. MarineMax itself, however, conducted no operations until the acquisition of five independent recreational boat
dealers on March 1, 1998, and we completed our initial public offering in June 1998. Since the initial acquisitions in March 1998, we have acquired 24 additional
recreational boat dealers, two boat brokerage operations, and two full-service yacht repair operations. acquired dealers operate under the MarineMax name.
We continually attempt to enhance our business by providing a full range of services, offering extensive and high-quality product lines, maintaining prime
retail locations, pursuing the MarineMax One Price hassle-free sales approach, and emphasizing a high level of customer service and satisfaction.
We also from time to time evaluate opportunities to expand our operations by acquiring recreational boat dealers to expand our geographic scope, expanding
our product lines, opening new retail locations within or outside our existing territories, and offering new products and services for our customers.
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acquisitions of additional recreational boat dealers represent an important strategy in our goal to enhanc e our position as the nation’s largest retailer of
recreational boats. The following table sets forth information regarding the businesses that we have acquired and their geographic regions.
Acquired Companies
bassett boat Company of Florida
Louis DelHomme Marine
Gulfwind USa, inc.
Gulfwind South, inc.
Harrison’s boat Center, inc. and Harrison’s
Marine Centers of arizona, inc. (1)
Stovall Marine, inc.
Cochran’s Marine, inc. and C & N
Marine Corporation
Sea Ray of North Carolina, inc.
brevard boat Company
Sea Ray of Las Vegas (2)
Treasure Cove Marina, inc.
Woods & Oviatt, inc.
boating World
Merit Marine, inc.
Suburban boatworks, inc.
Hansen Marine, inc.
Duce Marine, inc. (2)
Clark’s Landing, inc. (selected New Jersey
locations and operations)
associated Marine Technologies, inc.
Gulfwind Marine Partners, inc.
Seaside Marine, inc.
Sundance Marine, inc. (3)
Killinger Marine Center, inc. and Killinger
Marine Center of alabama, inc.
emarine international, inc. and
Steven Myers, inc.
imperial Marine
Port Jacksonville Marine
Port arrowhead Marina, inc.
Great american Marina (4)
Surfside — 3 Marina, inc.
Treasure island Marina, LLC
bassett Marine, LLC
Parker boat Company
Ocean alexander Yachts
Acquisition Date
March 1998
March 1998
March 1998
March 1998
Southeast Florida
Dallas and Houston, Texas
West Central Florida
Southwest Florida
Geographic Region
March 1998
april 1998
Northern California and arizona
Georgia
July 1998
July 1998
September 1998
September 1998
September 1998
October 1998
February 1999
March 1999
april 1999
august 1999
December 1999
Minnesota
North and South Carolina
east Central Florida
Nevada
Northern Ohio
Southeast Florida
Dallas, Texas
Southern New Jersey
Central New Jersey
Northeast Florida
Utah
april 2000
January 2001
april 2002
July 2002
June 2003
Northern New Jersey
Southeast Florida
West Florida
Southern California
Colorado
September 2003
Northwest Florida and alabama
October 2003
June 2004
June 2004
January 2006
February 2006
March 2006
February 2011
September 2012
March 2013
april 2014
Southeast Florida
baltimore, Maryland
Northeast Florida
Missouri, Oklahoma
West Florida
Connecticut, Maryland,
New York and Rhode island
Florida Panhandle
Connecticut, Rhode island,
Western Massachusetts
Central Florida
eastern United States
(1) We subsequently closed the Northern California operations of Harrison boat Center, inc. and Harrison’s Marine Centers of arizona, inc.
(2) We subsequently closed the operations of Sea Ray of Las Vegas and Duce Marine, inc.
(3) We subsequently sold the operations of Sundance Marine, inc.
(4)
Joint venture
apart from acquisitions, we have opened 32 new retail locations in existing territories, excluding those opened on a temporary basis for a specific
purpose. We also monitor the performance of our retail locations and close retail locations that do not meet our expectations. based on these factors and previous
depressed economic conditions, we have closed 61 retail locations since March 1998, excluding those opened on a temporary basis for a specific purpose, including
26 in fiscal 2009 and a total of six during the last three fiscal years.
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as a part of our acquisition strategy, we frequently engage in discussions with various recreational boat dealers regarding their potential acquisition by
us. in connection with these discussions, we and each potential acquisition candidate exchange confidential operational and financial information; conduct due
diligence inquiries; and consider the structure, terms, and conditions of the potential acquisition. in certain cases, the prospective acquisition can didate agrees not
to discuss a potential acquisition with any other party for a specific period of time, grants us an option to purchase the prospective dealer for a designated price
during a specific time period, and agrees to take other actions designed to enhance the possibility of the acquisition, such as preparing audited financial information
and converting its accounting system to the system specified by us. Potential acquisition discussions frequently take place over a long period of time and invol ve
difficult business integration and other issues, including in some cases, management succession and related matters. as a result of these and other factors, a
number of potential acquisitions that from time to time appear likely to occur do not result in binding legal agreements and are not consummated.
in addition to acquiring recreational boat dealers and opening new retail locations, we also add new product lines to expand our operations. The following
table sets forth certain of our current product lines that we have added to our existing locations during the years indicated.
Product Line
boston Whaler
Hatteras Yachts
Meridian Yachts
Grady White
boston Whaler
boston Whaler
azimut
atlantis
azimut
Meridian Yachts
boston Whaler
Harris
Nautique by Correct Craft
Harris
azimut
boston Whaler
Harris
Scout
Sailfish
Scarab Jet boats
atlantis
Ocean alexander Yachts
Scout
aquila
Galeon
Fiscal Year
1998
1999
2002
2002
2004
2005
2006
2006
2008
2009
2009
2010
2010
2011
2012
2012
2012
2012
2013
2013
2013
2014
2014
2014
2015
Geographic Regions
West Central Florida, Stuart, Florida, Dallas, Texas
Florida
Florida, Georgia, North and South Carolina, New Jersey,
Ohio, Minnesota, Texas, and Delaware
Houston, Texas
North and South Carolina
Houston
Northeast United States from Maryland to Maine
Northeast United States from Maryland to Maine
Florida
Maryland and Delaware
Southwest Florida
Missouri, Minnesota, and New Jersey
West Central Florida, Georgia, Minnesota, and Missouri,
West Central Florida
United States other than where previously held
Pompano, Florida
alabama, North and Southwest Florida, Wrightsville,
North Carolina, and Texas
Southeast Florida, Maryland, and New Jersey
Connecticut, brevard and Jacksonville, Florida, the Florida
panhandle, West Central Florida, New Jersey, New York,
North Carolina, Ohio, Rhode island, and Texas
all geographic regions in which we operate
Florida
eastern United States
Texas, New York
Worldwide, excluding China
North, Central, and South america
We add brands with the intent to either offer a migration path for our existing customer base or fill a gap in our product offerings. as a result, we believe
that new brands we offer are generally complementary and do not cannibalize the business generated from our other prominent brands. We also discontinue
offering product lines from time to time, primarily based upon customer preferences.
During the nine-year period from the commencement of our operations through our fiscal year ended September 30, 2007, our revenue increased from
$291.0 million to more than $1.2 billion. Our revenue and net income increased in seven of those nine years over the prior year revenue and net income. This
period was marked by an increase in retail locations from 41 on September 30, 1998 to 88 on September 30, 2007, resulting from acquisitions and opening new
stores in existing territories.
Our growth was interrupted during the fiscal year ended September 30, 2007, primarily as a result of factors related to the deteriorating housing market and
general economic conditions. The substantially deteriorating economic and financial conditions,
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reduced consumer confidence and spending, increased fuel prices, reduction of credit availability, financial market declines, and asset value deterioration all
contributed to substantially lower financial performance in the fiscal years ended September 30, 2008 and 2009, including significant net losses, followed by pre-
tax losses i n the fiscal years ended September 30, 2010 and 2011. We returned to profitability in fiscal 2012 .
Despite continued weakened industry conditions, we strive to maintain our core values of high customer service and satisfaction and plan to continue to
pursue strategies that we believe will enable us to achieve long-term success and growth as industry conditions continue to improve. as noted in the earlier table,
we have capitalized on a number of brand expansion opportunities in the markets in which we operate. We believe our expanded product offerings have
strengthened our same-store sales growth. as industry conditions permit, we plan to further expand our business through both acquisitions in new territories and
new store openings in existing territories. in addition, we plan to continue to expand our other traditional and newly offered services, including conducting used
boat sales at our retail locations, at offsite locations, and on the internet; selling related marine products, including engines, trailers, parts, and accessories at our
retail locations and at various offsite locations, and through our print catalog; providing maintenance, repair, and storage services at most of our retail locations;
offering our customers the ability to finance new or used boats; offering extended service contracts; arranging insurance coverage, including boat property, credit-
life, accident, disability, and casualty coverage; offering boat and yacht brokerage sales at most of our retail locations and at various offsite locations; and
conducting our yacht charter business. Our expansion plans will depend, in large part, upon economic and industry conditions.
We maintain our executive offices at 2600 McCormick Drive, Suite 200, Clearwater, Florida 33759, and our telephone number is (727) 531-1700. We were
incorporated in the state of Delaware in January 1998 and then re-incorporated in Florida in March 2015. Unless the context otherwise requires, all references to
“MarineMax” mean MarineMax, inc. prior to its acquisition of five previously independent recreational boat dealers in March 1998 (including their related real
estate companies) and all references to the “Company,” “our company,” “we,” “us,” and “our” mean, as a combined company, MarineMax, inc. and the 24
recreational boat dealers, two boat brokerage operations, and two full-service yacht repair operations acquired to date (the “acquired dealers,” and together with the
brokerage and repair operations, “operating subsidiaries,” or the “acquired companies”).
Our website is located at www.MarineMax.com . Through our website, we make available free of charge our annual report on Form 10-K, our quarterly
reports on Form 10-Q, our current reports on Form 8-K, our proxy statements, and any amendments to those reports filed or furnished pursuant to Section 13(a) or
15(d) of the Securities exchange act of 1934. These reports are available as soon as reasonably practicable after we electronically file those reports with the
Securities and exchange Commission (the “SeC”). We also post on our website the charters of our audit, Compensation, and Nominating/Corporate Governance
Committees; our Corporate Governance Guidelines, Code of business Conduct and ethics, and Code of ethics for the CeO and Senior Financial Officers, and any
amendments or waivers thereto; and any other corporate governance materials contemplated by the SeC or the regulations of the New York Stock exchange, or
NYSe. These documents are also available in print to any stockholder requesting a copy from our corporate secretary at our principal executive offices. because
our common stock is listed on the NYSe, our Chief executive Officer is required to make an annual certification to the NYSe stating that he is not aware of any
violation by us of the corporate governance listing standards of the NYSe. Our Chief executive Officer made his annual certification to that effect to the NYSe on
February 26, 2015.
General
Business
We are the largest recreational boat dealer in the United States. Through 53 retail locations in alabama, California, Connecticut, Florida, Georgia,
Maryland, Minnesota, Missouri, New Jersey, New York, North Carolina, Ohio, Oklahoma, Rhode island, and Texas, we sell new and used recreational boats,
including pleasure boats (such as sport boats, sport cruisers, sport yachts, and yachts), and fishing boats, with a focus on premium brands in each segment.
We are the nation’s largest retailer of Sea Ray, boston Whaler, and Meridian recreational boats and yachts, all of which are manufactured by brunswick
Corporation, or brunswick. Sales of new brunswick boats accounted for approximately 40% of our revenue in fiscal 2015. Sales of new Sea Ray and boston
Whaler boats, both divisions of brunswick, accounted for approximately 25% and 12%, respectively, of our revenue in fiscal 2015. brunswick is a world leading
manufacturer of marine products and marine engines. We believe our sales represented approximately 8% of all brunswick marine sales, including approximately
45% of its Sea Ray boat sales, during our fiscal 2015. We have agreements with brunswick covering Sea Ray products and boston Whaler products and are the
exclusive dealer of Sea Ray and boston Whaler boats in almost all of our geographic markets. We also are the exclusive dealer for Meridian Yachts in most of our
geographic markets. We also are the exclusive dealer for italy-based azimut-benetti Group, or azimut, for azimut mega-yachts, yachts, and other recreational
boats for the United States. Sales of new azimut boats accounted for approximately 12% of our revenue in fiscal 2015. additionally, we are the exclusive dealer
for certain other premium brands that serve specific industry segments in our markets as shown by the table on page four.
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We also are involved in other boating-related activities. We sell used boats at our retail locations, online, and at various third-party marinas and other offsite
locations; we sell marine engines and propellers, primarily to our retail customers as repla cements for their existing engines and propellers; we sell a broad variety
of parts and accessories at our retail locations and at various offsite locations, and through our print catalog; we offer maintenance, repair, and slip and storage
services at most of our retail locations; we offer finance and insurance, or F&i, products at our retail locations and at various offsite locations and to our customers
and independent boat dealers and brokers; we offer boat and yacht brokerage sales at most of our retail locations and at various offsite locations; and we conduct a
yacht charter business in which we offer customers the opportunity to charter third-party and company owned power and sailing yachts in exotic locations.
U.S. Recreational Boating Industry
The U.S. recreational boating industry generated approximately $35.4 billion in retail sales in calendar 2014, which is down from the peak of $39.5 billion
in calendar 2006. The retail sales include sales of new and used recreational boats; marine products, such as engines, trailers, parts, and accessories; and related
boating expenditures, such as fuel, insurance, docking, storage, and repairs. Retail sales of new and used boats, engines, trailers, equipment, and accessories
accounted for approximately $25.6 billion of such sales in 2014. Total powerboats sold in calendar 2014 were approximately 171,500 units as compared to 298,100
units sold in 2006. annual retail recreational boating sales were $17.9 billion in 1988, but declined to a low of $10.3 billion in 1992 based on industry data
published by the National Marine Manufacturers association. We believe this decline was attributable to several factors, including a recession, the Gulf War, and
the imposition throughout 1991 and 1992 of a luxury tax on boats sold at prices in excess of $100,000. The luxury tax was repealed in 1993, and retail boating
sales increased each year thereafter except for 1998, 2003, and 2007 through 2010.
The recreational boat retail market remains highly fragmented with little consolidation having occurred to date and consists of numerous boat retailers, most
of which are small companies owned by individuals that operate in a single market and provide varying degrees of merchandising, professional management, and
customer service. We believe that many boat retailers are encountering increased pressure from boat manufacturers to improve their levels of service and systems,
increased competition from larger national retailers in certain product lines, and, in certain cases, business succession issues.
Strategy
Our goal is to enhance our position as the nation’s leading recreational boat dealer. Key elements of our operating and growth strategy include the
following.
Emphasizing Customer Satisfaction and Loyalty . We seek to achieve a high level of customer satisfaction and establish long-term customer loyalty by
creating an overall enjoyable boating experience beginning with a hassle-free purchase process. We seek to further enhance and simplify the purchase process by
helping to arrange financing and insurance at our retail locations with competitive terms and streamlined turnaround. We offer the customer a thorough in-water
orientation of boat operations where available, as well as ongoing boat safety, maintenance, and use seminars and demonstrations for the customer’s entire
family. We also continue our customer service after the sale by leading and sponsoring MarineMax Getaways! group boating trips to various destinations,
rendezvous gatherings, and on-the-water organized events to provide our customers with pre-arranged opportunities to enjoy the pleasures of the boating
lifestyle. We also endeavor to provide superior maintenance and repair services, often through mobile service at the customer’s wet slip and with extended service
department hours and emergency service availability, that minimize the hassles of boat maintenance.
Achieving Operating Efficiencies and Synergies . We strive to increase the operating efficiencies of and achieve certain synergies among our dealerships in
order to enhance internal growth and profitability. We centralize various aspects of certain administrative functions at the corporate level, such as accounting,
finance, insurance coverage, employee benefits, marketing, strategic planning, legal support, purchasing and distribution, and management information
systems. Centralization of these functions reduces duplicative expenses and permits the dealerships to benefit from a level of scale and expertise that would
otherwise be unavailable to each dealership individually. We also seek to realize cost savings from reduced inventory carrying costs as a result of purchasing boat
inventories on a national level and directing boats to dealership locations that can more readily sell such boats; lower financing costs through our credit sources;
and volume purchase discounts and rebates for certain marine products, supplies, and advertising. The ability of our retail locations to offer the complementary
services of our other retail locations, such as offering customer excursion opportunities, providing maintenance and repair services at the customer’s boat location,
and giving access to broader inventory selections, increases the competitiveness of each retail location. by centralizing these types of activities, our store managers
have more time to focus on the customer and the development of their teams.
Promoting Brand Name Recognition and the MarineMax Connection . We are promoting our brand name recognition to take advantage of our status as the
nation’s only coast-to-coast marine retailer. This strategy also recognizes that many existing and potential customers who reside in Northern markets and vacation
for substantial periods in Southern markets will prefer to purchase
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and service their boats from the sa me well-known company. We refer to this strategy as the “MarineMax Connection.” as a result, our signage emphasizes the
MarineMax name at each of our locations, and we conduct national advertising in various print and other media.
Offering Additional Products and Services, Including Those Involving Higher Profit Margins . We plan to continue to offer additional product lines and
services throughout our dealerships and, when appropriate, online and various offsite locations. We are increasingly offering throughout our dealerships product
lines that previously have been offered only at certain of our locations. We also obtain additional product lines through the acquisition of distribution rights
directly from manufacturers and the acquisition of dealerships with distribution rights. in either situation, such expansion is typically done through agreements that
appoint us as the exclusive dealer for a designated geographic territory. We plan to continue to grow our financing and insurance, parts and accessories, service,
and boat storage businesses to better serve our customers and thereby increase revenue and improve profitability of these higher margin businesses. We also have
implemented programs to increase the generation of leads and sales of boats over the internet. in addition, we have established a yacht charter business and are
conducting programs to sell used boats, offer F&i products, and sell boating parts and accessories at various offsite locations.
Marketing over the Internet . Our web initiatives span across multiple websites, including our core site, www.MarineMax.com . The websites provide
customers with the ability to learn more about our company and our products. Our website generates direct sales and provides our stores with leads to potential
customers for new and used boats, brokerage sales, finance and insurance products, and repair and maintenance services. in addition, we utilize various feeder
websites and social networking websites to drive additional traffic and leads for our various product and service offerings. as mentioned above, we also maintain
multiple online storefronts for customers to submit an inquiry, purchase boats, and purchase a wide variety of boating parts and accessories.
Pursuing Strategic Acquisitions . One of our strategies is to capitalize upon the significant consolidation opportunities available in the highly fragmented
recreational boat dealer industry by acquiring independent dealers and improving their performance and profitability through the implementation of our operating
strategies. The primary acquisition focus is on well-established, high-end recreational boat dealers in geographic markets not currently served by us, particularly
geographic markets with strong boating demographics, such as areas within the coastal states and the Great Lakes region. We also may seek to acquire boat dealers
that, while located in attractive geographic markets, have not been able to realize favorable market share or profitability and that can benefit substantially from our
systems and operating strategies. We may expand our range of product lines, service offerings, and market penetration by acquiring companies that distribute
recreational boat product lines or boating-related services different from those we currently offer. as a result of our considerable industry experience and
relationships, we believe we are well positioned to identify and evaluate acquisition candidates and assess their growth prospects, the quality of their management
teams, their local reputation with customers, and the suitability of their locations. We believe we are regarded as an attractive acquirer by boat dealers because of:
(1) the historical performance and the experience and reputation of our management team within the industry; (2) our decentralized operating strategy, which
generally enables the managers of an acquired dealer to continue their involvement in dealership operations; (3) the ability of management and employees of an
acquired dealer to participate in our growth and expansion through potential stock ownership and career advancement opportunities; and (4) the ability to offer
liquidity to the owners of acquired dealers through the receipt of common stock or cash. We have entered into an agreement regarding acquisitions with the Sea
Ray Division of brunswick. Under the agreement, acquisitions of Sea Ray dealers will be mutually agreed upon by us and Sea Ray with reasonable efforts to be
made to include a balance of Sea Ray dealers that have been successful and those that have not been. The agreement provides that Sea Ray will not unreasonably
withhold its consent to any proposed acquisition of a Sea Ray dealer by us, subject to the conditions set forth in the agreement, as further described in “business —
brunswick agreement Relating to acquisitions.”
Opening New Facilities . We will continue to establish additional retail facilities in our existing and new markets subject to conditions. We believe that the
demographics of our existing geographic territories support the opening of additional facilities, and we have opened 32 new retail facilities, excluding those opened
on a temporary basis for a specific purpose, since our formation in January 1998. We continually monitor the performance of our retail locations and close retail
locations that do not meet our expectations or that were opened for a specific purpose that is no longer relevant. based on these factors since March 1998, we have
closed 61 retail locations, excluding those opened on a temporary basis for a specific purpose, including 26 in fiscal 2009 (and a total of six during the last three
fiscal years).
Emphasizing Employee Recruitment and Retention through Training, Motivation, and Development . We devote substantial efforts to recruit employees that
we believe to be exceptionally well qualified for their position and to train our employees to understand our core retail philosophies, which focus on making the
purchase of a boat and its subsequent use as hassle-free and enjoyable as possible. Through our MarineMax University, or MMU, we teach our retail philosophies
to existing and new employees at various locations and online, through MMU-online. MMU is a modularized and instructor-led educational program that focuses
on our retailing philosophies and provides instruction on such matters as the sales process, customer service, F&i, accounting, leadership, and human resources.
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Emphasizing Best Practices . We emph asize the best practices developed by us and our acquired dealers as appropriate throughout our locations. as an
example, we ha ve implemented a hassle-free approach at each of our dealerships. Under the MarineMax One Price hassle-free sales approach, we sell our boats at
prices generally representing a discount from the manufacturer’s suggested retail price, thereby eliminating the anxieties of price negotiations that occur in most
boat purchases. in addition, we adopt the best practices developed by us and our acquired dealers as applicable, considering location, design, layout, product
purchases, maintenance and repair services (including extended service hours and mobile or dockside services), product mix, employee training, and customer
education and services.
Operating with Decentralized Management . We maintain a generally decentralized approach to the operational management of our dealerships. The
decentralized management approach takes advantage of the extensive experience of local managers, enabling them to implement policies and make decisions,
including the appropriate product mix, based on the needs of the local market. Local management authority also fosters responsive customer service and promotes
long-term community and customer relationships. in addition, the centralization of certain administrative functions at the corporate level enhances the ability of
local managers to focus their efforts on day-to-day dealership operations and the customers.
Utilizing Technology Throughout Operations . We believe that our management information system, which currently is being utilized by each of our
dealerships and was developed over a number of years through cooperative efforts with a common vendor, enhances our ability to integrate successfully the
operations of our dealerships and future acquired dealers. The system facilitates the interchange of information and enhances cross-selling opportunities throughout
our company. The system integrates each level of operations on a company-wide basis, including but not limited to purchasing, inventory, receivables, payables,
financial reporting, budgeting, and sales management. The system also provides sales representatives with prospect and customer information that aids them in
tracking the status of their contacts with prospects, automatically generates follow-up correspondence to such prospects, facilitates the availability of boats
company-wide, locates boats needed to satisfy particular customer requests, and monitors the maintenance and service needs of customers’ boats. Our
representatives also utilize the computer system to assist in arranging customer financing and insurance packages. Our managers use a web-based tool to access
essentially all financial and operational data from anywhere at any time.
Products and Services
We offer new and used recreational boats and related marine products, including engines, trailers, parts, and accessories. While we sell a broad range of
new and used boats, we focus on premium brand products. in addition, we assist in arranging related boat financing, insurance, and extended service contracts;
provide boat maintenance and repair services; offer slip and storage accommodations; provide boat and yacht brokerage sales; and conduct a yacht charter business.
New Boat Sales
We primarily sell recreational boats, including pleasure boats and fishing boats. a number of the products we offer are manufactured by brunswick, a
leading worldwide manufacturer of recreational boats, including Sea Ray pleasure boats, boston Whaler fishing boats, and Meridian Yachts. Sales of new
brunswick boats accounted for approximately 40% of our revenue in fiscal 2015. Sales of new Sea Ray and boston Whaler boats, both divisions of brunswick,
accounted for approximately 25% and 12%, respectively, of our revenue in fiscal 2015. We believe our sales represented approximately 8% of all brunswick
marine sales, including approximately 45% of its Sea Ray boat sales, during our fiscal 2015 Certain of our dealerships also sell luxury yachts, fishing boats, and
pontoon boats provided by other manufacturers, including italy-based azimut. Sales of new azimut boats accounted for approximately 12% of our revenue in
fiscal 2015. During fiscal 2015, new boat sales accounted for 64.3% or $482.8 million of our revenue.
We offer recreational boats in most market segments, but have a particular focus on premium quality pleasure boats and yachts as reflected by our fiscal
2015 average new boat sales price of approximately $171,000, an increase of approximately 2% from approximately $167,000 in fiscal 2014, compared with an
estimated industry average selling price for calendar 2014 of approximately $43,000 based on industry data published by the National Marine Manufacturers
association. Given our locations in some of the more affluent, offshore boating areas in the United States and emphasis on high levels of customer service, we sell
a relatively higher percentage of large recreational boats, such as mega-yachts, yachts, and sport cruisers. We believe that the product lines we offer are among the
highest quality within their respective market segments, with well-established trade-name recognition and reputations for quality, performance, and styling.
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The following table is illustrative of the range and approximate manufactu rer suggested retail price range of new boats that we currently offer, but is not all
inclusive.
Product Line and Trade Name
Motor Yachts
azimut
Hatteras Motor Yachts
Ocean alexander Yachts
Convertibles
Hatteras Convertibles
Pleasure Boats
Sea Ray
atlantis
Meridian
aquila
Harris
Crest
Galeon
Fishing Boats
boston Whaler
Grady White
Scout
Sailfish
Ski Boats
Nautique by Correct Craft
Jet Boats
Scarab
Overall Length
40’ to 116’+
54’ to 100’+
72’ to 155’+
54’ to 77’+
19’ to 65’
34’ to 58’
34’ to 54’
38’ to 48’
16’ to 28’
19’ to 25’
30' to 78'
11’ to 42’
18’ to 37’
17’ to 35’
19’ to 32’
21’ to 25’
19’ to 26’
Manufacturer Suggested
Retail Price Range
$600,000 to $12,000,000+
2,000,000 to 10,000,000+
3,500,000 to 35,000,000+
2,000,000 to 7,000,000+
25,000 to 3,500,000+
450,000 to 2,300,000+
400,000 to 1,800,000
480,000 to 1,200,000
15,000 to 150,000
20,000 to 90,000
170,000 to 3,600,000
12,000 to 1,000,000
40,000 to 600,000
20,000 to 800,000
35,000 to 300,000
70,000 to 190,000
20,000 to 80,000
Motor Yachts . Hatteras Yachts, Ocean alexander Yachts, and azimut are three of the world’s premier yacht builders. The motor yacht product lines
typically include state-of-the-art designs with live-aboard luxuries. Hatteras offers a flybridge with extensive guest seating; covered aft deck, which may be fully or
partially enclosed, providing the boater with additional living space; an elegant salon; and multiple staterooms for accommodations. azimut yachts are known for
their americanized open layout with italian design and powerful performance. The luxurious interiors of azimut yachts are accented by windows and multiple
accommodations that have been designed for comfort. Ocean alexander Yachts are known for their excellent engineering, performance, and functionality
combined with luxuries typically found on larger mega yachts.
Convertibles . Hatteras Yachts is one of the world’s premier convertible yacht builders and offers state-of-the-art designs with live-aboard
luxuries. Convertibles are primarily fishing vessels, which are well equipped to meet the needs of even the most serious tournament-class competitor. Hatteras
features interiors that offer luxurious salon/galley arrangements, multiple staterooms with private heads, and a cockpit that includes a bait and tackle center,
fishbox, and freezer.
Pleasure Boats . Sea Ray and Meridian pleasure boats target both the luxury and the family recreational boating markets and come in a variety of
configurations to suit each customer’s particular recreational boating style. Sea Ray sport yachts and yachts serve the luxury segment of the recreational boating
market and include top-of-the-line living accommodations with a salon, a fully equipped galley, and multiple staterooms. Sea Ray sport yachts and yachts are
available in cabin, bridge cockpit, and cruiser models. Sea Ray sport boat and sport cruiser models are designed for performance and dependability to meet family
recreational needs and include many of the features and accommodations of Sea Ray’s sport yacht and yacht models. Meridian sport yachts and yachts are known
for their solid performance and thoughtful use of space with 360-degree views and spacious salon, galley, and stateroom accommodations. Meridian sport yachts
and yachts are generally available in sedan and motoryacht models. all Sea Ray and Meridian pleasure boats feature custom instrumentation that may include an
electronics package; various hull, deck, and cockpit designs that can include a swim platform; bow pulpit and raised bridge; and various amenities, such as swivel
bucket helm seats, lounge seats, sun pads, wet bars, built-in ice chests, and refreshment centers. Most Sea Ray and Meridian pleasure boats feature Mercury or
MerCruiser engines. We believe atlantis sport cruisers offer a unique-on-the-water experience with the azimut expertise expressed in a design concept that
merges sportiness with the comfort and relative ease of navigation. Galeon is one of europe’s leading boat manufacturers. We believe Galeon yachts combine the
latest technology and design with unparalleled modern styling and convenience. aquila power catamarans provide form, function, and offer practicality and
comfort with trend setting innovation. Harris Flotebote is one of the most innovative and premium pontoon boats offered and provides a variety of models to fit
boaters’ needs. Crest provides a variety of high quality pontoon models to meet family recreational needs.
