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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 2023.

Commission File Number. 1-14173

 

MARINEMAX, INC.

(Exact Name of Registrant as Specified in Its Charter)

 

 

Florida

59-3496957

(State or Other Jurisdiction of Incorporation or Organization)

(I.R.S. Employer Identification Number)

 

 

2600 McCormick Drive, Suite 200

 

Clearwater, Florida

33759

(Address of Principal Executive Offices)

(ZIP Code)

727-531-1700

(Registrant’s Telephone Number, Including Area Code)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $.001 per share

HZO

New York Stock Exchange

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 whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

 

Accelerated filer

 

Non-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 Exchange Act).

Yes No

The number of outstanding shares of the registrant’s Common Stock on January 22, 2024 was 22,299,588.

 

 

 


 

MARINEMAX, INC. AND SUBSIDIARIES

Table of Contents

 

Item No.

Page

 

PART I. FINANCIAL INFORMATION

 

1.

Financial Statements (Unaudited):

 

 

Condensed Consolidated Statements of Operations for the Three Months Ended December 31, 2022 and 2023

3

 

Condensed Consolidated Statements of Comprehensive Income for the Three Months Ended December 31, 2022 and 2023

 

4

 

Condensed Consolidated Balance Sheets as of September 30, 2023 and December 31, 2023

5

 

Condensed Consolidated Statements of Shareholders’ Equity for the Three Months Ended December 31, 2022 and 2023

6

 

Condensed Consolidated Statements of Cash Flows for the Three Months Ended December 31, 2022 and 2023

7

 

Notes to Condensed Consolidated Financial Statements

8

 

 

2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

21

 

 

3.

Quantitative and Qualitative Disclosures About Market Risk

25

 

 

4.

Controls and Procedures

26

 

 

PART II. OTHER INFORMATION

26

1.

Legal Proceedings

26

1A.

Risk Factors

26

2.

Unregistered Sales of Equity Securities and Use of Proceeds

27

3.

Defaults Upon Senior Securities

27

4.

Mine Safety Disclosures

27

5.

Other Information

27

6.

Exhibits

27

SIGNATURES

 

28

 

 

EX – 31.1

 

EX – 31.2

 

EX – 32.1

 

EX – 32.2

 

EX – 101 INSTANCE DOCUMENT

 

EX – 101 SCHEMA DOCUMENT

 

EX – 101 CALCULATION LINKBASE DOCUMENT

 

EX – 101 DEFINITION LINKBASE DOCUMENT

 

EX – 101 LABEL LINKBASE DOCUMENT

 

EX – 101 PRESENTATION LINKBASE DOCUMENT

 

 

 

2


 

PART I. FINANCIAL INFORMATION

ITEM 1. Financial Statements

MARINEMAX, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations

(Amounts in thousands, except share and per share data)

(Unaudited)

 

 

Three Months Ended

 

 

 

 

December 31,

 

 

 

 

2022

 

 

2023

 

 

Revenue

 

$

507,927

 

 

$

527,274

 

 

Cost of sales

 

 

321,030

 

 

 

351,793

 

 

Gross profit

 

 

186,897

 

 

 

175,481

 

 

 

 

 

 

 

 

 

 

Selling, general, and administrative expenses

 

 

150,397

 

 

 

156,482

 

 

Income from operations

 

 

36,500

 

 

 

18,999

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

9,484

 

 

 

18,365

 

 

Income before income tax provision (benefit)

 

 

27,016

 

 

 

634

 

 

 

 

 

 

 

 

 

 

Income tax provision (benefit)

 

 

7,029

 

 

 

(211

)

 

Net income

 

 

19,987

 

 

 

845

 

 

 

 

 

 

 

 

 

 

Less: Net income (loss) attributable to non-controlling interests

 

 

297

 

 

 

(85

)

 

  Net income attributable to MarineMax, Inc.

 

$

19,690

 

 

$

930

 

 

 

 

 

 

 

 

 

 

Basic net income per common share

 

$

0.91

 

 

$

0.04

 

 

 

 

 

 

 

 

 

 

Diluted net income per common share

 

$

0.89

 

 

$

0.04

 

 

 

 

 

 

 

 

 

 

Weighted average number of common shares used in computing
   net income per common share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

21,756,165

 

 

 

22,196,141

 

 

Diluted

 

 

22,223,173

 

 

 

22,809,017

 

 

 

See accompanying Notes to Condensed Consolidated Financial Statements.

