What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-02-02 compared with 2020-07-28 · 90 added, 100 removed, 145 unchanged (57% of the section changed)

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Actual results could differ materially from those currently anticipated as a result of a number of factors, including those set forth under “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended September 30, 2020.

In March 2020, the outbreak of COVID-19 caused by a novel strain of the coronavirus was recognized as a pandemic by the World Health Organization, and the outbreak has become increasingly widespread in the United States (including Florida in which we generated approximately 51% and 54% of our revenue during fiscal 2018 and 2019), and other countries in which we operate.

As a result, beginning in March 2020, we had temporarily closed certain departments or locations based on guidance from local government or health officials .

As of today, many of our stores are fully or partially operational.

In March 2020, the outbreak of COVID-19 caused by a novel strain of the coronavirus was recognized as a pandemic by the World Health Organization, and the outbreak is widespread throughout the United States (including Florida in which we generated approximately 54% and 54% of our revenue during fiscal 2019 and 2020), and in other countries in which we operate.

As a result, from March 2020 through June 2020, we temporarily closed certain departments or locations based on guidance from local government or health officials .

While as of today, virtually all of our stores are fully or partially operational, the effects of COVID-19 (including the related international, federal, state, and local governmental actions and regulations) remain unpredictable.

We are following guidelines to ensure we are safely operating as recommended.

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We are the largest recreational boat and yacht retailer in the United States with fiscal 2020 revenue above $1.5 billion.

Through our current 59 retail locations in 16 states (as of the filing of this Quarterly Report on 10-Q), we sell new and used recreational boats and related marine products, including engines, trailers, parts, and accessories.

Through our current 77 retail locations in 21 states, we sell new and used recreational boats and related marine products, including engines, trailers, parts, and accessories.

We also arrange related boat financing, insurance, and extended service contracts;

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In July 2020, we acquired Northrop & Johnson, another leading superyacht brokerage and services company with operations in multiple countries.

In October 2020, we purchased all of the outstanding equity of SkipperBud’s.

SkipperBud’s is one of the largest boat sales, brokerage, service and marina/storage groups in the United States .

MarineMax was incorporated in January 1998 (and reincorporated in Florida in March 2015).

We commenced operations with the acquisition of five independent recreational boat dealers on March 1, 1998.

Since the initial acquisitions in March 1998, we have, as of the filing of this Quarterly Report on 10-Q, acquired 29 recreational boat dealers, four boat brokerage operations, and two full-service yacht repair facilities.

Since the initial acquisitions in March 1998, we have acquired 30 recreational boat dealers, four boat brokerage operations, and two full-service yacht repair facilities.

As a part of our acquisition strategy, we frequently engage in discussions with various recreational boat dealers regarding their potential acquisition by us.

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As a result of these and other factors, a number of potential acquisitions that from time to time appear likely to occur do not result in binding legal agreements and are not consummated.

We completed three acquisitions in the fiscal year ended September 30, 2018, two acquisitions in the fiscal year ended September 30, 2019, and two acquisitions to date in fiscal 2020.

We completed two acquisitions in the fiscal year ended September 30, 2019, two acquisitions in fiscal 2020, and one acquisition to date in fiscal 2021.

General economic conditions and consumer spending patterns can negatively impact our operating results.

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Economic conditions in areas in which we operate dealerships, particularly Florida in which we generated approximately 54% and 54% of our revenue during fiscal 2019 and 2020, respectively, can have a major impact on our operations.

Local influences, such as corporate downsizing, military base closings, and inclement weather such as hurricanes and other storms, environmental conditions, and specific events, such as the BP oil spill in the Gulf of Mexico in 2010, as well as global influences, such as the COVID-19 pandemic, also could adversely affect, and in certain instances have adversely affected, our operations in certain markets.

Local influences, such as corporate downsizing, military base closings, and inclement weather such as hurricanes and other storms, environmental conditions, and specific events, such as the BP oil spill in the Gulf of Mexico in 2010, also could adversely affect, and in certain instances have adversely affected, our operations in certain markets.

