Discussion and analysis by the management of MARINEMAX INC of the financial situation and operating results (Form 10-K)

0


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. This
section of this Form 10-K generally discusses fiscal 2021 and 2020 items and
year-to-year comparisons between fiscal 2021 and 2020. Discussions of fiscal
2019 items and year-to-year comparisons between fiscal 2020 and 2019 that are
not included in this Form 10-K can be found in the "Management's Discussion and
Analysis of Financial Condition and Results of Operations" in Part II, Item 7 of
the Company's Annual Report on Form 10-K for the fiscal year ended September 30,
2020.

Overview

In March 2020, the outbreak of COVID-19 caused by a novel strain of the
coronavirus was recognized as a pandemic by the World Health Organization, and
the outbreak is widespread throughout the United States (including Florida in
which we generated approximately 54%, 54%, and 50% of our revenue during fiscal
2019, 2020, and 2021, respectively), and in other countries in which we operate.
As a result, from March 2020 through June 2020, we temporarily closed certain
departments or locations based on guidance from local government or health
officials. Currently, all of our stores are fully operational, but the effects
of COVID-19 (including the related international, federal, state, and local
governmental actions and regulations) remain unpredictable. We are following
guidelines to ensure we are safely operating as recommended. Where possible, we
are offering private personal showings as well as virtual appointments. Our
digital platform is serving as an effective solution in this environment with
robust online activity. Our experienced teams continue to engage with customers
virtually and in our stores to help customers select their boats and obtain
appropriate services.

We believe we are the largest recreational boat and yacht retailer and
superyacht services company in the world. Through our current 79 retail
locations in 21 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; and, where
available, offer slip and storage accommodations. In the British Virgin Islands
we offer the charter of catamarans, through MarineMax Vacations. We also own
Fraser Yachts Group, a leading superyacht brokerage and luxury yacht services
company with operations in multiple countries. In July 2020, we acquired
Northrop & Johnson, another leading superyacht brokerage and services company
with operations in multiple countries. In October 2020, we purchased all of the
outstanding equity of SkipperBud's. SkipperBud's is one of the largest boat
sales, brokerage, service and marina/storage groups in the United States. In May
2021, we purchased all of the outstanding equity of Cruisers Yachts. Cruisers
Yachts, a wholly-owned MarineMax subsidiary, manufactures sport yacht and yachts
with sales through our select retail dealership locations and through
independent dealers, and is recognized as one of the world's premier
manufacturers of premium sport yacht and yachts. In July 2021, we acquired
Nisswa Marine, a full-service dealer located in Minnesota. In November 2021, we
acquired Intrepid, a premier manufacturer of powerboats, and Texas MasterCraft,
a premier watersports dealer in Northern Texas.

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 32 recreational boat dealers, four boat brokerage operations, two
full-service yacht repair operations, and two boat and yacht manufacturers. As a
part of our acquisition strategy, we frequently engage in discussions with
various recreational boat dealers regarding their potential acquisition by us.
Potential acquisition discussions frequently take place over a long period of
time and involve difficult business integration and other issues, including, in
some cases, management succession and related matters. As a result of these and
other factors, a number of potential acquisitions that from time to time appear
likely to occur do not result in binding legal agreements and are not
consummated. We completed two acquisitions in the fiscal year ended September
30, 2019, two acquisitions in the fiscal year ended September 30, 2020, and
three acquisitions in the fiscal year ending September 30, 2021.

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 54%, 54%, and 50% of our revenue
during fiscal 2019, 2020, and 2021, 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

                                       36

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

Historically, in periods of lower consumer spending and depressed economic
conditions, we have, among other things, substantially reduced our acquisition
program, delayed new store openings, reduced our inventory purchases, engaged in
inventory reduction efforts, closed a number of our retail locations, reduced
our headcount, and amended and replaced our credit facility.

Although past economic conditions have adversely affected our operating results,
we believe during and after such conditions we have capitalized on our core
strengths to substantially outperform the industry, resulting in market share
gains. Our ability to capture such market share supports the alignment of our
retailing strategies with the desires of consumers. We believe the steps we have
taken to address weak market conditions in the past have yielded, and we believe
will yield in the future, an increase in revenue. Acquisitions remain an
important strategy for us, and, subject to a number of conditions, including
macro-economic conditions and finding attractive acquisition targets, we plan to
explore opportunities through this strategy. We expect our core strengths and
retailing strategies including our digital platform, will position us to
capitalize on growth opportunities as they occur and will allow us to emerge
with greater earnings potential.