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Fishing Boats . The fishing boats we offer, such as boston Whaler, Grady White, Scout, and Sailfish, range from entry level models to advanced models
designed for fishing and water sports in lakes, bays , and off-shore waters, with cabins with limited live-aboard capability. The fishing boats typically feature
livewells, in-deck fishboxes, rodholders, rigging stations, cockpit coaming pads, and fresh and saltwater washdowns.
Ski Boats . The ski boats we offer are Nautique by Correct Craft, which range from entry level models to advanced models and all of which are designed to
achieve an ultimate wake for increased skier and wakeboarder performance and safety. With a variety of designs and options, Nautique ski boats appeal to the
competitive and recreational user alike.
Jet Boats . The Scarab jet boats we offer range from entry level models to advanced models, all of which are designed for performance and with exclusive
design elements to meet family recreational needs. With a variety of designs and options, the jet boats we offer will appeal to a broad audience of jet boat
enthusiasts as well as existing customers.
Used Boat Sales
We sell used versions of the new makes and models we offer and, to a lesser extent, used boats of other makes and models generally taken as trade-ins.
During fiscal 2015, used boat sales accounted for 19.9% or $149.3 million of our revenue, and 63.9% of the used boats we sold were brunswick models.
Our used boat sales depend on our ability to source a supply of high-quality used boats at attractive prices. We acquire substantially all of our used boat
inventory through customer trade-ins. We intend to continue to increase our used boat business as a result of the availability of quality used boats generated from
our new boat sales efforts, the increasing number of used boats that are well-maintained through our service initiatives, our ability to market used boats throughout
our combined dealership network to match used boat demand, and the experience of our yacht brokerage operations. additionally, substantially all of our used boat
inventory is posted on our website, which expands the awareness and availability of our products to a large audience of boating enthusiasts. We also sell used boats
at various marinas and other offsite locations throughout the country.
To further enhance our used boat sales, we offer the brunswick Product Protection warranty plan available for used brunswick boats less than nine years
old. The brunswick Product Protection plan applies to each qualifying used boat, which has passed a 48-point inspection, and provides protection against failure of
most mechanical parts for up to three years. We believe these type of programs enhance our sales of used boats by motivating purchasers of used boats to complete
their purchases through our dealerships.
Marine Engines, Related Marine Equipment, and Boating Parts and Accessories
We offer marine engines and equipment, substantially all of which are manufactured by Mercury Marine, a division of brunswick. We sell marine engines
and propellers primarily to retail customers as replacements for their existing engines or propellers. Mercury Marine has introduced various new engine models
that reduce engine emissions to comply with current environmental Protection agency requirements. See “business — environmental and Other Regulatory
issues.” an industry leader for over seventy-five years, Mercury Marine specializes in state-of-the-art marine propulsion systems and accessories. Many of our
dealerships have been recognized by Mercury Marine as “Premier Service Dealers.” This designation is generally awarded based on meeting certain standards and
qualifications.
We also sell a broad variety of marine parts and accessories at our retail locations, at various offsite locations, and through our print catalog. These marine
parts and accessories include marine electronics; dock and anchoring products, such as boat fenders, lines, and anchors; boat covers; trailer parts; water sport
accessories, such as tubes, lines, wakeboards, and skis; engine parts; oils; lubricants; steering and control systems; corrosion control products, service products;
high-performance accessories, such as propellers and instruments; and a complete line of boating accessories, including life jackets, inflatables, and water sports
equipment. We also offer novelty items, such as shirts, caps, and license plates bearing the manufacturer’s or dealer’s logos. in all of our parts and accessories
business, we utilize our industry knowledge and experience to offer boating enthusiasts high-quality products with which we have experience.
The sale of marine engines, related marine equipment, and boating parts and accessories, which are all tangible products, accounted for 4.1% or $31.0
million of our fiscal 2015 revenue.
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Maintenance, Repair, and Storage Services
Providing customers with professional, prompt maintenance and repair services is critical to our sales efforts and contributes to our success. We provide
maintenance and repair services at most of our retail locations, with extended service hours at certain of our locations. in addition, in many of our markets, we
provide mobile maintenance and repair services at the location of the customer’s boat. We believe that this service commitment is a competitive advantage in the
markets in which we compete and is critical to our efforts to provide a trouble-free boating experience. To further this commitment, in certain of our markets, we
have opened stand-alone maintenance and repair facilities in locations that are more convenient for our customers and that increase the availability of such
services. We also believe that our maintenance and repair services contribute to strong customer relationships and that our emphasis on preventative maintenance
and quality service increases the potential supply of well-maintained boats for our used boat sales.
We perform both warranty and non-warranty repair services, with the cost of warranty work reimbursed by the manufacturer in accordance with the
manufacturer’s warranty reimbursement program. For warranty work, most manufacturers, including brunswick, reimburse a percentage of the dealer’s posted
service labor rates, with the percentage varying depending on the dealer’s customer satisfaction index rating and attendance at service training courses. We derive
the majority of our warranty revenue from brunswick products, as brunswick products comprise the majority of products sold. Certain other manufacturers
reimburse warranty work at a fixed amount per repair. because boat manufacturers permit warranty work to be performed only at authorized dealerships, we
receive substantially all of the warranted maintenance and repair work required for the new boats we sell. The third-party extended warranty contracts we offer
also result in an ongoing demand for our maintenance and repair services for the duration of the term of the extended warranty contract.
Our maintenance and repair services are performed by manufacturer-trained and certified service technicians. in charging for our mechanics’ labor, many
of our dealerships use a variable rate structure designed to reflect the difficulty and sophistication of different types of repairs. The percentage markups on parts are
similarly based on manufacturer suggested prices and market conditions for different parts.
at many of our locations, we offer boat storage services, including in-water slip storage and inside and outside land storage. These storage services are
offered at competitive market rates and include in-season and winter storage.
Maintenance, repair, and storage services accounted for 6.3% or $47.4 million of our revenue during fiscal 2015 of which, 4.0% or $30.4 million related to
repair services, 0.9% or $7.0 million related to parts and accessories for repairs, and 1.4% or $10.0 million related to income from storage service rentals. This
includes warranty and non-warranty services.
F&I Products
at each of our retail locations and at various offsite locations where applicable, we offer our customers the ability to finance new or used boat purchases and
to purchase extended service contracts and arrange insurance coverage, including boat property, credit life, and accident, disability, undercoating, and casualty
insurance coverage (collectively, “F&i”). We have relationships with various national marine product lenders under which the lenders purchase retail installment
contracts evidencing retail sales of boats and other marine products that are originated by us in accordance with existing pre-sale agreements between us and the
lenders. These arrangements permit us to receive a portion of the finance charges expected to be earned on the retail installment contract based on a variety of
factors, including the credit standing of the buyer, the annual percentage rate of the contract charged to the buyer, and the lender’s then current minimum required
annual percentage rate charged to the buyer on the contract. This participation is subject to repayment by us if the buyer prepays the contract or defaults within a
designated time period, usually 90 to 180 days. To the extent required by applicable state law, our dealerships are licensed to originate and sell retail installment
contracts financing the sale of boats and other marine products.
We also offer third-party extended service contracts under which, for a predetermined price, we provide all designated services pursuant to the service
contract guidelines during the contract term at no additional charge to the customer above a deductible. While we sell all new boats with the boat manufacturer’s
standard hull and engine warranty, extended service contracts provide additional coverage beyond the time frame or scope of the manufacturer’s
warranty. Purchasers of used boats generally are able to purchase an extended service contract, even if the selected boat is no longer covered by the manufacturer’s
warranty. Generally, we receive a fee for arranging an extended service contract. Most required services under the contracts are provided by us and paid for by the
third-party contract holder.
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We also are able to assist our customers with the opportunity to purchase credit life insurance, accident and disability insurance, and property and casualty
insurance. Credit life insurance policies provide for repayment of the boat financing contract if the purchaser dies while the contract is outstanding. accident and
disability insurance policies provide for payment of the monthly contract obligation during any period in w hich the buyer is disabled. Property and casualty
insurance covers loss or damage to the boat. We do not act as an insurance broker or agent or issue insurance policies on behalf of insurers. We do, however,
provide marketing activities and other relate d services to insurance companies and brokers for which we receive marketing fees. One of our strategies is to
generate increased marketing fees by offering more competitive insurance products.
During fiscal 2015, fee income generated from F&i products accounted for 2.5% or $18.8 million of our revenue. We believe that our customers’ ability to
obtain competitive financing quickly and easily at our dealerships complements our ability to sell new and used boats. We also believe our ability to provide
customer-tailored financing on a “same-day” basis gives us an advantage over many of our competitors, particularly smaller competitors that lack the resources to
arrange boat financing at their dealerships or that do not generate sufficient volume to attract the diversity of financing sources that are available to us.
Brokerage Sales
Through employees or subcontractors that are licensed boat or yacht brokers where applicable, we offer boat or yacht brokerage sales at most of our retail
locations. For a commission, we offer for sale brokered boats or yachts, listing them on various internet sites, advising our other retail locations of their availability
through our integrated computer system, and posting them on our web site, www.MarineMax.com . Often sales are co-brokered, with the commission split between
the buying and selling brokers. We believe that our access to potential used boat customers and methods of listing and advertising customers’ brokered boats or
yachts is more extensive than is typical among brokers. in addition to generating revenue from brokerage commissions, our brokerage sales also enable us to offer
a broad array of used boats or yachts without increasing related inventory costs. During fiscal 2015, brokerage sales commissions accounted for 2.3% or $17.3
million of our revenue.
Our brokerage customers generally receive the same high level of customer service as our new and used boat customers. Our waterfront retail locations
enable in-water demonstrations of an on-site brokered boat. Our maintenance and repair services, including mobile service, also are generally available to our
brokerage customers. The purchaser of a boat brokered through us also can take advantage of MarineMax Getaways! weekend and day trips and other rendezvous
gatherings and in-water events, as well as boat operation and safety seminars. We believe that the array of services we offer are unique in the brokerage business.
Yacht Charter
in 2011 we launched a yacht charter business in which we offer customers the opportunity to charter power and sailing yachts in exotic destinations, starting
with our initial location in the british Virgin islands. in this business, we sell specifically designed yachts to third parties for inclusion in our yacht charter fleet;
enter into yacht management agreements under which yacht owners enable us to put their yachts in our yacht charter program for a period of four to five years for a
fixed monthly fee payable by us; provide our services in storing, insuring, and maintaining their yachts; and charter these yachts to vacation customers at agreed
fees payable to us. The yacht owners will be able to utilize the yachts for personal use for a designated number of weeks during the term of the management
agreement and take possession of their yachts following the expiration of the yacht management agreements. During fiscal 2015, the income from rentals of
chartering power and sailing yachts accounted for 0.6% or $4.7 million of our revenue.
Offsite Sales
We sell used boats, offer F&i products, and sell parts and accessories at various third-party offsite locations, including marinas.
Retail Locations
We sell our recreational boats and other marine products and offer our related boat services through 53 retail locations in alabama, California, Connecticut,
Florida, Georgia, Maryland, Minnesota, Missouri, New Jersey, New York, North Carolina, Ohio, Oklahoma, Rhode island, and Texas. each retail location
generally includes an indoor showroom (including some of the industry’s largest indoor boat showrooms) and an outside area for displaying boat inventories, a
business office to assist customers in arranging financing and insurance, and maintenance and repair facilities.
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Many of our retail locations are waterfront properties on some of the nation’s most popular boating locations, including the San Diego bay in California;
Norwalk Harbor and Westbrook Harbor in Connecticut; multiple locations on the intracoastal Waterway, the at lantic Ocean, biscayne bay, boca Ciega bay,
Caloosahatchee River, Naples bay, Tampa bay, and the Saint andrews bay in Florida; Lake Lanier in Georgia; Chesapeake bay in Maryland; Lake Minnetonka,
and the St. Croix River in Minnesota; Lake of the Ozarks and Table Rock Lake in Missouri; barnegat bay, Lake Hopatcong, Little egg Harbor bay, and the
Manasquan River in New Jersey; Great South bay, the Hudson River, and Huntington Harbor in New York; Masonboro inlet in North Carolina; Lake erie in Ohio;
Grand Lake in Oklahoma; Newport Harbor and Greenwich bay in Rhode island; and Clear Lake, Lake Lewisville, and Lake Conroe in Texas. Our waterfront
retail locations, most of which include marina-type facilities and docks at which we display our boats, are easily ac cessible to the boating populace, serve as in-
water showrooms, and enable the sales force to give customers immediate in-water demonstrations of various boat models. Most of our other locations are in close
proximity to water.
Operations
Dealership Operations and Management
We have adopted a generally decentralized approach to the operational management of our dealerships. While certain administrative functions are
centralized at the corporate level, local management is primarily responsible for the day-to-day operations of the retail locations. each retail location is managed
by a general manager, who oversees the day-to-day operations, personnel, and financial performance of the individual store, subject to the direction of a regional
president, who generally has responsibility for the retail locations within a specified geographic region. Typically, each retail location also has a staff consisting of
an F&i manager, a parts manager, and a service manager, sales representatives, maintenance and repair technicians, and various support personnel.
We attempt to attract and retain quality employees by providing them with ongoing training to enhance sales professionalism and product knowledge, career
advancement opportunities within a larger company, and favorable benefit packages. We maintain a formal training program, called MarineMax University or
MMU, which provides training for employees in all aspects of our operations. Training sessions are held at our various regional locations covering a variety of
topics. MMU-online offers various modules over the internet. Highly trained, professional sales representatives are an important factor to our successful sales
efforts. These sales representatives are trained at MMU to recognize the importance of fostering an enjoyable sales process, to educate customers on the operation
and use of the boats, and to assist customers in making technical and design decisions in boat purchases. The overall focus of MMU is to teach our core retailing
values, which focus on customer service.
Sales representatives receive compensation primarily on a commission basis. each general manager is a salaried employee with incentive bonuses based on
the performance of the managed dealership. Maintenance and repair service managers receive compensation on a salary basis with bonuses based on the
performance of their departments. Our management information system provides each store and department manager with daily financial and operational
information, enabling them to monitor their performance on a daily, weekly, and monthly basis. We have a uniform, fully integrated management information
system serving each of our dealerships.
Sales and Marketing
Our sales philosophy focuses on selling the pleasures of the boating lifestyle. We believe that the critical elements of our sales philosophy include our
appealing retail locations, no-hassle sales approach, highly trained sales representatives, high level of customer service, emphasis on educating the customer and the
customer’s family on boating, and providing our customers with opportunities for boating through our MarineMax Getaways!. We strive to provide superior
customer service and support before, during, and after the sale. Our team and customers are United by Water®.
each retail location offers the customer the opportunity to evaluate a variety of new and used boats in a comfortable and convenient setting. Our full-service
retail locations facilitate a turn-key purchasing process that includes attractive lender financing packages, extended service agreements, and insurance. Many of our
retail locations are located on waterfronts and marinas, which attract boating enthusiasts and enable customers to operate various boats prior to making a purchase
decision.
The brands we offer are diverse in size and use and are spread across our customer activities of leisure, fishing, watersports, luxury, and vacations. We
believe the transformative qualities of the water should be shared by everyone, so we created our boat lineup accordingly. Our promise gives them meaning and
reason to exist next to one another on our showroom floor.
We sell our boats at posted MarineMax “One” Prices that generally represent a discount from the manufacturer’s suggested retail price. Our sales approach
focuses on customer service by minimizing customer anxiety associated with price negotiation.
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as a part of our sales and marketing efforts, our online marketing activity is important, with the majority of leads coming through our website,
www.MarineMax.com , and emails used as the primary marketing tool for our stores to connect with their customers. Social media is a growing venue for customer
engagement with stores and prospecting of new leads.
We also participate in boat shows and in-the-water sales events at area boating locations, typically held in January and February and toward the end of the
boating season, in each of our markets and in certain locations in close proximity to our markets. These shows and events are normally held at convention centers
or marinas, with area dealers renting space. boat shows and other offsite promotions are an important venue for generating sales orders. The boat shows also
generate a significant amount of interest in our products resulting in boat sales after the show.
We emphasize customer education through one-on-one education by our sales representatives and, at some locations, our delivery captains, before and after
a sale, and through in-house seminars for the entire family on boating safety, the use and operation of boats, and product demonstrations. Typically, one of our
delivery captains or the sales representative delivers the customer’s boat to an area boating location and thoroughly instructs the customer about the operation of the
boat, including hands-on instructions for docking and trailering the boat. To enhance our customer relationships after the sale, we lead and sponsor MarineMax
Getaways! group boating trips to various destinations, rendezvous gatherings, and on-the-water organized events that promote the pleasures of the boating
lifestyle. each company-sponsored event, planned and led by a company employee, also provides a favorable medium for acclimating new customers to boating,
sharing exciting boating destinations, creating friendships with other boaters, and enabling us to promote new product offerings to boating enthusiasts.
as a result of our relative size, we believe we have a competitive advantage within the industry by being able to conduct an organized and systematic
advertising and marketing effort. Part of our marketing effort includes an integrated customer relationship management system that tracks the status of each sales
representative’s contacts with a prospect, automatically generates follow-up correspondence, and facilitates company-wide availability of a particular boat or other
marine product desired by a customer.
Suppliers and Inventory Management
We purchase substantially all of our new boat inventory directly from manufacturers, which allocate new boats to dealerships based on the amount of boats
sold by the dealership and their market share. We also exchange new boats with other dealers to accommodate customer demand and to balance inventory.
We purchase new boats and other marine-related products from brunswick, which is a world leading manufacturer of marine products, including Sea Ray,
boston Whaler, Harris, and Meridian. We also purchase new boats and other marine related products from other manufacturers, including azimut, Hatteras, Grady
White, Scout, Sailfish, Malibu, and Nautique by Correct Craft. in fiscal 2015, sales of new brunswick and azimut boats accounted for approximately 40% and
12% of our revenue, respectively. Sales of new Sea Ray and boston Whaler boats, both divisions of brunswick, accounted for approximately 25% and 12%,
respectively, of our revenue in fiscal 2015. No purchases of new boats and other marine related products from any other manufacturer accounted for more than 10%
of our revenue in fiscal 2015. We believe our Sea Ray boat purchases represented approximately 45% of Sea Ray’s new boat sales, and approximately 8% of all
brunswick marine product sales during fiscal 2015.
We have entered into multi-year agreements with brunswick covering Sea Ray, boston Whaler, and Meridian products. We also have a multi-year
agreement with azimut-benetti Group for its azimut product line. We typically deal with each of our manufacturers, other than brunswick and azimut-benetti
Group, under an annually renewable, non-exclusive dealer agreement.
The dealer agreements do not restrict our right to sell any product lines or competing products provided that we are in compliance with the material
obligations of our dealer agreements. The terms of each dealer agreement appoints a designated geographical territory for the dealer, which is exclusive to the
dealer provided that the dealer is able to meet the material obligations of its dealer agreement.
Manufacturers generally establish prices on an annual basis, but may change prices at their sole discretion. Manufacturers typically discount the cost of
inventory and offer inventory financing assistance during the manufacturers’ slow seasons, generally October through March. To obtain lower cost of inventory,
we strive to capitalize on these manufacturer incentives to take product delivery during the manufacturers’ slow seasons. This permits us to gain pricing
advantages and better product availability during the selling season. arrangements with certain other manufacturers may restrict our right to offer some product
lines in certain markets.
We transfer individual boats among our retail locations to fill customer orders that otherwise might take substantially longer to fill from the
manufacturer. This reduces delays in delivery, helps us maximize inventory turnover, and assists in minimizing potential overstock or out-of-stock situations. We
actively monitor our inventory levels to maintain levels appropriate to meet current anticipated market demands. We are not bound by contractual agreements
governing the amount of inventory that we must purchase in any year from any manufacturer, but the failure to purchase at agreed upon levels may result in the loss
of certain manufacturer
14
incentives or dealership rights. We participate in numerous end-of-summer manufacturer boat sh ows, which manufacturers sponsor to sell off their remaining
inventory at reduced costs before the introduction of new model year products, typically beginning in September.
Inventory Financing
Marine manufacturers customarily provide interest assistance programs to retailers. The interest assistance varies by manufacturer and may include periods
of free financing or reduced interest rate programs. The interest assistance may be paid directly to the retailer or the financial institution depending on the
arrangements the manufacturer has established. We believe that our financing arrangements with manufacturers are standard within the industry.
We account for consideration received from our vendors in accordance with FaSb accounting Standards Codification 605-50, “Revenue Recognition‒
Customer Payments and incentives” (“aSC 605-50”). aSC 605-50 requires us to classify interest assistance received from manufacturers as a reduction of
inventory cost and related cost of sales as opposed to netting the assistance against our interest expense incurred with our lenders. Pursuant to aSC 605-50,
amounts received by us under our co-op assistance programs from our manufacturers are netted against related advertising expenses.
We are party to an inventory Financing agreement (the “amended Credit Facility”) with Ge Commercial Distribution Finance LLC. The amended Credit
Facility provides a floor plan financing commitment of up to $260.0 million. The amended Credit Facility matures in October 2018 and is subject to extension for
two one-year periods, with lender approval.
The interest rate under the amended Credit Facility is 345 basis points above the one-month London inter-bank Offering Rate (“LibOR”). There is an
unused line fee of ten basis points on the unused portion of the line.
The amended Credit Facility has certain financial covenants. The covenants include provisions that our leverage ratio not exceed 2.75 to 1.0 and that our
current ratio must be greater than 1.2 to 1.0. as of September 30, 2015, we were in compliance with all the covenants under the amended Credit Facility.
The initial advance under the amended Credit Facility was used to pay off our prior credit facility. Subsequent advances have been, and will be, initiated
by the acquisition of eligible new and used inventory or will be re-advances against eligible new and used inventory that has been partially paid-off. advances on
new inventory will generally mature 1,080 days from the original invoice date. advances on used inventory will mature 361 days from the date we acquire the
used inventory. each advance is subject to a curtailment schedule, which requires that we pay down the balance of each advance on a periodic basis starting after
six months. The curtailment schedule varies based on the type of inventory and the value of the inventory.
The collateral for the amended Credit Facility is all of our personal property with certain limited exceptions. None of our real estate has been pledged for
collateral for the amended Credit Facility.
as of September 30, 2015, we owed $137.2 million under the amended Credit Facility. Outstanding short-term borrowings accrued interest at a rate of
3.6% as of September 30, 2015, and the amended Credit Facility provided us with an additional net borrowing availability of approximately $54.5 million, based
upon the outstanding borrowing base availability. We have no indebtedness associated with our real estate holdings.
Management Information System
We believe that our management information system, which is utilized by each of our dealerships and was developed over a number of years through
cooperative efforts with a common vendor, enhances our ability to integrate successfully the operations of our dealerships and future acquisitions, facilitates the
interchange of information, and enhances cross-selling opportunities throughout our company. The system integrates each level of operations on a company-wide
basis, including but not limited to purchasing, inventory, receivables, payables, financial reporting, budgeting, and sales management. The system enables us to
monitor each dealership’s operations in order to identify quickly areas requiring additional focus and to manage inventory. The system also provides sales
representatives with prospect and customer information that aids them in tracking the status of their contacts with prospects, automatically generates follow-up
correspondence to such prospects, facilitates the availability of a particular boat company-wide, locates boats needed to satisfy a particular customer request, and
monitors the maintenance and service needs of customers’ boats. Company representatives also utilize the system to assist in arranging financing and insurance
packages.
Brunswick Agreement Relating to Acquisitions
We and the Sea Ray Division of brunswick are parties to an agreement that provides a process for the acquisition of additional Sea Ray boat dealers that we
elect to acquire. The agreement extends through august 31, 2018, with automatic annual one-year
15
extensions at each twelve month anniversary of the agreement, provided that our dealer agreements with the Sea Ray Division of brunswick are still then in
effect. Under the agreement, acquisitions of Sea Ray dealers will be mutually agreed upon by us and Sea Ray with r easonable efforts to be made to include a
balance of Sea Ray dealers that have been successful and those that have not been. The agreement provides that Sea Ray will not unreasonably withhold its consent
to any proposed acquisition of a Sea Ray dealer by us, subject to the conditions set forth in the agreement. among other things, the agreement provides for us to
provide Sea Ray with a business plan for each proposed acquisition, including historical financial and five-year projected financial information regarding the
acquisition candidate; marketing and advertising plans; service capabilities and managerial and staff personnel; information regarding the ability of the candidate to
achieve performance standards within designated periods; and information r egarding the success of our previous acquisitions of Sea Ray dealers. The agreement
also contemplates Sea Ray reaching a good faith determination whether the acquisition would be in its best interest based on our dedication and focus of resources
on the S ea Ray brand and Sea Ray’s consideration of any adverse effects that the approval would have on the resulting territory configuration of adjacent or other
dealers and the absence of any violation of applicable laws or rights granted by Sea Ray to others.
Dealer Agreements with Brunswick
We and the Sea Ray Division of brunswick and boston Whaler, inc. are parties to Sales and Service agreements relating to Sea Ray and boston Whaler
products respectively, effective September 1, 2014 and extending through august 31, 2018 with automatic annual one-year extensions at each twelve-month
anniversary of the agreement, provided that we are not in breach of a material term of the agreement, following written notice and expiration of applicable cure
periods without cure (certain termination provisions are summarized below).
The agreements appoint certain of our operating subsidiaries as a dealer for the retail sale, display, and servicing of all Sea Ray or boston Whaler products,
parts, and accessories currently or in the future sold by Sea Ray or boston Whaler, as applicable. The agreements specify a designated geographical territory and
dealer region or location for the dealer, which is exclusive to the dealer. The agreement also specifies retail locations, which the dealer may not close, change, or
add to without the prior written consent of the relevant manufacturer, provided that such manufacturer may not unreasonably withhold its consent. The
manufacturer reserves the right to modify the territory or appoint other dealers to sell, display, and service product from dealer locations within the territory at any
time if we close a dealer location without prior written notice to Sea Ray and prior written approval by Sea Ray, which will not be unreasonably withheld or in the
case of boston Whaler, in the event that a dealer location fails to meet performance standards while carrying competitive product following written notice and a
period of 60 days to cure or six months for matters for which a cure cannot be completed in 60 days. The agreements also restrict the dealer from selling,
advertising (other than in recognized and established marine publications), soliciting for sale, or offering for resale any products outside its territory except as
otherwise provided by the relevant manufacturer’s advertising policy or other applicable policy as long as similar restrictions also apply to all domestic dealers
selling comparable products. in addition, the agreements provide for the lowest product prices charged by the relevant manufacturer from time to time to other
domestic dealers, subject to the dealer meeting all the requirements and conditions of applicable programs and the right of the manufacturer in good faith to charge
lesser prices to other dealers to meet existing competitive circumstances, for unusual and non-ordinary business circumstances, or for limited duration promotional
programs.
among other things, the dealer agreements require each dealer to achieve performance standards including inventory stocking levels, provision of annual
sales forecasts, submission of orders pursuant to the manufacturer’s current buying program, unit retail sales, customer satisfaction and marketing support. The
sales performance will be in accordance with fair and reasonable standards and sales levels established by the manufacturer in collaboration with the dealer based
on factors such as population, sales potential, market share percentage of products sold in the territory compared with competitive products sold in the territory,
product availability, local economic conditions, competition, past sales history, historical product mix and stocking practices, existing product inventory, number of
retail locations, and other special circumstances that may affect the sale of the relevant products or the dealer, in each case established in a manner similar to those
applied to domestic dealers selling comparable products.
The dealer is also required to maintain at each retail location, or at another acceptable location, a service department that is properly staffed and equipped to
service Sea Ray or boston Whaler products, as applicable, promptly and professionally and to maintain parts and supplies to service such products properly on a
timely basis, to provide or arrange for warranty and service work for such products.
Sea Ray and boston Whaler respectively have each agreed to indemnify us against any losses to third parties resulting from their respective negligent acts or
omissions involving the design or manufacture of any of its products or any breach by it of the agreement. We have agreed to indemnify Sea Ray or boston Whaler
respectively against any losses to third parties resulting from our negligent acts or omissions involving the dealer’s application, use, or repair of Sea Ray or boston
Whaler products respectively, statements or representation not specifically authorized by the relevant manufacturer, the installation of any after-market components
or any other modification or alteration of the products, and any breach by us of the agreement.
