UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-K
☑ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended September 30, 2018
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 ☐ No ☑
indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the act. Yes ☐ No ☑
indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities exchange act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the
past 90 days. Yes ☑ No ☐
indicate by check mark whether the registrant has submitted electronically every interactive Data File required to be submitted pursuant to Rule 405 of
Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes
☑ No ☐
indicate by check mark if disclosure of delinquent filers pursuant to item 405 of Regulation S-K (§ 229.450 of this chapter) is not contained herein, and will not
be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part iii of this Form 10-K or any
amendment to this Form 10-K. ☐
indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an
emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in
Rule 12b-2 of the exchange act.
Large accelerated filer
Non-accelerated filer
☐
☐
accelerated filer
Smaller reporting company
emerging growth company
☑
☐
☐
if an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or
revised financial accounting standards provided pursuant to Section 13(a) of the exchange act. ☐
indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the act). Yes ☐ No ☑
The aggregate market value of common stock held by non-affiliates of the registrant (21,154,772 shares) based on the closing price of the registrant’s common
stock as reported on the New York Stock exchange on March 30, 2018, which was the last business day of the registrant’s most recently completed second fiscal
quarter, was $411,460,315. For purposes of this computation, all officers and directors of the registrant are deemed to be affiliates. Such determination should not
be deemed to be an admission that such officers and directors are, in fact, affiliates of the registrant.
as of November 26, 2018, there were outstanding 27,282,316 shares of the registrant’s common stock, par value $.001 per share.
Documents Incorporated by Reference
Portions of the registrant’s definitive proxy statement for the 2019 annual Meeting of Shareholders are incorporated by reference into Part iii of this report.
MARINEMAX, INC.
ANNUAL REPORT ON FORM 10-K
Fiscal Year Ended September 30, 2018
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
1
22
36
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39
39
39
42
43
52
52
52
52
55
56
56
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57
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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 2019 and thereafter; our belief that our
practices enhance our ability to attract more customers, foster an overall enjoyable boating experience, and offer boat manufacturers stable and professional retail
distribution and a broad geographic presence; our assessment of our competitive advantages, including our hassle-free sales approach, prime retail locations,
premium product offerings, extensive facilities, strong management and team members, and emphasis on customer service and satisfaction before and after a boat
sale; our belief that our core values of customer service and satisfaction and our strategies for growth and enhancing our business, including without limitation, our
acquisition strategies and pursuit of contract manufacturing and vertical integration, will enable us to achieve success and long-term growth as economic conditions
continue to recover; and our belief that our retailing strategies are aligned with the desires of consumers. 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 and yacht retailer in the United States. Through 63 retail locations in alabama, Connecticut, Florida, Georgia,
Maryland, Massachusetts, Minnesota, Missouri, New Jersey, New York, North Carolina, Ohio, Oklahoma, Rhode island, South Carolina and Texas, we sell new
and used recreational boats, including pleasure 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; yacht charter services; and we operate a yacht charter business in the british Virgin
islands.
We are the nation’s largest retailer of Sea Ray and boston Whaler recreational boats and yachts which are manufactured by brunswick Corporation
(“brunswick”). Sales of new brunswick boats accounted for approximately 40% of our revenue in fiscal 2018. Sales of new Sea Ray and boston Whaler boats,
both divisions of brunswick, accounted for approximately 21% and 17%, respectively, of our revenue in fiscal 2018. brunswick is a world leading manufacturer of
marine products and marine engines. We believe our sales represented approximately 12% of all brunswick marine sales, including approximately 42% of its Sea
Ray boat sales, during our fiscal 2018. 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 Harris aluminum boats, a division of brunswick,
in most of our geographic markets. We also are the exclusive dealer for italy-based azimut-benetti Group, or azimut, for azimut mega-yachts, yachts, and other
recreational boats for the United States. Sales of new azimut boats and yachts accounted for approximately 11% of our revenue in fiscal 2018. 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 28 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 2018 was
approximately $203,000, a slight increase from approximately $195,000 in fiscal 2017, compared with the industry average selling price for calendar 2017 of
approximately $48,000 based on industry data published by the National Marine Manufacturers association. Our stores that operated at least 12 months averaged
approximately $19.9 million in annual sales in fiscal 2018. We consider a store to be one or more retail locations that are adjacent or operate as one entity. Our
same-store sales increased 22% in fiscal 2016, increased 5% in fiscal 2017 and increased 10% in fiscal 2018.
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 $39.0 billion in retail sales in calendar 2017, which is down slightly from the peak of $39.5
billion in calendar 2006. Total powerboats sold in calendar 2017 were approximately 199,100 units as compared to 298,100 units sold in calendar 2006. The retail
sales include sales of new and used boats; marine products, such as engines, trailers, equipment, and accessories; and related expenditures, such as fuel, insurance,
docking, storage, and repairs. Retail sales of new and used boats, engines, trailers, and accessories accounted for approximately $29.8 billion of these sales in 2017
based on industry data from the National Marine Manufacturers association. The highly-fragmented retail boating industry generally consists of small dealers that
operate in a single market and provide varying degrees of merchandising, professional management, and customer service. We believe that many small dealers
find it increasingly difficult to make the managerial and capital commitments necessary to achieve higher customer service levels and upgrade systems and
facilities as required by boat manufacturers and often demanded by customers. We also believe that many dealers lack an exit strategy for their owners. We
believe these factors contribute to our opportunity to gain a competitive advantage in current and future markets, through market expansions and acquisitions.
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Strategy
Our goal is to enhance our position as the nation’s leading recreational boat and yacht retailer. Key elements of our operating and growth strategy include
the following:
•
•
•
•
•
•
•
•
•
•
•
emphasizing customer satisfaction and loyalty by creating an overall enjoyable boating experience, beginning with a hassle-free purchase process,
superior products, 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, as well as pursuing contract manufacturing or vertical integration strategies as opportunities arise;
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 28 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 potentially acquiring recreational boat dealers to expand our geographic
scope, expanding our product lines, opening new retail locations within or outside our existing territories, and offering new products and services for our customers
and by potentially acquiring companies to pursue contract manufacturing or vertical integration strategies.
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acquisitions of additional recreational boat dealers represent an important strategy in our goal to enhance our position as t he 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. (5)
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
bahia Mar Marina
Russo Marine
Hall Marine Group
island Marine Center
Tera Miranda
bay Pointe Marina
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
January 2016
april 2016
January 2017
January 2018
april 2018
September 2018
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
Florida Panhandle
eastern Massachusetts and Rhode island
North Carolina, South Carolina and Georgia
New Jersey
Oklahoma
Massachusetts
(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)
initially a joint venture; full ownership acquired in February 2016.
3
(5) We subsequently sold the operations of Seaside Marine, inc.
apart from acquisitions, we have opened 34 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 65 retail locations since March 1998, excluding those opened on a temporary basis for a specific purpose, including
26 in fiscal 2009 and a total of four during the last three fiscal years.
as a part of our acquisition strategy, we frequently engage in discussions with various recreational boat dealers regarding their potential acquisition by
us. in connection with these discussions, we and each potential acquisition candidate exchange confidential operational and financial information; conduct due
diligence inquiries; and consider the structure, terms, and conditions of the potential acquisition. in certain cases, the prospective acquisition candidate agrees not
to discuss a potential acquisition with any other party for a specific period of time, grants us an option to purchase the prospective dealer for a designated price
during a specific time period, and agrees to take other actions designed to enhance the possibility of the acquisition, such as preparing audited financial information
and converting its accounting system to the system specified by us. Potential acquisition discussions frequently take place over a long period of time and involve
difficult business integration and other issues, including in some cases, management succession and related matters. as a result of these and other factors, a
number of potential acquisitions that from time to time appear likely to occur do not result in binding legal agreements and are not consummated.
in addition to acquiring recreational boat dealers and opening new retail locations, we also add new product lines to expand our operations. The following
table sets forth certain of our current product lines that we have added to our existing locations during the years indicated.
Product Line
boston Whaler
Hatteras Yachts
Grady-White
boston Whaler
azimut & atlantis
Grady-White
azimut
boston Whaler
Harris
Nautique by Correct Craft
Harris
Crest
azimut
Scout
Sailfish
Scarab Jet boats
atlantis
Ocean alexander Yachts
Scout
aquila
Galeon
Grady-White
Sea Pro
Yamaha Jet boats
bennington
Mastercraft
NauticStar
Tigé
Geographic Regions
West Central Florida, Stuart, Florida, Dallas, Texas
Florida
Houston, Texas
North and South Carolina (2004), Houston, Texas (2005)
Northeast United States from Maryland to Maine
Pensacola, Florida (2006), Jacksonville, Florida (2010)
Florida
Southwest Florida (2009), Pompano beach, Florida (2012)
Missouri, Minnesota, and New Jersey
West Central Florida, Georgia, Minnesota, and Missouri,
West Central Florida (2011), alabama (2012), North and Southwest Florida
(2012), Wrightsville, North Carolina (2012), and Texas (2012)
Georgia (2011), Oklahoma (2012), North Carolina and South Carolina
(2012), New Jersey (2015), Florida (2018)
United States other than where previously held
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 america, Central america, and South america
Miami, Florida
Florida (2016), North Carolina (2017), and South Carolina (2017)
Georgia, North Carolina, and South Carolina
South Carolina
South Carolina
Panama City, Florida, Oklahoma, Missouri, Minnesota, North
Carolina and South Carolina
Orlando, Florida, Oklahoma, and Georgia
Fiscal Year
1998
1999
2002
2004-2005
2006
2006-2010
2008
2009-2012
2010
2010
2011-2012
2011-2018
2012
2012
2013
2013
2013
2014
2014
2014
2015
2016
2016-2017
2017
2017
2018
2018
2018
4
We add brands with the intent to either offer a migration path for our existing customer base or fill a gap in our product offerings. as a result, we believe
that new brands we offer are generally complementary and do not negatively impact the business generated from our other prominent brands. We also discontinue
offering product lines from time to time, primarily based upon customer preferences.
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 approaching $1.2 billion. Our revenue and net income increased in seven of those nine years over the prior year revenue and net income. This
period was marked by an increase in retail locations from 41 on September 30, 1998 to 88 on September 30, 2007, resulting from acquisitions and opening new
stores in existing territories.
Our growth was interrupted during the fiscal year ended September 30, 2007, primarily as a result of factors related to the deteriorating housing market and
general economic conditions. The substantially deteriorating economic and financial conditions, reduced consumer confidence and spending, increased fuel prices,
reduction of credit availability, financial market declines, and asset value deterioration all contributed to substantially lower financial performance in the fiscal
years ended September 30, 2008 and 2009, including significant net losses, followed by pre-tax losses in the fiscal years ended September 30, 2010 and 2011. We
returned to profitability in fiscal 2012 and have continued to be profitable through fiscal 2018.
as industry conditions continue to recover, we strive to maintain our core values of high customer service and satisfaction and plan to continue to pursue
strategies that we believe will enable us to achieve long-term success and growth. as noted in the earlier table, we have capitalized on a number of brand expansion
opportunities in the markets in which we operate. We believe our expanded product offerings have strengthened our same-store sales growth. We plan to further
expand our business through both acquisitions in new territories and new store openings in existing territories. in addition, we plan to continue to expand our other
traditional 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 28
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”). The SeC maintains an internet site, located at http://www.sec.gov, that contains reports, proxy and information
statements and other information regarding the Registrant and other issuers that file electronically with the SeC. We also post on our website the charters of our
audit, Compensation, and Nominating/Corporate Governance Committees; our Corporate Governance Guidelines, Code of business Conduct and ethics, and Code
of ethics for the CeO and Senior Financial Officers, and any amendments or waivers thereto; and any other corporate governance materials contemplated by the
SeC or the regulations of the New York Stock exchange, or NYSe. These documents are also available in print to any stockholder requesting a copy from our
corporate secretary at our principal executive offices. because our common stock is listed on the NYSe, our Chief executive Officer is required to make an annual
certification to the NYSe stating that he is not aware of any violation by us of the corporate governance listing standards of the NYSe. Our Chief executive
Officer made his annual certification to that effect to the NYSe on March 8, 2018.
General
Business
We are the largest recreational boat and yacht retailer in the United States. Through 63 retail locations in alabama, Connecticut, Florida, Georgia,
Maryland, Massachusetts, Minnesota, Missouri, New Jersey, New York, North Carolina, Ohio, Oklahoma, Rhode island, South Carolina and Texas, we sell new
and used recreational boats, including pleasure boats (such as sport
5
boa ts, sport cruisers, sport yachts, and yachts), and fishing boats, with a focus on premium brands in each segment. We also offer the cha rter of power catamarans
in the british Virgin islands.
We are the nation’s largest retailer of Sea Ray and boston Whaler recreational boats and yachts, which are manufactured by brunswick Corporation, or
brunswick. Sales of new brunswick boats accounted for approximately 40% of our revenue in fiscal 2018. Sales of new Sea Ray and boston Whaler boats, both
divisions of brunswick, accounted for approximately 21% and 17%, respectively, of our revenue in fiscal 2018. brunswick is a world leading manufacturer of
marine products and marine engines. We believe our sales represented approximately 12% of all brunswick marine sales, including approximately 42% of its Sea
Ray boat sales, during our fiscal 2018. 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 Harris aluminum boats, a division of brunswick,
in most of our geographic markets. We also are the exclusive dealer for italy-based azimut-benetti Group, or azimut, for azimut mega-yachts, yachts, and other
recreational boats for the United States. Sales of new azimut boats and yachts accounted for approximately 11% of our revenue in fiscal 2018. additionally, we are
the exclusive dealer for certain other premium brands that serve specific industry segments in our markets as shown by the table on page four.
We also are involved in other boating-related activities. We sell used boats at our retail locations, online, and at various third-party marinas and other offsite
locations; we sell marine engines and propellers, primarily to our retail customers as replacements for their existing engines and propellers; we sell a broad variety
of parts and accessories at our retail locations and at various offsite locations, and through our print catalog; we offer maintenance, repair, and slip and storage
services at most of our retail locations; we offer finance and insurance, or F&i, products at 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 yachts in exotic locations.
U.S. Recreational Boating Industry
The U.S. recreational boating industry generated approximately $39.0 billion in retail sales in calendar 2017, which is down slightly 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 $29.8 billion of such sales in calendar 2017. Total powerboats sold in calendar 2017 were approximately 199,100 units as compared to
298,100 units sold in calendar 2006. To provide historical perspective, annual retail recreational boating sales were $17.9 billion in 1988, but declined to a low of
$10.3 billion in 1992 based on industry data published by the National Marine Manufacturers association. We believe this decline was attributable to several
factors, including a recession, the Gulf War, and the imposition throughout 1991 and 1992 of a luxury tax on boats sold at prices in excess of $100,000. The luxury
tax was repealed in 1993, and retail boating sales increased each year thereafter except for 1998, 2003, and 2007 through 2010. We believe recreational boating has
a natural appeal to consumers, along with other outdoor activities, and will continue to grow in favorable economic conditions absent any unusual industry
headwinds (see Risk Factors).
The recreational boat retail market remains highly fragmented with little consolidation having occurred to date and consists of numerous boat retailers, most
of which are small companies owned by individuals that operate in a single market and provide varying degrees of merchandising, professional management, and
customer service. We believe that many boat retailers are encountering increased pressure from boat manufacturers to improve their levels of service and systems,
increased competition from larger national retailers in certain product lines, and, in certain cases, business succession issues.
Strategy
Our goal is to enhance our position as the nation’s leading recreational boat and yacht retailer. Key elements of our operating and growth strategy include
the following.
Emphasizing Customer Satisfaction and Loyalty . We seek to achieve a high level of customer satisfaction and establish long-term customer loyalty by
creating an overall enjoyable boating experience beginning with a hassle-free purchase process. We seek to further enhance and simplify the purchase process by
helping to arrange financing and insurance at our retail locations with competitive terms and streamlined turnaround. We offer the customer a thorough in-water
orientation of boat operations where available, as well as ongoing boat safety, maintenance, and use seminars and demonstrations for the customer’s entire
family. We also continue our customer service after the sale by leading and sponsoring MarineMax Getaways!® group boating trips to various destinations,
rendezvous gatherings, and on-the-water organized events to provide our customers with pre-arranged opportunities to enjoy the pleasures of the boating
lifestyle. We also endeavor to provide superior maintenance and repair services, often through mobile service at the customer’s wet slip and with extended service
department hours and emergency service availability, that minimize the hassles of boat maintenance.
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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, p urchasing and distribution, management information systems and
cybersecurity . Centralization of these functions reduces duplicative e xpenses 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 bo at
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 adv ertising. The ability of our retail locations to offer the complementary
services of our other retail locations, such as offering customers MarineMax Getaways! ® excursions, providing maintenance and repair services at the customer’s
boat location, and giv ing access to broader inventory selections, increases the competitiveness of each retail location. by centralizing these types of activities, our
general managers have more time to focus on the customer and the development of their teams.
Promoting Brand Name Recognition and the MarineMax Connection . We are promoting our brand name recognition to take advantage of our status as the
nation’s largest recreational boat and yacht retailer. This strategy also recognizes that many existing and potential customers who reside in Northern markets and
vacation for substantial periods in Southern markets will likely prefer to purchase and service their boats from the same well-known company. We refer to this
strategy as the “MarineMax Connection.” as a result, our signage emphasizes the MarineMax name at each of our locations, and we conduct national advertising in
various print and other media.
Offering Additional Products and Services, Including Those Involving Higher Profit Margins . We plan to continue to offer additional product lines and
services throughout our dealerships and, when appropriate, online and various offsite locations. We are increasingly offering throughout our dealerships product
lines that previously have been offered only at certain of our locations. We also obtain additional product lines through the acquisition of distribution rights
directly from manufacturers and the acquisition of dealerships with distribution rights. in either situation, such expansion is typically done through agreements that
appoint us as the exclusive dealer for a designated geographic territory. We plan to continue to grow our financing and insurance, parts and accessories, service,
and boat storage businesses to better serve our customers and thereby increase revenue and improve profitability of these higher margin businesses. We also have
implemented programs to increase the generation of leads and sales of boats over the internet. in addition, we have established a yacht charter business and are
conducting programs to sell used boats, offer F&i products, and sell boating parts and accessories at various offsite locations.
Marketing over the Internet . Our web initiatives span across multiple websites, including our core site, www.MarineMax.com . The websites provide
customers with the ability to learn more about our company and our products. Our website generates direct sales and provides our stores with leads to potential
customers for new and used boats, brokerage sales, finance and insurance products, and repair and maintenance services. in addition, we utilize various feeder
websites and social networking websites to drive additional traffic and leads for our various product and service offerings. as mentioned above, we also maintain
multiple online storefronts for customers to submit an inquiry, purchase boats, and purchase a wide variety of boating parts and accessories.
Pursuing Strategic Acquisitions . One of our strategies is to capitalize upon the significant consolidation opportunities available in the highly fragmented
recreational boat dealer industry by acquiring independent dealers and improving their performance and profitability through the implementation of our operating
strategies. The primary acquisition focus is on well-established, high-end recreational boat dealers in geographic markets not currently served by us, particularly
geographic markets with strong boating demographics, such as areas within the coastal states and the Great Lakes region. We also may seek to acquire boat dealers
that, while located in attractive geographic markets, have not been able to realize favorable market share or profitability and that can benefit substantially from our
systems and operating strategies. We may expand our range of product lines, service offerings, and market penetration by acquiring companies that distribute
recreational boat product lines or boating-related services different from those we currently offer. also, we may consider contract manufacturing or vertical
integration strategies as opportunities arise. 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.”
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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 su pport the opening of additional facilities, and we have open ed 34 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 location s 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 6 5 retail locations, excluding those opened on a temporary basis for a specific purpos e, including 26 in fiscal 2009 and a total of four during the last
three fisca l years .
Emphasizing Employee Recruitment and Retention through Training, Motivation, and Development . We devote substantial efforts to recruit employees that
we believe to be exceptionally well qualified for their position and to train our employees to understand our core retail philosophies, which focus on making the
purchase of a boat and its subsequent use as hassle-free and enjoyable as possible. Through our MarineMax University, or MMU, we teach our retail philosophies
to existing and new employees at various locations and online, through MMU-online. MMU is a modularized and instructor-led educational program that focuses
on our retailing philosophies and provides instruction on such matters as the sales process, customer service, F&i, accounting, leadership, and human resources.
Emphasizing Best Practices . We emphasize the best practices developed by us and our acquired dealers as appropriate throughout our locations. as an
example, we have implemented a hassle-free approach at each of our dealerships. Under the MarineMax One Price hassle-free sales approach, we sell our boats at
prices generally representing a discount from the manufacturer’s suggested retail price, thereby eliminating the anxieties of price negotiations that occur in most
boat purchases. in addition, we adopt the best practices developed by us and our acquired dealers as applicable, considering location, design, layout, product
purchases, maintenance and repair services (including extended service hours and mobile or dockside services), product mix, employee training, and customer
education and services.
Operating with Decentralized Management . We maintain a generally decentralized approach to the operational management of our dealerships. The
decentralized management approach takes advantage of the extensive experience of local managers, enabling them to implement policies and make decisions,
including the appropriate product mix, based on the needs of the local market. Local management authority also fosters responsive customer service and promotes
long-term community and customer relationships. in addition, the centralization of certain administrative functions at the corporate level enhances the ability of
local managers to focus their efforts on day-to-day dealership operations and the customers.
Utilizing Technology Throughout Operations . We believe that our management information system, which currently is being utilized by each of our
dealerships and was developed over a number of years through cooperative efforts with a common vendor, enhances our ability to integrate successfully the
operations of our dealerships and future acquired dealers. The system facilitates the interchange of information and enhances cross-selling opportunities throughout
our Company. The system integrates each level of operations on a Company-wide basis, including but not limited to purchasing, inventory, receivables, payables,
financial reporting, budgeting, and sales management. The system also provides sales representatives with prospect and customer information that aids them in
tracking the status of their contacts with prospects, automatically generates follow-up correspondence to such prospects, facilitates the availability of boats
Company-wide, locates boats needed to satisfy particular customer requests, and monitors the maintenance and service needs of customers’ boats. Our
representatives also utilize the computer system to assist in arranging customer financing and insurance packages. Our managers use a web-based tool to access
essentially all financial and operational data from anywhere at any time.
Products and Services
We offer new and used recreational boats and related marine products, including engines, trailers, parts, and accessories. While we sell a broad range of
new and used boats, we focus on premium brand products. in addition, we assist in arranging related boat financing, insurance, and extended service contracts;
provide boat maintenance and repair services; offer slip and storage accommodations; provide boat and yacht brokerage sales; and conduct a yacht charter business.
New Boat Sales
We primarily sell recreational boats, including pleasure boats and fishing boats. a number of the products we offer are manufactured by brunswick, a
leading worldwide manufacturer of recreational boats and yachts, including Sea Ray pleasure boats, boston Whaler fishing boats, and Harris aluminum boats. Sales
of new brunswick boats accounted for approximately 40% of our revenue in fiscal 2018. Sales of new Sea Ray and boston Whaler boats, both divisions of
brunswick, accounted for approximately 21% and 17%, respectively, of our revenue in fiscal 2018. We believe our sales represented approximately 12% of all
brunswick marine sales, including approximately 42% of its Sea Ray boat sales, during our fiscal 2018. 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
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boats and yachts accounted for approximately 11 % of our revenue in fiscal 2018 . During fiscal 2018 , new boat sales accounted for approximately 71.2 % or $ 839
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
2018 average new boat sales price of approximately $203,000 a slight increase from approximately $195,000 in fiscal 2017, compared with an estimated industry
average selling price for calendar 2017 of approximately $48,000 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.
The following table is illustrative of the range and approximate manufacturer suggested retail price range of new boats that we currently offer, but is not all
inclusive.
Product Line and Trade Name
Motor Yachts
azimut
Hatteras Motor Yachts
Ocean alexander Yachts
Convertibles
Hatteras Convertibles
Pleasure Boats
Sea Ray
atlantis
aquila
Galeon
NauticStar
Pontoon Boats
Harris
Crest
bennington
Fishing Boats
boston Whaler
Grady White
Scout
Sailfish
Sea Pro
Ski Boats
Nautique by Correct Craft
Tigé
Mastercraft
Jet Boats
Scarab
Yamaha Jet boats
Overall Length
40’ to 120’+
60’ to 100’+
70’ to 155’+
45’ to 77’+
19’ to 65’
43’ to 50’
36’ to 48’
30’ to 78’
19’ to 28’
16’ to 27’
19’ to 25’
17’ to 25’
11’ to 42’
18’ to 45’
17’ to 53’
19’ to 32’
17’ to 24’
20’ to 25’
20’ to 23’
20’ to 26’
16’ to 26’
19’ to 24’
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+
480,000 to 1,200,000
400,000 to 3,600,000
25,000 to 125,000
15,000 to 150,000
20,000 to 150,000
20,000 to 150,000
12,000 to 1,000,000
40,000 to 1,000,000
20,000 to 1,750,000
35,000 to 300,000
30,000 to 120,000
70,000 to 190,000
70,000 to 160,000
70,000 to 190,000
20,000 to 80,000
30,000 to 75,000
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
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tournament-class competitor. Hatteras features interiors that offer luxurious salon/galley arrangements, multiple staterooms with private heads, and a cockpit that
includes a bait and tackle center, fishbox, and freezer.
Pleasure Boats . Sea Ray pleasure boats target both the luxury and the family recreational boating markets and come in a variety of configurations to suit
each customer’s particular recreational boating style. Sea Ray pleasure boats feature custom instrumentation that may include an electronics package; various hull,
deck, and cockpit designs that can include a swim platform; bow pulpit and raised bridge; and various amenities, such as swivel bucket helm seats, lounge seats,
sun pads, wet bars, built-in ice chests, and refreshment centers. Most Sea Ray pleasure boats feature Mercury or MerCruiser engines. We believe atlantis sport
cruisers offer a unique-on-the-water experience with the azimut expertise expressed in a design concept that merges sportiness with the comfort and relative ease
of navigation. Galeon specializes in luxury yacht and motor boats with over thirty years of experience. Galeon is one of europe’s leading and premier boat
manufacturers. We believe Galeon yachts combine the latest technology, hand crafted excellence, unparalleled attention to detail, superb performance, and great
innovative designs with modern styling and convenience. aquila power catamarans provide form, function, and offer practicality and comfort with trend setting
innovation. We believe NauticStar provides sport deck boats that combine comfort, features, economy, and versatility that make NauticStar a popular choice among
experienced boaters.
Pontoon Boats . Harris is a pontoon industry leader and offers a variety of some of the most innovative, luxurious, and premium pontoon models to fit
boaters’ needs. Harris is known for exceptional performance combined with a stable and safe platform. Crest provides a variety of pontoon models that are
designed to provide extreme levels of quality, safety, style and comfort to meet family recreational needs. bennington offers what we believe to be industry leading
design, meticulous craftsmanship, and a quiet, smooth, ride. With a variety of designs and options, the pontoon boats we offer appeal to a broad audience of
pontoon boat enthusiasts and existing customers.
Fishing Boats . The fishing boats we offer, such as boston Whaler, Grady-White, Scout, Sailfish, and Sea Pro, range from entry level models to advanced
models designed for fishing and water sports in lakes, bays, and off-shore waters, with cabins with limited live-aboard capability. The fishing boats typically
feature livewells, in-deck fishboxes, rodholders, rigging stations, cockpit coaming pads, and fresh and saltwater washdowns.
Ski Boats . The ski boats we offer are Nautique by Correct Craft, Tigé, and Mastercraft, which range from entry level models to advanced models and all of
which are designed to achieve an ultimate wake for increased skiing, surfing, and wakeboarding performance and safety. With a variety of designs and options,
Nautique, Tigé, and Mastercraft 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. Yamaha jet boats are designed to offer a reliable, high performing, internal propulsion system with superior
handling. With a variety of designs and options, the jet boats we offer appeal to a broad audience of jet boat enthusiasts and existing customers.
Used Boat Sales
We sell used versions of the new makes and models we offer and, to a lesser extent, used boats of other makes and models generally taken as trade-ins.
During fiscal 2018, used boat sales accounted for 14.8% or approximately $174 million of our revenue, and 56.7% 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 this type of program enhances our sales of used boats by motivating purchasers of used boats to complete
their purchases through our dealerships.
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Marine Engines, Related Marine Equipment, and Boating Parts and Accessories
We offer marine engines and equipment, predominantly manufactured by Mercury Marine, a division of brunswick, and Yamaha. We sell marine engines
and propellers primarily to retail customers as replacements for their existing engines or propellers. Mercury Marine and Yamaha have introduced various new
engine models that are designed to reduce engine emissions to comply with current environmental Protection agency requirements. See “business —
environmental and Other Regulatory issues.” industry leaders, Mercury Marine and Yamaha, specialize in state-of-the-art marine propulsion systems and
accessories. Many of our dealerships have been recognized by Mercury Marine as “Premier Service Dealers.” 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 and service products;
high-performance accessories, such as propellers and instruments; and a complete line of boating accessories, including life jackets, inflatables, and water sports
equipment. We also offer novelty items, such as shirts, caps, and license plates bearing the manufacturer’s or dealer’s logos. in all of our parts and accessories
business, we utilize our industry knowledge and experience to offer boating enthusiasts high-quality products with which we have experience.
The sale of marine engines, related marine equipment, and boating parts and accessories, which are all tangible products, accounted for approximately 3.6%
or $42 million of our fiscal 2018 revenue.
Maintenance, Repair, and Storage Services
Providing customers with professional, prompt maintenance and repair services is critical to our sales efforts and contributes to our success. We provide
maintenance and repair services at most of our retail locations, with extended service hours at certain of our locations. in addition, in many of our markets, we
provide mobile maintenance and repair services at the location of the customer’s boat. We believe that this service commitment is a competitive advantage in the
markets in which we compete and is critical to our efforts to provide a trouble-free boating experience. To further this commitment, in certain of our markets, we
have opened stand-alone maintenance and repair facilities in locations that are more convenient for our customers and that increase the availability of such
services. We also believe that our maintenance and repair services contribute to strong customer relationships and that our emphasis on preventative maintenance
and quality service increases the potential supply of well-maintained boats for our used boat sales.
We perform both warranty and non-warranty repair services, with the cost of warranty work reimbursed by the manufacturer in accordance with the
manufacturer’s warranty reimbursement program. For warranty work, most manufacturers, including brunswick, reimburse a percentage of the dealer’s posted
service labor rates, with the percentage varying depending on the dealer’s customer satisfaction index rating and attendance at service training courses. We derive
the majority of our warranty revenue from brunswick products, as brunswick products comprise the 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 approximately 5.9% or $69 million of our revenue during fiscal 2018 of which, approximately 3.8%
or $45 million related to repair services, approximately 0.9% or $10 million related to parts and accessories for repairs, and approximately 1.2% or $14 million
related to income from storage service rentals. This includes warranty and non-warranty services.
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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, disability, undercoating, gel sealant, fabric protection, and casualty
insurance coverage (collectively, “F&i”). We have relationships with various national marine product lenders under which the lenders purchase retail installment
contracts evidencing retail sales of boats and other marine products that are originated by us in accordance with existing pre-sale agreements between us and the
lenders. These arrangements permit us to receive a portion of the finance charges expected to be earned on the retail installment contract based on a variety of
factors, including the credit standing of the buyer, the annual percentage rate of the contract charged to the buyer, and the lender’s then current minimum required
annual percentage rate charged to the buyer on the contract. This participation is subject to repayment by us if the buyer prepays the contract or defaults within a
designated time period, usually 0 to 180 days. To the extent required by applicable state law, our dealerships are licensed to originate and sell retail installment
contracts financing the sale of boats and other marine products.
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.
We also are able to assist our customers with the opportunity to obtain property and casualty insurance. 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 related services to insurance companies and brokers for which we receive marketing fees. One of our strategies is to generate increased marketing fees
by offering more competitive insurance products.
During fiscal 2018, fee income generated from F&i products accounted for approximately 2.4% or $29 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 website, www.MarineMax.com . Often sales are co-brokered, with the commission split between
the buying and selling brokers. We believe that our access to potential used boat customers and methods of listing and advertising customers’ brokered boats or
yachts is more extensive than is typical among brokers. in addition to generating revenue from brokerage commissions, our brokerage sales also enable us to offer
a broad array of used boats or yachts without increasing related inventory costs. During fiscal 2018, brokerage sales commissions accounted for approximately
1.8% or $21 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 yachts in exotic destinations, starting with our
initial location in the british Virgin islands (bVi). 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 several 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 terms of the management agreement
and take possession of their yachts following the expiration of the yacht management agreements.
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in addition to the specific business we launched in the bVi, we also offer yacht charter services. For a fee, we assist yacht owners in the charter of their
vessel by third-parties. During fiscal 2018 , the income from rentals of chartering power yachts and yacht charter fees, accounted for approximately 0.3 % or $ 3
million of our revenue. Our facilities in the british Virgin islands and yacht c harter fleet suffered damage from Hurricane irma in September of 2017. We maintain
insurance for inventory damage, subject to deductibles. The yacht charter fleet resumed charters during fiscal 2018 on a limited basis as damage was repaired, and
we expect the yacht charter fleet to return to full o perations in 2019.
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 63 retail locations in alabama, Connecticut, Florida,
Georgia, Maryland, Massachusetts, Minnesota, Missouri, New Jersey, New York, North Carolina, Ohio, Oklahoma, Rhode island, South Carolina 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, maintenance and repair facilities, and at certain retail locations boat storage
services, including in-water slip storage and inside and outside land storage.
Many of our retail locations are waterfront properties on some of the nation’s most popular boating locations, including the Norwalk Harbor and Westbrook
Harbor in Connecticut; multiple locations on the intracoastal Waterway, the atlantic Ocean, boca Ciega bay, Caloosahatchee River, Naples bay, Tampa bay,
Pensacola bay, and the Saint andrews bay in Florida; Lake Lanier and Wilmington River in Georgia; Chesapeake bay in Maryland; Lake Minnetonka, and the
St. Croix River in Minnesota; Lake of the Ozarks and Table Rock Lake in Missouri; barnegat bay, Lake Hopatcong, Little egg Harbor bay, and the Manasquan
River in New Jersey; Great South bay, the Hudson River, and Huntington Harbor in New York; Town River and Weymouth black River in Massachusetts;
Masonboro inlet in North Carolina; Lake Wylie in South Carolina; Lake erie in Ohio; Grand Lake in Oklahoma; Newport Harbor and Greenwich bay in Rhode
island; and Clear Lake and Lake Lewisville in Texas. Our waterfront retail locations, most of which include marina-type facilities and docks at which we display
our yachts and boats, are easily accessible to the boating populace, serve as in-water showrooms, and enable the sales force to give customers immediate in-water
demonstrations of various boat models. Most of our other locations are in close proximity to water.
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 or district president, who generally has responsibility for the retail locations within a specified geographic region. Typically, each retail location also has
a staff consisting of an F&i manager, a parts manager, 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.
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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 our brands meaning
and reason to exist next to one another on our showroom floor.
We sell our boats at posted MarineMax “One Price” 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.
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, February, March, and toward the end of
the boating season, in each of our markets and in certain locations in close proximity to our markets. These shows and events are normally held at convention
centers or marinas, with area dealers renting space. boat shows and other offsite promotions are an important venue for generating sales orders. 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 Mercury Marine. We also purchase new boats and other marine related products from other manufacturers, including but not limited
to, azimut, Hatteras, Grady-White, Galeon, Nautique, Scout, Sailfish, and aquila. in fiscal 2018, sales of new brunswick and azimut boats and yachts accounted
for approximately 40% and 11% of our revenue, respectively. Sales of new Sea Ray and boston Whaler boats, both divisions of brunswick, accounted for
approximately 21% and 17%, respectively, of our revenue in fiscal 2018. No purchases of new boats and other marine related products from any other
manufacturer accounted for more than 10% of our revenue in fiscal 2018. We believe our Sea Ray boat purchases represented approximately 42% of Sea Ray’s
new boat sales, and approximately 12% of all brunswick marine product sales during fiscal 2018.
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in June 20 18, brunswick announced it would be disc ontinuing its Sea Ray sport yacht and yacht models , resulting in the wind down of yacht production in
the third calendar quarter of 2018 . Sea Ray sport yacht and yacht mod els represented approximately 10 % of revenue during fiscal year 2018. We believe our
brand and product diversification should allow us to replace the Sea Ray sport yacht and yacht revenue.
We have entered into multi-year agreements with brunswick covering Sea Ray and boston Whaler. We also have a multi-year agreement with azimut-
benetti Group for its azimut product line. We typically deal with each of our manufacturers, other than brunswick and azimut-benetti Group, under an annually
renewable, non-exclusive dealer agreement.
The dealer agreements do not restrict our right to sell any product lines or competing products provided that we are in compliance with the material
obligations of our dealer agreements. The terms of each dealer agreement appoints a designated geographical territory for the dealer, which is exclusive to the
dealer provided that the dealer is able to meet the material obligations of its dealer agreement.
Manufacturers generally establish prices on an annual basis, but may change prices at their sole discretion. Manufacturers typically discount the cost of
inventory and offer inventory financing assistance during the manufacturers’ slow seasons, generally October through March. To obtain lower cost of inventory,
we strive to capitalize on these manufacturer incentives to take product delivery during the manufacturers’ slow seasons. This permits us to gain pricing
advantages and better product availability during the selling season. arrangements with certain other manufacturers may restrict our right to offer some product
lines in certain markets.
We transfer individual boats among our retail locations to fill customer orders that otherwise might take substantially longer to fill from the
manufacturer. This reduces delays in delivery, helps us maximize inventory turnover, and assists in minimizing potential overstock or out-of-stock situations. We
actively monitor our inventory levels to maintain levels appropriate to meet current anticipated market demands. We are not bound by contractual agreements
governing the amount of inventory that we must purchase in any year from any manufacturer, but the failure to purchase at agreed upon levels may result in the loss
of certain manufacturer incentives or dealership rights.
Inventory Financing
Marine manufacturers customarily provide interest assistance programs to retailers. The interest assistance varies by manufacturer and may include periods
of free financing or reduced interest rate programs. The interest assistance may be paid directly to the retailer or the financial institution depending on the
arrangements the manufacturer has established. We believe that our financing arrangements with manufacturers are standard within the industry.
We account for consideration received from our vendors in accordance with 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. accounting for consideration
received is not expected to materially change with the adoption of aSU 2014-09, “Revenue from Contracts with Customers (Topic 606)”, in fiscal 2019.
We are party to an inventory Financing agreement (the “amended Credit Facility”) led by Wells Fargo Commercial Distribution Finance LLC (formerly
Ge Commercial Distribution Finance Corporation). The amended Credit Facility provides a floor plan financing commitment of up to $400 million. The
amended Credit Facility matures in October 2021 and the amended Credit Facility includes two additional one-year extension periods, with lender approval.
The interest rate under the amended Credit Facility is 345 basis points above the one-month London inter-bank Offering Rate (“LibOR”). There is an
unused line 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, 2018, 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.
