1. COMPANY BACKGROUND AND BASIS OF PRESENTATION:
\nWe are the largest recreational boat retailer in the United States. We engage primarily in the retail sale, brokerage, and service of new and used boats, motors, trailers, marine parts and accessories and offer slip and storage accommodations in certain locations. In addition, we arrange related boat financing, insurance, and extended service contracts. We also offer the charter of power and sailing yachts in the British Virgin Islands. As of September 30, 2015, we operated through 53 retail locations in 15 states, consisting of Alabama, California, Connecticut, Florida, Georgia, Maryland, Minnesota, Missouri, New Jersey, New York, North Carolina, Ohio, Oklahoma, Rhode Island, and Texas. Our MarineMax Vacations operations maintain a facility in Tortola, British Virgin Islands.
\nWe are the nation’s largest retailer of Sea Ray, Boston Whaler, and Meridian recreational boats and yachts, all of which are manufactured by Brunswick Corporation (“Brunswick”). Sales of new Brunswick boats accounted for approximately 40% of our revenue in fiscal 2015. Sales of new Sea Ray and Boston Whaler boats, both divisions of Brunswick, accounted for approximately 25% and 12%, respectively, of our revenue in fiscal 2015. Brunswick is a world leading manufacturer of marine products and marine engines. We believe we represented approximately 45% of Brunswick’s Sea Ray boat sales, during our fiscal 2015.
\nWe have dealership agreements with Sea Ray, Boston Whaler, Meridian, and Mercury Marine, all subsidiaries or divisions of Brunswick. We also have dealer agreements with Italy-based Azimut-Benetti Group’s product line for Azimut Yachts. These agreements allow us to purchase, stock, sell, and service these manufacturers’ boats and products. These agreements also allow us to use these manufacturers’ names, trade symbols, and intellectual properties in our operations.
\nWe have multi-year dealer agreements with Brunswick covering Sea Ray products that appoints us as the exclusive dealer of Sea Ray boats in our geographic markets. We are the exclusive dealer for Boston Whaler through multi-year dealer agreements for many of our geographic markets. In addition, we are the exclusive dealer for Azimut Yachts for the entire United States through a multi-year dealer agreement. Sales of new Azimut boats accounted for approximately 12% of our revenue in fiscal 2015. We believe non-Brunswick brands offer a migration for our existing customer base or fill a void in our product offerings, and accordingly, do not compete with the business generated from our other prominent brands.
\nAs is typical in the industry, we deal with most of our manufacturers, other than Sea Ray, Boston Whaler, Meridian, and Azimut Yachts, under renewable annual dealer agreements, each of which gives us the right to sell various makes and models of boats within a given geographic region. Any change or termination of these agreements, or the agreements discussed above, for any reason, or changes in competitive, regulatory, or marketing practices, including rebate or incentive programs, could adversely affect our results of operations. Although there are a limited number of manufacturers of the type of boats and products that we sell, we believe that adequate alternative sources would be available to replace any manufacturer other than Sea Ray and Azimut as a product source. These alternative sources may not be available at the time of any interruption, and alternative products may not be available at comparable terms, which could affect operating results adversely.
\nGeneral economic conditions and consumer spending patterns can negatively impact our operating results. Unfavorable local, regional, national, or global economic developments or uncertainties regarding future economic prospects could reduce consumer spending in the markets we serve and adversely affect our business. Economic conditions in areas in which we operate dealerships, particularly Florida in which we generated approximately 51%, 52%, and 53% of our revenue during fiscal 2013, 2014, and 2015, respectively, can have a major impact on our operations. Local influences, such as corporate downsizing, military base closings, inclement weather such as Hurricane Sandy, environmental conditions, and specific events, such as the BP oil spill in the Gulf of Mexico, also could adversely affect, and in certain instances have adversely affected, our operations in certain markets.
\nIn 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.
\nLower consumer spending resulting from a downturn in the housing market and other economic factors adversely affected our business in fiscal 2007, and continued weakness in consumer spending and depressed economic conditions had a substantial negative effect on our business and industry for several years after fiscal 2007. These conditions caused us to substantially reduce our acquisition program, delay new store openings, reduce our inventory purchases, engage in inventory reduction efforts, close a number of our retail locations, reduce our headcount, and amend and replace our credit facility. Acquisitions and new store openings remain important strategies to our company, and we plan to accelerate our growth through these strategies as economic conditions continue to improve. However, we cannot predict the length of unfavorable economic or industry conditions or the extent to which they will continue to adversely affect our operating results nor can we predict the effectiveness of the measures we have taken to address this environment.
\n\n
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:
\nCash and Cash Equivalents
\nWe consider all highly liquid investments with an original maturity of three months or less to be cash equivalents.
\nVendor Consideration Received
\nWe 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.
\nInventories
\nInventory costs consist of the amount paid to acquire inventory, net of vendor consideration and purchase discounts, the cost of equipment added, reconditioning costs, and transportation costs relating to acquiring inventory for sale. We state new and used boat, motor, and trailer inventories at the lower of cost, determined on a specific-identification basis, or market. We state parts and accessories at the lower of cost, determined on an average cost basis, or market. We utilize our historical experience, the aging of the inventories, and our consideration of current market trends as the basis for determining a lower of cost or market valuation allowance. As of September 30, 2014 and 2015, our lower of cost or market valuation allowance for new and used boat, motor, and trailer inventories was $2.2 million and $1.8 million, respectively. If events occur and market conditions change, causing the fair value to fall below carrying value, the lower of cost or market valuation allowance could increase.
\nProperty and Equipment
\nWe 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:
\n\n
| \n
| \n\n
| \n\n Years | \n
| \n Buildings and improvements | \n\n
| \n\n 5-40 | \n
| \n Machinery and equipment | \n\n
| \n\n 3-10 | \n
| \n Furniture and fixtures | \n\n
| \n\n 5-10 | \n
| \n Vehicles | \n\n
| \n\n 3-5 | \n
\n
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.
\nGoodwill
\nWe account for goodwill in accordance with FASB Accounting Standards Codification 350, “Intangibles - Goodwill and Other” (“ASC 350”), which provides that the excess of cost over net assets of businesses acquired is recorded as goodwill. The acquisitions of Bassett Marine, LLC and Parker Boat Company resulted in goodwill of $802,000. In accordance with ASC 350, we review goodwill for impairment at least annually and whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Our annual impairment test is performed during the fourth fiscal quarter. If the carrying amount of goodwill exceeds its fair value we would recognize an impairment loss in accordance with ASC 350. As of September 30, 2015, and based upon our most recent analysis, we determined through our qualitative assessment that it is not “more likely than not” that the fair values of our reporting units are less than their carrying values. As a result, we were not required to perform the two-step goodwill impairment test.
\nImpairment of Long-Lived Assets
\nFASB Accounting Standards Codification 360-10-40, “Property, Plant, and Equipment - Impairment or Disposal of Long-Lived Assets” (“ASC 360-10-40”), requires that long-lived assets, such as property and equipment and purchased intangibles subject to amortization, be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of the asset is measured by comparison of its carrying amount to undiscounted future net cash flows the asset is expected to generate. If such assets are considered to be impaired, the impairment to be recognized is measured as the amount by which the carrying amount of the asset exceeds its fair market value. Estimates of expected future cash flows represent our best estimate based on currently available information and reasonable and supportable assumptions. Any impairment recognized in accordance with ASC 360-10-40 is permanent and may not be restored. Based upon our most recent analysis, which excludes fixed assets classified as held for sale, we believe no further impairment of long-lived assets existed as of September 30, 2015.
\nCustomer Deposits
\nCustomer 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.
\nInsurance
\nWe 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.
\nRevenue Recognition
\nWe recognize revenue from boat, motor, and trailer sales, and parts and service operations at the time the boat, motor, trailer, or part is delivered to or accepted by the customer or the service is completed. We recognize deferred revenue from service operations and slip and storage services on a straight-line basis over the term of the contract or when service is completed. We recognize commissions earned from a brokerage sale at the time the related brokerage transaction closes. We recognize commissions earned by us for placing notes with financial institutions in connection with customer boat financing when we recognize the related boat sales. We recognize marketing fees earned on credit life, accident, disability, gap, and hull insurance products sold by third-party insurance companies at the later of customer acceptance of the insurance product as evidenced by contract execution or when the related boat sale is recognized. Pursuant to negotiated agreements with financial and insurance institutions, we are charged back for a portion of these fees should the customer terminate or default on the related finance or insurance contract before it is outstanding for a stipulated minimum period of time. We base the chargeback allowance, which was not material to the consolidated financial statements taken as a whole as of September 30, 2015, on our experience with repayments or defaults on the related finance or insurance contracts.
\nWe 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 determine the chargeback allowance, which was not material to the consolidated financial statements taken as a whole as of September 30, 2015, based upon our experience with terminations or defaults on the service contracts.
\nThe following table sets forth percentages of our revenue generated by certain products and services, for each of last three fiscal years.
\n\n
| \n
| \n\n
| \n\n 2013 | \n\n
| \n\n
| \n\n 2014 | \n\n
| \n\n
| \n\n 2015 | \n\n
| \n|||
| \n New boat sales | \n\n
| \n\n
| \n\n 61.9 | \n\n % | \n\n
| \n\n
| \n\n 65.2 | \n\n % | \n\n
| \n\n
| \n\n 64.3 | \n\n % | \n
| \n Used boat sales | \n\n
| \n\n
| \n\n 19.4 | \n\n % | \n\n
| \n\n
| \n\n 16.8 | \n\n % | \n\n
| \n\n
| \n\n 19.9 | \n\n % | \n
| \n Maintenance, repair, storage, and charter services | \n\n
| \n\n
| \n\n 8.0 | \n\n % | \n\n
| \n\n
| \n\n 7.8 | \n\n % | \n\n
| \n\n
| \n\n 6.9 | \n\n % | \n
| \n Finance and insurance products | \n\n
| \n\n
| \n\n 2.8 | \n\n % | \n\n
| \n\n
| \n\n 2.6 | \n\n % | \n\n
| \n\n
| \n\n 2.5 | \n\n % | \n
| \n Parts and accessories | \n\n
| \n\n
| \n\n 5.5 | \n\n % | \n\n
| \n\n
| \n\n 5.1 | \n\n % | \n\n
| \n\n
| \n\n 4.1 | \n\n % | \n
| \n Brokerage sales | \n\n
| \n\n
| \n\n 2.4 | \n\n % | \n\n
| \n\n
| \n\n 2.5 | \n\n % | \n\n
| \n\n
| \n\n 2.3 | \n\n % | \n
| \n Total revenue | \n\n
| \n\n
| \n\n 100.0 | \n\n % | \n\n
| \n\n
| \n\n 100.0 | \n\n % | \n\n
| \n\n
| \n\n 100.0 | \n\n % | \n
\n
Stock-Based Compensation
\nWe 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.
\nAdvertising and Promotional Cost
\nWe expense advertising and promotional costs as incurred and include them in selling, general, and administrative expenses in the accompanying consolidated statements of operations. Pursuant to ASC 605-50, we net amounts received by us under our co-op assistance programs from our manufacturers against the related advertising expenses. Total advertising and promotional expenses approximated $9.8 million, $9.5 million, and $10.5 million, net of related co-op assistance of approximately $419,000, $473,000, and $737,000, for the fiscal years ended September 30, 2013, 2014, and 2015, respectively.
\nIncome Taxes
\nWe 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.
\nConcentrations of Credit Risk
\nFinancial instruments, which potentially subject us to concentrations of credit risk, consist principally of cash and cash equivalents and accounts receivable. Concentrations of credit risk with respect to our cash and cash equivalents are limited primarily to amounts held with financial institutions. Concentrations of credit risk arising from our receivables are limited primarily to amounts due from manufacturers and financial institutions.