 

 

3


 

MARINEMAX, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive Income

(Amounts in thousands)

(Unaudited)

 

 

Three Months Ended

 

 

 

December 31,

 

 

 

2022

 

 

2023

 

 

Net income

$

19,987

 

 

$

845

 

 

 

 

 

 

 

 

Other comprehensive income (loss), net of tax:

 

 

 

 

 

 

Foreign currency translation adjustments

 

5,086

 

 

 

3,226

 

 

Interest rate swap contract

 

(69

)

 

 

(286

)

 

Total other comprehensive income, net of tax

 

5,017

 

 

 

2,940

 

 

 

 

 

 

 

 

Comprehensive income

 

25,004

 

 

 

3,785

 

 

Less: comprehensive income attributable to non-controlling interests

 

498

 

 

 

267

 

 

Comprehensive income attributable to MarineMax, Inc.

$

24,506

 

 

$

3,518

 

 

 

See accompanying Notes to Condensed Consolidated Financial Statements.

 

4


 

MARINEMAX, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(Amounts in thousands, except share data)

(Unaudited)

 

 

September 30,

 

 

December 31,

 

 

 

2023

 

 

2023

 

ASSETS

 

 

 

 

 

 

CURRENT ASSETS:

 

 

 

 

 

 

Cash and cash equivalents

 

$

201,456

 

 

$

210,323

 

Accounts receivable, net

 

 

85,780

 

 

 

94,601

 

Inventories

 

 

812,830

 

 

 

876,233

 

Prepaid expenses and other current assets

 

 

23,110

 

 

 

24,864

 

Total current assets

 

 

1,123,176

 

 

 

1,206,021

 

Property and equipment, net of accumulated depreciation of $144,259 and $148,110

 

 

527,552

 

 

 

532,492

 

Operating lease right-of-use assets, net

 

 

138,785

 

 

 

140,785

 

Goodwill

 

 

559,820

 

 

 

575,850

 

Other intangible assets, net

 

 

39,713

 

 

 

38,958

 

Other long-term assets

 

 

32,259

 

 

 

32,401

 

Total assets

 

$

2,421,305

 

 

$

2,526,507

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

CURRENT LIABILITIES:

 

 

 

 

 

 

Accounts payable

 

$

71,706

 

 

$

43,957

 

Contract liabilities (customer deposits)

 

 

81,700

 

 

 

74,636

 

Accrued expenses

 

 

112,746

 

 

 

112,417

 

Short-term borrowings (Floor Plan)

 

 

537,060

 

 

 

664,858

 

Current maturities on long-term debt

 

 

33,767

 

 

 

33,766

 

Current operating lease liabilities

 

 

10,070

 

 

 

10,372

 

Total current liabilities

 

 

847,049

 

 

 

940,006

 

Long-term debt, net of current maturities

 

 

389,231

 

 

 

380,972

 

Noncurrent operating lease liabilities

 

 

123,789

 

 

 

125,550

 

Deferred tax liabilities, net

 

 

56,927

 

 

 

57,939

 

Other long-term liabilities

 

 

85,892

 

 

 

87,469

 

Total liabilities

 

 

1,502,888

 

 

 

1,591,936

 

COMMITMENTS AND CONTINGENCIES

 

 

 

 

 

 

SHAREHOLDERS’ EQUITY:

 

 

 

 

 

 

Preferred stock, $.001 par value, 1,000,000 shares authorized, none issued or outstanding
   as of September 30, 2023 and December 31, 2023

 

 

 

 

 

 

Common stock, $.001 par value, 40,000,000 shares authorized, 29,374,724 and
   
29,565,039 shares issued and 22,107,703 and 22,298,018 shares outstanding as of
   September 30, 2023 and December 31, 2023, respectively

 

 

29

 

 

 

29

 

Additional paid-in capital

 

 

323,218

 

 

 

328,955

 

Accumulated other comprehensive income

 

 

1,303

 

 

 

3,891

 

Retained earnings

 

 

739,949

 

 

 

740,879

 

Treasury stock, at cost, 7,267,021 shares held as of September 30, 2023
   and December 31, 2023

 

 

(148,656

)

 

 

(148,656

)

Total shareholders’ equity attributable to MarineMax, Inc.

 

 

915,843

 

 

 

925,098

 

Non-controlling interests

 

 

2,574

 

 

 

9,473

 

Total shareholders’ equity

 

 

918,417

 

 

 

934,571

 

   Total liabilities and shareholders’ equity

 

$

2,421,305

 

 

$

2,526,507

 

 

See accompanying Notes to Condensed Consolidated Financial Statements.

