.{
0
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☑QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
☑ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended: DecemberMarch 31, 20172024
OR
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 001-37502
MCBC
MASTERCRAFT BOAT HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
Delaware | 06-1571747 | |
(State or Other Jurisdiction | (I.R.S. Employer | |
of Incorporation or Organization) | Identification No.) |
100 Cherokee Cove Drive, Vonore, TN37885
(Address of Principal Executive Office) (Zip Code)
(423) (423) 884-2221
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Common Stock | MCFT | NASDAQ |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.☑Yes☐ No
☑ Yes ☐ No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§229.405232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).☑Yes☐ No
☑ Yes ☐ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☐ | Accelerated filer | ☑ | |
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Non-accelerated filer |
| Smaller reporting company |
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Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☑☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).☐ Yes ☑ No
☐ Yes ☑ No
As of February 5, 2018,May 3, 2024, there were 18,679,13116,981,048 shares of the Registrant’s common stock, par value $0.01 per share, issued and outstanding.
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Page | ||
PART I | FINANCIAL INFORMATION | |
Item 1. | Financial Statements | |
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4 | ||
5 | ||
Unaudited Condensed Consolidated | 6 | |
7 | ||
Notes to Unaudited Condensed Consolidated Financial Statements | 8 | |
Management’s Discussion and Analysis of Financial Condition and Results of Operations | 18 | |
26 | ||
26 | ||
27 | ||
27 | ||
27 | ||
28 | ||
28 | ||
28 | ||
29 | ||
30 |
2
2
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This quarterly reportQuarterly Report on Form 10-Q contains certain “forward-looking statements” within the meaning of the federal securities laws. WeThese forward-looking statements can generally be identified by the use of statements that include words such as “could,” “may,” “might,” “will,” “expect,” “likely,” “believe,” “continue,” “anticipate,” “estimate,” “intend,” “plan,” “project” and other similar expressions to identify some but not all forward-looking statements and include statements in this quarterly report on Form 10-Q concerning our pipeline of new models;
our ability to continue our operating momentum, capture additional market share and deliver continued growth; expectations regarding driving margin expansion, sales increases and organic growth; the successful integration of Nautic Star, LLC into our business; our fiscal 2018 outlook and key growth initiatives.words or phrases. Forward-looking statements involve estimates and uncertainties that could cause actual results to differ materially from those expressed in the forward-looking statements.
The forward-looking statements contained in this quarterly reportQuarterly Report on Form 10-Q are based on assumptions that we have made in light ofconsidering our industry experience and our perceptions of historical trends, current conditions, expected future developments and other important factors we believe are appropriate under the circumstances. As you read and consider this quarterly reportQuarterly Report on Form 10-Q, you should understand that these statements are not guarantees of performance or results. They involve risks, uncertainties (many of which are beyond our control) and assumptions. Although we believe that these forward-looking statements are based on reasonable assumptions, you should be aware that many important factors could affect our actual operating and financial performance and cause our performance to differ materially from the performance anticipated in the forward-looking statements, including but not limited to the following: changes in interest rates, the potential effects of supply chain disruptions and production inefficiencies, general economic conditions, demand for our products, inflation, changes in consumer preferences, competition within our industry, our reliance on ourability to maintain a reliable network of independent dealers, our ability to manage our manufacturing levels and our large fixed cost base, the successful introduction of our new products, geopolitical conflicts, such as the conflict between Russia and Ukraine, the conflict in the Gaza Strip and general unrest in the Middle East, financial institution disruptions and the other important factors described under the caption “Risk Factors” in this quarterly report on Form 10-Q and our Annual Report on Form 10-K for the fiscal year ended June 30, 2017,2023, filed with the Securities and Exchange Commission (the “SEC”(“SEC”) on September 7, 2017August 30, 2023 (our “2023 Annual Report”) and in ourthis Quarterly Report on Form 10-Q for the fiscal quarter ended October 1, 2017, filed with the SEC on November 13, 2017.10-Q. Should one or more of these risks or uncertainties materialize, or should any of these assumptions prove incorrect, our actual operating and financial performance may vary in material respects from the performance projected in these forward-looking statements.
Further, any forward-looking statement speaks only as of the date on which it is made, and except as required by law, we undertake no obligation to update any forward-looking statement contained in this quarterly reportQuarterly Report on Form 10-Q to reflect events or circumstances after the date on which it is made or to reflect the occurrence of anticipated or unanticipated events or circumstances. New important factors that could cause our business not to develop as we expect may emerge from time to time, and it is not possible for us to predict all of them.
3
MCBCMASTERCRAFT BOAT HOLDINGS, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except share and per share data)
|
| Three Months Ended |
|
| Nine Months Ended |
|
| ||||||||||
|
| March 31, |
|
| April 2, |
|
| March 31, |
|
| April 2, |
|
| ||||
(Dollar amounts in thousands, except per share data) |
| 2024 |
|
| 2023 |
|
| 2024 |
|
| 2023 |
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NET SALES |
| $ | 95,708 |
|
| $ | 166,776 |
|
| $ | 299,406 |
|
| $ | 495,480 |
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COST OF SALES |
|
| 77,360 |
|
|
| 124,178 |
|
|
| 240,493 |
|
|
| 368,682 |
|
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GROSS PROFIT |
|
| 18,348 |
|
|
| 42,598 |
|
|
| 58,913 |
|
|
| 126,798 |
|
|
OPERATING EXPENSES: |
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|
|
|
|
|
|
|
|
|
|
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Selling and marketing |
|
| 3,924 |
|
|
| 3,927 |
|
|
| 10,538 |
|
|
| 10,748 |
|
|
General and administrative |
|
| 9,978 |
|
|
| 9,156 |
|
|
| 27,446 |
|
|
| 26,874 |
|
|
Amortization of other intangible assets |
|
| 450 |
|
|
| 489 |
|
|
| 1,362 |
|
|
| 1,467 |
|
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Total operating expenses |
|
| 14,352 |
|
|
| 13,572 |
|
|
| 39,346 |
|
|
| 39,089 |
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|