In an economic downturn, consumer discretionary spending levels generally decline, at times resulting in disproportionately large reductions in the sale of luxury goods.

Consumer spending on luxury goods also may decline as a result of lower consumer

confidence levels, even if prevailing economic conditions are favorable.

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.

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

Although past economic conditions have adversely affected our operating results, we believe we have capitalized on our core strengths to substantially outperform the industry, resulting in market share gains.

Although past economic conditions have adversely affected our operating results, we believe during and after such conditions we have capitalized on our core strengths to substantially outperform the industry, resulting in market share gains.

Our ability to capture such market share supports the alignment of our retailing strategies with the desires of consumers.

We believe the steps we have taken to address weak market conditions in the past have yielded, and will yield in the future, an increase in revenue.

We believe the steps we have taken to address weak market conditions in the past have yielded, and we believe will yield in the future, an increase in revenue.

Acquisitions remain an important strategy for us, and, subject to a number of conditions, including macro-economic conditions and finding attractive acquisition targets, we plan to explore opportunities through this strategy.

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Pursuant to negotiated agreements with financial institutions, we are charged back for a portion of these fees should the customer terminate or default on the related finance contract before it is outstanding for a stipulated minimum period of time.

We base the chargeback allowance, which was not material to the unaudited condensed consolidated financial statements taken as a whole as of June 30, 2020, on our experience with repayments or defaults on the related finance contracts.

We base the chargeback allowance, which was not material to the unaudited condensed consolidated financial statements taken as a whole as of December 31, 2020, on our experience with repayments or defaults on the related finance contracts.

We recognize variable consideration from commissions earned on extended warranty service contracts sold on behalf of third-party insurance companies at generally the later of customer acceptance of the service contract terms as evidenced by contract execution or recognition of the related boat sale.

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We have determined labor hours expended to be the relevant measure of work performed to co mplete the maintenance and repair service for the customer.

As a practical expedient, since repair and maintenance service contracts have an original duration of one year or less, we do not consider the time value of money, and we do not disclose estimated revenue expected to be recognized in the future for performance obligations that are unsatisfied (or partially unsatisfied) at the end of the reporting period or when we expect to recognize such revenue.

Contract assets , recorded in Prepaid expenses and other current assets, totaled approximately $2.5 million and $ 4.1 million as of September 30, 2019 and June 30, 2020 , respectively.

As a practical expedient, because repair and maintenance service contracts have an original duration of one year or less, we do not consider the time value of money, and we do not disclose estimated revenue expected to be recognized in the future for performance obligations that are unsatisfied (or partially unsatisfied) at the end of the reporting period or when we expect to recognize such revenue.

Contract liabilities primarily consist of customer deposits.

We recognize contract liabilities (customer deposits) as revenue at the time of delivery or acceptance by the customers.

Contract assets, recorded in prepaid expenses and other current assets, totaled approximately $3.6 million and $4.5 million as of December 31, 2019 and December 31, 2020, respectively.

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

We recognize income from the rentals of chartering power yachts over time on a straight-line basis over the term of the contract as our performance obligations are met.

Vendor Consideration Received

V endor Consideration Received

We account for consideration received from our vendors in accordance with ASU 2014-09, “Revenue from Contracts with Customers (Topic 606)”.

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We state parts and accessories at the lower of cost, determined on an average cost basis, or net realizable value.

We utilize our historical experience, the aging of the inventories, and our consideration of current market trends as the basis for determining our lower of cost or net realizable value.

Our valuation allowance contains uncertainties because the calculation requires management to make assumptions and to apply judgment regarding the amount at which the inventory will ultimately be sold which considers forecasted market trends, model changes, and new product introductions.

We do not believe there is a reasonable likelihood that there will be a change in the future estimates or assumptions we use to calculate our valuation allowance which would result in a material effect on our operating results.

As of September 30, 2019 and June 30, 2020, our valuation allowance for new and used boat, motor, and trailer inventories was $2.2 million and $3.4 million, respectively.