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The agreements may be terminated:
·
·
·
·
·
·
·
·
by the manufacturer, upon 60 days’ prior written notice, if we do not have an ability to purchase products via flooring or self-financing or fail to
meet our financial obligations as they become due to the relevant manufacturer or to our lenders;
as to any dealer region, or in the case of boston Whaler, any dealer location, if we are failing to meet performance standards and begin selling,
displaying or advertising products that are competitive with the products being sold under the agreement (other than products of another brunswick
brand or new products currently carried), if we do not cure our failure within 90 days after written notice, or if we are meeting the performance
standards and then starts failing to meet performance standards after beginning selling, displaying or advertising products that are competitive with
products sold under the agreement (other than products of another brunswick brand or new products currently carried) and do not cure our failure
within six months after written notice, or with respect to boston Whaler and dealer’s locations in New York, in the event such dealer location fails to
meet performance standards and does not cure such failure within 6 months after written notice;
with respect to the Sea Ray agreements, by either party upon prior written notice to the other given within 60 days after the 6 th anniversary of the
agreement, with termination effective at the end of the 7 th year, failing which the agreement will renew for a 3 year term beginning on the 7 th
anniversary; with respect to the boston Whaler agreements, by either party upon prior written notice to the other given within 60 days after the 4th
anniversary of the agreement, with termination effective at the end of the 5 th year, failing which the agreement will renew for a 2 year term
beginning on the 5 th anniversary;
with respect to Sea Ray, following the 7 th anniversary of the agreement, upon 24 months’ notice (or with respect to boston Whaler, following the 5
th anniversary of the agreement, upon 12 months’ notice), in the event of a material breach or default of any of the material obligations, performance
standards, covenants, representations, warranties or duties imposed in the agreement or in the applicable manufacturer’s policies or programs
applicable to domestic dealers which breach is not cured during the notice period and through the parties working in good faith to resolve any issue;
by Sea Ray or boston Whaler, as applicable, or us upon 60 days’ written notice if the other makes a fraudulent misrepresentation that is material to
the agreement or in the event of the insolvency, bankruptcy, or receivership of the other;
by Sea Ray or boston Whaler, as applicable, in the event of the assignment of the agreement by the dealer without the prior written consent of Sea
Ray or boston Whaler, as applicable;
by Sea Ray or boston Whaler, as applicable, upon at least 60 days' prior written notice in the event of the commission by dealer of an act of fraud
upon Sea Ray or boston Whaler, as applicable, or the commission by us or one of our officers of a felony or act of fraud which is materially
detrimental to Sea Ray’s or boston Whaler’s respective reputation or business or which materially impairs our ability to perform our duties under the
agreement or we fail to pay any lender financing products under the agreement after the sale of products by us; or
upon the mutual consent of Sea Ray or boston Whaler, as applicable, and us.
either party may elect to not extend the term at the expiration of each applicable 12 month period in the event of a material breach or default by the other of
any of the material obligations, performance standards, covenants, representations, warranties, or duties imposed by the agreement or the manufacturer’s manual
that is not remedied or cured following notice thereof. in the event of a remedy or cure, the additional 12 month period shall be added to the term.
Dealer Agreements with Azimut
We are parties to Dealership agreements with azimut benetti S.P.a. for the retail sale, display, and servicing of designated azimut products and parts sold
by azimut. The Dealership agreements extend through September 1, 2016 with a one year period added at each twelve month anniversary provided that we are
able to agree in good faith on acceptable retail sales goals. The dealership agreements grant us the exclusive right to sell the azimut products and parts in
designated geographical areas. among other things, each dealership agreement requires the applicable dealer to:
·
·
·
·
·
display the azimut products in the most appropriate and effective manner;
maintain an adequate inventory of azimut products and meet mutually agreed upon minimum purchase requirements;
use commercially reasonable best efforts to establish the best image for azimut and to promote the sales of the products;
operate through at least one permanent office to ensure adequate promotion of the products;
maintain adequate signage to show azimut at its offices or service yards;
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·
·
·
·
·
·
·
promote the products at various events and meetings;
advertise and market the products in accordance with agreed upon marketing plans and budgets;
attend boat shows and display a full range of boats;
maintain appropriate and adequate after-sale service;
provide assistance under warranty for all boats in the geographical area;
comply with azimut’s warranty procedures; and
perform maintenance services for azimut boats.
azimut has agreed to indemnify each of our dealers against any losses resulting from an alleged breach of warranty or injury or damage caused by a defect
in design, manufacture or assembly of a product. each of our dealers has agreed to indemnify azimut against any losses resulting from the dealer’s failure to
comply with any material obligation with respect to a product or customer; any actual negligence, errors or omissions in connection with the sale, preparation,
repairs, or service of products; any modification of products except as approved by azimut; a breach of any material agreement; or unauthorized warranties,
misleading statements, misrepresentations or deceptive or unfair practices.
each dealer agreement may be terminated upon 30 days prior written notice in event that the defaulting party has not remedied a default during such period,
in the event of any of the following:
·
·
·
·
·
·
·
·
·
·
·
by azimut or dealer, for failure of the other to maintain a necessary license;
by azimut or dealer, for the change, transfer, or attempted transfer by the other party of the whole or any part of the agreement other than to an
affiliate as part of a corporate restructuring or any change in control without the prior consent of azimut;
by azimut or dealer, for the knowing submission of an intentional fraudulent statement, application, request, refund, credit, or warranty claim;
by azimut or dealer, for the knowing use of a deceptive or fraudulent practice in the sale of a product;
by azimut or dealer, for the indictment for or conviction of a crime or violation of law which will have an adverse and material effect on the other’s
reputation or operations;
by azimut or dealer, for the other entering into an agreement or understanding to fix prices for the products;
by dealer for azimut’s material and continuous failure to supply product or appointing another dealer in the territory or failure to fulfill warranty
obligations;
by azimut for dealer’s abandonment of operations or failure to maintain business as a going concern;
by azimut for dealer’s material and continuous failure to represent, promote, sell, or service the products, achieve minimum yearly sales or comply
with purchase orders as agreed by the parties considering various factors such as the economy, the euro impact, product availability, and growth
potential;
by azimut or dealer for the insolvency, bankruptcy, commencement of bankruptcy proceedings, appointment of a receiver or other officer with
similar powers, levy under attachment, garnishment or execution, or similar process, which is not vacated or removed within ten days; and
by mutual agreement of the dealer and azimut.
Upon termination of the dealer agreements by azimut without cause, termination by dealer with cause and nonrenewal and expiration, azimut is required to
repurchase unsold inventory within sixty days of termination.
Employees
as of September 30, 2015, we had 1,289 employees, 1,189 of whom were in store-level operations and 100 of whom were in corporate administration and
management. We are not a party to any collective bargaining agreements. We consider our relations with our employees to be excellent.
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Trademarks and Service Marks
We have registered trade names and trademarks with the U.S. Patent and Trademark Office for various names, including “MarineMax,” “MarineMax
Getaways!,” “MarineMax Care,” “Delivering the Dream,” “MarineMax Delivering the boating Dream,” “Newcoast Financial Services,” “MarineMax boating
Gear Center,” “MarineMax Vacations,” “United by Water” and “Women on Water.” We have registered the name “MarineMax” in the european Community,
China, australia, and Cuba; “Maximizing Your enjoyment on the Water” in the european Community, Cuba, and australia; and “United by Water” in the
european Community, australia and Cuba. We have trade names and trademarks registered in Canada for various names, including “MarineMax,” “Delivering the
Dream,” and “The Water Gene.” We have various trade name and trademark applications including “MarineMax,” “United by Water,” and “Maximizing Your
enjoyment on Water” pending in australia, brazil, China, Cuba, european Union, and india. There can be no assurance that any of these applications will be
granted.
Seasonality and Weather Conditions
Our business, as well as the entire recreational boating industry, is highly seasonal, with seasonality varying in different geographic markets. Over the
three-year period ended September 30, 2015, the average revenue for the quarters ended December 31, March 31, June 30, and September 30 represented
approximately 18%, 24%, 32%, and 26%, respectively, of our average annual revenues. With the exception of Florida, we generally realize significantly lower
sales and higher levels of inventories and related short-term borrowings, in the quarterly periods ending December 31 and March 31. The onset of the public boat
and recreation shows in January generally stimulates boat sales and typically allows us to reduce our inventory levels and related short-term borrowings throughout
the remainder of the fiscal year.
Our 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. 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.
Environmental and Other Regulatory Issues
Our operations are subject to extensive regulation, supervision, and licensing under various federal, state, and local statutes, ordinances, and
regulations. While we believe that we maintain all requisite licenses and permits and are in compliance with all applicable federal, state, and local regulations,
there can be no assurance that we will be able to maintain all requisite licenses and permits. The failure to satisfy those and other regulatory requirements could
have a material adverse effect on our business, financial condition, and results of operations. The adoption of additional laws, rules, and regulations could also
have a material adverse effect on our business. Various federal, state, and local regulatory agencies, including the Occupational Safety and Health administration,
or OSHa, the United States environmental Protection agency, or ePa, and similar federal and local agencies, have jurisdiction over the operation of our
dealerships, repair facilities, and other operations with respect to matters such as consumer protection, workers’ safety, and laws regarding protection of the
environment, including air, water, and soil.
The ePa has various air emissions regulations for outboard marine engines that impose more strict emissions standards for two-cycle, gasoline outboard
marine engines. The majority of the outboard marine engines we sell are manufactured by Mercury Marine. Mercury Marine’s product line of low-emission
engines, including the OptiMax, Verado, and other four-stroke outboards, have achieved the ePa’s mandated 2006 emission levels. any increased costs of
producing engines resulting from ePa standards, or the inability of our manufacturers to comply with ePa requirements, could have a material adverse effect on
our business.
Certain of our facilities own and operate underground storage tanks, or USTs, for the storage of various petroleum products. The USTs are generally
subject to federal, state, and local laws and regulations that require testing and upgrading of USTs and remediation of contaminated soils and groundwater resulting
from leaking USTs. in addition, if leakage from company-owned or operated USTs migrates onto the property of others, we may be subject to civil liability to
third parties for remediation costs or other damages. based on historical experience, we believe that our liabilities associated with UST testing, upgrades, and
remediation are unlikely to have a material adverse effect on our financial condition or operating results.
as with boat dealerships generally, and parts and service operations in particular, our business involves the use, handling, storage, and contracting for
recycling or disposal of hazardous or toxic substances or wastes, including environmentally sensitive materials, such as motor oil, waste motor oil and filters,
transmission fluid, antifreeze, freon, waste paint and lacquer thinner, batteries, solvents, lubricants, degreasing agents, gasoline, and diesel fuels. accordingly, we
are subject to regulation by federal, state, and local authorities establishing requirements for the use, management, handling, and disposal of these materials and
health and environmental quality standards, and liability related thereto, and providing penalties for violations of those standards. We are also subject to laws,
19
ordinances, and regulations governing investigation and remediation of contamination at facilities we operate to which we send hazardous or toxic substances or
wastes for treatment, rec ycling, or disposal.
We do not believe we have any material environmental liabilities or that compliance with environmental laws, ordinances, and regulations will, individually
or in the aggregate, have a material adverse effect on our business, financial condition, or results of operations. However, soil and groundwater contamination has
been known to exist at certain properties owned or leased by us. We have also been required and may in the future be required to remove aboveground and
underground storage tanks containing hazardous substances or wastes. as to certain of our properties, specific releases of petroleum have been or are in the process
of being remedied in accordance with state and federal guidelines. We are monitoring the soil and groundwater as required by applicable state and federal
guidelines. in addition, the shareholders of the acquired dealers have indemnified us for specific environmental issues identified on environmental site assessments
performed by us as part of the acquisitions. We maintain insurance for pollutant cleanup and removal. The coverage pays for the expenses to extract pollutants
from land or water at the insured property, if the discharge, dispersal, seepage, migration, release, or escape of the pollutants is caused by or results from a covered
cause of loss. We also have additional storage tank liability insurance and “Superfund” coverage where applicable. in addition, certain of our retail locations are
located on waterways that are subject to federal or state laws regulating navigable waters (including oil pollution prevention), fish and wildlife, and other matters.
Three of the properties we own were historically used as gasoline service stations. Remedial action with respect to prior historical site activities on these
properties has been completed in accordance with federal and state law. We, however, do not believe that these environmental issues will result in any material
liabilities to us.
additionally, certain states have required or are considering requiring a license in order to operate a recreational boat. While such licensing requirements
are not expected to be unduly restrictive, regulations may discourage potential first-time buyers, thereby limiting future sales, which could adversely affect our
business, financial condition, and results of operations.
Product Liability
The products we sell or service may expose us to potential liabilities for personal injury or property damage claims relating to the use of those
products. Historically, the resolution of product liability claims has not materially affected our business. Our manufacturers generally maintain product liability
insurance, and we maintain third-party product liability insurance, which we believe to be adequate. However, we may experience legal claims in excess of our
insurance coverage, and those claims may not be covered by insurance. Furthermore, any significant claims against us could adversely affect our business,
financial condition, and results of operations and result in negative publicity. excessive insurance claims also could result in increased insurance premiums.
Competition
We operate in a highly competitive environment. in addition to facing competition generally from recreation businesses seeking to attract consumers’
leisure time and discretionary spending dollars, the recreational boat industry itself is highly fragmented, resulting in intense competition for customers, quality
products, boat show space, and suitable retail locations. We rely to a certain extent on boat shows to generate sales. Our inability to participate in boat shows in
our existing or targeted markets could have a material adverse effect on our business, financial condition, and results of operations.
We compete primarily with single-location boat dealers and, with respect to sales of marine equipment, parts, and accessories, with national specialty
marine stores, catalog retailers, sporting goods stores, and mass merchants. Competition among boat dealers is generally based on the quality of available products,
the price and value of the products, and attention to customer service. There is significant competition both within markets we currently serve and in new markets
that we may enter. We compete in each of our markets with retailers of brands of boats and engines we do not sell in that market. in addition, several of our
competitors, especially those selling boating accessories, are large national or regional chains that have substantial financial, marketing, and other
resources. However, we believe that our integrated corporate infrastructure and marketing and sales capabilities, our cost structure, and our nationwide presence
enable us to compete effectively against these companies. Private sales of used boats represent an additional significant source of competition.
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Executive Officers
The following table sets forth information concerning each of our executive officers as of December 1, 2015:
Name
William H. McGill Jr.
Michael H. McLamb
Charles a. Cashman
William brett McGill
Paulee C. Day
anthony e. Cassella, Jr
Age
Position
71
50
52
47
46
46
Chairman of the board, President, Chief executive
Officer, and Director
executive Vice President, Chief Financial Officer,
Secretary, and Director
executive Vice President Sales, Marketing, and
Manufacturer Relations
executive Vice President Operations
executive Vice President, Chief Legal Officer, and
assistant Secretary
Vice President and Chief accounting Officer
William H. McGill Jr . has served as the Chief executive Officer of MarineMax since January 23, 1998 and as the Chairman of the board and as a director
of our company since March 6, 1998. Mr. McGill served as the President of our company from January 23, 1988 until September 8, 2000 and re-assumed the
position on July 1, 2002. Mr. McGill was the principal owner and president of Gulfwind USa, inc., one of our operating subsidiaries, from 1973 until its merger
with us.
Michael H. McLamb has served as executive Vice President of our company since October 2002, as Chief Financial Officer since January 23, 1998, as
Secretary since april 5, 1998, and as a director since November 1, 2003. Mr. McLamb served as Vice President and Treasurer of our company from January 23,
1998 until October 22, 2002. Mr. McLamb, a certified public accountant, was employed by arthur andersen LLP from December 1987 to December 1997, serving
most recently as a senior manager.
Charles A. Cashman has served as executive Vice President Sales, Marketing, and Manufacturer Relations of our company since October 2015. Mr.
Cashman served as Vice President of east Operations of our company from May 2012 to September 2015 and was appointed as an executive officer by our board
of Directors in November 2012. Mr. Cashman served as Regional President of east Florida from October 2008 to May 2012, and as District Manager of the east
Coast of Florida from March 2007 to October 2008. Mr. Cashman served several other positions of increasing responsibility, including Sales Consultant, Sales
Manager, and General Manager, since joining our company in 1992.
William Brett McGill has served as executive Vice President Operations of our company since October 2015. Mr. McGill served as Vice President of West
Operations of our company from May 2012 to September 2015 and was appointed as an executive officer by our board of Directors in November 2012. Mr.
McGill served as one of our Regional Presidents from March 2006 to May 2012, as Vice President of information Technology, Service and Parts of our company
from October 2004 to March 2006, and as Director of information Services from March 1998. Mr. McGill began his professional career with a software
development firm, integrated Dealer Systems, prior to joining our company in 1996. William brett McGill is the son of William H. McGill, Jr.
Paulee C. Day has served as executive Vice President and Chief Legal Officer of our company since October 2015. Ms. Day has served as Vice President
of our company since February 2009 and as General Counsel and assistant Secretary since January 2003. Ms. Day, an active member of the Florida bar, was
employed by Maxxim Medical from May 1999 to November 2002, serving as Vice President, General Counsel, and Secretary. Prior to that time, Ms. Day was
Corporate attorney at eckerd Corporation from June 1997 through May 1999 and a corporate attorney at the law firm Trenam, Kemker, Scharf, barkin, Frye,
O’Neill and Mullis, P.a. from January 1995 through June 1997.
Anthony E. Cassella, Jr. has served as Chief accounting Officer of our company since October 2014 and Vice President of accounting and Shared Services
of our company since February 2011. Mr. Cassella served as Director of Shared Services from October 2007 until February 2011 and Regional Controller from
March 1999 until October 2007. Mr. Cassella was the Controller of Merit Marine which the Company acquired in March 1999. Mr. Cassella, a certified public
accountant, worked in public accounting from June 1991 to February 1998, serving most recently as manager.
Item 1A.
Risk Factors
General economic conditions and consumer spending patterns can negatively impact our operating results, and the severe recession that began in late 2007 has
adversely affected the boating industry and our company.
General economic conditions and consumer spending patterns can negatively impact our operating results. Unfavorable local, regional, national, or global
economic developments or uncertainties regarding future economic prospects could reduce consumer
21
spend ing 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 51%, 52%, and 53 % of our revenue during fiscal 2013, 2014, and 2015, resp ectively, can have a major impact on our
operations. Local influences, such as corporate downsizing, military base closings, and inclement weather such as Hurricane Sandy, environmental conditions, and
specific events, such as the bP oil spill in the Gulf of Mexico, also could adversely affect, and in certain instances have adversely affected, our operations in certain
markets.
in an economic downturn, consumer discretionary spending levels generally decline, at times resulting in disproportionately large reductions in the sale of
luxury goods. Consumer spending on luxury goods also may decline as a result of lower consumer confidence levels, even if prevailing economic conditions are
favorable. as a result, an economic downturn could impact us more than certain of our competitors due to our strategic focus on a higher end of our market.
although we have expanded our operations during periods of stagnant or modestly declining industry trends, the cyclical nature of the recreational boating industry
or the lack of industry growth could adversely affect our business, financial condition, or results of operations in the future. any period of adverse economic
conditions or low consumer confidence has a negative effect on our business.
Lower consumer spending resulting from a downturn in the housing market and other economic factors adversely affected our business in fiscal 2007, and
continued weakness in consumer spending and depressed economic conditions had a substantial negative effect on our business for several years afterwards. Our
revenue decreased from $1.2 billion in fiscal 2007, to $885.4 million in fiscal 2008, to $588.6 million in fiscal 2009, to $450.3 million in fiscal 2010. Our earnings
decreased from a net income of $20.1 million in fiscal 2007 to a net loss of $134.3 million in fiscal 2008 (including a $122.1 million goodwill impairment charge),
a net loss of $76.8 million in fiscal 2009, and net income of $2.5 million in fiscal 2010 (including a $19.2 million tax refund). These substantially deteriorating
economic and financial conditions had a greater impact on many other participants in the boating industry, with certain manufacturers and dealers ceasing business
operations or filing for bankruptcy.
These conditions caused us to reduce substantially our acquisition program, delay new store openings, reduce our inventory purchases, engage in inventory
reduction efforts, close a number of our retail locations, reduce our headcount, and amend and replace our credit facility. While we believe the steps we took
enabled us to emerge from the current economic environment as a stronger and more profitable company, we cannot predict the length or severity of unfavorable
economic, financial, or industry conditions or the extent to which they will adversely affect our operating results nor can we predict the effectiveness of the
measures we have taken to address this environment or whether additional measures will be necessary. a continuation of depressed economic or industry factors
could have additional negative effects on our company, including interfering with our supply of certain brands by manufacturers, reduced marketing and other
support by manufacturers, decreased revenue, additional pressures on margins, and our failure to satisfy covenants under our credit agreement.
The availability and costs of borrowed funds can adversely affect our ability to obtain adequate boat inventory and the ability and willingness of our customers
to finance boat purchases.
The availability and costs of borrowed funds can adversely affect our ability to obtain and maintain adequate boat inventory and the holding costs of that
inventory as well as the ability and willingness of our customers to finance boat purchases. as of September 30, 2015, we had no long-term debt. We rely on the
amended Credit Facility with Ge Commercial Distribution Finance LLC to purchase and maintain our inventory of boats. Our ability to borrow under the
amended Credit Facility depends on our ability to continue to satisfy our covenants and other obligations under the amended Credit Facility. The variable interest
rate under our amended Credit Facility will fluctuate with changing market conditions and, accordingly, our interest expense will increase if interest rates rise. a
significant increase in interest rates could have a material adverse effect on our operating results. The aging of our inventory limits our borrowing capacity as
defined provisions in the amended Credit Facility reduce the allowable advance rate as our inventory ages. Our access to funds under the amended Credit Facility
also depends upon the ability of our lenders, to meet their funding commitments, particularly if they experience shortages of capital or experience excessive
volumes of borrowing requests from others during a short period of time. Depressed economic conditions, weak consumer spending, turmoil in the credit markets,
and lender difficulties, among other potential reasons, could interfere with our ability to maintain compliance with our debt covenants and to utilize the amended
Credit Facility to fund our operations. accordingly, it may be necessary for us to close additional stores, further reduce our expense structure, or modify the
covenants with our lenders. any inability to utilize the amended Credit Facility or the acceleration of amounts owed, resulting from a covenant violation,
insufficient collateral, or lender difficulties, could require us to seek other sources of funding to repay amounts outstanding under the amended Credit Facility or
replace or supplement the amended Credit Facility, which may not be possible at all or under commercially reasonable terms.
The amended Credit Facility provides a floor plan financing commitment of up to $260.0 million. The collateral for the amended Credit Facility is all of
our personal property with certain limited exceptions. None of our real estate has been pledged as collateral for the amended Credit Facility. as of September 30,
2015, we were in compliance with all of the covenants under the amended Credit Facility and our additional available borrowings under the amended Credit
Facility was approximately $54.5 million based upon the outstanding borrowing base availability.
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Similarly, decrease s 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 insura nce activities. Tight credit conditions during each
fiscal year beginning with fiscal 2008 and continuing through fiscal 2011 adversely affected the ability of customers to finance boat purchases, which had a
negative effect on our operating results.
Our strategies to enhance our performance may not be successful.
We are increasing our efforts to grow our financing and insurance, parts and accessories, service, yacht charter, and boat storage businesses to better serve
our customers and thereby increase revenue and improve profitability as a result of these higher margin businesses. in addition, we have implemented programs to
increase the lead capture and sale over the internet of used boats, parts, accessories, and a wide range of boating supplies and products. These efforts and programs
are designed to increase our revenue and reduce our dependence on the sale of new boats. These business initiatives have required, and will continue to require, us
to add personnel, invest capital, enter businesses in which we do not have extensive experience, and encounter substantial competition. as a result, our strategies to
enhance our performance may not be successful and we may increase our expenses or write off such investments if not successful.
Our success depends to a significant extent on the well being, as well as the continued popularity and reputation for quality of the boating products, of our
manufacturers, particularly Brunswick’s Sea Ray and Boston Whaler boat lines and Azimut-Benetti Group’s Azimut products.
approximately 40% of our revenue in fiscal 2015 resulted from sales of new boats manufactured by brunswick, including approximately 25% from
brunswick’s Sea Ray division, 12% from brunswick’s boston Whaler division, and approximately 3% from brunswick’s other divisions. additionally,
approximately 12% of our revenue in fiscal 2015 resulted from sales of new boats manufactured by azimut-benetti Group. The remainder of our fiscal 2015
revenue from new boat sales resulted from sales of products from a limited number of other manufacturers, none of which accounted for more than 10% of our
revenue.
We depend on our manufacturers to provide us with products that compare favorably with competing products in terms of quality, performance, safety, and
advanced features, including the latest advances in propulsion and navigation systems. any adverse change in the production efficiency, product development
efforts, technological advancement, marketplace acceptance, marketing capabilities, and financial condition of our manufacturers, particularly brunswick and
azimut-benetti Group given our reliance on Sea Ray, boston Whaler, and azimut, would have a substantial adverse impact on our business. any difficulties
encountered by any of our manufacturers, particularly brunswick and azimut-benetti Group, resulting from economic, financial, or other factors could adversely
affect the quality and amount of products that they are able to supply to us and the services and support they provide to us.
The interruption or discontinuance of the operations of brunswick, azimut-benetti Group, or other manufacturers could cause us to experience shortfalls,
disruptions, or delays with respect to needed inventory. although we believe that adequate alternate sources would be available that could replace any
manufacturer other than brunswick and azimut-benetti Group as a product source, those alternate sources may not be available at the time of any interruption, and
alternative products may not be available at comparable quality and prices.
We have dealer agreements with brunswick covering Sea Ray and boston Whaler products. each dealer agreement has a multi-year term and provides for
the lowest product prices charged by the Sea Ray division of brunswick or boston Whaler, as applicable, from time to time to other domestic Sea Ray or boston
Whaler dealers, as applicable. These terms are subject to:
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the dealer meeting all the requirements and conditions of the manufacturer’s applicable programs; and
the right of brunswick in good faith to charge lesser prices to other dealers
·
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to meet existing competitive circumstances;
for unusual and non-ordinary business circumstances; or
for limited duration promotional programs.
each dealer agreement designates a specific geographical territory for the dealer, which is exclusive to the dealer provided that the dealer is able to meet the
material obligations of its dealer agreement.
in March 2006, we became the exclusive dealer for azimut-benetti Group’s azimut product line for the Northeast United States. Our geographic territory
was expanded to include Florida in September 2008 and to the entire United States in July 2012. The azimut dealer agreement provides a geographic territory to
promote the product line and to network with the appropriate clientele through various independent locations designated for azimut retail sales. Our dealer
agreement is multi-year term but requires us to be in compliance with its terms and conditions.
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as is typical in the industry, we generally d eal with manufacturers, other than the Sea Ray division of brunswick and azimut, under renewable annual
dealer agreements. These agreements do not contain any contractual provisions concerning product pricing or required purchasing levels. Pricing is gen erally
established on a model year basis, but is subject to change in the manufacturer’s sole discretion. any change or termination of these arrangements for any reason
could adversely affect product availability and cost and our financial performance.
Boat manufacturers exercise substantial control over our business.
We depend on our dealer agreements. Through dealer agreements, boat manufacturers, including brunswick and azimut, exercise significant control over
their dealers, restrict them to specified locations, and retain approval rights over changes in management and ownership, among other things. The continuation of
our dealer agreements with most manufacturers, including brunswick and azimut, depends upon, among other things, our achieving stated goals for customer
satisfaction ratings and market share penetration in the market served by the applicable dealership. Failure to meet the customer satisfaction, market share goals,
and other conditions set forth in any dealer agreement could have various consequences, including the following:
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the termination of the dealer agreement;
the imposition of additional conditions in subsequent dealer agreements;
limitations on boat inventory allocations;
reductions in reimbursement rates for warranty work performed by the dealer;
loss of certain manufacturer to dealer incentives;
denial of approval of future acquisitions; or
the loss of exclusive rights to sell in the geographic territory.
These events could have a material adverse effect on our competitive position and financial performance.
The failure to receive rebates and other dealer incentives on inventory purchases or retail sales could substantially reduce our margins.
We rely on manufacturers’ programs that provide incentives for dealers to purchase and sell particular boat makes and models or for consumers to buy
particular boat makes or models. any eliminations, reductions, limitations, or other changes relating to rebate or incentive programs that have the effect of
reducing the benefits we receive, whether relating to the ability of manufacturers to pay or our ability to qualify for such incentive programs, could increase the
effective cost of our boat purchases, reduce our margins and competitive position, and have a material adverse effect on our financial performance.
Fuel prices and supply may affect our business.
all of the recreational boats we sell are powered by diesel or gasoline engines. Consequently, an interruption in the supply, or a significant increase in the
price or tax on the sale of fuel on a regional or national basis could have a material adverse effect on our sales and operating results. increases in fuel prices (such
as those that occurred during fiscal 2008) negatively impact boat sales. at various times in the past, diesel or gasoline fuel has been difficult to obtain. The supply
of fuels may be interrupted, rationing may be imposed, or the price of or tax on fuels may significantly increase in the future, adversely impacting our business.
Our sales may be adversely impacted by a material increase in interest rates.
Over the past several years, our economy has been positively impacted by historically unprecedented low interest rates. Such interest rates, driven by the
policies of the Federal Reserve, have begun to become a political issue in the United States. The Federal Reserve continues to be ambiguous concerning the
interest rate issues. Given that we sell products that are often financed, a material increase in interest rates may adversely impact our customers’ willingness or
desire to purchase our products.
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The availability of boat insurance is critical to our success.
The ability of our customers to secure reasonably affordable boat insurance that is satisfactory to lenders that finance our customers’ purchases is critical to
our success. Historically, affordable boat insurance has been available. in addition, as a severe storm approaches land, insurance providers cease underwriting until
the storm has passed. This loss of insurance prevents lenders from lending. as a result, sales of boats can be temporarily halted making our revenue difficult to
predict and causing sales to be delayed or potentially cancelled. any difficulty of customers to obtain affordable boat insurance could impede boat sales and
adversely affect our business.
Other recreational activities and poor industry perception can adversely affect the levels of boat purchases.