OPERATING INCOME |
|
| 3,996 |
|
|
| 29,026 |
|
|
| 19,567 |
|
|
| 87,709 |
|
|
OTHER INCOME (EXPENSE): |
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Interest expense |
|
| (762 | ) |
|
| (695 | ) |
|
| (2,494 | ) |
|
| (1,923 | ) |
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Interest income |
|
| 1,398 |
|
|
| 1,195 |
|
|
| 4,164 |
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|
| 1,967 |
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|
INCOME BEFORE INCOME TAX EXPENSE |
|
| 4,632 |
|
|
| 29,526 |
|
|
| 21,237 |
|
|
| 87,753 |
|
|
INCOME TAX EXPENSE |
|
| 806 |
|
|
| 6,744 |
|
|
| 4,408 |
|
|
| 20,353 |
|
|
NET INCOME FROM CONTINUING OPERATIONS |
|
| 3,826 |
|
|
| 22,782 |
|
|
| 16,829 |
|
|
| 67,400 |
|
|
LOSS FROM DISCONTINUED OPERATIONS, NET OF TAX (Note 3) |
|
| (71 | ) |
|
| (272 | ) |
|
| (993 | ) |
|
| (21,139 | ) |
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NET INCOME |
| $ | 3,755 |
|
| $ | 22,510 |
|
| $ | 15,836 |
|
| $ | 46,261 |
|
|
|
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NET INCOME (LOSS) PER SHARE: |
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Basic |
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Continuing operations |
| $ | 0.23 |
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| $ | 1.30 |
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| $ | 0.99 |
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| $ | 3.80 |
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Discontinued operations |
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| (0.01 | ) |
|
| (0.02 | ) |
|
| (0.06 | ) |
|
| (1.19 | ) |
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Net income |
| $ | 0.22 |
|
| $ | 1.28 |
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| $ | 0.93 |
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| $ | 2.61 |
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Diluted |
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Continuing operations |
| $ | 0.23 |
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| $ | 1.28 |
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| $ | 0.98 |
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| $ | 3.78 |
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Discontinued operations |
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| (0.01 | ) |
|
| (0.01 | ) |
|
| (0.05 | ) |
|
| (1.19 | ) |
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Net income |
| $ | 0.22 |
|
| $ | 1.27 |
|
| $ | 0.93 |
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| $ | 2.59 |
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WEIGHTED AVERAGE SHARES USED FOR COMPUTATION OF: |
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Basic earnings per share |
|
| 16,844,440 |
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| 17,559,920 |
|
|
| 17,003,616 |
|
|
| 17,725,208 |
|
|
Diluted earnings per share |
|
| 16,965,624 |
|
|
| 17,748,910 |
|
|
| 17,093,958 |
|
|
| 17,851,655 |
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|
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|
| Three Months Ended |
| Six Months Ended |
| ||||||||
|
| December 31, 2017 |
| January 1, 2017 |
| December 31, 2017 |
| January 1, 2017 |
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NET SALES |
| $ | 78,435 |
| $ | 51,134 |
| $ | 143,484 |
| $ | 111,823 |
|
COST OF SALES |
|
| 58,501 |
|
| 36,848 |
|
| 105,387 |
|
| 79,728 |
|
GROSS PROFIT |
|
| 19,934 |
|
| 14,286 |
|
| 38,097 |
|
| 32,095 |
|
OPERATING EXPENSES: |
|
|
|
|
|
|
|
|
|
|
|
|
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Selling and marketing |
|
| 3,672 |
|
| 2,444 |
|
| 6,409 |
|
| 4,498 |
|
General and administrative |
|
| 4,955 |
|
| 4,776 |
|
| 9,290 |
|
| 8,869 |
|
Amortization of intangible assets |
|
| 525 |
|
| 27 |
|
| 552 |
|
| 54 |
|
Total operating expenses |
|
| 9,152 |
|
| 7,247 |
|
| 16,251 |
|
| 13,421 |
|
OPERATING INCOME |
|
| 10,782 |
|
| 7,039 |
|
| 21,846 |
|
| 18,674 |
|
OTHER EXPENSE: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
| 1,139 |
|
| 512 |
|
| 1,630 |
|
| 1,123 |
|
INCOME BEFORE INCOME TAX EXPENSE |
|
| 9,643 |
|
| 6,527 |
|
| 20,216 |
|
| 17,551 |
|
INCOME TAX EXPENSE |
|
| 1,634 |
|
| 2,496 |
|
| 5,161 |
|
| 6,537 |
|
NET INCOME |
| $ | 8,009 |
| $ | 4,031 |
| $ | 15,055 |
| $ | 11,014 |
|
|
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EARNINGS PER COMMON SHARE: |
|
|
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|
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|
|
|
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Basic |
| $ | 0.43 |
| $ | 0.22 |
| $ | 0.81 |
| $ | 0.59 |
|
Diluted |
| $ | 0.43 |
| $ | 0.22 |
| $ | 0.81 |
| $ | 0.59 |
|
WEIGHTED AVERAGE SHARES USED FOR COMPUTATION OF: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share |
|
| 18,619,834 |
|
| 18,592,936 |
|
| 18,617,467 |
|
| 18,592,372 |
|
Diluted earnings per share |
|
| 18,702,352 |
|
| 18,605,078 |
|
| 18,694,489 |
|
| 18,598,841 |
|
The notesNotes to Unaudited Condensed Consolidated Financial Statements form an integral part of the condensed consolidated financial statements.
4
MCBCMASTERCRAFT BOAT HOLDINGS, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except share and per share data)
|
| March 31, |
|
| June 30, |
| ||
(Dollar amounts in thousands, except per share data) |
| 2024 |
|
| 2023 |
| ||
ASSETS |
|
|
|
|
|
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CURRENT ASSETS: |
|
|
|
|
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Cash and cash equivalents |
| $ | 22,509 |
|
| $ | 19,817 |
|
Held-to-maturity securities (Note 4) |
|
| 83,183 |
|
|
| 91,560 |
|
Accounts receivable, net of allowance of $96 and $122, respectively |
|
| 13,473 |
|
|
| 15,741 |
|
Inventories, net (Note 5) |
|
| 41,432 |
|
|
| 58,298 |
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Prepaid expenses and other current assets |
|
| 14,414 |
|
|
| 10,083 |
|
Total current assets |
|
| 175,011 |
|
|
| 195,499 |
|
Property, plant and equipment, net (Note 6) |
|
| 79,593 |
|
|
| 77,921 |
|
Goodwill (Note 7) |
|
| 28,493 |
|
|
| 28,493 |
|
Other intangible assets, net (Note 7) |
|
| 34,100 |
|
|
| 35,462 |
|
Deferred income taxes |
|
| 14,377 |
|
|
| 12,428 |
|
Deferred debt issuance costs, net |
|
| 306 |
|
|
| 304 |
|
Other long-term assets |
|
| 9,002 |
|
|
| 3,869 |
|
Total assets |
| $ | 340,882 |
|
| $ | 353,976 |
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LIABILITIES AND EQUITY |
|
|
|
|
|
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CURRENT LIABILITIES: |
|
|
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Accounts payable |
|
| 15,216 |
|
|
| 20,391 |
|
Income tax payable |
|
| 1,022 |
|
|
| 5,272 |
|
Accrued expenses and other current liabilities (Note 8) |
|
| 66,164 |
|
|
| 72,496 |
|
Current portion of long-term debt, net of unamortized debt issuance costs (Note 10) |
|
| 4,371 |
|
|
| 4,381 |
|
Total current liabilities |
|
| 86,773 |
|
|
| 102,540 |
|
Long-term debt, net of unamortized debt issuance costs (Note 10) |
|
| 45,982 |
|
|
| 49,295 |
|
Unrecognized tax positions |
|
| 8,174 |
|
|
| 7,350 |
|
Other long-term liabilities |
|
| 2,855 |
|
|
| 2,702 |
|
Total liabilities |
|
| 143,784 |
|
|
| 161,887 |
|
COMMITMENTS AND CONTINGENCIES |
|