If events occur and market conditions change, causing the fair value to fall below carrying value, the valuation allowance could increase.

We utilize our historical experience, the aging of the inventories, and our consideration of current market trends as the basis for determining a lower of cost or net realizable value valuation allowance.

Our lower of cost or net realizable value valuation allowance contains uncertainties because the calculation requires management to make assumptions and to apply judgment regarding the amount at which the inventory will ultimately be sold which considers forecasted market trends, model changes, and new product introductions.

We do not believe there is a reasonable likelihood that there will be a change in the future estimates or assumptions we use to calculate our lower of cost or net realizable value valuation allowance which would result in a material effect on our operating results.

As of September 30, 2020 and December 31, 2020, our lower of cost or net realizable value valuation allowance for new and used boat, motor, and trailer inventories was $2.4 million and $2.3 million, respectively.

If events occur and market conditions change, causing the fair value to fall below carrying value, the lower of cost of net realizable value valuation allowance could increase.

We account for goodwill in accordance with FASB Accounting Standards Codification 350, “Intangibles — Goodwill and Other” (“ASC 350”), which provides that the excess of cost over net assets of businesses acquired is recorded as goodwill.

In July 2019, we purchased Fraser Yachts Group, a leading superyacht brokerage and the largest luxury yacht services company in the world.

In April 2019, we purchased Sail & Ski Center, a privately owned boat dealer located in Texas.

In February 2020, we purchased Boatyard, a mobile software developer for the marine industry.

In total, current and previous acquisitions have resulted in the recording of $65.4 million in goodwill and other intangible assets as of June 30, 2020.

In October 2020, we purchased all of the outstanding equity of SkipperBud’s.

In July 2020, we purchased Northrop & Johnson, a leading superyacht brokerage and services company.

In March 2020, we purchased Boatyard, a digital platform with an expansive range of on-demand services to streamline the boating experience by qualified service providers from a smartphone.

In July 2019, we purchased Fraser Yachts Group , a leading superyacht brokerage and largest luxury yacht services company .

In total, current and previous acquisitions have resulted in the recording of $84.3 million and $143.1 million in goodwill and other intangible assets as of September 30, 2020 and December 31, 2020, respectively.

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.

impairment tes t is performed during the third 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 June 30, 2020, 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 of December 31, 2020, and based upon our most recent analysis, we determined through our qualitative assessment that it is not “more likely than not” that the fair values of our reporting units are less than their carrying values.

As a result, we were not required to perform a quantitative goodwill impairment test.

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Any impairment recognized in accordance with ASC 360-10-40 is permanent and may not be restored.

Based upon our most recent analysis, we believe no impairment of long-lived assets existed as of June 30, 2020.

Based upon our most recent analysis, we believe no impairment of long-lived assets existed as of December 31, 2020.

We do not believe there is a reasonable likelihood that there will be a change in the future estimates or assumptions used to test for recoverability which would result in a material effect on our operating results.

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We account for our stock-based compensation plans following the provisions of FASB Accounting Standards Codification 718, “Compensation — Stock Compensation” (“ASC 718”).

In accordance with ASC 718, we use the Black-Scholes valuation model for valuing all stock-based compensation and shares purchased under our Employee Stock Purchase Plan.

In accordance with ASC 718, we use the Black-Scholes valuation model for valuing all options granted 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.

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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.

Due to the uncertainties caused by the COVID-19 pandemic, we cannot reliably estimate the overall annual effective tax rate in the current reporting period and as such have used the actual effective tax rate for the nine months ended June 30, 2020 to account for income taxes.

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.

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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 June 30, 2020, we have no available taxable income in prior carryback years, limited reversals of existing deferred tax liabilities or prudent and feasible tax planning strategies.

As of December 31, 2020, we have (i) no available taxable income in prior carryback years;

(ii) limited reversals of existing deferred tax liabilities and (iii) prudent and feasible tax planning strategies.

Therefore, the recoverability of our deferred tax assets is dependent upon generating future taxable income.

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Significant judgment is required in making estimates regarding our ability to generate income in future periods.