Effective May 2, 2021, our reportable segments changed as a result of the
Company's acquisition of Cruisers Yachts, which changed management's reporting
structure and operating activities. We now report our operations through two new
reportable segments: Retail Operations and Product Manufacturing. See Note 21 of
the Notes to Consolidated Financial Statements.

As of September 30, 2021, the Retail Operations segment includes the activity of
77 retail locations in Alabama, California, Connecticut, Florida, Georgia,
Illinois, Maryland, Massachusetts, Michigan, Minnesota, Missouri, New Jersey,
New York, North Carolina, Ohio, Oklahoma, Rhode Island, South Carolina, Texas,
Washington and Wisconsin, where we sell new and used recreational boats,
including pleasure and fishing boats, with a focus on premium brands in each
segment. We also sell related marine products, including engines, trailers,
parts, and accessories. In addition, we provide repair, maintenance, and slip
and storage services; we arrange related boat financing, insurance, and extended
service contracts; we offer boat and yacht brokerage sales; yacht charter
services. In the British Virgin Islands we offer the charter of catamarans,
through MarineMax Vacations. Fraser Yachts Group and Northrop & Johnson, leading
superyacht brokerage and luxury yacht services companies with operations in
multiple countries, are also included in this segment.

As of September 30, 2021, the Product Manufacturing segment includes activity of
Cruisers Yachts, a wholly-owned MarineMax subsidiary, manufacturing sport yacht
and yachts with sales through our select retail dealership locations and through
independent dealers. Cruisers Yachts is recognized as one of the world's premier
manufacturers of premium sport yacht and yachts, producing models from 33' to
60' feet.

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 are 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 consolidated 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.

                                       37

————————————————– ——————————

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 consolidated financial statements taken
as a whole as of September 30, 2020 and 2021, 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 variable
consideration from marketing fees earned on 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 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 $2.6 million and $5.7 million as of September 30, 2020 and
September 30, 2021, respectively.

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

Intersegment revenue represents yachts that were manufactured in our Product
Manufacturing segment and were sold to our Retail Operations segment. The
Product Manufacturing segment supplies our Retail Operations segment along with
various independent dealers.

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. Total contract liabilities of
approximately $24.3 million recorded as of September 30, 2019 were recognized in
revenue during the fiscal year ended September 30, 2020. Total contract
liabilities of approximately $31.8 million recorded as of September 30, 2020
were recognized in revenue during the fiscal year ended September 30, 2021.

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

                                       38

————————————————– ——————————

Inventories


Inventories are stated at the lower of cost or net realizable value. The cost of
inventories purchased from our vendors consist of the amount paid to acquire the
inventory, net of vendor consideration and purchase discounts, the cost of
equipment added, reconditioning costs, and transportation costs relating to
acquiring inventory for sale. Trade-in used boats are initially recorded at fair
value and adjusted for reconditioning and other costs. The cost of inventories
that are manufactured by the Company consist of material, labor, and
manufacturing overhead. Unallocated overhead and abnormal costs are expensed as
incurred. New and used boats, motors, and trailers inventories are accounted for
on a specific identification basis. Raw materials and parts, accessories, and
other inventories are accounted for on an average cost basis. We utilize our
historical experience, the aging of the inventories, and our consideration of
current market trends as the basis for determining a lower of cost or net
realizable value. Our 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
valuation allowance which would result in a material effect on our operating
results. As of September 30, 2020 and 2021, our valuation allowance for new and
used boat, motor and trailer inventories was $2.4 million and $0.4 million,
respectively. If events occur and market conditions change, causing the fair
value to fall below carrying value, the valuation allowance could increase.