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EQUITY: |
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Common stock, $.01 par value per share — authorized, 100,000,000 shares; issued and outstanding, 17,018,448 shares at March 31, 2024 and 17,312,850 shares at June 30, 2023 |
|
| 170 |
|
|
| 173 |
|
Additional paid-in capital |
|
| 65,072 |
|
|
| 75,976 |
|
Retained earnings |
|
| 131,656 |
|
|
| 115,820 |
|
MasterCraft Boat Holdings, Inc. equity |
|
| 196,898 |
|
|
| 191,969 |
|
Noncontrolling interest |
|
| 200 |
|
|
| 120 |
|
Total equity |
|
| 197,098 |
|
|
| 192,089 |
|
Total liabilities and equity |
| $ | 340,882 |
|
| $ | 353,976 |
|
|
|
|
|
|
|
|
|
|
| December 31, |
| June 30, |
| ||
|
| 2017 |
| 2017 |
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|
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| |
ASSETS |
|
|
|
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CURRENT ASSETS: |
|
|
|
|
|
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Cash and cash equivalents |
| $ | 6,250 |
| $ | 4,038 |
|
Accounts receivable — net of allowances of $61 and $82, respectively |
|
| 1,917 |
|
| 3,500 |
|
Inventories — net |
|
| 18,283 |
|
| 11,676 |
|
Prepaid expenses and other current assets |
|
| 3,021 |
|
| 2,438 |
|
Total current assets |
|
| 29,471 |
|
| 21,652 |
|
Property, plant and equipment — net |
|
| 19,533 |
|
| 14,827 |
|
Intangible assets — net |
|
| 52,090 |
|
| 16,643 |
|
Goodwill |
|
| 66,818 |
|
| 29,593 |
|
Deferred debt issuance costs — net |
|
| 428 |
|
| 481 |
|
Other |
|
| 302 |
|
| 125 |
|
Total assets |
| $ | 168,642 |
| $ | 83,321 |
|
LIABILITIES AND STOCKHOLDERS' EQUITY |
|
|
|
|
|
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CURRENT LIABILITIES: |
|
|
|
|
|
|
|
Accounts payable |
| $ | 12,800 |
| $ | 11,008 |
|
Income tax payable |
|
| 2,413 |
|
| 780 |
|
Accrued expenses and other current liabilities |
|
| 27,446 |
|
| 21,410 |
|
Current portion of long term debt, net of unamortized debt issuance costs |
|
| 5,072 |
|
| 3,687 |
|
Total current liabilities |
|
| 47,731 |
|
| 36,885 |
|
Long term debt, net of unamortized debt issuance costs (Note 8) |
|
| 89,905 |
|
| 30,790 |
|
Deferred income taxes |
|
| 266 |
|
| 953 |
|
Unrecognized tax positions |
|
| 3,439 |
|
| 2,932 |
|
Total liabilities |
|
| 141,341 |
|
| 71,560 |
|
COMMITMENTS AND CONTINGENCIES |
|
|
|
|
|
|
|
STOCKHOLDERS' EQUITY: |
|
|
|
|
|
|
|
Common stock, $.01 par value per share — authorized, 100,000,000 shares; issued and outstanding, 18,679,131 shares at December 31, 2017 and 18,637,445 shares at June 30, 2017 |
|
| 187 |
|
| 186 |
|
Additional paid-in capital |
|
| 113,429 |
|
| 112,945 |
|
Accumulated deficit |
|
| (86,315) |
|
| (101,370) |
|
Total stockholders' equity |
|
| 27,301 |
|
| 11,761 |
|
Total liabilities and stockholders' equity |
| $ | 168,642 |
| $ | 83,321 |
|
The notesNotes to Unaudited Condensed Consolidated Financial Statements form an integral part of the condensed consolidated financial statements.
5
MCBCMASTERCRAFT BOAT HOLDINGS, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTSTATEMENTS OF STOCKHOLDERS’ EQUITY
(Dollars in thousands, except share and per share data)
|
|
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|
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| Additional |
|
|
|
|
| MasterCraft Boat |
|
|
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| |||||||
|
| Common Stock |
|
| Paid-in |
|
| Retained |
|
| Holdings, |
|
| Noncontrolling |
|
|
|
| ||||||||||
(Dollar amounts in thousands) |
| Shares |
|
| Amount |
|
| Capital |
|
| Earnings |
|
| Inc. Equity |
|
| Interest |
|
| Total |
| |||||||
Balance at June 30, 2023 |
|
| 17,312,850 |
|
| $ | 173 |
|
| $ | 75,976 |
|
| $ | 115,820 |
|
| $ | 191,969 |
|
| $ | 120 |
|
| $ | 192,089 |
|
Share-based compensation activity |
|
| 185,055 |
|
|
| — |
|
|
| (683 | ) |
|
| — |
|
|
| (683 | ) |
|
| — |
|
|
| (683 | ) |
Repurchase and retirement of common stock |
|
| (241,764 | ) |
|
| (2 | ) |
|
| (5,783 | ) |
|
| — |
|
|
| (5,785 | ) |
|
| — |
|
|
| (5,785 | ) |
Capital contribution from noncontrolling interest |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 80 |
|
|
| 80 |
|
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 6,195 |
|
|
| 6,195 |
|
|
| — |
|
|
| 6,195 |
|
Balance at October 1, 2023 |
|
| 17,256,141 |
|
|
| 171 |
|
|
| 69,510 |
|
|
| 122,015 |
|
|
| 191,696 |
|
|
| 200 |
|
|
| 191,896 |
|
Share-based compensation activity |
|
| (8,117 | ) |
|
| 1 |
|
|
| 8 |
|
|
| — |
|
|
| 9 |
|
|
| — |
|
|
| 9 |
|
Repurchase and retirement of common stock |
|
| (214,219 | ) |
|
| (2 | ) |
|
| (4,458 | ) |
|
| — |
|
|
| (4,460 | ) |
|
| — |
|
|
| (4,460 | ) |
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 5,886 |
|
|
| 5,886 |
|
|
| — |
|
|
| 5,886 |
|
Balance at December 31, 2023 |
|
| 17,033,805 |
|
|
| 170 |
|
|
| 65,060 |
|
|
| 127,901 |
|
|
| 193,131 |
|
|
| 200 |
|
|
| 193,331 |
|
Share-based compensation activity |
|
| 58,205 |
|
|
| 1 |
|
|
| 1,582 |
|
|
| — |
|
|
| 1,583 |
|
|
| — |
|
|
| 1,583 |
|
Repurchase and retirement of common stock |
|
| (73,562 | ) |
|
| (1 | ) |
|
| (1,570 | ) |
|
| — |
|
|
| (1,571 | ) |
|
| — |
|
|
| (1,571 | ) |
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 3,755 |
|
|
| 3,755 |
|
|
| — |
|
|
| 3,755 |
|
Balance at March 31, 2024 |
|
| 17,018,448 |
|
| $ | 170 |
|
| $ | 65,072 |
|
| $ | 131,656 |
|
| $ | 196,898 |
|
| $ | 200 |
|
| $ | 197,098 |
|
|
|
|
|
|
|
|
| Additional |
|
|
|
|
| MasterCraft Boat |
|
|
|
|
|
|
| |||||||
|
| Common Stock |
|
| Paid-in |
|
| Retained |
|
| Holdings, |
|
| Noncontrolling |
|
|
|
| ||||||||||
|
| Shares |
|
| Amount |
|
| Capital |
|
| Earnings |
|
| Inc. Equity |
|
| Interest |
|
| Total |
| |||||||
Balance at June 30, 2022 |
|
| 18,061,437 |
|
| $ | 181 |
|
| $ | 96,584 |
|
| $ | 46,883 |
|
| $ | 143,648 |
|
| $ | — |
|
| $ | 143,648 |
|
Share-based compensation activity |
|
| 128,040 |
|
|
| 1 |
|
|
| 649 |
|
|
| — |
|
|
| 650 |
|
|
| — |
|
|
| 650 |
|
Repurchase and retirement of common stock |
|
| (191,360 | ) |
|
| (2 | ) |
|
| (4,176 | ) |
|
| — |
|
|
| (4,178 | ) |
|
| — |
|
|
| (4,178 | ) |
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 4,068 |
|
|
| 4,068 |
|
|
| — |
|
|
| 4,068 |
|
Balance at October 2, 2022 |
|
| 17,998,117 |
|
|
| 180 |
|
|
| 93,057 |
|
|
| 50,951 |
|
|
| 144,188 |
|
|
| — |
|
|
| 144,188 |
|
Share-based compensation activity |
|
| 2,466 |
|
|
| — |
|
|
| 745 |
|
|
| — |
|
|
| 745 |
|
|
| — |
|
|
| 745 |
|
Repurchase and retirement of common stock |
|
| (224,284 | ) |
|
| (2 | ) |
|
| (4,792 | ) |
|
| — |
|
|
| (4,794 | ) |
|
| — |
|
|
| (4,794 | ) |
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 19,683 |
|
|
| 19,683 |
|
|
| — |
|
|
| 19,683 |
|
Balance at January 1, 2023 |
|
| 17,776,299 |
|
|
| 178 |
|
|
| 89,010 |
|
|
| 70,634 |
|
|
| 159,822 |
|
|
| — |
|
|
| 159,822 |
|
Share-based compensation activity |
|
| 5,733 |
|
|
| — |
|
|
| 883 |
|
|
| — |
|
|
| 883 |
|
|
| — |
|
|
| 883 |
|
Repurchase and retirement of common stock |
|
| (210,150 | ) |
|
| (2 | ) |
|
| (7,066 | ) |
|
| — |
|
|
| (7,068 | ) |
|
| — |
|
|
| (7,068 | ) |
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 22,510 |
|
|
| 22,510 |
|
|
| — |
|
|
| 22,510 |
|
Balance at April 2, 2023 |
|
| 17,571,882 |
|