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The collateral for the amended Credit Facility is primarily the Company’s inventory that is financed through the amended Credit Facility and related
accounts receivable. None of our real estate has been pledged for collateral for the amended Credit Facility. The amended Credit Facility contemplates that other
lenders may be added by the Company to finance other inventory not financed under this Facili ty .
as of September 30, 2018, we owed $212.9 million under the amended Credit Facility. Outstanding short-term borrowings accrued interest at a rate of
5.5% as of September 30, 2018, and the amended Credit Facility provided us with an additional net borrowing availability of approximately $71.6 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. We mitigate cybersecurity risks by employing a number of measures, including employee training, systems, monitoring and testing, and maintenance of
protective systems and contingency plans.
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, 2020, with automatic annual one-year extensions at each twelve month anniversary of the agreement,
provided that our dealer agreements with the Sea Ray Division of brunswick are still then in effect. Under the agreement, acquisitions of Sea Ray dealers will be
mutually agreed upon by us and Sea Ray with reasonable efforts to be made to include a balance of Sea Ray dealers that have been successful and those that have
not been. The agreement provides that Sea Ray will not unreasonably withhold its consent to any proposed acquisition of a Sea Ray dealer by us, subject to the
conditions set forth in the agreement. among other things, the agreement provides for us to provide Sea Ray with a business plan for each proposed acquisition,
including historical financial and five-year projected financial information regarding the acquisition candidate; marketing and advertising plans; service capabilities
and managerial and staff personnel; information regarding the ability of the candidate to achieve performance standards within designated periods; and information
regarding the success of our previous acquisitions of Sea Ray dealers. The agreement also contemplates Sea Ray reaching a good faith determination whether the
acquisition would be in its best interest based on our dedication and focus of resources on the Sea Ray brand and Sea Ray’s consideration of any adverse effects
that the approval would have on the resulting territory configuration of adjacent or other dealers and the absence of any violation of applicable laws or rights
granted by Sea Ray to others.
Dealer Agreements with Brunswick
We and the Sea Ray Division of brunswick and boston Whaler, inc. are parties to Sales and Service agreements relating to Sea Ray and boston Whaler
products respectively, effective September 1, 2014 and extending through august 31, 2019 with automatic annual one-year extensions at each twelve-month
anniversary of the agreement, provided that we are not in breach of a material term of the agreement, following written notice and expiration of applicable cure
periods without cure (certain termination provisions are summarized below).
The agreements appoint certain of our operating subsidiaries as a dealer for the retail sale, display, and servicing of all Sea Ray or boston Whaler products,
parts, and accessories currently or in the future sold by Sea Ray or boston Whaler, as applicable. The agreements specify a designated geographical territory and
dealer region or location for the dealer, which is exclusive to the dealer. The agreement also specifies retail locations, which the dealer may not close, change, or
add to without the prior written consent of the relevant manufacturer, provided that such manufacturer may not unreasonably withhold its consent. The
manufacturer reserves the right to modify the territory or appoint other dealers to sell, display, and service product from dealer locations within the territory at any
time if we close a dealer location without prior written notice to Sea Ray and prior written approval by Sea Ray, which will not be unreasonably withheld or in the
case of boston Whaler, in the event that a dealer location fails to meet performance standards while carrying competitive product following written notice and a
period of 60 days to cure or six months for matters for which a cure cannot be completed in 60 days. The agreements also restrict the dealer from selling,
advertising (other than in recognized and
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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 applicab le 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, su bject 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 busines s 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.
The agreements may be terminated:
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by the manufacturer, upon 60 days’ prior written notice, if we do not have an ability to purchase products via floor plan financing or self-financing or
fail to meet our financial obligations as they become due to the relevant manufacturer or to our lenders;
as to any dealer region, or in the case of boston Whaler, any dealer location, if we are failing to meet performance standards and begin selling,
displaying or advertising products that are competitive with the products being sold under the agreement (other than products of another brunswick
brand or new products currently carried), if we do not cure our failure within 90 days after written notice, or if we are meeting the performance
standards and then start failing to meet performance standards after beginning selling, displaying or advertising products that are competitive with
products sold under the agreement (other than products of another brunswick brand or new products currently carried) and do not cure our failure
within six months after written notice, or with respect to boston Whaler and dealer’s locations in New York, in the event such dealer location fails to
meet performance standards and does not cure such failure within 6 months after written notice;
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;
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by Sea Ray or boston Whaler, as applicable, in the event of the assignment of the agreement by the dealer without the prior written consent of Sea
Ray or boston Whaler, as applicable;
by Sea Ray or boston Whaler, as applicable, upon at least 60 days' prior written notice in the event of the commission by dealer of an act of fraud
upon Sea Ray or boston Whaler, as applicable, or the commission by us or one of our officers of a felony or act of fraud which is materially
detrimental to Sea Ray’s or boston Whaler’s respective reputation or business or which materially impairs our ability to perform our duties under the
agreement or we fail to pay any lender financing products under the agreement after the sale of products by us; or
upon the mutual consent of Sea Ray or boston Whaler, as applicable, and us.
either party may elect to not extend the term at the expiration of each applicable 12 month period in the event of a material breach or default by the other of
any of the material obligations, performance standards, covenants, representations, warranties, or duties imposed by the agreement or the manufacturer’s manual
that is not remedied or cured following notice thereof. in the event of a remedy or cure, the additional 12 month period shall be added to the term.
Dealer Agreements with Azimut
We are parties to Dealership agreements with azimut benetti S.P.a. for the retail sale, display, and servicing of designated azimut products and parts sold
by azimut. The Dealership agreements automatically renew each year provided that we are able to agree in good faith on acceptable retail sales goals. The
Dealership agreements grant us the exclusive right to sell the azimut products and parts in designated geographical areas. among other things, each Dealership
agreement requires the applicable dealer to:
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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;
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:
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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;
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by azimut or dealer, for the knowing use of a deceptive or fraudulent practice i n 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, 2018, we had 1,573 employees, 1,466 of whom were in store-level operations and 107 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.
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,” “MarineMax Delivering the boating Dream,” “Newcoast Financial Services,” “MarineMax boating Gear Center,” “boating
Gear Center Powered by MarineMax,” “MarineMax Vacations,” “United by Water,” “Women on Water,” “MarineMax Maximizing Your enjoyment on the
Water,” “Myboat.com,” “Nukleus,” and “Max Makeover.” We have registered the name “MarineMax” in the european Union, China, australia, brazil, india, and
Cuba; “MarineMax Maximizing Your enjoyment on the Water” in the european Union, Cuba, india, and australia; and “United by Water” in the european Union,
China, australia, india, and Cuba. We have trade names and trademarks registered in Canada for various names, including “MarineMax,” “Delivering the Dream,”
“United by Water,” “The Water Gene,” “Myboat.com,” and “Nukleus.” We have various trade name and trademark applications outside of the United States for
various marks, specifically “Nukleus” in india, and “United by Water” in brazil. 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, 2018, the average revenue for the quarters ended December 31, March 31, June 30, and September 30 represented
approximately 20%, 22%, 33%, and 25%, 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, such as Hurricanes Harvey and irma in 2017. although our geographic diversity is likely to reduce
the overall impact to us of adverse weather conditions in any one market area, these conditions will continue to represent potential, material adverse risks to us and
our future financial performance.
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Environmental and O ther 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, SeaPro, Pro XS, 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, and above ground storage tanks, or aSTs, for the storage of various petroleum
products. The USTs and aSTs are generally subject to federal, state, and local laws and regulations that require testing and upgrading of tanks and remediation of
contaminated soils and groundwater resulting from leaking tanks. in addition, if leakage from Company-owned or operated tanks migrates onto the property of
others, we may be subject to civil liability to third parties for remediation costs or other damages. based on historical experience, we believe that our liabilities
associated with tank testing, upgrades, and remediation are unlikely to have a material adverse effect on our financial condition or operating results.
as with boat dealerships generally, and parts and service operations in particular, our business involves the use, handling, storage, and contracting for
recycling or disposal of hazardous or toxic substances or wastes, including environmentally sensitive materials, such as motor oil, waste motor oil and filters,
transmission fluid, antifreeze, freon, waste paint and lacquer thinner, batteries, solvents, lubricants, degreasing agents, gasoline, and diesel fuels. accordingly, we
are subject to regulation by federal, state, and local authorities establishing requirements for the use, management, handling, and disposal of these materials and
health and environmental quality standards, and liability related thereto, and providing penalties for violations of those standards. We are also subject to laws,
ordinances, and regulations governing investigation and remediation of contamination at facilities we operate to which we send hazardous or toxic substances or
wastes for treatment, recycling, or disposal.
We do not believe we have any material environmental liabilities or that compliance with environmental laws, ordinances, and regulations will, individually
or in the aggregate, have a material adverse effect on our business, financial condition, or results of operations. However, soil and groundwater contamination has
been known to exist at certain properties owned or leased by us. We have also been required and may in the future be required to remove 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.
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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 and online retailers, sporting goods stores, and mass merchants. Competition among boat dealers is generally based on the quality of
available products, the price and value of the products, and attention to customer service. There is significant competition both within markets we currently serve
and in new markets that we may enter. We compete in each of our markets with retailers of brands of boats and engines we do not sell in that market. in addition,
several of our competitors, especially those selling boating accessories, are large national or regional chains that have substantial financial, marketing, and other
resources. However, we believe that our integrated corporate infrastructure and marketing and sales capabilities, our cost structure, and our nationwide presence
enable us to compete effectively against these companies. Private sales of used boats represent an additional significant source of competition.
Executive Officers
The following table sets forth information concerning each of our executive officers as of November 29, 2018:
Name
William H. McGill Jr.
William brett McGill
Michael H. McLamb
Charles a. Cashman
anthony e. Cassella, Jr
Age
74
50
53
55
49
Position
executive Chairman of the board, and Director
Chief executive Officer and President
executive Vice President, Chief Financial Officer,
Secretary, and Director
executive Vice President and Chief Revenue Officer
Vice President and Chief accounting Officer
William H. McGill Jr . has served as the executive Chairman of the board since October 2018. Mr. McGill served as Chief executive Officer of our
company from January 23, 1998 to September 30, 2018 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 from July 1, 2002 to October 1,
2017. Mr. McGill was the principal owner and president of Gulfwind USa, inc., one of our operating subsidiaries, from 1973 until its merger with us in 1998. in
December 2016, Mr. McGill joined the board of Directors of Joi Scientific, inc., an energy company with which we have a licensing agreement.
William Brett McGill has served as Chief executive Officer since October 2018, and as President since October 2017. Mr. McGill served as President and
Chief Operating Officer of our company from October 2017 to October 2018. Mr. McGill served as executive Vice President and Chief Operating Officer from
October 2016 to October 2017, executive Vice President Operations of our company from October 2015 to September 2016, 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.
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.
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Charles A. Cashman has served as executive Vice President and Chief Revenue Officer of our company since October 2016. Mr. Cashman served as
executive Vice President Sales, Marketing, and Manufacturer Relations of our company from October 2015 to September 2016, served as Vice President of east
Operations of our company from May 2012 to September 2015, and was appointed as an executive officer by our bo ard 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.
Anthony E. Cassella, Jr. has served as Vice President of our company since February 2016, Chief accounting Officer of our company since October 2014,
and Vice President of accounting and Shared Services of our company since February 2011. Mr. Cassella served as Director of Shared Services from October 2007
until February 2011 and Regional Controller from March 1999 until October 2007. Mr. Cassella was the Controller of Merit Marine which the Company acquired
in March 1999. Mr. Cassella, a certified public accountant, worked in public accounting from June 1991 to February 1998, serving most recently as manager.
Item 1A.
Risk Factors
General economic conditions and consumer spending patterns can have a material adverse effect on our business, financial condition, and results of
operations.
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 55%, 55%, and 51% of our
revenue during fiscal 2016, 2017, and 2018, respectively, can have a major impact on our operations. Local influences, such as corporate downsizing, military base
closings, and inclement weather such as hurricanes or other storms, environmental conditions, and specific events, such as the bP oil spill in the Gulf of Mexico in
2010, or Hurricanes Harvey and irma in 2017, also could adversely affect, and in certain instances have adversely affected, our operations in certain markets.
in an economic downturn, consumer discretionary spending levels generally decline, at times resulting in disproportionately large reductions in the sale of
luxury goods. Consumer spending on luxury goods also may decline as a result of lower consumer confidence levels, even if prevailing economic conditions are
favorable. as a result, an economic downturn could impact us more than certain of our competitors due to our strategic focus on a higher end of our market.
although we have expanded our operations during periods of stagnant or modestly declining industry trends, the cyclical nature of the recreational boating industry
or the lack of industry growth could adversely affect our business, financial condition, or results of operations in the future. any period of adverse economic
conditions or low consumer confidence has a negative effect on our business.
Lower consumer spending resulting from a downturn in the housing market and other economic factors adversely affected our business in fiscal 2007, and
continued weakness in consumer spending and depressed economic conditions had a substantial negative effect on our business for several years afterwards. Our
revenue decreased from $1.2 billion in fiscal 2007, to $885.4 million in fiscal 2008, to $588.6 million in fiscal 2009, and to $450.3 million in fiscal 2010. Our
earnings decreased from a net income of $20.1 million in fiscal 2007 to a net loss of $134.3 million in fiscal 2008 (including a $122.1 million goodwill impairment
charge), a net loss of $76.8 million in fiscal 2009, net income of $2.5 million in fiscal 2010 (including a $19.2 million tax refund), and a net loss of $11.5 million in
fiscal 2011. These substantially deteriorating economic and financial conditions had a greater impact on many other participants in the boating industry, with
certain manufacturers and dealers ceasing business operations or filing for bankruptcy.
Unfavorable economic conditions can cause us to 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. While we believe the steps we
took enabled us to emerge from the economic environment of the severe recession as a stronger and more profitable company, we cannot predict whether
unfavorable economic, financial, or industry conditions will return or the extent to which they would adversely affect our operating results if they returned nor can
we predict the effectiveness of the measures we have taken to address this environment or whether additional measures will be necessary. a return of depressed
economic or industry factors would have additional negative effects on our company, including interfering with our supply of certain brands by manufacturers,
reduced marketing and other support by manufacturers, decreased revenue, additional pressures on margins, and our failure to satisfy covenants under our credit
agreement.
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The availability and costs of borrowed funds can adversely affect our ability to obtain adequate b oat 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, 2018, we had no long-term debt. We rely on the
amended Credit Facility led by Wells Fargo Commercial Distribution Finance LLC to purchase and maintain our inventory of boats. The amended Credit Facility
provides a floor plan financing commitment of up to $400.0 million. The collateral for the amended Credit Facility is primarily the Company’s inventory that is
financed through the amended Credit Facility and related accounts receivable. None of our real estate has been pledged as collateral for the amended Credit
Facility. as of September 30, 2018, 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 $212.9 million based upon the outstanding borrowing base availability.
Our ability to borrow under the amended Credit Facility depends on our ability to continue to satisfy our covenants and other obligations under the
amended Credit Facility and the ability for our manufacturers to be approved vendors under our 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 as interest rates rise. a significant
increase in interest rates could have a material adverse effect on our operating results. The aging of our inventory limits our borrowing capacity as defined
provisions in the 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, under such circumstances, it may be necessary for us to close stores, further reduce our expense structure, liquidate
inventory below cost to free up capital, or modify the covenants with our lenders. any inability to utilize the amended Credit Facility or the acceleration of
amounts owed, resulting from a covenant violation, insufficient collateral, or lender difficulties, could require us to seek other sources of funding to repay amounts
outstanding under the amended Credit Facility or replace or supplement the amended Credit Facility, which may not be possible at all or under commercially
reasonable terms.
Similarly, decreases in the availability of credit and increases in the cost of credit adversely affect the ability of our customers to purchase boats from us and
thereby adversely affect our ability to sell our products and impact the profitability of our finance and insurance activities. For example, 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.
Failure to implement strategies to enhance our performance or our strategies could have a material adverse effect on our business and financial condition.
We are increasing our efforts to grow our financing and insurance, parts and accessories, service, yacht charter, brokerage, and boat storage businesses to
better serve our customers and thereby increase revenue and improve profitability as a result of these higher margin businesses. in addition, we have implemented
programs to increase the 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. in addition, we are 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, as well as pursuing contract manufacturing or vertical
integration strategies as opportunities arise. 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. The failure to obtain a high
quality and desirable mix of competitively priced products that our customers demand could have a material adverse effect on our business, financial condition,
and results of operations.
approximately 40% of our revenue in fiscal 2018 resulted from sales of new boats manufactured by brunswick, including approximately 21% from
brunswick’s Sea Ray division, 17% from brunswick’s boston Whaler division, and approximately 2% from brunswick’s other divisions. additionally,
approximately 11% of our revenue in fiscal 2018 resulted from sales of new boats manufactured by azimut-benetti Group. The remainder of our fiscal 2018
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.
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We depend on our manufacturers to provide us with products that compare favorably with competing products in terms of quality, perf ormance, safety, and
advanced features, including the latest advances in propulsion and navigation systems. any adverse change in the production efficiency, product development
efforts, technological advancement, expansion of manufacturing footprint, supp ly chain and third-party suppliers, marketplace acceptance, marketing capabilities,
ability to secure adequate access to capital, and financial condition of our manufacturers, particularly brunswick and azimut-benetti Group given our reliance on
Sea Ray, b oston 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 advers ely affect the quality and amount of products
that they are able to supply to us and the services and support they provide to us.
in June 2018, brunswick announced it would be discontinuing its Sea Ray sport yacht and yacht models, resulting in the wind down of yacht production in
the third calendar quarter of 2018. Sea Ray sport yacht and yacht models represented approximately 10% of revenue during fiscal year 2018. Failure to replace the
Sea Ray sport yacht and yacht revenue could have a material adverse effect on our business, financial condition, and results of operations.
Further, any interruption or discontinuance of the operations of brunswick, azimut-benetti Group, or other manufacturers, as experienced in June 2018 with
brunswick, could cause us to experience shortfalls, disruptions, or delays with respect to needed inventory. although we believe in our brand, our product
diversification and that adequate alternate sources would be available that could replace any manufacturer other than brunswick and azimut-benetti Group as a
product source, those alternate sources may not be available at the time of any interruption, and alternative products may not be available at comparable quality and
prices.
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:
•
•
the dealer meeting all the requirements and conditions of the manufacturer’s applicable programs; and
the right of brunswick in good faith to charge lesser prices to other dealers
•
•
•
to meet existing competitive circumstances;
for unusual and non-ordinary business circumstances; or
for limited duration promotional programs.
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 a multi-year term but requires us to be in compliance with its terms and conditions.
as is typical in the industry, we generally deal with manufacturers, other than Sea Ray and boston Whaler (both divisions of brunswick) and azimut, under
renewable annual dealer agreements. These agreements do not contain any contractual provisions concerning product pricing or required purchasing
levels. Pricing is generally established on a model year basis, but is subject to change in the manufacturer’s sole discretion. any change or termination of these
arrangements for any reason could adversely affect product availability and cost and our financial performance.
Boat manufacturers exercise substantial control over our business.
We depend on our dealer agreements. Through 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:
•
•
•
the termination of the dealer agreement;
the imposition of additional conditions in subsequent dealer agreements;
limitations on boat inventory allocations;
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•
•
•
•
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 adversely affect our business.
all of the recreational boats we sell are powered by diesel or gasoline engines. Consequently, an interruption in the supply, or a significant increase in the
price or tax on the sale of fuel on a regional or national basis could have a material adverse effect on our sales and operating results. increases in fuel prices (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 and adverse changes in fiscal policy or credit market conditions.
Over the past several years, our economy has been positively impacted by historically unprecedented low interest rates. Such interest rates, driven by the
policies of the Federal Reserve, are a political issue in the United States. although interest rates have risen in 2018 and are generally expected to continue to rise in
fiscal 2019, the Federal Reserve continues to be somewhat ambiguous concerning the interest rate issues. The Federal Reserve has increased its benchmark interest
rate this year and signaled that rates could continue to rise more quickly than previously expected. any such change or market expectation of such change may
result in significantly higher long-term interest rates.
Given that we sell products that are often financed, a material increase in interest rates and adverse changes in fiscal policy or credit market conditions, may
negatively impact our customers’ willingness or desire to purchase our products. in addition, such an increase or adverse change could reduce the availability
and/or increase the costs of obtaining new debt and refinancing existing indebtedness or negatively impact the market price of our common stock.
Our sales may be adversely impacted by periods of economic or political instability or uncertainty.
in times of political and economic uncertainty, consumers including high net worth individuals, may elect to defer expenditures for luxury items, which can
adversely affect our financial performance. Consumer spending on luxury goods also may decline as a result of political uncertainty and instability, even if
prevailing economic conditions are favorable. We cannot predict the timing of periods of political or economic uncertainty.
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. However, 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.
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Other recreational activities, poor industry perception, and pote ntial health risks from environmental conditions can adversely affect the levels of boat
purchases.
Other recreational activities, poor industry perception, real or perceived health risks, and environmental conditions can adversely affect the levels of boat
purchases. Demand for our products can be adversely affected by competition from other activities that occupy consumers’ time, including other forms of
recreation as well as religious, cultural and community activities. in addition, real or perceived health risks from engaging in outdoor activities and local
environmental conditions in the areas in which we operate dealerships could adversely affect the levels of boat purchases. Further, as a seller of high-end consumer
products, we must compete for discretionary spending with a wide variety of other recreational activities and consumer purchases. in addition, perceived hassles of
boat ownership and customer service and customer education throughout the retail boat industry, which has traditionally been perceived to be relatively poor,
represent impediments to boat purchases.
Adverse federal or state tax policies can have a negative effect on us.
Changes in federal and state tax laws, such as an imposition of luxury taxes on new boat purchases, increases in prevailing 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, digital channels are increasingly significant in serving our existing
customer base and reaching new customers. Our continued expansion and success will be negatively impacted if we are not able to fully exploit these
channels.
Our digital channels are subject to a number of risks and uncertainties that are beyond our control, including the following:
•
•
•
•
•
•
•
•
•
•
•
changes in technology;
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 or application downtime or other
problems;
failure to adequately respond to customers, process orders or deliver services, which may negatively impact both future digital and/or in-store
purchases by such customers;
inability of our suppliers or service partners to fulfill customer orders, which may negatively impact customer satisfaction;
our failure to assess and evaluate our digital product and service offerings to ensure that our products and services are desired by boating enthusiasts;
the potential exposure to liability with respect to third-party information, including but not limited to copyright, trademark infringement, or other
wrongful acts of third parties; false or erroneous information provided by third parties; or illegal activities by third parties, such as the sale of stolen
boats or other goods; and
cybersecurity risk.
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.
Elements of our yacht charter business expose us to certain risks.
Our yacht charter business entails the sale of specifically designed yachts to third parties for inclusion in our yacht charter fleet; a yacht management
agreement under which yacht owners enable us to put their yachts in our yacht charter program for a period of
26
several years for a fixed monthly fee payable by us; our services in storing, insuring, and maintaining their yachts; and the charter by us of the se 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 increas ed 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 cos ts.
Customers consider safety and reliability a primary concern in selecting a yacht charter provider. The yacht charter business may present a number of safety
risks including but not limited to, catastrophic disaster, adverse weather and marine conditions, such as Hurricane irma in 2017, and 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 retail sales business.
The yacht charter business is also highly fragmented, consisting primarily of local operators and franchisees. Competition among charter operators is based
on location, the type and size of yachts offered, charter rates, destinations serviced, and attention to customer service. Yacht charters also face competition from
other travel and leisure options, including, but not limited to, cruises, hotels, resorts, theme parks, organized tours, land-based casino operators, and vacation
ownership properties. We therefore risk losing business not only to other charter operators, but also to vacation operators that provide such alternatives.
Our success depends, in part, on our ability to continue to make successful acquisitions at attractive or fair prices and to integrate the operations of acquired
dealers and each dealer we acquire in the future.
Since March 1, 1998, we have acquired 28 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 at
attractive or fair prices that align with our culture and focus on customer service and to integrate the operations of acquired dealers, including centralizing certain
functions to achieve cost savings and pursuing programs and processes that promote cooperation and the sharing of opportunities and resources among our
dealerships. We may not be able to oversee the combined entity efficiently, realize anticipated synergies, or implement effectively our growth and operating
strategies. To the extent that we successfully pursue our acquisition strategy, our resulting growth will place significant additional demands on our management
and infrastructure. in addition, we are also pursuing contract manufacturing or vertical integration strategies as opportunities arise. To the extent we are successful
in pursuing these strategies, we will face certain risks in addition to those that exist with acquisitions more closely related to our historical business, including
potential inexperience in a line of business that is either new to us or that has become materially more significant to us as a result of a transaction, the potential
difficulty of presenting a unified corporate image, greater uncertainties in the financial benefits and potential liabilities associated with this expanded base of
acquisitions, different types of legal and operational risks, and different types of applicable financial metrics and goals. Our failure to pursue successfully our
acquisition strategies 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 expected returns
required by our acquisition criteria to be in the best interest of shareholders. acquisitions also may become more difficult or less attractive in the future as we
acquire more of the most attractive dealers that best align with our culture and focus on customer service. in addition, we may encounter difficulties in integrating
the operations of acquired dealers with our own operations, difficulties in retaining employees, create potential risks of losing customers, suppliers, or other
business relationships, and encounter difficulties managing acquired dealers profitably without substantial costs, delays, or other operational or financial problems.
We may issue common or preferred stock and incur substantial indebtedness in making future acquisitions. The size, timing, and integration of any future
acquisitions may cause substantial fluctuations in operating results from quarter to quarter. Consequently, operating results for any quarter may not be indicative of
the results that may be achieved for any subsequent quarter or for a full fiscal year. These fluctuations could adversely affect the market price of our common
stock.
27
Our ability to continue to grow through the acquisition of additional dealers will depend upon various factors, including the following:
•
•
•
•
•
•
the availability of suitable acquisition candidates at attractive purchase prices;
the ability to compete effectively for available acquisition opportunities;
the availability of cash on hand, borrowed funds or common stock with a sufficient market price to complete the acquisitions;
the ability to obtain any requisite manufacturer or governmental approvals;
the ability to obtain approval of our lenders under our current credit agreement; 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, 2020, 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 want to be acquired by us. Under the agreement, acquisitions of Sea Ray dealers will
be mutually agreed upon by us and Sea Ray with reasonable efforts to be made to include a balance of Sea Ray dealers that have been successful and those that
have not been. The agreement provides that Sea Ray will not unreasonably withhold its consent to any proposed acquisition of a Sea Ray dealer by us, subject to
the conditions set forth in the agreement. among other things, the agreement requires us to provide Sea Ray with a business plan for each proposed acquisition,
including historical financial and five-year projected financial information regarding the acquisition candidate; marketing and advertising plans; service capabilities
and managerial and staff personnel; information regarding the ability of the candidate to achieve performance standards within designated periods; and information
regarding the success of our previous acquisitions of Sea Ray dealers. The agreement also contemplates Sea Ray reaching a good faith determination whether the
acquisition would be in its best interest based on our dedication and focus of resources on the Sea Ray brand and Sea Ray’s consideration of any adverse effects
that the approval would have on the resulting territory configuration and adjacent or other dealers’ sales and the absence of any violation of applicable laws or
rights granted by Sea Ray to others.
Our growth strategy also entails expanding our product lines and geographic scope by obtaining additional distribution rights from our existing and new
manufacturers. We may not be able to secure additional distribution rights or obtain suitable alternative sources of supply if we are unable to obtain such
distribution rights. The inability to expand our product 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 shareholders will experience dilution in the voting power of their common stock and earnings
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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 par tial consideration. Our inability to use our common s tock 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, our credit arrangements contain financial covenants and other restrictions with which we must comply, including limitations 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 have 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, improving
existing retail locations in our current markets, 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, 2018, the average revenue for the quarterly periods ended December 31, March 31, June 30, and
September 30 represented approximately 20%, 22%, 33%, and 25%, 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, which are generally closed or experience lower volume in the winter months.
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Weather and environmental conditions may adversely impact our business.
Weather and environmental conditions may adversely impact our operating results. For example, drought conditions, reduced rainfall levels, excessive rain
and environmental conditions, such as the bP oil spill in the Gulf of Mexico in 2010 or recent hurricanes in the Gulf of Mexico and atlantic Ocean, may force
boating areas to close or render boating dangerous or inconvenient, thereby curtailing customer demand for our products. While we traditionally maintain a full
range of insurance coverage for any such events, there can be no assurance that such insurance coverage is adequate to cover losses that we sustain as a result of
such disasters. in addition, unseasonably cool weather and prolonged winter conditions may lead to shorter selling seasons in certain locations. Many of our
dealerships sell boats to customers for use on reservoirs, thereby subjecting our business to the continued viability of these reservoirs for boating use. although our
geographic diversity and any future geographic expansion should reduce the overall impact on us of adverse weather and environmental conditions in any one
market area, weather and environmental conditions will continue to represent potential material adverse risks to us and our future operating performance.
in addition, hurricanes and other storms could result in the disruption of our operations and/or supply chain, including boat deliveries from manufacturers,
or damage to our boat 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 in 2012 or Hurricanes Harvey and
irma in 2017. We maintain insurance for property damage and business interruption, subject to deductibles.
We face intense competition.
We operate in a highly competitive environment. in addition to facing competition generally from recreation businesses seeking to attract consumers’
leisure 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, online catalog retailers, sporting goods stores, and mass merchants. Competition among boat dealers is based on the quality of
available products, the price and value of the products, and attention to customer service. There is significant competition both within markets we currently serve
and in new markets that we may enter. We compete in each of our markets with retailers of brands of boats and engines we do not sell in that market. in addition,
several of our competitors, especially those selling marine equipment and accessories, are large national or regional chains that have substantial financial,
marketing, and other resources. Private sales of used boats represent an additional source of competition.
Due to various matters, including environmental concerns, permitting and zoning requirements, and competition for waterfront real estate, some markets in
the United States have experienced an increased waiting list for marina and storage availability. in general, the markets in which we currently operate are not
experiencing any unusual difficulties. However, marine retail activity could be adversely affected in markets that do not have sufficient marine and storage
availability to satisfy demand.
A significant amount of our boat sales are from the State of Florida.
economic conditions, weather and environmental conditions, competition, market conditions, and any other adverse conditions impacting the State of
Florida in which we generated approximately 55%, 55%, and 51% of our revenue during fiscal 2016, 2017, and 2018, respectively, could have a major impact on
our operations.
Timing of large boat and yacht sales and failure to adequately anticipate consumer preference and demand may have an adverse impact on our business.
Forecasting optimal inventory levels is difficult to predict based on changes in economic conditions, consumer preferences, delivery of new models from
manufacturers, and timing of large boat and yacht sales. Failure to adequately anticipate consumer demand and preferences could negatively impact our inventory
management strategies, inventory carrying costs, and our operating margins.
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.
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The availability of financing for our boat purchasers and the level of par ticipation 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 unfavor able 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 reduc ed, materially im pact ing our operating results.
if customer financing becomes more difficult to secure, it may adversely impact our business.
Changes, including the lengthening of manufacturer warranties, may reduce our ability to offer and sell extended service contracts which may have a
material adverse impact on our ability to sell F&i products.
The Dodd-Frank act established a consumer financial protection bureau with broad regulatory powers. although boat dealers are generally excluded, the
Dodd-Frank act could lead to additional, indirect regulation of boat dealers through its regulation of other financial institutions which provide such financing to our
customers.
The reduction of profit margins on sales of F&i products or the lack of demand for or the unavailability of these products could have a material adverse
effect on our operating margins.
Our operations are dependent upon key personnel and team members.
Our success depends, in large part, upon our ability to attract, train, and retain, qualified team members and executive officers, as well as the continuing
efforts and abilities of team members and executive officers. although we have employment agreements with certain of our executive officers and management
succession plans, we cannot ensure that these or other executive personnel and team members will remain with us, or that our succession planning will adequately
mitigate the risk associated with key personnel transitions. expanding our operations may require us to add additional executive personnel and team members in
the future. as a result of our decentralized operating strategy, we also rely on the management teams of our dealerships. in addition, we likely will depend on the
senior management of any significant businesses we acquire in the future. The loss of the services of one or more key employees before we are able to attract and
retain qualified replacement personnel could adversely affect our business. additionally, our ability to manage our personnel costs and operating expenses is
subject to external factors such as unemployment levels, prevailing wage rates, healthcare and other benefit costs, changing demographics, and our reputation and
relevance within the labor markets where we are located.
The products we sell or service may expose us to potential liability for personal injury or property damage claims relating to the use of those products.
Manufacturers of the products we sell generally maintain product liability insurance. We also maintain third-party product liability insurance that we
believe to be adequate. We may experience claims that are not covered by or that are in excess of our insurance coverage. The institution of any significant claims
against us could subject us to damages, result in higher insurance costs, and harm our business reputation with potential customers.
Environmental and other regulatory issues may impact our operations.
Our operations are subject to extensive regulation, supervision, and licensing under various federal, state, and local statutes, ordinances, and regulations,
such as those relating to finance and insurance, consumer protection, consumer privacy, escheatment, anti-money laundering, environmental, emissions, health or
safety, 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, SeaPro, Pro XS, 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
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future could be passed on to our company, or could result in the inability or potential unfor eseen 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, and above ground storage tanks, or aSTs, for the storage of various petroleum
products. USTs and aSTs are generally subject to federal, state, and local laws and regulations that require testing and upgrading of tanks and remediation of
contaminated soils and groundwater resulting from leaking tanks. in addition, we may be subject to civil liability to third parties for remediation costs or other
damages if leakage from our owned or operated tanks 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:
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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.
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 remediated in accordance with state and federal guidelines. We are monitoring the soil and groundwater as
required by applicable state and federal guidelines. We also may have additional storage tank liability insurance and Superfund coverage where
applicable. environmental laws and regulations are complex and subject to frequent change. Compliance with amended, new, or more stringent laws or
regulations, more strict interpretations of existing laws, or the future discovery of environmental conditions may require additional expenditures by us, and such
expenditures may be material.
Three of the properties we own were historically used as gasoline service stations. Remedial action with respect to prior historical site activities on these
properties has been completed in accordance with federal and state law. While we do not believe that these environmental issues will result in any material
liabilities to us, we cannot provide assurances that no such material liabilities will occur.
additionally, certain states have required or are considering requiring a license in order to operate a recreational boat. These regulations could discourage
potential buyers, thereby limiting future sales and adversely affecting our business, financial condition, and results of operations.
Furthermore, the Patient Protection and affordable Care act, increased our annual employee health care costs that we fund, and significantly increased our
cost of compliance and compliance risk 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. adverse changes in labor policy could lead to increased unionization efforts, which could lead to higher labor costs, disrupt our store operations, and
adversely affect our operating results.
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The market price of our common stock could be subject to wide fluctuatio ns as a result of many factors.
Factors that could affect the trading price of our common stock include the following:
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variations in our operating results;
the thin trading volume and relatively small public float of our common stock;
our ability to continue to secure adequate levels of financing;
variations in same-store sales;
general economic, political, and market conditions;
changes in earnings estimates published by analysts;
changes in earnings estimates or management’s failure to provide earnings estimates;
the level and success of our acquisition program and new store openings;
the success of dealership integration;
relationships with manufacturers;
seasonality and weather conditions;
governmental policies and regulations;
the performance of the recreational boat industry in general;
factors relating to suppliers and competitors; and
timing and amount of our share repurchases.
in addition, market demand for small-capitalization stocks, and price and volume fluctuations in the stock market unrelated to our performance could result
in significant fluctuations in the market price of our common stock.
The performance of our common stock could adversely affect our ability to raise equity in the public markets and adversely affect our acquisition program.
The issuance of additional capital stock in the future, including shares that we may issue pursuant to stock-based grants, including grants of stock options,
restricted stock awards and restricted stock units, and future acquisitions, may result in dilution in the net tangible book value per share of our common stock.
Our board of directors has the legal power and authority to determine the terms of an offering of shares of our capital stock, or securities convertible into or
exchangeable for these shares, to the extent of our shares of authorized and unissued capital stock. The issuance of additional common stock in the future,
including shares that we may issue pursuant to stock-based grants, including grants of stock options, restricted stock awards and restricted stock units, and future
acquisitions, may result in dilution in the net tangible book value per share of our common stock.
The timing and amount of our share repurchases are subject to a number of uncertainties.
in august 2017, the board of Directors approved a new stock repurchase plan authorizing the Company to purchase up to 2.0 million shares of its commons
stock through September 30, 2019. There is no guarantee that our stock repurchase plans will be able to successfully mitigate the dilutive effect of stock options
and stock-based grants. The success of our stock repurchase plans is based upon a number of factors, including the price and availability of the Company’s stock,
general market conditions, the nature of other investment opportunities available to us from time to time, and the availability of cash.
A substantial number of shares are eligible for future sale.
as of September 30, 2018, there were 27,141,267 shares of our common stock outstanding. Substantially all of these shares are freely tradable without
restriction or further registration under the securities laws, unless held by an “affiliate” of our company, as that term is defined in Rule 144 under the securities
laws. Shares held by affiliates of our company, which generally include our directors, officers, and certain principal shareholders, are subject to the resale
limitations of Rule 144. Outstanding shares of common stock issued in connection with the acquisition of any acquired dealers are available for resale beginning
six months after the respective dates of the acquisitions, subject to compliance with the provisions of Rule 144 under the securities laws.
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Through September 30, 2018 , we have issued options to purchase approximately 5,011,549 shares of common stock and 1,941,204 restricted stock awards,
net of forfeitures and expirations, under our incentive stock plans, and we issued 860,535 shares of common stock under our employee stock purc hase 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 affiliate s of our company, who will be subject to the volume and other limitations of Rule 144.
We may issue additional shares of common stock or preferred stock under the securities laws as part of any acquisition we may complete in the future. if
issued pursuant to an effective registration statement, these shares generally will be freely tradable after their issuance by persons not affiliated with us or the
acquired companies.
We do not pay cash dividends.
We have never paid cash dividends on our common stock and we have no current intention to do so for the foreseeable future.
Certain provisions of our restated articles of incorporation and bylaws and Florida law may make a change in the control of our company more difficult to
complete, even if a change in control were in the shareholders’ interest or might result in a premium over the market price for the shares held by the
shareholders.
Our articles of incorporation and bylaws divide our board of directors into three classes of directors elected for staggered three-year terms. The articles of
incorporation also provide that the board of directors may authorize the issuance of one or more series of preferred stock from time to time and may determine the
rights, preferences, privileges, and restrictions and fix the number of shares of any such series of preferred stock, without any vote or action by our
shareholders. The board of directors may authorize the issuance of preferred stock with voting or conversion rights that could adversely affect the voting power or
other rights of the holders of common stock. The articles of incorporation also allow our board of directors to fix the number of directors and to fill vacancies on
the board of directors.
Our articles of incorporation contain provisions that adopt substantially all of the protections afforded under Florida's affiliated transactions statute (which
provides that, with certain exceptions, a transaction with an "interested shareholder" must generally be approved by the affirmative vote of the holders of two-thirds
of the voting shares (other than the shares owned by the interested shareholder)), except that our articles of incorporation define an "interested shareholder" as any
person who holds 15% or more of our outstanding stock (rather than 10% as set forth in the statute). Certain of our dealer agreements could also make it difficult
for a third party to attempt to acquire a significant ownership position in our company.