Good will


We account for acquisitions in accordance with FASB ASC 805, "Business
Combinations" ("ASC 805"), and goodwill in accordance with ASC 350, "Intangibles
- Goodwill and Other" ("ASC 350"). For business combinations, the excess of the
purchase price over the estimated fair value of net assets acquired in a
business combination is recorded as goodwill. In accordance with ASC 350, we
test 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 third fiscal quarter. If the
carrying amount of a reporting unit's goodwill exceeds its fair value we
recognize an impairment loss in accordance with ASC 350. 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 ASC 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 (or asset group) is measured by comparison of its carrying amount to
undiscounted future net cash flows the asset (or asset group) is expected to
generate over the remaining life of the asset (or asset group). 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 (or asset group) exceeds
its fair market value. Estimates of expected future cash flows represent our
best estimate based on currently available information and reasonable and
supportable assumptions. Our impairment loss calculations contain uncertainties
because they require us to make assumptions and to apply judgment in order to
estimate expected future cash flows. Any impairment recognized in accordance
with ASC 360-10-40 is permanent and may not be restored. Based upon our most
recent analysis, we believe no impairment of long-lived assets existed as of
September 30, 2021. 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.

Recent accounting positions

See note 3 of the appendices to the consolidated financial statements.

                                       39

————————————————– ——————————

Results of operations


The following table sets forth certain financial data as a percentage of revenue
for the periods indicated:



                                                           Fiscal Year Ended September 30,
                                            2019                        2020                        2021
                                                               (Amounts in thousands)
Revenue                            $ 1,237,153       100.0 %   $ 1,509,713       100.0 %   $ 2,063,257       100.0 %
Cost of sales                          914,321        73.9 %     1,111,000        73.6 %     1,403,824        68.0 %
Gross profit                           322,832        26.1 %       398,713        26.4 %       659,433        32.0 %
Selling, general and
administrative expenses                262,300        21.2 %       291,998        19.3 %       449,974        21.8 %
Income from operations                  60,532         4.9 %       106,715         7.1 %       209,459        10.2 %
Interest expense                        11,579         0.9 %         9,275         0.6 %         3,665         0.2 %
Income before income taxes              48,953         4.0 %        97,440         6.5 %       205,794        10.0 %
Income tax provision                    12,968         1.0 %        22,806         1.5 %        50,815         2.5 %
Net income                         $    35,985         3.0 %   $    74,634         5.0 %   $   154,979         7.5 %



Year ended September 30, 2021, compared to the year ended September 30, 2020


Revenue. Revenue increased $553.5 million, or 36.7%, to approximately $2.063
billion for the fiscal year ended September 30, 2021 from $1.510 billion for the
fiscal year ended September 30, 2020. Of this increase, $202.9 million was
attributable to a 13.4% increase in comparable-store sales and an approximate
$350.6 million net increase was related to stores opened, including acquired, or
closed that were not eligible for inclusion in the comparable-store base. The
increase in our comparable-store sales was primarily due to demand driven
increases in new and used boat revenue and our higher margin finance and
insurance products, brokerage, parts, service, and storage services.

Gross Profit. Gross profit increased $260.7 million, or 65.4%, to $659.4 million
for the fiscal year ended September 30, 2021 from $398.7 million for the fiscal
year ended September 30, 2020. Gross profit as a percentage of revenue increased
to 32.0% for the fiscal year ended September 30, 2021 from 26.4% for the fiscal
year ended September 30, 2020. The increase in gross profit as a percentage of
revenue was primarily the result of demand driven price increases resulting in
greater new and used boat margins and increases in our higher margin businesses,
including our superyacht-services companies, as a percentage of sales. The
increase in gross profit dollars was primarily attributable to increased new and
used boat sales.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $158.0 million, or 54.1%, to $450.0 million
for the fiscal year ended September 30, 2021 from $292.0 million for the fiscal
year ended September 30, 2020. Selling, general and administrative expenses
increased as a percentage of revenue to 21.8% for the fiscal year ended
September 30, 2021 from 19.3% for the fiscal year ended September 30, 2020. The
increase in selling, general, and administrative expenses was driven by an
increase in mix to our higher margin businesses which typically carry a higher
expense structure and acquisitions.

Interest Expense. Interest expense decreased $5.6 million, or 60.2%, to
$3.7 million for the fiscal year ended September 30, 2021, from $9.3 million for
the fiscal year ended September 30, 2020. Interest expense as a percentage of
revenue decreased to 0.2% for the fiscal year ended September 30, 2021, from
0.6% for the fiscal year ended September 30, 2020. The decrease in interest
expense was primarily the result of decreased borrowings.