| $ | 176 |
|
| $ | 82,827 |
|
| $ | 93,144 |
|
| $ | 176,147 |
|
| $ | — |
|
| $ | 176,147 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Additional |
|
|
|
|
|
|
| |
|
| Common Stock |
| Paid-in |
| Accumulated |
|
|
|
| |||||
|
| Shares |
| Amount |
| Capital |
| Deficit |
| Total |
| ||||
Balance at June 30, 2017 |
| 18,637,445 |
| $ | 186 |
| $ | 112,945 |
| $ | (101,370) |
| $ | 11,761 |
|
Equity-based compensation activity |
| 41,686 |
|
| 1 |
|
| 484 |
|
| — |
|
| 485 |
|
Net income |
| — |
|
| — |
|
| — |
|
| 15,055 |
|
| 15,055 |
|
Balance at December 31, 2017 |
| 18,679,131 |
| $ | 187 |
| $ | 113,429 |
| $ | (86,315) |
| $ | 27,301 |
|
The notesNotes to Unaudited Condensed Consolidated Financial Statements form an integral part of the condensed consolidated financial statements.
6
MCBCMASTERCRAFT BOAT HOLDINGS, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands, except share and per share data)
|
| Nine Months Ended |
| |||||
|
| March 31, |
|
| April 2, |
| ||
(Dollar amounts in thousands) |
| 2024 |
|
| 2023 |
| ||
CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
|
|
| ||
Net income |
| $ | 15,836 |
|
| $ | 46,261 |
|
Loss from discontinued operations, net of tax |
|
| 993 |
|
|
| 21,139 |
|
Net income from continuing operations |
|
| 16,829 |
|
|
| 67,400 |
|
Adjustments to reconcile net income from continuing operations to net cash provided by operating activities: |
|
|
|
|
|
| ||
Depreciation and amortization |
|
| 8,327 |
|
|
| 7,833 |
|
Share-based compensation |
|
| 2,531 |
|
|
| 2,892 |
|
Unrecognized tax benefits |
|
| 824 |
|
|
| 111 |
|
Deferred income taxes |
|
| (1,949 | ) |
|
| 7,194 |
|
Amortization of debt issuance costs |
|
| 192 |
|
|
| 172 |
|
Changes in certain operating assets and liabilities |
|
| (1,737 | ) |
|
| 21,610 |
|
Other, net |
|
| (2,094 | ) |
|
| 153 |
|
Net cash provided by operating activities of continuing operations |
|
| 22,923 |
|
|
| 107,365 |
|
Net cash used in operating activities of discontinued operations |
|
| (603 | ) |
|
| (2,403 | ) |
Net cash provided by operating activities |
|
| 22,320 |
|
|
| 104,962 |
|
|
|
|
|
|
|
| ||
CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
|
|
| ||
Purchases of property, plant and equipment |
|
| (12,622 | ) |
|
| (18,871 | ) |
Purchases of investments |
|
| (120,277 | ) |
|
| (83,509 | ) |
Maturities of investments |
|
| 130,053 |
|
|
| 10,000 |
|
Other, net |
|
| 5 |
|
|
| — |
|
Net cash used in investing activities of continuing operations |
|
| (2,841 | ) |
|
| (92,380 | ) |
Net cash used in investing activities of discontinued operations |
|
| — |
|
|
| (501 | ) |
Net cash used in investing activities |
|
| (2,841 | ) |
|
| (92,881 | ) |
|
|
|
|
|
|
| ||
CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
|
| ||
Principal payments on long-term debt |
|
| (3,375 | ) |
|
| (2,250 | ) |
Repurchase and retirement of common stock |
|
| (11,728 | ) |
|
| (15,972 | ) |
Other, net |
|
| (1,684 | ) |
|
| (609 | ) |
Net cash used in financing activities of continuing operations |
|
| (16,787 | ) |
|
| (18,831 | ) |
NET CHANGE IN CASH AND CASH EQUIVALENTS |
|
| 2,692 |
|
|
| (6,750 | ) |
|
|
|
|
|
|
| ||
CASH AND CASH EQUIVALENTS — BEGINNING OF PERIOD |
|
| 19,817 |
|
|
| 34,203 |
|
CASH AND CASH EQUIVALENTS — END OF PERIOD |
| $ | 22,509 |
|
| $ | 27,453 |
|
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: |
|
|
|
|
|
| ||
Cash payments for interest, net of amounts capitalized |
| $ | 2,259 |
|
| $ | 1,773 |
|
Cash payments for income taxes |
|
| 9,684 |
|
|
| 6,209 |
|
NON-CASH INVESTING AND FINANCING ACTIVITIES: |
|
|
|
|
|
| ||
Activity related to sales-type lease |
|
| 3,898 |
|
|
| — |
|
Capital expenditures in accounts payable and accrued expenses |
|
| 908 |
|
|
| 2,855 |
|
|
|
|
|
|
|
|
|
|
| Six Months Ended |
| ||||
|
| December 31, 2017 |
| January 1, 2017 |
| ||
CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
|
|
|
|
Net income |
| $ | 15,055 |
| $ | 11,014 |
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
|
Depreciation and amortization |
|
| 2,210 |
|
| 1,622 |
|
Inventory obsolescence reserve |
|
| (322) |
|
| 221 |
|
Deferred issuance costs |
|
| 235 |
|
| 185 |
|
Stock-based compensation |
|
| 528 |
|
| 305 |
|
Unrecognized tax benefits |
|
| 258 |
|
| 307 |
|
Deferred income taxes |
|
| (604) |
|
| 2,102 |
|
Net provision of doubtful accounts |
|
| (21) |
|
| 30 |
|
|
|
|
|
|
|
|
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
Accounts receivable |
|
| 3,377 |
|
| 472 |
|
Inventories |
|
| 101 |
|
| 1,682 |
|
Prepaid expenses and other current assets |
|
| (489) |
|
| (242) |
|
Income tax receivable |
|
| — |
|
| (576) |
|
Other assets |
|
| (11) |
|
| — |
|
Accounts payable |
|
| (849) |
|
| (1,609) |
|
Income tax payable |
|
| 1,633 |
|
| (749) |
|
Accrued expenses and other current liabilities |
|
| 1,351 |
|
| (1,843) |
|
Net cash provided by operating activities |
|
| 22,452 |
|
| 12,921 |
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
|
|
|
|
Disposal of assets |
|
| 96 |
|
| — |
|
Payment for acquisition, net of cash acquired |
|
| (79,128) |
|
| — |
|
Purchases of property and equipment |
|
| (1,474) |
|
| (1,060) |
|
Net cash used in investing activities |
|
| (80,506) |
|
| (1,060) |
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
Proceeds from issuance of long-term debt |
|
| 80,832 |
|
| — |
|
Payments of costs directly associated with offerings |
|
| — |
|
| (254) |
|
Cash paid for withholding taxes on vested stock |
|
| (43) |
|
| — |
|
Excess tax benefits |
|
| — |
|
| 312 |
|
Principal payments on long-term debt |
|
| (19,201) |
|
| (2,500) |
|
Payments on revolving line of credit |
|
| — |
|
| (3,126) |
|
Payments of deferred financing costs |
|
| (1,322) |
|
| — |
|
Net cash used in financing activities |
|
| 60,266 |
|
| (5,568) |
|
NET CHANGE IN CASH AND CASH EQUIVALENTS |
|
| 2,212 |
|
| 6,293 |
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS — BEGINNING OF PERIOD |
|
| 4,038 |
|
| 73 |
|
CASH AND CASH EQUIVALENTS — END OF PERIOD |
| $ | 6,250 |
| $ | 6,366 |
|
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: |
|
|
|
|
|
|
|
Cash payments for interest |
| $ | 1,383 |
| $ | 915 |
|
Cash payments for income taxes |
| $ | 3,872 |
| $ | 5,148 |
|
SIGNIFICANT NON-CASH INVESTING AND FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
Accrued working capital adjustment - NauticStar acquisition |
|
| 1,383 |
|
| — |
|
The notesNotes to Unaudited Condensed Consolidated Financial Statements form an integral part of the condensed consolidated financial statements.
7
MCBCMASTERCRAFT BOAT HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DollarsUnless otherwise noted, dollars in thousands, except share and per share data)
1.ORGANIZATION AND NATURE OF BUSINESS
MCBC Holdings, Inc. (the “Company”) was formed on January 28, 2000, as a Delaware holding company and operates primarily through its wholly owned subsidiaries, MasterCraft Boat Company, LLC; Nautic Star, LLC; MasterCraft Services, Inc.; MasterCraft Parts, Ltd.; and MasterCraft International Sales Administration, Inc. The Company and its subsidiaries collectively are referred to herein as the “Company”.