 

 

5


 

MARINEMAX, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Shareholders’ Equity

(Amounts in thousands, except share data)

(Unaudited)

 

 

 

 

 

 

 

 

Additional

 

 

Accumulated
Other

 

 

 

 

 

 

 

 

 

 

 

Total

 

 

 

Common Stock

 

 

Paid-in

 

 

Comprehensive

 

 

Retained

 

 

Treasury

 

 

Non-controlling

 

 

Shareholders’

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Income (loss)

 

 

Earnings

 

 

Stock

 

 

Interests

 

 

Equity

 

BALANCE, September 30, 2023

 

 

29,374,724

 

 

$

29

 

 

$

323,218

 

 

$

1,303

 

 

$

739,949

 

 

$

(148,656

)

 

$

2,574

 

 

$

918,417

 

Net income (loss)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

930

 

 

 

 

 

 

(85

)

 

 

845

 

Non-controlling interests in subsidiaries from acquisitions

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

6,655

 

 

 

6,655

 

Distributions to non-controlling interests

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(23

)

 

 

(23

)

Shares issued pursuant to employee stock purchase plan

 

 

55,375

 

 

 

 

 

 

1,353

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,353

 

Shares issued upon vesting of equity awards, net of minimum tax withholding

 

 

128,065

 

 

 

 

 

 

(1,116

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,116

)

Shares issued upon exercise of stock options

 

 

5,000

 

 

 

 

 

 

81

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

81

 

Stock-based compensation

 

 

1,875

 

 

 

 

 

 

5,419

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5,419

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

2,588

 

 

 

 

 

 

 

 

 

352

 

 

 

2,940

 

BALANCE, December 31, 2023

 

 

29,565,039

 

 

$

29

 

 

$

328,955

 

 

$

3,891

 

 

$

740,879

 

 

$

(148,656

)

 

$

9,473

 

 

$

934,571

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

Accumulated
Other

 

 

 

 

 

 

 

 

 

 

 

Total

 

 

 

Common Stock

 

 

Paid-in

 

 

Comprehensive

 

 

Retained

 

 

Treasury

 

 

Non-controlling

 

 

Shareholders’

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Income (loss)

 

 

Earnings

 

 

Stock

 

 

Interests

 

 

Equity

 

BALANCE, September 30, 2022

 

 

28,939,846

 

 

$

29

 

 

$

303,432

 

 

$

(2,806

)

 

$

630,667

 

 

$

(148,656

)

 

$

-

 

 

$

782,666

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

19,690

 

 

 

 

 

 

297

 

 

 

19,987

 

Non-controlling interests in subsidiaries from acquisitions

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,208

 

 

 

2,208

 

Shares issued pursuant to employee stock purchase plan

 

 

49,572

 

 

 

 

 

 

1,255

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,255

 

Shares issued upon vesting of equity awards, net of minimum tax withholding

 

 

126,552

 

 

 

 

 

 

(1,059

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,059

)

Shares issued upon exercise of stock options

 

 

1,000

 

 

 

 

 

 

7

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

7

 

Stock-based compensation

 

 

1,507

 

 

 

 

 

 

4,845

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4,845

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

4,816

 

 

 

 

 

 

 

 

 

201

 

 

 

5,017

 

BALANCE, December 31, 2022

 

 

29,118,477

 

 

$

29

 

 

$

308,480

 

 

$

2,010

 

 

$

650,357

 

 

$

(148,656

)

 

$

2,706

 

 

$

814,926

 

 

See accompanying Notes to Condensed Consolidated Financial Statements.

 

6


 

MARINEMAX, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(Amounts in thousands)

(Unaudited)

 

 

Three Months Ended December 31,

 

 

 

2022

 

 

2023

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

Net income

 

$

19,987

 

 

$

845

 

Adjustments to reconcile net income to net cash used in operating
   activities:

 

 

 

 

 

 

Depreciation and amortization

 

 

9,118

 

 

 

10,932

 

Deferred income tax provision, net of effects of acquisitions

 

 

1,784

 

 

 

1,012

 

(Gain) loss on sale of property and equipment and assets held for sale

 

 

113

 

 

 

(7

)

Stock-based compensation expense

 

 

4,845

 

 

 

5,419

 

(Increase) decrease in, net of effects of acquisitions —

 

 

 

 

 

 

Accounts receivable, net

 

 

(11,939

)

 

 

(8,550

)

Inventories

 

 

(149,234

)

 

 

(63,403

)

Prepaid expenses and other assets

 

 

1,042

 

 

 

(1,591

)