\nFair Value of Financial Instruments
\nThe 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.
\nUse of Estimates and Assumptions
\nThe preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Significant estimates made by us in the accompanying consolidated financial statements relate to valuation allowances, valuation of goodwill and intangible assets, valuation of long-lived assets, and valuation of accruals. Actual results could differ materially from those estimates.
3. NEW ACCOUNTING PRONOUNCEMENTS:
\nIn May 2014, the FASB issued Accounting Standards Update No. 2014-09, “Revenue from Contracts with Customers (Topic 606)” (ASU 2014-9), a converged standard on revenue recognition. The new pronouncement requires revenue recognition to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance also specifies the accounting for some costs to obtain or fulfill a contract with a customer, as well as enhanced disclosure requirements. ASU 2014-9 is effective for annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. Early adoption is not permitted. We currently do not believe the adoption of this standard will have a material impact on our consolidated financial statements.
\n
4. ACCOUNTS RECEIVABLE:
\nTrade 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.
\nThe allowance for uncollectible receivables, which was not material to the consolidated financial statements as of September 30, 2014 or 2015, was based on our consideration of customer payment practices, past transaction history with customers, and economic conditions. When an account becomes uncollectable, we expense it as a bad debt and we credit payments subsequently received to the bad debt expense account. We review the allowance for uncollectible receivables when an event or other change in circumstances results in a change in the estimate of the ultimate collectability of a specific account.
\nAccounts receivable, net consisted of the following as of September 30,
\n\n
| \n
| \n\n
| \n\n 2014 | \n\n
| \n\n
| \n\n 2015 | \n\n
| \n||
| \n
| \n\n
| \n\n (Amounts in thousands) | \n\n
| \n|||||
| \n Trade receivables | \n\n
| \n\n $ | \n\n 7,175 | \n\n
| \n\n
| \n\n $ | \n\n 13,010 | \n\n
| \n
| \n Amounts due from manufacturers | \n\n
| \n\n
| \n\n 4,974 | \n\n
| \n\n
| \n\n
| \n\n 4,879 | \n\n
| \n
| \n Other receivables | \n\n
| \n\n
| \n\n 398 | \n\n
| \n\n
| \n\n
| \n\n 585 | \n\n
| \n
| \n
| \n\n
| \n\n $ | \n\n 12,547 | \n\n
| \n\n
| \n\n $ | \n\n 18,474 | \n\n
| \n
5. INVENTORIES:
\nInventories, net, consisted of the following as of September 30,
\n\n
| \n
| \n\n
| \n\n 2014 | \n\n
| \n\n
| \n\n 2015 | \n\n
| \n||
| \n
| \n\n
| \n\n (Amounts in thousands) | \n\n
| \n|||||
| \n New boats, motors, and trailers | \n\n
| \n\n $ | \n\n 200,318 | \n\n
| \n\n
| \n\n $ | \n\n 230,359 | \n\n
| \n
| \n Used boats, motors, and trailers | \n\n
| \n\n
| \n\n 37,191 | \n\n
| \n\n
| \n\n
| \n\n 36,992 | \n\n
| \n
| \n Parts, accessories, and other | \n\n
| \n\n
| \n\n 6,642 | \n\n
| \n\n
| \n\n
| \n\n 6,524 | \n\n
| \n
| \n
| \n\n
| \n\n $ | \n\n 244,151 | \n\n
| \n\n
| \n\n $ | \n\n 273,875 | \n\n
| \n
6. PROPERTY AND EQUIPMENT:
\nProperty and equipment consisted of the following as of September 30,
\n\n
| \n
| \n\n
| \n\n 2014 | \n\n
| \n\n
| \n\n 2015 | \n\n
| \n||
| \n
| \n\n
| \n\n (Amounts in thousands) | \n\n
| \n|||||
| \n Land | \n\n
| \n\n $ | \n\n 40,970 | \n\n
| \n\n
| \n\n $ | \n\n 43,090 | \n\n
| \n
| \n Buildings and improvements | \n\n
| \n\n
| \n\n 84,726 | \n\n
| \n\n
| \n\n
| \n\n 78,425 | \n\n
| \n
| \n Machinery and equipment | \n\n
| \n\n
| \n\n 23,405 | \n\n
| \n\n
| \n\n
| \n\n 24,709 | \n\n
| \n
| \n Furniture and fixtures | \n\n
| \n\n
| \n\n 3,787 | \n\n
| \n\n
| \n\n
| \n\n 3,199 | \n\n
| \n
| \n Vehicles | \n\n
| \n\n
| \n\n 5,543 | \n\n
| \n\n
| \n\n
| \n\n 5,846 | \n\n
| \n
| \n
| \n\n
| \n\n
| \n\n 158,431 | \n\n
| \n\n
| \n\n
| \n\n 155,269 | \n\n
| \n
| \n Accumulated depreciation and amortization | \n\n
| \n\n
| \n\n (56,553 | \n\n ) | \n\n
| \n\n
| \n\n (56,282 | \n\n ) | \n
| \n
| \n\n
| \n\n $ | \n\n 101,878 | \n\n
| \n\n
| \n\n $ | \n\n 98,987 | \n\n
| \n
\n
Depreciation and amortization expense on property and equipment totaled approximately $6.8 million, $7.3 million, and $7.9 million for the fiscal years ended September 30, 2013, 2014, and 2015, respectively.
7. OTHER ASSETS:
\nDuring February 2006, we became party to a joint venture with Brunswick that acquired certain real estate and assets of Great American Marina for an aggregate purchase price of approximately $11.0 million, of which we contributed approximately $4.0 million and Brunswick contributed approximately $7.0 million. The terms of the agreement specify that we operate and maintain the service business and that Brunswick operate and maintain the marina business. Simultaneously with the closing, the acquired entity became Gulfport Marina, LLC (“Gulfport”). We account for our investment in Gulfport in accordance with FASB Accounting Standards Codification 323, “Investment – Equity Method and Joint Venture”. Accordingly, we adjust the carrying amount of our investment in Gulfport to recognize our share of earnings or losses, based on the service business we operate. The carrying amount of our investment is included in other long-term assets on the consolidated balance sheets, and our share of the earnings or losses based on the service business that we operate are included in selling, general and administrative expenses on the consolidated statements of operations.
\nApproximately $6.7 million of certain real estate assets were classified as held for sale and were included in prepaid expenses and other current assets on the consolidated balance sheet as of September 30, 2015.
\n
8. SHORT-TERM BORROWINGS:
\nIn October 2015, we entered into an amendment to our Inventory Financing Agreement (the “Amended Credit Facility”), originally entered into in June 2010, as subsequently amended, with GE Commercial Distribution Finance LLC. The October 2015 amendment extended the maturity date of the Credit Facility to October 2018, subject to additional extension for two one-year periods, with lender approval. The October 2015 amendment, among other things, modified the amount of borrowing availability and maturity date of the Credit Facility. The Amended Credit Facility provides a floor plan financing commitment of up to $260.0 million, an increase from the previous limit of $235.0 million, subject to borrowing base availability resulting from the amount and aging of our inventory.
\nThe 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.
\nAdvances under the Amended Credit Facility are initiated by the acquisition of eligible new and used inventory or are re-advances against eligible new and used inventory that have been partially paid-off. Advances on new inventory will generally mature 1,080 days from the original invoice date. Advances on used inventory will mature 361 days from the date we acquire the used inventory. Each advance is subject to a curtailment schedule, which requires that we pay down the balance of each advance on a periodic basis starting after six months. The curtailment schedule varies based on the type and value of the inventory. The collateral for the Amended Credit Facility is all of our personal property with certain limited exceptions. None of our real estate has been pledged for collateral for the Amended Credit Facility.
\nAs of September 30, 2014 and 2015, our indebtedness associated with financing our inventory and working capital needs totaled approximately $124.4 million and $137.2 million, respectively. As of September 30, 2014 and 2015, the interest rate on the outstanding short-term borrowings was approximately 3.6% and 3.6%. As of September 30, 2015, our additional available borrowings under our Amended Credit Facility were approximately $54.5 million based upon the outstanding borrowing base availability.
\nAs 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.
\nThe availability and costs of borrowed funds can adversely affect our ability to obtain adequate boat inventory and the holding costs of that inventory as well as the ability and willingness of our customers to finance boat purchases. As of September 30, 2015, we had no long-term debt. However, we rely on our Amended Credit Facility to purchase our inventory of boats. The aging of our inventory limits our borrowing capacity as defined curtailments reduce the allowable advance rate as our inventory ages. Our access to funds under our Amended Credit Facility also depends upon the ability of our lenders to meet their funding commitments, particularly if they experience shortages of capital or experience excessive volumes of borrowing requests from others during a short period of time. Unfavorable economic conditions, weak consumer spending, turmoil in the credit markets, and lender difficulties, among other potential reasons, could interfere with our ability to utilize our Amended Credit Facility to fund our operations. Any inability to utilize our Amended Credit Facility could require us to seek other sources of funding to repay amounts outstanding under the credit agreements or replace or supplement our credit agreements, which may not be possible at all or under commercially reasonable terms.