On October 2, 2017, the Company acquired all of the outstanding membership interests and other equity securities of Nautic Star, LLC, a Mississippi limited liability company (“NauticStar”). As a result of the acquisition, the Company consolidated the financial results of NauticStar. See Note 3: Acquisition. The Company reports its results of operations under two reportable segments: MasterCraft and NauticStar, based on their boat manufacturing operations.
The Company is a designer and manufacturer of premium inboard tournament ski boats and luxury performance V-drive runabouts under the MasterCraft brand and salt water fishing and general recreational boats under the NauticStar brand. The Company also leases a parts warehouse in the United Kingdom to expedite service, primarily to MasterCraft dealers and customers in Europe.
Basis of Presentation — The Company’s fiscal year begins July 1 and ends June 30, with the interim quarterly reporting periods consisting of 13 weeks. Therefore, the fiscal quarter end will not always coincide with the date of the end of The Due to the There New Accounting Pronouncements Segment Reporting ASU No. 2023-07, Improvements to Reportable Segment Disclosures, requires incremental disclosures about an entity’s reportable segments but does not change the definition of a segment or the guidance for determining reportable segments. The new guidance requires disclosure of significant segment expenses that are (1) regularly provided to (or easily computed from information regularly provided to) the chief operating Income Taxes Accounting Standard Update ("ASU") No. 2023-09, Improvements to Income Tax Disclosures, requires entities to disclose in their rate reconciliation table additional categories of information about federal, state and foreign income taxes and provide more details about 8 the reconciling items in some categories if items meet a quantitative threshold. Entities would have to provide qualitative disclosures about the new categories. The guidance will require all entities to disclose income taxes paid, net of refunds, disaggregated by federal (national), state and foreign taxes for annual periods and to disaggregate the information by jurisdiction based on a quantitative threshold. The guidance makes several other changes to the disclosure requirements. Entities are required to apply the guidance prospectively, with the option to apply it retrospectively. The guidance is 2.BASISthea calendar month.information furnished in theaccompanying unaudited condensed consolidated financial statements includes normal recurring adjustmentsinclude the accounts of MasterCraft Boat Holdings, Inc. ("Holdings") and reflects all adjustments, whichits wholly owned subsidiaries. Holdings and its subsidiaries collectively are referred to herein as the "Company." The unaudited condensed consolidated financial statements have been prepared on the same basis as the Company’s audited consolidated financial statements for the year ended June 30, 2023, and, in the opinion of management, reflect all adjustments considered necessary for a fair presentationto present fairly the Company’s financial position as of theMarch 31, 2024, its results of operations for the three and nine months ended March 31, 2024 and April 2, 2023, its cash flows for the nine months ended March 31, 2024 and April 2, 2023, and its statements of financial positionequity for the interim periods presented.three and nine months ended March 31, 2024 and April 2, 2023. All adjustments are of a normal, recurring nature. Certain information and footnote disclosures normally included in annual consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and the applicable rules and regulations of the U.S. Securities and Exchange Commission (“SEC”)SEC for financial information have been condensed or omitted pursuant to such rules and regulations. The June 30, 20172023 condensed consolidated balance sheet data was derived from the audited financial statements but does not include all disclosures required by U.S. GAAP for complete financial statements. However, management believes that the disclosures in these condensed consolidated financial statements are adequate to make the information presented not misleading. These condensed consolidated financial statements should be read in conjunction with the Company’s consolidated financial statements and notes thereto included in our 2023 Annual Report on Form 10-K for10-K.fiscal year ended June 30, 2017. The unaudited condensed consolidated financial statements have been prepared on the same basis asseasonality of the Company’s audited consolidated financial statements forbusiness, the year ended June 30, 2017 and, in the opinion of management, reflect all adjustments considered necessary to present fairly the Company’s financial position as of December 31, 2017 andinterim results of its operations, and its cash flows for the six months ended December 31, 2017 and January 1, 2017 and statement of shareholders’ equity for the six months ended December 31, 2017. All adjustments are of a normal recurring nature. Our8MCBC HOLDINGS, INC. AND SUBSIDIARIESNOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Dollars in thousands, except share and per share data)interim operating results for the six months ended December 31, 2017 and January 1, 2017 are not necessarily indicative of the results tothat may be expected in future operating quarters.for the remainder of the fiscal year.have beenwere no significant changes in, or changes to, the application of the Company’s significant or critical accounting policies or critical accounting estimatesestimation procedures for the sixthree and nine months ended DecemberMarch 31, 20172024, as compared with the significant accounting policiesthose described in the Company’s audited consolidated financial statements for the financialfiscal year ended June 30, 2017.2023.New Accounting Pronouncements Issued But Not Yet AdoptedInvestment in Sales-Type Lease— On July 1, 2023, the Company became a lessor in a sales-type lease arrangement consisting of land valued at $3.9 million. In February 2016, the Financialaccordance with Accounting Standards Board (the “FASB”Codification (“ASC”) issued Accounting Standards Update (“ASU”) No. 2016-02, 842, Leases,(Topic 842). This guidance establishes a right-of-use (“ROU”) model that requires a lessee to record a ROU asset the underlying land was derecognized as Property, plant and equipment and a sales-type lease liabilitywas recognized as a net investment in a lease. The net investment balances are represented as lease receivable and unguaranteed residual asset amounts on the balance sheet for all leases with terms longer than 12 months. Leaseswithin other current assets and other long-term assets. The interest earned on the net investment will be classifiedrecognized as either financeinterest income.with classification affecting the pattern of expense recognitiondecision maker and (2) included in the income statement.reported measure of segment profit or loss. The new standard also allows companies to disclose multiple measures of segment profit or loss if those measures are used to assess performance and allocate resources. This update is effective for fiscal years beginning after December 15, 2018, including interim periods within those31, 2023, or fiscal years. A modified