Other recreational activities and poor industry perception can adversely affect the levels of boat purchases. Demand for our products can be adversely
affected by competition from other activities that occupy consumers’ time, including other forms of recreation as well as religious, cultural and community
activities. as a seller of high-end consumer products, we must compete for discretionary spending with a wide variety of other recreational activities and consumer
purchases. in addition, perceived hassles of boat ownership and relatively poor customer service and customer education throughout the retail boat industry
represent impediments to boat purchases.
Adverse federal tax policies can have a negative effect on us.
Changes in federal and state tax laws, such as an imposition of luxury taxes on new boat purchases, increases in prevailing tax rates, and removal of certain
interest deductions, also influence consumers’ decisions to purchase products we offer and could have a negative effect on our sales. For example, during 1991 and
1992, the federal government imposed a luxury tax on new recreational boats with sales prices in excess of $100,000, which coincided with a sharp decline in
boating industry sales from a high of more than $17.9 billion in 1988 to a low of $10.3 billion in 1992. any increase in tax rates, including those on capital gains
and dividends, particularly those on high-income taxpayers, could adversely affect our boat sales.
In addition to our traditional repeat and referral business in our physical locations, online channels are increasingly significant in serving our existing
customer base and reaching new customers. Our continued expansion and success will be negatively impacted if we are not able to fully exploit these
channels.
Our on-line channels are subject to a number of risks and uncertainties that are beyond our control, including the following:
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changes in technology;
changes in consumer willingness to conduct business electronically, including increasing concerns with consumer privacy and risk and changing
laws, rules, and regulations, such as the imposition of or increase in taxes;
technology or security impediments that may inhibit our ability to electronically market our products and services;
changes in applicable federal, state and commercial regulation, such as the Federal Trade Commission act, the Fair Credit Reporting act, the
Gramm-Leach-bliley act, purchasing card industry requirements, Office of Foreign assets Control regulations and similar types of international
laws;
failure of our service providers to perform their services properly and in a timely and efficient manner;
failures in our infrastructure or by third parties, such as telephone or electric power service, resulting in website downtime or other problems;
failure by us to accurately and timely respond to customers, process orders or deliver services, which may negatively impact both future online and
in-store purchases by such customers;
inability of our suppliers or service partners to fulfill customer orders, which may negatively impact customer satisfaction;
our failure to assess and evaluate our online product and service offering to ensure that our products and services are desired by boating enthusiasts;
and
the potential exposure to liability with respect to third-party information, including copyright, trademark infringement, or other wrongful acts of third
parties; false or erroneous information provided by third parties; or illegal activities by third parties, such as the sale of stolen boats or other goods.
Further, we may also be vulnerable to competitive pressures from the growing electronic commerce activity in our market, both as they may impact our own
on-line business, and as they may impact the operating results and investment values of our existing physical locations.
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Our yacht charter business exposes us to certain risks.
Our yacht charter business entails the sale by us of specifically designed yachts to third parties for inclusion in our yacht charter fleet; a yacht management
agreement under which yacht owners enable us to put their yachts in our yacht charter program for a period of four to five years for a fixed monthly fee payable by
us; our services in storing, insuring, and maintaining their yachts; and the charter by us of these yachts to vacation customers at agreed fees payable to us. Our
failure to find purchasers for yachts intended for our charter fleet will increase our boat inventory and related operating costs; lack of sales into our charter fleet
may result in increased losses due to market adjustments of our yacht charter inventory; and our failure to generate a sufficient number of vacation charter
customers will require us to absorb all the costs of the monthly fees to the yacht owners as well as other operating costs.
Customers consider safety and reliability a primary concern in selecting a yacht charter provider. The yacht charter business may present a number of safety
risks including but not limited to; catastrophic disaster, adverse weather and marine conditions, mechanical failure and collision. if we are unable to maintain
acceptable records for safety and reliability, our ability to retain current customers and attract new customers may be adversely affected. additionally, any safety
issue encountered during a yacht charter may result in claims against us as well as negative publicity. These events could have a material adverse effect on the
competitive position and financial performance of both our yacht charter business and our core boat sales business.
The yacht charter business is also highly fragmented, consisting primarily of local operators and franchisees. Competition among charter operators is based
on location, the type and size of yachts offered, charter rates, destinations serviced, and attention to customer service. Yacht charters also face competition from
other travel and leisure options, including, but not limited to, cruises, hotels, resorts, theme parks, organized tours, land-based casino operators, and vacation
ownership properties. We therefore risk losing business not only to other charter operators, but also to vacation operators that provide such alternatives.
Our success depends, in part, on our ability to continue to make successful acquisitions and to integrate the operations of acquired dealers and each dealer we
acquire in the future.
Since March 1, 1998, we have acquired 24 recreational boat dealers, two boat brokerage operations, and two full-service yacht repair facilities. each
acquired dealer operated independently prior to its acquisition by us. Our success depends, in part, on our ability to continue to make successful acquisitions and to
integrate the operations of acquired dealers, including centralizing certain functions to achieve cost savings and pursuing programs and processes that promote
cooperation and the sharing of opportunities and resources among our dealerships. We may not be able to oversee the combined entity efficiently or to implement
effectively our growth and operating strategies. To the extent that we successfully pursue our acquisition strategy, our resulting growth will place significant
additional demands on our management and infrastructure. Our failure to pursue successfully our acquisition strategies or operate effectively the combined entity
could have a material adverse effect on our rate of growth and operating performance.
Unforeseen expenses, difficulties, and delays frequently encountered in connection with expansion through acquisitions could inhibit our growth and
negatively impact our profitability.
Our growth strategy of acquiring additional recreational boat dealers involves significant risks. This strategy entails reviewing and potentially reorganizing
acquired business operations, corporate infrastructure and systems, and financial controls. Unforeseen expenses, difficulties, and delays frequently encountered in
connection with rapid expansion through acquisitions could inhibit our growth and negatively impact our profitability. We may be unable to identify suitable
acquisition candidates or to complete the acquisitions of candidates that we identify. increased competition for acquisition candidates or increased asking prices by
acquisition candidates may increase purchase prices for acquisitions to levels beyond our financial capability or to levels that would not result in the returns
required by our acquisition criteria. acquisitions also may become more difficult or less attractive in the future as we acquire more of the most attractive
dealers. in addition, we may encounter difficulties in integrating the operations of acquired dealers with our own operations or managing acquired dealers
profitably without substantial costs, delays, or other operational or financial problems.
We may issue common or preferred stock and incur substantial indebtedness in making future acquisitions. The size, timing, and integration of any future
acquisitions may cause substantial fluctuations in operating results from quarter to quarter. Consequently, operating results for any quarter may not be indicative of
the results that may be achieved for any subsequent quarter or for a full fiscal year. These fluctuations could adversely affect the market price of our common
stock.
Our ability to continue to grow through the acquisition of additional dealers will depend upon various factors, including the following:
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the availability of suitable acquisition candidates at attractive purchase prices;
the ability to compete effectively for available acquisition opportunities;
the availability of borrowed funds or common stock with a sufficient market price to complete the acquisitions;
26
·
·
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the ability to obtain any requisite ma nufacturer or governmental approvals;
the ability to obtain approval of our lenders under our current credit agreement; and
the absence of one or more manufacturers attempting to impose unsatisfactory restrictions on us in connection with their approval of acquisitions.
as a part of our acquisition strategy, we frequently engage in discussions with various recreational boat dealers regarding their potential acquisition by
us. in connection with these discussions, we and each potential acquisition candidate exchange confidential operational and financial information, conduct due
diligence inquiries, and consider the structure, terms, and conditions of the potential acquisition. in certain cases, the prospective acquisition candidate agrees not
to discuss a potential acquisition with any other party for a specific period of time, grants us an option to purchase the prospective dealer for a designated price
during a specific time period, and agrees to take other actions designed to enhance the possibility of the acquisition, such as preparing audited financial information
and converting its accounting system to the system specified by us. Potential acquisition discussions frequently take place over a long period of time and involve
difficult business integration and other issues, including in some cases, management succession 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 may be required to obtain the consent of Brunswick and various other manufacturers prior to the acquisition of other dealers.
in determining whether to approve acquisitions, manufacturers may consider many factors, including our financial condition and ownership
structure. Manufacturers also may impose conditions on granting their approvals for acquisitions, including a limitation on the number of their dealers that we may
acquire. Our ability to meet manufacturers’ requirements for approving future acquisitions will have a direct bearing on our ability to complete acquisitions and
effect our growth strategy. There can be no assurance that a manufacturer will not terminate its dealer agreement, refuse to renew its dealer agreement, refuse to
approve future acquisitions, or take other action that could have a material adverse effect on our acquisition program.
We and the Sea Ray Division of brunswick have an agreement extending through august 31, 2018, with automatic annual one-year extensions at each
twelve month anniversary of the agreement, provided that our dealer agreements with the Sea Ray Division of brunswick are still then in effect. The agreement
provides a process for the acquisition of additional Sea Ray boat dealers that desire to be acquired by us. Under the agreement, acquisitions of Sea Ray dealers will
be mutually agreed upon by us and Sea Ray with reasonable efforts to be made to include a balance of Sea Ray dealers that have been successful and those that
have not been. The agreement provides that Sea Ray will not unreasonably withhold its consent to any proposed acquisition of a Sea Ray dealer by us, subject to
the conditions set forth in the agreement. among other things, the agreement requires us to provide Sea Ray with a business plan for each proposed acquisition,
including historical financial and five-year projected financial information regarding the acquisition candidate; marketing and advertising plans; service capabilities
and managerial and staff personnel; information regarding the ability of the candidate to achieve performance standards within designated periods; and information
regarding the success of our previous acquisitions of Sea Ray dealers. The agreement also contemplates Sea Ray reaching a good faith determination whether the
acquisition would be in its best interest based on our dedication and focus of resources on the Sea Ray brand and Sea Ray’s consideration of any adverse effects
that the approval would have on the resulting territory configuration and adjacent or other dealers sales and the absence of any violation of applicable laws or rights
granted by Sea Ray to others.
Our growth strategy also entails expanding our product lines and geographic scope by obtaining additional distribution rights from our existing and new
manufacturers. We may not be able to secure additional distribution rights or obtain suitable alternative sources of supply if we are unable to obtain such
distribution rights. The inability to expand our product lines and geographic scope by obtaining additional distribution rights could have a material adverse effect
on the growth and profitability of our business.
Our growth strategy may require us to secure significant additional capital, the amount of which will depend upon the size, timing, and structure of future
acquisitions and our working capital and general corporate needs.
if we finance future acquisitions in whole or in part through the issuance of common stock or securities convertible into or exercisable for common stock,
existing stockholders will experience dilution in the voting power of their common stock and earnings per share could be negatively impacted. The extent to which
we will be able and willing to use our common stock for acquisitions will depend on the market value of our common stock and the willingness of potential sellers
to accept our common stock as full or partial consideration. Our inability to use our common stock as consideration, to generate cash from operations, or to obtain
additional funding through debt or equity financings in order to pursue our acquisition program could materially limit our growth.
any borrowings made to finance future acquisitions or for operations could make us more vulnerable to a downturn in our operating results, a downturn in
economic conditions, or increases in interest rates on borrowings that are subject to interest rate fluctuations. if our cash flow from operations is insufficient to
meet our debt service requirements, we could be required to sell additional equity securities, refinance our obligations, or dispose of assets in order to meet our debt
service requirements. in addition,
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our credit arrangements contain financial covenants and other restrictions with which we must comply, including li mitations on the incurrence of additional
indebtedness. adequate financing may not be available if and when we need it or may not be available on terms acceptable to us. The failure to obtain sufficient
financing on favorable terms and conditions could h ave a material adverse effect on our growth prospects and our business, financial condition, and results of
operations.
Our internal growth and operating strategies of opening new locations and offering new products involve risk.
in addition to pursuing growth by acquiring boat dealers, we intend to continue to pursue a strategy of growth through opening new retail locations and
offering new products in our existing and new territories. accomplishing these goals for expansion will depend upon a number of factors, including the following:
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our ability to identify new markets in which we can obtain distribution rights to sell our existing or additional product lines;
our ability to lease or construct suitable facilities at a reasonable cost in existing or new markets;
our ability to hire, train, and retain qualified personnel;
the timely and effective integration of new retail locations into existing operations;
our ability to achieve adequate market penetration at favorable operating margins without the acquisition of existing dealers; and
our financial resources.
Our dealer agreements with brunswick require brunswick’s consent to open, close, or change retail locations that sell Sea Ray or boston Whaler products
as applicable, and other dealer agreements generally contain similar provisions. We may not be able to open and operate new retail locations or introduce new
product lines on a timely or profitable basis. Moreover, the costs associated with opening new retail locations or introducing new product lines may adversely
affect our profitability.
as a result of these growth strategies, we expect to continue to expend significant time and effort in opening and acquiring new retail locations and
introducing new products. Our systems, procedures, controls, and financial resources may not be adequate to support expanding operations. The inability to
manage our growth effectively could have a material adverse effect on our business, financial condition, and results of operations.
Our planned growth also will impose significant added responsibilities on members of senior management and require us to identify, recruit, and integrate
additional senior level managers. We may not be able to identify, hire, or train suitable additions to management.
Our business, as well as the entire recreational boating industry, is highly seasonal, with seasonality varying in different geographic markets.
Over the three-year period ended September 30, 2015, the average revenue for the quarterly periods ended December 31, March 31, June 30, and
September 30 represented approximately 18%, 24%, 32%, and 26%, respectively, of our average annual revenue. With the exception of Florida, we generally
realize significantly lower sales and higher levels of inventories and related short-term borrowings in the quarterly periods ending December 31 and March 31. The
onset of the public boat and recreation shows in January stimulates boat sales and allows us to reduce our inventory levels and related short-term borrowings
throughout the remainder of the fiscal year. Our business could become substantially more seasonal if we acquire dealers that operate in colder regions of the
United States.
Weather and environmental conditions may adversely impact our business.
Weather and environmental conditions may adversely impact our operating results. For example, drought conditions, reduced rainfall levels, excessive rain
and environmental conditions, such as the bP oil spill in the Gulf of Mexico, may force boating areas to close or render boating dangerous or inconvenient, thereby
curtailing customer demand for our products. While we traditionally maintain a full range of insurance coverage for any such events, there can be no assurance that
such insurance coverage is adequate to cover losses that we sustain as a result of such disasters. in addition, unseasonably cool weather and prolonged winter
conditions may lead to shorter selling seasons in certain locations. Many of our dealerships sell boats to customers for use on reservoirs, thereby subjecting our
business to the continued viability of these reservoirs for boating use. although our geographic diversity and any future geographic expansion should reduce the
overall impact on us of adverse weather and environmental conditions in any one market area, weather and environmental conditions will continue to represent
potential material adverse risks to us and our future operating performance.
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in addition, hurricanes and other storms could result in the disruption of our operations or damage to our bo at inventories and facilities as has been the case
when Florida and other markets have been affected by hurricanes. While we traditionally maintain property and casualty insurance coverage for damage caused by
hurricanes and other storms, there can be no assurance that such insurance coverage is adequate to cover losses that we may sustain as a result of hurricanes and
other storms such as damage from Hurricane Sandy. We maintain insurance for property damage and business interruption, subject to deductibl es.
We face intense competition.
We operate in a highly competitive environment. in addition to facing competition generally from recreation businesses seeking to attract consumers’
leisure time and discretionary spending dollars, the recreational boat industry itself is highly fragmented, resulting in intense competition for customers, quality
products, boat show space, and suitable retail locations. We rely to a certain extent on boat shows to generate sales. Our inability to participate in boat shows in
our existing or targeted markets could have a material adverse effect on our business, financial condition, and results of operations.
We compete primarily with single-location boat dealers and, with respect to sales of marine parts, accessories, and equipment, with national specialty
marine parts and accessories stores, catalog retailers, sporting goods stores, and mass merchants. Competition among boat dealers is based on the quality of
available products, the price and value of the products, and attention to customer service. There is significant competition both within markets we currently serve
and in new markets that we may enter. We compete in each of our markets with retailers of brands of boats and engines we do not sell in that market. in addition,
several of our competitors, especially those selling marine equipment and accessories, are large national or regional chains that have substantial financial,
marketing, and other resources. Private sales of used boats represent an additional source of competition.
Due to various matters, including environmental concerns, permitting and zoning requirements, and competition for waterfront real estate, some markets in
the United States have experienced an increased waiting list for marina and storage availability. in general, the markets in which we currently operate are not
experiencing any unusual difficulties. However, marine retail activity could be adversely effected in markets that do not have sufficient marine and storage
availability to satisfy demand.
We depend on income from financing, insurance, and extended service contracts.
a portion of our income results from referral fees derived from the placement or marketing of various finance and insurance, or F&i products, consisting of
customer financing, insurance products, and extended service contracts, the most significant component of which is the participation and other fees resulting from
our sale of customer financing contracts.
The availability of financing for our boat purchasers and the level of participation and other fees we receive in connection with such financing depend on the
particular agreement between us and the lender and the current rate environment. Lenders may impose terms in their boat financing arrangements with us that may
be unfavorable to us or our customers, resulting in reduced demand for our customer financing programs and lower participation and other fees. Laws or
regulations may be enacted nationally or locally which could result in fees from lenders being eliminated or reduced, materially impacting our operating results.
Customer financing became more difficult to secure during fiscal 2008, which continued in each subsequent fiscal year through fiscal 2011.
Changes, including the lengthening of manufacturer warranties, may reduce our ability to offer and sell extended service contracts which may have a
material adverse impact on our ability to sell F&i products.
The Dodd-Frank act established a new consumer financial protection agency with broad regulatory powers. although boat dealers are generally excluded,
the Dodd-Frank act could lead to additional, indirect regulation of boat dealers through its regulation of other financial institutions which provide such financing to
our customers.
The reduction of profit margins on sales of F&i products or the lack of demand for or the unavailability of these products could have a material adverse
effect on our operating margins.
We depend on key personnel.
Our success depends, in large part, upon the continuing efforts and abilities of our executive officers. although we have employment agreements with
certain of our executive officers, we cannot assure that these or other executive personnel will remain with us. expanding our operations may require us to add
additional executive personnel in the future. as a result of our decentralized operating strategy, we also rely on the management teams of our dealerships. in
addition, we likely will depend on the senior management of any significant businesses we acquire in the future. The loss of the services of one or more of these
key employees before we are able to attract and retain qualified replacement personnel could adversely affect our business.
29
The products we sell or service may expose us to potential liability for pers onal injury or property damage claims relating to the use of those products.
Manufacturers of the products we sell generally maintain product liability insurance. We also maintain third-party product liability insurance that we
believe to be adequate. We may experience claims that are not covered by or that are in excess of our insurance coverage. The institution of any significant claims
against us could subject us to damages, result in higher insurance costs, and harm our business reputation with potential customers.
Environmental and other regulatory issues may impact our operations.
Our operations are subject to extensive regulation, supervision, and licensing under various federal, state, and local statutes, ordinances, and regulations,
such as those relating to finance and insurance, consumer protection, consumer privacy, escheatment, anti-money laundering, environmental, emissions, health or
safety, and employment practices. With respect to employment practices, we are subject to various laws and regulations, including complex federal, state, and local
wage and hour and anti-discrimination laws. The failure to satisfy those and other regulatory requirements could have a material adverse effect on our business,
financial condition, and results of operations. in addition, failure to comply with U.S. trade sanctions, the U.S. Foreign Corrupt Practices act and other applicable
laws or regulations could result in the assessment of damages, the imposition of penalties, changes to our processes, or a cessation of our operations, as well as
damage to our image and reputation, all of which could have a material adverse effect on our business.
Various federal, state, and local regulatory agencies, including the Occupational Safety and Health administration, or OSHa, the United States
environmental Protection agency, or ePa, and similar federal and local agencies, have jurisdiction over the operation of our dealerships, repair facilities, and other
operations, with respect to matters such as consumer protection, workers’ safety, and laws regarding protection of the environment, including air, water, and
soil. The ePa promulgated emissions regulations for outboard marine engines that impose stricter emissions standards for two-cycle, gasoline outboard marine
engines. The majority of the outboard marine engines we sell are manufactured by Mercury Marine. Mercury Marine’s product line of low-emission engines,
including the OptiMax, Verado, and other four-stroke outboards, have achieved the ePa’s mandated 2006 emission levels. it is possible that environmental
regulatory bodies may impose higher emissions standards in the future for these and other marine engines. any increased costs of producing engines resulting from
current or potentially higher ePa standards in the future could be passed on to our company, or could result in the inability or potential unforeseen delays of our
manufacturers to comply with current and future ePa requirements, and these potential consequences could have a material adverse effect on our business.
Certain of our facilities own and operate underground storage tanks, or USTs, for the storage of various petroleum products. USTs are generally subject to
federal, state, and local laws and regulations that require testing and upgrading of USTs and remediation of contaminated soils and groundwater resulting from
leaking USTs. in addition, we may be subject to civil liability to third parties for remediation costs or other damages if leakage from our owned or operated USTs
migrates onto the property of others.
Our business involves the use, handling, storage, and contracting for recycling or disposal of hazardous or toxic substances or wastes, including
environmentally sensitive materials, such as motor oil, waste motor oil and filters, transmission fluid, antifreeze, freon, waste paint and lacquer thinner, batteries,
solvents, lubricants, degreasing agents, gasoline, and diesel fuels. accordingly, we are subject to regulation by federal, state, and local authorities establishing
investigation and health and environmental quality standards, and liability related thereto, and providing penalties for violations of those standards.
We also are subject to laws, ordinances, and regulations governing investigation and remediation of contamination at facilities we operate or to which we
send hazardous or toxic substances or wastes for treatment, recycling, or disposal. in particular, the Comprehensive environmental Response, Compensation and
Liability act, or CeRCLa or “Superfund,” imposes joint, strict, and several liability on:
·
·
·
owners or operators of facilities at, from, or to which a release of hazardous substances has occurred;
parties that generated hazardous substances that were released at such facilities; and
parties that transported or arranged for the transportation of hazardous substances to such facilities.
a majority of states have adopted Superfund statutes comparable to and, in some cases, more stringent than CeRCLa. if we were to be found to be a
responsible party under CeRCLa or a similar state statute, we could be held liable for all investigative and remedial costs associated with addressing such
contamination. in addition, claims alleging personal injury or property damage may be brought against us as a result of alleged exposure to hazardous substances
resulting from our operations. in addition, certain of our retail locations are located on waterways that are subject to federal or state laws regulating navigable
waters (including oil pollution prevention), fish and wildlife, and other matters.
30
Soil and groundwater contamination has been known to exist at certain properties owned or leased by us. We have also been required and may in the future
be required to remove aboveground and underground storage tanks containing hazardous s ubstances or wastes. as to certain of our properties, specific releases of
petroleum have been or are in the process of being remediated in accordance with state and federal guidelines. We are monitoring the soil and groundwater as
required by applicable state and federal guidelines. We also may have additional storage tank liability insurance and Superfund coverage where
applicable. environmental laws and regulations are complex and subject to frequent change. Compliance with amended, new, or more str ingent laws or
regulations, more strict interpretations of existing laws, or the future discovery of environmental conditions may require additional expenditures by us, and such
expenditures may be material.
Three of the properties we own were historically used as gasoline service stations. Remedial action with respect to prior historical site activities on these
properties has been completed in accordance with federal and state law. While we do not believe that these environmental issues will result in any material
liabilities to us, we cannot provide assurances that no such material liabilities will occur.
additionally, certain states have required or are considering requiring a license in order to operate a recreational boat. These regulations could discourage
potential buyers, thereby limiting future sales and adversely affecting our business, financial condition, and results of operations.
Furthermore, the Patient Protection and affordable Care act, which was signed into law on March 23, 2010, is expected to increase our annual employee
health care costs that we fund, and significantly increase our cost of compliance and compliance risk related to offering health care benefits.
Finally, new laws and regulations, particularly at the federal level, in other areas may be enacted, which could also materially adversely impact our
business. The labor policy of the current administration could lead to increased unionization efforts, which could lead to higher labor costs, disrupt our store
operations, and adversely affect our operating results.
The market price of our common stock could be subject to wide fluctuations as a result of many factors.
Factors that could affect the trading price of our common stock include the following:
·
·
·
·
·
·
·
·
·
·
·
·
·
variations in our operating results;
the thin trading volume and relatively small public float of our common stock;
our ability to continue to secure adequate levels of financing;
variations in same-store sales;
general economic, political, and market conditions;
changes in earnings estimates published by analysts;
the level and success of our acquisition program and new store openings;
the success of dealership integration;
relationships with manufacturers;
seasonality and weather conditions;
governmental policies and regulations;
the performance of the recreational boat industry in general; and
factors relating to suppliers and competitors.
in addition, market demand for small-capitalization stocks, and price and volume fluctuations in the stock market unrelated to our performance could result
in significant fluctuations in the market price of our common stock.
The performance of our common stock could adversely affect our ability to raise equity in the public markets and adversely affect our acquisition program.
31
The issuance of additional capital stock in the future, including shares that we may issue pursuant to stock-based grants, including stock option grants, and
future acquisitions, may result in dilution in the net tangible book value per share of our common stock.
Our board of directors has the legal power and authority to determine the terms of an offering of shares of our capital stock, or securities convertible into or
exchangeable for these shares, to the extent of our shares of authorized and unissued capital stock. The issuance of additional common stock in the future,
including shares that we may issue pursuant to stock-based grants, including stock option grants, and future acquisitions, may result in dilution in the net tangible
book value per share of our common stock.
A substantial number of shares are eligible for future sale.
as of September 30, 2015, there were 24,199,661 shares of our common stock outstanding. Substantially all of these shares are freely tradable without
restriction or further registration under the securities laws, unless held by an “affiliate” of our company, as that term is defined in Rule 144 under the securities
laws. Shares held by affiliates of our company, which generally include our directors, officers, and certain principal stockholders, are subject to the resale
limitations of Rule 144 described below. Outstanding shares of common stock issued in connection with the acquisition of any acquired dealers are available for
resale beginning six months after the respective dates of the acquisitions, subject to compliance with the provisions of Rule 144 under the securities laws.
Through September 30, 2015, we have issued options to purchase approximately 5,279,478 shares of common stock and 669,999 restricted stock awards
under our incentive stock plans, and we issued 702,689 shares of common stock under our employee stock purchase plan. We have filed a registration statement
under the securities laws to register the common stock to be issued under these plans. as a result, shares issued under these plans will be freely tradable without
restriction unless acquired by affiliates of our company, who will be subject to the volume and other limitations of Rule 144.
We may issue additional shares of common stock or preferred stock under the securities laws as part of any acquisition we may complete in the future. if
issued pursuant to an effective registration statement, these shares generally will be freely tradable after their issuance by persons not affiliated with us or the
acquired companies.
We do not pay cash dividends.
We have never paid cash dividends on our common stock and we have no current intention to do so for the foreseeable future.
Certain provisions of our restated articles of incorporation and bylaws and Florida law may make a change in the control of our company more difficult to
complete, even if a change in control were in the stockholders’ interest or might result in a premium over the market price for the shares held by the
stockholders.
Our articles of incorporation and bylaws divide our board of directors into three classes of directors elected for staggered three-year terms. The articles of
incorporation also provides that the board of directors may authorize the issuance of one or more series of preferred stock from time to time and may determine the
rights, preferences, privileges, and restrictions and fix the number of shares of any such series of preferred stock, without any vote or action by our
stockholders. The board of directors may authorize the issuance of preferred stock with voting or conversion rights that could adversely affect the voting power or
other rights of the holders of common stock. The articles of incorporation also allows our board of directors to fix the number of directors and to fill vacancies on
the board of directors.
Our articles of incorporation contain provisions that adopt substantially all of the protections afforded under Florida's affiliated transactions statute (which
provides that, with certain exceptions, a transaction with an "interested shareholder" must generally be approved by the affirmative vote of the holders of two-thirds
of the voting shares (other than the shares owned by the interested shareholder)), except that our articles of incorporation define an "interested shareholder" as any
person who holds 15% or more of our outstanding stock (rather than 10% as set forth in the statute). Certain of our dealer agreements could also make it difficult
for a third party to attempt to acquire a significant ownership position in our company.
32
Our sales of yachts produced by the Azimut-Benetti Group in Italy , yachts produced by Galeon in Poland, and motor and sailing yachts produced by Sino
Eagle in China expose us to international political, economic, and other risks.
Our sales of yachts produced by the azimut-benetti Group in italy, yachts produced by Galeon in Poland, and yachts for our yacht charter fleet produced by
Sino eagle in China expose us to international political, economic, and other risks. Protectionist trade legislation in the United States, the european Union, italy,
Poland, or China, such as a change in current tariff structures, export or import compliance laws, or other trade policies could adversely affect our ability to import
yachts from these foreign suppliers under economically favorable terms and conditions. Our foreign purchase of yachts creates a number of logistical and
communications challenges. The economic, political, and other risks we face resulting from these foreign purchases include the following:
·
·
·
·
·
·
·
·
·
·
·
·
·
compliance with U.S. and local laws and regulatory requirements as well as changes in those laws and requirements;
transportation delays or interruptions and other effects of less developed infrastructures;
limitations on imports and exports;
foreign exchange rate fluctuations;
imposition of restrictions on currency conversion or the transfer of funds;
tariffs and duties and other trade barrier restrictions;
maintenance of quality standards;
unexpected changes in regulatory requirements;
differing labor regulations;
potentially adverse tax consequences;
possible employee turnover or labor unrest;
the burdens and costs of compliance with a variety of foreign laws; and
political or economic instability.