Our sales of yachts produced by the Azimut-Benetti Group in Italy, yachts produced by Galeon in Poland, and power catamarans 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 power catamarans for our 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.
There have been recent changes, and future, additional changes may occur, to United States and foreign trade and tax policies, including heightened import
restrictions, import and export licenses, new tariffs, trade embargoes, government sanctions, or trade barriers. any of these restrictions could prevent or make it
difficult or more costly for us to import yachts from foreign suppliers under economically favorable terms and conditions. increased tariffs could require us to
increase our prices which likely could decrease demand for our products. in addition, other countries may limit their trade with the United States or retaliate
through their own restrictions and/or increased tariffs which would affect our ability to export products and therefore adversely affect our sales. Many of these
challenges are present in China, a market from which we purchase products. in particular, currently proposed tariffs could affect our Chinese suppliers. While such
tariffs may be delayed or cancelled before coming into effect and we have taken steps to mitigate their potential effects, such tariffs would likely increase our costs
for our Chinese suppliers.
Our foreign purchase of yachts and power catamarans creates a number of logistical and communications challenges. The economic, political, and other
risks we face resulting from these foreign purchases include the following:
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• 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;
• effects from the voter-approved exit of the United Kingdom from the european Union (often referred to as brexit), including any resulting
deterioration in economic conditions, volatility in currency exchange rates, or adverse regulatory changes;
• limitations on imports and exports;
• foreign exchange rate fluctuations;
• imposition of restrictions on currency conversion or the transfer of funds;
• the effects of issued or threatened government sanctions, tariffs and duties, trade barriers or economic restrictions, including the tariffs recently
proposed by the U.S. government on various imports from China and by the Chinese government on certain U.S. goods, the scope and duration of
which, if implemented, remain uncertain;
• 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 operations could be negatively impacted by an outage or breach of our informational technology systems or a cybersecurity event.
Our business is dependent upon the efficient operation of our information systems. 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, marketing, 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. Unauthorized parties may also attempt to gain access to our systems or facilities, or those of third parties with whom we do business, through fraud, trickery,
or other forms of deceiving our team members, contractors, vendors, and temporary staff. While we attempt to mitigate these risks by employing a number 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. it is possible that we might not be
aware of a successful cyber-related attack on our systems until well after the incident. in addition, a cyber-related attack could result in other negative
consequences, including damage to our reputation or competitiveness, remediation or increased protection costs, litigation or regulatory action, and could adversely
affect our business, financial condition, and results of operations. Depending on the nature of the information compromised, we may have obligations to notify
customers and/or employees about the incident, and we may need to provide some form of remedy, such as a subscription to a credit monitoring service, for the
individuals affected by the incident.
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Changes in the assumptions used to calculate our acquisition related contingent consideration liabilities could have a material adverse impact on our financial
results.
Our recent acquisitions included contingent consideration liabilities relating to payments based on the future performance of the operations acquired. Under
generally accepted accounting principles, we are required to estimate the fair value of any contingent consideration. Our estimates of fair value are based upon
assumptions believed to be reasonable but which are uncertain and involve significant judgments. Changes in business conditions or other events could materially
change the projection of future earnings used in the fair value calculations of contingent consideration liabilities. We reassess the fair value quarterly, and increases
or decreases based on the actual or expected future performance of the acquired operations will be recorded in our results of operations. These quarterly
adjustments could have a material effect on our results of operations.
An impairment in the carrying value of long-lived assets and goodwill could negatively impact our financial results and net worth.
Our long-lived assets, such as property and equipment, are required to be reviewed for impairment whenever events or changes in circumstance indicate that
the carrying value of an asset may not be recoverable. as of September 30, 2018, we have approximately $139 million of property and equipment, net of
accumulated depreciation, recorded on our consolidated balance sheet. Recoverability of an asset is measured by comparison of its carrying amount to
undiscounted future net cash flows the asset is expected to generate. if such assets are considered to be impaired, the impairment to be recognized is measured as
the amount by which the carrying amount of the asset exceeds its fair market value. estimates of expected future cash flows represent our best estimate based on
currently available information and reasonable and supportable assumptions. Our impairment loss calculations contain uncertainties because they require us to
make assumptions and to apply judgment in order to estimate expected future cash flows.
additionally, our goodwill is recorded at fair value at the time of acquisition and is not amortized, but reviewed for impairment at least annually or more
frequently if impairment indicators arise. in evaluating the potential for impairment of goodwill, we make assumptions regarding industry conditions, our future
financial performance, and other factors. Uncertainties are inherent in evaluating and applying these factors to the assessment of goodwill. While we do not believe
there is a reasonable likelihood that there will be a change in the judgments and assumptions used in our assessments of goodwill and long-lived assets which
would result in a material effect on our operating results, we cannot predict whether events or circumstances will change in the future that could result in non-cash
impairment charges that could adversely impact our financial results and net worth.
Our business could be negatively affected by the actions of activist shareholders
Certain of our shareholders may from time to time advance shareholder proposals or otherwise attempt to effect changes or acquire control over our
business. Such proposals or attempts are sometimes led by investors seeking to increase short-term shareholder value by advocating corporate actions such as
financial restructuring, increased borrowing, special dividends, stock repurchases or even sales of assets or the entire company. Such an action focused on the
short-term may be to the long-term detriment of our shareholders. if faced with actions by activist shareholders, we may not be able to respond effectively to such
actions, which could be disruptive to our business.
Item 1B.
Unresolved Staff Comments
Not applicable.
Item 2.
Properties
We lease our corporate offices in Clearwater, Florida. We also lease 39 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
29 other retail locations we operate. 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.
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The following table reflects the status, approximate size, and facilities of the various retail locations we op erate as of the date of this report.
Location
Alabama
Gulf Shores
Connecticut
Norwalk
Westbrook
Florida
Cape Haze
Clearwater
Cocoa
Dania
Fort Lauderdale
Fort Myers
Jacksonville
Key Largo
Miami
Miami
Miami beach
Naples
North Palm beach
Orlando
Panama City
Pensacola
Pompano beach
Pompano beach
Sarasota
St. Petersburg(3)
Stuart
Tampa(4)
Venice
Georgia
buford (atlanta)
Cumming (atlanta)
Savannah
Maryland
baltimore
Location Type
Square
Footage(1)
Facilities at Property
Company owned
4,000
Retail and service
Third-party lease
Third-party lease
Company owned
Company owned
Company owned
Company owned
Third-party lease
Company owned
Third-party lease
Third-party lease
Company owned
Company owned
Third-party lease
Company owned
Third-party lease
Third-party lease
Third-party lease
Company owned
Company owned
Company owned
Third-party lease
Company owned
Company owned
Company owned
Company owned
Company owned
Third-party lease
Third-party lease
9,000
4,200
Retail and service; 56 wet slips
Retail and service
18,000
42,000
15,000
32,000
2,400
60,000
9,000
8,900
7,200
5,000
1,600
19,600
960
18,389
10,500
52,750
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 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 only
Retail and service; 14 wet slips
Retail only
Retail and service
Retail only; 8 wet slips
Retail, service, and storage; 60 wet
slips
Retail and service; 16 wet slips
Retail and service; 24 wet slips
Retail, service, and storage; 15 wet
slips
Retail and service; 20 wet slips
Retail and service; 66 wet slips
Retail and service
Retail, service, and storage; 90 wet
slips
13,500
13,000
50,600
Retail and service
Retail and service; 50 wet slips
Retail, marina, service and storage;
36 wet slips
Third-party lease
7,600
Retail and service; 17 wet slips
37
Operated
Since(2)
1998
1994
1998
—
1973
1968
1991
1977
1983
2016
2002
1980
2005
2018
1997
2016
1984
2011
2016
1990
2005
1972
2006
2002
—
1972
2001
1981
2017
2005
Waterfront
—
Norwalk Harbor
Westbrook Harbor
intracoastal Waterway
Tampa bay
—
Port everglades
intracoastal Waterway
Caloosahatchee River
intracoastal Waterway
Card Sound
Little River
Little River
—
Naples bay
intracoastal Waterway
—
Saint andrews bay
Pensacola bay
intracoastal Waterway
intracoastal Waterway
Sarasota bay
boca Ciega bay
intracoastal Waterway
—
intracoastal Waterway
—
Lake Lanier
Wilmington River
baltimore inner Harbor
Joppa(4)
Kent island
White Marsh(4)
Massachusetts
Danvers
Hingham
Quincy
Minnesota
bayport
excelsior
Rogers
Missouri
branson
Lake Ozark
Laurie(4)
Osage beach
New Jersey
brant beach
brick
Lake Hopatcong
Ship bottom
Somers Point
Ocean View
North Somers Point
New York
Copiague
Huntington
Lindenhurst
Manhattan
North Carolina
Lake Norman
Southport
Wrightsville beach
Ohio
Port Clinton
Oklahoma
afton
Rhode Island
Newport
Warwick
South Carolina
Charleston
Columbia
Greenville
Lake Wylie
Company owned
Third-party lease
Company owned
Third-party lease
Third-party lease
Company owned
Third-party lease
Third-party lease
Company owned
Third-party lease
Company owned
Company owned
Company owned
Third-party lease
Company owned
Company owned
Third-party lease
Third-party lease
Third-party lease
Third-party lease
Retail, service, and storage; 294
wet slips
Retail only
Retail and service
28,400
8,300
19,800
1966
2013
—
32,000
2,000
14,700
Retail and service
Retail only
Retail, service, and storage; 247
wet slips
450
2,500
70,000
Retail only; 10 wet slips
Retail only; 14 wet slips
Retail, service, and storage
1,500
60,300
700
2,000
Retail only; 6 wet slips
Retail, service, and storage; 300
wet slips
Retail and service
Retail and service
2016
2016
2018
1996
2013
1991
2000
1987
—
1987
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
Retail, service, and storage
Storage only
3,800
20,000
4,600
19,300
31,000
13,800
500
Third-party lease
15,000
Retail only
Third-party lease
Third-party lease
Third-party lease
Third-party lease
Third-party lease
Third-party lease
1,200
14,600
1,200
Retail and service
Retail, marina, service, and storage;
370 wet slips
Retail only; 75 wet slips
10,300
1,600
34,500
Retail only
Retail only
Retail, service, and storage
Company owned
80,000
Retail, service and storage; 8 wet
slips
Third-party lease
3,500
Retail and service; 23 wet slips
Third-party lease
Third-party lease
Third-party lease
Third-party lease
Third-party lease
Third-party lease
700
4,400
Retail only
Retail and service
14,800
7,200
24,500
76,400
Retail, service, and storage
Retail, service, and storage
Retail, service, and storage
Retail, marina, service, and storage;
82 wet slips
38
Gunpowder River
Kent Narrows
—
—
Weymouth black River
Town River
St Croix River
Lake Minnetonka
—
Table Rock Lake
Lake of the Ozarks
—
—
barnegat bay
Manasquan River
Lake Hopatcong
—
Little egg Harbor bay
—
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
Grand Lake
Newport Harbor
Greenwich bay
—
—
—
Lake Wylie
1965
1977
1998
1972
1987
2018
2018
1993
1995
1968
1996
2017
2008
1996
1997
2003
2011
1998
2017
2017
2017
2017
Texas
Lewisville (Dallas)
Seabrook
British Virgin
Islands
Tortola
Company owned
Company owned
22,000
32,000
Retail and service
Retail and service; 30 wet slips
2002
2002
—
Clear Lake
Third-party lease
2,550
Vacation Charters; 45 wet slips
2011
Nanny Cay
(1)
(2)
(3)
(4)
Square footage is approximate and does not include outside sales space or dock or marina facilities.
Operated since date is the date the facility was opened by us or opened prior to its acquisition by us.
initially a joint venture; full ownership acquired in February 2016.
Owned location that is currently closed.
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, 2018, 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
2016
Fourth quarter
2017
First quarter
Second quarter
Third quarter
Fourth quarter
2018
First quarter
Second quarter
Third quarter
Fourth quarter (through November 26, 2018)
High
Low
22.05 $
15.10
23.50 $
23.65 $
20.02 $
22.30 $
24.30 $
25.05 $
23.75 $
26.11 $
17.70
17.60
13.80
15.05
18.30
17.30
16.40
18.71
$
$
$
$
$
$
$
$
$
On November 26, 2018, the closing sale price of our common stock was $21.33 per share. On November 26, 2018, there were approximately 100 record
holders and approximately 7,600 beneficial owners of our common stock.
Dividends
We have never declared or paid cash dividends on our common stock. We currently plan to retain any earnings to finance the growth of our business rather
than to pay cash dividends. Payments of any cash dividends in the future will depend on our financial condition, results of operations, statutory restrictions, loan
covenants and capital requirements as well as other factors deemed relevant by our board of directors (such as market expectations).
39
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, 2018.
Period
July 1, 2018 to July 31, 2018
august 1, 2018 to august 31, 2018
September 1, 2018 to September 30, 2018
Total
Total
Number
of Shares
Purchased (1)(2)
Average
Price Paid
per Share
— $
— $
71,765 $
71,765 $
-
-
21.25
21.25
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
—
—
—
—
—
—
342,885
342,885
(1)
(2)
Under the terms of the program, the Company is authorized to purchase up to 2.0 million shares of its common stock through September 30, 2019.
71,765 shares reported in September 2018 are attributable to shares tendered by employees for the payment of applicable withholding taxes in connection
with the vesting of restricted stock or restricted stock unit awards.
40
Performance Graph
The following line graph compares cumulative total stockholder returns for the five years ended September 30, 2018 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, 2013. 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.
41
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 KPMG LLP. The financial data shown below should be read in conjunction with the consolidated financial statements and the related notes
thereto and "Management's Discussion and analysis 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
income from operations
interest expense, net
income before income tax provision (benefit)
income tax provision (benefit)
Net income
Net 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 shareholders' equity
2014
Fiscal Year Ended September 30,
2016
(Amounts in thousands except share, per share, and retail location data)
2015
2017
624,692
462,872
161,820
146,433
15,387
4,024
11,363
91
11,272
$
$
$
751,370
566,603
184,767
159,435
25,332
4,454
20,878
(27,414)
$
48,292
942,050
716,022
226,028
185,776
40,252
5,462
34,790
12,208
22,582
$
$
1,052,320
787,005
265,315
220,026
45,289
7,481
37,808
14,261
23,547
$
$
2018
1,177,371
879,138
298,233
235,050
63,183
9,903
53,280
13,968
39,312
0.46
$
1.92
$
0.91
$
0.95
$
1.71
$
$
$
24,655,262
25,102,289
24,820,847
24,678,800
23,030,662
$
54
12,658
$
6%
53
15,320
$
22%
56
18,539
$
22%
62
18,364
$
5%
63
19,873
10%
2014
2015
September 30,
2016
2017
2018
$
126,126 $
402,681
802
239,295
152,414 $
467,622
802
283,645
159,232 $
546,688
9,947
312,473
$
139,069
639,990
25,942
302,198
179,276
640,538
27,428
353,092
(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.
42
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 and yacht retailer in the United States with fiscal 2018 revenue approaching $1.2 billion. Through our current 63 retail
locations in 16 states (as of the filing of this annual Report on Form 10-K), we sell new and used recreational boats and related marine products, including engines,
trailers, parts, and accessories. We also arrange related boat financing, insurance, and extended service contracts; provide boat repair and maintenance services;
offer yacht and boat brokerage sales; yacht charter services; and, where available, offer slip and storage accommodations, as well as the charter of power 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, as of the filing of this annual Report on Form 10-
K, acquired 28 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 three acquisitions in the fiscal year ended September 30, 2016, one in the fiscal year ended September 30,
2017, and three acquisitions in the fiscal year ending September 30, 2018.
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 55%, 55%, and 51% of our
revenue during fiscal 2016, 2017, and 2018, respectively, can have a major impact on our operations. Local influences, such as corporate downsizing, military base
closings, and inclement weather such as hurricanes and other storms, environmental conditions, and specific events, such as the bP oil spill in the Gulf of Mexico
in 2010, also could adversely affect, and in certain instances have adversely affected, our operations in certain markets.
in an economic downturn, consumer discretionary spending levels generally decline, at times resulting in disproportionately large reductions in the sale of
luxury goods. Consumer spending on luxury goods also may decline as a result of lower consumer confidence levels, even if prevailing economic conditions are
favorable. 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 is likely to have 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 industry conditions continue to
improve. However, we cannot predict the length of unfavorable economic or industry conditions or the extent to which they could adversely affect our operating
results nor can we predict the effectiveness of the measures we have taken to address unfavorable economic or industry conditions.
although past economic conditions have adversely affected our operating results, we believe 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. 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 with greater earnings
potential as industry conditions continue to recover.
43
Application of Critical Accounting Policies
We have identified the policies below as critical to our business operations and the understanding of our results of operations. The impact and risks related
to these policies on our business operations 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 (including future earnings) that we believe are reasonable under the circumstances. The results of these assumptions
form the basis for making judgments about the carrying values of assets and liabilities, including contingent assets and liabilities such as contingent consideration
liabilities from acquisitions, which are not readily apparent from other sources. actual results could differ significantly from those estimates under different
assumptions and conditions. We believe that the following discussion addresses our most critical accounting policies, which are those that are most important to
the portrayal of our financial condition and results of operations and require our most difficult, subjective, and complex judgments, often as a result of the need to
make estimates about the effect of matters that are inherently uncertain.
Revenue Recognition
We recognize revenue from boat, motor, and trailer sales 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 as services are 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 recognize income
from the rentals of chartering power yachts on a straight-line basis over the term of the contract as services are completed. 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, 2018. 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. Our consideration received
from our vendors contains uncertainties because the calculation requires management to make assumptions and to apply judgment regarding a number of factors,
including our ability to collect amounts due from vendors and the ability to meet certain criteria stipulated by our vendors. We do not believe there is a reasonable
likelihood that there will be a change in the future estimates or assumptions we use to calculate our vendor considerations which would result in a material effect on
our operating results. accounting for consideration received is not expected to materially change with the adoption of aSU 2014-09, “Revenue from Contracts with
Customers (Topic 606)”, in fiscal 2019.
44
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 net realizable value. We state parts and accessories at the lower of cost, determined on an average cost basis,
or net realizable value. We utilize our historical experience, the aging of the inventories, and our consideration of current market trends as the basis for determining
a lower of cost or net realizable value valuation allowance. Our lower of cost or net realizable value valuation allowance contains uncertainties because the
calculation requires management to make assumptions and to apply judgment regarding the amount at which the inventory will ultimately be sold which considers
forecasted market trends, model changes, and new product introductions. 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 net realizable value valuation allowance which would result in a material effect on our operating
results. as of September 30, 2017 and September 30, 2018, our lower of cost or net realizable value valuation allowance for new and used boat, motor, and trailer
inventories was $1.8 million and $1.5 million, respectively. if events occur and market conditions change, causing the fair value to fall below carrying value, the
lower of cost or net realizable value valuation 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. in January 2017, we purchased Hall Marine Group, a privately
owned boat dealer in the Southeast United States with locations in North Carolina, South Carolina, and Georgia, resulting in the recording of $16.0 million in
goodwill. in January 2018, we purchased island Marine Center, a privately owned boat dealer located in New Jersey resulting in the recording of $1.3 million in
goodwill. in total, current and previous acquisitions have resulted in the recording of $27.4 million in goodwill. 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, 2018, 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 a quantitative goodwill
impairment test. The qualitative assessment requires us to make judgments and assumptions regarding macroeconomic and industry conditions, our financial
performance, and other factors. We do not believe there is a reasonable likelihood that there will be a change in the judgments and assumptions used in our
qualitative assessment which would result in a material effect on our operating results.
Impairment of Long-Lived 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. The analysis is performed at a regional level for indicators of permanent impairment given the
geographical interdependencies among our locations. based upon our most recent analysis, we believe no impairment of long-lived assets existed as of September
30, 2018. 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.
45
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. Our valuation models and
generally accepted valuation techniques require us to make assumptions and to apply judgment to determine the fair value of our awards. These assumptions and
judgments include estimating the volatility of our stock price, expected dividend yield, employee turnover rates and employee stock option exercise behaviors. We
do not believe there is a reasonable likelihood that there will be a change in the future estimates or assumptions we use to calculate our stock-based compensation
which would result in a material effect on our operating results.
Income Taxes
We account for income taxes in accordance with FaSb accounting Standards Codification 740, “income Taxes” (“aSC 740”). Under aSC 740, we
recognize deferred tax assets and liabilities for the future tax consequences attributable to temporary differences between the financial statement carrying amounts
of existing assets and liabilities and their respective tax bases. We measure deferred tax assets and liabilities using enacted tax rates expected to apply to taxable
income in the years in which we expect those temporary differences to be recovered or settled. We record valuation allowances to reduce our deferred tax assets to
the amount expected to be realized by considering all available positive and negative evidence.
Pursuant to aSC 740, we must consider all positive and negative evidence regarding the realization of deferred tax assets. aSC 740 provides for four
possible sources of taxable income to realize deferred tax assets: 1) taxable income in prior carryback years, 2) reversals of existing deferred tax liabilities, 3) tax
planning strategies and 4) projected future taxable income. as of September 30, 2018, we have no available taxable income in prior carryback years, limited
reversals of existing deferred tax liabilities or prudent and feasible tax planning strategies. Therefore, the recoverability of our deferred tax assets is dependent
upon generating future taxable income.
The determination of releasing valuation allowances against deferred tax assets is made, in part, pursuant to our assessment as to whether it is more likely
than not that we will generate sufficient future taxable income against which benefits of the deferred tax assets may or may not be realized. Significant judgment is
required in making estimates regarding our ability to generate income in future periods.
in the fourth quarter of fiscal 2016, we reached the conclusion that it was appropriate to release the majority of our valuation allowance against our state net
operating loss deferred tax assets due to our operating performance in fiscal 2016 being greater than projected at fiscal 2015 year end. We considered forecasts of
future operating results and the utilization of net operating losses within the statutory mandated carryforward periods and determined it was more likely than not
that the majority of our state net operating loss deferred tax assets would be realized. as a result of the release of a portion of our deferred tax asset valuation
allowance, we recorded an approximately $1.1 million reduction in our income tax provision. a portion of the valuation allowance was retained based on
particular jurisdictions. Specifically, the valuation allowance was retained for states with a shorter statutory carryforward periods and states where our economic
presence, as defined by the jurisdiction’s tax laws, has been reduced.
During the fourth quarter of fiscal 2017, the Company recorded a net tax benefit of $1.8 million primarily pertaining to a worthless stock deduction. The tax
benefit of this deduction was primarily based on the write-off of the Company’s investment in its british Virgin islands subsidiary for US tax purposes.
The Tax Cuts and Jobs act of 2017 (the “Tax act”) was signed into U.S. law on December 22, 2017. The Tax act contains provisions which impact the
Company’s current and future income taxes including a reduction in U.S. Federal corporate income tax rate from 35% to 21%, effective January 1, 2018. in
accordance with the Tax act, our blended statutory tax rate for fiscal year 2018 approximated 24.5% as a result of the reduced U.S. Federal corporate income tax
rate. For fiscal year 2018, we recorded a non-cash adjustment to income tax expense of approximately $805,000 for the remeasurement of deferred taxes on the
enactment date as a result of the change in tax law enacted by the Tax act.
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
46
income tax exposure. Our effective income tax rate is affected by changes in t ax 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.
Recent Accounting Pronouncements
in May 2014, the FaSb issued accounting Standards Update No. 2014-09, “Revenue from Contracts with Customers (Topic 606)” (“aSU 2014-09”), a
converged standard on revenue recognition. The new pronouncement requires revenue recognition to depict the transfer of promised goods or services to
customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance also
specifies the accounting for some costs to obtain or fulfill a contract with a customer, as well as enhanced disclosure requirements. aSU 2014-09 is effective for
annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. early adoption is permitted for
annual reporting periods beginning after December 15, 2016. While we have not completed the implementation process, we currently do not believe the adoption of
this standard will have a material impact on our consolidated financial statements, or will cause a significant change to our current accounting policies or internal
control over financial reporting for revenue recognition on boat, motor, and trailer sales, brokerage commissions, slip and storage services, charter rentals, yacht
charter services, and fee income generated from finance and insurance products. However, the timing of revenue recognition for certain parts and service operations
will be accelerated, as we have determined these performance obligations are satisfied over time under the new standard. We currently anticipate adopting the
standard using the modified retrospective approach applied only to contracts not completed as of the date of adoption, with no restatement of comparative periods.
We are finalizing our cumulative effect adjustment and currently expect that all changes to our revenue recognition methods as a result of adopting the new
standard will result in a net, after-tax cumulative effect adjustment to increase retained earnings as of October 1, 2018 in the range of $200,000 to $800,000. We
plan to adopt aSU 2014-09 in fiscal 2019.
in February 2016, the FaSb issued aSU 2016-02, “Leases (Topic 842)” (“aSU 2016-02”). This update requires organizations to recognize lease assets and
lease liabilities on the balance sheet and also disclose key information about leasing arrangements. aSU 2016-02 is effective for annual reporting periods beginning
on or after December 15, 2018, and interim periods within those annual periods. earlier application is permitted for all entities as of the beginning of an interim or
annual period. While we are continuing to evaluate the impact of the adoption of aSU 2016-02 on our consolidated financial statements, we believe the adoption
of aSU 2016-02 will have a significant and material impact to our consolidated balance sheet given our current lease agreements for our leased retail
locations. We are continuing to evaluate the impact the adoption of aSU 2016-02 will have on our other consolidated financial statements. based on our current
assessment, we expect that most of our operating lease commitments will be subject to the new guidance and recognized as operating lease liabilities and right-of-
use assets upon adoption, resulting in a material increase in the assets and liabilities recorded on our consolidated balance sheet. We expect to elect the majority of
the standard’s available practical expedients on adoption . We are continuing our assessment, which may identify additional impacts this standard will have on our
consolidated financial statements and related disclosures and internal control over financial reporting. We plan to adopt aSU 2016-02 in fiscal 2020.
in January 2017, the FaSb issued aSU 2017-04, “Simplifying the Test for Goodwill impairment (Topic 350)” (“aSU 2017-04”). This update removes the
requirement to compare the implied fair value of goodwill with its carrying amount as part of step 2 of the goodwill impairment test. as a result, under aSU 2017-
04, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount and should
recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the impairment loss recognized
should not exceed the total amount of goodwill allocated to that reporting unit. This guidance is effective prospectively for fiscal years beginning after December
15, 2019. early adoption is permitted for interim or annual goodwill impairment tests performed after January 1, 2017. We elected to early adopt the new
guidance in the fourth quarter of fiscal 2018. The adoption of aSU 2017-04 did not have an impact on the Company’s consolidated financial position, results of
operations, or internal controls.
47
Results of Op erations
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 provision
Net income
2016
942,050
716,022
226,028
185,776
40,252
5,462
34,790
12,208
22,582
$
$
Fiscal Year Ended September 30,
2017
(Amounts in thousands)
2018
100.0% $ 1,052,320
787,005
76.0%
265,315
24.0%
220,026
19.7%
45,289
4.3%
7,481
0.6%
37,808
3.7%
14,261
1.3%
23,547
2.4% $
100.0% $ 1,177,371
879,138
298,233
235,050
63,183
9,903
53,280
13,968
39,312
74.8%
25.2%
20.9%
4.3%
0.7%
3.6%
1.4%
2.2% $
100.0%
74.7%
25.3%
20.0%
5.3%
0.8%
4.5%
1.2%
3.3%
Fiscal Year Ended September 30, 2018, Compared with Fiscal Year Ended September 30, 2017
Revenue . Revenue increased $125.1 million, or 11.9%, to approximately $1.177 billion for the fiscal year ended September 30, 2018 from $1.052 billion
for the fiscal year ended September 30, 2017. Of this increase, $100.3 million was attributable to a 10% increase in comparable-store sales and an approximate
$24.8 million net increase related to stores opened or closed that were not eligible for inclusion in the comparable-store base. The increase in our comparable-store
sales was primarily 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 parts revenue. improving industry conditions resulting from improved economic conditions contributed to our comparable-store
sales growth.
Gross Profit . Gross profit increased $32.9 million, or 12.4%, to $298.2 million for the fiscal year ended September 30, 2018 from $265.3 million for the
fiscal year ended September 30, 2017. Gross profit as a percentage of revenue increased to 25.3% for the fiscal year ended September 30, 2018 from 25.2% for the
fiscal year ended September 30, 2017. The increase in gross profit as a percentage of revenue was primarily the result of improved margins on boat sales and our
higher margin service, parts and accessories products, and storage services. The increase in gross profit dollars was primarily attributable to the increase in our
gross margins and increased boat sales.
Selling, General, and Administrative Expenses. Selling, general, and administrative expenses increased $15.0 million, or 6.8%, to $235.0 million for the
fiscal year ended September 30, 2018 from $220.0 million for the fiscal year ended September 30, 2017. Selling, general, and administrative expenses for the fiscal
year ended September 30, 2018, included $1.4 million of adjustments related to contingent consideration obligations, which reduced expenses, partially offset by a
$1.2 million increase in non-recurring unusual costs. additionally, selling, general, and administrative expenses for the fiscal year ended September 30, 2017
included $2.9 million of expenses as a result of losses from Hurricane irma. excluding these items and making both years comparable, selling, general, and
administrative expenses increased $18.1 million, or 8.4%, to $235.3 million and as a percentage of revenue decreased to 20.0% for the fiscal year ended September
30, 2018, from 20.6% for the fiscal year ended September 30, 2017 . The increase in selling, general, and administrative expenses was primarily attributable to
increased commissions resulting from increased new and used boat sales, increased compensation due to improved performance, and increased health care costs
due to rising claims . The decrease in selling, general, and administrative expenses as a percentage of revenue was driven by increased efficiencies and operating
leverage in the business.
Interest Expense . interest expense increased $2.4 million, or 32.4%, to $9.9 million for the fiscal year ended September 30, 2018, from $7.5 million for the
fiscal year ended September 30, 2017. interest expense as a percentage of revenue increased to 0.8% for the fiscal year ended September 30, 2018, from 0.7% for
the fiscal year ended September 30, 2017. The increase in interest expense was primarily the result of increased borrowings and increases in interest rates.
Income Taxes . income tax expense decreased $293,000, or 2.1%, to $14.0 million for the fiscal year ended September 30, 2018 from $14.3 million for the
fiscal year ended September 30, 2017. Our effective income tax rate decreased to 26.2% for fiscal year ended September 30, 2018, from 37.7% for fiscal year
ended September 30, 2017. The decrease was mainly due to the passage of the Tax Cuts and Jobs act legislation in December 2017, which lowered the federal
corporate tax rate from 35% to 21%, and the utilization of Hurricane irma and Hurricane Harvey employee Retention Credits, partially offset by the re-
measurement of our beginning deferred tax assets and liabilities which resulted in an additional charge to income tax expense for the period of $805,000.
Fiscal Year Ended September 30, 2017, Compared with Fiscal Year Ended September 30, 2016
48
Revenue . Revenue increased $110.3 million, or 11.7%, to $1.052 billion for the fiscal year ended September 30, 2017 from $942.1 million for the fiscal
year ended September 30, 2016. Of this increase, $50.2 million was attributable to a 5% increase in comparable-store sales and an approxi mate $60.1 million net
increase related to stores opened or closed that were not eligible for inclusion in the comparable-store base. The increase in our comparable-store sales was
primarily due to incremental increases in new boat sales and incremental i ncreases in brokerage sales, storage services, finance and insurance products, service
revenue, parts revenue, and charter rentals. improving industry conditions resulting from improved economic conditions contributed to our comparable-store sales
growth.
Gross Profit . Gross profit increased $39.3 million, or 17.4%, to $265.3 million for the fiscal year ended September 30, 2017 from $226.0 million for the
fiscal year ended September 30, 2016. Gross profit as a percentage of revenue increased to 25.2% for the fiscal year ended September 30, 2017, from 24.0% for the
fiscal year ended September 30, 2016. The increase in gross profit as a percentage of revenue was primarily the result of improved margins on new and used boat
sales. The increase in gross profit dollars was primarily attributable to the increase in our gross margins and increased boat sales. additionally, our higher margin
service, parts and accessories products, storage, and charter services increased as a percentage of revenue, contributing to our overall margins increasing
accordingly.
Selling, General, and Administrative Expenses. Selling, general, and administrative expenses increased $34.3 million, or 18.4%, to $220.0 million for the
fiscal year ended September 30, 2017 from $185.8 million for the fiscal year ended September 30, 2016. Selling, general, and administrative expenses for the fiscal
year ended September 30, 2017 included $2.9 million of expenses as a result of losses from Hurricane irma. excluding this item and making both years
comparable, selling, general, and administrative expenses increased $31.4 million, or 16.9%, to $217.1 million and as a percentage of revenue increased to 20.6%
for the fiscal year ended September 30, 2017, from 19.7% for the fiscal year ended September 30, 2016. The increase in selling, general, and administrative
expenses was primarily attributable to recent acquisitions.
Interest Expense . interest expense increased $2.0 million, or 37.0%, to $7.5 million for the fiscal year ended September 30, 2017, from $5.5 million for the
fiscal year ended September 30, 2016. interest expense as a percentage of revenue increased to 0.7% for the fiscal year ended September 30, 2017, from 0.6% for
the fiscal year ended September 30, 2016. The increase in interest expense was primarily the result of increased borrowings and increases in interest rates.
Income Taxes . income tax expense increased $2.1 million, or 16.8%, to $14.3 million for the fiscal year ended September 30, 2017, from $12.2 million for
the fiscal year ended September 30, 2016. Our effective income tax rate was 37.7% for the fiscal year ended September 30, 2017, which included a net benefit of
$1.8 million primarily pertaining to a worthless stock deduction. Our effective income tax rate was 35.1% for the fiscal year ended September 30, 2016, which
included a deferred tax asset valuation allowance reversal of $1.1 million.
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 we believe our geographic diversity is likely to reduce the overall impact to us of
adverse weather conditions in any one market area, these conditions will continue to represent potential, material adverse risks to us and our future financial
performance.
49
Liquidity and Capital Resources
Our cash needs are primarily for working capital to support operations, including new and used boat and related parts inventories, off-season liquidity, and
growth through acquisitions and new store openings. acquisitions 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 return of or 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, 2018, 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, 2018, 2017, and 2016, cash provided by operating activities approximated $70.4 million, $4.7 million, and $22.9
million, respectively. For the fiscal year ended September 30, 2018, cash provided by operating activities was primarily related to our net income adjusted for non-
cash expenses and gains such as depreciation and amortization expense, deferred income tax provision, stock-based compensation expense, gains on insurance
settlements, gain on contingent acquisition consideration, decreases in inventory driven by inventory optimization efforts, insurance proceeds received as a result of
Hurricane irma, and increases in accrued expenses and other long-term liabilities , partially offset by increases in accounts receivable and decreases in accounts
payable and customer deposits. For the fiscal year ended September 30, 2017, cash provided by operating activities was primarily related to net income adjusted for
non-cash expenses such as depreciation and amortization expense, income tax expense, stock based compensation expense, increases in accounts payable and
accrued expenses, partially offset by an increase in inventory driven by the expansion of current and new brands, and decreases in customer deposits. For the fiscal
year ended September 30, 2016, cash provided by operating activities was primarily related to net income adjusted for non-cash expenses such as depreciation and
amortization expense, income tax expense, stock based compensation expense, increases in customer deposits and accrued expenses, partially offset by an increase
in inventory driven by the expansion of current and new brands, decreases in accounts payable, and increases in accounts receivable.
For the fiscal years ended September 30, 2018, 2017, and 2016, cash used in investing activities was approximately $23.3 million, $32.1 million, and
$29.7 million, respectively. For the fiscal year ended September 30, 2018, cash used in investing activities was primarily used to purchase property and equipment
associated with improving existing retail facilities, purchase property and equipment associated with business acquisitions, and capital improvements as a result of
Hurricane irma . For the fiscal year ended September 30, 2017, cash used in investing activities was primarily used to purchase property and equipment associated
with business acquisitions and property and equipment associated with improving existing retail facilities. For the fiscal year ended September 30, 2016, cash used
in investing activities was primarily used to purchase property and equipment associated with business acquisitions and property and equipment associated with
improving existing retail facilities.
For the fiscal year ended September 30, 2018 cash used in financing activities was approximately $40.2 million, and for the fiscal years ended 2017 and
2016 cash provided by financing activities was approximately $30.7 million and $12.9 million, respectively. For the fiscal year ended September 30, 2018, cash
used in financing activities was primarily attributable to a decrease in net short-term borrowings as a result of decreased inventory levels, contingent consideration
payments from acquisitions, and repurchase of common stock under the share repurchase program, partially offset by proceeds from the issuance of common stock
from our stock based compensation plans. For the fiscal year ended September 30, 2017, 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, 2016, cash provided by financing activities
was primarily attributable to net short-term borrowings as a result of increased inventory levels and proceeds from the issuance of common stock from our stock
based compensation plans, partially offset by the repurchase of common stock under the share repurchase program.
in October 2018, we amended and restated our inventory Financing agreement (the “amended Credit Facility”), originally entered into in June 2010, as
subsequently amended, with Wells Fargo Commercial Distribution Finance LLC (formerly Ge Commercial Distribution Finance Corporation). The October 2018
amendment and restatement extended the maturity date of the Credit Facility to October 2021, and the amended Credit Facility includes two additional one-year
extension periods, with lender
50
approval. The October 2018 amendment and restatement, among othe r things, modified the amount of borrowing availability and maturity date of the Credit
Facility. The amended Credit Facility provides a floor plan fi nancing commitment of up to $400 .0 million, an increas e from the previous limit of $35 0.0 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.
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 primarily the Company’s inventory that is financed through the amended Credit Facility and related accounts
receivable. None of our real estate has been pledged for collateral for the amended Credit Facility.
as of September 30, 2018, our indebtedness associated with financing our inventory and working capital needs totaled approximately $212.9 million. as of
September 30, 2017 and 2018, the interest rate on the outstanding short-term borrowings was approximately 4.7% and 5.5%, respectively. as of September 30,
2018, our additional available borrowings under our amended Credit Facility were approximately $71.6 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 the attached condensed
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.
Commitments and Commercial Commitments
The following table sets forth a summary of our material contractual obligations and commercial commitments as of September 30, 2018:
Year Ending September 30,
2019
2020
2021
2022
2023
Thereafter
Total
Short-Term
Borrowings (1)
Other Liabilities
(2)
(Amounts in thousands)
Operating
Leases (3)
$
$
212,949
—
—
—
—
—
212,949 $
2,055
493
—
—
—
—
2,548 $
7,296 $
7,077
6,077
4,961
4,835
25,361
55,607 $
Total
222,300
7,570
6,077
4,961
4,835
25,361
271,104
(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, 2018, the interest rate on our short-term borrowings was approximately 5.5%.
The amounts included in other liabilities consist primarily of gross unrecognized tax benefits, our estimated liability for claims on certain workers’
compensation insurance policies, and estimated future contingent consideration payments.
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-
51
balance sheet financing, liquidity, or market or credit risk suppor t; 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 t he financial statements.
Item 7A.
Quantitative and Qualitative Disclosures about Market Risk
Interest Rate Risk
as of September 30, 2018, 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 $2.1 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, 2018 and assumes no mitigating changes by us to reduce the outstanding balances and no additional interest assistance that could be
received from vendors due to the interest rate increase.