In response to the COVID-19 pandemic, the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) was signed into law in March 2020.

The CARES Act lifts certain deduction limitations originally imposed by the Tax Cuts and Jobs Act of 2017 (“2017 Tax Act”).

Corporate taxpayers may carryback net operating losses (“NOLs”) originating during 2018 through 2020 for up to five years, which was not previously allowed under the 2017 Tax Act.

The CARES Act also eliminates the 80% of taxable income limitations by allowing corporate entities to fully utilize NOL carryforwards to offset taxable income in 2018, 2019 or 2020.

Taxpayers may generally deduct interest up to the sum of 50% of adjusted taxable income plus business interest income (30% limit under the 2017 Tax Act) for tax years beginning January 1, 2019 and 2020.

The CARES Act allows taxpayers with alternative minimum tax credits to claim a refund in 2020 for the entire amount of the credits instead of recovering the credits through refunds over a period of years, as originally enacted by the 2017 Tax Act.

The enactment of the CARES Act did not result in any material adjustments to the Company’s income tax provision for the three months ended December 31, 2020, or to its net deferred tax assets as of December 31, 2020.

The application of income tax law is inherently complex.

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Consolidated Results of Operations

The following discussion compares the three and nine months ended June 30, 2020, with the three and nine months ended June 30, 2019 and should be read in conjunction with the unaudited condensed consolidated financial statements, including the related notes thereto, appearing elsewhere in this report.

Three Months Ended June 30, 2020 Compared with Three Months Ended June 30, 2019

Revenue increased $114.8 million, or 29.9%, to $498.3 million for the three months ended June 30, 2020, from $383.5 million for the three months ended June 30, 2019.

Of this increase, $132.0 million was attributable to a 36.7% increase in comparable-store sales, which was partially offset by an approximate $17.2 million net decrease related to stores opened and closed that were not eligible for inclusion in the comparable-store base.

The increase in our comparable-store sales was primarily due to increases in new and used boat revenue.

The significance of the impact of the COVID-19 pandemic on the Company’s business and the duration for which it may have an impact cannot be determined at this time.

However, we believe our customers desire to spend more time out on the water, which helped to drive the comparable-store sales growth, will be resilient.

Gross Profit.

Gross profit increased $25.8 million, or 26.4%, to $123.5 million for the three months ended June 30, 2020, from $97.7 million for the three months ended June 30, 2019.

Gross profit as a percentage of revenue decreased to 24.8% for the three months ended June 30, 2020 from 25.5% for the three months ended June 30, 2019.

The decrease in gross profit as a percentage of revenue was primarily the result of increases in new and used boat sales which carry lower margins than our higher margin businesses, partially offset by addition of Fraser Yachts Group, a higher margin business .

The increase in gross profit dollars was primarily attributable to increased new and used boat sales.

Selling, General, and Administrative Expenses.

Selling, general, and administrative expense increased $5.8 million, or 8.4%, to $74.8 million for the three months ended June 30, 2020, from $69.0 million for the three months ended June 30, 2019.

Selling, general, and administrative expenses as a percentage of revenue decreased to 15.0% for the three months ended June 30, 2020 from 18.0% for the three months ended June 30, 2019.

The decrease in selling, general, and administrative expenses as a percentage of revenue was primarily driven by increased revenue combined with increased efficiencies and operating leverage in the business.

The increase in dollars was primarily attributable to increased commissions resulting from increased new and used boat sales and increased compensation due to improved performance.

Interest Expense.

Interest expense decreased $0.8 million, or 27.5%, to $2.1 million for the three months ended June 30, 2020 from $2.9 million for the three months ended June 30, 2019.

Interest expense as a percentage of revenue decreased to 0.4% for the three months ended June 30, 2020 from 0.8% for the three months ended June 30, 2019.

The decrease in interest expense was primarily the result of lower interest rates and declining inventory levels.

Income Taxes.

Income tax expense increased $4.9 million, or 73.1%, to $11.6 million for the three months ended June 30, 2020, from $6.7 million for the three months ended June 30, 2019.