(Decrease) increase in, net of effects of acquisitions —

 

 

 

 

 

 

Accounts payable

 

 

(2,789

)

 

 

(28,049

)

Contract liabilities (customer deposits)

 

 

(26,832

)

 

 

(7,064

)

Accrued expenses and other liabilities

 

 

(2,389

)

 

 

1,361

 

Net cash used in operating activities

 

 

(156,294

)

 

 

(89,095

)

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

Purchases of property and equipment

 

 

(10,437

)

 

 

(13,329

)

Cash used in acquisition of businesses, net of cash acquired

 

 

(488,248

)

 

 

(4,362

)

Proceeds from insurance settlements

 

 

177

 

 

 

382

 

Proceeds from sale of property and equipment and assets held for sale

 

 

25

 

 

 

9

 

Net cash used in investing activities

 

 

(498,483

)

 

 

(17,300

)

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

Net borrowings on short-term borrowings

 

 

208,860

 

 

 

127,798

 

Proceeds from long-term debt

 

 

400,000

 

 

 

 

Payments of long-term debt

 

 

(641

)

 

 

(8,442

)

Contingent acquisition consideration payments

 

 

(4,000

)

 

 

(2,250

)

Net proceeds from issuance of common stock under incentive compensation and
   employee purchase plans

 

 

1,262

 

 

 

1,434

 

Payments on tax withholdings for equity awards

 

 

(2,962

)

 

 

(4,198

)

Net cash provided by financing activities

 

 

602,519

 

 

 

114,342

 

Effect of exchange rate changes on cash

 

$

1,757

 

 

 

920

 

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS

 

 

(50,501

)

 

 

8,867

 

CASH AND CASH EQUIVALENTS, beginning of period

 

$

228,274

 

 

 

201,456

 

CASH AND CASH EQUIVALENTS, end of period

 

$

177,773

 

 

$

210,323

 

Supplemental disclosures of cash flow information:

 

 

 

 

 

 

Cash paid for:

 

 

 

 

 

 

Interest

 

$

1,832

 

 

$

18,493

 

Income taxes

 

$

2,187

 

 

$

843

 

Non-cash items:

 

 

 

 

 

 

Contingent consideration liabilities from acquisitions

 

$

68,680

 

 

$

613

 

 

See accompanying Notes to Condensed Consolidated Financial Statements.

 

7


 

MARINEMAX, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

1.
COMPANY BACKGROUND:

We believe we are the world’s largest recreational boat and yacht retailer, selling new and used recreational boats, yachts, and related marine products and services. As of December 31, 2023, we have over 130 locations worldwide, including 81 retail dealership locations, some of which include marinas. Collectively, with the IGY acquisition, as of September 30, 2023, we own or operate 66 marina and storage locations worldwide. Through Fraser Yachts and Northrop & Johnson, we believe we are the largest superyacht services provider, operating locations across the globe. Cruisers Yachts manufactures boats and yachts with sales through our select retail dealership locations and through independent dealers. Intrepid Powerboats manufactures powerboats and sells through a direct-to-consumer model. MarineMax provides finance and insurance services through wholly owned subsidiaries and operates MarineMax Vacations in Tortola, British Virgin Islands. The Company, through a wholly owned subsidiary New Wave Innovations, also owns Boatyard, an industry-leading customer experience digital product company, and Boatzon, a boat and marine digital retail platform.

We are the largest retailer of Sea Ray and Boston Whaler recreational boats which are manufactured by Brunswick Corporation (“Brunswick”). Sales of new Brunswick boats accounted for approximately 24% of our revenue in fiscal 2023. Sales of new Sea Ray and Boston Whaler boats, both divisions of Brunswick, accounted for approximately 11% and 11%, respectively, of our revenue in fiscal 2023. Brunswick is a world leading manufacturer of marine products and marine engines.

We have dealership agreements with Sea Ray, Boston Whaler, Harris, and Mercury Marine, all of which are subsidiaries or divisions of Brunswick. We also have dealer agreements with Italy-based Azimut-Benetti Group’s product line for Azimut and Benetti yachts and mega yachts. These agreements allow us to purchase, stock, sell, and service these manufacturers’ boats and products. These agreements also allow us to use these manufacturers’ names, trade symbols, and intellectual properties in our operations. The agreements for Sea Ray and Boston Whaler products, respectively, appoint us as the exclusive dealer of Sea Ray and Boston Whaler boats, respectively, in our geographic markets. In addition, we are the exclusive dealer for Azimut Yachts for the entire United States. Sales of new Azimut yachts accounted for approximately 11% of our revenue in fiscal 2023. 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.