Increased cybersecurity requirements, vulnerabilities, threats and more sophisticated and targeted computer crime could pose a risk to our systems, networks,
and data.
Our business is dependent upon the efficient operation of our information systems. The systems facilitate the interchange of information and enhances
cross-selling opportunities throughout our company. The systems integrate each level of operations on a company-wide basis, including but not limited to
purchasing, inventory, receivables, payables, financial reporting, budgeting, sales management, as well as to prepare our consolidated financial and operating data.
The failure of our information systems to perform as designed or the failure to maintain and enhance or protect the integrity of these systems could disrupt our
business operations, impact sales and the results of operations, expose us to customer or third-party claims, or result in adverse publicity.
increased global cybersecurity vulnerabilities, threats and more sophisticated and targeted cyber-related attacks pose a risk to the security of our and our
customers’, suppliers’ and third-party service providers’ products, systems and networks and the confidentiality, availability and integrity of our data. While we
attempt to mitigate these risks by employing a number of measures, including employee training, systems, monitoring and testing, and maintenance of protective
systems and contingency plans, we remain potentially vulnerable to additional known or unknown threats. We may also have access to sensitive, confidential or
personal data or information that is subject to privacy, security laws, and regulations. Despite our efforts to protect sensitive, confidential or personal data or
information, we may be vulnerable to security breaches, theft, misplaced or lost data, programming errors, employee errors and/or malfeasance that could
potentially lead to the compromising of sensitive, confidential or personal data or information, improper use of our systems, unauthorized access, use, disclosure,
modification or destruction of information, and operational disruptions. in addition, a cyber-related attack could result in other negative consequences, including
damage to our reputation or competitiveness, remediation or increased protection costs, litigation or regulatory action.
Item 1B.
Unresolved Staff Comments
Not applicable.
33
Item 2.
P roperties
We lease our corporate offices in Clearwater, Florida. We also lease 30 of our retail locations under leases, many of which contain multi-year renewal
options and some of which grant us a first right of refusal to purchase the property at fair value. in most cases, we pay a fixed rent at negotiated rates. in
substantially all of the leased locations, we are responsible for taxes, utilities, insurance, and routine repairs and maintenance. We own the property associated with
28 other retail locations we operate and one joint venture as noted below. additionally, we own four retail locations that are currently closed as noted below. a
store is considered one or more retail locations that are adjacent or operate as one entity.
34
The following table reflects the status, approximate size, and facilities of the various retail locati ons we operate as of the date of this report.
Location Type
Square
Footage(1)
Facilities at Property
Operated
Since(2)
Location
Alabama
Gulf Shores
California
San Diego
Connecticut
Norwalk
Westbrook
Florida
Cape Haze
Clearwater
Cocoa
Dania
Daytona beach
Fort Lauderdale
Fort Myers
Jacksonville
Key Largo
Miami
Miami
Naples
Orlando
Panama City
Pensacola
Pompano beach
Pompano beach
Sarasota
St. Petersburg(3)
Stuart
Tampa(4)
Venice
Georgia
buford (atlanta)
Cumming (atlanta)
Maryland
baltimore
Joppa
Kent island
Company owned
4,000
Retail and service
Third-party lease
700
Retail only
Third-party lease
Third-party lease
Company owned
Company owned
Company owned
Company owned
Third-party lease
Third-party lease
Company owned
Company owned
Third-party lease
Company owned
Company owned
Company owned
Third-party lease
Third-party lease
Third-party lease
Company owned
Company owned
Third-party lease
Joint venture
Company owned
Company owned
Company owned
Company owned
Third-party lease
Third-party lease
Company owned
Third-party lease
9,000
4,200
Retail and service; 56 wet slips
Retail and service
18,000
42,000
15,000
32,000
16,000
2,400
60,000
15,000
8,900
7,200
5,000
19,600
18,389
10,500
24,300
23,000
5,400
26,500
15,000
29,100
13,100
62,000
Retail, 8 wet slips
Retail and service; 20 wet slips
Retail and service
Repair and service; 16 wet slips
Retail and service
Retail only
Retail, service, and storage; 64
wet slips
Retail and service
Retail and service; 6 wet slips
Retail and service; 15 wet slips
Service only; 11 wet slips
Retail and service; 14 wet slips
Retail and service
Retail only; 8 wet slips
Retail and service
Retail and service; 16 wet slips
Retail and service; 24 wet slips
Retail, service, and storage; 15
wet slips
Yacht service, 20 wet slips
Retail and service; 66 wet slips
Retail and service
Retail, service, and storage; 90
wet slips
13,500
13,000
Retail and service
Retail and service; 50 wet slips
7,600
28,400
8,300
Retail and service; 17 wet slips
Retail, service, and storage; 294
wet slips
Retail only
35
1998
2011
1994
1998
—
1973
1968
1991
2007
1977
1983
2004
2002
1980
2005
1997
1984
2011
1974
1990
2005
1972
2006
2002
Waterfront
—
San Diego bay
Norwalk Harbor
Westbrook Harbor
intracoastal Waterway
Tampa bay
—
Port everglades
—
intracoastal Waterway
Caloosahatchee River
—
Card Sound
Little River
Little River
Naples bay
—
Saint andrews bay
—
intracoastal Waterway
intracoastal Waterway
Sarasota bay
boca Ciega bay
intracoastal Waterway
—
—
1972
2001
1981
2005
1966
2013
intracoastal Waterway
—
Lake Lanier
baltimore inner Harbor
Gunpowder River
Kent Narrows
White Marsh(4)
Minnesota
bayport
excelsior
Rogers
Missouri
branson
Lake Ozark
Laurie(4)
Osage beach
Springfield(4)
New Jersey
brant beach
brick
Lake Hopatcong
Ship bottom
Somers Point
New York
Copiague
Huntington
Lindenhurst
Manhattan
North Carolina
Southport
Wrightsville beach
Ohio
Port Clinton
Oklahoma
afton
Rhode Island
Newport
Warwick
Texas
Lake Conroe
Lewisville (Dallas)
Seabrook
British Virgin
Islands
Tortola
Company owned
19,800
Retail and service
—
—
Third-party lease
450
Retail only; 10 wet slips
Third-party lease
Company owned
Third-party lease
Company owned
Company owned
Company owned
Company owned
Third-party lease
Company owned
Company owned
Third-party lease
Third-party lease
2,500
70,000
Retail only; 14 wet slips
Retail, service, and storage
1,500
60,300
700
2,000
12,200
Retail only; 6 wet slips
Retail, service, and storage; 300
wet slips
Retail and service
Retail and service
Retail and service
Retail, service, and storage; 36
wet slips
Retail, service, and storage; 225
wet slips
Retail and service; 80 wet slips
Retail and service
Retail, service, and storage; 33
wet slips
3,800
20,000
4,600
19,300
31,000
Third-party lease
15,000
Retail only
Third-party lease
Third-party lease
Third-party lease
Third-party lease
Third-party lease
Company owned
1,200
14,600
1,200
Retail and service
Retail, marina, service, and
storage; 370 wet slips
Retail only; 75 wet slips
1,600
34,500
Retail only
Retail, service, and storage
80,000
Retail, service and storage; 8 wet
slips
1996
2013
1991
2000
1987
—
—
—
1965
1977
1998
1972
1987
1993
1995
1968
1996
2008
1996
1997
St Croix River
Lake Minnetonka
—
Table Rock Lake
Lake of the Ozarks
—
—
—
barnegat bay
Manasquan River
Lake Hopatcong
—
Little egg Harbor bay
—
Huntington Harbor and Long island
Sound
Neguntatogue Creek to Great South
bay
Hudson River
Cape Fear River
Masonboro inlet
Lake erie
Third-party lease
3,500
Retail and service; 23 wet slips
2003
Grand Lake
Third-party lease
Third-party lease
Third-party lease
Company owned
Company owned
700
4,400
Retail only
Retail and service
5,000
22,000
32,000
Retail only; 4 wet slips
Retail and service
Retail and service; 30 wet slips
2011
1998
2015
2002
2002
Newport Harbor
Greenwich bay
Lake Conroe
—
Clear Lake
Third-party lease
1,050
Vacation Charters; 12 wet slips
2011
Maya Cove
(1) Square footage is approximate and does not include outside sales space or dock or marina facilities.
(2) Operated since date is the date the facility was opened by us or opened prior to its acquisition by us.
(3) Joint venture entered into with brunswick to acquire marina and service facility.
(4) Owned location that is currently closed.
36
Item 3.
Legal Proceedings
We are party to various legal actions arising in the ordinary course of business. While it is not feasible to determine the actual outcome of these actions as
of September 30, 2015, we do not believe that these matters will have a material adverse effect on our consolidated financial condition, results of operations, or
cash flows.
Item 4.
Mine Safety Disclosures
Not applicable.
Item 5.
Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Market Information, Holders
Our common stock is listed on the New York Stock exchange under the symbol HZO. The following table sets forth high and low sale prices of the
common stock for each calendar quarter indicated as reported on the New York Stock exchange.
PART II
2013
First quarter
Second quarter
Third quarter
Fourth quarter
2014
First quarter
Second quarter
Third quarter
Fourth quarter
2015
First quarter
Second quarter
Third quarter
Fourth quarter (through December 1, 2015)
High
Low
$
$
$
$
$
$
$
$
$
$
$
$
14.18 $
13.72 $
13.04 $
16.95 $
17.06 $
16.90 $
19.37 $
20.36 $
28.69 $
27.33 $
24.34 $
19.28 $
8.60
10.85
10.17
12.01
13.33
14.47
15.20
15.63
18.81
20.58
13.86
13.93
On December 1, 2015, the closing sale price of our common stock was $18.21 per share. On December 1, 2015, there were approximately 100 record
holders and approximately 5,100 beneficial owners of our common stock.
Dividends
We have never declared or paid cash dividends on our common stock. We currently plan to retain any earnings to finance the growth of our business rather
than to pay cash dividends. Payments of any cash dividends in the future will depend on our financial condition, results of operations, and capital requirements as
well as other factors deemed relevant by our board of directors.
37
Purchases of Equity Securities by the Issuer
The following table presents information with respect to our repurchases of our common stock during the three months ended September 30, 2015.
Period
July 1, 2015 to July 31, 2015
august 1, 2015 to august 31, 2015
September 1, 2015 to September 30, 2015
Total
Total
Number
of Shares
Purchased (1)
Average
Price Paid
per Share
Total Number
of Shares
Purchased
as Part of
Publicly
Announced
Plans or
Programs
Maximum
Number of
Shares
that may
be Purchased
Under the
Plans or
Programs
288,942 $
132,638 $
65,853 $
487,433 $
18.43
16.94
14.69
17.52
288,942
132,638
65,853
487,433
626,058
493,420
427,567
427,567
(1) The purchases were made pursuant to the share repurchase program announced by the Company on april 27, 2015. Under the terms of the program, the
Company is authorized to purchase up to 1.0 million shares of its common stock until March 31, 2017.
38
Performance Graph
The following line graph compares cumulative total stockholder returns for the five years ended September 30, 2015 for (i) our common stock, (ii) the
Russell 2000 index, and (iii) the Nasdaq Retail Trade index. The graph assumes an investment of $100 on September 30, 2010. The calculations of cumulative
stockholder return on the Russell 2000 index and the Nasdaq Retail Trade index include reinvestment of dividends. The calculation of cumulative stockholder
return on our common stock does not include reinvestment of dividends because we did not pay any dividends during the measurement period. The historical
performance shown is not necessarily indicative of future performance.
The performance graph above shall not be deemed “filed” for purposes of Section 18 of the Securities exchange act of 1934, as amended, or exchange act,
or otherwise subject to the liability of that section. The performance graph above will not be deemed incorporated by reference into any filing of our company
under the exchange act or the Securities act of 1933, as amended.
Item 6.
Selected Financial Data
The following table contains certain financial and operating data and is qualified by the more detailed consolidated financial statements and notes thereto
included elsewhere in this report. The balance sheet and statement of operations data were derived from the consolidated financial statements and notes thereto that
have been audited by ernst & Young LLP and KPMG LLP, respectively, for the applicable years when each served as our independent registered certified public
accounting firm. The financial data shown
39
below should be read in conjunction with the consolidated financial statements and the related notes thereto and "Management's Discussion and analysi s of
Financial Condition and Results of Operations" included elsewhere in this report.
Statement of Operations Data:
Revenue
Cost of sales
Gross profit
Selling, general, and administrative expenses
(Loss) income from operations
interest expense, net
(Loss) income before income tax benefit (provision)
income tax benefit (provision)
Net (loss) income
Net (loss) income per share:
Diluted
Weighted average number of shares:
Diluted
Other Data (as of year-end):
Number of retail locations (1)
Sales per store (2) (4)
Same-store sales growth (3) (4)
Balance Sheet Data:
Working capital
Total assets
Goodwill
Total stockholders' equity
2011
Fiscal Year Ended September 30,
2013
(Amounts in thousands except share, per share, and retail location data)
2012
2014
$
480,894
361,400
119,494
127,896
(8,402)
3,488
(11,890)
367
(11,523) $
524,456
391,173
133,283
127,913
5,370
4,447
923
176
1,099
$
$
584,497
433,644
150,853
132,505
18,348
4,218
14,130
894
15,024
$
$
624,692
462,872
161,820
146,433
15,387
4,024
11,363
(91)
$
11,272
$
2015
751,370
566,603
184,767
159,435
25,332
4,454
20,878
27,414
48,292
(0.52) $
0.05
$
0.63
$
0.46
$
1.92
$
$
$
22,375,271
22,335,918
24,003,728
24,655,262
25,102,289
$
54
9,913
$
8%
53
10,646
$
11%
54
12,757
$
11%
54
12,658
$
6%
53
15,320
22%
2011
2012
September 30,
2013
2014
2015
$
95,536 $
363,129
—
195,000
101,745 $
365,121
452
200,944
116,439 $
381,902
802
221,812
126,126 $
402,681
802
239,295
161,668
467,622
802
283,645
(1)
(2)
(3)
(4)
includes only those retail locations open at period end.
includes only those stores open for the entire preceding 12-month period.
New and acquired stores are included in the comparable base at the end of the store's thirteenth month of operations.
a store is one or more retail locations that are adjacent or operate as one entity. Sales per store and same-store sales growth is intended only as supplemental
information and is not a substitute for revenue or net income presented in accordance with generally accepted accounting principles.
40
Item 7.
Management's Discussion and Analysis of Financial Condition and Results of Operations
The following should be read in conjunction with Part i, including the matters set forth in the “Risk Factors” section of this report, and our Consolidated
Financial Statements and notes thereto included elsewhere in this report.
Overview
We are the largest recreational boat retailer in the United States with fiscal 2015 revenue in excess of $750 million. Through our current 53 retail locations
in 15 states, we sell new and used recreational boats and related marine products, including engines, trailers, parts, and accessories. We also arrange related boat
financing, insurance, and extended service contracts; provide boat repair and maintenance services; offer yacht and boat brokerage sales; and, where available, offer
slip and storage accommodations, as well as the charter of power and sailing yachts in the british Virgin islands.
MarineMax was incorporated in January 1998 (and reincorporated in Florida in March 2015). We commenced operations with the acquisition of five
independent recreational boat dealers on March 1, 1998. Since the initial acquisitions in March 1998, we have acquired 24 recreational boat dealers, two boat
brokerage operations, and two full-service yacht repair facilities. 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 a relatively
small acquisition in each of the fiscal years ended September 30, 2013 and 2014, and none in the fiscal year ended September 30, 2015.
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 51%, 52%, and 53% of our
revenue during fiscal 2013, 2014, and 2015, respectively, can have a major impact on our operations. Local influences, such as corporate downsizing, military base
closings, and inclement weather such as Hurricane Sandy, environmental conditions, and specific events, such as the bP oil spill in the Gulf of Mexico, also could
adversely affect, and in certain instances have adversely affected, our operations in certain markets.
in an economic downturn, consumer discretionary spending levels generally decline, at times resulting in disproportionately large reductions in the sale of
luxury goods. Consumer spending on luxury goods also may decline as a result of lower consumer confidence levels, even if prevailing economic conditions are
favorable. as a result, an economic downturn could impact us more than certain of our competitors due to our strategic focus on a higher end of our market.
although we have expanded our operations during periods of stagnant or modestly declining industry trends, the cyclical nature of the recreational boating industry
or the lack of industry growth may adversely affect our business, financial condition, and results of operations. any period of adverse economic conditions or low
consumer confidence has a negative effect on our business.
Lower consumer spending resulting from a downturn in the housing market and other economic factors adversely affected our business in fiscal 2007, and
continued weakness in consumer spending and depressed economic conditions had a substantial negative effect on our business and industry for several years after
fiscal 2007. These conditions caused us to substantially reduce our acquisition program, delay new store openings, reduce our inventory purchases, engage in
inventory reduction efforts, close a number of our retail locations, reduce our headcount, and amend and replace our credit facility. acquisitions and new store
openings remain important strategies to our company, and we plan to accelerate our growth through these strategies as economic conditions continue to improve.
However, we cannot predict the length of unfavorable economic or industry conditions or the extent to which they will continue to adversely affect our operating
results nor can we predict the effectiveness of the measures we have taken to address this environment.
although economic conditions have adversely affected our operating results, 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 have yielded, and will yield in the future, an increase in revenue. as general economic
trends continue to improve, we expect our core strengths and retailing strategies will position us to capitalize on growth opportunities as they occur and will allow
us to emerge from this challenging economic environment with greater earnings potential.
41
App lication of Critical Accounting Policies
We have identified the policies below as critical to our business operations and the understanding of our results of operations. The impact and risks related
to these policies on our business operations is discussed throughout Management's Discussion and analysis of Financial Condition and Results of Operations when
such policies affect our reported and expected financial results.
in the ordinary course of business, we make a number of estimates and assumptions relating to the reporting of results of operations and financial condition
in the preparation of our financial statements in conformity with accounting principles generally accepted in the United States. We base our estimates on historical
experiences and on various other assumptions that we believe are reasonable under the circumstances. The results form the basis for making judgments about the
carrying values of assets and liabilities that are not readily apparent from other sources. actual results could differ significantly from those estimates under different
assumptions and conditions. We believe that the following discussion addresses our most critical accounting policies, which are those that are most important to the
portrayal of our financial condition and results of operations and require our most difficult, subjective, and complex judgments, often as a result of the need to make
estimates about the effect of matters that are inherently uncertain.
Revenue Recognition
We recognize revenue from boat, motor, and trailer sales and parts and service operations at the time the boat, motor, trailer, or part is delivered to or
accepted by the customer or the service is completed. We recognize deferred revenue from service operations and slip and storage services on a straight-line basis
over the term of the contract or when service is completed. We recognize commissions earned from a brokerage sale at the time the related brokerage transaction
closes. We recognize commissions earned by us for placing notes with financial institutions in connection with customer boat financing when we recognize the
related boat sales. We recognize marketing fees earned on credit, life, accident, disability, gap, and hull insurance products sold by third-party insurance companies
at the later of customer acceptance of the insurance product as evidenced by contract execution or when the related boat sale is recognized. We also recognize
commissions earned on extended warranty service contracts sold on behalf of third-party insurance companies at the later of customer acceptance of the service
contract terms as evidenced by contract execution or recognition of the related boat sale.
Certain finance and extended warranty commissions and marketing fees on insurance products may be charged back if a customer terminates or defaults on
the underlying contract within a specified period of time. based upon our experience of terminations and defaults, we maintain a chargeback allowance that was not
material to our financial statements taken as a whole as of September 30, 2015. Should results differ materially from our historical experiences, we would need to
modify our estimate of future chargebacks, which could have a material adverse effect on our operating margins. We do not believe there is a reasonable likelihood
that there will be a change in the future estimates or assumptions we use to calculate our estimate of future chargebacks which would result in a material effect on
our operating results.
Vendor Consideration Received
We account for consideration received from our vendors in accordance with FaSb accounting Standards Codification 605-50, “Revenue Recognition -
Customer Payments and incentives” (“aSC 605-50”). aSC 605-50 requires us to classify interest assistance received from manufacturers as a reduction of
inventory cost and related cost of sales as opposed to netting the assistance against our interest expense incurred with our lenders. Pursuant to aSC 605-50,
amounts received by us under our co-op assistance programs from our manufacturers are netted against related advertising expenses. The consideration received
from our vendors contains uncertainties because the calculation requires management to make assumptions and to apply judgment regarding a number of factors,
including our ability to collect amounts due from vendors and the ability to meet certain criteria stipulated by our vendors. We do not believe there is a reasonable
likelihood that there will be a change in the future estimates or assumptions we use to calculate our vendor considerations which would result in a material effect on
our operating results.
42
Inventories
inventory costs consist of the amount paid to acquire inventory, net of vendor consideration and purchase discounts, the cost of equipment added,
reconditioning costs, and transportation costs relating to acquiring inventory for sale. We state new and used boat, motor, and trailer inventories at the lower of
cost, determined on a specific-identification basis, or market. We state parts and accessories at the lower of cost, determined on an average cost basis, or market.
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
market valuation allowance. Our lower of cost or market valuation allowance contains uncertainties because the calculation requires management to make
assumptions and to apply judgment regarding the amount at which the inventory will ultimately be sold which considers forecasted market trends, model changes,
and new product introductions. We do not believe there is a reasonable likelihood that there will be a change in the future estimates or assumptions we use to
calculate our lower of cost or market valuation allowance which would result in a material effect on our operating results. as of September 30, 2014 and September
30, 2015, our lower of cost or market valuation allowance for new and used boat, motor, and trailer inventories was $2.2 million and $1.8 million, respectively. if
events occur and market conditions change, causing the fair value to fall below carrying value, the lower of cost or market valuation allowance could increase.
Goodwill
We account for goodwill in accordance with FaSb accounting Standards Codification 350, “intangibles - Goodwill and Other” (“aSC 350”), which
provides that the excess of cost over net assets of businesses acquired is recorded as goodwill. The acquisitions of bassett Marine, LLC and Parker boat Company
resulted in goodwill of $802,000. in accordance with aSC 350, we review goodwill for impairment at least annually and whenever events or changes in
circumstances indicate that the carrying value may not be recoverable. Our annual impairment test is performed during the fourth fiscal quarter. if the carrying
amount of goodwill exceeds its fair value we would recognize an impairment loss in accordance with aSC 350. as of September 30, 2015, and based upon our
most recent analysis, we determined through our qualitative assessment that it is not “more likely than not” that the fair values of our reporting units are less than
their carrying values. as a result, we were not required to perform the two-step goodwill impairment test. The qualitative assessment requires us to make judgments
and assumptions regarding macroeconomic and industry conditions, our financial performance, and other factors. We do not believe there is a reasonable likelihood
that there will be a change in the judgments and assumptions used in our qualitative assessment which would result in a material effect on our operating results.
Impairment of Long-Lived Assets
FaSb accounting Standards Codification 360-10-40, “Property, Plant, and equipment - impairment or Disposal of Long-Lived assets” (“aSC 360-10-
40”), requires that long-lived assets, such as property and equipment and purchased intangibles subject to amortization, be reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of the asset is measured by comparison of
its carrying amount to undiscounted future net cash flows the asset is expected to generate. if such assets are considered to be impaired, the impairment to be
recognized is measured as the amount by which the carrying amount of the asset exceeds its fair market value. estimates of expected future cash flows represent
our best estimate based on currently available information and reasonable and supportable assumptions. Our impairment loss calculations contain uncertainties
because they require us to make assumptions and to apply judgment in order to estimate expected future cash flows. any impairment recognized in accordance with
aSC 360-10-40 is permanent and may not be restored. based upon our most recent analysis, we believe no impairment of long-lived assets existed as of September
30, 2015. We do not believe there is a reasonable likelihood that there will be a change in the future estimates or assumptions used to test for recoverability which
would result in a material effect on our operating results.
Stock-Based Compensation
We account for our stock-based compensation plans following the provisions of FaSb accounting Standards Codification 718, “Compensation — Stock
Compensation” (“aSC 718”). in accordance with aSC 718, we use the black-Scholes valuation model for valuing all stock-based compensation and shares
purchased under our employee Stock Purchase Plan. We measure compensation for restricted stock awards and restricted stock units at fair value on the grant date
based on the number of shares expected to vest and the quoted market price of our common stock. For restricted stock units with market conditions, we utilize a
Monte Carlo simulation embedded in a lattice model to determine the fair value. We recognize compensation cost for all awards in operations, net of estimated
forfeitures, on a straight-line basis over the requisite service period for each separately vesting portion of the award. Our valuation models and generally accepted
valuation techniques require us to make assumptions and to apply judgment to determine the fair value of our awards. These assumptions and judgments include
estimating the volatility of our stock price, expected dividend yield, employee turnover rates and employee stock option exercise behaviors. We do not believe
there is a reasonable likelihood that there will be a change in the future estimates or assumptions we use to calculate our stock-based compensation which would
result in a material effect on our operating results.
43
Income Taxes
We account for income taxes in accordance with FaSb accounting Standards Codification 740, “income Taxes” (“aSC 740”). Under aSC 740, we
recognize deferred tax assets and liabilities for the future tax consequences attributable to temporary differences between the financial statement carrying amounts
of existing assets and liabilities and their respective tax bases. We measure deferred tax assets and liabilities using enacted tax rates expected to apply to taxable
income in the years in which we expect those temporary differences to be recovered or settled. We record valuation allowances to reduce our deferred tax assets to
the amount expected to be realized by considering all available positive and negative evidence.
Pursuant to aSC 740, we must consider all positive and negative evidence regarding the realization of deferred tax assets. aSC 740 provides for four
possible sources of taxable income to realize deferred tax assets: 1) taxable income in prior carryback years, 2) reversals of existing deferred tax liabilities, 3) tax
planning strategies and 4) projected future taxable income. as of September 30, 2015, we have no available taxable income in prior carryback years, limited
reversals of existing deferred tax liabilities or prudent and feasible tax planning strategies. Therefore, the recoverability of our deferred tax assets is dependent
upon projected future taxable income.
Since the fourth quarter of 2008, the Company has maintained a full valuation allowance against its deferred tax assets, having determined it was more
likely than not that the deferred tax assets would not be realized. The determination of releasing valuation allowances against deferred tax assets is made, in part,
pursuant to our assessment as to whether it is more likely than not that we will generate sufficient future taxable income against which benefits of the deferred tax
assets may or may not be realized. Significant judgment is required in making estimates regarding our ability to generate income in future periods.
in the fourth quarter of 2015, we reached the conclusion that it was appropriate to release our valuation allowance against the majority of our deferred tax
assets due to the sustained positive operating performance of our operations throughout the entire fiscal year and the projection of future taxable income.
additionally, we maintained a cumulative three year income position throughout fiscal year 2015, reached six consecutive quarters of positive pre-tax operating
earnings, and experienced a continued recovery in industry and general economic conditions, all of which were positive factors that overcame prior negative
evidence. We also considered forecasts of future operating results and utilization of net operating losses and tax credits prior to their expiration. as a result, we
recorded a $27.5 million net reversal of our deferred tax asset valuation allowance in the fourth quarter of 2015 after determining it was more likely than not that
certain deferred tax assets would be realized.
The application of income tax law is inherently complex. Laws and regulations in this area are voluminous and are often ambiguous. Under aSC 740, the
impact of uncertain tax positions taken or expected to be taken on an income tax return must be recognized in the financial statements at the largest amount that is
more likely than not to be sustained upon audit by the relevant taxing authority. an uncertain income tax position will not be recognized in the financial statements
unless it is more likely than not of being sustained. as such, we are required to make subjective assumptions and judgments regarding our effective tax rate and our
income tax exposure. Our effective income tax rate is affected by changes in tax law in the jurisdictions in which we currently operate, tax jurisdictions of new
retail locations, our earnings, and the results of tax audits. We believe that the judgments and estimates discussed herein are reasonable.
as we finalized the Consolidated balance Sheets as of September 30, 2015, we determined that the current deferred tax assets should be increased by $7.1
million with a corresponding decrease of $7.1 million to the non-current deferred tax assets as compared with the unaudited Consolidated balance Sheets included
in the earnings release issued on November 3, 2015. This revision had no impact on the Consolidated Statements of Operations, Consolidated Statements of
Stockholders' equity or Consolidated Statement of Cash Flows.
For a more comprehensive list of our accounting policies, including those which involve varying degrees of judgment, see Note 2 — “Significant
accounting Policies” of Notes to Consolidated Financial Statements.
Recent Accounting Pronouncements
in May 2014, the FaSb issued accounting Standards Update No. 2014-09, “Revenue from Contracts with Customers (Topic 606)” (aSU 2014-9), a
converged standard on revenue recognition. The new pronouncement requires revenue recognition to depict the transfer of promised goods or services to customers
in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance also specifies the
accounting for some costs to obtain or fulfill a contract with a customer, as well as enhanced disclosure requirements. aSU 2014-9 is effective for annual reporting
periods beginning after December 15, 2017, including interim reporting periods within that reporting period. early adoption is not permitted. We currently do not
believe the adoption of this standard will have a material impact on our consolidated financial statements.