Our effective income tax rate decreased to 24.9% for the three months ended June 30, 2020 from 26.0% for the three months ended June 30, 2019.

Due to the uncertainties surrounding the COVID-19 pandemic, we changed from using a projected effective tax rate to an actual effective tax rate to estimate income tax expense for the three months ended June 30, 2020.

Nine Months Ended June 30, 2020 Compared with Nine Months Ended June 30, 2019

Revenue increased $181.9 million, or 19.6%, to $1.11 billion for the nine months ended June 30, 2020, from $929.0 million for the nine months ended June 30, 2019.

Of this increase, $192.8 million was attributable to a 21.8% increase in comparable-store sales, which was partially offset by an approximate $10.9 million net decrease related to stores opened and closed that were not eligible for inclusion in the comparable-store base.

The increase in our comparable-store sales was primarily due to increases in new and used boat revenue and our higher margin finance and insurance products, brokerage, and storage services.

The following discussion compares the three months ended December 31, 2020, with the three months ended December 31, 2019 and should be read in conjunction with the unaudited condensed consolidated financial statements, including the related notes thereto, appearing elsewhere in this report.

Three Months Ended December 31, 2020 Compared with Three Months Ended December 31, 2019

Revenue increased $107.3 million, or 35.3%, to $411.5 million for the three months ended December 31, 2020, from $304.2 million for three months ended December 31, 2019.

The increase was due to a net increase of $61.5 million or 20.2% in comparable-store sales and an increase of $45.8 million from stores opened, stores closed, and acquisitions that are not eligible for inclusion in the comparable-store base for the full period.

The increase in our comparable-store sales was primarily due to demand driven increases in new and used boat revenue and our higher margin finance and insurance products, brokerage, parts, service, and storage services.

Gross Profit.

Gross profit increased $46.8 million, or 19.9%, to $282.2 million for the nine months ended June 30, 2020, from $235.4 million for the nine months ended June 30, 2019.

Gross profit as a percentage of revenue increased to 25.4% for the nine months ended June 30, 2020 from 25.3% for the nine months ended June 30, 2019.

The increase in gross profit as a percentage of revenue was primarily the result of improvement in our higher margin businesses, including the addition of Fraser Yachts Group.

Gross profit increased $43.4 million, or 54.2%, to $123.4 million for the three months ended December 31, 2020, from $80.0 million for the three months ended December 31, 2019.

Gross profit as a percentage of revenue increased to 30.0% for the three months ended December 31, 2020 from 26.3% for the three months ended December 31, 2019 .

The increase in gross profit as a percentage of revenue was primarily the result of demand driven increased new and used boat margins and increases in our higher margin businesses, including the additional sales of Northrop & Johnson (which typically carry higher margins), as a percentage of sales.

The increase in gross profit dollars was primarily attributable to increased new and used boat sales.

Selling, General, and Administrative Expenses.

Selling, general, and administrative expense increased $20.9 million, or 11.1%, to $208.3 million for the nine months ended June 30, 2020, from $187.4 million for the nine months ended June 30, 2019.

Selling, general, and administrative expenses as a percentage of revenue decreased to 18.7% for the nine months ended June 30, 2020 from

20.2 % for the nine months ended June 30, 2019 .

The decrease in selling, general, and administrative expenses as a percentage of revenue was driven primarily by increased revenue combined with increased efficiencies and operating leverage in the business .

The increase in dollars was primarily attributable to increased commissions resulting from increased new and used boat sales and increased compensation due to improved performance.

Selling, general, and administrative expense increased $27.0 million, or 42.0%, to $91.4 million for the three months ended December 31, 2020, from $64.4 million for the three months ended December 31, 2019.

The increase in selling, general, and administrative expenses was driven by the increases in revenue from increases in comparable-store sales and acquisitions.

Interest Expense.

Interest expense remained consistent at $8.5 million for the nine months ended June 30, 2020, and for the nine months ended June 30, 2019.