In October 2022, we completed the acquisition of IGY Marinas. IGY Marinas maintains a network of luxury marinas situated in yachting and sport fishing destinations around the world. IGY Marinas has created standards for service and quality in nautical tourism. It offers a global network of marinas in the Americas, the Caribbean, and Europe, delivering year-round accommodations. IGY Marinas caters to a wide variety of luxury yachts, while also being exclusive home ports for some of the world’s largest megayachts. In December 2022, we acquired Midcoast Construction Enterprises, LLC (Midcoast Marine Group), a leading full-service marine construction company based on Central Florida’s Gulf Coast. In January 2023, we acquired Boatzon, a boat and marine digital retail platform, through our technology entity, New Wave Innovations. In June 2023, we acquired C&C Boat Works, a full-service boat dealer in Crosslake, Minnesota. In October 2023, we acquired a controlling interest of AGY, a luxury charter management agency based in Athens, Greece.

As is typical in the industry, we deal with most of our manufacturers, other than Sea Ray, Boston Whaler, and Azimut Yachts, under renewable annual dealer agreements, each of which gives us the right to sell various makes and models of boats within a given geographic region. Any change or termination of these agreements, or the agreements discussed above, for any reason, or changes in competitive, regulatory or marketing practices, including rebate or incentive programs, could adversely affect our results of operations. Although there are a limited number of manufacturers of the type of boats and products that we sell, we believe that adequate alternative sources would be available to replace any manufacturer other than Sea Ray, Boston Whaler, and Azimut as a product source. These alternative sources may not be available at the time of any interruption, and alternative products may not be available at comparable terms, which could adversely affect operating results.

General economic conditions and consumer spending patterns can negatively impact our operating results. Unfavorable local, regional, national, or global economic developments or uncertainties regarding future economic prospects could reduce consumer spending in the markets we serve and adversely affect our business. Economic conditions in areas in which we operate dealerships, particularly Florida in which we generated approximately 50%, 51% and 53% of our dealership revenue during fiscal 2021, 2022, and 2023, respectively, can have a major impact on our operations. Local influences, such as corporate downsizing, military base closings, inclement weather such as Hurricanes Harvey and Irma in 2017 and Hurricane Ian in 2022, environmental conditions, and specific events, such as the BP oil spill in the Gulf of Mexico in 2010, also could adversely affect, and in certain instances have adversely affected, our operations in certain markets.

In an economic downturn, consumer discretionary spending levels generally decline, at times resulting in disproportionately large reductions in the sale of luxury goods. Consumer spending on luxury goods also may decline as a result of lower consumer confidence levels, even if prevailing economic conditions are favorable. As a result, an economic downturn would likely impact us more than certain of our competitors due to our strategic focus on a higher end of our market. Although we have expanded our operations during periods

 

8


 

of stagnant or modestly declining industry trends, the cyclical nature of the recreational boating industry or the lack of industry growth may adversely affect our business, financial condition, and results of operations. Any period of adverse economic conditions or low consumer confidence is likely to have a negative effect on our business.

Historically, in periods of lower consumer spending and depressed economic conditions, we have, among other things, substantially reduced our acquisition program, delayed new store openings, reduced our inventory purchases, engaged in inventory reduction efforts, closed a number of our retail locations, reduced our headcount, and amended and replaced our credit facility. Acquisitions remain an important strategy for us, and, subject to a number of conditions, including macro-economic conditions and finding attractive acquisition targets, we plan to continue to explore opportunities through this strategy.

 

2.
BASIS OF PRESENTATION:

These Unaudited Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information, the instructions to Quarterly Report on Form 10-Q, and Rule 10-01 of Regulation S-X and should be read in conjunction with our Annual Report on Form 10-K for the fiscal year ended September 30, 2023. Accordingly, these Unaudited Condensed Consolidated Financial Statements do not include all of the information and note disclosures required by accounting principles generally accepted in the United States for complete financial statements. All adjustments, consisting of only normal recurring adjustments considered necessary for fair presentation, have been reflected in these Unaudited Condensed Consolidated Financial Statements. The operating results for the three months ended December 31, 2023, are not necessarily indicative of the results that may be expected in future periods.

The preparation of Unaudited Condensed Consolidated Financial Statements in conformity with accounting principles generally accepted in the United States requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the Unaudited Condensed Consolidated Financial Statements and the reported amounts of revenue and expenses during the reporting periods. Significant estimates made by us in the accompanying Unaudited Condensed Consolidated Financial Statements include valuation allowances, valuation of goodwill and intangible assets, valuation of long-lived assets and valuation of contingent consideration liabilities. Actual results could differ from those estimates.