44
Results of Operations
The following table sets forth certain financial data as a percentage of revenue for the periods indicated:
Revenue
Cost of sales
Gross profit
Selling, general, and administrative expenses
income from operations
interest expense
income before income taxes
income tax benefit (provision)
Net income
2013
$ 584,497
433,644
150,853
132,505
18,348
4,218
14,130
894
15,024
$
Fiscal Year Ended September 30,
2014
(Amounts in thousands)
624,692
462,872
161,820
146,433
15,387
4,024
11,363
(91)
11,272
100.0% $
74.1%
25.9%
23.4%
2.5%
0.6%
1.9%
0.0%
1.9% $
100.0% $
74.2%
25.8%
22.7%
3.1%
0.7%
2.4%
0.2%
2.6% $
2015
751,370
566,603
184,767
159,435
25,332
4,454
20,878
27,414
48,292
100.0%
75.4%
24.6%
21.2%
3.4%
0.6%
2.8%
3.6%
6.4%
Fiscal Year Ended September 30, 2015 Compared with Fiscal Year Ended September 30, 2014
Revenue . Revenue increased $126.7 million, or 20.3%, to $751.4 million for the fiscal year ended September 30, 2015 from $624.7 million for the fiscal
year ended September 30, 2014. Of this increase, $133.4 million was attributable to a 22% increase in comparable-store sales, which was partially offset by an
approximate $6.7 million net decrease related to stores opened and closed that were not eligible for inclusion in the comparable-store base. The increase in our
comparable-store sales was due to incremental increases in new and used boat sales and incremental increases in brokerage sales, storage services, finance and
insurance products, service revenue, and charter rentals. improving industry conditions resulting from improved economic conditions contributed to our
comparable-store sales growth.
Gross Profit . Gross profit increased $22.9 million, or 14.2%, to $184.8 million for the fiscal year ended September 30, 2015 from $161.8 million for the
fiscal year ended September 30, 2014. Gross profit as a percentage of revenue decreased to 24.6% for the fiscal year ended September 30, 2015 from 25.9% for the
fiscal year ended September 30, 2014. The decrease in gross profit as a percentage of revenue was primarily the result of an increase in used boat sales which carry
a lower margin than new boat sales. We further saw an increase in larger boat sales which also generally carry lower gross margins. Lastly, the strong growth in
revenue was driven by boat sales. The increase in boat sales relative to our overall revenue caused our higher margin brokerage, finance and insurance products,
service, parts and accessories products, and storage services to decrease as a percentage of revenue, contributing to our overall margins decreasing accordingly. The
increase in gross profit dollars was primarily attributable to the increase in comparable-store sales.
Selling, General, and Administrative Expenses. Selling, general, and administrative expenses increased $13.0 million, or 8.9%, to $159.4 for the fiscal year
ended September 30, 2015 from $146.4 million for the fiscal year ended September 30, 2014. The fiscal years ended September 30, 2014 and 2015 included gains
of approximately $1.0 million and $1.6 million, net of store closing costs, respectively, for gains realized on sales of real estate. additionally, the fiscal year ended
September 30, 2014 included a recovery recognized of approximately $555,000, net of taxes and other expenses, from the Deepwater Horizon Settlement Program
for damages suffered as a result of the Deepwater Horizon oil spill. excluding these items and making both years comparable, selling, general, and administrative
expenses increased $13.1 million, or 8.8%, to $161.1 million and as a percentage of revenue decreased to 21.4% for the fiscal year ended September 30, 2015 from
23.7% for the fiscal year ended September 30, 2014. The overall increase in selling, general, and administrative expenses was primarily attributable to increased
personnel expenses partially resulting from increased health care costs as well as increased commissions resulting from increased boat sales. The decrease in
selling, general, and administrative expenses as a percentage of revenue was driven by improved expense leverage with increasing revenue.
Interest Expense . interest expense increased $430,000, or 10.7%, to $4.5 million for the fiscal year ended September 30, 2015 from $4.0 million for the
fiscal year ended September 30, 2014. interest expense as a percentage of revenue remained consistent at 0.6% for the fiscal year ended September 30, 2015 and
2014. The increase in interest expense was primarily the result of increased borrowings.
Income Taxes . We had an income tax benefit of $27.4 million for the fiscal year ended September 30, 2015 compared with an income tax expense of
$91,000 for the fiscal year ended September 30, 2014. The income tax benefit in fiscal 2015 is the result of the reversal of substantially all of our deferred tax asset
valuation allowance after determining it was more likely than not that certain deferred tax assets would be realized. in fiscal 2014, the income tax expense is
primarily related to Federal alternative minimum tax and state tax expenses. in fiscal 2016 our tax provision will be reflected as a reduction of future earnings as a
result of the reversal of substantially all of our deferred tax asset valuation allowance.
45
Fiscal Year Ended September 30, 2014 Compared with Fiscal Year Ended September 30, 2013
Revenue . Revenue increased $40.2 million, or 6.9%, to $624.7 million for the fiscal year ended September 30, 2014 from $584.5 million for the fiscal year
ended September 30, 2013. Of this increase, $37.7 million was attributable to a 6% increase in comparable-store sales. The increase in our comparable-store sales
was due to incremental increases in new boat sales and incremental increases in brokerage sales, parts and accessories, storage services, and charter rentals.
improving industry conditions resulting from improved economic conditions contributed to our comparable-store sales growth.
Gross Profit . Gross profit increased $11.0 million, or 7.3%, to $161.8 million for the fiscal year ended September 30, 2014 from $150.9 million for the
fiscal year ended September 30, 2013. Gross profit as a percentage of revenue increased to 25.9% for the fiscal year ended September 30, 2014 from 25.8% for the
fiscal year ended September 30, 2013. The increase in gross profit was primarily attributable to the increase in comparable-store sales and incrementally increased
margins on new and used boat sales due to improving industry inventory and industry-wide conditions.
Selling, General, and Administrative Expenses . Selling, general, and administrative expenses increased $13.9 million, or 10.5%, to $146.4 for the fiscal
year ended September 30, 2014 from $132.5 million for the fiscal year ended September 30, 2013. The fiscal year ended September 30, 2013 and 2014 included a
recovery recognized of approximately $11.7 million and $555,000, net of taxes and other expenses, from the Deepwater Horizon Settlement Program for damages
suffered as a result of the Deepwater Horizon Oil Spill. The fiscal year ended September 30, 2014 include a gain of approximately $1.0 million, net of store
closing costs, for the sale of our Walker, Minnesota retail location. excluding these items and making both years comparable, selling, general, and administrative
expenses increased $3.8 million, or 2.6%, to $148.0 million and as a percentage of revenue decreased to 23.7% for the fiscal year ended September 30, 2014 from
24.7% for the fiscal year ended September 30, 2013. The overall increase in selling, general, and administrative expenses was primarily attributable to increased
commissions resulting from increased boat sales.
Interest Expense . interest expense decreased $194,000, or 4.6%, to $4.0 million for the fiscal year ended September 30, 2014 from $4.2 million for the
fiscal year ended September 30, 2013. interest expense as a percentage of revenue decreased to 0.6% for the fiscal year ended September 30, 2014 from 0.7% for
the fiscal year ended September 30, 2013. The decrease was primarily a result of lower interest rates under the amended Credit Facility.
Income Taxes . We had income tax expense of $91,000 for the fiscal year ended September 30, 2014 compared with an income tax benefit of $894,000 for
the fiscal year ended September 30, 2013. in fiscal 2013, the tax benefit was primarily attributable to a favorable tax settlement with a state in which we operate. in
fiscal 2014, the income tax expense is primarily related to Federal alternative minimum tax and state tax expenses. in fiscal 2014 and 2013, the income tax
expenses, excluding the favorable tax settlement in 2013, resulted in a low tax rate due to the utilization of the net operating loss carryforwards for tax purposes
which we had a full valuation allowance.
Quarterly Data and Seasonality
Our business, as well as the entire recreational boating industry, is highly seasonal, with seasonality varying in different geographic markets. With the
exception of Florida, we generally realize significantly lower sales and higher levels of inventories, and related short-term borrowings, in the quarterly periods
ending December 31 and March 31. The onset of the public boat and recreation shows in January stimulates boat sales and typically allows us to reduce our
inventory levels and related short-term borrowings throughout the remainder of the fiscal year. Our business could become substantially more seasonal if we
acquire dealers that operate in colder regions of the United States or close retail locations in warm climates.
Our business is also subject to weather patterns, which may adversely affect our results of operations. For example, prolonged winter conditions, drought
conditions (or merely reduced rainfall levels) or excessive rain, may limit access to area boating locations or render boating dangerous or inconvenient, thereby
curtailing customer demand for our products and services. 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. 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.
46
Liquidity and Capital Re sources
Our cash needs are primarily for working capital to support operations, including new and used boat and related parts inventories, off-season liquidity, and
growth through acquisitions and new store openings. acquisitions and new store openings remain important strategies to our company, and we plan to accelerate
our growth through these strategies as more robust economic conditions return. However, we cannot predict the length of unfavorable economic or financial
conditions. We regularly monitor the aging of our inventories and current market trends to evaluate our current and future inventory needs. We also use this
evaluation in conjunction with our review of our current and expected operating performance and expected business levels to determine the adequacy of our
financing needs.
These cash needs have historically been financed with cash generated from operations and borrowings under the amended Credit Facility. 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.
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 our ability to utilize the amended Credit Facility to fund operations. as of September 30, 2015, we were in compliance with all covenants
under the amended Credit Facility. We currently depend upon dividends and other payments from our dealerships and the amended Credit Facility to fund our
current operations and meet our cash needs. as 100% owner of each of our dealerships, we determine the amounts of such distributions subject to applicable law,
and currently, no agreements exist that restrict this flow of funds from our dealerships.
For the fiscal years ended September 30, 2015, 2014, and 2013, cash provided by operating activities approximated $2.5 million, $10.8 million, and $7.8
million, respectively. For the fiscal year ended September 30, 2015, cash provided by operating activities was primarily related to net income and an increase in
accounts payable partially offset by an increase in inventory driven by the expansion of current and new brands and increases in accounts receivable. For the fiscal
year ended September 30, 2014, cash provided by operating activities was primarily related to net income and a decrease in accounts receivable partially offset by
an increase in inventory driven by the expansion of current and new brands and decreases in accrued expenses. For the fiscal year ended September 30, 2013, cash
provided by operating activities was primarily related to net income partially offset by an increase in inventory driven by the timing of orders and increased trade-
ins on new boat sales and decreases in accrued expenses and long-term liabilities
For the fiscal years ended September 30, 2015, 2014, and 2013, cash used in investing activities was approximately $3.8 million, $12.8 million, and
$12.6 million, respectively. For the fiscal year ended September 30, 2015 cash used in investing activities was primarily used to purchase property and equipment
associated with improving existing retail facilities and was partially offset by the proceeds from the sale of real estate. For the fiscal year ended September 30,
2014, cash used in investing activities was primarily used to improve existing retail facilities and purchase a note receivable in conjunction with the planned
acquisition of a retail facility, partially offset by proceeds received from the sale of our Walker, Minnesota retail facility and insurance proceeds received as a result
of Hurricane Sandy. For the fiscal year ended September 30, 2013, cash used in investing activities was primarily used to purchase inventory associated with a
business acquisition and to purchase property and equipment associated with improving existing retail facilities and making capital improvements as a result of
damages caused by Hurricane Sandy and partially offset by insurance proceeds received as a result of Hurricane Sandy.
For the fiscal years ended September 30, 2015, 2014 and 2013, cash provided by financing activities was approximately $6.0 million, $6.1 million, and
$4.9 million, respectively. For the fiscal year ended September 30, 2015, cash provided by financing activities was primarily attributable to net short-term
borrowings as a result of increased inventory levels and proceeds from the issuance of common stock from our stock based compensation plans, partially offset by
the repurchase of common stock under the share repurchase program. For the fiscal year ended September 30, 2014, cash provided by financing activities was
primarily attributable to net short-term borrowings as a result of increased inventory levels and proceeds from the issuance of common stock from our stock based
compensation plans. For the fiscal year ended September 30, 2013, cash provided by financing activities was primarily attributable to net short-term borrowings as
a result of increased inventory levels and proceeds from the issuance of common stock from our stock based compensation plans.
in October 2015, we entered into the amended Credit Facility with Ge Commercial Distribution Finance LLC. The October 2015 amendment extended the
maturity date of the Credit Facility to October 2018, subject to additional extension for two one-year periods, with lender approval. The October 2015 amendment,
among other things, modified the amount of borrowing availability and maturity date of the Credit Facility. The amended Credit Facility provides a floor plan
financing commitment of up to $260.0 million, an increase from the previous limit of $235.0 million, subject to borrowing base availability resulting from the
amount and aging of our inventory.
47
The amended Credit Facility has certain financial covenants as specified in the agreement. The covenants include provisions that our leverage ratio must
not exceed 2.75 to 1.0 and that our current ratio must be greater than 1.2 to 1.0. The interest rate for amounts outstanding under the amended Credit Facility is 345
basis points above the one-month London inter-bank Offering Rate (“LibOR”). There is an unused line fee of ten basis points on the unused portion of the
amended Credit Facility.
advances under the amended Credit Facility are initiated by the acquisition of eligible new and used inventory or are re-advances against eligible new and
used inventory that have been partially paid-off. advances on new inventory will generally mature 1,080 days from the original invoice date. advances on used
inventory will mature 361 days from the date we acquire the used inventory. each advance is subject to a curtailment schedule, which requires that we pay down
the balance of each advance on a periodic basis starting after six months. The curtailment schedule varies based on the type and value of the inventory. The
collateral for the amended Credit Facility is all of our personal property with certain limited exceptions. None of our real estate has been pledged for collateral for
the amended Credit Facility.
as of September 30, 2014 and 2015, our indebtedness associated with financing our inventory and working capital needs totaled approximately $124.4
million and $137.2 million, respectively. as of September 30, 2014 and 2015, the interest rate on the outstanding short-term borrowings was approximately 3.6%
and 3.6%. as of September 30, 2015, our additional available borrowings under our amended Credit Facility were approximately $54.5 million based upon the
outstanding borrowing base availability. The aging of our inventory limits our borrowing capacity as defined curtailments reduce the allowable advance rate as our
inventory ages.
except as specified in this “Management’s Discussion and analysis of Financial Condition, and Results of Operations” and in our consolidated financial
statements, we have no material commitments for capital for the next 12 months. We believe that our existing capital resources will be sufficient to finance our
operations for at least the next 12 months, except for possible significant acquisitions.
Contractual Commitments and Commercial Commitments
The following table sets forth a summary of our material contractual obligations and commercial commitments as of September 30, 2015:
Year Ending September 30,
2016
2017
2018
2019
2020
Thereafter
Total
Short-Term
Borrowings (1)
Long-Term
Liabilities (2)
Operating
Leases (3)
Total
$
$
137,186 $
—
—
—
—
—
137,186 $
(Amounts in thousands)
— $
586
—
—
—
—
586 $
5,350 $
4,817
4,234
3,428
3,123
11,711
32,663 $
142,536
5,403
4,234
3,428
3,123
11,711
170,435
(1)
(2)
(3)
estimates of future interest payments for short-term borrowings have been excluded in the tabular presentation. amounts due are contingent upon the
outstanding balances and the variable interest rates. as of September 30, 2015, the interest rate on our short-term borrowings was approximately 3.6%.
The amounts included in long-term liabilities consist primarily of gross unrecognized tax benefits and our estimated liability for claims on certain workers’
compensation insurance policies. While we estimate the amount to be paid in excess of 12 months, the ultimate timing of the payments is subject to certain
variability. accordingly, we have classified all amounts as due in the following year for the purposes of this table.
amounts for operating lease commitments do not include certain operating expenses such as maintenance, insurance, and real estate taxes. These amounts
are not a material component of operating expenses.
Off-Balance Sheet Arrangements
We do not have any transactions, arrangements, or other relationships with unconsolidated entities that are reasonably likely to affect our financial
condition, liquidity, or capital resources. We have no special purpose or limited purpose entities that provide off-balance sheet financing, liquidity, or market or
credit risk support; we do not engage in hedging, or research and development services; and we do not have other relationships that expose us to liability that is not
reflected in the financial statements.
48
Item 7A.
Quantitative and Qualitat ive D isclosures about Market Risk
as of September 30, 2015, all of our short-term debt bore interest at a variable rate, tied to LibOR as a reference rate. Changes in the underlying LibOR
interest rate on our short-term debt could affect our earnings. For example, a hypothetical 100 basis point increase in the interest rate on our short-term debt would
result in an increase of approximately $1.4 million in annual pre-tax interest expense. This estimated increase is based upon the outstanding balance of our short-
term debt as of September 30, 2015 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.
Products purchased from european-based and Chinese-based manufacturers are subject to fluctuations in the U.S. dollar exchange rate, which ultimately
may impact the retail price at which we can sell such products. accordingly, fluctuations in the value of the 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 product lines in the United
States. accordingly, 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 product lines. 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, we cannot assure that our strategies will adequately protect our operating results from the effects of
exchange rate fluctuations.
Item 8.
Financi al Statements and Supplementary Data
Reference is made to the financial statements, the notes thereto, and the report thereon, commencing on page F-1 of this report, which financial statements,
notes, and report are incorporated herein by reference.
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Not applicable.
Item 9A.
Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that material information required to be disclosed by us in Securities exchange
act reports is recorded, processed, summarized and reported within the time periods specified in the Securities and exchange Commission’s rules and forms, and
that such information is accumulated and communicated to our management, including the Chief executive Officer and Chief Financial Officer, as appropriate, to
allow timely decisions regarding required disclosure.
Our Chief executive Officer and Chief Financial Officer have evaluated the effectiveness of the design and operation of our disclosure controls and
procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities exchange act of 1934) as of the end of the period covered by this report. based on
such evaluation, such officers have concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were effective at the
reasonable assurance level.
Changes in Internal Controls
During the quarter ended September 30, 2015, there were no changes in our internal controls 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 controls 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 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
49
management override of the control. The design of any system of controls also is based in par t upon certain assumptions about the likelihood of future events, and
there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, a control may become
inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. because of the inherent limitations in a
cost-effective control system, misstatements due to error or fraud may occur and not be detected.
CEO and CFO Certifications
exhibits 31.1 and 31.2 are the Certifications of the Chief executive Officer and Chief Financial Officer, respectively. The Certifications are required in
accordance with Section 302 of the Sarbanes-Oxley act of 2002 (the “Section 302 Certifications”). This item of this report, which you are currently reading is the
information concerning the evaluation referred to in the Section 302 Certifications and this information should be read in conjunction with the Section 302
Certifications for a more complete understanding of the topics presented.
Management’s Report on Internal Control over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) of
the Securities exchange act of 1934. Under the supervision and with the participation of our management, including our Chief executive Officer and Chief
Financial Officer, we conducted an evaluation of the effectiveness of the Company’s internal control over financial reporting as of September 30, 2015 as required
by the Securities exchange act of 1934 Rule 13a-15(c). in making this assessment, we used the criteria set forth by the Committee of Sponsoring Organizations of
the Treadway Commission (“COSO”) in internal Control — integrated Framework (2013). based on its evaluation, our management concluded that its internal
control over financial reporting was effective as of September 30, 2015.
Our internal control over financial reporting as of September 30, 2015 has been audited by KPMG LLP, an independent registered public accounting firm,
as stated in their report which appears herein.
50
The board of Directors and Stockholders
MarineMax, inc.:
Report of Independent Registered Public Accounting Firm
We have audited MarineMax, inc.’s internal control over financial reporting as of September 30, 2015, based on criteria established in Internal Control
– Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). MarineMax, inc.’s management is
responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting,
included in the accompanying management’s report on internal control over financial reporting. Our responsibility is to express an opinion on the Company’s
internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company accounting Oversight board (United States). Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing
and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we
considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
a company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. a company’s internal
control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made
only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection
of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. also, projections of any evaluation
of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
in our opinion, MarineMax, inc. maintained, in all material respects, effective internal control over financial reporting as of September 30, 2015, based
on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission
(COSO).
We also have audited, in accordance with the standards of the Public Company accounting Oversight board (United States), the consolidated balance
sheets of MarineMax, inc. and subsidiaries as of September 30, 2014 and 2015, and the related consolidated statements of operations, stockholders’ equity, and
cash flows for each of the years in the three-year period ended September 30, 2015, and our report dated December 8, 2015 expressed an unqualified opinion on
those consolidated financial statements.
/s/ KPMG LLP
Tampa, Florida
December 8, 2015
Certified Public accountants
51
Item 9B.
Other Information
None.
PART III
Item 10.
Directors, Executive Officers and Corporate Governance
The information required by this item relating to our directors and corporate governance is incorporated herein by reference to the definitive Proxy
Statement (particularly under the caption “Corporate Governance”) to be filed pursuant to Regulation 14a of the exchange act for our 2016 annual Meeting of
Stockholders. The information required by this item relating to our executive officers is included in “business — executive Officers.”
We have adopted a code of ethics that applies to our principal executive officer, principal financial officer, and other senior accounting personnel. The
“Code of ethics for the CeO and Senior Financial Officers” is located on our website at www.MarineMax.com in the investor Relations section under Corporate
Governance.
We intend to satisfy the disclosure requirement under item 5.05(c) of Form 8-K regarding any amendment to, or waiver from, a provision of this code of
ethics by posting such information on our website, at the address and location specified above.
Item 11.
Exe cutive Compensation
The information required by this item is incorporated herein by reference to the definitive Proxy Statement (particularly under the caption “executive
Compensation”) to be filed pursuant to Regulation 14a of the exchange act for our 2016 annual Meeting of Stockholders.
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information required by this item is incorporated herein by reference to the definitive Proxy Statement (particularly under the caption “Security
Ownership of Principal Stockholders, Directors, and Officers”) to be filed pursuant to Regulation 14a of the exchange act for our 2016 annual Meeting of
Stockholders.
Item 13.
Certain Relationships and Related Transactions, and Director Independence
The information required by this item is incorporated herein by reference to the definitive Proxy Statement (particularly under the caption “Certain
Relationships and Related Transactions”) to be filed pursuant to Regulation 14a of the exchange act for our 2016 annual Meeting of Stockholders.
Item 14.
Principal Accountant Fees and Services
The information required by this item is incorporated herein by reference to the definitive Proxy Statement (particularly under the caption “Ratification of
appointment of independent auditor”) to be filled pursuant to Regulation 14a of the exchange act for our 2016 annual Meeting of Stockholders.
Item 15.
Exhibits, Financial Statement Schedules
PART IV
(a)
(1)
(2)
Financial Statements and Financial Statement Schedules
Financial Statements are listed in the index to Consolidated Financial Statements on page F-1 of this report.
No financial statement schedules are included because such schedules are not applicable, are not required, or because required information is included in
the consolidated financial statements or notes thereto.
52
(b)
Exhibits
Exhibit
Number
2.1
3.1
3.2
4.1
10.3(h)*
10.3(i)*
10.4*
10.5*
10.20
10.20(a)
10.20(b)
10.20(c)†
10.20(d)†
10.20(e)†
10.20(f)†
10.20(g)†
10.20(h)†
10.21(f)†
10.21(g)†
10.21(h)†
10.21(i)†
10.21(j)†
10.21(k)†
10.21(l)
10.21(m) †
10.21(n) †
10.21(o) †
10.21(p) †
10.22*
10.23*
10.24*
10.25
10.26†
Exhibit
agreement and Plan of Merger, dated February 25, 2015, by and between MarineMax, inc. and MarineMax Reincorporation, inc. (1)
articles of incorporation of the Registrant.(2)
bylaws of the Registrant. (2)
Specimen of Common Stock Certificate. (2)
employment agreement between Registrant and William H. McGill Jr. (3)
employment agreement between Registrant and Michael H. McLamb. (3)
1998 incentive Stock Plan, as amended through February 27, 2001. (4)
2008 employee Stock Purchase Plan, as amended. (5)
agreement Relating to acquisitions between Registrant and brunswick Corporation, dated December 7, 2005. (6)
amendment, executed October 17, 2014, to agreement Relating to acquisitions between Registrant and brunswick Corporation, dated December 7,
2005. (7)
Sea Ray Sales and Service agreement. (6)
Sea Ray Sales and Service agreement, executed October 17, 2014, by and between MarineMax east, inc. and Sea Ray, a Division of brunswick
Corporation. (7)
Sea Ray Sales and Service agreement, executed October 17, 2014, by and between MarineMax Northeast, LLC, and Sea Ray, a Division of
brunswick Corporation. (7)
Sea Ray Sales and Service agreement, executed October 17, 2014, by and between MarineMax, inc. and Sea Ray, a Division of brunswick
Corporation. (7)
boston Whaler Sales and Service agreement, executed December 5, 2014, by and between MarineMax east, inc. and boston Whaler, a Division of
brunswick Corporation. (8)
boston Whaler Sales and Service agreement, executed December 5, 2014, by and between MarineMax Northeast, LLC, and boston Whaler, a
Division of brunswick Corporation. (8)
boston Whaler Sales and Service agreement, executed December 5, 2014, by and between MarineMax, inc. and boston Whaler, a Division of
brunswick Corporation. (8)
inventory Financing agreement executed on June 24, 2010, among MarineMax, inc. and its subsidiaries, as borrowers, and Ge Commercial
Distribution Finance Corporation, as Lender. (9)
Program Terms Letter executed on June 24, 2010, among MarineMax, inc. and its subsidiaries, as borrowers, and Ge Commercial Distribution
Finance Corporation, as Lender. (9)
amendment Number One to inventory Financing agreement, executed on December 17, 2010, among MarineMax, inc. and its subsidiaries, as
borrowers, and Ge Commercial Distribution Finance Corporation, as Lender. (10)
amendment Number One to Program Terms Letter, executed on December 17, 2010, among MarineMax, inc. and its subsidiaries, as borrowers, and
Ge Commercial Distribution Finance Corporation, as Lender. (10)
amendment Number Two to inventory Financing agreement, executed on June 1, 2011, among MarineMax, inc. and its subsidiaries, as borrowers,
and Ge Commercial Distribution Finance Corporation, as Lender. (11)
amendment Number Two to Program Terms Letter, executed on June 1, 2011, among MarineMax, inc. and its subsidiaries, as borrowers, and Ge
Commercial Distribution Finance Corporation, as Lender. (11)
amendment Number Three to inventory Financing agreement, executed on July 27, 2012, by and among MarineMax, inc. and its subsidiaries, as
borrowers, and Ge Commercial Distribution Finance Corporation, as Lender. (12)
amended and Restated inventory Financing agreement, executed on June 28, 2013, by and among MarineMax, inc. and its subsidiaries, as
borrowers, and Ge Commercial Distribution Finance Corporation, as Lender. (13)
amended and Restated Program Terms Letter, executed on June 28, 2013, among MarineMax, inc. and its subsidiaries, as borrowers, and Ge
Commercial Distribution Finance Corporation, as Lender. (13)
amendment Number Four to the amended and Restated inventory Financing agreement, executed on august 29, 2014, by and among MarineMax,
inc. and its subsidiaries, as borrowers, and Ge Commercial Distribution Finance Corporation, as Lender. (7)
Second amended and Restated Program Terms Letter, executed on august 29, 2014, among MarineMax, inc. and its subsidiaries, as borrowers, and
Ge Commercial Distribution Finance Corporation, as Lender. (7)
MarineMax, inc. 2007 incentive Compensation Plan (14)
Form Stock Option agreement for 2007 incentive Compensation Plan (14)
Form Restricted Stock Unit award agreement for 2007 incentive Compensation Plan (14)
Director Fee Share Purchase Program (15)
Floor Plan Loan agreement executed on October 7, 2010, by and among MarineMax, inc. and its subsidiaries, as borrowers, and CGi Finance, inc.,
as Lender. (16)
53
Exhibit
Number
10.26(a)
10.26(b)
10.27†
10.28
10.29(a)*
10.29(b)*
10.29(c)*
10.31*
10.32†
10.32(a)
10.32(b)
10.32(c)
10.33†
10.33(a)
10.33(b)
10.33(c)
10.33(d)
21
23.1
31.1
31.2
32.1
32.2
101.iNS
101.SCH
101.CaL
101.DeF
101.Lab
101.PRe
Exhibit
Notice of extension to Floor Plan Loan agreement executed on September 15, 2011, by and among MarineMax, inc. and its subsidiaries, as
borrowers, and CGi Finance, inc., as Lender. (17)
Notice of extension to Floor Plan Loan agreement executed on July 5, 2012, by and among MarineMax, inc. and its subsidiaries, as borrowers, and
CGi Finance, inc., as Lender. (12)
Floor Plan Credit Loan Note executed on October 7, 2010, by MarineMax, inc. and its subsidiaries, as borrowers, payable to CGi Finance, inc., as
Lender. (16)
Pledge and Security agreement executed on October 7, 2010, by and among MarineMax, inc. and its subsidiaries, as borrowers, and CGi Finance,
inc., as Lender. (16)
MarineMax, inc. 2011 Stock-based Compensation Plan, as amended (18)
Form Stock Option agreement for 2011 Stock-based Compensation Plan (18)
Form Restricted Stock Unit award agreement for 2011 Stock-based Compensation Plan (18)
Severance Policy for Key executives (19)
Dealership agreement dated September 1, 2008 by and between MarineMax Northeast, LLC and azimut benetti S.P.a. (21)
First amendment dated June 22, 2010 to Dealership agreement dated September 1, 2008, by and between MarineMax Northeast, LLC and azimut
benetti S.P.a. (20)
Second amendment dated February 29, 2012 to Dealership agreement dated September 1, 2008, by and between MarineMax Northeast, LLC and
azimut benetti S.P.a. (20)
Third amendment dated July 21, 2012 to Dealership agreement dated September 1, 2008, by and between MarineMax Northeast, LLC and azimut
benetti S.P.a. (20)
Dealership agreement dated September 1, 2008 by and between MarineMax east, LLC and azimut benetti S.P.a. (20)
First amendment dated June 22, 2010 to Dealership agreement dated September 1, 2008, by and between MarineMax east, inc. and azimut benetti
S.P.a. (20)
Second amendment dated February 29, 2012 to Dealership agreement dated September 1, 2008, by and between MarineMax east, inc. and azimut
benetti S.P.a. (20)
Third amendment dated July 21, 2012 to Dealership agreement dated September 1, 2008, by and between MarineMax east, inc. and azimut
benetti S.P.a. (20)
Fourth amendment dated august 21, 2013 to Dealership agreement dated September 1, 2008, by and between MarineMax east, inc. and azimut
benetti S.P.a. (20)
List of Subsidiaries
Consent of KPMG LLP
Certification of Chief executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a), promulgated under the Securities exchange act of 1934, as
amended.
Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a), promulgated under the Securities exchange act of 1934, as
amended.
Certification pursuant to U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley act of 2002.
Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley act of 2002.
XbRL instance Document
XbRL Taxonomy extension Schema Document
XbRL Taxonomy extension Calculation Linkbase Document
XbRL Taxonomy extension Definition Linkbase Document
XbRL Taxonomy extension Label Linkbase Document
XbRL Taxonomy extension Presentation Linkbase Document
†
*
(1)
( 2 )
( 3 )
( 4 )
( 5 )
(6)
(7)
(8)
Certain information in this exhibit has been omitted and filed separately with the Securities and exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
Management contract or compensatory plan or arrangement.
incorporated by reference to Registrant’s Form 8-K as filed February 26, 2015.
incorporated by reference to Registrant’s Form 8-K as filed March 20, 2015.
incorporated by reference to Registrant’s Form 8-K as filed on June 13, 2006.
incorporated by reference to Registrant’s Form 10-Q for the quarterly period ended December 31, 2001, as filed on February 14, 2002.
incorporated by reference to Registrant’s Form 8-K as filed on December 19, 2008.
incorporated by reference to Registrant’s Form 8-K as filed on December 9, 2005.
incorporated by reference to Registrant’s Form 10-K for the year ended September 30, 2014, as filed on December 11, 2014.
incorporated by reference to Registrant’s Form 10-Q for the quarterly period ended December 31, 2014, as filed on February 5, 2015.
54
( 9 )
( 10 )
( 11 )
( 12 )
( 13 )
( 14 )
( 15 )
( 16 )
( 17 )
(1 8 )
(19)
(20)
incorporated by reference to Registrant’s Form 10-Q for the quarterly period ended June 30, 2010, as filed on august 9, 2010.
incorporated by reference to Registrant’s Form 10-Q for the quarterly period ended December 31, 2010, as filed on February 8, 2011.
incorporated by reference to Registrant’s Form 10-Q for the quarterly period ended June 30, 2011, as filed on august 5, 2011.
incorporated by reference to Registrant’s Form 10-Q for the quarterly period ended June 30, 2012, as filed on august 3, 2012.
incorporated by reference to Registrant’s Form 10-Q for the quarterly period ended June 30, 2013, as filed on august 6, 2013.
incorporated by reference to Registrant’s Form 8-K as filed on March 6, 2007.
incorporated by reference to Registrant’s Form S-8 (File No. 333-141657) as filed March 29, 2007.
incorporated by reference to Registrant’s Form 10-K for the year ended September 30, 2010, as filed on December 2, 2010.
incorporated by reference to Registrant’s Form 10-K for the year ended September 30, 2011, as filed on December 8, 2011.
incorporated by reference to Registrant’s Form 8-K as filed on January 25, 2011.
incorporated by reference to Registrant’s Form 8-K as filed on November 27, 2012.
incorporated by reference to Registrant’s Form 10-K for the year ended September 30, 2013, as filed on December 6, 2013.
(c) Financial Statements Schedules
(1)
See item 15(a) above.
55
Pursuant to the requirements of Section 13 or 15(d) of the Securities exchange act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
SIGNATURES
MARINEMAX, INC.
/s/ William H. McGill Jr.
William H. McGill Jr.
Chairman of the board and Chief executive Officer
Date: December 8, 2015
Pursuant to the requirements of the Securities exchange act of 1934, this report has been signed below by the following persons on behalf of the registrant
and in the capacities and on the dates indicated.
Signature
/s/ William H. McGill Jr.
William H. McGill Jr.
/s/ Michael H. McLamb
Michael H. McLamb
/s/ evelyn Follit
evelyn Follit
/s/ Clint Moore
Clint Moore
/s/ Hilliard M. eure iii
Hilliard M. eure iii
/s/ Charles R. Oglesby
Charles R. Oglesby
/s/ Joseph a. Watters
Joseph a. Watters
/s/ Dean S. Woodman
Dean S. Woodman
Capacity
Chairman of the board, President, and Chief executive
Officer
(Principal executive Officer)
executive Vice President, Chief Financial Officer,
Secretary, and Director
(Principal accounting and
Financial Officer)
Director
Director
Director
Director
Director
Director
56
Date
December 8, 2015
December 8, 2015
December 8, 2015
December 8, 2015
December 8, 2015
December 8, 2015
December 8, 2015
December 8, 2015
MARINEMAX, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
CONSOLiDaTeD FiNaNCiaL STaTeMeNTS
Report of independent Registered Public accounting Firm
Consolidated balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Stockholders’ equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Page
F-2
F-3
F-4
F-5
F-6
F-7
Report of Independent Regist ered Public Accounting Firm
The board of Directors and Stockholders
MarineMax, inc.:
We have audited the accompanying consolidated balance sheets of MarineMax, inc. and subsidiaries as of September 30, 2014 and 2015, and the related
consolidated statements of operations, stockholders’ equity, and cash flows for each of the years in the three-year period ended September 30, 2015. These
consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company accounting Oversight board (United States). Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. an audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. an audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
in our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of MarineMax, inc.
and subsidiaries as of September 30, 2014 and 2015, and the results of their operations and their cash flows for each of the years in the three-year period ended
September 30, 2015, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company accounting Oversight board (United States), MarineMax, inc.’s internal
control over financial reporting as of September 30, 2015, based on criteria established in Internal Control – Integrated Framework (2013) issued by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated December 8, 2015, expressed an unqualified opinion on the
effectiveness of the Company’s internal control over financial reporting.
/s/ KPMG LLP
Tampa, Florida
December 8, 2015
Certified Public accountants
F-2
MARINEMAX, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(amounts in thousands except share and per share data)
ASSETS
September 30,
2014
September 30,
2015
CURReNT aSSeTS:
Cash and cash equivalents
accounts receivable, net
inventories, net
Prepaid expenses and other current assets
Deferred tax assets, net
Total current assets
Property and equipment, net
Other long-term assets, net
Deferred tax assets, net
Total assets
LIABILITIES AND STOCKHOLDERS' EQUITY
CURReNT LiabiLiTieS:
accounts payable
Customer deposits
accrued expenses
Short-term borrowings
Total current liabilities
Long-term liabilities
Total liabilities
COMMiTMeNTS aND CONTiNGeNCieS
STOCKHOLDeRS' eQUiTY:
Preferred stock, $.001 par value, 1,000,000 shares authorized,
none issued or outstanding as of September 30, 2014 and 2015
Common stock, $.001 par value; 40,000,000 shares authorized, 25,002,807
and 25,562,994 shares issued and 24,211,907 and 24,199,661 shares
outstanding as of September 30, 2014 and 2015, respectively
additional paid-in capital
Retained earnings
Treasury stock, at cost, 790,900 and 1,363,333 shares held as of
September 30, 2014 and 2015
Total stockholders' equity
Total liabilities and stockholders' equity
$
$
$
$
27,839 $
12,547
244,151
4,415
—
288,952
101,878
11,851
—
402,681 $
7,823 $
10,979
19,600
124,424
162,826
560
163,386
32,611
18,474
273,875
10,845
9,254
345,059
98,987
5,313
18,263
467,622
13,510
12,731
19,964
137,186
183,391
586
183,977
—
—
25
227,939
27,141
(15,810)
239,295
402,681 $
26
234,478
75,433
(26,292)
283,645
467,622
See accompanying notes to consolidated financial statements.
F-3
MARINEMAX, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(amounts in thousands except share and per share data)
Revenue
Cost of sales
Gross profit
Selling, general, and administrative expenses
income from operations
interest expense
income before income taxes
income tax benefit (provision)
Net income
basic net income per common share
Diluted net income per common share
Weighted average number of common shares used
in computing net income per common share:
basic
Diluted
2013
For the Year Ended September 30,
2014
2015
$
$
$
$
584,497 $
433,644
150,853
132,505
18,348
4,218
14,130
894
15,024 $
0.65 $
0.63 $
624,692 $
462,872
161,820
146,433
15,387
4,024
11,363
(91)
11,272 $
0.47 $
0.46 $
751,370
566,603
184,767
159,435
25,332
4,454
20,878
27,414
48,292
1.97
1.92
23,253,992
23,916,238
24,003,728
24,655,262
24,466,243
25,102,289
See accompanying notes to consolidated financial statements.
F-4
MARINEMAX, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(amounts in thousands except share data)
Additional
Total
baLaNCe, September 30, 2012
Net income
Shares issued pursuant to employee stock
purchase plan
Shares issued upon vesting of equity awards,
net of tax withholding
Shares issued upon exercise of stock options
Stock-based compensation
baLaNCe, September 30, 2013
Net income
Shares issued pursuant to employee stock
purchase plan
Shares issued upon vesting of equity awards,
net of tax withholding
Shares issued upon exercise of stock options
Stock-based compensation
baLaNCe, September 30, 2014
Net income
Purchase of treasury stock
Shares issued pursuant to employee stock
purchase plan
Shares issued upon vesting of equity awards,
net of tax withholding
Shares issued upon exercise of stock options
Stock-based compensation
Stock option tax benefit, net of shortfalls
baLaNCe, September 30, 2015
Common Stock
Shares
Amount
23,701,050 $
—
Paid-in
Capital
24 $ 215,885 $
—
—
Retained Treasury Stockholders’
Stock
Earnings
(15,810) $
—
845 $
15,024
200,944
15,024
Equity
81,715
—
574
—
—
574
32,666
504,400
16,664
24,336,495 $
—
(157)
—
2,692
—
—
2,735
24 $ 221,729 $
—
—
—
—
—
15,869 $
11,272
—
—
—
(15,810) $
—
(157)
2,692
2,735
221,812
11,272
55,333
—
574
—
—
574
88,729
512,147
10,103
25,002,807 $
—
—
(541)
—
3,591
1
—
2,586
25 $ 227,939 $
—
—
—
—
—
—
—
27,141 $
48,292
—
—
—
—
(15,810) $
—
(10,482)
(541)
3,592
2,586
239,295
48,292
(10,482)
48,987
—
669
—
—
669
3,340
477,631
30,229
—
25,562,994 $
—
—
3,045
1
3,018
—
—
(193)
26 $ 234,478 $
—
—
—
—
75,433 $
—
—
—
—
(26,292) $
-
3,046
3,018
(193)
283,645
See accompanying notes to consolidated financial statements.
F-5
MARINEMAX, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(amounts in thousands)
CaSH FLOWS FROM OPeRaTiNG aCTiViTieS:
Net income
adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization
Deferred income tax provision (benefit)
Loss (gain) on sale of property and equipment and assets held for sale
Loss (gain) on insurance settlements
Stock-based compensation expense, net
(increase) Decrease in —
accounts receivable, net
inventories, net
Prepaid expenses and other assets
(Decrease) increase in —
accounts payable
Customer deposits
accrued expenses and long-term liabilities
Net cash provided by operating activities
CaSH FLOWS FROM iNVeSTiNG aCTiViTieS:
Purchases of property and equipment
Purchase of note receivable
Net cash used in acquisition of businesses, primarily inventory
Proceeds from insurance settlements
Proceeds from sale of property and equipment
Net cash used in investing activities
CaSH FLOWS FROM FiNaNCiNG aCTiViTieS:
Net borrowings on short-term borrowings
Net proceeds from issuance of common stock under incentive compensation,
and employee purchase plans
Purchase of treasury stock
Net cash provided by financing activities
NeT iNCReaSe iN CaSH aND CaSH eQUiVaLeNTS:
CaSH aND CaSH eQUiVaLeNTS, beginning of period
CaSH aND CaSH eQUiVaLeNTS, end of period
Supplemental Disclosures of Cash Flow information:
Cash paid for:
interest
income taxes
Non-cash: exchange of note receivable for property and equipment
Non-cash: real estate assets classified as held for sale
For the Year Ended September 30,
2014
2015
2013
$
15,024 $
11,272 $
48,292
6,777
—
136
154
2,735
319
(8,853)
(820)
(2,645)
832
(5,848)
7,811
(9,822)
—
(4,638)
1,743
113
(12,604)
7,281
—
(821)
(235)
2,586
6,005
(16,110)
(307)
612
1,637
(1,111)
10,809
(9,194)
(6,020)
—
756
1,612
(12,846)
7,858
(27,710)
(1,846)
—
3,018
(5,927)
(29,724)
738
5,687
1,752
390
2,528
(9,746)
—
—
—
5,995
(3,751)
1,823
1,954
12,762
3,109
—
4,932
139
23,617
23,756 $
4,380 $
330
-
-
4,166
—
6,120
4,083
23,756
27,839 $
3,932 $
58
-
-
3,715
(10,482)
5,995
4,772
27,839
32,611
4,516
88
6,020
6,650
$
$
See accompanying notes to consolidated financial statements
F-6
MARINEMAX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. COMPANY BACKGROUND AND BASIS OF PRESENTATION:
We are the largest recreational boat retailer in the United States. We engage primarily in the retail sale, brokerage, and service of new and used boats,
motors, trailers, marine parts and accessories and offer slip and storage accommodations in certain locations. in addition, we arrange related boat financing,
insurance, and extended service contracts. We also offer the charter of power and sailing yachts in the british Virgin islands. as of September 30, 2015, we
operated through 53 retail locations in 15 states, consisting of alabama, California, Connecticut, Florida, Georgia, Maryland, Minnesota, Missouri, New Jersey,
New York, North Carolina, Ohio, Oklahoma, Rhode island, and Texas. Our MarineMax Vacations operations maintain a facility in Tortola, british Virgin islands.
We are the nation’s largest retailer of Sea Ray, boston Whaler, and Meridian recreational boats and yachts, all of which are manufactured by brunswick
Corporation (“brunswick”). Sales of new brunswick boats accounted for approximately 40% of our revenue in fiscal 2015. Sales of new Sea Ray and boston
Whaler boats, both divisions of brunswick, accounted for approximately 25% and 12%, respectively, of our revenue in fiscal 2015. brunswick is a world leading
manufacturer of marine products and marine engines. We believe we represented approximately 45% of brunswick’s Sea Ray boat sales, during our fiscal 2015.
We have dealership agreements with Sea Ray, boston Whaler, Meridian, and Mercury Marine, all subsidiaries or divisions of brunswick. We also have
dealer agreements with italy-based azimut-benetti Group’s product line for azimut Yachts. These agreements allow us to purchase, stock, sell, and service these
manufacturers’ boats and products. These agreements also allow us to use these manufacturers’ names, trade symbols, and intellectual properties in our operations.
We have multi-year dealer agreements with brunswick covering Sea Ray products that appoints us as the exclusive dealer of Sea Ray boats in our
geographic markets. We are the exclusive dealer for boston Whaler through multi-year dealer agreements for many of our geographic markets. in addition, we are
the exclusive dealer for azimut Yachts for the entire United States through a multi-year dealer agreement. Sales of new azimut boats accounted for approximately
12% of our revenue in fiscal 2015. We believe non-brunswick brands offer a migration for our existing customer base or fill a void in our product offerings, and
accordingly, do not compete with the business generated from our other prominent brands.
as is typical in the industry, we deal with most of our manufacturers, other than Sea Ray, boston Whaler, Meridian, and azimut Yachts, under renewable
annual dealer agreements, each of which gives us the right to sell various makes and models of boats within a given geographic region. any change or termination
of these agreements, or the agreements discussed above, for any reason, or changes in competitive, regulatory, or marketing practices, including rebate or incentive
programs, could adversely affect our results of operations. although there are a limited number of manufacturers of the type of boats and products that we sell, we
believe that adequate alternative sources would be available to replace any manufacturer other than Sea Ray and azimut as a product source. These alternative
sources may not be available at the time of any interruption, and alternative products may not be available at comparable terms, which could affect operating results
adversely.
General economic conditions and consumer spending patterns can negatively impact our operating results. Unfavorable local, regional, national, or global
economic developments or uncertainties regarding future economic prospects could reduce consumer spending in the markets we serve and adversely affect our
business. economic conditions in areas in which we operate dealerships, particularly Florida in which we generated approximately 51%, 52%, and 53% of our
revenue during fiscal 2013, 2014, and 2015, respectively, can have a major impact on our operations. Local influences, such as corporate downsizing, military base
closings, inclement weather such as Hurricane Sandy, environmental conditions, and specific events, such as the bP oil spill in the Gulf of Mexico, also could
adversely affect, and in certain instances have adversely affected, our operations in certain markets.
in an economic downturn, consumer discretionary spending levels generally decline, at times resulting in disproportionately large reductions in the sale of
luxury goods. Consumer spending on luxury goods also may decline as a result of lower consumer confidence levels, even if prevailing economic conditions are
favorable. as a result, an economic downturn could impact us more than certain of our competitors due to our strategic focus on a higher end of our market.
although we have expanded our operations during periods of stagnant or modestly declining industry trends, the cyclical nature of the recreational boating industry
or the lack of industry growth may adversely affect our business, financial condition, and results of operations. any period of adverse economic conditions or low
consumer confidence has a negative effect on our business.
F-7
MARINEMAX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Lower consumer spending resulting from a downturn in the housing market and other economic factors adversely affected our business in fiscal 2007, and
continued weakness in consumer spending and depressed economic conditions had a substantial nega tive effect on our busines s and industry for several years
after fiscal 2007 . Th ese conditions caused us to substantially reduce our acquisition program, delay new store openings, reduce our inventory purchases, engage in
inventory reduction efforts, close a number of our retail locations, reduce our headcount, and amend and replace our credit facility. acquisitions and new store
openings remain important strategies to our company, and we plan to accelerate our growth through th ese strategies as economic co nditions continue to improve .
However, we c annot predict the length of un favorable economic or industry conditions or the extent to which they will continue to adversely affect our operating
results nor can we predict the effectiveness of the measures we h ave t aken to address this environment .
in order to provide comparability between periods presented, certain amounts have been reclassified from the previously reported consolidated financial
statements to conform to the consolidated financial statement presentation of the current period. The consolidated financial statements include our accounts and the
accounts of our subsidiaries, all of which are wholly owned. all significant intercompany transactions and accounts have been eliminated.
2. SIGNIFICANT ACCOUNTING POLICIES:
Cash and Cash Equivalents
We consider all highly liquid investments with an original maturity of three months or less to be cash equivalents.
Vendor Consideration Received
We account for consideration received from our vendors in accordance with FaSb accounting Standards Codification 605-50, “Revenue Recognition -
Customer Payments and incentives” (“aSC 605-50”). aSC 605-50 requires us to classify interest assistance received from manufacturers as a reduction of
inventory cost and related cost of sales as opposed to netting the assistance against our interest expense incurred with our lenders. Pursuant to aSC 605-50,
amounts received by us under our co-op assistance programs from our manufacturers are netted against related advertising expenses. Further pursuant to aSC 605-
50, manufacturer incentives based upon cumulative volume of sales and purchases are recorded when the amounts are probable and reasonably estimable.
Inventories
inventory costs consist of the amount paid to acquire inventory, net of vendor consideration and purchase discounts, the cost of equipment added,
reconditioning costs, and transportation costs relating to acquiring inventory for sale. We state new and used boat, motor, and trailer inventories at the lower of
cost, determined on a specific-identification basis, or market. We state parts and accessories at the lower of cost, determined on an average cost basis, or market.
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
market valuation allowance. as of September 30, 2014 and 2015, our lower of cost or market valuation allowance for new and used boat, motor, and trailer
inventories was $2.2 million and $1.8 million, respectively. if events occur and market conditions change, causing the fair value to fall below carrying value, the
lower of cost or market valuation allowance could increase.
Property and Equipment
We record property and equipment at cost, net of accumulated depreciation, and depreciate property and equipment over their estimated useful lives using
the straight-line method. We capitalize and amortize leasehold improvements over the lesser of the life of the lease or the estimated useful life of the asset. Useful
lives for purposes of computing depreciation are as follows:
buildings and improvements
Machinery and equipment
Furniture and fixtures
Vehicles
Years
5-40
3-10
5-10
3-5
We remove the cost of property and equipment sold or retired and the related accumulated depreciation from the accounts at the time of disposition and
include any resulting gain or loss in the consolidated statements of operations. We charge maintenance,
F-8
MARINEMAX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
r epairs, and minor replacements to operations as incurred, and we capitalize and amortize major replacements and improvements over their useful lives.
Goodwill
We account for goodwill in accordance with FaSb accounting Standards Codification 350, “intangibles - Goodwill and Other” (“aSC 350”), which
provides that the excess of cost over net assets of businesses acquired is recorded as goodwill. The acquisitions of bassett Marine, LLC and Parker boat Company
resulted in goodwill of $802,000. in accordance with aSC 350, we review goodwill for impairment at least annually and whenever events or changes in
circumstances indicate that the carrying value may not be recoverable. Our annual impairment test is performed during the fourth fiscal quarter. if the carrying
amount of goodwill exceeds its fair value we would recognize an impairment loss in accordance with aSC 350. as of September 30, 2015, and based upon our
most recent analysis, we determined through our qualitative assessment that it is not “more likely than not” that the fair values of our reporting units are less than
their carrying values. as a result, we were not required to perform the two-step goodwill impairment test.
Impairment of Long-Lived Assets
FaSb accounting Standards Codification 360-10-40, “Property, Plant, and equipment - impairment or Disposal of Long-Lived assets” (“aSC 360-10-
40”), requires that long-lived assets, such as property and equipment and purchased intangibles subject to amortization, be reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of the asset is measured by comparison of
its carrying amount to undiscounted future net cash flows the asset is expected to generate. if such assets are considered to be impaired, the impairment to be
recognized is measured as the amount by which the carrying amount of the asset exceeds its fair market value. estimates of expected future cash flows represent
our best estimate based on currently available information and reasonable and supportable assumptions. any impairment recognized in accordance with aSC 360-
10-40 is permanent and may not be restored. based upon our most recent analysis, which excludes fixed assets classified as held for sale, we believe no further
impairment of long-lived assets existed as of September 30, 2015.
Customer Deposits
Customer deposits primarily include amounts received from customers toward the purchase of boats. We recognize these deposits as revenue at the time of
delivery or acceptance by the customers.
Insurance
We retain varying levels of risk relating to the insurance policies we maintain, most significantly workers’ compensation insurance and employee medical
benefits. We are responsible for the claims and losses incurred under these programs, limited by per occurrence deductibles and paid claims or losses up to pre-
determined maximum exposure limits. Our third-party insurance carriers pay any losses above the pre-determined exposure limits. We estimate our liability for
incurred but not reported losses using our historical loss experience, our judgment, and industry information.
Revenue Recognition
We recognize revenue from boat, motor, and trailer sales, and parts and service operations at the time the boat, motor, trailer, or part is delivered to or
accepted by the customer or the service is completed. We recognize deferred revenue from service operations and slip and storage services on a straight-line basis
over the term of the contract or when service is completed. We recognize commissions earned from a brokerage sale at the time the related brokerage transaction
closes. We recognize commissions earned by us for placing notes with financial institutions in connection with customer boat financing when we recognize the
related boat sales. We recognize marketing fees earned on credit life, accident, disability, gap, and hull insurance products sold by third-party insurance companies
at the later of customer acceptance of the insurance product as evidenced by contract execution or when the related boat sale is recognized. Pursuant to negotiated
agreements with financial and insurance institutions, we are charged back for a portion of these fees should the customer terminate or default on the related finance
or insurance contract before it is outstanding for a stipulated minimum period of time. We base the chargeback allowance, which was not material to the
consolidated financial statements taken as a whole as of September 30, 2015, on our experience with repayments or defaults on the related finance or insurance
contracts.
We also recognize commissions earned on extended warranty service contracts sold on behalf of third-party insurance companies at the later of customer
acceptance of the service contract terms as evidenced by contract execution or recognition of the related boat sale. We are charged back for a portion of these
commissions should the customer terminate or default on the service
F-9
MARINEMAX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
contract prior to its scheduled maturity. We determine the chargeback allowance, which was not material to the consolidated financial statements taken as a whole
as of September 30, 2015, based upon our experience with terminations or defaults on the service contracts.
The following table sets forth percentages of our revenue generated by certain products and services, for each of last three fiscal years.
New boat sales
Used boat sales
Maintenance, repair, storage, and charter services
Finance and insurance products
Parts and accessories
brokerage sales
Total revenue
2013
2014
2015
61.9%
19.4%
8.0%
2.8%
5.5%
2.4%
100.0%
65.2%
16.8%
7.8%
2.6%
5.1%
2.5%
100.0%
64.3%
19.9%
6.9%
2.5%
4.1%
2.3%
100.0%
Stock-Based Compensation
We account for our stock-based compensation plans following the provisions of FaSb accounting Standards Codification 718, “Compensation — Stock
Compensation” (“aSC 718”). in accordance with aSC 718, we use the black-Scholes valuation model for valuing all stock-based compensation and shares
purchased under our employee Stock Purchase Plan. We measure compensation for restricted stock awards and restricted stock units at fair value on the grant date
based on the number of shares expected to vest and the quoted market price of our common stock. We recognize compensation cost for all awards in operations, net
of estimated forfeitures, on a straight-line basis over the requisite service period for each separately vesting portion of the award.
Advertising and Promotional Cost
We expense advertising and promotional costs as incurred and include them in selling, general, and administrative expenses in the accompanying
consolidated statements of operations. Pursuant to aSC 605-50, we net amounts received by us under our co-op assistance programs from our manufacturers
against the related advertising expenses. Total advertising and promotional expenses approximated $9.8 million, $9.5 million, and $10.5 million, net of related co-
op assistance of approximately $419,000, $473,000, and $737,000, for the fiscal years ended September 30, 2013, 2014, and 2015, respectively.
Income Taxes
We account for income taxes in accordance with FaSb accounting Standards Codification 740, “income Taxes” (“aSC 740”). Under aSC 740, we
recognize deferred tax assets and liabilities for the future tax consequences attributable to temporary differences between the financial statement carrying amounts
of existing assets and liabilities and their respective tax basis. We measure deferred tax assets and liabilities using enacted tax rates expected to apply to taxable
income in the years in which we expect those temporary differences to be recovered or settled. We record valuation allowances to reduce our deferred tax assets to
the amount expected to be realized by considering all available positive and negative evidence.
Concentrations of Credit Risk
Financial instruments, which potentially subject us to concentrations of credit risk, consist principally of cash and cash equivalents and accounts receivable.
Concentrations of credit risk with respect to our cash and cash equivalents are limited primarily to amounts held with financial institutions. Concentrations of credit
risk arising from our receivables are limited primarily to amounts due from manufacturers and financial institutions.
Fair Value of Financial Instruments
The carrying amount of our financial instruments approximates fair value resulting from either length to maturity or existence of interest rates that
approximate prevailing market rates unless otherwise disclosed in these consolidated financial statements.
F-10
MARINEMAX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Use of Estimates and Assumptions
The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States requires us to make
estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated
financial statements and the reported amounts of revenues and expenses during the reporting periods. Significant estimates made by us in the accompanying
consolidated financial statements relate to valuation allowances, valuation of goodwill and intangible assets, valuation of long-lived assets, and valuation of
accruals. actual results could differ materially from those estimates.
3. NEW ACCOUNTING PRONOUNCEMENTS:
in May 2014, the FaSb issued accounting Standards Update No. 2014-09, “Revenue from Contracts with Customers (Topic 606)” (aSU 2014-9), a
converged standard on revenue recognition. The new pronouncement requires revenue recognition to depict the transfer of promised goods or services to customers
in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance also specifies the
accounting for some costs to obtain or fulfill a contract with a customer, as well as enhanced disclosure requirements. aSU 2014-9 is effective for annual reporting
periods beginning after December 15, 2017, including interim reporting periods within that reporting period. early adoption is not permitted. We currently do not
believe the adoption of this standard will have a material impact on our consolidated financial statements.
4. ACCOUNTS RECEIVABLE:
Trade receivables consist primarily of receivables from financial institutions, which provide funding for customer boat financing and amounts due from
financial institutions earned from arranging financing with our customers. We normally collect these receivables within 30 days of the sale. Trade receivables also
include amounts due from customers on the sale of boats, parts, service, and storage. amounts due from manufacturers represent receivables for various
manufacturer programs and parts and service work performed pursuant to the manufacturers’ warranties.