Foreign Currency Exchange Rate Risk
Products purchased from european-based and Chinese-based manufacturers are transacted in U.S. dollars. Fluctuations in the U.S. dollar exchange rate may
impact the retail price at which we can sell foreign products. accordingly, fluctuations in the value of other currencies compared with the U.S. dollar may impact
the price points at which we can profitably sell such foreign products, and such price points may not be competitive with other products in the United States. Thus,
such fluctuations in exchange rates ultimately may impact the amount of revenue, cost of goods sold, cash flows, and earnings we recognize for such foreign
products. We cannot predict the effects of exchange rate fluctuations on our operating results. in certain cases, we may enter into foreign currency cash flow hedges
to reduce the variability of cash flows associated with forecasted purchases of boats and yachts from european-based and Chinese-based manufacturers. We are not
currently engaged in foreign currency exchange hedging transactions to manage our foreign currency exposure. if and when we do engage in foreign currency
exchange hedging transactions, there can be no assurance that our strategies will adequately protect our operating results from the effects of exchange rate
fluctuations.
Item 8.
Financial Statements and Supplementary Data
Reference is made to the financial statements, the notes thereto, and the report thereon, commencing on page F-1 of this report, which financial statements,
notes, and report are incorporated herein by reference.
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, 2018, there were no changes in our internal control over financial reporting that materially affected, or were
reasonably likely to materially affect, our internal control over financial reporting.
52
Limitations on the Effectiveness of Controls
Our management, including our Chief executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures and
internal control over financial reporting will prevent all errors and all fraud. a control system, no matter how well conceived and operated, can provide only
reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are
resource constraints, and the benefits of controls must be considered relative to their costs. although our disclosure controls and procedures are designed to
provide reasonable assurance of achieving their objectives, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute
assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that
judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. additionally, controls can be circumvented by the
individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of controls also is based
in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under
all potential future conditions; over time, a control may become inadequate because of changes in conditions, or the degree of compliance with the policies or
procedures may deteriorate. because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be
detected.
CEO and CFO Certifications
exhibits 31.1 and 31.2 are the Certifications of the Chief executive Officer and Chief Financial Officer, respectively. The Certifications are required in
accordance with Section 302 of the Sarbanes-Oxley act of 2002 (the “Section 302 Certifications”). This item of this report, which you are currently reading is the
information concerning the evaluation referred to in the Section 302 Certifications and this information should be read in conjunction with the Section 302
Certifications for a more complete understanding of the topics presented.
Management’s Report on Internal Control over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) of
the Securities exchange act of 1934. Under the supervision and with the participation of our management, including our Chief executive Officer and Chief
Financial Officer, we conducted an evaluation of the effectiveness of the Company’s internal control over financial reporting as of September 30, 2018 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, 2018.
Our internal control over financial reporting as of September 30, 2018 has been audited by KPMG LLP, an independent registered public accounting firm,
as stated in their report which appears herein.
53
Report of Independent Registered Public Accounting Firm
To the Shareholders and board of Directors
MarineMax, inc.:
Opinion on Internal Control Over Financial Reporting
We have audited MarineMax, inc. ’s and subsidiaries’ (the Company) internal control over financial reporting as of September 30, 2018, based on criteria
established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. in our
opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of September 30, 2018, based on criteria established
in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
We also have audited, in accordance with the standards of the Public Company accounting Oversight board (United States) (PCaOb), the consolidated balance
sheets of the Company as of September 30, 2018 and 2017, the related consolidated statements of operations, shareholders’ equity, and cash flows for each of the
years in the three-year period ended September 30, 2018, and the related notes (collectively, the consolidated) financial statements, and our report dated November
29, 2018 expressed an unqualified opinion on those consolidated financial statements.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal
control over financial reporting, included in the accompanying Management’s 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 are a public accounting firm registered with the PCaOb and
are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the
Securities and exchange Commission and the PCaOb.
We conducted our audit in accordance with the standards of the PCaOb. Those standards require that we plan and perform the audit to obtain reasonable assurance
about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting
included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the
design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered
necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
a company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles. a company’s internal control over financial
reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions
and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with
authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with
the policies or procedures may deteriorate.
/s/ KPMG LLP
Tampa, Florida
November 29, 2018
Certified Public accountants
54
Item 9B.
Other information
Employment Agreement – William H. McGill, Jr.
The Company and Mr. W. McGill, Jr. entered into an amended employment agreement, dated November 29, 2018 (the “amended employment agreement”).
The amended employment agreement provides that:
•
•
•
•
•
Mr. W. McGill, Jr.’s salary will be reduced to $500,000 per year;
The payment of $1.0 million to Mr. W. McGill, Jr.’s estate in the event of his death will be reduced to $750,000;
in the event of the Company’s termination of Mr. W. McGill, Jr. ’s employment without Good Cause (as defined in the amended employment
agreement) or Mr. W. McGill, Jr. terminates his employment with Good Reason (as defined in the amended employment agreement), all restricted
stock or restricted stock units (or other comparable forms of equity compensation, if any) which are subject to performance conditions for vesting, shall
be fully vested and treated as if the performance conditions for such award had been fully met at target and shall not be subject to any risk of forfeiture
or repurchase as of the date of termination;
The age at which Mr. W. McGill, Jr. may retire from his services to the Company and begin receiving certain retirement benefits has increased from the
age of 75 to the age of 80. Medicare supplemental medical coverage for life for Mr. W. McGill, Jr. will no longer be included as a retirement benefit;
and
in the event of a Change in Control (as such term is defined in the amended employment agreement) or if Mr. W. McGill, Jr. terminates the amended
employment agreement as a result of a Change in Control, any payment received by Mr. W. McGill, Jr. as a result of such termination will be capped at
such amount as to not incur any excise tax payments under Section 4999 of the internal Revenue Code of 1986, as amended (the “Code”).
The other terms of the amended employment agreement remain substantially the same as Mr. W. McGill, Jr.’s prior employment agreement, which was filed as
an exhibit to the Periodic Report on Form 8-K, dated June 13, 2006. For further information regarding the terms and conditions of the amended employment
agreement, reference is made to the complete text thereof which is filed as an exhibit to this Form 10-K.
Employment Agreement – Michael H. McLamb
The Company and Mr. Michael H. McLamb entered into an amended employment agreement, dated November 29, 2018 (the “amended employment
agreement”). The amended employment agreement provides that:
•
•
Mr. McLamb’s salary will be increased to $375,000 per year; and
in the event of the Company’s termination of Mr. McLamb’s employment without Good Cause (as defined in the amended employment agreement) or
Mr. McLamb terminates his employment with Good Reason (as defined in the amended employment agreement), all of his restricted stock or restricted
stock units (or other comparable forms of equity compensation, if any) which are subject to performance conditions for vesting, shall be fully vested and
treated as if the performance conditions for such award had been fully met at target and shall not be subject to any risk of forfeiture or repurchase as of
the date of termination.
The other terms of the amended employment agreement remain substantially the same as Mr. McLamb’s prior employment agreement, which was filed as an
exhibit to the Periodic Report on Form 8-K, dated June 13, 2006. For further information regarding the terms and conditions of the amended employment
agreement, reference is made to the complete text thereof which is filed as an exhibit to this Form 10-K.
Employment Agreement – Brett McGill
The Company entered into an employment agreement with Mr. b. McGill, dated November 29, 2018 (the “employment agreement”), which sets forth the
terms of Mr. b. McGill’s service as the Company’s President and Chief executive Officer. Pursuant to the employment agreement, the Company will pay Mr. b.
McGill a base salary of at least $520,000 annually (subject to annual review by the board (or a committee of the board)). Mr. b. McGill will be eligible to receive
a bonus or other incentive compensation as may be determined by the board or a committee of the board based upon such factors as the board or such committee
may consider
55
in its sole discretion. in addition, the employment agreement contains customary covena nts regarding confidentiality, non-competition, non-solicitation, and non-
interference.
The Company and Mr. b. McGill may each terminate his employment at any time. if the Company terminates Mr. b. McGill’s employment without “good
cause” or he terminates his employment with “good reason” or upon a “change in control” of the Company that is not approved by at least two-thirds of our
directors or does not provide him with the same position he had with the Company immediately prior to the change of control, as such terms are defined in the
agreement, Mr. b. McGill will receive an amount equal to the average of his base salary and bonus in the two fiscal years prior to termination (in a lump sum in the
event of a change in control), for a period of thirty months after the effective date of termination; his stock options will vest and be exercisable for up to their full
term (or for such shorter period of time that would not cause Mr. b. McGill any adverse tax consequences); his restricted stock and/or restricted stock units (or
comparable forms of equity compensation, if any) will vest (at target), whether subject to performance conditions or not, and shall not be subject to any risk of
forfeiture or repurchase as of the date of termination, and other stock-based compensation will not be subject to forfeiture or repurchase, subject in each case to
certain exceptions. in the event of Mr. b. McGill’s death, the employment agreement provides for a payment of $1.0 million to his estate; for all stock options to
vest and be exercisable for their full term; and for other stock-based compensation to vest and not be subject to forfeiture or repurchase, subject to certain
exceptions. in the event of Mr. b. McGill’s disability, the employment agreement provides for the payment in a lump sum of the average of his base salary and
bonus in the two fiscal years prior to disability for one year; for all stock options to vest and be exercisable for up to full term (or for such shorter period of time
that would not cause the executive any adverse tax consequences); and for other stock-based compensation to vest and not be subject to forfeiture or repurchase,
subject to certain exceptions. if any payments to Mr. b. McGill upon his termination are subject to the excise tax imposed under Section 4999 of the Code, then
such payments shall be reduced in a manner determined by the Company that is consistent with the requirements of Section 409a of the Code until no amount
payable to Mr. b. McGill will be subject to such excise taxes.
For further information regarding the terms and conditions of the employment agreement, reference is made to the complete text thereof which is filed as an
exhibit to this Form 10-K.
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 2019 annual Meeting of
Shareholders (the “2019 Proxy Statement”). The information required by this item relating to our executive officers is included in “business — executive
Officers.”
We have adopted a code of ethics that applies to our principal executive officer, principal financial officer, and other senior accounting personnel. The
“Code of ethics for the CeO and Senior Financial Officers” is located on our website at www.MarineMax.com in the investor Relations section under Corporate
Governance.
We intend to satisfy the disclosure requirement under item 5.05(c) of Form 8-K regarding any amendment to, or waiver from, a provision of this code of
ethics by posting such information on our website, at the address and location specified above.
Item 11.
Executive Compensation
The information required by this item is incorporated herein by reference to the 2019 Proxy Statement (particularly under the caption “executive
Compensation”).
Item 12.
Security Ownership of Certain Bene ficial Owners and Management and Related Stockholder Matters
The information required by this item is incorporated herein by reference to the 2019 Proxy Statement (particularly under the caption “Security Ownership
of Principal Shareholders, Directors, and Officers”).
Item 13.
Certain Relationships and Related Transactions, and Director Independence
The information required by this item is incorporated herein by reference to the 2019 Proxy Statement (particularly under the caption “Certain Relationships
and Related Transactions”).
56
Item 14.
Principal Accou ntant Fees and Services
The information required by this item is incorporated herein by reference to the 2019 Proxy Statement (particularly under the caption “Ratification of
appointment of independent auditor”).
Item 15.
Exhibits, Financial Statement Schedules
PART IV
(a)
(1)
(2)
(3)
Financial Statements and Financial Statement Schedules
Financial Statements. Financial Statements are listed in the index to Consolidated Financial Statements on page F-1 of this report.
Financial Statement Schedules. 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.
Exhibits. See item 15(b) below.
(b)
Exhibits
Exhibit
Number
2.1
3.1
3.2
4.1
10.3(h)*
10.3(i)*
10.3(j)*
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†
10.21(a)†
10.21(b)†
10.21(c)†
10.21(d)†
10.21(e)†
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., as amended
employment agreement between Registrant and Michael H. McLamb, as amended
employment agreement between Registrant and William brett McGill.
2008 employee Stock Purchase Plan, as amended.
agreement Relating to acquisitions between Registrant and brunswick Corporation, dated December 7, 2005. (3)
amendment, executed October 17, 2014, to agreement Relating to acquisitions between Registrant and brunswick Corporation, dated December 7,
2005. (4)
Sea Ray Sales and Service agreement. (3)
Sea Ray Sales and Service agreement, executed October 17, 2014, by and between MarineMax east, inc. and Sea Ray, a Division of brunswick
Corporation. (4)
Sea Ray Sales and Service agreement, executed October 17, 2014, by and between MarineMax Northeast, LLC, and Sea Ray, a Division of
brunswick Corporation. (4)
Sea Ray Sales and Service agreement, executed October 17, 2014, by and between MarineMax, inc. and Sea Ray, a Division of brunswick
Corporation. (4)
boston Whaler Sales and Service agreement, executed December 5, 2014, by and between MarineMax east, inc. and boston Whaler, a Division of
brunswick Corporation. (5)
boston Whaler Sales and Service agreement, executed December 5, 2014, by and between MarineMax Northeast, LLC, and boston Whaler, a
Division of brunswick Corporation. (5)
boston Whaler Sales and Service agreement, executed December 5, 2014, by and between MarineMax, inc. and boston Whaler, a Division of
brunswick Corporation. (5)
inventory Financing agreement executed on June 24, 2010, among MarineMax, inc. and its subsidiaries, as borrowers, and Ge Commercial
Distribution Finance Corporation, as Lender. (6)
Program Terms Letter executed on June 24, 2010, among MarineMax, inc. and its subsidiaries, as borrowers, and Ge Commercial Distribution
Finance Corporation, as Lender. (6)
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. (7)
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. (7)
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. (8)
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. (8)
57
Exhibit
Number
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) †
10.21(q) †
10.22*
10.23
10.24(a)*
10.24(b)*
10.24(c)*
10.25*
10.26†
10.26(a)
10.26(b)
10.26(c)
10.27†
10.27(a)
10.27(b)
10.27(c)
10.27(d)
21
23.1
Exhibit
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. (9)
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. (10)
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. (10)
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. (4)
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. (4)
Second amended and Restated inventory Financing agreement, executed on October 30, 2015, among MarineMax, inc. and its subsidiaries, as
borrowers, and Ge Commercial Distribution Finance LLC f/k/a Ge Commercial Distribution Finance Corporation, as Lender. (11)
Third amended and Restated Program Terms Letter, executed on October 30, 2015, among MarineMax and its subsidiaries, as borrowers, and Ge
Commercial Distribution Finance LLC f/k/a Ge Commercial Distribution Finance Corporation, as Lender. (11)
First amendment to Second amended and Restated inventory Financing agreement, executed on March 31, 2016, among and its subsidiaries, as
borrowers, and Ge Commercial Distribution Finance LLC f/k/a Ge Commercial Distribution Finance Corporation, as Lender. (12)
Second amendment to Second amended and Restated inventory Financing agreement, First amendment to Third amended and Restated Program
Terms Letter and First amendment to [***********], executed on June 9, 2016, by and among MarineMax, inc. and its subsidiaries, as borrowers,
and Wells Fargo Commercial Distribution Finance LLC f/k/a Ge Commercial Distribution Finance Corporation, as Lender. (12)
Third amendment to Second amended and Restated inventory Financing agreement and Second amendment to [**********], executed on
October 22, 2016, by and among MarineMax, inc. and its subsidiaries, Wells Fargo Commercial Distribution Finance LLC, bank of the West, inc.
and M&T bank. (13)
Third amended and Restated inventory Financing agreement, executed on May 9, 2017, by and among MarineMax, inc. and its subsidiaries, as
borrowers, and Wells Fargo Commercial Distribution Finance LLC, bank of the West, inc., M&T bank, and branch banking & Trust Company.
(14)
Fourth amended and Restated Program Terms Letter, executed on May 9, 2017, by and among MarineMax, inc. and its subsidiaries, as borrowers,
and Wells Fargo Commercial Distribution Finance, LLC. (14)
MarineMax, inc. 2007 incentive Compensation Plan (15)
Director Fee Share Purchase Program (16)
MarineMax, inc. 2011 Stock-based Compensation Plan, as amended (17)
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. (20)
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.
58
Exhibit
Number
31.1
31.2
32.1
32.2
101.iNS
101.SCH
101.CaL
101.DeF
101.Lab
101.PRe
Exhibit
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 18 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 )
(9 )
(10 )
(11 )
(12 )
(13 )
(14 )
(15 )
(16 )
(17 )
(18 )
(19 )
(20 )
(c)
(1)
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 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.
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 10-Q for the quarterly period ended December 31, 2015, as filed on February 4, 2016.
incorporated by reference to Registrant’s Form 10-Q for the quarterly period ended June 30, 2016, as filed on august 3, 2016.
incorporated by reference to Registrant’s Form 10-Q for the quarterly period ended December 31, 2016 as filed on February 2, 2017.
incorporated by reference to Registrant’s Form 10-Q for the quarterly period ended June 30, 2017, as filed on July 25, 2017.
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 S-8 (File No. 333-177019) as filed on June 7, 2017.
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.
Financial Statements Schedules
See item 15(a) above.
59
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/ W. brett McGill
W. brett McGill
Chief executive Officer and President
Date: November 29, 2018
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.
Date
November 29, 2018
November 29, 2018
November 29, 2018
November 29, 2018
November 29, 2018
November 29, 2018
November 29, 2018
November 29, 2018
November 29, 2018
November 29, 2018
Signature
/s/ W. brett McGill
W. brett McGill
/s/ Michael H. McLamb
Michael H. McLamb
Capacity
Chief executive Officer and President,
(Principal executive Officer)
executive Vice President, Chief Financial Officer,
Secretary, and Director
(Principal accounting and
Financial Officer)
/s/ William H. McGill Jr.
William H. McGill Jr.
executive Chairman of the board,
Director
/s/ Clint Moore
Clint Moore
/s/ George e. borst
George e. borst
/s/ Hilliard M. eure iii
Hilliard M. eure iii
/s/ evelyn Follit
evelyn Follit
/s/ Charles R. Oglesby
Charles R. Oglesby
/s/ Joseph a. Watters
Joseph a. Watters
/s/ Rebecca White
Rebecca White
Director
Director
Director
Director
Director
Director
Director
60
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 Shareholders’ 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
To the Shareholders and board of Directors
MarineMax, inc.:
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of MarineMax, inc. and subsidiaries (the Company) as of September 30, 2018 and 2017, the related
consolidated statements of operations, shareholders’ equity, and cash flows for each of the years in the three‑year period ended September 30, 2018, and the related
notes (collectively, the consolidated financial statements). in our opinion, the consolidated financial statements present fairly, in all material respects, the financial
position of the Company as of September 30, 2018 and 2017, and the results of its operations and its cash flows for each of the years in the three‑year period ended
September 30, 2018, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company accounting Oversight board (United States) (PCaOb), the Company’s internal
control over financial reporting as of September 30, 2018, based on criteria established in Internal Control – Integrated Framework (2013) issued by the
Committee of Sponsoring Organizations of the Treadway Commission, and our report dated November 29, 2018 expressed an unqualified opinion on the
effectiveness of the Company’s internal control over financial reporting.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits. We are a public accounting firm registered with the PCaOb and are required to be independent with respect to the
Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and exchange Commission and the PCaOb.
We conducted our audits in accordance with the standards of the PCaOb. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing
procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that
respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial
statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall
presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ KPMG LLP
We have served as the Company’s auditor since 2013.
Tampa, Florida
November 29, 2018
Certified Public accountants
F-2
MARINEMAX, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(amounts in thousands except share and per share data)
ASSETS
September 30, 2017
September 30, 2018
CURReNT aSSeTS:
Cash and cash equivalents
accounts receivable, net
inventories, net
Prepaid expenses and other current assets
Total current assets
Property and equipment, net
Goodwill and other long-term assets, net
Deferred tax assets, net
Total assets
LIABILITIES AND SHAREHOLDERS' EQUITY
CURReNT LiabiLiTieS:
accounts payable
Customer deposits
accrued expenses
Short-term borrowings
Total current liabilities
Long-term liabilities
Total liabilities
COMMiTMeNTS aND CONTiNGeNCieS
SHaReHOLDeRS' eQUiTY:
Preferred stock, $.001 par value, 1,000,000 shares authorized,
none issued or outstanding as of September 30, 2017 and 2018
Common stock, $.001 par value; 40,000,000 shares authorized, 26,314,066
and 27,141,267 shares issued and 21,887,579 and 22,670,536 shares
outstanding as of September 30, 2017 and 2018, respectively
additional paid-in capital
Retained earnings
Treasury stock, at cost, 4,426,487 and 4,470,731 shares held as of
September 30, 2017 and 2018, respectively
Total shareholders' equity
Total liabilities and shareholders' equity
$
$
$
$
41,952 $
24,661
401,301
5,842
473,756
127,160
30,305
8,769
639,990 $
26,432 $
21,032
33,046
254,177
334,687
3,105
337,792
48,822
34,003
377,074
5,392
465,291
138,716
33,123
3,408
640,538
23,134
17,006
32,926
212,949
286,015
1,431
287,446
—
—
26
249,974
126,759
(74,561)
302,198
639,990 $
27
262,250
166,071
(75,256)
353,092
640,538
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 tax provision
income tax 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
2016
For the Year Ended September 30,
2017
2018
942,050 $
716,022
226,028
185,776
40,252
5,462
34,790
12,208
22,582 $
0.93 $
0.91 $
1,052,320 $
787,005
265,315
220,026
45,289
7,481
37,808
14,261
23,547 $
0.98
0.95 $
1,177,371
879,138
298,233
235,050
63,183
9,903
53,280
13,968
39,312
1.77
1.71
$
$
$
$
24,203,947
24,820,847
23,966,611
24,678,800
22,269,378
23,030,662
See accompanying notes to consolidated financial statements.
F-4
MARINEMAX, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(amounts in thousands except share data)
baLaNCe, September 30, 2015
Net income
adjustment to adopt aSU 2016-09
Purchase of treasury stock
Shares issued pursuant to employee stock
purchase plan
Shares issued upon vesting of equity awards,
net of minimum tax withholding
Shares issued upon exercise of stock options
Stock-based compensation
baLaNCe, September 30, 2016
Net income
Purchase of treasury stock
Shares issued pursuant to employee stock
purchase plan
Shares issued upon vesting of equity awards,
net of minimum tax withholding
Shares issued upon exercise of stock options
Stock-based compensation
baLaNCe, September 30, 2017
Net income
Purchase of treasury stock
Shares issued pursuant to employee stock
purchase plan
Shares issued upon vesting of equity awards,
net of minimum tax withholding
Shares issued upon exercise of stock options
Stock-based compensation
baLaNCe, September 30, 2018
Common Stock
Shares
Amount
Additional
Paid-in
Capital
Retained
Earnings
25,562,994 $
—
—
—
26 $
—
—
—
234,478 $
—
—
—
75,433 $
22,582
5,197
—
Treasury
Stock
(26,292) $
—
—
(5,531)
Equity
283,645
22,582
5,197
(5,531)
Total
Shareholders’
68,495
—
823
—
—
823
36,546
272,510
37,087
25,977,632 $
—
—
—
—
—
26 $
—
—
(362)
1,878
4,241
241,058 $
—
—
—
—
—
103,212 $
23,547
—
—
—
—
(31,823) $
—
(42,738)
(362)
1,878
4,241
312,473
23,547
(42,738)
51,697
—
887
—
—
887
56,539
184,931
43,267
26,314,066 $
—
—
—
—
—
26 $
—
—
(479)
2,271
6,237
249,974 $
—
—
—
—
—
126,759 $
39,312
—
—
—
—
(74,561) $
—
(695)
(479)
2,271
6,237
302,198
39,312
(695)
67,187
—
950
—
—
950
163,350
586,531
10,133
27,141,267 $
—
1
—
27 $
(1,643)
6,732
6,237
262,250 $
—
—
—
166,071 $
—
—
—
(75,256) $
(1,643)
6,733
6,237
353,092
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
Loss on sale of property and equipment and assets held for sale
Gain on insurance settlements
Proceeds from insurance settlements
Gain on contingent acquisition consideration
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
Proceeds from insurance settlements
Net cash used in acquisition of businesses
Proceeds from sale of property and equipment and assets held for sale
Net cash used in investing activities
CaSH FLOWS FROM FiNaNCiNG aCTiViTieS:
Net borrowings on short-term borrowings
Net proceeds from issuance of common stock under incentive
compensation, and employee purchase plans
Contingent acquisition consideration payments
Payments on tax withholdings for equity awards
Purchase of treasury stock
Net cash provided by (used in) 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 items:
Held for sale assets classified as property and equipment
accrued tax withholdings upon vesting of equity awards
Contingent consideration liabilities from acquisitions
adjustment to retained earnings and deferred tax assets to adopt
aSU 2016-09
accrued acquisition of property and equipment
exchange of equity interest for controlling interest
2016
For the Year Ended September 30,
2017
2018
$
22,582 $
23,547 $
39,312
7,964
11,639
51
—
—
—
4,241
(5,436)
(32,417)
(1,517)
(4,278)
16,625
3,409
22,863
(12,913)
—
(17,062)
228
(29,747)
9,364
12,306
306
—
—
—
6,237
266
(57,107)
(1,710)
16,835
(9,341)
4,042
4,745
(14,367)
—
(18,725)
994
(32,098)
10,673
5,361
330
(1,082)
2,342
(1,440)
6,237
(11,279)
26,773
(996)
(3,325)
(4,065)
1,573
70,414
(13,804)
823
(10,524)
190
(23,315)
15,768
70,819
(43,383)
2,701
—
(80)
(5,531)
12,858
5,974
32,611
38,585 $
3,158
(150)
(369)
(42,738)
30,720
3,367
38,585
41,952 $
6,002 $
855
8,482 $
457
3,800
282
3,307
5,197
—
2,860
—
392
3,720
—
300
—
7,683
(3,324)
(510)
(695)
(40,229)
6,870
41,952
48,822
12,021
9,424
—
1,525
—
—
129
—
$
$
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 and yacht 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 yachts in the british Virgin islands. as of September 30, 2018, we operated through
63 retail locations in 16 states, consisting of alabama, Connecticut, Florida, Georgia, Maryland, Massachusetts, Minnesota, Missouri, New Jersey, New York,
North Carolina, Ohio, Oklahoma, Rhode island, South Carolina, and Texas. Our MarineMax Vacations operations maintain a facility in Tortola, british Virgin
islands.
We are the nation’s largest retailer of Sea Ray and boston Whaler recreational boats and yachts which are manufactured by brunswick Corporation
(“brunswick”). Sales of new brunswick boats accounted for approximately 40% of our revenue in fiscal 2018. Sales of new Sea Ray and boston Whaler boats,
both divisions of brunswick, accounted for approximately 21% and 17%, respectively, of our revenue in fiscal 2018. brunswick is a world leading manufacturer of
marine products and marine engines. We believe we represented approximately 42% of brunswick’s Sea Ray boat sales, during our fiscal 2018.
We have dealership agreements with Sea Ray, boston Whaler, Harris, and Mercury Marine, all subsidiaries or divisions of brunswick. We also have dealer
agreements with italy-based azimut-benetti Group’s product line for azimut 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 appoint 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 and yachts accounted for
approximately 11% of our revenue in fiscal 2018. 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, 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 55%, 55%, and 51% of our
revenue during fiscal 2016, 2017, and 2018, respectively, can have a major impact on our operations. Local influences, such as corporate downsizing, military base
closings, inclement weather such as Hurricane Sandy in 2012 or Hurricanes Harvey and irma in 2017, environmental conditions, and specific events, such as the
bP oil spill in the Gulf of Mexico in 2010, also could adversely affect, and in certain instances have adversely affected, our operations in certain markets.
in an economic downturn, consumer discretionary spending levels generally decline, at times resulting in disproportionately large reductions in the sale of
luxury goods. Consumer spending on luxury goods also may decline as a result of lower consumer confidence levels, even if prevailing economic conditions are
favorable. as a result, an economic downturn could impact us more than certain of our competitors due to our strategic focus on a higher end of our
market. although we have expanded our operations during periods of stagnant or modestly declining industry trends, the cyclical nature of the recreational boating
industry or the lack of industry growth 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 eco nomic 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 condition s 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 fac ility. acquisitions and new store
openings remain important strategies to our company, and we plan to accelerate our gro wth through these strategies as industry conditions continue to
improve. However, we cannot predict the length of unfavorable economic or industry conditions or the exten t to which they could adversely affect our operating
results nor can we predict the effectiveness of the measures we have t aken to address unfavorable economic or industry conditions .
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.
accounting for consideration received is not expected to materially change with the adoption of aSU 2014-09, “Revenue from Contracts with Customers (Topic
606)”, in fiscal 2019.
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 net realizable value. We state parts and accessories at the lower of cost, determined on an average cost basis,
or net realizable value. We utilize our historical experience, the aging of the inventories, and our consideration of current market trends as the basis for determining
a lower of cost or net realizable value valuation allowance. 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 net realizable value valuation allowance which would result in a material effect on our operating results. as of
September 30, 2017 and 2018, our lower of cost or net realizable value valuation allowance for new and used boat, motor, and trailer inventories was $1.8 million
and $1.5 million, respectively. if events occur and market conditions change, causing the fair value to fall below carrying value, the lower of cost or net realizable
value valuation 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
F-8
Years
5-40
3-10
5-10
3-5
MARINEMAX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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, repairs, 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. in January 2017, we purchased Hall Marine Group, a privately
owned boat dealer in the Southeast United States with locations in North Carolina, South Carolina, and Georgia, resulting in the recording of $16.0 million in
goodwill. in January 2018, we purchased island Marine Center, a privately owned boat dealer located in New Jersey resulting in the recording of $1.3 million in
goodwill. in total, current and previous acquisitions have resulted in the recording of $27.4 million in goodwill. 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, 2018 , 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 a quantitative 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. The analysis is performed at a regional level for indicators of permanent impairment given the geographical
interdependencies amongst our locations. based upon our most recent analysis, we believe no further impairment of long-lived assets existed as of September 30,
2018.
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 as services are completed. We recognize commissions earned from a brokerage sale at the time the related brokerage transaction
closes. We recognize income from the rentals of chartering power yachts on a straight-line basis over the term of the contract as services are completed. 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
F-9
MARINEMAX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 custome r 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, 2018 , 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 contract prior to its scheduled maturity. We determined the chargeback allowance, which was
not material to the consolidated financial statements taken as a whole as of September 30, 2018, 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
2016
2017
2018
68.5%
17.5%
6.0%
2.5%
3.5%
2.0%
100.0%
70.9%
14.9%
6.3%
2.4%
3.6%
1.9%
100.0%
71.2%
14.8%
6.2%
2.4%
3.6%
1.8%
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 $13.5 million, $16.2 million, and $16.5 million, net of related
co-op assistance of approximately $730,000, $779,000, and $653,000, for the fiscal years ended September 30, 2016, 2017, and 2018, 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
F-10
MARINEMAX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
to amounts held with financial institutions. Concentrations of credit risk arising from our receivables are limited primarily to amounts due from manufacturers and
financial institutions.
Fair Value of Financial Instruments
The carrying amount of our financial instruments approximates fair value resulting from either length to maturity or existence of interest rates that
approximate prevailing market rates unless otherwise disclosed in these consolidated financial statements.
Use of Estimates and Assumptions
The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States requires us to make
estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated
financial statements and the reported amounts of revenues and expenses during the reporting periods. Significant estimates made by us in the accompanying
consolidated financial statements relate to valuation allowances, valuation of goodwill and intangible assets, valuation of long-lived assets, valuation of contingent
consideration, and valuation of accruals. actual results could differ materially from those estimates.
Segment Reporting
We operate as one reporting segment in accordance with the FaSb accounting Standards Codification 280, “Segment Reporting”. The metrics used by our
Chief executive Officer (as the Company’s chief operating decision maker or the “CODM”) to assess the performance of the Company are focused on viewing the
business as a single integrated business.
3. NEW ACCOUNTING PRONOUNCEMENTS:
in May 2014, the FaSb issued accounting Standards Update No. 2014-09, “Revenue from Contracts with Customers (Topic 606)” (“aSU 2014-09”), a
converged standard on revenue recognition. The new pronouncement requires revenue recognition to depict the transfer of promised goods or services to
customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance also
specifies the accounting for some costs to obtain or fulfill a contract with a customer, as well as enhanced disclosure requirements. aSU 2014-09 is effective for
annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. early adoption is permitted for
annual reporting periods beginning after December 15, 2016. While we have not completed the implementation process, we currently do not believe the adoption of
this standard will have a material impact on our consolidated financial statements, or will cause a significant change to our current accounting policies or internal
control over financial reporting for revenue recognition on boat, motor, and trailer sales, brokerage commissions, slip and storage services, charter rentals, yacht
charter services, and fee income generated from finance and insurance products. However, the timing of revenue recognition for certain parts and service operations
will be accelerated, as we have determined these performance obligations are satisfied over time under the new standard. We currently anticipate adopting the
standard using the modified retrospective approach applied only to contracts not completed as of the date of adoption, with no restatement of comparative periods.
We are finalizing our cumulative effect adjustment and currently expect that all changes to our revenue recognition methods as a result of adopting the new
standard will result in a net, after-tax cumulative effect adjustment to increase retained earnings as of October 1, 2018 in the range of $200,000 to $800,000. We
plan to adopt aSU 2014-09 in fiscal 2019.
in February 2016, the FaSb issued aSU 2016-02, “Leases (Topic 842)” (“aSU 2016-02”). This update requires organizations to recognize lease assets and
lease liabilities on the balance sheet and also disclose key information about leasing arrangements. aSU 2016-02 is effective for annual reporting periods beginning
on or after December 15, 2018, and interim periods within those annual periods. earlier application is permitted for all entities as of the beginning of an interim or
annual period. While we are continuing to evaluate the impact of the adoption of aSU 2016-02 on our consolidated financial statements, we believe the adoption
of aSU 2016-02 will have a significant and material impact to our consolidated balance sheet given our current lease agreements for our leased retail
locations. We are continuing to evaluate the impact the adoption of aSU 2016-02 will have on our other consolidated financial statements. based on our current
assessment, we expect that most of our operating lease commitments will be subject to the new guidance and recognized as operating lease liabilities and right-of-
use assets upon adoption, resulting in a material increase in the assets and liabilities recorded on our consolidated balance sheet. We expect to elect the majority of
the standard’s available practical expedients on adoption . We are continuing our assessment, which may identify additional impacts this standard will have on our
consolidated financial statements and related disclosures and internal control over financial reporting. We plan to adopt aSU 2016-02 in fiscal 2020.
F-11
MARINEMAX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
in January 2017, the FaSb issued aSU 2017-04, “Simplifying the Test for Goodwill impairment (Topic 350)” (“aSU 2017-04”). This update removes the
requirement to compare the implied fair value of goodwill with its carrying amount as part of step 2 of the goodwill impairment test. as a result, under aSU 2017-
04, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carryin g amount and should
recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the impairment loss recognized
should not exceed the total amount of goodwill allocated to that reporting unit. This guidance is effective prospectively for fiscal years beginning after December
15, 2019. early adoption is permitted for interim or annual goodwill impairment tests performed after January 1, 2017. We elected to early adopt the new
guidance in the fo urth quarter of fiscal 2018. The adoption of aSU 2017-04 did not have an impact on the Company’s consolidated financial position, results of
operations, or internal controls.
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, 2017 or 2018, 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, net
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
2017
2018
(Amounts in thousands)
15,860 $
8,192
609
24,661 $
18,864
14,343
796
34,003
2017
2018
(Amounts in thousands)
357,957 $
35,211
8,133
401,301 $
332,320
35,999
8,755
377,074
$
$
$
$
F-12
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
2017
2018
(Amounts in thousands)
51,283 $
100,284
33,278
3,938
7,862
196,645
(69,485)
127,160 $
56,628
108,693
32,155
3,925
9,328
210,729
(72,013)
138,716
$
$
Depreciation and amortization expense on property and equipment totaled approximately $8.0 million, $9.4 million, and $10.7 million for the fiscal years
ended September 30, 2016, 2017, and 2018, respectively.
7. GOODWILL AND OTHER ASSETS:
in total, current and previous acquisitions have resulted in the recording of $25.9 million and $27.4 million in goodwill as of September 30, 2017 and 2018,
respectively.
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 specified that we were to operate and maintain the service business and that brunswick was to operate and maintain the
marina business. Simultaneously with the closing, the acquired entity became Gulfport Marina, LLC (“Gulfport”). We accounted for our investment in Gulfport in
accordance with FaSb accounting Standards Codification 323, “investment – equity Method and Joint Venture”. accordingly, we adjusted the carrying amount
of our investment in Gulfport to recognize our share of earnings or losses, based on the service business we operated. During February 2016, we acquired
brunswick’s interest in the Gulfport joint venture. after the acquisition of brunswick’s interest, we reported the complete operations of Gulfport in our
consolidated balance sheet as of September 30, 2017 and 2018, and consolidated statement of operations for the remainder of fiscal year 2016, fiscal year 2017, and
fiscal year 2018 subsequent to the acquisition in accordance with FaSb accounting Standards Codification 805, “business Combinations”.
8. SHORT-TERM BORROWINGS:
in October 2018, we amended and restated our inventory Financing agreement (the “amended Credit Facility”), originally entered into in June 2010, as
subsequently amended, with Wells Fargo Commercial Distribution Finance LLC (formerly Ge Commercial Distribution Finance Corporation). The October 2018
amendment and restatement extended the maturity date of the Credit Facility to October 2021, and the amended Credit Facility includes two additional one-year
extension periods, with lender approval. The October 2018 amendment and restatement, 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 $400.0 million, an increase from the
previous limit of $350.0 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.
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
F-13
MARINEMAX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
for the amended Credit Facility is primarily the Company’s inventor y that is financed through the a mended Credit Facility and related accounts receivable. None
of our real estate has been ple dged for collateral for the amended Credit Facility. The amended Credit Facility contemplates that other lenders may be added by
the Company to finance other inv entory not financed under this F acility.
as of September 30, 2017 and 2018, our indebtedness associated with financing our inventory and working capital needs totaled approximately $254.2
million and $212.9 million, respectively. as of September 30, 2017 and 2018, the interest rate on the outstanding short-term borrowings was approximately 4.7%
and 5.5%, respectively. as of September 30, 2018, our additional available borrowings under our amended Credit Facility were approximately $71.6 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, 2018, 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 provision (benefit) from income taxes consisted of the following for the fiscal years ended September 30,
Current provision (benefit):
Federal
State
Total current provision
Deferred provision (benefit):
Federal
State
Total deferred provision
Total income tax provision
2016
2017
(Amounts in thousands)
2018
$
$
$
496 $
73
569 $
11,691
(52)
11,639
12,208 $
2,321 $
(366)
1,955 $
10,190
2,116
12,306
14,261 $
8,055
195
8,250
4,205
1,513
5,718
13,968
F-14
MARINEMAX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
During the fourth quarter of fiscal 2017, the Company recorded a net tax benefit of $1.8 million primarily pertaining to a worthless stock deduction. The tax
benefit of this deduction was primarily based on the write-off of the Company’s investment in its british Virgin islands subsidiary for US tax purposes .