All references to the “Company,” “we,” “us,” and “our” mean, as a combined company, MarineMax, Inc. and its subsidiaries.

In order to provide comparability between periods presented, certain amounts have been reclassified from the previously reported consolidated financial statements to conform to the consolidated financial statement presentation of the current period. Specifically, goodwill was moved into a separate caption on the balance sheets. This reclassification had no impact on net income or retained earnings in either period presented. The Unaudited Condensed Consolidated Financial Statements include our accounts and the accounts of our subsidiaries. All significant intercompany transactions and accounts have been eliminated.

 

 

3.
NEW ACCOUNTING PRONOUNCEMENTS:

In September 2022, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2022-04 — Liabilities — Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations which is intended to enhance the transparency surrounding the use of supplier finance programs. The guidance requires companies that use supplier finance programs to make annual disclosures about the program’s key terms, the balance sheet presentation of related amounts, the confirmed amount outstanding at the end of the period and associated roll forward information. Only the amount outstanding at the end of the period must be disclosed in interim periods. The guidance does not affect the recognition, measurement or financial statement presentation of supplier finance program obligations. The guidance becomes effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, except for the roll forward information, which is effective for fiscal years beginning after December 15, 2023. We adopted this ASU during the first quarter of fiscal 2024 and the adoption did not have an impact on our consolidated financial statement disclosures.

The Company currently has no other material accounting pronouncements recently adopted or yet to be adopted as of December 31, 2023.

 

4.
FAIR VALUE MEASUREMENTS:

The Company uses valuation approaches that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible. The Company determines fair value based on assumptions that market participants would use in pricing an asset or liability in the principal or most advantageous market. When considering market participant assumptions in fair value measurements, the following fair value hierarchy distinguishes between observable and unobservable inputs, which are categorized in one of the following levels:

 

9


 

Level 1 - Unadjusted quoted prices in active markets for identical assets or liabilities accessible to the reporting entity at the measurement date.

Level 2 - Other than quoted prices included in Level 1 inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability.

Level 3 - Unobservable inputs for the asset or liability used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at measurement date.

The following tables summarize the Company’s financial assets and liabilities measured at fair value in the accompanying Unaudited Condensed Consolidated Balance Sheets:

 

 

December 31, 2023

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

 

 

(Amounts in thousands)

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate swap contract

 

$

 

 

$

1,030

 

 

$

 

 

$

1,030

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Contingent consideration liabilities

 

$

 

 

$

 

 

$

84,641

 

 

$

84,641

 

 

 

 

September 30, 2023

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

 

 

(Amounts in thousands)

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate swap contract

 

$

 

 

$

1,409

 

 

$

 

 

$

1,409

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Contingent consideration liabilities

 

$

 

 

$

 

 

$

86,059

 

 

$

86,059

 

There were no transfers between the valuation hierarchy Levels 1, 2, and 3 for the three months ended December 31, 2023 and for the fiscal year ended September 30, 2023.

The fair value of the Company's interest rate swap contract is calculated as the present value of expected future cash flows, determined on the basis of forward interest rates and present value factors. The inputs to the fair value measurements reflect Level 2 inputs. The interest rate swap contract balance is included in other long-term assets in the accompanying Unaudited Condensed Consolidated Balance Sheets. The interest rate swap contract is designated as a cash flow hedge with changes in fair value reported in other comprehensive income in the accompanying Unaudited Condensed Consolidated Statements of Comprehensive Income. For the three months ended December 31, 2022 and 2023, no significant amounts were reclassified out of accumulated other comprehensive income.

The fair value of the Company's contingent consideration liabilities is based on the present value of the expected future payments to be made to the sellers of the acquired entities in accordance with the provisions outlined in the respective purchase agreements, which is a Level 3 fair value measurement. In determining fair value, we estimated the acquired entity’s future performance using financial projections developed by management for the acquired entity and market participant assumptions that were derived for revenue growth and/or profitability. We estimated future payments using the earnout formula and performance targets specified in each purchase agreement and the financial projections just described. The risk associated with the financial projections was evaluated using a Monte Carlo simulation analysis, pursuant to which the projections were discounted to present value using a discount rate that takes into consideration market-based rates of return, and then simulated to reflect the ability of the acquired entity to achieve the earnout targets. Such calculated earnout payments were further discounted at our estimated cost of debt, to account for counterparty risk. We note that changes in financial projections, market participant assumptions for revenue growth and/or profitability, or market risk factors, would result in a change in the fair value of recorded earnout obligations.

