MarineMax(HZO) - 2022 Q3 - Quarterly Report

PART I. FINANCIAL INFORMATION Financial Statements The company's financial statements for June 30, 2022, reflect revenue and net income growth, balance sheet expansion, and decreased operating cash flow Condensed Consolidated Statements of Operations The condensed consolidated statements of operations show revenue and net income growth for both the three and nine-month periods ended June 30, 2022 Condensed Consolidated Statements of Operations (Unaudited, in thousands) | Metric | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Change (%) | | :--- | :--- | :--- | :--- | | Revenue | $688,537 | $666,328 | 3.3% | | Gross Profit | $236,473 | $204,674 | 15.5% | | Income from Operations | $95,300 | $80,908 | 17.8% | | Net Income | $70,179 | $59,618 | 17.7% | | Diluted EPS | $3.17 | $2.59 | 22.4% | | Metric | Nine Months Ended June 30, 2022 | Nine Months Ended June 30, 2021 | Change (%) | | :--- | :--- | :--- | :--- | | Revenue | $1,771,334 | $1,600,947 | 10.6% | | Gross Profit | $608,987 | $484,881 | 25.6% | | Income from Operations | $214,285 | $165,761 | 29.3% | | Net Income | $159,629 | $122,153 | 30.7% | | Diluted EPS | $7.11 | $5.33 | 33.4% | Condensed Consolidated Balance Sheets As of June 30, 2022, total assets grew to $1.32 billion, driven by increased inventories and goodwill, with liabilities and equity also rising Condensed Consolidated Balance Sheet Highlights (Unaudited, in thousands) | Metric | June 30, 2022 | September 30, 2021 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $281,351 | $222,192 | | Inventories, net | $374,217 | $230,984 | | Goodwill and other intangible assets, net | $248,194 | $201,122 | | Total Assets | $1,320,069 | $1,007,823 | | Liabilities & Equity | | | | Short-term borrowings | $107,222 | $23,943 | | Total Liabilities | $577,329 | $412,931 | | Total Shareholders' Equity | $742,740 | $594,892 | | Total Liabilities and Shareholders' Equity | $1,320,069 | $1,007,823 | Condensed Consolidated Statements of Cash Flows For the nine months ended June 30, 2022, operating cash flow significantly decreased due to inventory, while investing activities used cash for acquisitions, and financing provided cash from borrowings Cash Flow Summary (Unaudited, in thousands) | Cash Flow Activity | Nine Months Ended June 30, 2022 | Nine Months Ended June 30, 2021 | | :--- | :--- | :--- | | Net cash provided by operating activities | $123,036 | $329,614 | | Net cash used in investing activities | ($113,161) | ($131,105) | | Net cash (used in) provided by financing activities | $50,868 | ($154,071) | | Net increase in cash and cash equivalents | $59,159 | $44,628 | Notes to Condensed Consolidated Financial Statements The notes detail the company's business background, including reliance on Brunswick brands and recent acquisitions, along with revenue recognition, segment reporting, and debt structure - The company is the world's largest recreational boat and yacht retailer, operating 79 retail locations in 21 states as of June 30, 2022, also owning superyacht brokerage firms and boat manufacturers like Cruisers Yachts and Intrepid Powerboats[26] - Sales of new boats from Brunswick Corporation accounted for approximately 27% of revenue in fiscal 2021, with exclusive dealership agreements for Sea Ray, Boston Whaler, and Azimut Yachts in its markets[27][28] - In November 2021, the company acquired Intrepid Powerboats and Texas MasterCraft, adding to its Product Manufacturing and Retail Operations segments, respectively[29] Segment Revenue and Income from Operations (in thousands) | Segment | Nine Months Ended June 30, 2022 | Nine Months Ended June 30, 2021 | | :--- | :--- | :--- | | Revenue | | | | Retail Operations | $1,690,172 | $1,591,445 | | Product Manufacturing | $129,804 | $20,417 | | Income from Operations | | | | Retail Operations | $204,124 | $164,841 | | Product Manufacturing | $13,733 | $3,521 | Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes revenue growth to acquisitions and comparable-store sales, with gross profit margin expanding due to demand and higher-margin businesses, maintaining strong liquidity despite inventory build-up - For the nine months ended June 30, 2022, revenue increased 10.6% to $1.771 billion, driven by a $44.0 million (2.8%) increase in comparable-store sales and contributions from acquisitions[119] - Gross profit margin for the nine-month period increased to 34.4% from 30.3% in the prior year, primarily due to demand-driven increases in boat margins and growth in higher-margin businesses[120] - Selling, general, and administrative (SG&A) expenses increased by 23.7% for the nine-month period, driven by the mix of higher-margin businesses, increased commissions from higher gross profit, and recently acquired operations[121] - The company maintains a $500 million credit facility, expiring in July 2024, for working capital and inventory financing, and was in compliance with all covenants as of June 30, 2022[129][131] Quantitative and Qualitative Disclosures About Market Risk The company is exposed to interest rate risk on variable-rate debt, with a 100 basis point increase potentially raising annual pre-tax interest expense by $1.4 million, and also faces unhedged foreign currency exchange risk - The company is exposed to interest rate risk, where a hypothetical 100 basis point increase in interest rates would result in an approximate $1.4 million increase in annual pre-tax interest expense based on debt levels at June 30, 2022[137] - The company faces foreign currency exchange rate risk on products purchased from European and Chinese manufacturers, which can impact retail pricing and profitability, and is not currently engaged in foreign currency hedging[138][139] Controls and Procedures Management, including the CEO and CFO, concluded that disclosure controls and procedures were effective as of June 30, 2022, while internal controls are being implemented for the recently acquired Intrepid - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of the end of the period covered by the report (June 30, 2022)[142] - Following the acquisition of Intrepid on November 1, 2021, the company is implementing accounting processes and internal controls over financial reporting for the new subsidiary[143] PART II. OTHER INFORMATION Legal Proceedings The company is involved in various legal actions arising in the ordinary course of business, which are not expected to have a material adverse effect on its financials - The company states that ongoing legal actions from the ordinary course of business are not expected to have a material adverse effect on its financials[147] Risk Factors No new risk factors were reported for the period - No new risk factors were disclosed in this quarterly report[148] Unregistered Sales of Equity Securities and Use of Proceeds During the three months ended June 30, 2022, the company repurchased 127,079 shares of common stock at an average price of $39.52 per share under an existing program Common Stock Repurchases (Q3 2022) | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | April 1, 2022 - April 30, 2022 | 127,079 | $39.52 | | May 1, 2022 - May 31, 2022 | - | - | | June 1, 2022 - June 30, 2022 | - | - | | Total | 127,079 | $39.52 | - The company's share repurchase program, extended on March 1, 2022, authorizes the purchase of up to 10 million shares through March 31, 2024[150] Exhibits This section lists the exhibits filed with the Form 10-Q, including CEO and CFO certifications and Sarbanes-Oxley certifications - Key exhibits filed include CEO and CFO certifications pursuant to Rule 13a-14(a) and Section 906 of the Sarbanes-Oxley Act of 2002[156]