On December 22, 2017, the Tax act was enacted which, among a number of its provisions, lowered the U.S. corporate tax rate from 35% to 21%, effective
January 1, 2018. The Company's blended statutory tax rate for fiscal year 2018 will approximate 24.5% as a result of the change in statutory rates. For fiscal year
2018, we recorded a non-cash adjustment to income tax expense of $805,000 for the remeasurement of deferred taxes on the enactment date.
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 provision
State taxes, net of federal effect
Worthless stock deduction
Stock based compensation
Valuation allowance
Foreign rate differential
effect of Federal Tax Reform
Other
effective tax rate
2016
2017
2018
35.0%
3.6%
—
(0.5)%
(3.2)%
0.5%
—
(0.3)%
35.1%
35.0%
4.4%
(4.8)%
0.2%
(0.1)%
2.4%
—
0.6%
37.7%
24.5%
4.1%
—
(2.0)%
(0.3)%
—
1.5%
(1.6)%
26.2%
Deferred income taxes reflect the impact of temporary differences between the amount of assets and liabilities recognized for financial reporting purposes
and such amounts recognized for income tax purposes. The tax effects of these temporary differences representing the components of deferred tax assets as of
September 30,
Deferred tax assets:
inventories
accrued expenses
Stock based compensation
Tax loss carryforwards
Other
Valuation allowance
Total long-term deferred tax assets
Deferred tax liabilities:
Depreciation and amortization
Total long-term deferred tax liabilities
Net deferred tax assets
2017
2018
(Amounts in thousands)
$
$
$
1,028 $
521
4,121
3,901
593
(246)
9,918
(1,149)
(1,149) $
8,769 $
588
644
2,258
3,910
580
(119)
7,861
(4,453)
(4,453)
3,408
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, 2018, 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 fiscal 2008, the Company had maintained a full valuation allowance against its deferred tax assets, having determined it was
more likely than not that the deferred tax assets would not be realized. The determination of releasing valuation allowances against deferred tax assets is made, in
part, pursuant to our assessment as to whether it 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.
F-15
MARINEMAX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
in the fourth quarter of fiscal 2016 , we reached the conclusion that it was appropriate to release the majority of our valuation allowance against our state net
operating loss deferred tax assets due to our operating performance in fiscal 2016 being greater than projected at fiscal 2015 year end. We considered forecasts of
future operating results and the utilization of net operating losses within the statutory mandated carryforward periods and determined it was more likely than not
that the majority of our state net operating loss deferred tax assets would be realized. as a result of the release of a portion of our deferred tax asset valuation
allowance, we recorded approximately $1.1 million reduction in our income tax provision. a portion of the valuation allowance was retained based on particular
jurisdictions. Specifically, states with a shorter statutory carryforward periods and states where our economic presence, as defined by the jurisdiction’s tax laws,
has been reduced.
as of September 30, 2017, we no longer had federal net operating loss (NOL) carryforwards for federal income tax purposes. as of September 30, 2018, the
Company has state NOL carryforwards of approximately $83.5 million for state income tax purposes, which resulted in a deferred tax asset of $3.9 million, and
expire at various dates from 2029 through 2032.
Significant judgment is also required in evaluating our uncertain tax positions. although we believe our tax return positions are sustainable, we recognize
tax benefits from uncertain tax positions in the financial statements only when it is more likely than not that the positions will not be sustained upon examination,
including resolution of any related appeals or litigation processes, based on the technical merits and a consideration of the relevant taxing authority's administrative
practices and precedents. To the extent that the final tax outcome of these matters is different than the amounts recorded, such differences will impact the provision
for income taxes in the period in which such determination is made. The provision for income taxes includes the impact of reserve provisions and changes to
reserves that are considered appropriate, as well as the related net interest and penalties.
in fiscal 2017, the Company released a reserve for an uncertain tax position based on administrative practice in the applicable jurisdiction in the amount of
$264,000 of which approximately $177,000 impacted the effective tax rate. as of September 30, 2017 and 2018, we had approximately $0 of gross unrecognized
tax benefits.
The reconciliation of the total amount recorded for unrecognized tax benefits at the beginning and end of the fiscal years ended September 30, 2017 and
2018 is as follows:
Unrecognized tax benefits at the beginning of the year
increases in tax positions for prior years
Decreases in tax positions for prior years
Unrecognized tax benefits at the end of the year
2017
2018
(Amounts in thousands)
$
$
254 $
10
(264)
- $
-
-
-
-
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, 2017 and 2018, interest and penalties represented approximately $0 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 2014, and we are not subject to assessments
prior to the 2013 fiscal year for the majority of the State jurisdictions.
10. SHAREHOLDERS’ EQUITY:
in august 2017, our board of Directors approved a new share repurchase plan allowing our company to repurchase up to 2,000,000 shares of our common
stock through September 30, 2019. 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, 2018 we had purchased an
aggregate of 4,470,731 shares of common stock under the current and historical share repurchase plans for an aggregate purchase price of approximately $75.3
million. as of September 30, 2018, approximately 342,885 shares remained available for future purchases under the share repurchase program.
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
F-16
MARINEMAX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 expe cted 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.
Cash received from option exercises under all share-based compensation arrangements for the fiscal years ended September 30, 2016, 2017, and 2018 was
approximately $2.7 million, $3.2 million, and $7.7 million, respectively. We currently expect to satisfy share-based awards with registered shares available to be
issued.
12. THE INCENTIVE STOCK PLANS:
During February 2017, our shareholders approved a proposal to amend the 2011 Stock-based Compensation Plan (“2011 Plan”) to increase the 2,200,456
share threshold by 1,000,000 shares to 3,200,456 shares. During January 2011, our shareholders 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 and the February 2017 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 3,000,000 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, 2017 through September 30, 2018:
balance as of September 30, 2017
Options granted
Options cancelled/forfeited/expired
Options exercised
Restricted stock awards granted
Restricted stock awards forfeited
additional shares of stock issued
balance as of September 30, 2018
exercisable as of September 30, 2018
Shares
Available
for Grant
1,386,561
(5,000)
14,750
—
(341,517)
61,925
(69,472)
1,047,247
Options
Aggregate
Intrinsic
Value
Outstanding
(in thousands)
Weighted
Average
Exercise
Price
1,207,504 $
5,000
(14,750)
(586,531)
—
—
—
611,223 $
607,889 $
5,737 $
—
—
—
—
—
—
5,544 $
5,537 $
11.81
18.95
12.27
11.48
—
—
—
12.18
12.14
Weighted
Average
Remaining
Contractual
Life
5.3
4.4
4.4
The weighted-average grant date fair value of options granted during the fiscal years ended September 30, 2016 and September 30, 2018 was $6.88 and
$8.42, respectively. No options were granted during the fiscal year ended September 30, 2017. The total intrinsic value of options exercised during the fiscal years
ended September 30, 2016, 2017, and 2018 was approximately $3.6 million, $1.6 million, and $6.3 million, respectively.
F-17
MARINEMAX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
as of September 30, 2017 and 2018 , there were approximately $ 200,000 and $ 100,000 , respectively, of unrecognized compensation costs related to non-
vested options that are expected to be recognized over a weighted average period of 1.8 years . The total fair value of options vested during the fiscal years ended
September 30, 2016 , 2017 , and 2018 was approximately $ 0.2 million , $ 2.5 million and $ 1.3 million, respectively.
We used the black-Scholes model to estimate the fair value of options granted. The expected term of options granted is derived from the output of the
option pricing model and represents the period of time that options granted are expected to be outstanding. Volatility is based on the historical volatility of our
common stock. The risk-free rate for periods within the contractual term of the options is based on the U.S. Treasury yield curve in effect at the time of grant.
below are the weighted-average assumptions used for the fiscal years ended September 30, 2016 and 2018. No options were granted for the fiscal year
ended September 30, 2017.
Dividend yield
Risk-free interest rate
Volatility
expected life
2016
0.0%
1.0%
48.2%
5.0 years
2017
—
—
—
—
2018
0.0%
2.7%
45.4%
5.0 years
13. EMPLOYEE STOCK PURCHASE PLAN:
During February 2012, our shareholders approved a proposal to amend our 2008 employee Stock Purchase Plan (“Stock Purchase Plan”) to increase the
number of shares available under that plan by 500,000 shares. During February 2018, our board of Directors approved a proposal to amend the Stock Purchase Plan
to extend it such that the final annual offering will be in 2027. 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 20 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
2016
0.0%
0.2%
50.9%
Six months
2017
0.0%
0.7%
40.9%
Six months
2018
0.0%
1.5%
49.9%
Six months
as of September 30, 2018, we had issued 860,535 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 employees and Officers pursuant to the
2011 Plan and the 2007 Plan. The restricted stock awards and RSUs have varying vesting periods, but generally become fully vested between two and four years
after the grant date, depending on the specific award, performance targets met for performance based awards granted to Officers, and vesting period for time based
awards. Officer performance based awards
F-18
MARINEMAX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
are granted at the target amount of shares that may be earned and the actual amount of the award earned generally could range from 0% to 200% of the target
number of shares based on the actual specified performance target met. We accounted for the restr icted stock awards granted using the measurement and
recognition provisions of aSC 718. accordingly, the fair value of the restricted stock awards, including performance based awards, is measured on the grant date
and recognized in earnings over the requi site service period for each separately vesting portion of the award.
The following table summarizes restricted stock award activity from September 30, 2017 through September 30, 2018:
Non-vested balance as of September 30, 2017
Changes during the period
awards granted
awards vested
awards forfeited
Non-vested balance as of September 30, 2018
Shares/
Units
Weighted
Average
Grant Date
Fair Value
606,543 $
16.53
341,517 $
(181,809) $
(61,925) $
704,326 $
20.13
16.55
17.15
17.61
as of September 30, 2018, we had approximately $6.3 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
2016
2017
2018
24,203,947
23,966,611
22,269,378
616,900
712,189
761,284
24,820,847
24,678,800
23,030,662
During the fiscal years ended September 30, 2016, 2017, and 2018 there were 140,521, 18,526, and 1,288 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, wet slips, machinery, equipment, and vehicles related to our dealerships under non-cancelable third-party operating leases.
Certain of our leases include options for renewal periods and provisions for escalation. Rental expenses, including month-to-month rentals, were approximately
$7.1 million, $8.3 million, and $8.4 million for the fiscal years ended September 30, 2016, 2017, and 2018, respectively.
F-19
MARINEMAX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Future minimum lease payments under non-cancelable operating leases as of September 30, 2018 , were as follows:
2019
2020
2021
2022
2023
Thereafter
Total
(Amounts
in thousands)
7,296
7,077
6,077
4,961
4,835
25,361
55,607
$
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 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 matched 25% of participants’ contributions, up to a maximum of 5% of each participant’s
compensation, in fiscal 2016 and 2017, and 50% of participants’ contributions, up to a maximum of 5% of each participant’s compensation in fiscal 2018. We
contributed, under the Plan, or pursuant to previous similar plans, approximately $713,000, $765,000, and $1.9 million for the fiscal years ended September 30,
2016, 2017, and 2018, respectively.
F-20
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
income from
operations
interest expense
income before income
income tax
provision
income tax
provision
Net income
Net income
per share:
Diluted
Weighted average
number of shares:
Diluted
December 31,
2016
March 31,
2017
$
226,875 $
173,737
53,138
245,018 $
183,959
61,059
September
30,
2017
December 31,
2017
June 30,
March 31,
2018
2017
(Amounts in thousands except share and per share data)
329,809 $
245,017
84,792
236,921 $
177,672
59,249
250,618 $
184,292
66,326
270,605 $
201,312
69,293
June 30,
2018
September
30,
2018
361,254 $
270,567
90,687
308,591
229,587
79,004
47,095
54,781
59,557
58,593
50,246
58,659
64,089
62,056
6,043
1,569
6,278
2,045
25,235
1,897
7,733
1,970
9,003
2,542
10,634
2,840
26,598
2,499
16,948
2,022
4,474
4,233
23,338
5,763
6,461
7,794
24,099
14,926
1,831
2,643 $
1,484
2,749 $
9,094
14,244 $
1,852
3,911 $
2,249
4,212 $
1,610
6,184 $
6,723
17,376 $
3,386
11,540
$
$
0.11 $
0.11 $
0.57 $
0.17 $
0.19 $
0.27 $
0.75 $
0.50
24,923,125 25,116,359 25,095,398 23,591,854 22,712,648 22,940,594 23,182,546 23,286,206
F-21
2018 AMENDED AND RESTATED EMPLOYMENT AGREEMENT
THiS 2018 aMeNDeD aND ReSTaTeD eMPLOYMeNT aGReeMeNT (this “agreement”), is entered into this ___ day of
November 2018, by and between MarineMax, inc., a Florida corporation (the “Company”), and William H. McGill, Jr. (“executive”), and
amends any and all previously existing employment arrangements or agreements between the parties and is effective as of 1st day of October,
2018 (“effective Date”).
Exhibit 10.3(h)
RECITALS
a.
The Company is engaged primaril y in the business of selling, renting, leasing, and servicing boating, nautical, and other
related lifestyle entertainment products and services, and related activities and executive has experience in such business.
b. executive served as Chairman and Chief executive Officer of the Company. The Company desires to assure itself of the
continued availability of executive in the role of executive Chairman.
C. The Company desires to employ executive, and executive desires to accept such employment, pursuant to the terms and
conditions set forth in this agreement.
NOW, THeReFORe, in consideration of the mutual promises, terms, covenants, and conditions set forth herein and the
AGREEMENT
performance of each, it is hereby agreed as follows:
1. EMPLOYMENT AND DUTIES
.
(a) EMPLOYMENT
. The Company hereby employs executive, and executive hereby agrees to act, as executive Chairman of the Company. as such,
executive shall have responsibilities, duties, and authority reasonably accorded to, expected of, and consistent with executive’s position and
executive shall report directly to the board of Directors of the Company (the “board”). executive hereby accepts this employment upon the
terms and conditions herein contained and, subject to Section l(c) hereof, agrees to devote his best efforts and substantially all of his business
time and attention to promote and further the business of the Company.
(b) POLICIES
. executive shall faithfully adhere to, execute, and fulfill all lawful policies established by the Company.
(c) OTHER ACTIVITIES
. executive shall not, during the period of his employment hereunder, be engaged in any other business activity pursued for gain,
profit, or other pecuniary advantage if such activity interferes in any material respect with executive’s duties and responsibilities hereunder.
The foregoing limitations shall not be construed as prohibiting executive from (i) making personal investments in such form or manner as
will neither require his services in the operation or affairs of the companies or enterprises in which such investments are made nor subject
executive to any conflict of interest with respect to his duties to the Company, (ii) serving on any civic or charitable boards or
committees, (iii) delivering lectures or fulfilling speaking engagements, or (iv) serving, with the written approval of the board, as a director
of one or more corporations, in each case so long as any such activities do not significantly interfere with the performance of executive’s
responsibilities under this
agreement. in addition, executive shall comply with the restrictions listed in Section 3 of this agreement.
(d) PLACE OF PERFORMANCE
. executive shall not be required by the Company or in the performance of his duties to relocate his primary residence.
2. COMPENSATION
. For all services rendered by executive, the Company shall compensate executive as follows:
(a) BASE SALARY
. From the effective Date, the base salary payable to executive shall be Five Hundred Thousand Dollars ($500,000) per year,
payable on a regular basis in accordance with the Company’s standard payroll procedures, but not less than monthly. On at least an annual
basis, the board or a committee of the board shall review executive’s performance and may make increases to such base salary if, in its sole
discretion, any such increase is warranted.
(b) BONUS OR OTHER INCENTIVE COMPENSATION
. executive shall be eligible to receive a bonus or other incentive compensation as may be determined by the board or a committee
of the board based upon such factors as the board or such committee, in its sole discretion, may deem relevant, including, without limitation,
the performance of executive and the Company; provided, however, that the board or a committee of the board shall establish for each fiscal
year of the Company a bonus program in which executive shall be entitled to participate, which bonus program provides executive with a
reasonable opportunity, based on the performance of the Company, the past compensation practices of the Company and executive’s then
base salary, to maintain or increase executive’s total compensation compared to the previous fiscal year.
(c) EXECUTIVE PERQUISITES, BENEFITS, AND OTHER COMPENSATION
. executive shall be entitled to receive additional benefits and compensation from the Company in such form and to such extent as
specified below:
iNSURaNCe COVeRaGe
. Payment of all premiums for coverage for executive and his dependent family members under all health,
hospitalization, disability, dental, life, and other insurance plans that the Company may have in effect from time to time, with the benefits
provided to executive to be on terms no less favorable than the benefits provided to other Company executive officers.
ReiMbURSeMeNT FOR eXPeNSeS
. The Company shall provide reimbursement to executive for business travel and other out-of-pocket expenses
reasonably incurred by executive in the performance of his services under this agreement. all reimbursable expenses shall be appropriately
documented in reasonable detail by executive upon submission of any request for reimbursement and shall be in a format and manner
consistent with the Company’s expense reporting policy. Such expenses shall be submitted to the Company’s Chief Financial Officer for
approval or to such other officer of the Company as the board may from time to time direct. except as expressly provided otherwise herein,
no reimbursement payable to executive pursuant to any provisions of this agreement or pursuant to any plan or arrangement of the Company
shall be paid later than the last day of the calendar year following the calendar year in which the related expense was incurred, and no such
reimbursement during any calendar year shall affect the amounts eligible for reimbursement in any other calendar year, except, in each case,
to the extent that the right to reimbursement does not provide for a “deferral of compensation” within the meaning of Section 409a of the
internal Revenue Code of 1986, as amended (the “Section 409a”).
2
VACATION
. Paid vacation in accordance with the applicable policy of the Company as in effect from time to time. executive shall
be entitled to no less than four (4) weeks paid vacation per year; provided, however, executive may carryover up to, but not more than, two
weeks of unused vacation time from one calendar year to the next succeeding calendar year. The maximum amount of vacation that may be
accrued for any calendar year is six (6) weeks of paid vacation. No additional paid vacation shall accrue above the six (6) week limit.
OTHeR eXeCUTiVe PeRQUiSiTeS
. The Company shall provide executive with other executive perquisites as may be made available to or deemed
appropriate for executive by the board or a committee of the board and participation in all other Company-wide employee benefits
(including group insurance, pension, retirement, and other plans and programs) as are available to the Company’s executive officers from
time to time.
3. NON-COMPETITION AGREEMENT
.
(a) NON-COMPETITION
. executive shall not, during the period of his employment •by or with the Company, and during the Noncompete Period (as
hereinafter defined) for any reason whatsoever, directly or indirectly, for himself or on behalf of or in conjunction with any other person:
OTHeR aCTiViTieS
contractor, consultant, advisor, or sales representative, in any Competitive business within the Restricted Territory;
. engage, as an officer, director, shareholder, owner, principal, partner, lender, joint venturer, employee, independent
SOLiCiTaTiON OF eMPLOYeeS
. Call upon any person who is, at that time, within the Restricted Territory, an employee of the Company or any of its
subsidiaries, in a managerial capacity for the purpose or with the intent of enticing such employee away from or out of the employ of the
Company or any of its subsidiaries;
SOLiCiTaTiON OF CUSTOMeRS
. Call upon any person or entity that is, at that time, or that has been, within one (1) year prior to that time, a customer
‘of the Company or any of its subsidiaries, within the Restricted Territory for the purpose of soliciting or selling products or services in direct
competition with the Company or any of its subsidiaries within the Restricted Territory;
(iv) SOLiCiTaTiON OF aCQUiSiTiON CaNDiDaTeS
. Call upon any prospective acquisition candidate (that is, a business that the Company may have an interest in
acquiring), on executive’s own behalf or on behalf of any person, which candidate was, to executive’s knowledge after due inquiry, either
called upon by the Company, or for which the Company made an acquisition analysis, for the purpose of acquiring such candidate.
(b) CERTAIN DEFINITIONS
.
as used in this agreement, the following terms shall have the meanings ascribed to them:
COMPeTiTiVe bUSiNeSS
shall mean any Person that sells, rents, brokers, leases, stores, repairs, restores, or services recreational boats or
other boating products or provides services relating to recreational boats or other boating products or any other business in which the
Company is engaged;
NONCOMPeTe PeRiOD
shall mean the longer of (i) the two (2) year period immediately following the termination of executive’s employment
with the Company or (ii) the time during which severance payments are being made by the Company to executive in accordance with this
agreement; provided, however, that if the executive’s employment is terminated by the Company
3
without Good Cause, executive terminates his employment with Good Reason or, executive terminates his employment after a Change in
Control pursuant to Section 4(b)(vii)(b), then the Noncompete Period shall be for the one (1) year period immediately following the
termination of his employment with the Company.
PeRSON
shall mean any individual, corporation, limited liability company, partnership, firm, or other business of whatever
nature;
ReSTRiCTeD TeRRiTORY
shall mean any state or other political jurisdiction in which, or any location within two hundred (200) miles of which,
the Company or any subsidiary of the Company maintains any facilities; sells, rents, brokers, leases, stores, repairs, restores, or services
recreational boats or other boating products; or provides services relating to recreational boats or other boating products; and
SUbSiDiaRY
and any other business organization in which the Company holds at least a fifty percent (50%) equity interest.
shall mean the Company’s consolidated subsidiaries, including corporations, partnerships, limited liability companies,
(c) ENFORCEMENT
. because of the difficulty of measuring economic losses to the Company as a result of a breach of the foregoing covenants, and
because of the immediate and irreparable damage that could be caused to the Company for which it would have no other adequate remedy,
executive agrees that the foregoing covenants may be enforced by the Company in the event of breach by him, by injunctions and restraining
orders.
(d) REASONABLE RESTRAINT
. it is agreed by the parties that the foregoing covenants in this Section 3 impose a reasonable restraint on executive in light of the
activities and business of the Company (including the Company’s subsidiaries) on the effective Date and the current plans of the Company
(including the Company’s subsidiaries); but it is also the intent of the Company and executive that such covenants be construed and enforced
in accordance with the changing activities, business, and locations of the Company (including the Company’s subsidiaries) throughout the
term of this covenant, whether before or after the date of termination of the employment of executive. For example, if, during the term of
this agreement, the Company (including the Company’s subsidiaries) engages in new and different activities, enters a new business, or
establishes new locations for its current activities or business in addition to or other than the activities or business enumerated above or the
locations currently established therefore, then executive will be precluded from soliciting the customers or employees of such new activities
or business or from such new location and from directly competing with such new business within the Restricted Territory through the term of
these covenants.
(e) OTHER ACTIVITIES
. it is further agreed by the parties that, in the event that executive shall cease to be employed hereunder and enters into a business
or pursues other activities not in competition with the Company (including the Company’s subsidiaries), or similar activities or business in
locations, the operation of which, under such circumstances, does not violate this Section 3, and in any event such new business, activities, or
location are not in violation of this Section 3 or of executive’s obligations under this Section 3, if any, executive shall not be chargeable with
a violation of this Section 3 if the Company (including the Company’s subsidiaries) shall thereafter enter the same, similar, or a competitive
(i) business, (ii) course of activities, or (iii) location, as applicable.
(f) SEPARATE COVENANTS
. The covenants in this Section 3 are severable and separate, and the unenforceability of any specific covenant shall not affect the
provisions of any other covenant. Moreover, in the event any court of competent jurisdiction shall determine that the scope, time, or territorial
restrictions set forth are unreasonable, then it is the intention of the parties that such
4
restrictions be enforced to the fullest extent that the court deems reasonable, and the agreement shall thereby be reformed.
(g) INDEPENDENT AGREEMENT
. all of the covenants in this Section 3 shall be construed as an agreement independent of any other provision in this agreement,
and the existence of any claim or cause of action of executive against the Company, whether predicated on this agreement or otherwise, shall
not constitute a defense to the enforcement by the Company of such covenants, except as provided in Section 4(d) below. it is specifically
agreed that the Noncompete Period defined in this Section 3, during which the agreements and covenants of executive made in this Section 3
shall be effective, shall be computed by excluding from such computation any time during which executive is in violation of any provision of
this Section 3.
4. AT-WILL EMPLOYMENT; TERMINATION; RIGHTS ON TERMINATION
(a) AT WILL EMPLOYMENT
. executive’s employment with the Company shall be at-will. The executive may terminate his employment at any time for any
reason (subject to the notice requirements provided in this agreement) and the Company may terminate executive’s employment with the
Company at any time and for any reason (subject to the severance provisions of this agreement). This at-will employment relationship cannot
be changed except by written authorization by the board of Directors of the Company.
(b) TERMINATION
. executive’s employment under this agreement may be terminated in any one of the followings ways:
DeaTH OF eXeCUTiVe
. The employment of executive shall terminate immediately upon executive’s death provided that the Company shall
pay to the estate of executive an amount equal to $750,000 and continue to pay for a period of 6 months all premiums for coverage for
executive’s dependent family members under all health, hospitalization, disability, dental, life, and other insurance plans that the Company
maintained at the time of executive’s death. in the event of such termination, all options to purchase Common Stock of the Company held by
executive shall thereupon vest and shall be exercisable for the maximum period of time, up to their full term, that will not cause executive
with respect to such options to be subject to any excise tax under Section 409a of the internal Revenue Code of 1986, as amended (“Section
409a”) notwithstanding the termination of employment. all restricted stock and/or restricted stock units (or comparable forms of equity
compensation, if any) held by the executive which, as of the date of the death of executive, are not then subject to any performance
conditions for vesting, shall be fully vested and shall not be subject to any risk of forfeiture or repurchase as of the date of executive’s death.
The payment described in Section, if payable, shall be paid within ten (10) days after the executive’s death.
DiSabiLiTY OF eXeCUTiVe
. The Company may terminate executive’s employment in the event the executive is disabled. The executive shall be
disabled if the executive is unable to engage in any substantial gainful activity by reason of a medically determined physical or mental
impairment expected to last at least twelve consecutive months or result in death, or if applicable, for at least three (3) months the executive is
receiving income replacement benefits under a Company sponsored plan by reason of any medically determined physical or mental
impairment expected to last at least twelve (12) consecutive months or result in death, or if the executive is determined to be disabled under a
Company disability plan with a similar definition of disability. in the event executive’s employment under this agreement is terminated as a
result of executive’s disability, executive shall receive from the Company, in a lump-sum payment due within ten (10) days of the effective
date of termination, an amount equal to the average of the base salary and bonus paid to executive for the two (2) prior full fiscal years, for
one (1) year. in the event of such termination, all options to purchase Common
5
Stock of the Company held by executive shall thereupon vest and shall be exercisable for the maximum period of time, up to their full term,
that will not cause executive with respect to such options to be subject to any excise tax under Section 409a notwithstanding the termination
of employment. all restricted stock and/or restricte d stock units (or comparable form s of equity compensation, if any) held by the executive
which, as of the date of the disability of executive, are not then subject to any performance conditions for vesting, shall be fully vested and
shall not be subject to any risk of forfeiture .or repurchase as of the date of executive ’ s termination due to disability (as defined in this
paragraph).
TeRMiNaTiON bY THe COMPaNY FOR GOOD CaUSe
. The Company may terminate executive’s employment upon ten (10) days prior written notice to executive for “Good
Cause,” which shall mean any one or more of the following: (a) executive’s willful and material breach of this agreement which has not
been cured by the executive within thirty (30) days following written notice of such breach from the Company; (b) executive’s gross
negligence in the performance or intentional nonperformance (continuing for thirty (30) days after receipt of written notice of need to cure) of
any of executive’s material duties and responsibilities hereunder; (C) executive’s willful dishonesty, fraud, or misconduct with respect to the
business or affairs of the Company, which materially and adversely affects the operations or reputation of the Company; (D) executive’s
conviction of a felony crime involving dishonesty or moral turpitude; or (e) a confirmed positive illegal drug test result. in the event of a
termination by the Company for Good Cause, executive shall have no right to any severance compensation.
TeRMiNaTiON bY THe COMPaNY WiTHOUT GOOD CaUSe OR bY eXeCUTiVe WiTH GOOD ReaSON
. The Company may terminate executive’s employment without Good Cause upon the approval of a majority of the
members of the board, excluding executive if executive is a member of the board. executive may terminate his employment under this
agreement for Good Reason upon thirty (30) days prior notice to the Company.
WiTH GOOD ReaSON
ReSULT OF TeRMiNaTiON bY THe COMPaNY WiTHOUT GOOD CaUSe OR bY eXeCUTiVe
. Should the Company terminate executive’s employment without Good Cause or should executive
terminate his employment with Good Reason, the Company shall pay to executive for three (3) years after such termination, on such dates as
would otherwise be paid by the Company, an amount equal to the average of the base salary and bonus paid to executive for the two (2) prior
full fiscal years. The amounts payable under the preceding sentence and any amounts that are payable under Section 4(b)(vi)(a) shall
commence on the first payroll date following executive’s “separation from service” from the Company within the meaning of Section 409a,
and shall be treated as a series of separate payments under Treasury Regulations Section 1.409a-2(b)(2)(iii). Further, if the Company
terminates executive’s employment without Good Cause or executive terminates his employment with Good Reason, (1) the Company shall
make the family medical insurance premium payments contemplated by CObRa or provide comparable coverage for a period of three (3)
years after such termination (2) all options to purchase Common Stock of the Company held by executive shall vest thereupon and shall be
exercisable for the maximum period of time, up to their full term, that will not cause executive with respect to such options to be subject to
any excise tax under Section 409a notwithstanding the termination of employment, (3) the Company shall maintain life insurance
coverage, comparable to that provided immediately prior to termination, for a period of
three (3) years thereafter with the beneficiary designated by executive, (4) all restricted stock and/or restricted stock units (or
comparable forms of equity compensation, if any) held by executive which, as of the effective date of the termination of executive, are not
then subject to any performance conditions for vesting, shall be fully vested and shall not be subject to any risk of forfeiture or repurchase as
of the date of termination, (5) all restricted stock and/or restricted stock units (or comparable forms of equity compensation, if any) held by
executive which, as of the effective date of the termination of executive, is subject to performance conditions for vesting, shall be fully
vested and treated as if the performance
6
conditions for such award had been fully met at target and shall not be subject to any risk of forfeiture or repurchase as of the date of
termination , and ( 6 ) executive shall be entitled to receive all other unpaid benefits due and owing through executive ’ s last day of
employment. Further, any term ination by the Company without Good Cause or by executive for Good Reason shall operate to shorten the
Noncompete Period set forth in Section 3 to one (1) year from the date of termination of employment.
DeFiNiTiON OF GOOD ReaSON
. executive shall have “Good Reason” to terminate employment upon occurrence of any of the following
events without executive’s prior written approval: ( 1) executive suffers a material reduction in authority, responsibilities or duties as
provided herein; (2) executive’s annual base salary for a fiscal year as determined pursuant to Section 2(a) is reduced to a level that is less
than ninety percent (90%) of the base salary paid to executive during the prior contract year under this agreement; (3) the Company takes
steps to deny executive a reasonable opportunity to maintain executive’s total compensation (i.e., base salary plus bonus and any other
annual cash incentive compensation) compared to the previous fiscal year (provided total compensation may take into account performance
of the Company and past compensation practices of the Company); or (4) the Company breaches a material provision of this agreement. in
order for an event to justify termination for Good Reason, the executive must give written notice to the Company of such event within 90
days of its first occurrence and the Company must have 30 days to cure, if possible.
ReSiGNaTiON bY eXeCUTiVe WiTHOUT GOOD ReaSON
. executive may, without cause, and without Good Reason terminate his own employment under this agreement,
effective thirty (30) days after written notice is provided to the Company or such earlier time as any such resignation may be accepted by the
Company. if executive resigns or otherwise terminates his employment without Good Reason, executive shall receive no severance
compensation.
ReTiReMeNT
. The Company (so long as executive does not have Good Reason to terminate his employment under this agreement)
and executive (so long as the Company does not have Good Cause to terminate executive’s employment under this agreement) shall each
have the right, upon not less than thirty (30) days prior written notice to the other, to elect that executive Retire from his services to the
Company upon reaching the age of eighty (80) provided that, if requested by the Company prior to the end of the thirty (30) day notice period,
executive shall defer his Retirement for a period of up to six (6) months from the date of the notice and continue his employment under this
agreement. in the event of any such Retirement, executive shall make himself available for a period of thirty-six (36) months following the
date of Retirement to render consulting services to the Company requiring not more than four (4) days per month and the Company shall in
consideration for such retirement services (a) pay executive for each of two (2) years an amount equal to fifty percent (50%) of the average
of the base salary and bonus paid to him for the two (2) full fiscal years immediately preceding such Retirement on the same date as salary
would otherwise be paid by the Company, (b) maintain life insurance coverage comparable to that provided at the date of Retirement for a
period of three (3) years with the beneficiary designed by executive, (C) vest all unvested options to the extent not previously vested and have
such options be exercisable for the extent the maximum period of time, up to their full term, that will not cause executive with respect to such
options to be subject to any excise tax under Section 409a notwithstanding the termination of employment and (D) all restricted stock and/or
restricted stock units (or comparable forms of equity compensation, if any) held by executive which, as of the effective date of the retirement
of executive, are not then subject to any performance conditions for vesting, shall be fully vested and shall not be subject to any risk of
forfeiture or repurchase as of the date of termination. The Noncompete Period provided for in Section 3 shall equal the thirty-six (36)
month consulting period and an additional two (2) year period thereafter.
7
CHANGE IN CONTROL OF THE COMPANY
.
POSSibiLiTY OF CHaNGe iN CONTROL
. executive understands and acknowledges that the Company may be merged or consolidated with or into
another entity and that such entity shall automatically succeed to the rights and obligations of the Company hereunder or that the Company
may undergo another type of Change in Control. in the event such a merger or consolidation or other Change in Control is initiated prior to
the end of the Term, then the provisions of this Section 4(b)(vii) shall be applicable.
TeRMiNaTiON bY eXeCUTiVe
. Subject to the exceptions set forth in Section 4(b)(vii)(e), if any Change of Control is initiated during
executive’s employment hereunder, executive may, at his sole discretion, elect to terminate his employment under this agreement by
providing written notice to the Company at least thirty (30) business days at any time beginning on the effective date of the Change in Control
and ending one (1) year after the closing of the transaction giving rise to the Change in Control. in such case, the applicable provisions of
Section 4(b)(iv) hereof will apply as though the Company had terminated executive’s employment
without Good Cause; however, under such circumstances, the amount of the severance payments due to executive shall be paid in a lump
sum, the Noncompete Period of Section 3 hereof shall be limited to a period of one (1) year from the effective date of termination, and
executive shall make himself available, for a period of twelve (12) months following the date of his termination of employment, to render
consulting services relating to the business and operations of the Company requiring not more than four (4) days a month. To the extent that
executive shall be determined by a final and non-appealable determination of a court of competent jurisdiction to have willfully violated
either the noncompetition or consulting requirement, executive shall reimburse the Company for Five Hundred Thousand Dollars
($500,000) of the severance amount paid to him for either violation and One Million Dollars ($1,000,000) of the severance amount paid to
him for a violation of both covenants. if any of the payments or benefits received or to be received by the executive (including, without
limitation, any payments or benefits received in connection with a Change in Control or the executive’s termination of employment, whether
pursuant to the terms of this agreement or any other plan, arrangement, or agreement, or otherwise) (all such payments collectively referred
to herein as the “280G Payments”) constitute “parachute payments” within the meaning of Section 280G of the internal Revenue Code of
1986, as amended, (the “Code”) would, but for this Section 4 (b) (iv) (b), be subject to the excise tax imposed under Section 4999 of the Code
(“excise Tax”), then such 280G Payments shall be reduced in a manner determined by the Company (by the minimum possible amounts) that
is consistent with the requirements of Section 409a until no amount payable to the executive will be subject to the excise Tax. if two
economically equivalent amounts are subject to reduction but are payable at different times, the amounts shall be reduced (but not below zero)
on a pro rata basis.
eFFeCTiVe DaTe OF CHaNGe iN CONTROL
. For purposes of applying Section 4 hereof under the circumstances described in 4(b)(vii)(b) above, the
effective date of the Change in Control will be the closing date of the transaction giving rise to the Change in Control and all compensation,
reimbursements, and lump-sum payments due executive must be paid in full by the Company promptly following executive’s election to
terminate his employment following such Change in Control.
DeFiNiTiON OF CHaNGe iN CONTROL
. a “Change of Control” shall mean the items in (1)-(4) below and a transaction that would be required to
be reported in response to item 6(e) of Schedule 14a of Regulation 14a promulgated under the Securities exchange act of 1934 (“exchange
act”), as amended, as in effect on the effective Date of this agreement, or if item 6(e) is no longer in effect, any regulations issued by the
Securities and exchange Commission pursuant to the
8
exchange act, which serve similar purposes, provided that to constitute a Change in Control the transaction must satisfy the requirements of
Treasury Regulation § l.409a-3(i)(5) relating to “ change in the ownership or effective control of a corporation, or a change in the ownership
of a substantial portion of the assets of a corporation ” :
TURNOVeR OF bOaRD
. The following individuals no longer constitute a majority of the members of the board: (a) the
individuals who, as of the effective Date of this agreement, constitute the board (the “Current Directors”); (b) the individuals who thereafter
are elected to the board and whose election, or nomination for election, to the board was approved by a vote of at least two-thirds (2/3) of
the Current Directors then still in office (such directors becoming “additional Directors” immediately following their election); and (C) the
individuals who are elected to the board and whose election, or nomination for election, to the board was approved by a vote of at least two-
thirds (2/3) of the Current Directors and additional Directors then still in the office (such directors also becoming “additional Directors”
immediately following their election);
TeNDeR OFFeR
the Company, and such offer is consummated for the equity securities of the Company representing thirty percent (30%) or more of the
combined voting power of the Company’s then outstanding voting securities;
. a tender offer or exchange offer is made where the intent of such offer is to take over control of
MeRGeR OR CONSOLiDaTiON
. The stockholders of the Company shall approve a merger, consolidation, recapitalization, or
reorganization of the Company, a reverse stock split of outstanding voting securities, or consummation of any such transaction if stockholder
approval is not obtained, other than any such transaction that would result in at least seventy five percent (75%) of the total voting power
represented by the voting securities of the surviving entity outstanding immediately after such transaction being beneficially owned by the
holders of outstanding voting securities of the Company immediately prior to the transaction, with the voting power of each such continuing
holder relative to other such continuing holders not substantially altered in the transaction; or
LiQUiDaTiON OR SaLe OF aSSeTS
. The stockholders of the Company shall approve a plan of complete liquidation of the Company
or an agreement for the sale or disposition by the Company of all or a substantial portion of the Company’s assets to another person or entity,
which is not a wholly owned subsidiary of the Company (i.e., fifty percent (50%) or more of the total assets of the Company).
eXCePTiONS FROM CHaNGe iN CONTROL
. a Change in Control shall not be considered to have taken place for purposes of this Section 4 in the event
that both (1) the Change in Control shall have been specifically approved by at least two-thirds (2/3) of the Current and additional Directors
(as defined above) and (2) the successor company assumes this agreement and appoints executive to the same position at the successor
corporation as executive had with the Company immediately prior to the Change in Control; provided that if the successor corporation has a
parent, the parent rather than the successor corporation must appoint executive to the position with the same title and responsibilities as
executive had with the Company immediately prior to the Change in Control. Sales of the Company’s Common Stock issued, beneficially
owned or controlled by the Company shall not be considered in determining whether a Change in Control has occurred.