\nSimilarly, 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:
\nThe components of our benefit (provision) from income taxes consisted of the following for the fiscal years ended September 30,
\n\n
| \n
| \n\n
| \n\n 2013 | \n\n
| \n\n
| \n\n 2014 | \n\n
| \n\n
| \n\n 2015 | \n\n
| \n|||
| \n
| \n\n
| \n\n (Amounts in thousands) | \n\n
| \n|||||||||
| \n Current benefit (provision): | \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n
| \n Federal | \n\n
| \n\n $ | \n\n (101 | \n\n ) | \n\n
| \n\n $ | \n\n (46 | \n\n ) | \n\n
| \n\n $ | \n\n (209 | \n\n ) | \n
| \n State | \n\n
| \n\n
| \n\n 995 | \n\n
| \n\n
| \n\n
| \n\n (45 | \n\n ) | \n\n
| \n\n
| \n\n (87 | \n\n ) | \n
| \n Total current benefit (provision) | \n\n
| \n\n $ | \n\n 894 | \n\n
| \n\n
| \n\n $ | \n\n (91 | \n\n ) | \n\n
| \n\n $ | \n\n (296 | \n\n ) | \n
| \n Deferred benefit (provision): | \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n
| \n Federal | \n\n
| \n\n
| \n\n — | \n\n
| \n\n
| \n\n
| \n\n — | \n\n
| \n\n
| \n\n
| \n\n 22,056 | \n\n
| \n
| \n State | \n\n
| \n\n
| \n\n — | \n\n
| \n\n
| \n\n
| \n\n — | \n\n
| \n\n
| \n\n
| \n\n 5,654 | \n\n
| \n
| \n Total deferred benefit (provision) | \n\n
| \n\n
| \n\n — | \n\n
| \n\n
| \n\n
| \n\n — | \n\n
| \n\n
| \n\n
| \n\n 27,710 | \n\n
| \n
| \n Total income tax benefit (provision) | \n\n
| \n\n $ | \n\n 894 | \n\n
| \n\n
| \n\n $ | \n\n (91 | \n\n ) | \n\n
| \n\n $ | \n\n 27,414 | \n\n
| \n
\n
\n
Below is a reconciliation of the statutory federal income tax rate to our effective tax rate for the fiscal years ended September 30,
\n\n
| \n
| \n\n
| \n\n 2013 | \n\n
| \n\n
| \n\n 2014 | \n\n
| \n\n
| \n\n 2015 | \n\n
| \n|||
| \n Federal tax benefit (provision) | \n\n
| \n\n
| \n\n (35.0 | \n\n )% | \n\n
| \n\n
| \n\n (35.0 | \n\n )% | \n\n
| \n\n
| \n\n (35.0 | \n\n )% | \n
| \n State taxes, net of federal effect | \n\n
| \n\n
| \n\n 0.7 | \n\n % | \n\n
| \n\n
| \n\n (4.4 | \n\n )% | \n\n
| \n\n
| \n\n (3.2 | \n\n )% | \n
| \n Stock based compensation | \n\n
| \n\n
| \n\n (0.6 | \n\n )% | \n\n
| \n\n
| \n\n (0.2 | \n\n )% | \n\n
| \n\n
| \n\n (0.4 | \n\n )% | \n
| \n Valuation allowance | \n\n
| \n\n
| \n\n 45.0 | \n\n % | \n\n
| \n\n
| \n\n 42.5 | \n\n % | \n\n
| \n\n
| \n\n 171.5 | \n\n % | \n
| \n Foreign rate differential | \n\n
| \n\n
| \n\n (2.9 | \n\n )% | \n\n
| \n\n
| \n\n (3.0 | \n\n )% | \n\n
| \n\n
| \n\n (0.3 | \n\n )% | \n
| \n Other | \n\n
| \n\n
| \n\n (0.9 | \n\n )% | \n\n
| \n\n
| \n\n (0.7 | \n\n )% | \n\n
| \n\n
| \n\n (1.3 | \n\n )% | \n
| \n Effective tax rate | \n\n
| \n\n
| \n\n 6.3 | \n\n % | \n\n
| \n\n
| \n\n (0.8 | \n\n )% | \n\n
| \n\n
| \n\n 131.3 | \n\n % | \n
\n
\n
Deferred income taxes reflect the impact of temporary differences between the amount of assets and liabilities recognized for financial reporting purposes and such amounts recognized for income tax purposes. In addition, the company maintains an excess benefit for share based payments of $5.2 million which may be used to offset future income taxes payable. The tax effects of these temporary differences representing the components of deferred tax assets (liabilities) as of September 30,
\n\n
| \n
| \n\n
| \n\n 2014 | \n\n
| \n\n
| \n\n 2015 | \n\n
| \n||
| \n
| \n\n
| \n\n (Amounts in thousands) | \n\n
| \n|||||
| \n Current deferred tax assets: | \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n
| \n Inventories | \n\n
| \n\n $ | \n\n 1,712 | \n\n
| \n\n
| \n\n $ | \n\n 1,361 | \n\n
| \n
| \n Accrued expenses | \n\n
| \n\n
| \n\n 1,110 | \n\n
| \n\n
| \n\n $ | \n\n 911 | \n\n
| \n
| \n Tax loss carryforwards | \n\n
| \n\n
| \n\n - | \n\n
| \n\n
| \n\n $ | \n\n 7,560 | \n\n
| \n
| \n Current deferred tax assets | \n\n
| \n\n
| \n\n 2,822 | \n\n
| \n\n
| \n\n
| \n\n 9,832 | \n\n
| \n
| \n Valuation allowance | \n\n
| \n\n
| \n\n (2,822 | \n\n ) | \n\n
| \n\n
| \n\n (578 | \n\n ) | \n
| \n Net current deferred tax assets | \n\n
| \n\n $ | \n\n — | \n\n
| \n\n
| \n\n $ | \n\n 9,254 | \n\n
| \n
| \n Long-term deferred tax assets: | \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n
| \n Depreciation and amortization | \n\n
| \n\n $ | \n\n 6,008 | \n\n
| \n\n
| \n\n $ | \n\n 5,152 | \n\n
| \n
| \n Stock based compensation | \n\n
| \n\n
| \n\n 3,902 | \n\n
| \n\n
| \n\n $ | \n\n 3,776 | \n\n
| \n
| \n Tax loss carryforwards | \n\n
| \n\n
| \n\n 24,418 | \n\n
| \n\n
| \n\n
| \n\n 9,890 | \n\n
| \n
| \n Other | \n\n
| \n\n
| \n\n 374 | \n\n
| \n\n
| \n\n
| \n\n 585 | \n\n
| \n
| \n Long-term deferred tax assets | \n\n
| \n\n
| \n\n 34,702 | \n\n
| \n\n
| \n\n
| \n\n 19,403 | \n\n
| \n
| \n Valuation allowance | \n\n
| \n\n
| \n\n (34,702 | \n\n ) | \n\n
| \n\n
| \n\n (1,140 | \n\n ) | \n
| \n Net long-term deferred tax assets | \n\n
| \n\n $ | \n\n — | \n\n
| \n\n
| \n\n $ | \n\n 18,263 | \n\n
| \n
\n
Pursuant to ASC 740, we must consider all positive and negative evidence regarding the realization of deferred tax assets. ASC 740 provides for four possible sources of taxable income to realize deferred tax assets: 1) taxable income in prior carryback years, 2) reversals of existing deferred tax liabilities, 3) tax planning strategies and 4) projected future taxable income. As of September 30, 2015, we have no available taxable income in prior carryback years, limited reversals of existing deferred tax liabilities or prudent and feasible tax planning strategies. Therefore, the recoverability of our deferred tax assets is dependent upon generating future taxable income.
\n\n
Since the fourth quarter of 2008, the Company has maintained a full valuation allowance against its deferred tax assets, having determined it was more likely than not that the deferred tax assets would not be realized. The determination of releasing valuation allowances against deferred tax assets is made, in part, pursuant to our assessment as to whether it is more likely than not that we will generate sufficient future taxable income against which benefits of the deferred tax assets may or may not be realized. Significant judgment is required in making estimates regarding our ability to generate income in future periods.
\nIn the fourth quarter of 2015, we reached the conclusion that it was appropriate to release our valuation allowance against the majority of our deferred tax assets due to the sustained positive operating performance of our operations throughout the entire fiscal year and the projection of future taxable income. Additionally, we maintained a cumulative three year income position throughout fiscal year 2015, reached six consecutive quarters of positive pre-tax operating earnings, and experienced a continued recovery in industry and general economic conditions, all of which were positive factors that overcame prior negative evidence. We also considered forecasts of future operating results and utilization of net operating losses and tax credits prior to their expiration. As a result, we recorded a $27.5 million net reversal of substantially all of our deferred tax asset valuation allowance in the fourth quarter of 2015 after determining it was more likely than not that certain deferred tax assets would be realized. The total valuation allowance as of September 30, 2014 was $37.5 million.
\nAs of September 30, 2015, we had federal net operating loss (NOL) carryforwards for federal income tax purposes of $31.7 million that will begin to expire in 2031 which excludes benefits for share based payments of $14.6 million. State NOL carryforwards for state income tax purposes will expire at various dates through 2032.
\nUnder ASC 740, the impact of uncertain tax positions taken or expected to be taken on an income tax return must be recognized in the financial statements at the largest amount that is more likely than not to be sustained upon audit by the relevant taxing authority. An uncertain income tax position will not be recognized in the financial statements unless it is more likely than not of being sustained. As of September 30, 2014 and 2015, we had approximately $234,000 and $244,000, respectively, of gross unrecognized tax benefits, of which approximately $154,000 and $154,000, respectively, if recognized, would impact the effective tax rate before considering a change in valuation allowance.
\nThe reconciliation of the total amount recorded for unrecognized tax benefits at the beginning and end of the fiscal years ended September 30, 2014 and 2015 is as follows:
\n\n
| \n
| \n\n
| \n\n 2014 | \n\n
| \n\n
| \n\n 2015 | \n\n
| \n||
| \n
| \n\n
| \n\n (Amounts in thousands) | \n\n
| \n|||||
| \n Unrecognized tax benefits at the beginning of the year | \n\n
| \n\n $ | \n\n 224 | \n\n
| \n\n
| \n\n $ | \n\n 234 | \n\n
| \n
| \n Increases in tax positions for prior years | \n\n
| \n\n
| \n\n 10 | \n\n
| \n\n
| \n\n
| \n\n 10 | \n\n
| \n
| \n Unrecognized tax benefits as of September 30, | \n\n
| \n\n $ | \n\n 234 | \n\n
| \n\n
| \n\n $ | \n\n 244 | \n\n
| \n
\n
Consistent with our prior practices, we recognize interest and penalties related to uncertain tax positions as a component of income tax expense. As of September 30, 2014 and 2015, interest and penalties represented approximately $110,000 and $120,000, respectively, of the gross unrecognized tax benefits.
\nWe are subject to tax by both federal and state taxing authorities. Until the respective statutes of limitations expire, we are subject to income tax audits in the jurisdictions in which we operate. We are no longer subject to U.S. federal tax assessments for fiscal years prior to 2011, and we are not subject to assessments prior to the 2010 fiscal year for the majority of the state jurisdictions.
\nWe do not expect a change to the total amount of unrecognized tax benefits in the next 12 months based on examinations by tax authorities, the expiration of statutes of limitations, or potential settlements of outstanding positions.
\n
10. STOCKHOLDERS’ EQUITY:
\nIn April 2015, our Board of Directors approved a new share repurchase plan allowing our company to repurchase up to 1,000,000 shares of our common stock through March 31, 2017. Under the plan, we may buy back common stock from time to time in the open market or in privately negotiated blocks, dependent upon various factors, including price and availability of the shares, and general market conditions. Through September 30, 2015, we had purchased an aggregate of 1,363,333 shares of common stock under the current and historical share repurchase plans for an aggregate purchase price of approximately $26.3 million.
11. STOCK-BASED COMPENSATION:
\nWe 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.
\nCash received from option exercises under all share-based compensation arrangements for the fiscal years ended September 30, 2013, 2014, and 2015 was approximately $3.3 million, $4.2 million, and $3.7 million, respectively. There were no tax benefits realized for tax deductions from option exercises for the fiscal years ended September 30, 2013, 2014, and 2015. We currently expect to satisfy share-based awards with registered shares available to be issued.
12. THE INCENTIVE STOCK PLANS:
\nDuring February 2013, our stockholders approved a proposal to amend the 2011 Stock-Based Compensation Plan (“2011 Plan”) to increase the 1,200,456 share threshold by 1,000,000 shares to 2,200,456 shares. During January 2011, our stockholders approved a proposal to authorize our 2011 Plan, which replaced our 2007 Incentive Compensation Plan (“2007 Plan”). Our 2011 Plan provides for the grant of stock options, stock appreciation rights, restricted stock, stock units, bonus stock, dividend equivalents, other stock related awards, and performance awards (collectively “awards”), that may be settled in cash, stock, or other property. Our 2011 Plan is designed to attract, motivate, retain, and reward our executives, employees, officers, directors, and independent contractors by providing such persons with annual and long-term performance incentives to expend their maximum efforts in the creation of stockholder value. Subsequent to the February 2013 amendment described above, the total number of shares of our common stock that may be subject to awards under the 2011 Plan is equal to 2,000,000 shares, plus: (i) any shares available for issuance and not subject to an award under the 2007 Plan, which was 200,456 shares at the time of approval of the 2011 Plan; (ii) the number of shares with respect to which awards granted under the 2011 Plan and the 2007 Plan terminate without the issuance of the shares or where the shares are forfeited or repurchased; (iii) with respect to awards granted under the 2011 Plan and the 2007 Plan, the number of shares that are not issued as a result of the award being settled for cash or otherwise not issued in connection with the exercise or payment of the award; and (iv) the number of shares that are surrendered or withheld in payment of the exercise price of any award or any tax withholding requirements in connection with any award granted under the 2011 Plan or the 2007 Plan. The 2011 Plan terminates in January 2021, and awards may be granted at any time during the life of the 2011 Plan. The date on which awards vest are determined by the Board of Directors or the Plan Administrator. The Board of Directors has appointed the Compensation Committee as the Plan Administrator. The exercise prices of options are determined by the Board of Directors or the Plan Administrator and are at least equal to the fair market value of shares of common stock on the date of grant. The term of options under the 2011 Plan may not exceed ten years. The options granted have varying vesting periods. To date, we have not settled or been under any obligation to settle any awards in cash.