Interest expense as a percentage of revenue decreased to 0.8% for the nine months ended June 30, 2020, from 0.9% for the nine months ended June 30, 2019.

Interest expense decreased $2.0 million, or 60.6%, to $1.3 million for the three months ended December 31, 2020, from $3.3 million for the three months ended December 31, 2019.

Interest expense as a percentage of revenue decreased to 0.3% for the three months ended December 31, 2020 from 1.1% for the three months ended December 31, 2019.

The decrease in interest expense was primarily the result of decreased interest rates and decreased borrowings.

Income Taxes.

Income tax expense increased $6.2 million, or 60.7%, to $16.4 million for the nine months ended June 30, 2020, from $10.2 million for the nine months ended June 30, 2019.

Our effective income tax rate decreased to 25.1% for the nine months ended June 30, 2020 from 25.8% for nine months ended June 30, 2019.

Income tax expense increased $3.9 million, or 120.8%, to $7.1 million for the three months ended December 31, 2020, from $3.2 million for the three months ended December 31, 2019.

Our effective income tax rate decreased to 23.2% for the

three months ended December 31, 2020, from 26.3% for three months ended December 31, 2019.

The decrease in the effective income tax rate was primarily attributed to excess equity compensation for tax purposes.

Liquidity and Capital Resources

Our cash needs are primarily for working capital to support operations, including new and used boat and related parts inventories, off-season liquidity, and growth through acquisitions and new store openings.

Acquisitions and new store openings remain important strategies to our company, and we have recently completed certain acquisitions, and we plan to explore growth opportunities through these strategies.

Our cash needs are primarily for working capital to support operations, including new and used boat and related parts inventories, off-season liquidity, and growth through acquisitions.

Acquisitions remain an important strategy for us, and we plan to continue our growth through this strategy in appropriate circumstances.

However, we cannot predict the return of, or length of, favorable economic or financial conditions.

We regularly monitor the aging of our inventories and current market trends to evaluate our current and future inventory needs.

We also use this evaluation in conjunction with our review of our current and expected operating performance and expected business levels to determine the adequacy of our financing needs.

Our cash needs historically have been financed with cash generated from operations and borrowings under the Credit Facility.

These cash needs historically have been financed with cash generated from operations and borrowings under the Credit Facility (described below).

Our ability to utilize the Credit Facility to fund operations depends upon the collateral levels and compliance with the covenants of the Credit Facility.

Any turmoil in the credit markets and weakness in the retail markets may interfere with our ability to remain in compliance with the covenants of the Credit Facility and therefore our ability to utilize the Credit Facility to fund operations.

As of June 30, 2020, we were in compliance with all covenants under the Credit Facility.

As of December 31, 2020, we were in compliance with all covenants under the Credit Facility.

We currently depend upon dividends and other payments from our dealerships and the Credit Facility to fund our current operations and meet our cash needs.

As 100% owner of each of our dealerships, we determine the amounts of such distributions subject to applicable law, and currently, no agreements exist that restrict this flow of funds from our dealerships.

For the nine months ended June 30, 2020 and 2019 cash provided by operating activities was approximately $221.3 million, and $4.4 million, respectively.

For the nine months ended June 30, 2020, cash provided by operating activities was primarily related to decreases in inventory, increases in accounts payable, accrued expenses and other liabilities, customer deposits, and our net income adjusted for non-cash expenses such as depreciation and amortization expense, deferred income tax provision, and stock-based compensation expense, partially offset by increases in accounts receivable and prepaid expenses and other assets.

For the nine months ended June 30, 2019, cash provided by operating activities was primarily related to our net income adjusted for non-cash expenses such as depreciation and amortization expense, deferred income tax provision, and stock-based compensation expense, and increases in accounts payable, customer deposits, and accrued expenses and other long-term liabilities, partially offset by increases in accounts receivable, inventories, and prepaid expenses and other assets.

For the nine months ended June 30, 2020 and 2019, cash used in investing activities was approximately $7.2 million and $25.4 million, respectively.