NOTiFiCaTiON
. executive shall be notified in writing by the Company at any time that the Company anticipates that a
Change in Control may take place.
SPeCiFieD eMPLOYee
defined in Section 409a of the
. Notwithstanding any provision of this agreement to the contrary, if executive is a “specified employee” as
9
Code, executive shall not be entitled to any payments or benefits the right to which provides for a “ deferra l of compensation ” within the
meaning of Section 409a, and which payment or provision is triggered by executive ’ s termination of employment (whether such payments
or benefits are provided to executive under this agreement or under any other plan, program or arrangement of the Company), until the
earlier of (i) the date which is the first business day following the six-month anniversary of executive ’ s “ separation from service ” (within
the meaning of Section 409a of the Code) for any reason other than death or (ii) executive ’ s date of death, and such payments or benefits
that, if not for the six-month delay described herein, would be due and payable prior to such date shall be made or provided to executive on
such date. The Company shall make the determination as to whether executive is a “ specified employee ” in good faith in accordance with its
general procedures adopted in accordance with Section 409a of the Code and, at the time of the executive ’ s “ separation of service ” will
notify the executive whether or not he is a “ specified employee ” . if the continued benefits provided under Sections 4(b)(iv)(a) and 4(b)(vi)
are required to be delayed pursuant to the provisions of this paragraph, the executive may continue to participate in any benefit during the
period of such delay, provided that executive shall bear the full cost of such benefits during such delay period. Upon the date such benefits
otherwise would commence pursuant to this Section, employer may reimburse executive employer ’ s share of the cost of such benefits, to
the extent that such costs otherwise would have been paid by employer or to the extent that such benefits otherwise would have been
provided by employer at no cost to executive, in each case had such benefits commenced immediately upon executive ’ s termination of
employment. any remaining benefits shall be reimbursed or provided by employer in accordance with the schedule and procedures specified
herein.
(c) PAYMENTS TO TERMINATION DATE
. Upon termination of executive’s employment under this agreement for any reason provided above, executive shall be
entitled to receive all compensation earned and all benefits and reimbursements due through the effective date of termination. additional
compensation subsequent to termination, if any, will be due and payable to executive only to the extent and in the manner expressly
provided above. all other rights and obligations of the Company and executive under this agreement shall cease as of the effective date of
termination, except that the Company’s obligations under Section 8 (relating to indemnification of executive) and executive’s obligations
under Section 3 (relating to non-competition), Section 5 (relating to return of Company property), Section 6 (relating to inventions), Section
7 (relating to trade secrets), and Section 9 (relating to prior agreements) shall survive such termination in accordance with their terms.
(d) FAILURE TO PAY EXECUTIVE
. if termination of executive’s employment arises out of the Company’s failure to pay executive on a timely basis the amounts to
which he is entitled under this agreement or as a result of any other breach of this agreement by the Company, as determined by a court of
competent jurisdiction or pursuant to the provisions of Section 14, the Company shall pay all amounts and damages to which executive may
be entitled as a result of such breach, including interest thereon and all reasonable legal fees and expenses and other costs incurred by
executive to enforce his rights hereunder. Further, none of the provisions of Section 3 (relating to non-competition) shall apply in the event
executive’s employment under this agreement is terminated as a result of a breach by the Company.
(e) CONDITIONS PRECEDENT FOR PAYMENT OF SEVERANCE
. in consideration for the Company’s obligations to make any payments to executive pursuant to Section 4, upon termination of
executive’s employment with Company for any reason other than executive’s death, executive shall sign and not revoke a release in a form
satisfactory to the Company (the “Release”). Company shall present the Release to executive within ten (10) days of termination, and
executive shall have up to forty-five (45) days to consider whether to sign the Release; in the event executive executes the Release, executive
shall have an additional eight (8) calendar days in which to expressly revoke executive’s execution of the Release in writing. in the event that
executive fails to execute the Release
10
wi thin the forty-five (45) days following termination, or in the event executive formal ly revokes the executi ve ’ s Release within eight (8)
calendar days of his signing of the Release, then executive shall not be entitled to any payments or benefits under Section 4 of this
agreement. The Company sha ll make any payments to executi ve in accordance with the terms of Section 4 prior to executive ’ s fa ilure to
execute the Release wi thin forty-five (45) days or prior to his revocation; provided that if executive does not sign the Release or if executive
revokes the Release during any statutory revocation period, executive shall immediately reimburse Company for any and all such payments.
Upon executive’s termination of employment for any reason other than executive’s death, executive, unless otherwise
requested to continue by the Company’s board of directors, shall resign from the board of Directors (or the equivalent governing body) of the
Company and of any subsidiaries of the Company on which he sits as of the date of the termination of his employment.
(f) MITIGATION
. The Company and executive have mutually agreed that it would be appropriate to mitigate the costs to the Company of any
severance arrangements if executive accepts other employment, the Company secures insurance or other coverage at its cost, or
executive can obtain coverage under any governmental program without expense to executive, subject in each case to providing
comparable benefits to executive with no out-of-pocket cost to him. as a result, all medical, disability, and other similar benefits payable to
executive following the termination of his employment under this agreement shall be reduced on a dollar-for-dollar basis by (i) any
medical, disability, and other similar benefits received by or which may reasonably be receivable by executive from any subsequent
employer, (ii) any governmental benefits available to executive upon premium payments made or reimbursed by the Company to or on
behalf of executive, or (iii) any insurance, annuity, or comparable payments or coverage furnished by the Company at no cost to executive
as an alternative to the benefits provided by this agreement.
(g) DELAY IN SEVERANCE PAYMENTS
. To the extent required under Section 409a, any severance payments due under this Section 4 shall be delayed until the first date
such payment may be made in compliance with Section 409a(a)(2)(b).
5. RETURN OF COMPANY PROPERTY
. all records, designs, patents, business plans, :financial statements, manuals, memoranda, lists, and other property delivered to or compiled
by executive by or on behalf of the Company (or its subsidiaries) or its representatives, vendors, or customers that pertain to the business of
the Company (or its subsidiaries) shall be and remain the property of the Company and be subject at all times to its discretion and control.
Likewise, all correspondence, reports, records, charts, advertising materials, and other similar data pertaining to the business, activities, or
future plans of the Company (or its subsidiaries) that is collected by executive shall be delivered promptly to the Company without request by
it upon termination of executive’s employment.
6. INVENTIONS
. executive shall disclose promptly to the Company any and all significant conceptions and ideas for
inventions, improvements, and valuable discoveries, whether patentable or not, which are conceived or made by executive, solely or jointly
with another, during the period of employment or within one (1) year thereafter, and which are directly related to the business or activities
of the Company (or its subsidiaries) and which executive conceives as a result of his employment by the Company. executive hereby assigns
and agrees to assign all his interests therein to the Company or its nominee. Whenever requested to do so by the Company, executive shall
execute any and all applications, assignments, and other instruments that the Company shall deem necessary to apply for and obtain Letters
Patent of the United States or any foreign country or to otherwise protect the Company’s interest therein.
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7. TRADE SECRETS
. executive agrees that he will not, during or after the period of employment under this agreement, disclose the specific terms of the
Company’s relationships or agreements with its respective significant vendors or customers, or any other significant and material trade secret
of the Company, whether in existence or proposed, to any person, firm, partnership, corporation, or business for any reason or purpose
whatsoever.
8. INDEMNIFICATION
. in the event executive is made a party to any threatened, pending, or completed action, suit, or proceeding, whether civil, criminal,
administrative, or investigative (other than an action by the Company against executive), by reason of the fact that he is or was performing
services under this agreement, then the Company shall indemnify executive against all expenses (including attorneys’ fees),
judgments, fines, and amounts paid in settlement, as actually and reasonably incurred by executive in connection therewith to the maximum
extent permitted by applicable law; provided, however, the executive must deliver a written undertaking to the Company that if it is
subsequently determined by a court of law in a final, non-appealable judgment that the executive was not entitled to indemnification under
applicable law, then the executive will repay all amounts. The advancement of expenses shall be mandatory. in the event that both
executive and the Company are made a party to the same third-party action, complaint, suit, or proceeding, the Company agrees to engage
competent legal representation, and executive agrees to use the same representation, provided that if counsel selected by the Company shall
have a conflict of interest that prevents such counsel from representing executive, executive may engage separate counsel and the Company
shall pay all attorneys’ fees of such separate counsel. Further, while executive is expected at all times to use his best efforts to faithfully
discharge his duties under this agreement, executive cannot be held liable to the Company for errors or omissions made in good faith if
executive has not exhibited gross, willful, and wanton negligence and misconduct or performed criminal and fraudulent acts that materially
damage the business of the Company. Notwithstanding this Section 8, the provision of any indemnification agreement applicable to the
directors or officers of the Company to which executive shall be a party shall apply rather than this Section 8 to the extent inconsistent with
this Section 8.
9. NO PRIOR AGREEMENTS
. executive hereby represents and warrants to the Company that the execution of this agreement by executive and his employment by the
Company and the performance of his duties hereunder will not violate or be a breach of any agreement with a former employer, client, or any
other person or entity. Further, executive agrees to indemnify the Company for any claim, including, but not limited to, attorneys’ fees and
expenses of investigation, by any such third party that such third party may now have or may hereafter come to have against the Company
based upon or arising out of any non-competition, invention, or secrecy agreement between executive and such third party that was in
existence as of the effective Date of this agreement
10. ASSIGNMENT; BINDING EFFECT
. executive understands that he is being employed by the Company on the basis of his personal qualifications, experience, and skills.
executive agrees, therefore, he cannot assign all or any portion of his performance under this agreement. Subject to the preceding two (2)
sentences and the express provisions of Section 11 below, this agreement shall be binding upon, inure to the benefit of and be enforceable by
the parties hereto and their respective heirs, legal representatives, successors, and assigns.
11. COMPLETE AGREEMENT
. This agreement is not a promise of future employment. executive has no oral representations, understandings, or agreements with the
Company or any of its officers, directors, or representatives covering the same subject matter as this agreement. This written agreement is
the final, complete, and exclusive statement and expression of the agreement between the Company and executive and of all the terms of this
agreement, and it cannot be varied, contradicted, or supplemented by evidence of any prior or contemporaneous oral or written agreements.
This written agreement may not be later modified except by a further writing signed by a duly authorized officer of
12
the Co mpany and executive, and no term of this agreement may be waived except by writing signed by the party waiving the benefit of such
term. This agreement hereby supersedes any other employment agreements or understandings, written or oral, between the Company and
executive.
12. NOTICE
. Whenever any notice is required hereunder, it shall be given in writing addressed as follows:
To the Company:
MarineMax, inc.
2600 McCormick Drive, Suite 200
Clearwater, Florida 33759
attention: Corporate Secretary
With a copy to
Holland & Knight LLP
100 North Tampa Street
Suite 4100
Tampa, Florida 33602
attention: Robert J. Grammig, esq.
To executive:
William H. McGill, Jr.
10857 Reflection Lane
Hideout, UT 84036
Notice shall be deemed given and effective when hand delivered or on the first business day after being deposited with a reputable, nationally
recognized overnight delivery service or when actually received. either party may change the address for notice by notifying the other party
of such change in accordance with this Section 12.
13. SEVERABILITY; HEADINGS
. if any portion of this agreement is held invalid or inoperative, the other portions of this agreement shall be deemed valid and operative
and, so far as is reasonable and possible, effect shall be given to the intent manifested by the portion held invalid or inoperative. The Section
headings herein are for reference purposes only and are not intended in any way to describe, interpret, define or limit the extent or intent of
the agreement or of any part hereof.
14. MEDIATION ARBITRATION
. all disputes arising out of this agreement shall be resolved as set forth in this Section 14. if any party hereto desires to make any
claim arising out of this agreement (“Claimant”), then such party shall first deliver to the other party (“Respondent”) written
notice (“Claim Notice”) of Claimant’s intent to make such claim explaining Claimant’s reasons for such claim in sufficient detail for
Respondent to respond. Respondent shall have ten (10) business days from the date the Claim Notice was given to Respondent to object in
writing to the claim (“Notice of Objection”), or otherwise cure any breach hereof alleged in the
Claim Notice. any Notice of Objection shall specify with particularity the reasons for such objection. Following receipt of the Notice of
Objection, if any, Claimant and Respondent shall immediately seek to resolve by good faith negotiations the dispute alleged in the
Claim Notice, and may at the request of either party, utilize the services of an independent mediator. if Claimant
and Respondent are unable to resolve the dispute in writing within ten (10)
business days from the date negotiations began, then without the necessity
13
of further agreement of Claimant or Respondent, the dispute set forth in the Claim Notice shall be submitted to
binding arbitration (except for claims arising out of Sections 3 or 7 hereof), initiated by either Claimant or Respondent pursuant to
this Section. Such arbitration shall be conducted before a panel of three (3) arbitrators in Tampa, Florida, in accordance with the National
Rules for the Resolution of employment Disputes of the american arbitration association ( “ aaa ” ) then in effect provided that the parties
may agree to use arbitrators other than those provided by the aaa The arbitra tors shall not have the authori ty to add to, detract from, or
modify any provision hereof nor to award punitive damages to any injured party. The arbitrators shall have the authority to order back-pay,
severance compensation, vesting of options (or cash compensation in lieu of vesting of options), vesting and the removal of restrictions on
restricted stock and/or restricted stock units (or comparable forms of equity compensation, if any) that, as of the effective date of the
termination of executive, are n ot then subject to any performance conditions for vesting, reimbursement of costs, including those incurred to
enforce this agreement, and interest thereon in the event the arbitrators determine that executive was terminated without disability or without
Good Cause, as defined in Sections 4(b) and 4(c) hereof, respectively, or that the Company has otherwise materially breached this agreement.
a decision by a majority of the arbitration panel shall be final and binding. Judgment may be entered on the arbitrators ’ award in any court
having jurisdiction. The direct expense of any mediation or arbitration proceeding and, to the extent executive prevails, all reasonable legal
fees shall be borne by the Company.
15. NO PARTICIPATION IN SEVERANCE PLANS
. except as contemplated by this agreement, executive acknowledges and agrees that the compensation and other benefits set forth in this
agreement are and shall be in lieu of any compensation or other benefits that may otherwise be payable to or on behalf of executive pursuant
to the terms of any severance pay arrangement of the Company or any affiliate thereof, or any other similar arrangement of the Company or
any affiliates thereof providing for benefits upon involuntary termination of employment.
16. GOVERNING LAW
. This agreement shall in all respects be construed according to the laws of the state of Florida, notwithstanding the conflict of laws
provisions of such state.
17. COUNTERPARTS; FACSIMILE
. This agreement may be executed by facsimile and in two (2) or more counterparts, each of which shall be deemed an original and all of
which together shall constitute but one and the same instrument.
18. SECTION 409A
.
(a) This agreement is intended to satisfy the requirements of Section 409a of the Code with respect to amounts subject
thereto, and shall be interpreted and construed consistent with such intent; provided that, notwithstanding the other provisions of this
provision and the provision entitled, “Specified employee” above, with respect to any right to a payment or benefit hereunder (or portion
thereof) that does not otherwise provide for a “deferral of compensation” within the meaning of Section 409a of the Code, it is the intent of
the parties that such payment or benefit will not so provide. Furthermore, if either party notifies the other in writing that, based on the advice
of legal counsel, one or more of the provisions of this agreement contravenes any regulations or Treasury guidance promulgated under
Section 409a of the Code or causes any amounts to be subject to interest or penalties under Section 409a of the Code, the parties shall
promptly and reasonably consult with each other (and with their legal counsel), and shall use their reasonable best efforts, to reform the
provisions hereof to (a) maintain to the maximum extent practicable the original intent of the applicable provisions without violating the
provisions of Section 409a of the Code or increasing the costs to the Company of providing the applicable benefit or payment and (b) to the
extent practicable, to avoid the imposition of any tax, interest or other penalties under Section 409a of the Code upon executive or the
Company.
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(b) This agreement is intended, to the maximum extent possible, to meet the short term deferral exception and/or be a
separation pay plan due to an involuntary separation from service under Treasury Regulation Sections 1.409a-1(b)(4) and 1.409a-l (b)(9)(iii)
and therefore exempt from Code Section 409a.
15
iN WiTNeSS WHeReOF, the parties hereto have executed this agreement as of the day and year first above written.
MaRiNeMaX, iNC.
by:
Michael H. McLamb
Title: Vice President and Chief
Financial Officer
eXeCUTiVe:
William H. McGill, Jr.
16
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
Exhibit 10.3(i)
THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT executed on November ___, 2018 (this
“agreement”), by and between MarineMax, inc., a Florida corporation (the “Company”), and Michael H. McLamb (“executive”) to
amend and restate in its entirety any and all previously existing employment arrangements or agreements between the parties.
RECITALS
a.
The Company is engaged primarily in the business of selling, renting, leasing, and servicing boating, nautical,
and other related lifestyle entertainment products and services, and related activities and executive has experience in such business.
b.
executive currently serves as executive Vice President and Chief Financial Officer of the Company. The
Company desires to assure itself of the continued availability of executive.
C.
The Company desires to employ executive, and executive desires to accept such employment, pursuant to the
terms and conditions set forth in this agreement, which shall replace the existing employment agreement between the Company and
executive.
NOW, THEREFORE , in consideration of the mutual promises, terms, covenants, and conditions set forth herein and the
AGREEMENT
performance of each, it is hereby agreed as follows:
1. EMPLOYMENT AND DUTIES .
(a) EMPLOYMENT . The Company hereby employs executive, and executive hereby agrees to act, as
executive Vice President and Chief Financial Officer of the Company. as such, executive shall have responsibilities, duties, and
authority reasonably accorded to, expected of, and consistent with executive’s position and executive shall report directly to the
Chief executive Officer and to the board of Directors of the Company (the “board”). executive hereby accepts this employment
upon the terms and conditions herein contained and, subject to Section l(c) hereof, agrees to devote his best efforts and substantially
all of his business time and attention to promote and further the business of the Company.
by the Company.
(b) POLICIES . executive shall faithfully adhere to, execute, and fulfill all lawful policies established
(c) OTHER ACTIVITIES . executive shall not, during the period of his employment hereunder (the
“Term”), be engaged in any other business activity pursued for gain, profit, or other pecuniary advantage if such activity interferes in
any material respect with executive’s duties and responsibilities hereunder. The foregoing limitations shall not be construed as
prohibiting executive from (i) making personal investments in such form or manner as will neither require his services in the
operation or affairs of the companies or enterprises in which such investments are made nor subject executive to any conflict of
interest with respect to his duties to the Company, (ii) serving on any civic or charitable boards or committees, (iii) delivering
lectures or fulfilling speaking engagements, or (iv) serving, with the written approval of the board, as a
director of one or more corporations, in each case so long as any such activities do not significantly interfere with the performance of
executive’s responsibilities under this agreement. in addition, executive shall comply with the restrictions listed in Section 3 of this
agreement.
performance of his duties to relocate his primary residence.
(d) PLACE OF PERFORMANCE . executive shall not be required by the Company or in the
2. COMPENSATION . For all services rendered by executive, the Company shall compensate executive as
follows:
(a) BASE SALARY effective the date hereof, the base salary payable to executive shall be Three
Hundred Seventy Thousand Dollars ($370,000) per year, payable on a regular basis in accordance with the Company’s standard
payroll procedures, but not less than monthly. On at least an annual basis, the board or a committee of the board shall review
executive’s performance and may make increases to such base salary if, in its sole discretion, any such increase is warranted.
(b) BONUS OR OTHER INCENTIVE COMPENSATION . executive shall be eligible to receive a
bonus or other incentive compensation as may be determined by the board or a committee of the board based upon such factors as
the board or such committee, in its sole discretion, may deem relevant, including, without limitation, the performance of executive
and the Company; provided, however, that the board or a committee of the board shall establish for each fiscal year of the Company
a bonus program in which executive shall be entitled to participate, which provides executive with a reasonable opportunity, based
on the performance of the Company, the past compensation practices of the Company and executive’s then base salary, to maintain
or increase executive’s total compensation compared to the previous fiscal year.
be entitled to receive additional benefits and compensation from the Company in such form and to such extent as specified below:
(c) EXECUTIVE PERQUISITES, BENEFITS, AND OTHER COMPENSATION . executive shall
(i) REIMBURSEMENT FOR EXPENSES . The Company shall provide reimbursement to
executive for business travel and other out-of-pocket expenses reasonably incurred by executive in the performance of his services
under this agreement. all reimbursable expenses shall be appropriately documented in reasonable detail by executive upon
submission of any request for reimbursement and shall be in a format and manner consistent with the Company’s expense reporting
policy. Such expenses shall be submitted to the Company’s Chief executive Officer for approval or to such other officer of the
Company as the board may from time to time direct. except as expressly provided otherwise herein, no reimbursement payable to
executive pursuant to any provisions of this agreement or pursuant to any plan or arrangement of the Company shall be paid later
than the last day of the calendar year following the calendar year in which the related expense was incurred, and no such
reimbursement during any calendar year shall affect the amounts eligible for reimbursement in any other calendar year, except, in
each case, to the extent that the right to reimbursement does not provide for a “deferral of compensation” within the meaning of
Section 409a.
2
(ii) VACATION . Paid vacation in accordance with the applicable policy of the Company as
in effect from time to time. executive shall be entitled to no less than four (4) weeks paid vacation per year; provided, however,
executive may carryover up to, but not more than, two weeks of unused vacation time from one calendar year to the next succeeding
calendar year. The maximum amount of vacation that may be accrued for any calendar year is six (6) weeks of paid vacation. No
additional paid vacation shall accrue above the six (6) week limit.
(iii) OTHER EXECUTIVE PERQUISITES . The Company shall provide executive with
other executive perquisites as may be made available to or deemed appropriate for executive by the board or a committee of the
board and participation in all other Company-wide employee benefits (including group insurance, pension, retirement, and other
plans and programs) as are available to the Company’s executive officers from time to time.
3. NON-COMPETITION AGREEMENT .
(a) NON-COMPETITION . executive shall not, during the period of his employment by or with the
Company, and during the Noncompete Period (as hereinafter defined) for any reason whatsoever, directly or indirectly, for himself
or on behalf of or in conjunction with any other person:
(i) OTHER ACTIVITIES . engage, as an officer, director, shareholder, owner, principal,
partner, lender, joint venturer, employee, independent contractor, consultant, advisor, or sales representative, in any Competitive
business within the Restricted Territory;
(ii) SOLICITATION OF EMPLOYEES . Call upon any person who is, at that time, within
the Restricted Territory, an employee of the Company or any of its subsidiaries, in a managerial capacity for the purpose or with the
intent of enticing such employee away from or out of the employ of the Company or any of its subsidiaries;
(iii) SOLICITATION OF CUSTOMERS . Call upon any person or entity that is, at that
time, or that has been, within one (1) year prior to that time, a customer of the Company or any of its subsidiaries, within the
Restricted Territory for the purpose of soliciting or selling products or services in direct competition with the Company or any of its
subsidiaries within the Restricted Territory;
. Call upon any prospective
acquisition candidate (that is, a business that the Company may have an interest in acquiring), on executive’s own behalf or on
behalf of any person, which candidate was, to executive’s knowledge after due inquiry, either called upon by the Company, or for
which the Company made an acquisition analysis, for the purpose of acquiring such candidate.
(iv) SOLICITATION OF ACQUISITION CANDIDATES
meanings ascribed to them:
(b) CERTAIN DEFINITIONS . as used in this agreement, the following terms shall have the
stores, repairs, restores, or services recreational boats or other boating
(i) COMPETITIVE BUSINESS shall mean any Person that sells,
rents,
brokers,
leases,
3
products or provides services relating to recreational boats or other boating products or any other business in which the Company is
engaged;
firm, or other business of whatever nature;
(ii) PERSON shall mean any individual, corporation, limited liability company, partnership,
(iii) RESTRICTED TERRITORY shall mean any state or other political jurisdiction in
which, or any location within two hundred (200) miles of which, the Company or any subsidiary of the Company maintains any
facilities; sells, rents, brokers, leases, stores, repairs, restores, or services recreational boats or other boating products; or provides
services relating to recreational boats or other boating products; and
including
corporations, partnerships, limited liability companies, and any other business organization in which the Company holds at least a
fifty percent (50%) equity interest.
consolidated subsidiaries,
(iv) SUBSIDIARY
mean the
Company’s
shall
(v) NONCOMPETE PERIOD shall
mean the longer of (i) the two (2) year period
immediately following the termination of executive’s employment with the Company or (ii) the time during which severance
payments are being made by the Company to executive in accordance with this agreement; provided, however, that if the
executive’s employment is terminated by the Company without Good Cause, executive terminates his employment with Good
Reason or, executive terminates his employment after a Change in Control pursuant to Section 4(b)(vi)(b), then the Noncompete
Period shall be for the one (1) year period immediately following the termination of his employment with the Company.
(c) ENFORCEMENT . because of the difficulty of measuring economic losses to the Company as a
result of a breach of the foregoing covenants, and because of the immediate and irreparable damage that could be caused to the
Company for which it would have no other adequate remedy, executive agrees that the foregoing covenants may be enforced by the
Company in the event of breach by him, by injunctions and restraining orders.
(d) REASONABLE RESTRAINT . it is agreed by the parties that the foregoing covenants in this
Section 3 impose a reasonable restraint on executive in light of the activities and business of the Company (including the Company’s
subsidiaries) on the date of the execution of this agreement and the current plans of the Company (including the Company’s
subsidiaries); but it is also the intent of the Company and executive that such covenants be construed and enforced in accordance
with the changing activities, business, and locations of the Company (including the Company’s subsidiaries) throughout the term of
this covenant, whether before or after the date of termination of the employment of executive. For example, if, during the term of
this agreement, the Company (including the Company’s subsidiaries) engages in new and different activities, enters a new business,
or establishes new locations for its current activities or business in addition to or other than the activities or business enumerated
above or the locations currently established therefor, then executive will be precluded from soliciting the customers or employees of
such new activities or business or from such new location and from directly competing with such new business within the Restricted
Territory through the term of these covenants.
4
(e) OTHER ACTIVITIES . it is further agreed by the parties that, in the event that executive shall
cease to be employed hereunder and enters into a business or pursues other activities not in competition with the Company (including
the Company’s subsidiaries), or similar activities or business in locations, the operation of which, under such circumstances, does not
violate this Section 3, and in any event such new business, activities, or location are not in violation of this Section 3 or of
executive’s obligations under this Section 3, if any, executive shall not be chargeable with a violation of this Section 3 if the
Company (including the Company’s subsidiaries) shall thereafter enter the same, similar, or a competitive (i) business, (ii) course of
activities, or (iii) location, as applicable.
(f) SEPARATE COVENANTS . The covenants in this Section 3 are severable and separate, and the
unenforceability of any specific covenant shall not affect the provisions of any other covenant. Moreover, in the event any court of
competent jurisdiction shall determine that the scope, time, or territorial restrictions set forth are unreasonable, then it is the intention
of the parties that such restrictions be enforced to the fullest extent that the court deems reasonable, and the agreement shall thereby
be reformed.
(g) INDEPENDENT AGREEMENT . all of the covenants in this Section 3 shall be construed as an
agreement independent of any other provision in this agreement, and the existence of any claim or cause of action of executive
against the Company, whether predicated on this agreement or otherwise, shall not constitute a defense to the enforcement by the
Company of such covenants; except as provided in Section 4(d) below. it is specifically agreed that the Noncompete Period
following termination of employment as defined in this Section 3, during which the agreements and covenants of executive made in
this Section 3 shall be effective, shall be computed by excluding from such computation any time during which executive is in
violation of any provision of this Section 3.
4. AT-WILL EMPLOYMENT; TERMINATION; RIGHTS ON TERMINATION .
(a) AT-WILL EMPLOYMENT . executive’s employment with the Company shall be at-will. The
executive may terminate his employment at any time for any reason (subject to the notice requirements provided in this agreement)
and the Company may terminate executive’s employment with the Company at any time and for any reason (subject to the severance
provisions of this agreement). This at-will employment relationship cannot be changed except by written authorization by the board
of Directors of the Company.
the followings ways:
(b) TERMINATION . executive’s employment under this agreement may be terminated in any one of
(i) DEATH OF EXECUTIVE . The employment of executive shall terminate immediately
upon executive’s death provided that the Company shall pay to the estate of executive an amount equal to $550,000. in the event of
such termination, all options to purchase Common Stock of the Company held by executive shall thereupon vest and shall be
exercisable for the maximum period of time, up to their full term, that will not cause executive with respect to such options to be
subject to any excise tax under Section 409a of the internal Revenue Code of 1986, as amended (“Section 409a”) notwithstanding
the termination of employment. all
5
restricted stock and/or restricted stock units (or comparable forms of equity compensation, if any) held by the executive which, as of
the date of the death of executive, are not then subject to any performance conditions for vesting, shall be fully vested and shall not
be subject to any risk of forfeiture or repurchase as of the date of executive’s death. The payment described in this Section, if
payable, will be paid within ten (10) days after the executive’s death.
(ii) DISABILITY OF EXECUTIVE . The Company may terminate executive’s employment
in the event the executive is disabled. The executive shall be disabled if the executive is unable to engage in any substantial gainful
activity by reason of a medically determined physical or mental impairment expected to last at least twelve consecutive months or
result in death, or if applicable, for at least three months the executive is receiving income replacement benefits under a Company
sponsored plan by reason of any medically determined physical or mental impairment expected to last at least twelve consecutive
months or result in death, or if the executive is determined to be disabled under a Company disability plan with a similar definition
of disability. in the event executive’s employment under this agreement is terminated as a result of executive’s disability,
executive shall receive from the Company, in a lump-sum payment due within ten (10) days of the effective date of termination, an
amount equal to the average of the base salary and bonus paid to executive for the two (2) prior full fiscal years, for one (1) year. in
the event of such termination, all options to purchase Common Stock of the Company held by executive shall thereupon vest and
shall be exercisable for the maximum period of time, up to their full term, that will not cause executive with respect to such options
to be subject to any excise tax under Section 409a notwithstanding the termination of employment. all restricted stock and/or
restricted stock units (or comparable forms of equity compensation, if any) held by the executive which, as of the date of the
disability of executive, are not then subject to any performance conditions for vesting, shall be fully vested and shall not be subject
to any risk of forfeiture or repurchase as of the date of executive’s termination due to disability (as defined in this paragraph).
(iii) TERMINATION BY THE COMPANY FOR GOOD CAUSE . The Company may
terminate executive’s employment upon ten (10) days prior written notice to executive for “Good Cause,” which shall mean any one
or more of the following: (a) executive’s willful and material breach of this agreement which has not been cured by the executive
within thirty (30) days following written notice of such breach from the Company; (b) executive’s gross negligence in the
performance or intentional nonperformance (continuing for thirty (30) days after receipt of written notice of need to cure) of any of
executive’s material duties and responsibilities hereunder; (C) executive’s willful dishonesty, fraud, or misconduct with respect to
the business or affairs of the Company, which materially and adversely affects the operations or reputation of the Company; (D)
executive’s conviction of a felony crime involving dishonesty or moral turpitude; or (e) a confirmed positive illegal drug test
result. in the event of a termination by the Company for Good Cause, executive shall have no right to any severance compensation.
(iv) TERMINATION BY THE COMPANY WITHOUT GOOD CAUSE OR BY
EXECUTIVE WITH GOOD REASON . The Company may terminate executive’s employment without Good Cause upon the
approval of a majority of the members of the board, excluding executive if executive is a member of the board. executive may
terminate his employment under this agreement for Good Reason upon thirty (30) days prior notice to the Company.
6
(a) RESULT OF TERMINATION BY THE COMPANY WITHOUT
GOOD CAUSE OR BY EXECUTIVE WITH GOOD REASON . Should the Company terminate executive’s employment
without Good Cause or should executive terminate his employment with Good Reason, the Company shall pay to executive for
eighteen (18) months after such termination, on such dates as would otherwise be paid by the Company, an amount equal to the
average of the base salary and bonus paid to executive for the two (2) prior full fiscal years. The amounts payable under the
preceding sentence shall commence on the first payroll date following executive’s “separation from service” from the Company
within the meaning of Section 409a of the internal Revenue Code of 1986, as amended (the “Code”), and shall be treated as a series
of separate payments under Treasury Regulations Section 1.409a-2(b)(2)(iii). Further, if the Company terminates executive’s
employment without Good Cause or executive terminates his employment with Good Reason, (1) all options to purchase Common
Stock of the Company held by executive shall vest thereupon and shall be exercisable for the maximum period of time, up to their
full term, that will not cause executive with respect to such options to be subject to any excise tax under Section 409a
notwithstanding the termination of employment, (2) all restricted stock and/or restricted stock units (or comparable forms of equity
compensation, if any) held by executive which, as of the effective date of the termination of executive, are not then subject to any
performance conditions for vesting, shall be fully vested and shall not be subject to any risk of forfeiture or repurchase as of the date
of termination, (3) all restricted stock and/or restricted stock units (or comparable forms of equity compensation, if any) held by
executive which, as of the effective date of the termination of executive, is subject to performance conditions for vesting, shall be
fully vested and treated as if the performance conditions for such award had been fully met at target and shall not be subject to any
risk of forfeiture or repurchase as of the date of termination , and ( 4 ) executive shall be entitled to receive all other unpaid benefits
due and owing through executive’s last day of employment. Further, any termination by the Company without Good Cause or by
executive for Good Reason shall operate to shorten the Noncompete Period set forth in Section 3 to one (1) year from the date of
termination of employment.
(b) DEFINITION OF GOOD REASON . executive shall have “Good
Reason” to terminate employment upon occurrence of any of the following events without executive’s prior written approval: (1)
executive suffers a material reduction in authority, responsibilities or duties as provided herein; (2) executive’s annual base salary
for a fiscal year as determined pursuant to Section 2(a) is reduced to a level that is less than ninety percent (90%) of the base salary
paid to executive during the prior contract year under this agreement; (3) executive is required to render his or her primary
employment services from a location more than 25 miles from the Company’s headquarters at the time executive began his
employment with the Company; (4) the Company takes steps to deny executive a reasonable opportunity to maintain executive’s
total compensation (i.e., base salary plus bonus and any other annual cash incentive compensation) compared to the previous fiscal
year (provided total compensation may take into account performance of the Company and the past compensation practices of the
Company); or (5) the Company breaches a material provision of this agreement. in order for an event to justify termination for
Good Reason, the executive must give written notice to the Company of such event within 90 days of its first occurrence and the
Company must have 30 days to cure, if possible.
7
(v) RESIGNATION BY EXECUTIVE WITHOUT GOOD REASON . executive may,
without cause, and without Good Reason terminate his own employment under this agreement, effective thirty (30) days after
written notice is provided to the Company or such earlier time as any such resignation may be accepted by the Company. if
executive resigns or otherwise terminates his employment without Good Reason, executive shall receive no severance
compensation.
(vi) CHANGE IN CONTROL OF THE COMPANY .
executive
understands and acknowledges that the Company may be merged or consolidated with or into another entity and that such entity shall
automatically succeed to the rights and obligations of the Company hereunder or that the Company may undergo another type of
Change in Control. in the event such a merger or consolidation or other Change in Control is initiated prior to the end of the Term,
then the provisions of this Section 4(b)(vi) shall be applicable.
(a) POSSIBILITY OF CHANGE IN CONTROL
.
(b) TERMINATION BY EXECUTIVE . Subject to the exceptions set
forth in Section 4(b)(vi)(e), if any Change of Control is initiated during executive’s employment hereunder, executive may, at his
sole discretion, elect to terminate his employment under this agreement by providing written notice to the Company at least thirty
(30) business days at any time beginning on the effective date of the Change in Control and ending one (1) year after the closing of
the transaction giving rise to the Change in Control. in such case, the applicable provisions of Section 4(b)(iv) hereof will apply as
though the Company had terminated executive’s employment without Good Cause during the Term; however, under such
circumstances, the amount of the severance payments due to executive shall be paid in a lump sum and the Noncompete Period of
Section 3 hereof shall be limited to one (1) year from the effective date of termination. if any of the payments or benefits received or
to be received by the executive (including, without limitation, any payment or benefits received in connection with a Change in
Control or the executive’s termination of employment, whether pursuant to the terms of this agreement or any other plan,
arrangement, or agreement, or otherwise) (all such payments collectively referred to herein as the "280G Payments") constitute
"parachute payments" within the meaning of Section 280G of the Code and would, but for this Section 4 (b) (vi) (b), be subject to
the excise tax imposed under Section 4999 of the Code (the "excise Tax"), then such 280G Payments shall be reduced in a manner
determined by the Company (by the minimum possible amounts) that is consistent with the requirements of Section 409a until no
amount payable to the executive will be subject to the excise Tax. if two economically equivalent amounts are subject to reduction
but are payable at different times, the amounts shall be reduced (but not below zero) on a pro rata basis.
(C) EFFECTIVE DATE OF CHANGE IN CONTROL . For purposes
of applying Section 4 hereof under the circumstances described in 4(b)(vi)(b) above, the effective date of the Change in Control will
be the closing date of the transaction giving rise to the Change in Control and all compensation, reimbursements, and lump-sum
payments due executive must be paid in full by the Company following such Change in Control promptly following executive’s
election to terminate his employment.
8
(D) DEFINITION OF CHANGE IN CONTROL
a “Change in
Control” shall mean the items in (1)-(4) below and a transaction that would be required to be reported in response to item 6(e) of
Schedule 14a of Regulation 14a promulgated under the Securities exchange act of 1934 (“exchange act”), as amended, as in
effect on the date of this agreement, or if item 6(e) is no longer in effect, any regulations issued by the Securities and exchange
Commission pursuant to the exchange act, which serve similar purposes, provided that to constitute a Change in Control the
transaction must satisfy the requirements of Treasury Regulation §1.409a ‑3(i)(5) relating to “change in the ownership or effective
control of a corporation, or a change in the ownership of a substantial portion of the assets of a corporation”:
.
(1) TURNOVER OF BOARD . The following individuals no
longer constitute a majority of the members of the board: (a) the individuals who, as of the date of this agreement, constitute the
board (the “Current Directors”); (b) the individuals who thereafter are elected to the board and whose election, or nomination for
election, to the board was approved by a vote of at least two-thirds (2/3) of the Current Directors then still in office (such directors
becoming “additional Directors” immediately following their election); and (C) the individuals who are elected to the board and
whose election, or nomination for election, to the board was approved by a vote of at least two-thirds (2/3) of the Current Directors
and additional Directors then still in the office (such directors also becoming “additional Directors” immediately following their
election);
(2) TENDER OFFER . a tender offer or exchange offer is
made where the intent of such offer is to take over control of the Company, and such offer is consummated for the equity securities
of the Company representing thirty percent (30%) or more of the combined voting power of the Company’s then outstanding voting
securities;
(3) MERGER OR CONSOLIDATION . The stockholders of
the Company shall approve a merger, consolidation, recapitalization, or reorganization of the Company, a reverse stock split of
outstanding voting securities, or consummation of any such transaction if stockholder approval is not obtained, other than any such
transaction that would result in at least seventy-five percent (75%) of the total voting power represented by the voting securities of
the surviving entity outstanding immediately after such transaction being beneficially owned by the holders of outstanding voting
securities of the Company immediately prior to the transaction, with the voting power of each such continuing holder relative to
other such continuing holders not substantially altered in the transaction; or
The
stockholders of the Company shall approve a plan of complete liquidation of the Company or an agreement for the sale or disposition
by the Company of all or a substantial portion of the Company’s assets to another person or entity, which is not a wholly owned
subsidiary of the Company (i.e., fifty percent (50%) or more of the total assets of the Company).”