retrospective transition approach is required2025 for lessees for capitalthe Company, and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available.should be adopted retrospectively unless impracticable. The Company is currently evaluating the impact, if any, that the adoption of this standard will have on financial disclosures.expected to have on its financial position or results of operations and related disclosures.In May 2014, the FASB and International Accounting Standards Board jointly issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606), which includes new principles-based accounting guidanceeffective for revenue recognition that will supersede virtually all existing revenue guidance. The core principle of this guidance is that an entity should recognize revenue 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 and services. To achieve the core principle, the guidance establishes the following five steps: 1) identify the contract(s) with a customer, 2) identify the performance obligation in the contract, 3) determine the transaction price, 4) allocate the transaction price to the performance obligations in the contract, and 5) recognize revenue when (or as) the entity satisfies a performance obligation. The guidance also details the accounting treatment for costs to obtain or fulfill a contract. Lastly, disclosure requirements have been enhanced to provide sufficient information to enable users of financial statements to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. In July 2015, the FASB announced that the implementation date would be delayed by one year. During 2016, the FASB issued certain amendments to clarify and improve the implementation of the guidance in ASU 2014-09. The effective date and transition requirements for these amendments and ASU 2014-09 are now for annual and interim periods beginning after December 15, 2017. The Company will adopt this guidance for our2024, or fiscal year beginning July 1, 2018. The Company is continuing to assess the potential effects of ASU 2014-09 on its consolidated financial statements, business processes, systems and controls. The Company plans to use the modified retrospective approach in applying the new standard. Based on the Company’s progress, it expects an impact from the new standard for dealers who are offered retail promotions which are currently recorded at the later of when the program has been communicated to the dealer or at the time of sale. Under the new standard, the Company expects these retail promotions to be recognized at the time of sale to a dealer. As a result, the Company expects a change in the timing of recording retail promotions and rebates; however, it does not expect a change in the total amount of cumulative revenue recognized for each transaction. Any potential effect9MCBC HOLDINGS, INC. AND SUBSIDIARIESNOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Dollars in thousands, except share and per share data)of adoption of this ASU has not yet been quantified. Additionally, the Company’s expectations may change as its implementation progresses.In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business. The guidance clarifies the definition of a business that provides a two-step analysis in the determination of whether an acquisition or derecognition is a business or an asset. The update removes the evaluation of whether a market participant could replace any missing elements and provides a framework to assist entities in evaluating whether both an input and a substantive process are present. This guidance is effective for annual reporting periods beginning after December 15, 2017, including interim periods within those annual reporting periods and early adoption is permitted for transactions that meet specified criteria. This guidance is to be applied on a prospective basis for transactions that occur after the effective date.In January 2017, the FASB issued ASU 2017-04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. This guidance eliminates Step 2 from the goodwill impairment test. Instead, an entity should recognize an impairment charge2026 for the amount by which the carrying value exceeds the reporting unit’s fair value, not to exceed the total amount of goodwill allocated to that reporting unit. ASU 2017-04 is effective for annual reporting periods, and interim periods therein, beginning after December 15, 2019.Company. The Company is currently evaluating the effectimpact, if any, that the adoption of this new guidancestandard will have on financial disclosures.
The following tables present the Company's revenue by major product category for each reportable segment:
|
| Three Months Ended March 31, 2024 |
| |||||||||||||
|
| MasterCraft |
|
| Crest |
|
| Aviara |
|
| Total |
| ||||
Major Product Categories: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Boats and trailers |
| $ | 66,961 |
|
| $ | 13,769 |
|
| $ | 11,731 |
|
| $ | 92,461 |
|
Parts |
|
| 2,443 |
|
|
| 292 |
|
|
| — |
|
|
| 2,735 |
|
Other revenue |
|
| 379 |
|
|
| 133 |
|
|
| — |
|
|
| 512 |
|
Total |
| $ | 69,783 |
|
| $ | 14,194 |
|
| $ | 11,731 |
|
| $ | 95,708 |
|
|
| Nine Months Ended March 31, 2024 |
| |||||||||||||
|
| MasterCraft |
|
| Crest |
|
| Aviara |
|
| Total |
| ||||
Major Product Categories: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Boats and trailers |
| $ | 207,160 |
|
| $ | 48,584 |
|
| $ | 31,374 |
|
| $ | 287,118 |
|
Parts |
|
| 9,574 |
|
|
| 770 |
|
|
| — |
|
|
| 10,344 |
|
Other revenue |
|
| 1,585 |
|
|
| 359 |
|
|
| — |
|
|
| 1,944 |
|
Total |
| $ | 218,319 |
|
| $ | 49,713 |
|
| $ | 31,374 |
|
| $ | 299,406 |
|
|
| Three Months Ended April 2, 2023 |
| |||||||||||||
|
| MasterCraft |
|
| Crest |
|
| Aviara |
|
| Total |
| ||||
Major Product Categories: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Boats and trailers |
| $ | 114,514 |
|
| $ | 35,936 |
|
| $ | 12,777 |
|
| $ | 163,227 |
|
Parts |
|
| 2,798 |
|
|
| 285 |
|
|
| — |
|
|
| 3,083 |
|
Other revenue |
|
| 318 |
|
|
| 148 |
|
|
| — |
|
|
| 466 |
|
Total |
| $ | 117,630 |
|
| $ | 36,369 |
|
| $ | 12,777 |
|
| $ | 166,776 |
|
|
| Nine Months Ended April 2, 2023 |
| |||||||||||||
|
| MasterCraft |
|
| Crest |
|
| Aviara |
|
| Total |
| ||||
Major Product Categories: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Boats and trailers |
| $ | 328,254 |
|
| $ | 115,444 |
|
| $ | 39,570 |
|
| $ | 483,268 |
|
Parts |
|
| 9,693 |
|
|
| 671 |
|
|
| — |
|
|
| 10,364 |
|
Other revenue |
|
| 1,368 |
|
|
| 480 |
|
|
| — |
|
|
| 1,848 |
|
Total |
| $ | 339,315 |
|
| $ | 116,595 |
|
| $ | 39,570 |
|
| $ | 495,480 |
|
Contract Liabilities
As of June 30, 2023, the Company had $3.3 million of contract liabilities associated with customer deposits and services. During the nine months ended March 31, 2024, $1.4 million was recognized as revenue. As of March 31, 2024, total contract liabilities associated with customer deposits and services of $3.5 million were reported in Accrued expenses and other current liabilities and Other long-term liabilities on the condensed consolidated balance sheet, and $0.6 million is expected to have on our financial position or resultsbe recognized as revenue during the remainder of operations and related disclosures.the year ending June 30, 2024.