For the nine months ended June 30, 2020, cash used in investing activities was primarily used to purchase property and equipment associated with improving existing retail facilities and acquisitions, partially offset by proceeds received from the sale of property and equipment.

For the nine months ended June 30, 2019, cash used in investing activities was primarily used to purchase property and equipment associated with improving existing retail facilities and the purchase of inventory and property and equipment associated with business acquisitions, partially offset by the proceeds from the sale of certain property and equipment.

For the nine months ended June 30, 2020, cash used in financing activities was $165.9 million.

For the nine months ended June 30, 2019 , cash provided by financing activities was approximately $43.7 million.

For the nine months ended June 30, 2020, cash used in financing activities was primarily attributable to decreases in net short-term borrowings as a result of decreased inventory levels, payments on tax withholdings for equity awards, and by the repurchase of common stock under the share repurchase program, partially offset by proceeds from the issuance of common stock from our stock based compensation plans.

For the nine months ended June 30, 2019 , cash provided by financing activities was primarily attributable to net short-term borrowings as a result of increased inventory levels and proceeds from the issuance of common stock from our stock based compensation plans, partially offset by the repurchase of common stock under the share repurchase programs and payments on tax withholdings for equity awards.

For the three months ended December 31, 2020 and 2019, cash used in operating activities was approximately $12.8 million and $19.3 million, respectively.

For the three months ended December 31, 2020, cash used in operating activities was primarily related to increases in inventory and prepaid expenses and other assets, decreases in accounts payable and accrued expenses, partially offset by decreases in accounts receivable, increases in customer deposits, and our net income adjusted for non-cash expenses such as depreciation and amortization expense, deferred income tax provision, and stock-based compensation expense.

For the three months ended December 31, 2019, cash used in operating activities was primarily related to increases in inventory and prepaid expenses and other assets, decreases in accounts payable, accrued expenses, and customer deposits, partially offset by decreases in accounts receivable and our net income adjusted for non-cash expenses such as depreciation and amortization expense, deferred income tax provision, and stock-based compensation expense.

For the three months ended December 31, 2020 and 2019, cash used in investing activities was approximately $55.2 million and $4.4 million, respectively.

For the three months ended December 31, 2020, cash used in investing activities was primarily used for acquisitions and to purchase property and equipment associated with improving existing retail facilities.

For the three months ended December 31, 2019, cash used in investing activities was primarily used to purchase property and equipment associated with improving existing retail facilities.

For the three months ended December 31, 2020 and 2019, cash provided by financing activities was $33.1 million and $21.0 million, respectively.

For the three months ended December 31, 2020, cash provided by financing activities was primarily attributable to proceeds from long-term debt and proceeds from the issuance of common stock from our stock based compensation plans, partially offset by net payments on short-term borrowings, payments on tax withholdings for equity awards, and payments for long-term debt and debt issuance costs.

For the three months ended December 31, 2019, cash provided by financing activities was primarily attributable to net short-term borrowings as a result of increased inventory levels and proceeds from the issuance of common stock from our stock based compensation plans, partially offset by payments on tax withholdings for equity awards.

In May 2020, we entered into a Loan and Security Agreement (the “Credit Facility”), with Wells Fargo Commercial Distribution Finance LLC, M&T Bank, Bank of the West, and Truist Bank.

The Credit Facility has a three-year term and expires in

May 2023, subject to extension for two one-year periods, with lender approval.

The Credit Facility provides the Company a line of credit with asset based borrowing availability of up to $440 million for working capital and inventory financing, with the amount permissible pursuant to a borrowing base formula.

The Credit Facility has a three-year term and expires in May 2023, subject to extension for two one-year periods, with lender approval.

The Credit Facility has certain financial covenants as specified in the agreement.

The covenants include provisions that our leverage ratio must not exceed 2.75 to 1.0 and that our current ratio must be greater than 1.2 to 1.0.

The interest rate for amounts outstanding under the Credit Facility is 345 basis points plus the greater of 75 basis points or the one-month London Inter-Bank Offering Rate (“LIBOR”).