(4) LIQUIDATION OR SALE OF ASSETS
.
(e) EXCEPTIONS FROM CHANGE IN CONTROL . a Change in
Control shall not be considered to have taken place for purposes of this Section 4 in the event that both (1) the Change in Control
shall have been specifically approved by at least two-thirds (2/3) of the Current and additional Directors (as defined above) and (2)
the successor company assumes this agreement and appoints executive to the same position at the
9
successor corporation as executive had with the Company immediately prior to the Change in Control; provided that if the successor
corporation has a parent, the parent rather than the successor corporation must appoint executive to the position with the same title
and responsibilities as executive had with the Company immediately prior to the Change in Control. Sales of the Company’s
Common Stock issued, beneficially owned or controlled by the Company shall not be considered in determining whether a Change in
Control has occurred.
Company at any time that the Company anticipates that a Change in Control may take place.
(F) NOTIFICATION . executive shall be notified in writing by the
(G) SPECIFIED EMPLOYEE . Notwithstanding any provision of this
agreement to the contrary, if executive is a “specified employee” as defined in Section 409a of the Code, executive shall not be
entitled to any payments or benefits the right to which provides for a “deferral of compensation” within the meaning of Section
409a, and which payment or provision is triggered by executive’s termination of employment (whether such payments or benefits
are provided to executive under this agreement or under any other plan, program or arrangement of the Company), until the earlier
of (i) the date which is the first business day following the six-month anniversary of executive’s “separation from service” (within
the meaning of Section 409a of the Code) for any reason other than death or (ii) executive’s date of death, and such payments or
benefits that, if not for the six-month delay described herein, would be due and payable prior to such date shall be made or provided
to executive on such date. The Company shall make the determination as to whether executive is a “specified employee” in good
faith in accordance with its general procedures adopted in accordance with Section 409a of the Code and, at the time of the
executive’s “separation of service” will notify the executive whether or not he is a “specified employee.
(c) PAYMENTS TO TERMINATION DATE . Upon termination of executive’s employment under
this agreement for any reason provided above, executive shall be entitled to receive all compensation earned and all benefits and
reimbursements due through the effective date of termination. additional compensation subsequent to termination, if any, will be
due and payable to executive only to the extent and in the manner expressly provided above. all other rights and obligations of the
Company and executive under this agreement shall cease as of the effective date of termination, except that the Company’s
obligations under Section 8 (relating to indemnification of executive) and executive’s obligations under Section 3 (relating to non-
competition), Section 5 (relating to return of Company property), Section 6 (relating to inventions), Section 7 (relating to trade
secrets), and Section 9 (relating to prior agreements) shall survive such termination in accordance with their terms.
(d) FAILURE TO PAY EXECUTIVE . if termination of executive’s employment arises out of the
Company’s failure to pay executive on a timely basis the amounts to which he is entitled under this agreement or as a result of any
other breach of this agreement by the Company, as determined by a court of competent jurisdiction or pursuant to the provisions of
Section 14, the Company shall pay all amounts and damages to which executive may be entitled as a result of such breach, including
interest thereon and all reasonable legal fees and expenses and other costs incurred by executive to enforce his rights
hereunder. Further, none of the provisions
10
of Section 3 (relating to non-competition) shall apply in the event executive’s employment under this agreement is terminated as a
result of a breach by the Company.
(e) CONDITIONS PRECEDENT FOR PAYMENT OF SEVERANCE . in consideration for the
Company’s obligations to make any payments to executive pursuant to Section 4, upon termination of executive’s employment with
Company for any reason other than executive’s death, executive shall sign and not revoke a release in a form satisfactory to the
Company (the “Release”). Company shall present the Release to executive within ten (10) days of termination, and executive shall
have up to forty-five (45) days to consider whether to sign the Release; in the event executive executes the Release, executive shall
have an additional eight (8) calendar days in which to expressly revoke executive’s execution of the Release in writing. in the event
that executive fails to execute the Release within the forty-five (45) days following termination, or in the event executive formally
revokes the executive’s Release within eight (8) calendar days of his signing of the Release, then executive shall not be entitled to
any payments or benefits under Section 4 of this agreement. The Company shall make any payments to executive in accordance
with the terms of Section 4 prior to executive’s failure to execute the Release within forty-five (45) days or prior to his revocation;
provided that if executive does not sign the Release or if executive revokes the Release during any statutory revocation period,
executive shall immediately reimburse Company for any and all such payments.
Upon executive’s termination of employment for any reason other than executive’s death, executive, unless
otherwise requested to continue by the Company’s board of directors, shall resign from the board of Directors of the Company and
of any subsidiaries of the Company on which he sits as of the date of the termination of his employment.
. To the extent required under Section 409a, any
severance payments due under this Section 4 shall be delayed until the first date such payment may be made in compliance with
Section 409a(a)(2)(b).
(f) DELAY IN SEVERANCE PAYMENTS
5. RETURN OF COMPANY PROPERTY . all records, designs, patents, business plans, financial statements,
manuals, memoranda, lists, and other property delivered to or compiled by executive by or on behalf of the Company (or its
subsidiaries) or its representatives, vendors, or customers that pertain to the business of the Company (or its subsidiaries) shall be and
remain the property of the Company and be subject at all times to its discretion and control. Likewise, all correspondence, reports,
records, charts, advertising materials, and other similar data pertaining to the business, activities, or future plans of the Company (or
its subsidiaries) that is collected by executive shall be delivered promptly to the Company without request by it upon termination of
executive’s employment.
6. INVENTIONS . executive shall disclose promptly to the Company any and all significant conceptions and
ideas for inventions, improvements, and valuable discoveries, whether patentable or not, which are conceived or made by executive,
solely or jointly with another, during the period of employment or within one (1) year thereafter, and which are directly related to the
business or activities of the Company (or its subsidiaries) and which executive conceives as a result of his employment by the
Company. executive hereby assigns and agrees to assign all his interests therein to the Company or its nominee. Whenever
requested to do so by the Company, executive shall execute any and all applications, assignments, and other instruments that the
11
Company shall deem necessary to apply for and obtain Letters Patent of the United States or any foreign country or to otherwise
protect the Company’s interest therein.
7. TRADE SECRETS . executive agrees that he will not, during or after the period of employment under this
agreement, disclose the specific terms of the Company’s relationships or agreements with its respective significant vendors or
customers, or any other significant and material trade secret of the Company, whether in existence or proposed, to any person, firm,
partnership, corporation, or business for any reason or purpose whatsoever.
8. INDEMNIFICATION . in the event executive is made a party to any threatened, pending, or completed
action, suit, or proceeding, whether civil, criminal, administrative, or investigative (other than an action by the Company against
executive), by reason of the fact that he is or was performing services under this agreement, then the Company shall indemnify
executive against all expenses (including attorneys’ fees), judgments, fines, and amounts paid in settlement, as actually and
reasonably incurred by executive in connection therewith to the maximum extent permitted by applicable law; provided, however,
the executive must deliver a written undertaking to the Company that if it is subsequently determined by a court of law in a final,
non-appealable judgment, that the executive was not entitled to indemnification under applicable law, then the executive will repay
all amounts. The advancement of expenses shall be mandatory. in the event that both executive and the Company are made a party
to the same third-party action, complaint, suit, or proceeding, the Company agrees to engage competent legal representation, and
executive agrees to use the same representation, provided that if counsel selected by the Company shall have a conflict of interest
that prevents such counsel from representing executive, executive may engage separate counsel and the Company shall pay all
attorneys’ fees of such separate counsel. Further, while executive is expected at all times to use his best efforts to faithfully
discharge his duties under this agreement, executive cannot be held liable to the Company for errors or omissions made in good
faith if executive has not exhibited gross, willful, and wanton negligence and misconduct or performed criminal and fraudulent acts
that materially damage the business of the Company. Notwithstanding this Section 8, the provision of any written indemnification
agreement applicable to the directors or officers of the Company to which executive shall be a party shall apply rather than this
Section 8 to the extent inconsistent with this Section 8.
9. NO PRIOR AGREEMENTS . executive hereby represents and warrants to the Company that the execution of
this agreement by executive and his employment by the Company and the performance of his duties hereunder will not violate or be
a breach of any agreement with a former employer, client, or any other person or entity. Further, executive agrees to indemnify the
Company for any claim, including, but not limited to, attorneys’ fees and expenses of investigation, by any such third party that such
third party may now have or may hereafter come to have against the Company based upon or arising out of any non-competition,
invention, or secrecy agreement between executive and such third party that was in existence as of the date of this agreement.
10. ASSIGNMENT; BINDING EFFECT . executive understands that he is being employed by the Company on
the basis of his personal qualifications, experience, and skills. executive agrees, therefore, he cannot assign all or any portion of his
performance under this agreement. Subject to the preceding two (2) sentences and the express provisions of Section 11
12
below, this agreement shall be binding upon, inure to the benefit of and be enforceable by the parties hereto and their respective
heirs, legal representatives, successors, and assigns.
11. COMPLETE AGREEMENT . This agreement is not a promise of future employment. executive has no
oral representations, understandings, or agreements with the Company or any of its officers, directors, or representatives covering the
same subject matter as this agreement. This written agreement is the final, complete, and exclusive statement and expression of the
agreement between the Company and executive and of all the terms of this agreement, and it cannot be varied, contradicted, or
supplemented by evidence of any prior or contemporaneous oral or written agreements. This written agreement may not be later
modified except by a further writing signed by a duly authorized officer of the Company and executive, and no term of this
agreement may be waived except by writing signed by the party waiving the benefit of such term. This agreement hereby
supersedes any other employment agreements or understandings, written or oral, between the Company and executive.
12. NOTICE . Whenever any notice is required hereunder, it shall be given in writing addressed as follows:
To the Company:
MarineMax, inc.
2600 McCormick Drive, Suite 200
Clearwater, Florida 33759
attention: Chief executive Officer
To executive:
Michael H. McLamb
2600 McCormick Drive, Suite 200
Clearwater, Florida 33759
in either case with a copy to:
Holland & Knight LLP
100 North Tampa Street
Suite 4100
Tampa, Florida 33602
attention: Robert J. Grammig, esq.
Notice shall be deemed given and effective when hand delivered on the first day after being deposited with a reputable nationally
recognized overnight delivery service or when actually received. either party may change the address for notice by notifying the
other party of such change in accordance with this Section 12.
13. SEVERABILITY; HEADINGS . if any portion of this agreement is held invalid or inoperative, the other
portions of this agreement shall be deemed valid and operative and, so far as is reasonable and possible, effect shall be given to the
intent manifested by the portion held
13
invalid or inoperative. The Section headings herein are for reference purposes only and are not intended in any way to describe,
interpret, define or limit the extent or intent of the agreement or of any part hereof.
14. MEDIATION ARBITRATION . all disputes arising out of this agreement shall be resolved as set forth in
this Section 14. if any party hereto desires to make any claim arising out of this agreement (“Claimant”), then such party shall first
deliver to the other party (“Respondent”) written notice (“Claim Notice”) of Claimant’s intent to make such claim explaining
Claimant’s reasons for such claim in sufficient detail for Respondent to respond. Respondent shall have ten (10) business days from
the date the Claim Notice was given to Respondent to object in writing to the claim (“Notice of Objection”), or otherwise cure any
breach hereof alleged in the Claim Notice. any Notice of Objection shall specify with particularity the reasons for such
objection. Following receipt of the Notice of Objection, if any, Claimant and Respondent shall immediately seek to resolve by good
faith negotiations the dispute alleged in the Claim Notice, and may at the request of either party, utilize the services of an
independent mediator. if Claimant and Respondent are unable to resolve the dispute in writing within ten (10) business days from
the date negotiations began, then without the necessity of further agreement of Claimant or Respondent, the dispute set forth in the
Claim Notice shall be submitted to binding arbitration (except for claims arising out of Sections 3 or 7 hereof), initiated by either
Claimant or Respondent pursuant to this Section. Such arbitration shall be conducted before a panel of three (3) arbitrators in
Tampa, Florida, in accordance with the National Rules for the Resolution of employment Disputes of the american arbitration
association (“aaa”) then in effect provided that the parties may agree to use arbitrators other than those provided by the aaa. The
arbitrators shall not have the authority to add to, detract from, or modify any provision hereof nor to award punitive damages to any
injured party. The arbitrators shall have the authority to order back-pay, severance compensation, vesting of options (or cash
compensation in lieu of vesting of options), vesting and the removal of restrictions on restricted stock and/or restricted stock units (or
comparable forms of equity compensation, if any) that, as of the effective date of the termination of executive, are not then subject to
any performance conditions for vesting, reimbursement of costs, including those incurred to enforce this agreement, and interest
thereon in the event the arbitrators determine that executive was terminated without disability or without Good Cause, as defined in
Sections 4(b) and 4(c) hereof, respectively, or that the Company has otherwise materially breached this agreement. a decision by a
majority of the arbitration panel shall be final and binding. Judgment may be entered on the arbitrators’ award in any court having
jurisdiction. The direct expense of any mediation or arbitration proceeding and, to the extent executive prevails, all reasonable legal
fees shall be borne by the Company.
15. NO PARTICIPATION IN SEVERANCE PLANS . except as contemplated by this agreement, executive
acknowledges and agrees that the compensation and other benefits set forth in this agreement are and shall be in lieu of any
compensation or other benefits that may otherwise be payable to or on behalf of executive pursuant to the terms of any severance
pay arrangement of the Company or any affiliate thereof, or any other similar arrangement of the Company or any affiliates thereof
providing for benefits upon involuntary termination of employment.
16. GOVERNING LAW . This agreement shall in all respects be construed according to the laws of the state of
Florida, notwithstanding the conflict of laws provisions of such state.
14
17. COUNTERPARTS; FACSIMILE . This agreement may be executed by facsimile and in two (2) or more
counterparts, each of which shall be deemed an original and all of which together shall constitute but one and the same instrument.
18. SECTION 409A .
(a) This agreement is intended to satisfy the requirements of Section 409a of the Code with respect to
amounts subject thereto, and shall be interpreted and construed consistent with such intent; provided that, notwithstanding the other
provisions of this provision and the provision entitled, “Specified employee” above, with respect to any right to a payment or benefit
hereunder (or portion thereof) that does not otherwise provide for a “deferral of compensation” within the meaning of Section 409a
of the Code, it is the intent of the parties that such payment or benefit will not so provide. Furthermore, if either party notifies the
other in writing that, based on the advice of legal counsel, one or more of the provisions of this agreement contravenes any
regulations or Treasury guidance promulgated under Section 409a of the Code or causes any amounts to be subject to interest or
penalties under Section 409a of the Code, the parties shall promptly and reasonably consult with each other (and with their legal
counsel), and shall use their reasonable best efforts, to reform the provisions hereof to (a) maintain to the maximum extent
practicable the original intent of the applicable provisions without violating the provisions of Section 409a of the Code or increasing
the costs to the Company of providing the applicable benefit or payment and (b) to the extent practicable, to avoid the imposition of
any tax, interest or other penalties under Section 409a of the Code upon executive or the Company.
(b) This agreement is intended, to the maximum extent possible, to meet the short term deferral
exception and/or be a separation pay plan due to an involuntary separation from service under Treasury Regulation Sections 1.409a-
1(b)(4) and 1.409a-1(b)(9)(iii) and therefore exempt from Code Section 409a. ”
IN WITNESS WHEREOF , the parties hereto have executed this agreement as of the day and year first above written.
MaRiNeMaX, iNC.
by:
William brett McGill
Title: President, CeO
eXeCUTiVe:
Michael H. McLamb
15
EMPLOYMENT AGREEMENT
Exhibit 10.3(j)
THiS eMPLOYMeNT aGReeMeNT (this “agreement”), by and between MarineMax, inc., a Florida corporation (the
“Company”), and William brett McGill (“executive”) is entered into and effective as of the _____ day of November, 2018.
RECITALS
a. The Company is engaged primarily in the business of selling, renting, leasing, and servicing boating, nautical, and other
related lifestyle entertainment products and services, and related activities and executive has experience in such business.
b. executive served as President and Chief Operating Officer of the Company. The Company desires to assure itself of the
continued availability of executive to serve as President and Chief executive Officer.
C. The Company desires to employ executive, and executive desires to accept such employment, pursuant to the terms and
conditions set forth in this agreement.
NOW, THeReFORe, in consideration of the mutual promises, terms, covenants, and conditions set forth herein and the
AGREEMENT
performance of each, it is hereby agreed as follows:
1. EMPLOYMENT AND DUTIES
.
(a) eMPLOYMeNT
. The Company hereby employs executive, and executive hereby agrees to act, as President and Chief executive Officer of the
Company. as such, executive shall have responsibilities, duties, and authority reasonably accorded to, expected of, and consistent with
executive’s position and executive shall report directly to the board of Directors of the Company (the “board”). executive hereby accepts
this employment upon the terms and conditions herein contained and, subject to Section l(c) hereof, agrees to devote his best efforts and
substantially all of his business time and attention to promote and further the business of the Company.
(b) POLiCieS
. executive shall faithfully adhere to, execute, and fulfill all lawful policies established by the Company.
(c) OTHeR aCTiViTieS
. executive shall not, during the period of his employment hereunder (the “Term”), be engaged in any other business activity
pursued for gain, profit, or other pecuniary advantage if such activity interferes in any material respect with executive’s duties and
responsibilities hereunder. The foregoing limitations shall not be construed as prohibiting executive from (i) making personal investments in
such form or manner as will neither require his services in the operation or affairs of the companies or enterprises in which such investments
are made nor subject executive to any conflict of interest with respect to his duties to the Company, (ii) serving on any civic or charitable
boards or committees, (iii) delivering lectures or fulfilling speaking engagements, or (iv) serving, with the written approval of the board, as a
director of one or more corporations, in each case so long as any such activities do not significantly interfere with the performance of
executive’s responsibilities under this agreement. in addition, executive shall comply with the restrictions listed in Section 3 of this
agreement.
(d) PLaCe OF PeRFORMaNCe
. executive shall not be required by the Company or in the performance of his duties to relocate his primary residence.
2. COMPENSATION
. For all services rendered by executive, the Company shall compensate executive as follows:
(a) baSe SaLaRY
. effective the date hereof, the base salary payable to executive shall be Five Hundred and Twenty Thousand Dollars ($520,000)
per year, payable on a regular basis in accordance with the Company’s standard payroll procedures, but not less than monthly. On at least an
annual basis, the board or a committee of the board shall review executive’s performance and may make increases to such base salary if, in
its sole discretion, any such increase is warranted.
(b) bONUS OR OTHeR iNCeNTiVe COMPeNSaTiON
. executive shall be eligible to receive a bonus or other incentive compensation as may be determined by the board or a committee
of the board based upon such factors as the board or such committee, in its sole discretion, may deem relevant, including, without limitation,
the performance of executive and the Company; provided, however, that the board or a committee of the board shall establish for each fiscal
year of the Company a bonus program in which executive shall be entitled to participate, which provides executive with a reasonable
opportunity, based on the performance of the Company, the past compensation practices of the Company and executive’s then base salary, to
maintain or increase executive’s total compensation compared to the previous fiscal year.
(c) eXeCUTiVe PeRQUiSiTeS, beNeFiTS, aND OTHeR COMPeNSaTiON
. executive shall be entitled to receive additional benefits and compensation from the Company in such form and to such extent as
specified below:
ReiMbURSeMeNT FOR eXPeNSeS
. The Company shall provide reimbursement to executive for business travel and other out-of-pocket expenses
reasonably incurred by executive in the performance of his services under this agreement. all reimbursable expenses shall be appropriately
documented in reasonable detail by executive upon submission of any request for reimbursement and shall be in a format and manner
consistent with the Company’s expense reporting policy. Such expenses shall be submitted to the Company’s Chief Financial Officer for
approval or to such other officer of the Company as the board may from time to time direct. except as expressly provided otherwise herein,
no reimbursement payable to executive pursuant to any provisions of this agreement or pursuant to any plan or arrangement of the Company
shall be paid later than the last day of the calendar year following the calendar year in which the related expense was incurred, and no such
reimbursement during any calendar year shall affect the amounts eligible for reimbursement in any other calendar year, except, in each case,
to the extent that the right to reimbursement does not provide a for “deferral of compensation” within the meaning of Section 409a.
VaCaTiON
. Paid vacation in accordance with the applicable policy of the Company as in effect from time to time. executive shall
be entitled to no less than four (4) weeks paid vacation per year; provided, however, executive may carryover up to, but not more than, two
weeks of unused vacation time from one calendar year to the next succeeding calendar year. The maximum amount of vacation that may be
accrued for any calendar year is six (6) weeks of paid vacation. No additional paid vacation shall accrue above the six (6) week limit.
OTHeR eXeCUTiVe PeRQUiSiTeS
appropriate for executive by the board or a committee of the board and participation in all other Company-wide employee benefits
. The Company shall provide executive with other executive perquisites as may be made available to or deemed
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(including group insurance, pension, retirement, and other plans and programs) as are available to the Company ’ s executive officers from
time to time.
3. NON-COMPETITION AGREEMENT
.
(a) NON-COMPeTiTiON
. executive shall not, during the period of his employment by or with the Company, and during the Noncompete Period (as
hereinafter defined) for any reason whatsoever, directly or indirectly, for himself or on behalf of or in conjunction with any other person:
OTHeR aCTiViTieS
contractor, consultant, advisor, or sales representative, in any Competitive business within the Restricted Territory;
. engage, as an officer, director, shareholder, owner, principal, partner, lender, joint venturer, employee, independent
SOLiCiTaTiON OF eMPLOYeeS
. Call upon any person who is, at that time, within the Restricted Territory, an employee of the Company or any of its
subsidiaries, in a managerial capacity for the purpose or with the intent of enticing such employee away from or out of the employ of the
Company or any of its subsidiaries;
SOLiCiTaTiON OF CUSTOMeRS
. Call upon any person or entity that is, at that time, or that has been, within one (1) year prior to that time, a customer of
the Company or any of its subsidiaries, within the Restricted Territory for the purpose of soliciting or selling products or services in direct
competition with the Company or any of its subsidiaries within the Restricted Territory;
SOLiCiTaTiON OF aCQUiSiTiON CaNDiDaTeS
. Call upon any prospective acquisition candidate (that is, a business that the Company may have an interest in
acquiring), on executive’s own behalf or on behalf of any person, which candidate was, to executive’s knowledge after due inquiry, either
called upon by the Company, or for which the Company made an acquisition analysis, for the purpose of acquiring such candidate.
(b) CeRTaiN DeFiNiTiONS
. as used in this agreement, the following terms shall have the meanings ascribed to them:
COMPeTiTiVe bUSiNeSS
shall mean any Person that sells, rents, brokers, leases, stores, repairs, restores, or services recreational boats or other
boating products or provides services relating to recreational boats or other boating products or any other business in which the Company is
engaged;
PeRSON
shall mean any individual, corporation, limited liability company, partnership, firm, or other business of whatever
nature;
ReSTRiCTeD TeRRiTORY
shall mean any state or other political jurisdiction in which, or any location within two hundred (200) miles of which,
the Company or any subsidiary of the Company maintains any facilities; sells, rents, brokers, leases, stores, repairs, restores, or services
recreational boats or other boating products; or provides services relating to recreational boats or other boating products; and
SUbSiDiaRY
and any other business organization in which the Company holds at least a fifty percent (50%) equity interest.
shall mean the Company’s consolidated subsidiaries, including corporations, partnerships, limited liability companies,
3
NONCOMPETE PERIOD
shall mean the longer of (i) the two (2) year period immediately following the termination of executive’s employment
with the Company or (ii) the time during which severance payments are being made by the Company to executive in accordance with this
agreement; provided, however, that if the executive’s employment is terminated by the Company without Good Cause, executive terminates
his employment with Good Reason or, executive terminates his employment after a Change in Control pursuant to Section 4(b)(vi)(b), then
the Noncompete Period shall be for the one (1) year period immediately following the termination of his employment with the Company.
(c) eNFORCeMeNT
. because of the difficulty of measuring economic losses to the Company as a result of a breach of the foregoing covenants, and
because of the immediate and irreparable damage that could be caused to the Company for which it would have no other adequate remedy,
executive agrees that the foregoing covenants may be enforced by the Company in the event of breach by him, by injunctions and restraining
orders.
(d) ReaSONabLe ReSTRaiNT
. it is agreed by the parties that the foregoing covenants in this Section 3 impose a reasonable restraint on executive in light of the
activities and business of the Company (including the Company’s subsidiaries) on the date of the execution of this agreement and the current
plans of the Company (including the Company’s subsidiaries); but it is also the intent of the Company and executive that such covenants be
construed and enforced in accordance with the changing activities, business, and locations of the Company (including the Company’s
subsidiaries) throughout the term of this covenant, whether before or after the date of termination of the employment of executive. For
example, if, during the term of this agreement, the Company (including the Company’s subsidiaries) engages in new and different activities,
enters a new business, or establishes new locations for its current activities or business in addition to or other than the activities or business
enumerated above or the locations currently established therefor, then executive will be precluded from soliciting the customers or employees
of such new activities or business or from such new location and from directly competing with such new business within the Restricted
Territory through the term of these covenants.
(e) OTHeR aCTiViTieS
. it is further agreed by the parties that, in the event that executive shall cease to be employed hereunder and enters into a business
or pursues other activities not in competition with the Company (including the Company’s subsidiaries), or similar activities or business in
locations, the operation of which, under such circumstances, does not violate this Section 3, and in any event such new business, activities, or
location are not in violation of this Section 3 or of executive’s obligations under this Section 3, if any, executive shall not be chargeable with
a violation of this Section 3 if the Company (including the Company’s subsidiaries) shall thereafter enter the same, similar, or a competitive
(i) business, (ii) course of activities, or (iii) location, as applicable.
(f) SePaRaTe COVeNaNTS
. The covenants in this Section 3 are severable and separate, and the unenforceability of any specific covenant shall not affect the
provisions of any other covenant. Moreover, in the event any court of competent jurisdiction shall determine that the scope, time, or territorial
restrictions set forth are unreasonable, then it is the intention of the parties that such restrictions be enforced to the fullest extent that the court
deems reasonable, and the agreement shall thereby be reformed.
(g) iNDePeNDeNT aGReeMeNT
. all of the covenants in this Section 3 shall be construed as an agreement independent of any other provision in this agreement,
and the existence of any claim or cause of action of executive against the Company, whether predicated on this agreement or otherwise, shall
not constitute a defense to the enforcement by the Company of such covenants; except as provided in Section 4(d) below. it is specifically
agreed that the Noncompete Period following termination of employment as defined in this Section 3, during which the agreements and
covenants of
4
executive made in this Section 3 shall be effective, shall be computed by excluding from such computation any time during which executive
is in violation of any provision of this Section 3.
4. AT-WILL EMPLOYMENT; TERMINATION; RIGHTS ON TERMINATION
.
(a) aT-WiLL eMPLOYMeNT
. executive’s employment with the Company shall be at-will. The executive may terminate his employment at any time for any
reason (subject to the notice requirements provided in this agreement) and the Company may terminate executive’s employment with the
Company at any time and for any reason (subject to the severance provisions of this agreement). This at-will employment relationship cannot
be changed except by written authorization by the board of Directors of the Company.
(b) TeRMiNaTiON
. executive’s employment under this agreement may be terminated in any one of the followings ways:
DeaTH OF eXeCUTiVe
. The employment of executive shall terminate immediately upon executive’s death provided that the Company shall
pay to the estate of executive an amount equal to $1,000,000. in the event of such termination, all options to purchase Common Stock of the
Company held by executive shall thereupon vest and shall be exercisable for the maximum period of time, up to their full term, that will not
cause executive with respect to such options to be subject to any excise tax under Section 409a of the internal Revenue Code of 1986, as
amended (“Section 409a”) notwithstanding the termination of employment. all restricted stock and/or restricted stock units (or comparable
forms of equity compensation, if any) held by the executive which, as of the date of the death of executive, are not then subject to any
performance conditions for vesting, shall be fully vested and shall not be subject to any risk of forfeiture or repurchase as of the date of
executive’s death. The payment described in this Section, if payable, will be paid within ten (10) days after the executive’s death.
DiSabiLiTY OF eXeCUTiVe
. The Company may terminate executive’s employment in the event the executive is disabled. The executive shall be
disabled if the executive is unable to engage in any substantial gainful activity by reason of a medically determined physical or mental
impairment expected to last at least twelve consecutive months or result in death, or if applicable, for at least three months the executive is
receiving income replacement benefits under a Company sponsored plan by reason of any medically determined physical or mental
impairment expected to last at least twelve consecutive months or result in death, or if the executive is determined to be disabled under a
Company disability plan with a similar definition of disability. in the event executive’s employment under this agreement is terminated as a
result of executive’s disability, executive shall receive from the Company, in a lump-sum payment due within ten (10) days of the effective
date of termination, an amount equal to the average of the base salary and bonus paid to executive for the two (2) prior full fiscal years, for
one (1) year. in the event of such termination, all options to purchase Common Stock of the Company held by executive shall thereupon vest
and shall be exercisable for the maximum period of time, up to their full term, that will not cause executive with respect to such options to be
subject to any excise tax under Section 409a notwithstanding the termination of employment. all restricted stock and/or restricted stock units
(or comparable forms of equity compensation, if any) held by the executive which, as of the date of the disability of executive, are not then
subject to any performance conditions for vesting, shall be fully vested and shall not be subject to any risk of forfeiture or repurchase as of the
date of executive’s termination due to disability (as defined in this paragraph).
TeRMiNaTiON bY THe COMPaNY FOR GOOD CaUSe
Cause,” which shall mean any one or more of the following: (a) executive’s willful and material breach
. The Company may terminate executive’s employment upon ten (10) days prior written notice to executive for “Good
5
of this agreement which has not be en cured by the executive within thirty (30) days following written notice of such breach from the
Company; (b) executive ’ s gross negligence in the performance or intentional nonperformance (continuing for thirty (30) days after receipt
of written notice of need to cure) of any of executive ’ s material duties and responsibilities hereunder; (C) executive ’ s willful dishonesty,
fraud, or misconduct with respect to the business or affairs of the Company, which materially and adversely affects the operations or
reputation of the Company; (D) executive ’ s conviction of a felony crime involving dishonesty or moral turpitude; or (e) a confirmed
positive illegal drug test result. in the event of a termination by the Company for Good Cause, executive shall have no right to any severance
compensation.
TeRMiNaTiON bY THe COMPaNY WiTHOUT GOOD CaUSe OR bY eXeCUTiVe WiTH GOOD ReaSON
. The Company may terminate executive’s employment without Good Cause upon the approval of a majority of the
members of the board, excluding executive if executive is a member of the board. executive may terminate his employment under this
agreement for Good Reason upon thirty (30) days prior notice to the Company.
WiTH GOOD ReaSON
ReSULT OF TeRMiNaTiON bY THe COMPaNY WiTHOUT GOOD CaUSe OR bY eXeCUTiVe
. Should the Company terminate executive’s employment without Good Cause or should executive
terminate his employment with Good Reason, the Company shall pay to executive for thirty (30) months after such termination, on such dates
as would otherwise be paid by the Company, an amount equal to the average of the base salary and bonus paid to executive for the two (2)
prior full fiscal years. The amounts payable under the preceding sentence shall commence on the first payroll date following executive’s
“separation from service” from the Company within the meaning of Section 409a of the internal Revenue Code of 1986, as amended (the
“Code”), and shall be treated as a series of separate payments under Treasury Regulations Section 1.409a-2(b)(2)(iii). Further, if the
Company terminates executive’s employment without Good Cause or executive terminates his employment with Good Reason, (1) all
options to purchase Common Stock of the Company held by executive shall vest thereupon and shall be exercisable for the maximum period
of time, up to their full term, that will not cause executive with respect to such options to be subject to any excise tax under Section 409a
notwithstanding the termination of employment, (2) all restricted stock and/or restricted stock units (or comparable forms of equity
compensation, if any) held by executive which, as of the effective date of the termination of executive, are not then subject to any
performance conditions for vesting, shall be fully vested and shall not be subject to any risk of forfeiture or repurchase as of the date of
termination, (3) all restricted stock and/or restricted stock units (or comparable forms of equity compensation, if any) held by executive
which, as of the effective date of the termination of executive, is subject to performance conditions for vesting, shall be fully vested and
treated as if the performance conditions for such award had been fully met at target and shall not be subject to any risk of forfeiture or
repurchase as of the date of termination, and (4) executive shall be entitled to receive all other unpaid benefits due and owing through
executive’s last day of employment. Further, any termination by the Company without Good Cause or by executive for Good Reason shall
operate to shorten the Noncompete Period set forth in Section 3 to one (1) year from the date of termination of employment.
DeFiNiTiON OF GOOD ReaSON
. executive shall have “Good Reason” to terminate employment upon the occurrence of any of the following
events, without executive’s written approval: (1) executive suffers a material reduction in authority, responsibilities, or duties as provided
herein; (2) executive’s annual base salary for a fiscal year as determined pursuant to Section 2(a) is reduced to a level that is less than ninety
percent (90%) of the base salary paid to executive during the prior contract year under this agreement; (3) executive is required to render his
or her primary employment services from a location more than 25 miles from the Company’s headquarters at the time executive began his
employment with the Company; (4) the Company takes steps to deny
6
executive a reasonable opportunity to maintain executive ’ s total compensation (i.e., base salary plus bonus and any other annual cash
incentive compensation) compared to the previous fiscal year (provided total compensation may take into account performance of the
Company and the past compensation practices of the Company) or (5) the Company breaches a material provision of this agreement. in
order for an event to justify termination for Good Reason, the executive must give written notice to the Company of such event within 9 0
days of its first occurrence and the Company must have 30 days to cure, if possible
ReSiGNaTiON bY eXeCUTiVe WiTHOUT GOOD ReaSON
. executive may, without cause, and without Good Reason terminate his own employment under this agreement,
effective thirty (30) days after written notice is provided to the Company or such earlier time as any such resignation may be accepted by the
Company. if executive resigns or otherwise terminates his employment without Good Reason, executive shall receive no severance
compensation.
CHaNGe iN CONTROL OF THe COMPaNY
.
POSSibiLiTY OF CHaNGe iN CONTROL
. executive understands and acknowledges that the Company may be merged or consolidated with or into
another entity and that such entity shall automatically succeed to the rights and obligations of the Company hereunder or that the Company
may undergo another type of Change in Control. in the event such a merger or consolidation or other Change in Control is initiated prior to
the end of the Term, then the provisions of this Section 4(b)(vi) shall be applicable.
TeRMiNaTiON bY eXeCUTiVe
.
Subject to the exceptions set forth in Section 4(b)(vi)(e), if any Change of Control is initiated during executive’s employment hereunder,
executive may, at his sole discretion, elect to terminate his employment under this agreement by providing written notice to the Company at
least thirty (30) business days at any time beginning on the effective date of the Change in Control and ending one (1) year after the closing of
the transaction giving rise to the Change in Control. in such case, the applicable provisions of Section 4(b)(iv) hereof will apply as though the
Company had terminated executive’s employment without Good Cause during the Term; however, under such circumstances, the amount of
the severance payments due to executive shall be paid in a lump sum and the Noncompete Period of Section 3 hereof shall be limited to one
(1) year from the effective date of termination. if any of the payments or benefits received or to be received by the executive (including,
without limitation, any payment or benefits received in connection with a Change in Control or the executive’s termination of employment,
whether pursuant to the terms of this agreement or any other plan, arrangement, or agreement, or otherwise) (all such payments collectively
referred to herein as the "280G Payments") constitute "parachute payments" within the meaning of Section 280G of the Code and would, but
for this Section 4 (b) (vi) (b), be subject to the excise tax imposed under Section 4999 of the Code (the "excise Tax"), then such 280G
Payments shall be reduced in a manner determined by the Company (by the minimum possible amounts) that is consistent with the
requirements of Section 409a until no amount payable to the executive will be subject to the excise Tax. if two economically equivalent
amounts are subject to reduction but are payable at different times, the amounts shall be reduced (but not below zero) on a pro rata basis.
eFFeCTiVe DaTe OF CHaNGe iN CONTROL
. For purposes of applying Section 4 hereof under the circumstances described in 4(b)(vi)(b) above, the
effective date of the Change in Control will be the closing date of the transaction giving rise to the Change in Control and all compensation,
reimbursements, and lump-sum payments due executive must be paid in full by the Company following such Change in Control promptly
following executive’s election to terminate his employment.
7
DEFINITION OF CHANGE IN CONTROL
. a “Change in Control” shall mean the items in (1)-(4) below and a transaction that would be required to be
reported in response to item 6(e) of Schedule 14a of Regulation 14a promulgated under the Securities exchange act of 1934 (“exchange
act”), as amended, as in effect on the date of this agreement, or if item 6(e) is no longer in effect, any regulations issued by the Securities
and exchange Commission pursuant to the exchange act, which serve similar purposes; provided that to constitute a Change in Control the
transaction must satisfy the requirements of Treasury Regulation §1.409a-3(i)(5) relating to “change in the ownership or effective control of
a corporation, or a change in the ownership of a substantial portion of the assets of a corporation”:
TURNOVeR OF bOaRD
. The following individuals no longer constitute a majority of the members of the board: (a) the
individuals who, as of the date of this agreement, constitute the board (the “Current Directors”); (b) the individuals who thereafter are
elected to the board and whose election, or nomination for election, to the board was approved by a vote of at least two-thirds (2/3) of the
Current Directors then still in office (such directors becoming “additional Directors” immediately following their election); and (C) the
individuals who are elected to the board and whose election, or nomination for election, to the board was approved by a vote of at least two-
thirds (2/3) of the Current Directors and additional Directors then still in office (such directors also becoming “additional Directors”
immediately following their election);
TeNDeR OFFeR
the Company, and such offer is consummated for the equity securities of the Company representing thirty percent (30%) or more of the
combined voting power of the Company’s then outstanding voting securities;
. a tender offer or exchange offer is made where the intent of such offer is to take over control of
MeRGeR OR CONSOLiDaTiON
. The stockholders of the Company shall approve a merger, consolidation, recapitalization, or
reorganization of the Company, a reverse stock split of outstanding voting securities, or consummation of any such transaction if stockholder
approval is not obtained, other than any such transaction that would result in at least seventy-five percent (75%) of the total voting power
represented by the voting securities of the surviving entity outstanding immediately after such transaction being beneficially owned by the
holders of outstanding voting securities of the Company immediately prior to the transaction, with the voting power of each such continuing
holder relative to other such continuing holders not substantially altered in the transaction; or
LiQUiDaTiON OR SaLe OF aSSeTS
. The stockholders of the Company shall approve a plan of complete liquidation of the Company
or an agreement for the sale or disposition by the Company of all or a substantial portion of the Company’s assets to another person or entity,
which is not a wholly owned subsidiary of the Company (i.e., fifty percent (50%) or more of the total assets of the Company).
eXCePTiONS FROM CHaNGe iN CONTROL
. a Change in Control shall not be considered to have taken place for purposes of this Section 4 in the event
that both (1) the Change in Control shall have been specifically approved by at least two-thirds (2/3) of the Current and additional Directors
(as defined above) and (2) the successor company assumes this agreement and appoints executive to the same position at the successor
corporation as executive had with the Company immediately prior to the Change in Control; provided that if the successor corporation has a
parent, the parent rather than the successor corporation must appoint executive to the position with the same title and responsibilities as
executive had with the Company immediately prior to the Change in Control. Sales of the Company’s Common Stock issued, beneficially
owned or controlled by the Company shall not be considered in determining whether a Change in Control has occurred.