The allowance for uncollectible receivables, which was not material to the consolidated financial statements as of September 30, 2014 or 2015, was based
on our consideration of customer payment practices, past transaction history with customers, and economic conditions. When an account becomes uncollectable,
we expense it as a bad debt and we credit payments subsequently received to the bad debt expense account. We review the allowance for uncollectible receivables
when an event or other change in circumstances results in a change in the estimate of the ultimate collectability of a specific account.
accounts receivable, net consisted of the following as of September 30,
Trade receivables
amounts due from manufacturers
Other receivables
5. INVENTORIES:
inventories, net, consisted of the following as of September 30,
New boats, motors, and trailers
Used boats, motors, and trailers
Parts, accessories, and other
F-11
2014
2015
(Amounts in thousands)
7,175 $
4,974
398
12,547 $
13,010
4,879
585
18,474
2014
2015
(Amounts in thousands)
200,318 $
37,191
6,642
244,151 $
230,359
36,992
6,524
273,875
$
$
$
$
MARINEMAX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. PROPERTY AND EQUIPMENT:
Property and equipment consisted of the following as of September 30,
Land
buildings and improvements
Machinery and equipment
Furniture and fixtures
Vehicles
accumulated depreciation and amortization
2014
2015
(Amounts in thousands)
$
$
40,970 $
84,726
23,405
3,787
5,543
158,431
(56,553)
101,878 $
43,090
78,425
24,709
3,199
5,846
155,269
(56,282)
98,987
Depreciation and amortization expense on property and equipment totaled approximately $6.8 million, $7.3 million, and $7.9 million for the fiscal years
ended September 30, 2013, 2014, and 2015, respectively.
7. OTHER ASSETS:
During February 2006, we became party to a joint venture with brunswick that acquired certain real estate and assets of Great american Marina for an
aggregate purchase price of approximately $11.0 million, of which we contributed approximately $4.0 million and brunswick contributed approximately
$7.0 million. The terms of the agreement specify that we operate and maintain the service business and that brunswick operate and maintain the marina business.
Simultaneously with the closing, the acquired entity became Gulfport Marina, LLC (“Gulfport”). We account for our investment in Gulfport in accordance with
FaSb accounting Standards Codification 323, “investment – equity Method and Joint Venture”. accordingly, we adjust the carrying amount of our investment in
Gulfport to recognize our share of earnings or losses, based on the service business we operate. The carrying amount of our investment is included in other long-
term assets on the consolidated balance sheets, and our share of the earnings or losses based on the service business that we operate are included in selling, general
and administrative expenses on the consolidated statements of operations.
approximately $6.7 million of certain real estate assets were classified as held for sale and were included in prepaid expenses and other current assets on the
consolidated balance sheet as of September 30, 2015.
8. SHORT-TERM BORROWINGS:
in October 2015, we entered into an amendment to our inventory Financing agreement (the “amended Credit Facility”), originally entered into in June
2010, as subsequently amended, with Ge Commercial Distribution Finance LLC. The October 2015 amendment extended the maturity date of the Credit Facility to
October 2018, subject to additional extension for two one-year periods, with lender approval. The October 2015 amendment, among other things, modified the
amount of borrowing availability and maturity date of the Credit Facility. The amended Credit Facility provides a floor plan financing commitment of up to $260.0
million, an increase from the previous limit of $235.0 million, subject to borrowing base availability resulting from the amount and aging of our inventory.
The amended Credit Facility has certain financial covenants as specified in the agreement. The covenants include provisions that our leverage ratio must
not exceed 2.75 to 1.0 and that our current ratio must be greater than 1.2 to 1.0. The interest rate for amounts outstanding under the amended Credit Facility is 345
basis points above the one-month London inter-bank Offering Rate (“LibOR”). There is an unused line fee of ten basis points on the unused portion of the
amended Credit Facility.
F-12
MARINEMAX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
advances under the amended Credit Facility are initiated by the acquisition of eligible new and used inventory or are re-advan ces 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 inve ntory. each advance is subject to a curtailment schedule, which requires that we pay down
the balance of each advance on a periodic basis starting after six months. The curtailment schedule varies based on the type and value of the inventory. The
collatera l for the amended Credit Facility is all of our personal property with certain limited exceptions. None of our real estate has been pledged for collateral for
the amended Credit Facility.
as of September 30, 2014 and 2015, our indebtedness associated with financing our inventory and working capital needs totaled approximately $124.4
million and $137.2 million, respectively. as of September 30, 2014 and 2015, the interest rate on the outstanding short-term borrowings was approximately 3.6%
and 3.6%. as of September 30, 2015, our additional available borrowings under our amended Credit Facility were approximately $54.5 million based upon the
outstanding borrowing base availability.
as is common in our industry, we receive interest assistance directly from boat manufacturers, including brunswick. The interest assistance programs vary
by manufacturer, but generally include periods of free financing or reduced interest rate programs. The interest assistance may be paid directly to us or our lender
depending on the arrangements the manufacturer has established. We classify interest assistance received from manufacturers as a reduction of inventory cost and
related cost of sales as opposed to netting the assistance against our interest expense incurred with our lenders.
The availability and costs of borrowed funds can adversely affect our ability to obtain adequate boat inventory and the holding costs of that inventory as
well as the ability and willingness of our customers to finance boat purchases. as of September 30, 2015, we had no long-term debt. However, we rely on our
amended Credit Facility to purchase our inventory of boats. The aging of our inventory limits our borrowing capacity as defined curtailments reduce the allowable
advance rate as our inventory ages. Our access to funds under our amended Credit Facility also depends upon the ability of our lenders to meet their funding
commitments, particularly if they experience shortages of capital or experience excessive volumes of borrowing requests from others during a short period of time.
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 Facility to fund our operations. any inability to utilize our amended Credit Facility could require us to seek other
sources of funding to repay amounts outstanding under the credit agreements or replace or supplement our credit agreements, which may not be possible at all or
under commercially reasonable terms.
Similarly, decreases in the availability of credit and increases in the cost of credit adversely affect the ability of our customers to purchase boats from us and
thereby adversely affect our ability to sell our products and impact the profitability of our finance and insurance activities. Tight credit conditions during fiscal
2009, 2010, and 2011 adversely affected the ability of customers to finance boat purchases, which had a negative effect on our operating results.
9. INCOME TAXES:
The components of our benefit (provision) from income taxes consisted of the following for the fiscal years ended September 30,
Current benefit (provision):
Federal
State
Total current benefit (provision)
Deferred benefit (provision):
Federal
State
Total deferred benefit (provision)
Total income tax benefit (provision)
2013
2014
(Amounts in thousands)
2015
$
$
$
(101) $
995
894 $
—
—
—
894 $
(46) $
(45)
(91) $
—
—
—
(91) $
(209)
(87)
(296)
22,056
5,654
27,710
27,414
F-13
MARINEMAX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
below is a reconciliation of the statutory federal income tax rate to our effective tax rate for the fiscal years ended September 30,
Federal tax benefit (provision)
State taxes, net of federal effect
Stock based compensation
Valuation allowance
Foreign rate differential
Other
effective tax rate
2013
2014
2015
(35.0)%
0.7%
(0.6)%
45.0%
(2.9)%
(0.9)%
6.3%
(35.0)%
(4.4)%
(0.2)%
42.5%
(3.0)%
(0.7)%
(0.8)%
(35.0)%
(3.2)%
(0.4)%
171.5%
(0.3)%
(1.3)%
131.3%
Deferred income taxes reflect the impact of temporary differences between the amount of assets and liabilities recognized for financial reporting purposes
and such amounts recognized for income tax purposes. in addition, the company maintains an excess benefit for share based payments of $5.2 million which may
be used to offset future income taxes payable. The tax effects of these temporary differences representing the components of deferred tax assets (liabilities) as of
September 30,
Current deferred tax assets:
inventories
accrued expenses
Tax loss carryforwards
Current deferred tax assets
Valuation allowance
Net current deferred tax assets
Long-term deferred tax assets:
Depreciation and amortization
Stock based compensation
Tax loss carryforwards
Other
Long-term deferred tax assets
Valuation allowance
Net long-term deferred tax assets
2014
2015
(Amounts in thousands)
$
$
$
$
1,712 $
1,110 $
- $
2,822
(2,822)
— $
6,008 $
3,902 $
24,418
374
34,702
(34,702)
— $
1,361
911
7,560
9,832
(578)
9,254
5,152
3,776
9,890
585
19,403
(1,140)
18,263
Pursuant to aSC 740, we must consider all positive and negative evidence regarding the realization of deferred tax assets. aSC 740 provides for four
possible sources of taxable income to realize deferred tax assets: 1) taxable income in prior carryback years, 2) reversals of existing deferred tax liabilities, 3) tax
planning strategies and 4) projected future taxable income. as of September 30, 2015, we have no available taxable income in prior carryback years, limited
reversals of existing deferred tax liabilities or prudent and feasible tax planning strategies. Therefore, the recoverability of our deferred tax assets is dependent
upon generating future taxable income.
Since the fourth quarter of 2008, the Company has maintained a full valuation allowance against its deferred tax assets, having determined it was more
likely than not that the deferred tax assets would not be realized. The determination of releasing valuation allowances against deferred tax assets is made, in part,
pursuant to our assessment as to whether it is more likely than not that we will generate sufficient future taxable income against which benefits of the deferred tax
assets may or may not be realized. Significant judgment is required in making estimates regarding our ability to generate income in future periods.
in the fourth quarter of 2015, we reached the conclusion that it was appropriate to release our valuation allowance against the majority of our deferred tax
assets due to the sustained positive operating performance of our operations throughout the entire fiscal year and the projection of future taxable income.
additionally, we maintained a cumulative three year income position throughout fiscal year 2015, reached six consecutive quarters of positive pre-tax operating
earnings, and experienced a continued recovery in industry and general economic conditions, all of which were positive factors that overcame prior negative
evidence. We also
F-14
MARINEMAX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
considered forecasts of future operating results and utilization of net operating losses and tax credits prior to their expiration. as a result, we recorded a $ 27.5
million net reversal of substantially all of our deferred tax ass et val uation allowance in the fourth quarter of 2015 after determining it was more likely than not that
certain deferred tax assets would be realized. The total valuation allowance as of September 30, 2014 was $37.5 million.
as of September 30, 2015, we had federal net operating loss (NOL) carryforwards for federal income tax purposes of $31.7 million that will begin to expire
in 2031 which excludes benefits for share based payments of $14.6 million. State NOL carryforwards for state income tax purposes will expire at various dates
through 2032.
Under aSC 740, the impact of uncertain tax positions taken or expected to be taken on an income tax return must be recognized in the financial statements
at the largest amount that is more likely than not to be sustained upon audit by the relevant taxing authority. an uncertain income tax position will not be
recognized in the financial statements unless it is more likely than not of being sustained. as of September 30, 2014 and 2015, we had approximately $234,000 and
$244,000, respectively, of gross unrecognized tax benefits, of which approximately $154,000 and $154,000, respectively, if recognized, would impact the effective
tax rate before considering a change in valuation allowance.
The reconciliation of the total amount recorded for unrecognized tax benefits at the beginning and end of the fiscal years ended September 30, 2014 and
2015 is as follows:
Unrecognized tax benefits at the beginning of the year
increases in tax positions for prior years
Unrecognized tax benefits as of September 30,
2014
2015
(Amounts in thousands)
$
$
224 $
10
234 $
234
10
244
Consistent with our prior practices, we recognize interest and penalties related to uncertain tax positions as a component of income tax expense. as of
September 30, 2014 and 2015, interest and penalties represented approximately $110,000 and $120,000, respectively, of the gross unrecognized tax benefits.
We are subject to tax by both federal and state taxing authorities. Until the respective statutes of limitations expire, we are subject to income tax audits in the
jurisdictions in which we operate. We are no longer subject to U.S. federal tax assessments for fiscal years prior to 2011, and we are not subject to assessments
prior to the 2010 fiscal year for the majority of the state jurisdictions.
We do not expect a change to the total amount of unrecognized tax benefits in the next 12 months based on examinations by tax authorities, the expiration of
statutes of limitations, or potential settlements of outstanding positions.
10. STOCKHOLDERS’ EQUITY:
in april 2015, our board of Directors approved a new share repurchase plan allowing our company to repurchase up to 1,000,000 shares of our common
stock through March 31, 2017. Under the plan, we may buy back common stock from time to time in the open market or in privately negotiated blocks, dependent
upon various factors, including price and availability of the shares, and general market conditions. Through September 30, 2015, we had purchased an aggregate of
1,363,333 shares of common stock under the current and historical share repurchase plans for an aggregate purchase price of approximately $26.3 million.
11. STOCK-BASED COMPENSATION:
We account for our stock-based compensation plans following the provisions of FaSb accounting Standards Codification 718, “Compensation — Stock
Compensation” (“aSC 718”). in accordance with aSC 718, we use the black-Scholes valuation model for valuing all stock-based compensation and shares
purchased under our employee Stock Purchase Plan. We measure compensation for restricted stock awards and restricted stock units at fair value on the grant date
based on the number of shares expected to vest and the quoted market price of our common stock. We recognize compensation cost for all awards in operations, net
of estimated forfeitures, on a straight-line basis over the requisite service period for each separately vesting portion of the award.
F-15
MARINEMAX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Cash received from option exercises under all share-based compensation arrangements for the fiscal years ended September 30, 2013, 2014, and 2015 was
approximately $3.3 million, $4.2 million, and $ 3.7 million, respectively. There were no tax benefits realized for tax de ductions from option exercises for the fiscal
years ended September 30, 2013, 2014, and 2015. We currently expect to satisfy share-based awards with registered shares available to be issued.
12. THE INCENTIVE STOCK PLANS:
During February 2013, our stockholders approved a proposal to amend the 2011 Stock-based Compensation Plan (“2011 Plan”) to increase the 1,200,456
share threshold by 1,000,000 shares to 2,200,456 shares. During January 2011, our stockholders approved a proposal to authorize our 2011 Plan, which replaced
our 2007 incentive Compensation Plan (“2007 Plan”). Our 2011 Plan provides for the grant of stock options, stock appreciation rights, restricted stock, stock units,
bonus stock, dividend equivalents, other stock related awards, and performance awards (collectively “awards”), that may be settled in cash, stock, or other property.
Our 2011 Plan is designed to attract, motivate, retain, and reward our executives, employees, officers, directors, and independent contractors by providing such
persons with annual and long-term performance incentives to expend their maximum efforts in the creation of stockholder value. Subsequent to the February 2013
amendment described above, the total number of shares of our common stock that may be subject to awards under the 2011 Plan is equal to 2,000,000 shares, plus:
(i) any shares available for issuance and not subject to an award under the 2007 Plan, which was 200,456 shares at the time of approval of the 2011 Plan; (ii) the
number of shares with respect to which awards granted under the 2011 Plan and 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 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 2011 Plan or the 2007
Plan. The 2011 Plan terminates in January 2021, and awards may be granted at any time during the life of the 2011 Plan. The date 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 2011 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 option activity from September 30, 2014 through September 30, 2015:
balance as of September 30, 2014
Options authorized
Options granted
Options cancelled/forfeited/expired
Restricted stock awards issued
Options exercised
balance as of September 30, 2015
exercisable as of September 30, 2015
Shares
Available
for Grant
1,350,709
—
(295,000)
105,814
(111,000)
—
1,050,523
Options
Aggregate
Intrinsic
Value
Outstanding
(in thousands)
Weighted
Average
Exercise
Price
2,226,319 $
—
295,000
(105,814)
—
(477,631)
1,937,874 $
1,148,999 $
15,980 $
$
$
$
6,285 $
6,121 $
11.70
—
15.90
24.45
—
6.37
12.95
11.16
Weighted
Average
Remaining
Contractual
Life
6.6
6.5
5.1
The weighted-average grant date fair value of options granted during the fiscal years ended September 30, 2013, 2014, and 2015 was $4.49, $6.23, and
$5.80, respectively. The total intrinsic value of options exercised during the fiscal years ended September 30, 2013, 2014, and 2015 was approximately $3.3
million, $4.5 million, and $8.5 million, respectively.
as of September 30, 2014 and 2015, there were approximately $2.2 million and $2.2 million, respectively, of unrecognized compensation costs related to
non-vested options that are expected to be recognized over a weighted average period of 1.5 years. The total fair value of options vested during the fiscal years
ended September 30, 2013, 2014, and 2015 was approximately $2.5 million, $1.9 million, and $766,000, respectively.
F-16
MARINEMAX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
We used the black-Scholes model to estimate the fair value of options granted. The expected term of options granted is derived from the output of the
option pricing model and represents the period of time th at options granted are expected to be outstanding. Volatility is based on the historical volatility of our
common stock. The risk-free rate for periods within the contractual term of the options is based on the U.S. Treasury yield curve in effect at the ti me of grant.
The following are the weighted-average assumptions used for the fiscal years ended September 30,
Dividend yield
Risk-free interest rate
Volatility
expected life
2013
0.0%
0.6%
80.1%
2014
0.0%
0.7%
55.7%
2015
0.0%
0.9%
47.4%
4.3 years
3.2 years
3.1 years
13. EMPLOYEE STOCK PURCHASE PLAN:
During February 2012, our stockholders approved a proposal to amend our 2008 employee Stock Purchase Plan (“Stock Purchase Plan”) to increase the
number of shares available under that plan by 500,000 shares. The Stock Purchase Plan as amended provides for up to 1,000,000 shares of common stock to be
available for purchase by our regular employees who have completed at least one year of continuous service. in addition, there were 52,837 shares of common
stock available under our 1998 employee Stock Purchase Plan, which have been made available for issuance under our Stock Purchase Plan. The Stock Purchase
Plan provides for implementation of up to 10 annual offerings beginning on the first day of October starting in 2008, with each offering terminating on September
30 of the following year. each annual offering may be divided into two six-month offerings. For each offering, the purchase price per share will be the lower of
(i) 85% of the closing price of the common stock on the first day of the offering or (ii) 85% of the closing price of the common stock on the last day of the offering.
The purchase price is paid through periodic payroll deductions not to exceed 10% of the participant’s earnings during each offering period. However, no participant
may purchase more than $25,000 worth of common stock annually.
We used the black-Scholes model to estimate the fair value of options granted to purchase shares issued pursuant to the Stock Purchase Plan. The expected
term of options granted is derived from the output of the option pricing model and represents the period of time that options granted are expected to be outstanding.
Volatility is based on the historical volatility of our common stock. The risk-free rate for periods within the contractual term of the options is based on the
U.S. Treasury yield curve in effect at the time of grant.
The following are the weighted-average assumptions used for the fiscal years ended September 30,
Dividend yield
Risk-free interest rate
Volatility
expected life
2013
0.0%
0.1%
54.8%
2014
0.0%
0.1%
39.6%
2015
0.0%
0.1%
36.1%
Six months
Six months
Six months
as of September 30, 2015, we had issued 702,689 shares of common stock under our Stock Purchase Plan.
14. RESTRICTED STOCK AWARDS:
We have granted non-vested (restricted) stock awards (“restricted stock”) and restricted stock units (“RSUs”) to certain key employees pursuant to the 2011
Plan and the 2007 Plan. The restricted stock awards have varying vesting periods, but generally become fully vested between two and four years after the grant
date, depending on the specific award. We accounted for the restricted stock awards granted using the measurement and recognition provisions of aSC 718.
accordingly, the fair value of the restricted stock awards is measured on the grant date and recognized in earnings over the requisite service period for each
separately vesting portion of the award.
F-17
MARINEMAX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table summarizes restricted stock award activity from September 30, 2014 through Septe mber 30, 2015:
Non-vested balance as of September 30, 2014
Changes during the period
awards granted
awards vested
Non-vested balance as of September 30, 2015
Shares/
Units
Weighted
Average
Grant Date
Fair Value
3,340 $
6.10
111,000 $
(3,340) $
111,000 $
19.23
6.10
19.23
as of September 30, 2015, we had approximately $1.5 million of total unrecognized compensation cost related to non-vested restricted stock awards. We
expect to recognize that cost over a weighted-average period of 2.1 years.
15. NET INCOME PER SHARE:
The following is a reconciliation of the shares used in the denominator for calculating basic and diluted net income per share for the fiscal years ended
September 30,
Weighted average common shares outstanding used in
calculating basic income per share
effect of dilutive options and non-vested restricted
stock awards
Weighted average common and common equivalent shares
used in calculating diluted income per share
2013
2014
2015
23,253,992
23,916,238
24,466,243
749,736
739,024
636,046
24,003,728
24,655,262
25,102,289
During the fiscal years ended September 30, 2013, 2014, and 2015 there were 1,728,042, 1,144,600, and 1,553,207 weighted average shares of options
outstanding, respectively, that were not included in the computation of diluted income per share because the options’ exercise prices were greater than the average
market price of our common stock, and therefore, their effect would be anti-dilutive.
16. COMMITMENTS AND CONTINGENCIES:
Lease Commitments
We lease certain land, buildings, machinery, equipment, and vehicles related to our dealerships under non-cancelable third-party operating leases. Certain of
our leases include options for renewal periods and provisions for escalation. Rental expenses, including month-to-month rentals, were approximately $5.4 million,
$5.8 million, and $6.0 million for the fiscal years ended September 30, 2013, 2014, and 2015, respectively.
Future minimum lease payments under non-cancelable operating leases as of September 30, 2015, were as follows:
2016
2017
2018
2019
2020
Thereafter
Total
(Amounts
in thousands)
5,350
4,817
4,234
3,428
3,123
11,711
32,663
$
F-18
MARINEMAX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Other Commitments and Contingencies
We are party to various legal actions arising in the ordinary course of business. We believe that these matters should not have a material adverse effect on
our consolidated financial condition, results of operations, or cash flows.
in fiscal 2013 and 2014 we recognized a recovery of approximately $11.7 million and $555,000, net of taxes and other expenses, respectively, from the
Deepwater Horizon Settlement Program for damages suffered as a result of the Deepwater Horizon Oil Spill. The recovery was recorded as a reduction in selling,
general, and administrative expenses on our consolidated statements of operations. While additional claims are outstanding, we cannot be certain of the amount of
any further recovery.
During the fiscal years ended September 30, 2013, 2014, and 2015, we incurred costs associated with store closings and lease terminations of approximately
$162,000, $217,000, and $581,000, respectively. These costs primarily related to the future minimum operating lease payments of the closed locations. The store
closings were a key component in our effort to better match our fixed costs with the decline in retail business caused by the soft economic conditions. The store
closing costs have been included in selling, general, and administrative expenses in the consolidated statements of operations during the fiscal years ended
September 30, 2013, 2014, and 2015.
in connection with certain of our workers’ compensation insurance policies, we maintain standby letters of credit for our insurance carriers in the amount of
$1.4 million relating primarily to retained risk on our workers compensation claims.
We are subject to federal and state environmental regulations, including rules relating to air and water pollution and the storage and disposal of gasoline, oil,
other chemicals and waste. We believe that we are in compliance with such regulations.
17. EMPLOYEE 401(k) PROFIT SHARING PLANS:
employees are eligible to participate in our 401(k) Profit Sharing Plan (the “Plan”) following their 90-day introductory period starting either april 1 or
October 1, provided that they are 21 years of age. Under the Plan, we match 25% of participants’ contributions, up to a maximum of 5% of each participant’s
compensation. We contributed, under the Plan, or pursuant to previous similar plans, approximately $440,000, $463,000, and $605,000 for the fiscal years ended
September 30, 2013, 2014, and 2015, respectively.
F-19
MARINEMAX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
18. QUARTERLY FINANCIAL DATA (UNAUDITED):
The following table sets forth certain unaudited quarterly financial data for each of our last eight quarters. The information has been derived from unaudited
financial statements that we believe reflect all adjustments, consisting only of normal recurring adjustments, necessary for the fair presentation of such quarterly
financial information.
Revenue
Cost of sales
Gross profit
Selling, general,
and administrative
expenses
(Loss) income from
operations
interest expense
(Loss) income before
income tax benefit
(provision)
income tax benefit
(provision)
Net (loss) income
Net (loss) income
per share:
Diluted
Weighted average
number of shares:
Diluted
December 31,
2013
March 31,
2014
$
109,592 $
79,682
29,910
136,615 $
101,829
34,786
September
30,
2014
December 31,
2014
June 30,
March 31,
2015
2014
(Amounts in thousands except share and per share data)
214,401 $
160,195
54,206
164,084 $
121,168
42,916
158,126 $
120,671
37,455
172,143 $
129,943
42,200
June 30,
2015
September
30,
2015
231,849 $
174,809
57,040
189,252
141,180
48,072
32,282
35,687
41,652
36,823
36,095
40,557
41,049
41,734
(2,372)
997
(901)
1,078
12,554
1,051
6,093
885
1,360
1,146
1,643
1,253
15,991
1,141
6,338
914
(3,369)
(1,979)
11,503
5,208
214
390
14,850
5,424
—
(3,369) $
—
(1,979) $
—
11,503 $
(91)
5,117 $
$
—
214 $
—
390 $
—
14,850 $
27,414
32,838
$
(0.14) $
(0.08) $
0.47 $
0.21 $
0.01 $
0.02 $
0.59 $
1.32
23,715,945 23,845,302 24,719,369 24,813,777 24,947,968 25,265,857 25,316,092 24,883,360
F-20
LIST OF SUBSIDIARIES
Name
MarineMax east, inc. (1)
MarineMax Services, inc. (2)
MarineMax Northeast, LLC (2)
boating Gear Center, LLC (2)
US Liquidators, LLC (1)
Newcoast Financial Services, LLC (2)
My Web Services, LLC (1)
MarineMax Charter Services, LLC (2)
MarineMax Vacations, LTD (2)
(1) Wholly owned subsidiary of MarineMax, inc.
(2) Wholly owned subsidiary of MarineMax east, inc.
Exhibit 21
State or Jurisdiction of
Incorporation or Organization
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
british Virgin islands
Consent of Independent Registered Public Accounting Firm
Exhibit 23.1
The board of Directors and Stockholders
MarineMax, inc.:
We consent to the incorporation by reference in the registration statements on Form S-8 (Nos. 333-141657, 333-83332, 333-63307, 333-156358 and 333-
177019) of MarineMax, inc. and subsidiaries of our reports dated December 8, 2015, with respect to the consolidated balance sheets of MarineMax, inc. and
subsidiaries as of September 30, 2015 and 2014 and the related statements of operations, stockholders’ equity and cash flows for each of the years in the three-year
period ended September 30, 2015, and the effectiveness of internal control over financial reporting as of September 30, 2015 which reports appear in the September
30, 2015 annual report on Form 10-K of MarineMax, inc.
/s/ KPMG LLP
Tampa, Florida
December 8, 2015
Certified Public accountants
Exhibit 31.1
i, William H. McGill Jr., certify that:
1. i have reviewed this report on Form 10-K of MarineMax, inc.;
CERTIFICATION
2. based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the
financial condition, results of operations, and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and i are responsible for establishing and maintaining disclosure controls and procedures (as defined in exchange
act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in exchange act Rules 13a-15(f) and 15d-15(f)) for the registrant and
have:
a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;
b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes
in accordance with generally accepted accounting principles;
c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and
d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent
fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the
registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and i have disclosed, based on our most recent evaluation of internal control over financial reporting, to the
registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control
over financial reporting.
Date: December 8, 2015
/s/ W iLLiaM H. M C G iLL , J R .
William H. McGill Jr.
Chief Executive Officer
(Principal Executive Officer)
Exhibit 31.2
i, Michael H. McLamb, certify that:
1. i have reviewed this report on Form 10-K of MarineMax, inc.;
CERTIFICATION
2. based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the
financial condition, results of operations, and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and i am responsible for establishing and maintaining disclosure controls and procedures (as defined in exchange
act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in exchange act Rules 13a-15(f) and 15d-15(f)) for the registrant and
have:
a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;
b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes
in accordance with generally accepted accounting principles;
c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and
d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent
fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the
registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and i have disclosed, based on our most recent evaluation of internal control over financial reporting, to the
registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control
over financial reporting.
Date: December 8, 2015
/s/ M iCHaeL H. M C L aMb
Michael H. McLamb
Chief Financial Officer
(Principal Financial Officer)
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 32.1
in connection with the annual Report on Form 10-K of MarineMax, inc. (the “Company”) for the year ended September 30, 2015, as filed with the
Securities and exchange Commission on the date hereof (the “Report”), i, William H. McGill Jr., Chief executive Officer of the Company, certify, to my best
knowledge and belief, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley act of 2002, that:
(1)
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities exchange act of 1934 (15 U.S.C. 78m(a) or 78o(d));
and
(2)
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: December 8, 2015
/s/ W iLLiaM H. M C G iLL J R .
William H. McGill Jr.
Chief executive Officer
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 32.2
in connection with the annual Report on Form 10-K of MarineMax, inc. (the “Company”) for the year ended September 30, 2015, as filed with the
Securities and exchange Commission on the date hereof (the “Report”), i, Michael H. McLamb, Chief Financial Officer of the Company, certify, to my best
knowledge and belief, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley act of 2002, that:
(1)
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities exchange act of 1934 (15 U.S.C. 78m(a) or 78o(d));
and
(2)
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: December 8, 2015
/s/ M iCHaeL H. M C L aMb
Michael H. McLamb
Chief Financial Officer