9
In May 2017,
On September 2, 2022, the FASB issued ASU 2017-09, Compensation—Stock Compensation (Topic 718): ScopeCompany sold its NauticStar business to certain affiliates of Modification Accounting. This guidance provides clarity and reduces complexity when applying the guidance in Topic 718, Compensation—Stock Compensation to a changeIconic Marine Group, LLC ("Purchaser"). Pursuant to the term or conditionterms of a share-based payment. ASU 2017-09 is effective for annual reporting periods,the purchase agreement, substantially all of the assets of NauticStar were sold, including, among other things, all of the issued and interim periods therein, beginning after December 15, 2017. The Company is currently evaluatingoutstanding membership interests in its wholly-owned subsidiary NS Transport, LLC, all owned real property, equipment, inventory, intellectual property and accounts receivable, and the effect thatPurchaser assumed substantially all of the adoptionliabilities of this new guidance is expected to have on our financial position or results of operationsNauticStar, including, among other things, product liability and related disclosures.warranty claims.
New Accounting Pronouncements Issued And Adopted — In July 2015,During the FASB issued ASU 2015-11, Simplifying the Measurement of Inventory. This ASU changes the measurement principle for inventories valued under the FIFO or weighted-average methods from the lower of cost or market to the lower of cost and net realizable value. Net realizable value is defined by the FASB as estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. This ASU is effective for annual reporting periods beginning after December 15, 2016, and interim periods within those annual periods with early adoption permitted. The Company adopted the provisions of ASU 2015-11 on a prospective basis during the first quarter of fiscal year 2018. The adoption of this ASU did not have an impact on our financial position or results of operations and related disclosures.
In March 2016, the FASB issued ASU 2016-09, Compensation – Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. This guidance identifies areas for simplification involving several aspects of accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, an option to recognize gross stock compensation expense with actual forfeitures recognized as they occur, as well as certain classifications on the statement of cash flows. This ASU is effective for annual reporting periods beginning after December 15, 2016, and interim periods within those annual periods with early adoption
10
MCBC HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share data)
permitted. The Company adopted the provisions of ASU 2016-1 on a prospective basis during the first quarter of fiscal year 2018. The adoption of this ASU did not have an impact on our financial position or results of operations and related disclosures.
There are no other recently issued accounting pronouncements that are expected to have a material impact on our financial position or results of operations and related disclosures.
3. ACQUISITION
On Octobernine months ended April 2, 2017,2023, the Company completed its acquisition of NauticStar. The purchase price was $80,511, including customary adjustments for the amount of working capital in the acquired business at the closing date. A portionrecognized a $22.5 million loss on sale. The final settlement of the purchase price was deposited into an escrow accountsubject to customary working capital adjustments that had been in orderarbitration, but were settled in October 2023 without a significant impact to secure certain post-closing obligationsthe loss on sale previously recorded. The agreed upon settlement will be received in installment payments through July 2025. The value of the former members of NauticStar. The Company accounted for the transaction using the acquisition method in accordance with ASC 805, Business Combinations.
The total consideration has been allocated to the assets acquired and liabilities assumed based on preliminary estimatesthat were retained at the time of their fair values as of the date of acquisition. Because of the complexities involved with performing the valuation, the Company has recorded the tangible and intangible assets acquired and liabilities assumed based on their preliminary fair values as of October 2, 2017. The preliminary measurements of fair value were based upon estimates utilizing the assistance of third party valuation specialists, andsale, which are primarily related to certain claims, are subject to change. The Company expectsCertain of these claims have been settled or are expected to settle for higher amounts than previously estimated, with the valuation of tangible and intangible assets and working capital adjustments to be finalized during the second half of fiscal 2018.
related activity being recorded as discontinued operations.
11
MCBC HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share data)
The following table summarizes the preliminary purchase price allocation based on the estimated fair valuesoperating results of the assets acquired and liabilities assumed of NauticStar at the acquisition date:
|
|
|
|
Purchase Price: |
|
|
|
Cash paid, net of cash acquired | $ | 79,128 |
|
Accrued working capital adjustment |
| 1,383 |
|
| $ | 80,511 |
|
|
|
|
|
Recognized preliminary amounts of identifiable assets acquired and (liabilities assumed), at fair value: |
|
|
|
Accounts receivable | $ | 1,773 |
|
Inventories |
| 6,426 |
|
Other current assets |
| 94 |
|
Indemnification asset |
| 166 |
|
Deferred income taxes |
| 83 |
|
Property, Plant and equipment |
| 4,945 |
|
Identifiable intangible assets |
| 36,000 |
|
Current liabilities |
| (5,952) |
|
Unrecognized tax positions |
| (249) |
|
Preliminary estimate of the fair value of assets acquired and liabilities assumed |
| 43,286 |
|
Goodwill |
| 37,225 |
|
| $ | 80,511 |
|
The preliminary fair value estimatesdiscontinued operations for the Company’s identifiable intangible assets acquired as partfollowing periods:
| Nine Months Ended |
| |||||
| March 31, |
|
| April 2, |
| ||
| 2024 |
|
| 2023 |
| ||
NET SALES |
| 37 |
|
| $ | 7,767 |
|
COST OF SALES |
| 257 |
|
|
| 9,732 |
|
GROSS LOSS |
| (220 | ) |
|
| (1,965 | ) |
OPERATING EXPENSES: |
|
|
|
|
| ||
Selling, general and administrative |
| 1,237 |
|
|
| 2,639 |
|
Total operating expenses |
| 1,237 |
|
|
| 2,639 |
|
OPERATING LOSS |
| (1,457 | ) |
|
| (4,604 | ) |
Gain (loss) on sale of discontinued operations |
| 157 |
|
|
| (22,487 | ) |
LOSS BEFORE INCOME TAX BENEFIT |
| (1,300 | ) |
|
| (27,091 | ) |
INCOME TAX BENEFIT |
| 307 |
|
|
| 5,952 |
|
LOSS FROM DISCONTINUED OPERATIONS, NET OF TAX |
| (993 | ) |
| $ | (21,139 | ) |
The operating results, and components thereof, of discontinued operations for the acquisition are as follows:three months ended March 31, 2024 and April 2, 2023 were not significant.