Income Taxes. Income tax expense increased $28.0 million, or 122.8%, to $50.8
million for the fiscal year ended September 30, 2021 from $22.8 million for the
fiscal year ended September 30, 2020. Our effective income tax rate increased to
24.7% for fiscal year ended September 30, 2021, from 23.4% for fiscal year ended
September 30, 2020. The increase in the effective income tax rate was primarily
attributed to prior fiscal year state tax benefits and prior fiscal year tax
benefits from stock-based compensation that did not occur for the fiscal year
ended September 30, 2021.

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 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 could become substantially more
seasonal if we acquire additional dealers that operate in colder regions of the
United States or close retail locations in warm climates.

Our business is also subject to weather conditions, which may adversely affect our results of operations. For example, prolonged winter conditions, drought conditions (or simply reduced rainfall levels) or excessive rains can limit access to boating sites in the region.

                                       40

--------------------------------------------------------------------------------
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 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.

Liquidity and capital resources


Our cash needs are primarily for working capital to support operations,
including new and used boat and related parts inventories, off-season liquidity,
and growth through acquisitions. Acquisitions remain an important strategy for
us, and we plan to continue our growth through this strategy in appropriate
circumstances. However, we cannot predict the length of favorable 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 historically have been financed with cash generated from
operations and borrowings under the Credit Facility (described below). Our
ability to utilize the Credit Facility to fund operations depends upon the
collateral levels and compliance with the covenants of the Credit Facility. Any
turmoil in the credit markets and weakness in the retail markets may interfere
with our ability to remain in compliance with the covenants of the Credit
Facility and therefore our ability to utilize the Credit Facility to fund
operations. As of September 30, 2021, we were in compliance with all covenants
under the Credit Facility. We currently depend upon dividends and other payments
from our dealerships and the 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, 2021 and 2020, cash provided by
operating activities was approximately $373.9 million and $304.7 million,
respectively. For the fiscal year ended September 30, 2019, cash used in
operating activities was approximately $12.4 million. For the fiscal year ended
September 30, 2021, cash provided by operating activities was primarily related
to decreases in inventory, increases in contract liabilities (customer
deposits), accrued expenses and other liabilities, and our net income adjusted
for non-cash expenses and gains such as depreciation and amortization expense,
deferred income tax provision, and stock-based compensation expense. For the
fiscal year ended September 30, 2020, cash provided by operating activities was
primarily related to decreases in inventory, accounts receivable, increases in
accrued expenses and other liabilities, increases in accounts payable, and our
net income adjusted for non-cash expenses and gains such as depreciation and
amortization expense, deferred income tax provision, stock-based compensation
expense, and insurance proceeds received. For the fiscal year ended
September 30, 2019, cash used in operating activities was primarily related to
increases in inventory, accounts receivable, and prepaid expenses and other
assets, partially offset by our net income adjusted for non-cash expenses and
gains such as depreciation and amortization expense, deferred income tax
provision, stock-based compensation expense, insurance proceeds received, and
increases in accounts payable, contract liabilities, and accrued expenses and
other long-term liabilities.

For the fiscal years ended September 30, 2021, 2020, and 2019, cash used in
investing activities was approximately $161.1 million, $30.1 million, and
$56.3 million, respectively. For the fiscal year ended September 30, 2021, cash
used in investing activities was primarily used for acquisitions, to purchase
property and equipment associated with improving existing retail facilities, and
to purchase investments, partially offset by proceeds from insurance
settlements. For the fiscal year ended September 30, 2020, cash used in
investing activities was primarily used to purchase property and equipment
associated with improving existing retail facilities and purchase property and
equipment and other assets associated with business acquisitions. For the fiscal
year ended September 30, 2019, cash used in investing activities was primarily
used to purchase property and equipment associated with improving existing
retail facilities and purchase property and equipment and other assets
associated with business acquisitions.