The following table summarizes ranges for significant quantitative unobservable inputs we utilized in our fair value measurements with respect to contingent consideration liabilities:

Unobservable Input:

 

December 31, 2023

Earnout projected growth (including net operating income)

 

23% - 25%

Discount rate

 

11.0%

The contingent consideration liabilities balance is included in accrued expenses and other long-term liabilities in the accompanying Unaudited Condensed Consolidated Balance Sheets. Contingent consideration liabilities, recorded in other long-term liabilities, totaled approximately $80.7 million and $82.2 million as of September 30, 2023 and December 31, 2023, respectively. Changes in fair value and net present value of the contingent consideration liabilities are included in selling, general, and administrative expenses in the accompanying Unaudited Condensed Consolidated Statements of Operations.

 

10


 

The following table sets forth the changes in fair value of our contingent consideration liabilities, which reflect Level 3 inputs, for the three months ended December 31, 2022 and 2023:

 

 

Contingent Consideration Liabilities

 

 

 

2022

 

 

2023

 

 

 

(Amounts in thousands)

 

Beginning balance - September 30,

 

$

15,207

 

 

$

86,059

 

Additions from business acquisitions

 

 

68,680

 

 

 

613

 

Settlement of contingent consideration liabilities

 

 

(4,000

)

 

 

(2,250

)

Change in fair value and net present value of contingency

 

 

1,047

 

 

 

219

 

Ending balance - December 31,

 

$

80,934

 

 

$

84,641

 

We determined the carrying value of cash and cash equivalents, accounts receivable, accounts payable, accrued expenses, short-term borrowings, and the revolving mortgage facility approximate their fair values because of the nature of their terms and current market rates of these instruments. The fair value of our mortgage facilities and term loan, which are not carried at fair value in the accompanying Unaudited Condensed Consolidated Balance Sheets, was determined using Level 2 inputs based on the discounted cash flow method. We estimate the fair value of our mortgage facilities using a present value technique based on current market interest rates for similar types of financial instruments that reflect Level 2 inputs. The following table summarizes the carrying value and fair value of our mortgage facilities and term loan as of September 30, 2023 and December 31, 2023:

 

 

September 30, 2023

 

 

December 31, 2023

 

 

 

Fair Value

 

 

Carrying Value

 

 

Fair Value

 

 

Carrying Value

 

 

 

(Amounts in thousands)

 

Mortgage facility payable to Flagship Bank

 

$

6,027

 

 

$

5,907

 

 

$

6,268

 

 

$

5,783

 

Mortgage facility payable to Seacoast National Bank

 

 

17,223

 

 

 

16,735

 

 

 

18,013

 

 

 

16,396

 

Mortgage facility payable to Hancock Whitney Bank

 

 

24,171

 

 

 

23,279

 

 

 

24,949

 

 

 

22,801

 

Term loan payable to M&T Bank

 

 

379,650

 

 

 

377,500

 

 

 

379,644

 

 

 

370,000

 

 

5.
REVENUE RECOGNITION:

The majority of our revenue is from contracts with customers for the sale of boats, motors, and trailers. We recognize revenue from boat, motor, and trailer sales upon transfer of control of the boat, motor, or trailer to the customer, which is generally upon acceptance of the boat, motor, and trailer by the customer and the satisfaction of our performance obligations. The transaction price is determined with the customer at the time of sale. Customers may trade in a used boat to apply toward the purchase of a new or used boat. The trade-in is a type of noncash consideration measured at fair value, based on external and internal observable and unobservable market data and applied as payment to the contract price for the purchased boat. At the time of acceptance, the customer is able to direct the use of, and obtain substantially all of, the benefits of the boat, motor, or trailer. We recognize commissions earned from a brokerage sale when the related brokerage transaction closes upon transfer of control of the boat, motor, or trailer to the customer, which is generally upon acceptance by the customer.

We do not directly finance our customers’ boat, motor, or trailer purchases. In many cases, we assist with third-party financing for boat, motor, and trailer sales. We recognize commissions earned by us for placing notes with financial institutions in connection with customer boat financing when we recognize the related boat sales. Pursuant to negotiated agreements with financial institutions, we are charged back for a portion of these fees should the customer terminate or default on the related finance contract before it is outstanding for a stipulated minimum period of time. We base the chargeback allowance, which was not material to the Unaudited Condensed Consolidated Financial Statements taken as a whole as of December 31, 2023, on our experience with repayments or defaults on the related finance contracts. We recognize variable consideration from commissions earned on extended warranty service contracts sold on behalf of third-party insurance companies at generally the later of customer acceptance of the service contract terms as evidenced by contract execution or recognition of the related boat sale. We also recognize marketing fees earned on insurance products sold on behalf of third-party insurance companies at the later of customer acceptance of the insurance product as evidenced by contract execution or when the related boat sale is recognized.