\nThe following table summarizes option activity from September 30, 2014 through September 30, 2015:
\n\n
| \n
| \n\n
| \n\n Shares \nAvailable \nfor Grant | \n\n
| \n\n
| \n\n Options \nOutstanding | \n\n
| \n\n
| \n\n Aggregate \nIntrinsic \nValue \n(in thousands) | \n\n
| \n\n
| \n\n Weighted \nAverage \nExercise \nPrice | \n\n
| \n\n
| \n\n Weighted \nAverage \nRemaining \nContractual \nLife | \n\n
| \n|||||
| \n Balance as of September 30, 2014 | \n\n
| \n\n
| \n\n 1,350,709 | \n\n
| \n\n
| \n\n
| \n\n 2,226,319 | \n\n
| \n\n
| \n\n $ | \n\n 15,980 | \n\n
| \n\n
| \n\n $ | \n\n 11.70 | \n\n
| \n\n
| \n\n
| \n\n 6.6 | \n\n
| \n
| \n Options authorized | \n\n
| \n\n
| \n\n — | \n\n
| \n\n
| \n\n
| \n\n — | \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n — | \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n
| \n Options granted | \n\n
| \n\n
| \n\n (295,000 | \n\n ) | \n\n
| \n\n
| \n\n 295,000 | \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n $ | \n\n 15.90 | \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n
| \n Options cancelled/forfeited/expired | \n\n
| \n\n
| \n\n 105,814 | \n\n
| \n\n
| \n\n
| \n\n (105,814 | \n\n ) | \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n $ | \n\n 24.45 | \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n
| \n Restricted stock awards issued | \n\n
| \n\n
| \n\n (111,000 | \n\n ) | \n\n
| \n\n
| \n\n — | \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n — | \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n
| \n Options exercised | \n\n
| \n\n
| \n\n — | \n\n
| \n\n
| \n\n
| \n\n (477,631 | \n\n ) | \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n $ | \n\n 6.37 | \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n
| \n Balance as of September 30, 2015 | \n\n
| \n\n
| \n\n 1,050,523 | \n\n
| \n\n
| \n\n
| \n\n 1,937,874 | \n\n
| \n\n
| \n\n $ | \n\n 6,285 | \n\n
| \n\n
| \n\n $ | \n\n 12.95 | \n\n
| \n\n
| \n\n
| \n\n 6.5 | \n\n
| \n
| \n Exercisable as of September 30, 2015 | \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n 1,148,999 | \n\n
| \n\n
| \n\n $ | \n\n 6,121 | \n\n
| \n\n
| \n\n $ | \n\n 11.16 | \n\n
| \n\n
| \n\n
| \n\n 5.1 | \n\n
| \n
\n
The weighted-average grant date fair value of options granted during the fiscal years ended September 30, 2013, 2014, and 2015 was $4.49, $6.23, and $5.80, respectively. The total intrinsic value of options exercised during the fiscal years ended September 30, 2013, 2014, and 2015 was approximately $3.3 million, $4.5 million, and $8.5 million, respectively.
\nAs of September 30, 2014 and 2015, there were approximately $2.2 million and $2.2 million, respectively, of unrecognized compensation costs related to non-vested options that are expected to be recognized over a weighted average period of 1.5 years. The total fair value of options vested during the fiscal years ended September 30, 2013, 2014, and 2015 was approximately $2.5 million, $1.9 million, and $766,000, respectively.
\nWe 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.
\nThe following are the weighted-average assumptions used for the fiscal years ended September 30,
\n\n
| \n
| \n\n
| \n\n 2013 | \n\n
| \n\n
| \n\n 2014 | \n\n
| \n\n
| \n\n 2015 | \n\n
| \n|||
| \n Dividend yield | \n\n
| \n\n
| \n\n 0.0% | \n\n
| \n\n
| \n\n
| \n\n 0.0% | \n\n
| \n\n
| \n\n
| \n\n 0.0% | \n\n
| \n
| \n Risk-free interest rate | \n\n
| \n\n
| \n\n 0.6% | \n\n
| \n\n
| \n\n
| \n\n 0.7% | \n\n
| \n\n
| \n\n
| \n\n 0.9% | \n\n
| \n
| \n Volatility | \n\n
| \n\n
| \n\n 80.1% | \n\n
| \n\n
| \n\n
| \n\n 55.7% | \n\n
| \n\n
| \n\n
| \n\n 47.4% | \n\n
| \n
| \n Expected life | \n\n
| \n\n 4.3 years | \n\n
| \n\n
| \n\n 3.2 years | \n\n
| \n\n
| \n\n 3.1 years | \n\n
| \n
13. EMPLOYEE STOCK PURCHASE PLAN:
\nDuring February 2012, our stockholders approved a proposal to amend our 2008 Employee Stock Purchase Plan (“Stock Purchase Plan”) to increase the number of shares available under that plan by 500,000 shares. The Stock Purchase Plan as amended provides for up to 1,000,000 shares of common stock to be available for purchase by our regular employees who have completed at least one year of continuous service. In addition, there were 52,837 shares of common stock available under our 1998 Employee Stock Purchase Plan, which have been made available for issuance under our Stock Purchase Plan. The Stock Purchase Plan provides for implementation of up to 10 annual offerings beginning on the first day of October starting in 2008, with each offering terminating on September 30 of the following year. Each annual offering may be divided into two six-month offerings. For each offering, the purchase price per share will be the lower of (i) 85% of the closing price of the common stock on the first day of the offering or (ii) 85% of the closing price of the common stock on the last day of the offering. The purchase price is paid through periodic payroll deductions not to exceed 10% of the participant’s earnings during each offering period. However, no participant may purchase more than $25,000 worth of common stock annually.
\nWe 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.
\nThe following are the weighted-average assumptions used for the fiscal years ended September 30,
\n\n
| \n
| \n\n
| \n\n 2013 | \n\n
| \n\n
| \n\n 2014 | \n\n
| \n\n
| \n\n 2015 | \n\n
| \n|||
| \n Dividend yield | \n\n
| \n\n
| \n\n 0.0% | \n\n
| \n\n
| \n\n
| \n\n 0.0% | \n\n
| \n\n
| \n\n
| \n\n 0.0% | \n\n
| \n
| \n Risk-free interest rate | \n\n
| \n\n
| \n\n 0.1% | \n\n
| \n\n
| \n\n
| \n\n 0.1% | \n\n
| \n\n
| \n\n
| \n\n 0.1% | \n\n
| \n
| \n Volatility | \n\n
| \n\n
| \n\n 54.8% | \n\n
| \n\n
| \n\n
| \n\n 39.6% | \n\n
| \n\n
| \n\n
| \n\n 36.1% | \n\n
| \n
| \n Expected life | \n\n
| \n\n Six months | \n\n
| \n\n
| \n\n Six months | \n\n
| \n\n
| \n\n Six months | \n\n
| \n
\n
As of September 30, 2015, we had issued 702,689 shares of common stock under our Stock Purchase Plan.
14. RESTRICTED STOCK AWARDS:
\nWe have granted non-vested (restricted) stock awards (“restricted stock”) and restricted stock units (“RSUs”) to certain key employees pursuant to the 2011 Plan and the 2007 Plan. The restricted stock awards have varying vesting periods, but generally become fully vested between two and four years after the grant date, depending on the specific award. We accounted for the restricted stock awards granted using the measurement and recognition provisions of ASC 718. Accordingly, the fair value of the restricted stock awards is measured on the grant date and recognized in earnings over the requisite service period for each separately vesting portion of the award.
\nThe following table summarizes restricted stock award activity from September 30, 2014 through September 30, 2015:
\n\n
| \n
| \n\n
| \n\n Shares/ \nUnits | \n\n
| \n\n
| \n\n Weighted \nAverage \nGrant Date \nFair Value | \n\n
| \n||
| \n Non-vested balance as of September 30, 2014 | \n\n
| \n\n
| \n\n 3,340 | \n\n
| \n\n
| \n\n $ | \n\n 6.10 | \n\n
| \n
| \n Changes during the period | \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n
| \n Awards granted | \n\n
| \n\n
| \n\n 111,000 | \n\n
| \n\n
| \n\n $ | \n\n 19.23 | \n\n
| \n
| \n Awards vested | \n\n
| \n\n
| \n\n (3,340 | \n\n ) | \n\n
| \n\n $ | \n\n 6.10 | \n\n
| \n
| \n Non-vested balance as of September 30, 2015 | \n\n
| \n\n
| \n\n 111,000 | \n\n
| \n\n
| \n\n $ | \n\n 19.23 | \n\n
| \n
\n
As of September 30, 2015, we had approximately $1.5 million of total unrecognized compensation cost related to non-vested restricted stock awards. We expect to recognize that cost over a weighted-average period of 2.1 years.
15. NET INCOME PER SHARE:
\nThe 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,
\n\n
| \n
| \n\n
| \n\n 2013 | \n\n
| \n\n
| \n\n 2014 | \n\n
| \n\n
| \n\n 2015 | \n\n
| \n|||
| \n Weighted average common shares outstanding used in \ncalculating basic income per share | \n\n
| \n\n
| \n\n 23,253,992 | \n\n
| \n\n
| \n\n
| \n\n 23,916,238 | \n\n
| \n\n
| \n\n
| \n\n 24,466,243 | \n\n
| \n
| \n Effect of dilutive options and non-vested restricted \nstock awards | \n\n
| \n\n
| \n\n 749,736 | \n\n
| \n\n
| \n\n
| \n\n 739,024 | \n\n
| \n\n
| \n\n
| \n\n 636,046 | \n\n
| \n
| \n Weighted average common and common equivalent shares \nused in calculating diluted income per share | \n\n
| \n\n
| \n\n 24,003,728 | \n\n
| \n\n
| \n\n
| \n\n 24,655,262 | \n\n
| \n\n
| \n\n
| \n\n 25,102,289 | \n\n
| \n
\n
During the fiscal years ended September 30, 2013, 2014, and 2015 there were 1,728,042, 1,144,600, and 1,553,207 weighted average shares of options outstanding, respectively, that were not included in the computation of diluted income per share because the options’ exercise prices were greater than the average market price of our common stock, and therefore, their effect would be anti-dilutive.
16. COMMITMENTS AND CONTINGENCIES:
\nLease Commitments
\nWe lease certain land, buildings, machinery, equipment, and vehicles related to our dealerships under non-cancelable third-party operating leases. Certain of our leases include options for renewal periods and provisions for escalation. Rental expenses, including month-to-month rentals, were approximately $5.4 million, $5.8 million, and $6.0 million for the fiscal years ended September 30, 2013, 2014, and 2015, respectively.
\nFuture minimum lease payments under non-cancelable operating leases as of September 30, 2015, were as follows:
\n\n
| \n
| \n\n (Amounts \nin thousands) | \n\n
| \n|
| \n 2016 | \n\n
| \n\n 5,350 | \n\n
| \n
| \n 2017 | \n\n
| \n\n 4,817 | \n\n
| \n
| \n 2018 | \n\n
| \n\n 4,234 | \n\n
| \n
| \n 2019 | \n\n
| \n\n 3,428 | \n\n
| \n
| \n 2020 | \n\n
| \n\n 3,123 | \n\n
| \n
| \n Thereafter | \n\n
| \n\n 11,711 | \n\n
| \n
| \n Total | \n\n $ | \n\n 32,663 | \n\n
| \n
\n
Other Commitments and Contingencies
\nWe 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.