For the fiscal years ended September 30, 2021 and 2020, cash used in financing
activities was approximately $145.7 million and $158.1 million, respectively.
For the fiscal year ended September 30, 2019, cash provided by financing
activities was approximately $58.6 million. For the fiscal year ended September
30, 2021, cash used in financing activities was primarily attributable to net
payments for short-term borrowings, purchase of treasury stock, payments on tax
withholdings for equity awards, payments for long-term debt, and contingent
acquisition consideration payments, partially offset by proceeds from long-term
debt and net proceeds from issuance of common stock under incentive compensation
and employee purchase plans. For the fiscal year ended September 30, 2020, cash
used in financing activities was primarily attributable to a decrease in net
short-term borrowings as a result of decreased inventory levels, repurchase of
common stock under the share repurchase program, payments on tax withholdings
for equity awards, partially offset by proceeds from the issuance of common
stock from our stock-based compensation plans and proceeds from long- term debt.
For the fiscal year ended September 30, 2019, 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 and payments on tax withholdings
for equity awards.

                                       41
--------------------------------------------------------------------------------
In July 2021, we entered into an Amended and Restated Loan and Security
Agreement, with Wells Fargo Commercial Distribution Finance LLC, M&T Bank, Bank
of the West, and Truist Bank. The Credit Facility provides the Company a line of
credit with asset based borrowing availability of up to $500.0 million for
working capital and inventory financing, with the amount permissible pursuant to
a borrowing base formula. The Credit Facility has a three-year term and expires
in July 2024, subject to extension for two one-year periods, with lender
approval.

The 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 Credit Facility is 345 basis
points plus the greater of 75 basis points or the one-month LIBOR. There is an
unused line fee of ten basis points on the unused portion of the Credit
Facility. In October 2021, we amended the Credit Facility to allow for the
transition of the benchmark interest rate used from LIBOR to the Secured
Overnight Finance Rate (SOFR).

Advances under the 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 Credit Facility is primarily the Company's inventory that is
financed through the Credit Facility and related accounts receivable. None of
our real estate has been pledged for collateral for the Credit Facility.

As of September 30, 2021, our indebtedness associated with our short-term
borrowings and our long-term debt totaled approximately $24.1 million and $51.7
million, respectively. As of September 30, 2021, short-term borrowings and
long-term debt recorded on the Consolidated Balance Sheets included unamortized
debt issuance costs of approximately $0.2 million and $0.6 million,
respectively. Refer to Note 11 of the Notes to Consolidated Financial Statements
for disclosure of borrowing availability, interest rates, and terms of our
short-term borrowings and long-term debt.

Except as specified in this "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and in the attached consolidated financial
statements, we have no material commitments for capital for the next 12 months.
Based on the information currently available to us, the COVID-19 pandemic's
impact on consumer demand is uncertain, however, we believe that the cash
generated from sales and our existing capital resources will be adequate to meet
our liquidity and capital requirements for at least the next 12 months, except
for possible significant acquisitions.

Commitments and commercial commitments

The following table presents a summary of our contractual obligations and significant commercial commitments at September 30, 2021:




                                                       Payments Due by Period Ending September 30,
                                                                     1-3 Years       3-5 Years        More Than 5
                                                    Less Than 1      (2023 and       (2025 and      Years (2027 and
                                        Total       Year (2022)        2024)           2026)          thereafter)
                                                                  (Amounts in thousands)
Short-term borrowings (1)             $  24,136     $    24,136     $         -     $         -     $              -
Long-term debt (2)                       51,680           3,587           7,174           7,174               33,745
Other liabilities (3)                    13,618           6,015           7,603               -                    -
Operating leases (4)                    152,159          16,080          27,627          20,262               88,190
Total                                 $ 241,593     $    49,818     $    42,404     $    27,436     $        121,935





(1) Estimates of future interest payments for short-term borrowings have been

excluded from tabular presentation. The amounts due are subject to the

unpaid balances and variable interest rates. Refer to note 11 of

Notes to the consolidated financial statements for the disclosure of borrowings

availability, interest rates and terms of our short-term borrowings.

(2) Amounts included in long-term debt refer to future cash capital

Payments. Refer to note 11 of the notes to the consolidated financial statements

for disclosure of loan availability, interest rates and terms of our

long-term debt.

(3) The amounts included in other liabilities mainly consist of our estimate

liability for claims on certain insurance policies against industrial accidents and

estimated future payments of contingent consideration.

(4) The amounts of operating rental commitments do not include certain

expenses such as maintenance, insurance and property taxes. These amounts

    are not a material component of operating expenses.


                                       42

————————————————– ——————————

© Edgar online, source Previews


Share.

Comments are closed.