 

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We recognize revenue from parts and service operations (boat maintenance and repairs) over time as services are performed. Each boat maintenance and repair service is a single performance obligation that includes both the parts and labor associated with the service. Payment for boat maintenance and repairs is typically due upon the completion of the service, which is generally completed within a short period of time from contract inception. We satisfy our performance obligations, transfer control, and recognize revenue over time for parts and service operations because we are creating a contract asset with no alternative use and we have an enforceable right to payment for performance completed to date. Contract assets primarily relate to our right to consideration for work in process not yet billed at the reporting date associated with maintenance and repair services. We use an input method to recognize revenue and measure progress based on labor hours expended to satisfy the performance obligation at average labor rates. We have determined labor hours expended to be the relevant measure of work performed to complete the maintenance and repair service for the customer. As a practical expedient, because repair and maintenance service contracts have an original duration of one year or less, we do not consider the time value of money, and we do not disclose estimated revenue expected to be recognized in the future for performance obligations that are unsatisfied (or partially unsatisfied) at the end of the reporting period or when we expect to recognize such revenue. Contract assets, recorded in prepaid expenses and other current assets, totaled approximately $5.3 million and $6.5 million as of September 30, 2023 and December 31, 2023, respectively.

We recognize revenue from the sale of our manufactured boats and yachts when control of the boat or yacht is transferred to the dealer or customer, which is generally upon acceptance by the dealer or customer. At the time of acceptance, the dealer or customer is able to direct the use of, and obtain substantially all of the benefits of, the boat or yacht. We have elected to record shipping and handling activities that occur after the dealer or customer has obtained control of the boat or yacht as a fulfillment activity.

We recognize lessor common area charges, utility sales, food and beverage sales and other ancillary goods and services. Performance obligations include performing common area maintenance and providing utilities, food and beverages, and other ancillary goods and services when goods are transferred or services are performed. Payment terms typically align with when the goods and services are provided.

Contract liabilities primarily consist of customer deposits. We recognize contract liabilities (customer deposits) as revenue at the time of acceptance and the transfer of control to the customers.

We recognize revenue from service operations and slip and storage rentals over time on a straight-line basis over the term of the contract as our performance obligations are met. We recognize revenue from the rentals of chartering power yachts over time on a straight-line basis over the term of the contract as our performance obligations are met.

The following table sets forth percentages on the timing of revenue recognition by reportable segment:

 

Retail Operations

 

 

Product Manufacturing

 

 

Three Months Ended

 

 

Three Months Ended

 

 

December 31,

 

 

December 31,

 

 

2022

 

 

2023

 

 

2022

 

 

2023

 

Goods and services transferred at a point in time

 

85.6

%

 

 

85.7

%

 

 

100.0

%

 

 

100.0

%

Goods and services transferred over time

 

14.4

%

 

 

14.3

%

 

 

 

 

 

 

Revenue

 

100.0

%

 

 

100.0

%

 

 

100.0

%

 

 

100.0

%

The following tables set forth our revenue disaggregated into categories that depict the nature, amount, timing, and uncertainty of revenue and cash flows affected by economic factors.

 

 

Three months ended December 31, 2022

 

 

Three months ended December 31, 2023

 

 

 

 

Retail Operations

 

 

Product Manufacturing

 

 

Total

 

 

Retail Operations

 

 

Product Manufacturing

 

 

Total

 

 

New boat sales

 

 

68.5

%

 

 

96.3

%

 

 

68.8

%

 

 

66.3

%

 

 

98.9

%

 

 

66.4

%

 

Used boat sales

 

 

5.7

%

 

 

2.7

%

 

 

5.6

%

 

 

7.9

%

 

 

 

 

 

7.8

%

 

Maintenance and repair services

 

 

5.5

%

 

 

 

 

 

5.5

%

 

 

5.9

%

 

 

 

 

 

5.9

%

 

Storage and charter rentals

 

 

7.7

%

 

 

 

 

 

7.6

%

 

 

7.7

%

 

 

 

 

 

7.7

%

 

Finance and insurance products

 

 

2.5

%