8
NOTiFiCaTiON
. executive shall be notified in writing by the Company at any time that the Company anticipates that a
Change in Control may take place.
SPeCiFieD eMPLOYee
. Notwithstanding any provision of this agreement to the contrary, if executive is a “specified employee” as
defined in Section 409a of the Code, executive shall not be entitled to any payments or benefits the right to which provides for a “deferral of
compensation” within the meaning of Section 409a, and which payment or provision is triggered by executive’s termination of employment
(whether such payments or benefits are provided to executive under this agreement or under any other plan, program or arrangement of the
Company), until the earlier of (i) the date which is the first business day following the six-month anniversary of executive’s “separation from
service” (within the meaning of Section 409a of the Code) for any reason other than death or (ii) executive’s date of death, and such
payments or benefits that, if not for the six-month delay described herein, would be due and payable prior to such date shall be made or
provided to executive on such date. The Company shall make the determination as to whether executive is a “specified employee” in good
faith in accordance with its general procedures adopted in accordance with Section 409a of the Code and, at the time of the executive’s
“separation of service” will notify the executive whether or not he is a “specified employee.”
(c) PaYMeNTS TO TeRMiNaTiON DaTe
. Upon termination of executive’s employment under this agreement for any reason provided above, executive shall be entitled to
receive all compensation earned and all benefits and reimbursements due through the effective date of termination. additional compensation
subsequent to termination, if any, will be due and payable to executive only to the extent and in the manner expressly provided above. all
other rights and obligations of the Company and executive under this agreement shall cease as of the effective date of termination, except
that the Company’s obligations under Section 8 (relating to indemnification of executive) and executive’s obligations under Section 3
(relating to non-competition), Section 5 (relating to return of Company property), Section 6 (relating to inventions), Section 7 (relating to
trade secrets), and Section 9 (relating to prior agreements) shall survive such termination in accordance with their terms.
(d) FaiLURe TO PaY eXeCUTiVe
. if termination of executive’s employment arises out of the Company’s failure to pay executive on a timely basis the amounts to
which he is entitled under this agreement or as a result of any other breach of this agreement by the Company, as determined by a court of
competent jurisdiction or pursuant to the provisions of Section 14, the Company shall pay all amounts and damages to which executive may
be entitled as a result of such breach, including interest thereon and all reasonable legal fees and expenses and other costs incurred by
executive to enforce his rights hereunder. Further, none of the provisions of Section 3 (relating to non-competition) shall apply in the event
executive’s employment under this agreement is terminated as a result of a breach by the Company.
(e) CONDiTiONS PReCeDeNT FOR PaYMeNT OF SeVeRaNCe
. in consideration for Company’s obligations to make any payments to executive pursuant to Section 4, upon termination of
executive’s employment with Company for any reason other than executive’s death, executive shall sign and not revoke a release in a form
satisfactory to the Company (the “Release”). Company shall present the Release to executive within ten (10) days of termination, and
executive shall have up to forty-five (45) days to consider whether to sign the Release; in the event executive executes the Release,
executive shall have an additional eight (8) calendar days in which to expressly revoke executive’s execution of the Release in writing. in
the event that executive fails to execute the Release within the forty-five (45) days following termination, or in the event executive formally
revokes the executive’s Release within eight (8) calendar days of his signing of the Release, then executive shall not be entitled to any
payments or
9
benefits under Section 4 of this agreement. The Company shall make any payments to executive in accordance with the terms of Section 4
prior to executive’s failure to execute the Release within forty-five (45) days or prior to his revocation; provided that if executive does not
sign the Release or if executive revokes the Release during any statutory revocation period, executive shall immediately reimburse Company
for any and all such payment s.
Upon executive’s termination of employment for any reason other than executive’s death, executive, unless otherwise requested
to continue by the Company’s board of directors, shall resign from the board of Directors of the Company and of any subsidiaries of the
Company on which he sits as of the date of the termination of his employment.
(f) DeLaY iN SeVeRaNCe PaYMeNTS
. To the extent required under Section 409a, any severance payments due under this Section 4 shall be delayed until the first date
such payment may be made in compliance with Section 409a(a)(2)(b).
5. RETURN OF COMPANY PROPERTY
. all records, designs, patents, business plans, financial statements, manuals, memoranda, lists, and other property delivered to or compiled by
executive by or on behalf of the Company (or its subsidiaries) or its representatives, vendors, or customers that pertain to the business of the
Company (or its subsidiaries) shall be and remain the property of the Company and be subject at all times to its discretion and control.
Likewise, all correspondence, reports, records, charts, advertising materials, and other similar data pertaining to the business, activities, or
future plans of the Company (or its subsidiaries) that is collected by executive shall be delivered promptly to the Company without request by
it upon termination of executive’s employment.
6. INVENTIONS
. executive shall disclose promptly to the Company any and all significant conceptions and ideas for inventions, improvements, and valuable
discoveries, whether patentable or not, which are conceived or made by executive, solely or jointly with another, during the period of
employment or within one (1) year thereafter, and which are directly related to the business or activities of the Company (or its subsidiaries)
and which executive conceives as a result of his employment by the Company. executive hereby assigns and agrees to assign all his interests
therein to the Company or its nominee. Whenever requested to do so by the Company, executive shall execute any and all applications,
assignments, and other instruments that the Company shall deem necessary to apply for and obtain Letters Patent of the United States or any
foreign country or to otherwise protect the Company’s interest therein.
7. TRADE SECRETS
. executive agrees that he will not, during or after the period of employment under this agreement, disclose the specific terms of the
Company’s relationships or agreements with its respective significant vendors or customers, or any other significant and material trade secret
of the Company, whether in existence or proposed, to any person, firm, partnership, corporation, or business for any reason or purpose
whatsoever.
8. INDEMNIFICATION
. in the event executive is made a party to any threatened, pending, or completed action, suit, or proceeding, whether civil, criminal,
administrative, or investigative (other than an action by the Company against executive), by reason of the fact that he is or was performing
services under this agreement, then the Company shall indemnify executive against all expenses (including attorneys’ fees), judgments,
fines, and amounts paid in settlement, as actually and reasonably incurred by executive in connection therewith to the maximum extent
permitted by applicable law; provided, however, the executive must deliver a written undertaking to the Company that if it is subsequently
determined by a court of law in a final, non-appealable judgment, that the executive was not entitled to indemnification under applicable law,
then the executive will repay all amounts. The advancement of expenses shall be mandatory. in the event that both executive and the
Company are made a party to the same third-party action, complaint, suit, or proceeding, the Company agrees to engage competent legal
10
representation, and executive agrees to use the same representation, provided that if counsel selected by the Company shall have a conflict of
interest that prevents such counsel from representing executive, executive may engage separate counsel and the Company shall pay all
attorneys ’ fees of such separate counsel. Further, while executive is expected at all times to use his best efforts to faithfully discharge his
duties under this agreement, executive cannot be held liable to the Company for errors or omissions made in good faith if executive has not
exhibited gross, willful, and wanton negligence and misconduct or performed criminal and fraudulent acts that materially damage the business
of the Company. Notwithstanding this Section 8, the provision of any written indemnification agreement applicable to the directors or officers
of the Company to which executive shall be a party shall apply rather than this Section 8 to the extent inconsistent with this Section 8.
9. NO PRIOR AGREEMENTS
. executive hereby represents and warrants to the Company that the execution of this agreement by executive and his employment by the
Company and the performance of his duties hereunder will not violate or be a breach of any agreement with a former employer, client, or any
other person or entity. Further, executive agrees to indemnify the Company for any claim, including, but not limited to, attorneys’ fees and
expenses of investigation, by any such third party that such third party may now have or may hereafter come to have against the Company
based upon or arising out of any non-competition, invention, or secrecy agreement between executive and such third party that was in
existence as of the date of this agreement.
10. ASSIGNMENT; BINDING EFFECT
. executive understands that he is being employed by the Company on the basis of his personal qualifications, experience, and skills.
executive agrees, therefore, he cannot assign all or any portion of his performance under this agreement. Subject to the preceding two (2)
sentences and the express provisions of Section 11 below, this agreement shall be binding upon, inure to the benefit of and be enforceable by
the parties hereto and their respective heirs, legal representatives, successors, and assigns.
11. COMPLETE AGREEMENT
. This agreement is not a promise of future employment. executive has no oral representations, understandings, or agreements with the
Company or any of its officers, directors, or representatives covering the same subject matter as this agreement. This written agreement is
the final, complete, and exclusive statement and expression of the agreement between the Company and executive and of all the terms of this
agreement, and it cannot be varied, contradicted, or supplemented by evidence of any prior or contemporaneous oral or written agreements.
This written agreement may not be later modified except by a further writing signed by a duly authorized officer of the Company and
executive, and no term of this agreement may be waived except by writing signed by the party waiving the benefit of such term. This
agreement hereby supersedes any other employment agreements or understandings, written or oral, between the Company and executive.
12. NOTICE
. Whenever any notice is required hereunder, it shall be given in writing addressed as follows:
To the Company: MarineMax, inc.
With a copy to: Holland & Knight LLP
100 North Tampa Street
2600 McCormick Drive, Suite 200
Clearwater, Florida 33759
attention: executive Chairman and Lead ind. Director
Suite 4100
Tampa, Florida 33602
attention: Robert J. Grammig, esq.
11
To executive: Mr. William brett McGill
2600 McCormick Drive, Suite 200
Clearwater, Florida 33759
Notice shall be deemed given and effective when hand delivered or the first business day after being deposited with a reputable, nationally
recognized overnight delivery service or when actually received. either party may change the address for notice by notifying the other party
of such change in accordance with this Section 12.
13. SEVERABILITY; HEADINGS
. if any portion of this agreement is held invalid or inoperative, the other portions of this agreement shall be deemed valid and operative and,
so far as is reasonable and possible, effect shall be given to the intent manifested by the portion held invalid or inoperative. The Section
headings herein are for reference purposes only and are not intended in any way to describe, interpret, define or limit the extent or intent of
the agreement or of any part hereof.
14. MEDIATION ARBITRATION
. all disputes arising out of this agreement shall be resolved as set forth in this Section 14. if any party hereto desires to make any claim
arising out of this agreement (“Claimant”), then such party shall first deliver to the other party (“Respondent”) written notice (“Claim
Notice”) of Claimant’s intent to make such claim explaining Claimant’s reasons for such claim in sufficient detail for Respondent to respond.
Respondent shall have ten (10) business days from the date the Claim Notice was given to Respondent to object in writing to the claim
(“Notice of Objection”), or otherwise cure any breach hereof alleged in the Claim Notice. any Notice of Objection shall specify with
particularity the reasons for such objection. Following receipt of the Notice of Objection, if any, Claimant and Respondent shall immediately
seek to resolve by good faith negotiations the dispute alleged in the Claim Notice, and may at the request of either party, utilize the services of
an independent mediator. if Claimant and Respondent are unable to resolve the dispute in writing within ten (10) business days from the date
negotiations began, then without the necessity of further agreement of Claimant or Respondent, the dispute set forth in the Claim Notice shall
be submitted to binding arbitration (except for claims arising out of Sections 3 or 7 hereof), initiated by either Claimant or Respondent
pursuant to this Section. Such arbitration shall be conducted before a panel of three (3) arbitrators in Tampa, Florida, in accordance with the
National Rules for the Resolution of employment Disputes of the american arbitration association (“aaa”) then in effect provided that the
parties may agree to use arbitrators other than those provided by the aaa. The arbitrators shall not have the authority to add to, detract from,
or modify any provision hereof nor to award punitive damages to any injured party. The arbitrators shall have the authority to order back-pay,
severance compensation, vesting of options (or cash compensation in lieu of vesting of options), vesting and the removal of restrictions on
restricted stock and/or restricted stock units (or comparable forms of equity compensation, if any) that, as of the effective date of the
termination of executive, are not then subject to any performance conditions for vesting, reimbursement of costs, including those incurred to
enforce this agreement, and interest thereon in the event the arbitrators determine that executive was terminated without disability or without
Good Cause, as defined in Sections 4(b) and 4(c) hereof, respectively, or that the Company has otherwise materially breached this agreement.
a decision by a majority of the arbitration panel shall be final and binding. Judgment may be entered on the arbitrators’ award in any court
having jurisdiction. The direct expense of any mediation or arbitration proceeding and, to the extent executive prevails, all reasonable legal
fees shall be borne by the Company.
15. NO PARTICIPATION IN SEVERANCE PLANS
. except as contemplated by this agreement, executive acknowledges and agrees that the compensation and other benefits set forth in this
agreement are and shall be in lieu of any compensation or other benefits that may otherwise be payable to or on behalf of executive pursuant
to the terms of any severance pay arrangement of the Company or any
12
affiliate thereof, or any other similar arrangement of the Company or any affiliates thereof providing for benefits upon involuntary
termination of employment.
16. GOVERNING LAW
. This agreement shall in all respects be construed according to the laws of the state of Florida, notwithstanding the conflict of laws
provisions of such state.
17. COUNTERPARTS; FACSIMILE
. This agreement may be executed by facsimile and in two (2) or more counterparts, each of which shall be deemed an original and all of
which together shall constitute but one and the same instrument.
18. SECTION 409A
.
(a) This agreement is intended to satisfy the requirements of Section 409a of the Code with respect to amounts subject
thereto, and shall be interpreted and construed consistent with such intent; provided that, notwithstanding the other provisions of this
provision and the provision entitled, “Specified employee” above, with respect to any right to a payment or benefit hereunder (or portion
thereof) that does not otherwise provide for a “deferral of compensation” within the meaning of Section 409a of the Code, it is the intent of
the parties that such payment or benefit will not so provide. Furthermore, if either party notifies the other in writing that, based on the advice
of legal counsel, one or more of the provisions of this agreement contravenes any regulations or Treasury guidance promulgated under
Section 409a of the Code or causes any amounts to be subject to interest or penalties under Section 409a of the Code, the parties shall
promptly and reasonably consult with each other (and with their legal counsel), and shall use their reasonable best efforts, to reform the
provisions hereof to (a) maintain to the maximum extent practicable the original intent of the applicable provisions without violating the
provisions of Section 409a of the Code or increasing the costs to the Company of providing the applicable benefit or payment and (b) to the
extent practicable, to avoid the imposition of any tax, interest or other penalties under Section 409a of the Code upon executive or the
Company.
(b) This agreement is intended, to the maximum extent possible, to meet the short term deferral exception and/or be a
separation pay plan due to an involuntary separation from service under Treasury Regulation Sections 1.409a-1(b)(4) and 1.409a-1(b)(9)(iii)
and therefore exempt from Code Section 409a. ”
iN WiTNeSS WHeReOF, the parties hereto have executed this agreement as of the day and year first above written.
MaRiNeMaX, iNC.
by:
William H. McGill, Jr.
Title: executive Chairman
eXeCUTiVe:
William brett McGill
13
Exhibit 10.5
MarineMax, Inc.
2008 Employee Stock Purchase Plan
ARTICLE I
PURPOSE
1.1 Name. This Stock Purchase Plan shall be known as the MarineMax 2008 employee Stock Purchase Plan (the “Plan”).
1.2 Purpose. The Plan is intended to provide a method whereby employees of MarineMax, inc., a Delaware corporation (the “Company”), and one or more of its
Subsidiary Corporations will have an opportunity to acquire a proprietary interest in the Company through the purchase of shares of the Common Stock of the
Company.
1.3 Qualification. it is the intention of the Company to have the Plan qualify as an “employee stock purchase plan” under Section 423 of the Code. The provisions
of the Plan shall be construed so as to extend and limit participation in a manner consistent with the requirements of that section of the Code.
2.1 Base Pay. “base Pay” shall mean all annual cash compensation received by an employee. if any Offering is a six-month Offering, the base Pay shall be
divided by one-half.
ARTICLE II
DEFINITIONS
2.2 Code. “Code” shall mean the internal Revenue Code, as amended.
2.3 Closing Price. “Closing Price” shall have the meaning set forth in Section 6.2.
2.4 Committee. “Committee” shall have the meaning set forth in Section 11.1.
2.5 Employee. “employee” shall mean any person who is customarily employed on a full-time or part-time basis by the Company and is regularly scheduled to
work more than 20 hours per week.
2.6 Offering. “Offering” shall have the meaning set forth in Section 4.1.
2.7 Offering Commencement Date. “Offering Commencement Date” shall have the meaning set forth in Section 4.1.
2.8 Offering Termination Date. “Offering Termination Date” shall have the meaning set forth in Section 4.1.
2.9 Option. “Option” shall have the meaning set forth in Section 6.1.
2.10 Option Price. “Option Price” shall have the meaning set forth in Section 6.2.
2.11 Participating Company. “Participating Company” shall mean the Company and such Subsidiary Corporations as may be designated from time to time by the
board of Directors of the Company.
2.12 Participant. “Participant” shall have the meaning set forth in Section 3.4.
2.13 Participation Amount. “Participation amount” shall have the meaning set forth in Section 5.1.
2.14 Stock. “Stock” shall mean the Common Stock of the Company, par value one-tenth of one cent ($.001 per share).
2.15 Subsidiary Corporation. “Subsidiary Corporation” shall mean any present or future corporation which would be a “subsidiary corporation” of the Company,
as that term is defined in Code Section 424.
ARTICLE III
ELIGIBILITY AND PARTICIPATION
3.1 Initial Eligibility. any employee who shall have completed one year of continuous employment with a Participating Company and is employed by a
Participating Company on the date such employee’s participation in the Plan is to become effective shall be eligible to participate in Offerings under the Plan that
commence on or after such one-year employment period has concluded. any corporation that becomes a Subsidiary Corporation after the initial Offering
Commencement Date shall become a Participating Company only upon the decision of the board of Directors of the Company to designate such Subsidiary
Corporation as a Participating Company and to extend the benefits of the Plan to its eligible employees.
3.2 Leave of Absence. For purposes of participation in the Plan, a person on leave of absence shall be deemed to be an employee for the first 90 days of such leave
of absence and such employee’s employment shall be deemed to have terminated at the close of business on the 90th day of such leave of absence unless such
employee shall have returned to regular full-time or part-time employment (as the case may be) prior to the close of business on such 90th day. Termination by a
Participating Company of any employee’s leave of absence, other than termination of such leave of absence on return to full time or part time employment, shall
terminate an employee’s employment for all purposes of the Plan and shall terminate such employee’s participation in the Plan and right to exercise any Option.
3.3 Restrictions on Participation. Notwithstanding any provision of the Plan to the contrary, no employee shall be granted an Option to participate in the Plan:
(a) if, immediately after the grant, such employee would own Stock, and/or hold outstanding Options to purchase Stock, possessing five percent or more of the
total combined voting power or value of all classes of Stock of the Company (for purposes of this paragraph, the rules of Section 424(d) of the Code shall apply in
determining Stock ownership of any employee); or
(b) which permits such employee’s rights to purchase Stock under all employee stock purchase plans of the Company and all Participating Companies to accrue at
a rate that exceeds $25,000 in fair market value of the Stock (determined at the time such Option is granted) for each calendar year in which such Option is
outstanding.
3.4 Commencement of Participation. an eligible employee may become a participant (“Participant”) by completing the enrollment forms prescribed by the
Committee (including a purchase agreement and a payroll deduction authorization) and filing such forms with the designated office of the Company prior to the
Offering Commencement Date for the next scheduled Offering. Payroll deductions for a Participant shall commence on the next scheduled Offering
Commencement Date when such Participant’s authorization for a payroll deduction becomes effective and shall continue in effect for the term of this Plan, except
to the extent such payroll deduction is changed in accordance with this Section 3.4 or terminated in accordance with article 8. Subject to Section 5.4 , a Participant
may, at any time, increase or decrease the rate of, or cease, the Participant’s payroll deductions by filing the appropriate form with the designated office of the
Company and such change shall become effective as of the next applicable Offering Commencement Date.
ARTICLE IV
OFFERINGS
4.1 Annual Offerings. The Plan will be implemented by up to twenty annual offerings (“Offerings”) of the Company’s Stock beginning on the 1st day of October
in each of the years 2008 through 2027, with each Offering terminating on September 30 of the next year; provided, however, that each annual Offering may, in the
discretion of the Committee exercised prior to the commencement thereof, be divided into two six-month Offerings commencing respectively, on October 1 and
april 1, and terminating six months thereafter. as used in the Plan, “Offering Commencement Date” means the October 1 or april 1, as the case may be, on which
the particular Offering begins and “Offering Termination Date” means the March 31 or September 30, as the case may be, on
which the particular Offering terminates. any decision of the Committee to adjust the number of shares of Stock in an Offering must be made prior to the Offering
Commencement Date of that Offering.
ARTICLE V
PAYROLL DEDUCTIONS
5.1 Percentage of Participation. at the time an employee files authorization for payroll deductions and becomes a Participant in the Plan, the employee shall
elect to have deductions made from the employee’s pay on each payday during the time the employee is a Participant in an Offering. Such deductions shall be an
amount equal to the employee’s Participation amount divided by the number of payroll periods occurring during the Offering. an employee’s “Participation
amount” shall equal the rate of 1, 2, 3, 4, 5, 6, 7, 8, 9 or 10 percent (as elected by the employee) times such employee’s base Pay in effect at the Offering
Commencement Date of such Offering; provided, however, that prior to any Offering Commencement Date, the Committee shall have the discretion to limit
deductions to less than 10 percent (but no less than 5 percent) for any Offering.
5.2 Calculation of Base Pay. an employee’s base Pay as of an Offering Commencement Date and whether an employee is “part-time” shall be determined in the
discretion of the Committee based on the provisions of this Plan. in calculating an employee’s normal weekly rate of pay under this Section 5.2, retroactive
adjustments occurring during an Offering that are retroactive to the last day prior to the Offering Commencement Date of that particular Offering shall be taken into
account. in addition, if an employee’s base Pay includes commissions, the Committee may set such employee’s base Pay based upon commission averages and
standards as determined in the discretion of the Committee.
5.3 Participant’s Account. all payroll deductions made for a Participant pursuant to this article 5 shall be credited to such Participant’s account under the Plan. a
Participant may not make any separate cash payment into such account except when on leave of absence and then only as provided in Section 5.5.
5.4 Changes in Payroll Deductions. a Participant may discontinue participation in the Plan as provided in article 8, but no other change can be made during an
Offering and, specifically, a Participant may not alter the amount of such Participant’s payroll deductions for that Offering.
5.5 Leave of Absence. if a Participant goes on a leave of absence, such Participant shall have the right to elect: (a) to withdraw the balance in such Participant’s
account pursuant to Section 8.1 hereof, or (b) to discontinue contributions to the Plan but remain a Participant in the Plan, or remain a Participant in the Plan during
such leave of absence, authorizing deductions to be made from payments by the Company to the Participant during such leave of absence and undertaking to make
cash payments to the Plan at the end of each payroll period to the extent that amounts payable by the Participating Company to such Participant are insufficient to
meet such Participant’s authorized Plan deductions.
ARTICLE VI
GRANTING OF OPTION
6.1 Number of Option Shares. On each Offering Commencement Date, a Participant shall be deemed to have been granted an option (“Option”) to purchase a
maximum number of shares of Stock equal to the Participation amount with respect to such Participant, divided by the Option Price, determined as provided in
Section 6.2 hereof.
6.2 Option Price. The “Option Price” of Stock for each Offering shall be the lower of (a) 85% of the Closing Price of the Stock on the Offering Commencement
Date, or (b) 85% of the Closing Price of the Stock on the Offering Termination Date. The “Closing Price” of the Stock as to a particular day shall be the closing
price of the Stock as reported for such day in the Wall Street Journal or in such other source as the Committee deems reliable. if the Stock is not traded on the New
York Stock exchange or other principal exchange or market on which it is authorized or listed for trading on the Offering Commencement Date and/or Offering
Termination Date, as the case may be, the Closing Price for the Stock as to either of such dates on which such trading did not occur shall be the Closing Price on
the nearest prior business day on which trading did occur.
ARTICLE VII
EXERCISE OF OPTION
7.1 Automatic Exercise. Unless a Participant gives written notice to the Company as hereinafter provided, such Participant’s Option for the purchase of Stock
granted under Section 6.1 hereof will be deemed to have been exercised automatically on the Offering Termination Date applicable to such Offering for the
purchase of the number of full shares of Stock that the accumulated payroll deductions in such Participant’s account at that time will purchase at the applicable
Option Price (but not in excess of the number of shares for which Options have been granted to the employee pursuant to Section 6.1 hereof).
7.2 Fractional Shares. Fractional shares will not be issued under the Plan and any accumulated payroll deductions that would have been used to purchase
fractional shares will be, at the option of the Committee, either (a) returned (without interest) to the Participant promptly following the termination of an Offering,
or (b) added to the Participation amount for such Participant and held for the purchase of Stock in connection with the next Offering; provided, however, that such
amount (without interest) shall be refunded to any Participant who provides the Company with a written request for a refund prior to the use of such amount to
purchase Stock at the end of the next Offering.
7.3 Transferability of Option. During a Participant’s lifetime, Options held by such Participant shall be exercisable only by such Participant.
7.4 Delivery of Stock. as promptly as practicable after the Offering Termination Date of each Offering, the Company will deliver to each Participant, as
appropriate, the Stock purchased upon exercise of such Participant’s Option. all Stock delivered to each Participant will contain a restriction stating that such Stock
is restricted from being transferred for a period of one year from the date of issuance unless the Committee otherwise consents. The Committee may withhold its
consent to any such transfer in its absolute and sole discretion. any transfer in violation of the legend placed on each such stock certificate shall be void ab initio. in
no event, however, shall Stock be forfeited for violation of the transfer restriction.
ARTICLE VIII
WITHDRAWAL
8.1 In General. at any time prior to the last five days of an Offering, a Participant may withdraw payroll deductions credited to such Participant’s account under
the Plan by giving written notice to the designated office of the Company, which withdrawal notice shall be in form and substance as decided by the Committee.
all of the Participant’s payroll deductions credited to the Participant’s account will be paid to the Participant promptly after receipt of such Participant’s notice of
withdrawal, and no further payroll deductions will be made from the Participant’s pay during such Offering or during any subsequent Offering unless the
Participant re-enrolls as provided in Section 8.2 hereof. The Company may, at its option, treat any attempt by a Participant to borrow on the security of such
Participant’s accumulated payroll deductions as an election to withdraw such deductions.
8.2 Effect on Subsequent Participation. an employee’s withdrawal from any Offering will not have any effect upon such employee’s eligibility to participate in
any succeeding Offering or in any similar plan that may hereafter be adopted by the Company. in order to be eligible for a subsequent Offering; however, an
employee who has withdrawn from an Offering must satisfy the requirements of Section 3.4 hereof prior to the Offering Commencement Date of such subsequent
Offering.
8.3 Termination of Employment. Upon termination of a Participant’s employment for any reason, including retirement (but excluding death or permanent
disablement while in the employ of a Participating Company or continuation of a leave of absence for a period beyond 90 days), the payroll deductions credited to
such Participant’s account will be returned to the Participant, or, in the case of the Participant’s death subsequent to the termination of such Participant’s
employment, to the person or persons entitled thereto under Section 12.1 hereof.
8.4 Termination of Employment Due to Death. Upon termination of a Participant’s employment because of death or permanent disablement, the Participant or
Participant’s beneficiary (as defined in Section 12.1 hereof) shall have the right to elect, by written notice given to the designated office of the Company prior to the
earlier of the Offering Termination Date or the expiration of a period of 60 days commencing with the termination of the Participant’s employment, either:
(a) to withdraw all of the payroll deductions credited to the Participant’s account under the Plan; or
(b) to exercise the Participant’s Option on the next Offering Termination Date and purchase the number of full shares of Stock that the accumulated payroll
deductions in the Participant’s account at the date of the Participant’s cessation of employment will purchase at the applicable Option Price, and any excess in such
account will be returned to said beneficiary, without interest.
in the event that no such written notice of election shall be duly received by the designated office of the Company, the beneficiary shall automatically be deemed to
have elected, pursuant to paragraph (b), to exercise the Participant’s Option.
8.5 Leave of Absence. a Participant on leave of absence shall, subject to the election made by such Participant pursuant to Section 5.5 hereof, continue to be a
Participant in the Plan so long as such Participant is on continuous leave of absence. a Participant who has been on leave of absence for more than 90 days and
who therefore is not an employee for the purpose of the Plan shall not be entitled to participate in any Offering commencing after the 90th day of such leave of
absence. Notwithstanding any other provisions of the Plan, unless a Participant on leave of
absence returns to regular full time or part time employment with the Company at the earlier of: (a) the termination of such leave of absence, or (b) three months
after the 90th day of such leave of absence, such Participant’s participation in the Plan shall terminate on whichever of such dates first occurs.
9.1 Payment of Interest. No interest will be paid or allowed on any money paid into the Plan or credited to the account of any Participant, including any interest
paid on any and all money which is distributed to a Participant or such Participant’s beneficiary pursuant to the provisions of Sections 7.2, 8.1, 8.3, 8.4 and 10.1
hereof.
ARTICLE IX
INTEREST
ARTICLE X
STOCK
10.1 Maximum Shares. The maximum number of shares of Stock that shall be issued under the Plan, subject to adjustment upon changes in capitalization of the
Company as provided in Section 12.4 hereof, shall be 1,000,000 shares plus the number of shares reserved for issuance under the Company’s 1998 employee Stock
Purchase Plan (the “1998 Plan”) that are not purchased as of the expiration date of the 1998 Plan. if the total number of shares for which Options are exercised on
any Offering Termination Date in accordance with article 6 exceeds the maximum number of shares for the applicable Offering, the Company shall make a pro
rata allocation of the shares available for delivery and distribution in as nearly a uniform manner as shall be practicable and as the Committee shall determine to be
equitable, and the balance of payroll deductions credited to the account of each Participant under the Plan shall be returned to such Participant as promptly as
possible.
10.2 Participant’s Interest in Option Stock. a Participant will have no interest in Stock covered by such Participant’s Option until such Option has been
exercised.
10.3 Issuance of Shares. The shares issued upon the exercise of any such Option may be, as the Committee may from time to time determine: (i) unissued shares
of Stock, (ii) shares of Stock now held as treasury shares; or (iii) shares of Stock subsequently acquired by the Company, including, without limitation, shares of
Stock purchased in the open market by the Company.
10.4 Registration of Stock. Stock to be delivered to a Participant under the Plan will be registered in the name of the Participant, or, if the Participant so directs by
written notice to the designated office of the Company prior to the Offering Termination Date applicable thereto, in the names of the Participant and the
Participant’s spouse, in the form and manner permitted by applicable law.
10.5 Restrictions on Exercise. The board of Directors may, in its discretion, require as conditions to the exercise of any Option that the shares of Stock reserved
for issuance upon the exercise of the Option shall have been duly listed, upon official notice of issuance, upon the New York Stock exchange or other principal
exchange or market on which the Common Stock is authorized or listed for trading, and that either:
(a) a Registration Statement under the Securities act of 1933, as amended, with respect to said shares shall be effective; or
(b) the Participant shall have represented at the time of purchase, in form and substance satisfactory to the Company, that it is such Participant’s intention to
purchase the shares for investment and not for resale or distribution.
ARTICLE XI
ADMINISTRATION
11.1 Appointment of Committee. The board of Directors shall appoint a committee (“Committee”) to administer the Plan, which shall consist of no fewer than
two (2) members of the board of Directors. Members of the Committee who are employees shall be eligible to purchase Stock under the Plan.
11.2 Authority of Committee. Subject to the express provisions of the Plan, the Committee shall have plenary authority in its discretion to interpret and construe
any and all provisions of the Plan, to adopt rules and regulations for administering the Plan, and to make all other determinations deemed necessary or advisable for
administering the Plan. The Committee’s determination regarding the foregoing matters shall be conclusive. The Committee may delegate its authority as it deems
necessary or appropriate.
11.3 Rules Governing Administration of the Committee. The board of Directors may from time to time appoint members of the Committee in substitution for or
in addition to members previously appointed and may fill vacancies, however caused, in the Committee. The Committee may select one of its members as its
Chairman and shall hold its meetings at such times and places as it shall deem advisable and may hold telephonic meetings. a majority of its members shall
constitute a quorum. all determinations of the Committee shall be made by a majority of its members. The Committee may correct any defect or omission or
reconcile any inconsistency in the Plan, in the manner and to the extent it shall deem desirable. any decision or determination reduced to writing and signed by a
majority of the members of the Committee shall be as fully effective as if it had been made by a majority vote at a meeting duly called and held. The Committee
may appoint a secretary and shall make such rules and regulations for the conduct of its business as it shall deem advisable.
ARTICLE XII
MISCELLANEOUS
12.1 Designation of Beneficiary. a Participant may file a written designation of a beneficiary who is to receive any Stock and/or cash that such Participant would
be entitled to under the Plan. Such designation of beneficiary may be changed by the Participant at any time by written notice to the designated office of the
Company. Upon the death of a Participant and upon receipt by the Company of proof of identity and existence at the Participant’s death of a beneficiary validly
designated by the Participant under the Plan, the Company shall deliver such Stock and/or cash to such beneficiary. in the event of the death of a Participant and in
the absence of a beneficiary validly designated under the Plan who is living at the time of such Participant’s death, the Company shall deliver such Stock and/or
cash to the executor or administrator of the estate of the Participant, or if no such executor or administrator has been appointed (to the knowledge of the Company),
the Company, in its discretion, may deliver such Stock and/or cash to the spouse or to any one or more dependents of the Participant as the Company may
designate. No beneficiary shall, prior to the death of the Participant by whom he has been designated, acquire any interest in the Stock or cash credited to the
Participant under the Plan.
12.2 Transferability. Neither payroll deductions credited to a Participant’s account nor any rights with regard to an Option granted under the Plan may be
assigned, transferred, pledged, or otherwise disposed of in any way by the Participant, other than by will or the laws of descent and distribution. any such
attempted assignment, transfer, pledge or other disposition shall be without effect, except that the Company may treat such act as an election to withdraw funds in
accordance with article 8.
12.3 Use of Funds. all payroll deductions received or held by the Company under this Plan may be used by the Company for any corporate purpose and the
Company shall not be obligated to segregate such payroll deductions.
12.4 Adjustment Upon Changes in Capitalization.
(a) if, while any Options are outstanding, the outstanding shares of Stock of the Company have increased, decreased, changed into, or been exchanged for a
different number or type of shares or securities of the Company through reorganization, merger, recapitalization, reclassification, stock split (whether or not
effected in the form of a stock dividend), reverse stock split or similar transaction, equitable and proportionate adjustments shall be made by the Committee in the
number and/or type of shares of Stock that are subject to purchase under outstanding Options and to the Option Price applicable to such outstanding Options. in
addition, in any such event, the number and/or type of shares of Stock which may be offered in the Offerings described in article 4 hereof shall also be
proportionately adjusted.
(b) Upon the dissolution or liquidation of the Company, or upon a reorganization, merger or consolidation of the Company with one or more corporations as a
result of which the Company is not the surviving corporation, or upon a sale of substantially all of the assets or stock of the Company to another corporation, the
holder of each Option then outstanding under the Plan will thereafter be entitled to receive at the next Offering Termination Date upon the exercise of such Option
for each share as to which such Option shall be exercised, as nearly as reasonably may be determined, the cash, securities and/or property which a holder of one
share of Stock was entitled to receive upon and at the time of such transaction. The board of Directors shall take such steps in connection with such transactions as
the board shall deem necessary to assure that the provisions of this Section 12.4 shall thereafter be applicable, as nearly as reasonably may be determined, in
relation to the said cash, securities and/or property as to which such holder of such Option might thereafter be entitled to receive.
12.5 Amendment and Termination. The board of Directors shall have complete power and authority to terminate or amend the Plan; provided; however, that the
board of Directors shall not, without the approval of the stockholders of the Company (a) increase the maximum number of shares that may be issued under the
Plan (except pursuant to Section 12.4 hereof); or (b) amend the requirements as to the class of employees eligible to purchase Stock under the Plan. No
termination, modification, or amendment of the Plan may, without the consent of a Participant then holding an Option under the Plan to purchase stock, adversely
affect the rights of such Participant under such Option.
12.6 No Employment Rights. The Plan does not, directly or indirectly, create in any employee or class of employees any right with respect to continuation of
employment by any Participating Company, and it shall not be deemed to interfere in any way with any Participating Company’s right to terminate, or otherwise
modify, an employee’s employment at any time.
12.7 Effect of Plan. The provisions of the Plan shall, in accordance with its terms, be binding upon, and inure to the benefit of, all successors of each Participant,
including, without limitation, such Participant’s estate and the executors, administrators or trustees thereof, heirs and legatees, and any receiver, trustee in
bankruptcy or representative of creditors of such Participant.
12.8 Governing Law. The law of the State of Delaware will govern all matters relating to this Plan except to the extent it is superseded by the laws of the United
States.
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)
Gulfport Marina, LLC (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
Delaware
Exhibit 23.1
Consent of Independent Registered Public Accounting Firm
The board of Directors and Shareholders
MarineMax, inc.:
We consent to the incorporation by reference in the registration statements (No. 333-221933) on Form S-3 and (No. 333‑141657, 333‑83332, 333‑63307,
333‑156358, 333‑177019, 333‑218563 and 333‑218566) on Form S-8 of MarineMax, inc. and subsidiaries of our reports dated November 29, 2018, with respect to
the consolidated balance sheets of MarineMax, inc. and subsidiaries as of September 30, 2018 and 2017, and the related consolidated statements of operations,
shareholders’ equity, and cash flows for each of the years in the three-year period ended September 30, 2018, and the related notes (collectively, the “consolidated
financial statements”), and the effectiveness of internal control over financial reporting as of September 30, 2018, which reports appear in the September 30, 2018
annual report on Form 10‑K of MarineMax, inc.
/s/ KPMG LLP
Tampa, Florida
November 29, 2018
Certified Public accountants
Exhibit 31.1
i, W. brett McGill, 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: November 29, 2018
/s/ W. bReTT M C G iLL
W. brett McGill
Chief Executive Officer and President
(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 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: November 29, 2018
/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, 2018, as filed with the
Securities and exchange Commission on the date hereof (the “Report”), i, W. brett McGill, 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: November 29, 2018
/s/ W. bReTT M C GiLL
W. brett McGill
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, 2018, 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: November 29, 2018
/s/ M iCHaeL H. M C L aMb
Michael H. McLamb
Chief Financial Officer