\nIn fiscal 2013 and 2014 we recognized a recovery of approximately $11.7 million and $555,000, net of taxes and other expenses, respectively, from the Deepwater Horizon Settlement Program for damages suffered as a result of the Deepwater Horizon Oil Spill. The recovery was recorded as a reduction in selling, general, and administrative expenses on our consolidated statements of operations. While additional claims are outstanding, we cannot be certain of the amount of any further recovery.
\nDuring the fiscal years ended September 30, 2013, 2014, and 2015, we incurred costs associated with store closings and lease terminations of approximately $162,000, $217,000, and $581,000, respectively. These costs primarily related to the future minimum operating lease payments of the closed locations. The store closings were a key component in our effort to better match our fixed costs with the decline in retail business caused by the soft economic conditions. The store closing costs have been included in selling, general, and administrative expenses in the consolidated statements of operations during the fiscal years ended September 30, 2013, 2014, and 2015.
\nIn 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.
\nWe 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:
\nEmployees are eligible to participate in our 401(k) Profit Sharing Plan (the “Plan”) following their 90-day introductory period starting either April 1 or October 1, provided that they are 21 years of age. Under the Plan, we match 25% of participants’ contributions, up to a maximum of 5% of each participant’s compensation. We contributed, under the Plan, or pursuant to previous similar plans, approximately $440,000, $463,000, and $605,000 for the fiscal years ended September 30, 2013, 2014, and 2015, respectively.
\n
18. QUARTERLY FINANCIAL DATA (UNAUDITED):
\nThe 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.
\n\n
| \n
| \n\n
| \n\n December 31, \n2013 | \n\n
| \n\n
| \n\n March 31, \n2014 | \n\n
| \n\n
| \n\n June 30, \n2014 | \n\n
| \n\n
| \n\n September 30, \n2014 | \n\n
| \n\n
| \n\n December 31, \n2014 | \n\n
| \n\n
| \n\n March 31, \n2015 | \n\n
| \n\n
| \n\n June 30, \n2015 | \n\n
| \n\n
| \n\n September 30, \n2015 | \n\n
| \n||||||||
| \n
| \n\n
| \n\n (Amounts in thousands except share and per share data) | \n\n
| \n|||||||||||||||||||||||||||||
| \n Revenue | \n\n
| \n\n $ | \n\n 109,592 | \n\n
| \n\n
| \n\n $ | \n\n 136,615 | \n\n
| \n\n
| \n\n $ | \n\n 214,401 | \n\n
| \n\n
| \n\n $ | \n\n 164,084 | \n\n
| \n\n
| \n\n $ | \n\n 158,126 | \n\n
| \n\n
| \n\n $ | \n\n 172,143 | \n\n
| \n\n
| \n\n $ | \n\n 231,849 | \n\n
| \n\n
| \n\n $ | \n\n 189,252 | \n\n
| \n
| \n Cost of sales | \n\n
| \n\n
| \n\n 79,682 | \n\n
| \n\n
| \n\n
| \n\n 101,829 | \n\n
| \n\n
| \n\n
| \n\n 160,195 | \n\n
| \n\n
| \n\n
| \n\n 121,168 | \n\n
| \n\n
| \n\n
| \n\n 120,671 | \n\n
| \n\n
| \n\n
| \n\n 129,943 | \n\n
| \n\n
| \n\n
| \n\n 174,809 | \n\n
| \n\n
| \n\n
| \n\n 141,180 | \n\n
| \n
| \n Gross profit | \n\n
| \n\n
| \n\n 29,910 | \n\n
| \n\n
| \n\n
| \n\n 34,786 | \n\n
| \n\n
| \n\n
| \n\n 54,206 | \n\n
| \n\n
| \n\n
| \n\n 42,916 | \n\n
| \n\n
| \n\n
| \n\n 37,455 | \n\n
| \n\n
| \n\n
| \n\n 42,200 | \n\n
| \n\n
| \n\n
| \n\n 57,040 | \n\n
| \n\n
| \n\n
| \n\n 48,072 | \n\n
| \n
| \n Selling, general, \nand administrative \nexpenses | \n\n
| \n\n
| \n\n 32,282 | \n\n
| \n\n
| \n\n
| \n\n 35,687 | \n\n
| \n\n
| \n\n
| \n\n 41,652 | \n\n
| \n\n
| \n\n
| \n\n 36,823 | \n\n
| \n\n
| \n\n
| \n\n 36,095 | \n\n
| \n\n
| \n\n
| \n\n 40,557 | \n\n
| \n\n
| \n\n
| \n\n 41,049 | \n\n
| \n\n
| \n\n
| \n\n 41,734 | \n\n
| \n
| \n (Loss) income from \noperations | \n\n
| \n\n
| \n\n (2,372 | \n\n ) | \n\n
| \n\n
| \n\n (901 | \n\n ) | \n\n
| \n\n
| \n\n 12,554 | \n\n
| \n\n
| \n\n
| \n\n 6,093 | \n\n
| \n\n
| \n\n
| \n\n 1,360 | \n\n
| \n\n
| \n\n
| \n\n 1,643 | \n\n
| \n\n
| \n\n
| \n\n 15,991 | \n\n
| \n\n
| \n\n
| \n\n 6,338 | \n\n
| \n
| \n Interest expense | \n\n
| \n\n
| \n\n 997 | \n\n
| \n\n
| \n\n
| \n\n 1,078 | \n\n
| \n\n
| \n\n
| \n\n 1,051 | \n\n
| \n\n
| \n\n
| \n\n 885 | \n\n
| \n\n
| \n\n
| \n\n 1,146 | \n\n
| \n\n
| \n\n
| \n\n 1,253 | \n\n
| \n\n
| \n\n
| \n\n 1,141 | \n\n
| \n\n
| \n\n
| \n\n 914 | \n\n
| \n
| \n (Loss) income before \nincome tax benefit \n(provision) | \n\n
| \n\n
| \n\n (3,369 | \n\n ) | \n\n
| \n\n
| \n\n (1,979 | \n\n ) | \n\n
| \n\n
| \n\n 11,503 | \n\n
| \n\n
| \n\n
| \n\n 5,208 | \n\n
| \n\n
| \n\n
| \n\n 214 | \n\n
| \n\n
| \n\n
| \n\n 390 | \n\n
| \n\n
| \n\n
| \n\n 14,850 | \n\n
| \n\n
| \n\n
| \n\n 5,424 | \n\n
| \n
| \n Income tax benefit \n(provision) | \n\n
| \n\n
| \n\n — | \n\n
| \n\n
| \n\n
| \n\n — | \n\n
| \n\n
| \n\n
| \n\n — | \n\n
| \n\n
| \n\n
| \n\n (91 | \n\n ) | \n\n
| \n\n
| \n\n — | \n\n
| \n\n
| \n\n
| \n\n — | \n\n
| \n\n
| \n\n
| \n\n — | \n\n
| \n\n
| \n\n
| \n\n 27,414 | \n\n
| \n
| \n Net (loss) income | \n\n
| \n\n $ | \n\n (3,369 | \n\n ) | \n\n
| \n\n $ | \n\n (1,979 | \n\n ) | \n\n
| \n\n $ | \n\n 11,503 | \n\n
| \n\n
| \n\n $ | \n\n 5,117 | \n\n
| \n\n
| \n\n $ | \n\n 214 | \n\n
| \n\n
| \n\n $ | \n\n 390 | \n\n
| \n\n
| \n\n $ | \n\n 14,850 | \n\n
| \n\n
| \n\n $ | \n\n 32,838 | \n\n
| \n
| \n Net (loss) income \nper share: | \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n
| \n Diluted | \n\n
| \n\n $ | \n\n (0.14 | \n\n ) | \n\n
| \n\n $ | \n\n (0.08 | \n\n ) | \n\n
| \n\n $ | \n\n 0.47 | \n\n
| \n\n
| \n\n $ | \n\n 0.21 | \n\n
| \n\n
| \n\n $ | \n\n 0.01 | \n\n
| \n\n
| \n\n $ | \n\n 0.02 | \n\n
| \n\n
| \n\n $ | \n\n 0.59 | \n\n
| \n\n
| \n\n $ | \n\n 1.32 | \n\n
| \n
| \n Weighted average \nnumber of shares: | \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n
| \n Diluted | \n\n
| \n\n
| \n\n 23,715,945 | \n\n
| \n\n
| \n\n
| \n\n 23,845,302 | \n\n
| \n\n
| \n\n
| \n\n 24,719,369 | \n\n
| \n\n
| \n\n
| \n\n 24,813,777 | \n\n
| \n\n
| \n\n
| \n\n 24,947,968 | \n\n
| \n\n
| \n\n
| \n\n 25,265,857 | \n\n
| \n\n
| \n\n
| \n\n 25,316,092 | \n\n
| \n\n
| \n\n
| \n\n 24,883,360 | \n\n
| \n
Cash and Cash Equivalents
\nWe consider all highly liquid investments with an original maturity of three months or less to be cash equivalents.
Vendor Consideration Received
\nWe account for consideration received from our vendors in accordance with FASB Accounting Standards Codification 605-50, “Revenue Recognition - Customer Payments and Incentives” (“ASC 605-50”). ASC 605-50 requires us to classify interest assistance received from manufacturers as a reduction of inventory cost and related cost of sales as opposed to netting the assistance against our interest expense incurred with our lenders. Pursuant to ASC 605-50, amounts received by us under our co-op assistance programs from our manufacturers are netted against related advertising expenses. Further pursuant to ASC 605-50, manufacturer incentives based upon cumulative volume of sales and purchases are recorded when the amounts are probable and reasonably estimable.
Inventories
\nInventory costs consist of the amount paid to acquire inventory, net of vendor consideration and purchase discounts, the cost of equipment added, reconditioning costs, and transportation costs relating to acquiring inventory for sale. We state new and used boat, motor, and trailer inventories at the lower of cost, determined on a specific-identification basis, or market. We state parts and accessories at the lower of cost, determined on an average cost basis, or market. We utilize our historical experience, the aging of the inventories, and our consideration of current market trends as the basis for determining a lower of cost or market valuation allowance. As of September 30, 2014 and 2015, our lower of cost or market valuation allowance for new and used boat, motor, and trailer inventories was $2.2 million and $1.8 million, respectively. If events occur and market conditions change, causing the fair value to fall below carrying value, the lower of cost or market valuation allowance could increase.
Property and Equipment
\nWe 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:
\n\n
| \n
| \n\n
| \n\n Years | \n
| \n Buildings and improvements | \n\n
| \n\n 5-40 | \n
| \n Machinery and equipment | \n\n
| \n\n 3-10 | \n
| \n Furniture and fixtures | \n\n
| \n\n 5-10 | \n
| \n Vehicles | \n\n
| \n\n 3-5 | \n
\n
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
\nWe account for goodwill in accordance with FASB Accounting Standards Codification 350, “Intangibles - Goodwill and Other” (“ASC 350”), which provides that the excess of cost over net assets of businesses acquired is recorded as goodwill. The acquisitions of Bassett Marine, LLC and Parker Boat Company resulted in goodwill of $802,000. In accordance with ASC 350, we review goodwill for impairment at least annually and whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Our annual impairment test is performed during the fourth fiscal quarter. If the carrying amount of goodwill exceeds its fair value we would recognize an impairment loss in accordance with ASC 350. As of September 30, 2015, and based upon our most recent analysis, we determined through our qualitative assessment that it is not “more likely than not” that the fair values of our reporting units are less than their carrying values. As a result, we were not required to perform the two-step goodwill impairment test.