The interest rate for amounts outstanding under the Credit Facility is 345 basis points plus the greater of 75 basis points or the one-month LIBOR.

There is an unused line fee of ten basis points on the unused portion of the Credit Facility.

New inventory borrowing eligibility will generally mature 1,080 days from the original invoice date.

Used inventory borrowing eligibility will generally mature 361 days from the date we acquire the used inventory.

The collateral for the Credit Facility is all of our personal property with certain limited exceptions.

Advances under the Credit Facility are initiated by the acquisition of eligible new and used inventory or are re-advances against eligible new and used inventory that have been partially paid-off.

Advances on new inventory will generally mature 1,080 days from the original invoice date.

Advances on used inventory will mature 361 days from the date we acquire the used inventory.

Each advance is subject to a curtailment schedule, which requires that we pay down the balance of each advance on a periodic basis starting

after six months.

The curtailment schedule varies based on the type and value of the inventory.

The collateral for the Credit Facility is primarily the Company’s inventory that is financed through the Credit Facility and related accounts receivable.

None of our real estate has been pledged for collateral for the Credit Facility.

As of June 30, 2020, our indebtedness associated with financing our inventory and working capital needs totaled approximately $147.0 million.

As of June 30, 2019 and 2020, the interest rate on the outstanding short-term borrowings was approximately 5.9% and 3.9%, respectively.

As of June 30, 2020, our additional available borrowings under our Credit Facility were approximately $93.4 million based upon the outstanding borrowing base availability.

The aging of our inventory limits our borrowing capacity as defined curtailments reduce the allowable advance rate as our inventory ages.

As of December 31, 2020, our indebtedness associated with financing our inventory and working capital needs totaled approximately $163.4 million.

As of December 31, 2019 and 2020, the interest rate on the outstanding short-term borrowings was approximately 5.6% and 4.2%, respectively.

As of December 31, 2020, our additional available borrowings under our Credit Facility were approximately $133.4 million based upon the outstanding borrowing base availability.

As of December 31, 2020 we had approximately $50.1 million in long-term debt, net of current maturities as a result of our mortgage facilities.

See Note 10 of the Notes to Unaudited Condensed Consolidated Financial Statements.

Except as specified in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and in the unaudited condensed consolidated financial statements in the “Financial Statements (Unaudited)”, we have no material commitments for capital for the next 12 months.

Based on the information currently available to us, the COVID-19 pandemic’s impact on consumer demand is uncertain, we believe that the cash generated from sales and our existing capital resources will be adequate to meet our liquidity and capital requirements for at least the next 12 months, except for possible significant acquisitions.

Based on the information currently available to us, the COVID-19 pandemic’s impact on consumer demand is uncertain, however, we believe that the cash generated from sales and our existing capital resources will be adequate to meet our liquidity and capital requirements for at least the next 12 months, except for possible significant acquisitions.

Impact of Seasonality and Weather on Operations

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Our business is also subject to weather patterns, which may adversely affect our results of operations.

For example, prolonged or severe winter conditions, drought conditions (or merely reduced rainfall levels) or excessive rain, may limit access to area boating locations or render boating dangerous or inconvenient, thereby curtailing customer demand for our products and services.

In addition, unseasonably cool weather and prolonged or severe winter conditions may lead to a shorter selling season in certain locations.

Hurricanes and other storms could result in disruptions of our operations or damage to our boat inventories and facilities, as has been the case when Florida and other markets were affected by hurricanes.

For example, prolonged winter conditions, drought conditions (or merely reduced rainfall levels) or excessive rain, may limit access to area boating locations or render boating dangerous or inconvenient, thereby curtailing customer demand for our products.

In addition, unseasonably cool weather and prolonged winter conditions may lead to a shorter selling season in certain locations.

Although our geographic diversity is likely to reduce the overall impact to us of adverse weather conditions in any one market area, these conditions will continue to represent potential, material adverse risks to us and our future financial performance.

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What changed 10-Q

Item 2. Management’s Discussion and Analysis