WARRANTY COSTS AND OTHER CONTINGENCIES

9 Months Ended

Sep. 30, 2012

Warranty Costs

The Company warrants the entire boat, excluding the engine, against defects in materials and workmanship for a period of one year. The Company also warrants the entire deck and hull, including its bulkhead and supporting stringer system, against defects in materials and workmanship for periods extending up to 10 years. The Company records the estimated future warranty costs at the time of the sale based on its historical claims experience. An analysis of the warranty accruals for the nine months ended September 30, 2012 and 2011 is as follows:

(in thousands)	2012			2011
Balance at beginning of period	$	1,973		$	2,550
Less: Payments made during the period		(1,286	)		(1,184	)
Add: Warranty provision for the period		1,698			1,649
Changes to warranty provision for prior periods		92			(609	)
Balance at September 30	$	2,477		$	2,406

The warranty accruals are recorded in accrued expenses and other liabilities on the consolidated balance sheet.

Repurchase Obligations

The Company is a party to various agreements with third party lenders that provide floor plan financing to qualifying dealers whereby the Company guarantees varying amounts of debt on boats in dealer inventory. The Company’s obligation under these guarantees becomes effective in the case of a default under the financing arrangement between the dealer and the third party lender. The agreements provide for the return of repossessed boats to the Company in new and unused condition subject to normal wear and tear as defined, in exchange for the Company’s assumption of specified percentages of the debt obligation on those boats, up to certain contractually determined dollar limits by lender. The Company became contractually obligated to repurchase inventory of approximately $0.8 million during the year ended December 31, 2011 all of which were redistributed among existing and replacement dealers. There was no material repurchases of inventory under contractual agreements during the nine months ended September 30, 2012.

Management continues to monitor the risk of additional defaults and resulting repurchase obligations based in part on information provided by the third-party floor plan lenders and will adjust the guarantee liability at the end of each reporting period based on information reasonably available at that time.

The Company currently has an agreement with one of the floor plan lenders whereby the contractual repurchase limit is to not exceed 15 percent of the amount of the average net receivables financed by the floor plan lender for dealers during the prior 12 month period. The Company has contractual repurchase agreements with additional lenders for an aggregate maximum repurchase obligation of approximately $6.0 million with various expiration and cancellation terms of less than one year, for an aggregate repurchase obligation with all floor plan financing institutions of approximately $10.8 million as of September 30, 2012.