Impairment of Long-Lived Assets
\nFASB Accounting Standards Codification 360-10-40, “Property, Plant, and Equipment - Impairment or Disposal of Long-Lived Assets” (“ASC 360-10-40”), requires that long-lived assets, such as property and equipment and purchased intangibles subject to amortization, be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of the asset is measured by comparison of its carrying amount to undiscounted future net cash flows the asset is expected to generate. If such assets are considered to be impaired, the impairment to be recognized is measured as the amount by which the carrying amount of the asset exceeds its fair market value. Estimates of expected future cash flows represent our best estimate based on currently available information and reasonable and supportable assumptions. Any impairment recognized in accordance with ASC 360-10-40 is permanent and may not be restored. Based upon our most recent analysis, which excludes fixed assets classified as held for sale, we believe no further impairment of long-lived assets existed as of September 30, 2015.
Customer Deposits
\nCustomer 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
\nWe 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
\nWe recognize revenue from boat, motor, and trailer sales, and parts and service operations at the time the boat, motor, trailer, or part is delivered to or accepted by the customer or the service is completed. We recognize deferred revenue from service operations and slip and storage services on a straight-line basis over the term of the contract or when service is completed. We recognize commissions earned from a brokerage sale at the time the related brokerage transaction closes. We recognize commissions earned by us for placing notes with financial institutions in connection with customer boat financing when we recognize the related boat sales. We recognize marketing fees earned on credit life, accident, disability, gap, and hull insurance products sold by third-party insurance companies at the later of customer acceptance of the insurance product as evidenced by contract execution or when the related boat sale is recognized. Pursuant to negotiated agreements with financial and insurance institutions, we are charged back for a portion of these fees should the customer terminate or default on the related finance or insurance contract before it is outstanding for a stipulated minimum period of time. We base the chargeback allowance, which was not material to the consolidated financial statements taken as a whole as of September 30, 2015, on our experience with repayments or defaults on the related finance or insurance contracts.
\nWe 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 determine the chargeback allowance, which was not material to the consolidated financial statements taken as a whole as of September 30, 2015, based upon our experience with terminations or defaults on the service contracts.
\nThe following table sets forth percentages of our revenue generated by certain products and services, for each of last three fiscal years.
\n\n
| \n
| \n\n
| \n\n 2013 | \n\n
| \n\n
| \n\n 2014 | \n\n
| \n\n
| \n\n 2015 | \n\n
| \n|||
| \n New boat sales | \n\n
| \n\n
| \n\n 61.9 | \n\n % | \n\n
| \n\n
| \n\n 65.2 | \n\n % | \n\n
| \n\n
| \n\n 64.3 | \n\n % | \n
| \n Used boat sales | \n\n
| \n\n
| \n\n 19.4 | \n\n % | \n\n
| \n\n
| \n\n 16.8 | \n\n % | \n\n
| \n\n
| \n\n 19.9 | \n\n % | \n
| \n Maintenance, repair, storage, and charter services | \n\n
| \n\n
| \n\n 8.0 | \n\n % | \n\n
| \n\n
| \n\n 7.8 | \n\n % | \n\n
| \n\n
| \n\n 6.9 | \n\n % | \n
| \n Finance and insurance products | \n\n
| \n\n
| \n\n 2.8 | \n\n % | \n\n
| \n\n
| \n\n 2.6 | \n\n % | \n\n
| \n\n
| \n\n 2.5 | \n\n % | \n
| \n Parts and accessories | \n\n
| \n\n
| \n\n 5.5 | \n\n % | \n\n
| \n\n
| \n\n 5.1 | \n\n % | \n\n
| \n\n
| \n\n 4.1 | \n\n % | \n
| \n Brokerage sales | \n\n
| \n\n
| \n\n 2.4 | \n\n % | \n\n
| \n\n
| \n\n 2.5 | \n\n % | \n\n
| \n\n
| \n\n 2.3 | \n\n % | \n
| \n Total revenue | \n\n
| \n\n
| \n\n 100.0 | \n\n % | \n\n
| \n\n
| \n\n 100.0 | \n\n % | \n\n
| \n\n
| \n\n 100.0 | \n\n % | \n
Stock-Based Compensation
\nWe 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
\nWe expense advertising and promotional costs as incurred and include them in selling, general, and administrative expenses in the accompanying consolidated statements of operations. Pursuant to ASC 605-50, we net amounts received by us under our co-op assistance programs from our manufacturers against the related advertising expenses. Total advertising and promotional expenses approximated $9.8 million, $9.5 million, and $10.5 million, net of related co-op assistance of approximately $419,000, $473,000, and $737,000, for the fiscal years ended September 30, 2013, 2014, and 2015, respectively.
Income Taxes
\nWe 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
\nFinancial instruments, which potentially subject us to concentrations of credit risk, consist principally of cash and cash equivalents and accounts receivable. Concentrations of credit risk with respect to our cash and cash equivalents are limited primarily to amounts held with financial institutions. Concentrations of credit risk arising from our receivables are limited primarily to amounts due from manufacturers and financial institutions.
Fair Value of Financial Instruments
\nThe 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
\nThe preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Significant estimates made by us in the accompanying consolidated financial statements relate to valuation allowances, valuation of goodwill and intangible assets, valuation of long-lived assets, and valuation of accruals. Actual results could differ materially from those estimates.
In May 2014, the FASB issued Accounting Standards Update No. 2014-09, “Revenue from Contracts with Customers (Topic 606)” (ASU 2014-9), a converged standard on revenue recognition. The new pronouncement requires revenue recognition to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance also specifies the accounting for some costs to obtain or fulfill a contract with a customer, as well as enhanced disclosure requirements. ASU 2014-9 is effective for annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. Early adoption is not permitted. We currently do not believe the adoption of this standard will have a material impact on our consolidated financial statements.
Useful lives for purposes of computing depreciation are as follows:
\n
| \n
| \n\n
| \n\n Years | \n
| \n Buildings and improvements | \n\n
| \n\n 5-40 | \n
| \n Machinery and equipment | \n\n
| \n\n 3-10 | \n
| \n Furniture and fixtures | \n\n
| \n\n 5-10 | \n
| \n Vehicles | \n\n
| \n\n 3-5 | \n
The following table sets forth percentages of our revenue generated by certain products and services, for each of last three fiscal years.
\n
| \n
| \n\n
| \n\n 2013 | \n\n
| \n\n
| \n\n 2014 | \n\n
| \n\n
| \n\n 2015 | \n\n
| \n|||
| \n New boat sales | \n\n
| \n\n
| \n\n 61.9 | \n\n % | \n\n
| \n\n
| \n\n 65.2 | \n\n % | \n\n
| \n\n
| \n\n 64.3 | \n\n % | \n
| \n Used boat sales | \n\n
| \n\n
| \n\n 19.4 | \n\n % | \n\n
| \n\n
| \n\n 16.8 | \n\n % | \n\n
| \n\n
| \n\n 19.9 | \n\n % | \n
| \n Maintenance, repair, storage, and charter services | \n\n
| \n\n
| \n\n 8.0 | \n\n % | \n\n
| \n\n
| \n\n 7.8 | \n\n % | \n\n
| \n\n
| \n\n 6.9 | \n\n % | \n
| \n Finance and insurance products | \n\n
| \n\n
| \n\n 2.8 | \n\n % | \n\n
| \n\n
| \n\n 2.6 | \n\n % | \n\n
| \n\n
| \n\n 2.5 | \n\n % | \n
| \n Parts and accessories | \n\n
| \n\n
| \n\n 5.5 | \n\n % | \n\n
| \n\n
| \n\n 5.1 | \n\n % | \n\n
| \n\n
| \n\n 4.1 | \n\n % | \n
| \n Brokerage sales | \n\n
| \n\n
| \n\n 2.4 | \n\n % | \n\n
| \n\n
| \n\n 2.5 | \n\n % | \n\n
| \n\n
| \n\n 2.3 | \n\n % | \n
| \n Total revenue | \n\n
| \n\n
| \n\n 100.0 | \n\n % | \n\n
| \n\n
| \n\n 100.0 | \n\n % | \n\n
| \n\n
| \n\n 100.0 | \n\n % | \n
Accounts receivable, net consisted of the following as of September 30,
\n\n
| \n
| \n\n
| \n\n 2014 | \n\n
| \n\n
| \n\n 2015 | \n\n
| \n||
| \n
| \n\n
| \n\n (Amounts in thousands) | \n\n
| \n|||||
| \n Trade receivables | \n\n
| \n\n $ | \n\n 7,175 | \n\n
| \n\n
| \n\n $ | \n\n 13,010 | \n\n
| \n
| \n Amounts due from manufacturers | \n\n
| \n\n
| \n\n 4,974 | \n\n
| \n\n
| \n\n
| \n\n 4,879 | \n\n
| \n
| \n Other receivables | \n\n
| \n\n
| \n\n 398 | \n\n
| \n\n
| \n\n
| \n\n 585 | \n\n
| \n
| \n
| \n\n
| \n\n $ | \n\n 12,547 | \n\n
| \n\n
| \n\n $ | \n\n 18,474 | \n\n
| \n
Inventories, net, consisted of the following as of September 30,
\n\n
| \n
| \n\n
| \n\n 2014 | \n\n
| \n\n
| \n\n 2015 | \n\n
| \n||
| \n
| \n\n
| \n\n (Amounts in thousands) | \n\n
| \n|||||
| \n New boats, motors, and trailers | \n\n
| \n\n $ | \n\n 200,318 | \n\n
| \n\n
| \n\n $ | \n\n 230,359 | \n\n
| \n
| \n Used boats, motors, and trailers | \n\n
| \n\n
| \n\n 37,191 | \n\n
| \n\n
| \n\n
| \n\n 36,992 | \n\n
| \n
| \n Parts, accessories, and other | \n\n
| \n\n
| \n\n 6,642 | \n\n
| \n\n
| \n\n
| \n\n 6,524 | \n\n
| \n
| \n
| \n\n
| \n\n $ | \n\n 244,151 | \n\n
| \n\n
| \n\n $ | \n\n 273,875 | \n\n
| \n
Property and equipment consisted of the following as of September 30,
\n\n
| \n
| \n\n
| \n\n 2014 | \n\n
| \n\n
| \n\n 2015 | \n\n
| \n||
| \n
| \n\n
| \n\n (Amounts in thousands) | \n\n
| \n|||||
| \n Land | \n\n
| \n\n $ | \n\n 40,970 | \n\n
| \n\n
| \n\n $ | \n\n 43,090 | \n\n
| \n
| \n Buildings and improvements | \n\n
| \n\n
| \n\n 84,726 | \n\n
| \n\n
| \n\n
| \n\n 78,425 | \n\n
| \n
| \n Machinery and equipment | \n\n
| \n\n
| \n\n 23,405 | \n\n
| \n\n
| \n\n
| \n\n 24,709 | \n\n
| \n
| \n Furniture and fixtures | \n\n
| \n\n
| \n\n 3,787 | \n\n
| \n\n
| \n\n
| \n\n 3,199 | \n\n
| \n
| \n Vehicles | \n\n
| \n\n
| \n\n 5,543 | \n\n
| \n\n
| \n\n
| \n\n 5,846 | \n\n
| \n
| \n
| \n\n
| \n\n
| \n\n 158,431 | \n\n
| \n\n
| \n\n
| \n\n 155,269 | \n\n
| \n
| \n Accumulated depreciation and amortization | \n\n
| \n\n
| \n\n (56,553 | \n\n ) | \n\n
| \n\n
| \n\n (56,282 | \n\n ) | \n
| \n
| \n\n
| \n\n $ | \n\n 101,878 | \n\n
| \n\n
| \n\n $ | \n\n 98,987 | \n\n
| \n
The components of our benefit (provision) from income taxes consisted of the following for the fiscal years ended September 30,
\n\n
| \n
| \n\n
| \n\n 2013 | \n\n
| \n\n
| \n\n 2014 | \n\n
| \n\n
| \n\n 2015 | \n\n
| \n|||
| \n
| \n\n
| \n\n (Amounts in thousands) | \n\n
| \n|||||||||
| \n Current benefit (provision): | \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n
| \n Federal | \n\n
| \n\n $ | \n\n (101 | \n\n ) | \n\n
| \n\n $ | \n\n (46 | \n\n ) | \n\n
| \n\n $ | \n\n (209 | \n\n ) | \n
| \n State | \n\n
| \n\n
| \n\n 995 | \n\n
| \n\n
| \n\n
| \n\n (45 | \n\n ) | \n\n
| \n\n
| \n\n (87 | \n\n ) | \n
| \n Total current benefit (provision) | \n\n
| \n\n $ | \n\n 894 | \n\n
| \n\n
| \n\n $ | \n\n (91 | \n\n ) | \n\n
| \n\n $ | \n\n (296 | \n\n ) | \n
| \n Deferred benefit (provision): | \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n
| \n Federal | \n\n
| \n\n
| \n\n — | \n\n
| \n\n
| \n\n
| \n\n — | \n\n
| \n\n
| \n\n
| \n\n 22,056 | \n\n
| \n
| \n State | \n\n
| \n\n
| \n\n — | \n\n
| \n\n
| \n\n
| \n\n — | \n\n
| \n\n
| \n\n
| \n\n 5,654 | \n\n
| \n
| \n Total deferred benefit (provision) | \n\n
| \n\n
| \n\n — | \n\n
| \n\n
| \n\n
| \n\n — | \n\n
| \n\n
| \n\n
| \n\n 27,710 | \n\n
| \n
| \n Total income tax benefit (provision) | \n\n
| \n\n $ | \n\n 894 | \n\n
| \n\n
| \n\n $ | \n\n (91 | \n\n ) | \n\n
| \n\n $ | \n\n 27,414 | \n\n
| \n
Below is a reconciliation of the statutory federal income tax rate to our effective tax rate for the fiscal years ended September 30,
\n\n
| \n
| \n\n
| \n\n 2013 | \n\n
| \n\n
| \n\n 2014 | \n\n
| \n\n
| \n\n 2015 | \n\n
| \n|||
| \n Federal tax benefit (provision) | \n\n
| \n\n
| \n\n (35.0 | \n\n )% | \n\n
| \n\n
| \n\n (35.0 | \n\n )% | \n\n
| \n\n
| \n\n (35.0 | \n\n )% | \n
| \n State taxes, net of federal effect | \n\n
| \n\n
| \n\n 0.7 | \n\n % | \n\n
| \n\n
| \n\n (4.4 | \n\n )% | \n\n
| \n\n
| \n\n (3.2 | \n\n )% | \n
| \n Stock based compensation | \n\n
| \n\n
| \n\n (0.6 | \n\n )% | \n\n
| \n\n
| \n\n (0.2 | \n\n )% | \n\n
| \n\n
| \n\n (0.4 | \n\n )% | \n
| \n Valuation allowance | \n\n
| \n\n
| \n\n 45.0 | \n\n % | \n\n
| \n\n
| \n\n 42.5 | \n\n % | \n\n
| \n\n
| \n\n 171.5 | \n\n % | \n
| \n Foreign rate differential | \n\n
| \n\n
| \n\n (2.9 | \n\n )% | \n\n
| \n\n
| \n\n (3.0 | \n\n )% | \n\n
| \n\n
| \n\n (0.3 | \n\n )% | \n
| \n Other | \n\n
| \n\n
| \n\n (0.9 | \n\n )% | \n\n
| \n\n
| \n\n (0.7 | \n\n )% | \n\n
| \n\n
| \n\n (1.3 | \n\n )% | \n
| \n Effective tax rate | \n\n
| \n\n
| \n\n 6.3 | \n\n % | \n\n
| \n\n
| \n\n (0.8 | \n\n )% | \n\n
| \n\n
| \n\n 131.3 | \n\n % | \n
Deferred income taxes reflect the impact of temporary differences between the amount of assets and liabilities recognized for financial reporting purposes and such amounts recognized for income tax purposes. In addition, the company maintains an excess benefit for share based payments of $5.2 million which may be used to offset future income taxes payable. The tax effects of these temporary differences representing the components of deferred tax assets (liabilities) as of September 30,
\n\n
| \n
| \n\n
| \n\n 2014 | \n\n
| \n\n
| \n\n 2015 | \n\n
| \n||
| \n
| \n\n
| \n\n (Amounts in thousands) | \n\n
| \n|||||
| \n Current deferred tax assets: | \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n
| \n Inventories | \n\n
| \n\n $ | \n\n 1,712 | \n\n
| \n\n
| \n\n $ | \n\n 1,361 | \n\n
| \n
| \n Accrued expenses | \n\n
| \n\n
| \n\n 1,110 | \n\n
| \n\n
| \n\n $ | \n\n 911 | \n\n
| \n
| \n Tax loss carryforwards | \n\n
| \n\n
| \n\n - | \n\n
| \n\n
| \n\n $ | \n\n 7,560 | \n\n
| \n
| \n Current deferred tax assets | \n\n
| \n\n
| \n\n 2,822 | \n\n
| \n\n
| \n\n
| \n\n 9,832 | \n\n
| \n
| \n Valuation allowance | \n\n
| \n\n
| \n\n (2,822 | \n\n ) | \n\n
| \n\n
| \n\n (578 | \n\n ) | \n
| \n Net current deferred tax assets | \n\n
| \n\n $ | \n\n — | \n\n
| \n\n
| \n\n $ | \n\n 9,254 | \n\n
| \n
| \n Long-term deferred tax assets: | \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n
| \n Depreciation and amortization | \n\n
| \n\n $ | \n\n 6,008 | \n\n
| \n\n
| \n\n $ | \n\n 5,152 | \n\n
| \n
| \n Stock based compensation | \n\n
| \n\n
| \n\n 3,902 | \n\n
| \n\n
| \n\n $ | \n\n 3,776 | \n\n
| \n
| \n Tax loss carryforwards | \n\n
| \n\n
| \n\n 24,418 | \n\n
| \n\n
| \n\n
| \n\n 9,890 | \n\n
| \n
| \n Other | \n\n
| \n\n
| \n\n 374 | \n\n
| \n\n
| \n\n
| \n\n 585 | \n\n
| \n
| \n Long-term deferred tax assets | \n\n
| \n\n
| \n\n 34,702 | \n\n
| \n\n
| \n\n
| \n\n 19,403 | \n\n
| \n
| \n Valuation allowance | \n\n
| \n\n
| \n\n (34,702 | \n\n ) | \n\n
| \n\n
| \n\n (1,140 | \n\n ) | \n
| \n Net long-term deferred tax assets | \n\n
| \n\n $ | \n\n — | \n\n
| \n\n
| \n\n $ | \n\n 18,263 | \n\n
| \n
The reconciliation of the total amount recorded for unrecognized tax benefits at the beginning and end of the fiscal years ended September 30, 2014 and 2015 is as follows:
\n\n
| \n
| \n\n
| \n\n 2014 | \n\n
| \n\n
| \n\n 2015 | \n\n
| \n||
| \n
| \n\n
| \n\n (Amounts in thousands) | \n\n
| \n|||||
| \n Unrecognized tax benefits at the beginning of the year | \n\n
| \n\n $ | \n\n 224 | \n\n
| \n\n
| \n\n $ | \n\n 234 | \n\n
| \n
| \n Increases in tax positions for prior years | \n\n
| \n\n
| \n\n 10 | \n\n
| \n\n
| \n\n
| \n\n 10 | \n\n
| \n
| \n Unrecognized tax benefits as of September 30, | \n\n
| \n\n $ | \n\n 234 | \n\n
| \n\n
| \n\n $ | \n\n 244 | \n\n
| \n
The following table summarizes option activity from September 30, 2014 through September 30, 2015:
\n\n
| \n
| \n\n
| \n\n Shares \nAvailable \nfor Grant | \n\n
| \n\n
| \n\n Options \nOutstanding | \n\n
| \n\n
| \n\n Aggregate \nIntrinsic \nValue \n(in thousands) | \n\n
| \n\n
| \n\n Weighted \nAverage \nExercise \nPrice | \n\n
| \n\n
| \n\n Weighted \nAverage \nRemaining \nContractual \nLife | \n\n
| \n|||||
| \n Balance as of September 30, 2014 | \n\n
| \n\n
| \n\n 1,350,709 | \n\n
| \n\n
| \n\n
| \n\n 2,226,319 | \n\n
| \n\n
| \n\n $ | \n\n 15,980 | \n\n
| \n\n
| \n\n $ | \n\n 11.70 | \n\n
| \n\n
| \n\n
| \n\n 6.6 | \n\n
| \n
| \n Options authorized | \n\n
| \n\n
| \n\n — | \n\n
| \n\n
| \n\n
| \n\n — | \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n — | \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n
| \n Options granted | \n\n
| \n\n
| \n\n (295,000 | \n\n ) | \n\n
| \n\n
| \n\n 295,000 | \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n $ | \n\n 15.90 | \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n
| \n Options cancelled/forfeited/expired | \n\n
| \n\n
| \n\n 105,814 | \n\n
| \n\n
| \n\n
| \n\n (105,814 | \n\n ) | \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n $ | \n\n 24.45 | \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n
| \n Restricted stock awards issued | \n\n
| \n\n
| \n\n (111,000 | \n\n ) | \n\n
| \n\n
| \n\n — | \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n — | \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n
| \n Options exercised | \n\n
| \n\n
| \n\n — | \n\n
| \n\n
| \n\n
| \n\n (477,631 | \n\n ) | \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n $ | \n\n 6.37 | \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n
| \n Balance as of September 30, 2015 | \n\n
| \n\n
| \n\n 1,050,523 | \n\n
| \n\n
| \n\n
| \n\n 1,937,874 | \n\n
| \n\n
| \n\n $ | \n\n 6,285 | \n\n
| \n\n
| \n\n $ | \n\n 12.95 | \n\n
| \n\n
| \n\n
| \n\n 6.5 | \n\n
| \n
| \n Exercisable as of September 30, 2015 | \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n 1,148,999 | \n\n
| \n\n
| \n\n $ | \n\n 6,121 | \n\n
| \n\n
| \n\n $ | \n\n 11.16 | \n\n
| \n\n
| \n\n
| \n\n 5.1 | \n\n
| \n
The following are the weighted-average assumptions used for the fiscal years ended September 30,
\n\n
| \n
| \n\n
| \n\n 2013 | \n\n
| \n\n
| \n\n 2014 | \n\n
| \n\n
| \n\n 2015 | \n\n
| \n|||
| \n Dividend yield | \n\n
| \n\n
| \n\n 0.0% | \n\n
| \n\n
| \n\n
| \n\n 0.0% | \n\n
| \n\n
| \n\n
| \n\n 0.0% | \n\n
| \n
| \n Risk-free interest rate | \n\n
| \n\n
| \n\n 0.6% | \n\n
| \n\n
| \n\n
| \n\n 0.7% | \n\n
| \n\n
| \n\n
| \n\n 0.9% | \n\n
| \n
| \n Volatility | \n\n
| \n\n
| \n\n 80.1% | \n\n
| \n\n
| \n\n
| \n\n 55.7% | \n\n
| \n\n
| \n\n
| \n\n 47.4% | \n\n
| \n
| \n Expected life | \n\n
| \n\n 4.3 years | \n\n
| \n\n
| \n\n 3.2 years | \n\n
| \n\n
| \n\n 3.1 years | \n\n
| \n
The following are the weighted-average assumptions used for the fiscal years ended September 30,
\n\n
| \n
| \n\n
| \n\n 2013 | \n\n
| \n\n
| \n\n 2014 | \n\n
| \n\n
| \n\n 2015 | \n\n
| \n|||
| \n Dividend yield | \n\n
| \n\n
| \n\n 0.0% | \n\n
| \n\n
| \n\n
| \n\n 0.0% | \n\n
| \n\n
| \n\n
| \n\n 0.0% | \n\n
| \n
| \n Risk-free interest rate | \n\n
| \n\n
| \n\n 0.1% | \n\n
| \n\n
| \n\n
| \n\n 0.1% | \n\n
| \n\n
| \n\n
| \n\n 0.1% | \n\n
| \n
| \n Volatility | \n\n
| \n\n
| \n\n 54.8% | \n\n
| \n\n
| \n\n
| \n\n 39.6% | \n\n
| \n\n
| \n\n
| \n\n 36.1% | \n\n
| \n
| \n Expected life | \n\n
| \n\n Six months | \n\n
| \n\n
| \n\n Six months | \n\n
| \n\n
| \n\n Six months | \n\n
| \n
The following table summarizes restricted stock award activity from September 30, 2014 through September 30, 2015:
\n\n
| \n
| \n\n
| \n\n Shares/ \nUnits | \n\n
| \n\n
| \n\n Weighted \nAverage \nGrant Date \nFair Value | \n\n
| \n||
| \n Non-vested balance as of September 30, 2014 | \n\n
| \n\n
| \n\n 3,340 | \n\n
| \n\n
| \n\n $ | \n\n 6.10 | \n\n
| \n
| \n Changes during the period | \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n
| \n Awards granted | \n\n
| \n\n
| \n\n 111,000 | \n\n
| \n\n
| \n\n $ | \n\n 19.23 | \n\n
| \n
| \n Awards vested | \n\n
| \n\n
| \n\n (3,340 | \n\n ) | \n\n
| \n\n $ | \n\n 6.10 | \n\n
| \n
| \n Non-vested balance as of September 30, 2015 | \n\n
| \n\n
| \n\n 111,000 | \n\n
| \n\n
| \n\n $ | \n\n 19.23 | \n\n
| \n
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,
\n\n
| \n
| \n\n
| \n\n 2013 | \n\n
| \n\n
| \n\n 2014 | \n\n
| \n\n
| \n\n 2015 | \n\n
| \n|||
| \n Weighted average common shares outstanding used in \ncalculating basic income per share | \n\n
| \n\n
| \n\n 23,253,992 | \n\n
| \n\n
| \n\n
| \n\n 23,916,238 | \n\n
| \n\n
| \n\n
| \n\n 24,466,243 | \n\n
| \n
| \n Effect of dilutive options and non-vested restricted \nstock awards | \n\n
| \n\n
| \n\n 749,736 | \n\n
| \n\n
| \n\n
| \n\n 739,024 | \n\n
| \n\n
| \n\n
| \n\n 636,046 | \n\n
| \n
| \n Weighted average common and common equivalent shares \nused in calculating diluted income per share | \n\n
| \n\n
| \n\n 24,003,728 | \n\n
| \n\n
| \n\n
| \n\n 24,655,262 | \n\n
| \n\n
| \n\n
| \n\n 25,102,289 | \n\n
| \n
Future minimum lease payments under non-cancelable operating leases as of September 30, 2015, were as follows:
\n\n
| \n
| \n\n (Amounts \nin thousands) | \n\n
| \n|
| \n 2016 | \n\n
| \n\n 5,350 | \n\n
| \n
| \n 2017 | \n\n
| \n\n 4,817 | \n\n
| \n
| \n 2018 | \n\n
| \n\n 4,234 | \n\n
| \n
| \n 2019 | \n\n
| \n\n 3,428 | \n\n
| \n
| \n 2020 | \n\n
| \n\n 3,123 | \n\n
| \n
| \n Thereafter | \n\n
| \n\n 11,711 | \n\n
| \n
| \n Total | \n\n $ | \n\n 32,663 | \n\n
| \n
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.
\n\n
| \n
| \n\n
| \n\n December 31, \n2013 | \n\n
| \n\n
| \n\n March 31, \n2014 | \n\n
| \n\n
| \n\n June 30, \n2014 | \n\n
| \n\n
| \n\n September 30, \n2014 | \n\n
| \n\n
| \n\n December 31, \n2014 | \n\n
| \n\n
| \n\n March 31, \n2015 | \n\n
| \n\n
| \n\n June 30, \n2015 | \n\n
| \n\n
| \n\n September 30, \n2015 | \n\n
| \n||||||||
| \n
| \n\n
| \n\n (Amounts in thousands except share and per share data) | \n\n
| \n|||||||||||||||||||||||||||||
| \n Revenue | \n\n
| \n\n $ | \n\n 109,592 | \n\n
| \n\n
| \n\n $ | \n\n 136,615 | \n\n
| \n\n
| \n\n $ | \n\n 214,401 | \n\n
| \n\n
| \n\n $ | \n\n 164,084 | \n\n
| \n\n
| \n\n $ | \n\n 158,126 | \n\n
| \n\n
| \n\n $ | \n\n 172,143 | \n\n
| \n\n
| \n\n $ | \n\n 231,849 | \n\n
| \n\n
| \n\n $ | \n\n 189,252 | \n\n
| \n
| \n Cost of sales | \n\n
| \n\n
| \n\n 79,682 | \n\n
| \n\n
| \n\n
| \n\n 101,829 | \n\n
| \n\n
| \n\n
| \n\n 160,195 | \n\n
| \n\n
| \n\n
| \n\n 121,168 | \n\n
| \n\n
| \n\n
| \n\n 120,671 | \n\n
| \n\n
| \n\n
| \n\n 129,943 | \n\n
| \n\n
| \n\n
| \n\n 174,809 | \n\n
| \n\n
| \n\n
| \n\n 141,180 | \n\n
| \n
| \n Gross profit | \n\n
| \n\n
| \n\n 29,910 | \n\n
| \n\n
| \n\n
| \n\n 34,786 | \n\n
| \n\n
| \n\n
| \n\n 54,206 | \n\n
| \n\n
| \n\n
| \n\n 42,916 | \n\n
| \n\n
| \n\n
| \n\n 37,455 | \n\n
| \n\n
| \n\n
| \n\n 42,200 | \n\n
| \n\n
| \n\n
| \n\n 57,040 | \n\n
| \n\n
| \n\n
| \n\n 48,072 | \n\n
| \n
| \n Selling, general, \nand administrative \nexpenses | \n\n
| \n\n
| \n\n 32,282 | \n\n
| \n\n
| \n\n
| \n\n 35,687 | \n\n
| \n\n
| \n\n
| \n\n 41,652 | \n\n
| \n\n
| \n\n
| \n\n 36,823 | \n\n
| \n\n
| \n\n
| \n\n 36,095 | \n\n
| \n\n
| \n\n
| \n\n 40,557 | \n\n
| \n\n
| \n\n
| \n\n 41,049 | \n\n
| \n\n
| \n\n
| \n\n 41,734 | \n\n
| \n
| \n (Loss) income from \noperations | \n\n
| \n\n
| \n\n (2,372 | \n\n ) | \n\n
| \n\n
| \n\n (901 | \n\n ) | \n\n
| \n\n
| \n\n 12,554 | \n\n
| \n\n
| \n\n
| \n\n 6,093 | \n\n
| \n\n
| \n\n
| \n\n 1,360 | \n\n
| \n\n
| \n\n
| \n\n 1,643 | \n\n
| \n\n
| \n\n
| \n\n 15,991 | \n\n
| \n\n
| \n\n
| \n\n 6,338 | \n\n
| \n
| \n Interest expense | \n\n
| \n\n
| \n\n 997 | \n\n
| \n\n
| \n\n
| \n\n 1,078 | \n\n
| \n\n
| \n\n
| \n\n 1,051 | \n\n
| \n\n
| \n\n
| \n\n 885 | \n\n
| \n\n
| \n\n
| \n\n 1,146 | \n\n
| \n\n
| \n\n
| \n\n 1,253 | \n\n
| \n\n
| \n\n
| \n\n 1,141 | \n\n
| \n\n
| \n\n
| \n\n 914 | \n\n
| \n
| \n (Loss) income before \nincome tax benefit \n(provision) | \n\n
| \n\n
| \n\n (3,369 | \n\n ) | \n\n
| \n\n
| \n\n (1,979 | \n\n ) | \n\n
| \n\n
| \n\n 11,503 | \n\n
| \n\n
| \n\n
| \n\n 5,208 | \n\n
| \n\n
| \n\n
| \n\n 214 | \n\n
| \n\n
| \n\n
| \n\n 390 | \n\n
| \n\n
| \n\n
| \n\n 14,850 | \n\n
| \n\n
| \n\n
| \n\n 5,424 | \n\n
| \n
| \n Income tax benefit \n(provision) | \n\n
| \n\n
| \n\n — | \n\n
| \n\n
| \n\n
| \n\n — | \n\n
| \n\n
| \n\n
| \n\n — | \n\n
| \n\n
| \n\n
| \n\n (91 | \n\n ) | \n\n
| \n\n
| \n\n — | \n\n
| \n\n
| \n\n
| \n\n — | \n\n
| \n\n
| \n\n
| \n\n — | \n\n
| \n\n
| \n\n
| \n\n 27,414 | \n\n
| \n
| \n Net (loss) income | \n\n
| \n\n $ | \n\n (3,369 | \n\n ) | \n\n
| \n\n $ | \n\n (1,979 | \n\n ) | \n\n
| \n\n $ | \n\n 11,503 | \n\n
| \n\n
| \n\n $ | \n\n 5,117 | \n\n
| \n\n
| \n\n $ | \n\n 214 | \n\n
| \n\n
| \n\n $ | \n\n 390 | \n\n
| \n\n
| \n\n $ | \n\n 14,850 | \n\n
| \n\n
| \n\n $ | \n\n 32,838 | \n\n
| \n
| \n Net (loss) income \nper share: | \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n
| \n Diluted | \n\n
| \n\n $ | \n\n (0.14 | \n\n ) | \n\n
| \n\n $ | \n\n (0.08 | \n\n ) | \n\n
| \n\n $ | \n\n 0.47 | \n\n
| \n\n
| \n\n $ | \n\n 0.21 | \n\n
| \n\n
| \n\n $ | \n\n 0.01 | \n\n
| \n\n
| \n\n $ | \n\n 0.02 | \n\n
| \n\n
| \n\n $ | \n\n 0.59 | \n\n
| \n\n
| \n\n $ | \n\n 1.32 | \n\n
| \n
| \n Weighted average \nnumber of shares: | \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n\n
| \n
| \n Diluted | \n\n
| \n\n
| \n\n 23,715,945 | \n\n
| \n\n
| \n\n
| \n\n 23,845,302 | \n\n
| \n\n
| \n\n
| \n\n 24,719,369 | \n\n
| \n\n
| \n\n
| \n\n 24,813,777 | \n\n
| \n\n
| \n\n
| \n\n 24,947,968 | \n\n
| \n\n
| \n\n
| \n\n 25,265,857 | \n\n
| \n\n
| \n\n
| \n\n 25,316,092 | \n\n
| \n\n
| \n\n
| \n\n 24,883,360 | \n\n
| \n