|
|
|
|
|
|
| Estimates of Fair Value |
| Estimated Useful Life (in years) | ||
Definite-lived intangible: |
|
|
|
|
|
Dealer network | $ | 20,000 |
|
| 10 |
Indefinite-lived intangible: |
|
|
|
|
|
Trade name |
| 16,000 |
|
|
|
Total identifiable intangible assets | $ | 36,000 |
|
|
|
The value allocated to inventories reflects theamortized cost and net carrying amount, gross unrealized gains and losses, and estimated fair value of the acquired inventory based on the expected sales price of the inventory, less an estimated cost to completeour investments classified as held-to-maturity at March 31, 2024 and a reasonable profit margin. The value allocated to accounts receivable represents the estimated fair value of the acquired receivables based on the expected collection of those receivables, less an estimated allowance for bad debts. The fair value of the identifiable intangible assets were determined based on the following approaches:June 30, 2023 are summarized as follows:
|
|
|
|
|
| |||||||||||||
|
| March 31, 2024 |
| |||||||||||||
|
| Amortized |
|
| Gross |
|
| Gross |
|
| Estimated |
| ||||
|
| Cost / Net |
|
| Unrealized |
|
| Unrealized |
|
| Fair |
| ||||
|
| Carrying Amount |
|
| Gains |
|
| Losses |
|
| Value |
| ||||
Held-to-maturity securities: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Fixed income securities: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Corporate bonds |
| $ | 83,183 |
|
| $ | 6 |
|
| $ | (48 | ) |
| $ | 83,141 |
|
Total held-to-maturity securities |
| $ | 83,183 |
|
| $ | 6 |
|
| $ | (48 | ) |
| $ | 83,141 |
|
1210
|
|
|
| |||||||||||||
|
| June 30, 2023 |
| |||||||||||||
|
| Amortized |
|
| Gross |
|
| Gross |
|
| Estimated |
| ||||
|
| Cost / Net |
|
| Unrealized |
|
| Unrealized |
|
| Fair |
| ||||
|
| Carrying Amount |
|
| Gains |
|
| Losses |
|
| Value |
| ||||
Held-to-maturity securities: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Fixed income securities: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Corporate bonds |
| $ | 81,743 |
|
| $ | 1 |
|
| $ | (160 | ) |
| $ | 81,584 |
|
U.S. treasury bills |
|
| 9,817 |
|
|
| 31 |
|
|
| (1 | ) |
|
| 9,847 |
|
Total held-to-maturity securities |
| $ | 91,560 |
|
| $ | 32 |
|
| $ | (161 | ) |
| $ | 91,431 |
|
MCBC HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share data)
|
|
The fair value of the definite-lived intangible asset is being amortized using the straight-line method to amortization of intangible assets expense over the estimated useful life. Indefinite-lived intangible assets are not amortized, but instead are evaluated for potential impairment on an annual basis in accordance with the provisions of ASC Topic 350, Intangibles—Goodwill and Other. The weighted average useful life of identifiable definite-lived intangible assets acquired was 10.0 years. Goodwill of $37,225 arising from the acquisition consists of future growth prospects including dealer expansion into new geographic markets and capacity expansion as well as intangible assets that do not qualify for separate recognition. The indefinite-lived intangible asset and goodwill acquired are expected to be deductible for income tax purposes.
Acquisition and integration related costs of $1,486, which were incurred by the Company during the first half of fiscal 2018, were expensed in the period incurred, and are included in general and administrative expenses in the consolidated statement of operations and comprehensive income for the three and six months ended December 31, 2017.
Pro Forma Financial Information:
The following unaudited pro forma consolidated results of operations for the three and six months ended December 31, 2017 and three and six months ended January 1, 2017, assumes that the acquisition of NauticStar occurred as of July 1, 2016. The unaudited pro forma financial information combines historical results of MasterCraft and NauticStar, with adjustments for depreciation and amortization attributable to preliminary fair value estimates on acquired tangible and intangible assets for the respective periods. Non-recurring pro forma adjustments associated with the fair value step up of inventory were included in the reported pro forma cost of sales and earnings. The unaudited pro forma financial information is presented for informational purposes only and is not indicative of the results of operations that would have been achieved if the acquisition had taken place at the beginning of fiscal year 2017 or the results that may occur in the future:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended |
| Six Months Ended | ||||||||
|
| December 31, 2017 |
| January 1, 2017 |
| December 31, 2017 |
| January 1, 2017 | ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales |
| $ | 78,435 |
| $ | 68,286 |
| $ | 161,553 |
| $ | 146,400 |
Net income |
| $ | 8,876 |
| $ | 4,293 |
| $ | 16,981 |
| $ | 10,797 |
Basic earnings per share |
| $ | 0.48 |
| $ | 0.23 |
| $ | 0.91 |
| $ | 0.58 |
Diluted earnings per share |
| $ | 0.47 |
| $ | 0.23 |
| $ | 0.91 |
| $ | 0.58 |
13
MCBC HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share data)
4.INVENTORIES
Inventories consisted of the following:
|
| March 31, |
|
| June 30, |
| ||
|
| 2024 |
|
| 2023 |
| ||
Raw materials and supplies |
| $ | 27,262 |
|
| $ | 40,201 |
|
Work in process |
|
| 9,418 |
|
|
| 9,465 |
|
Finished goods |
|
| 6,395 |
|
|
| 10,335 |
|
Obsolescence reserve |
|
| (1,643 | ) |
|
| (1,703 | ) |
Total inventories |
| $ | 41,432 |
|
| $ | 58,298 |
|
|
|
|
|
|
|
|
|
|
| December 31, 2017 |
| June 30, 2017 |
| ||
Raw materials and supplies |
| $ | 11,550 |
| $ | 7,164 |
|
Work in process |
|
| 2,670 |
|
| 1,772 |
|
Finished goods |
|
| 5,072 |
|
| 3,427 |
|
Obsolescence reserve |
|
| (1,009) |
|
| (687) |
|
Total inventories |
| $ | 18,283 |
| $ | 11,676 |
|
Property, plant, and equipment, net consisted of the following:
|
| March 31, |
|
| June 30, |
|
| ||
|
| 2024 |
|
| 2023 |
|
| ||
Land and improvements |
| $ | 7,587 |
|
| $ | 10,456 |
|
|
Buildings and improvements |
|
| 51,848 |
|
|
| 46,759 |
|
|
Machinery and equipment |
|
| 42,309 |
|
|
| 40,632 |
|
|
Furniture and fixtures |
|
| 5,620 |
|
|
| 5,284 |
|
|
Construction in progress |
|
| 12,717 |
|
|
| 10,180 |
|
|
Total property, plant, and equipment |
|
| 120,081 |
|
|
| 113,311 |
|
|
Less accumulated depreciation |
|
| (40,488 | ) |
|
| (35,390 | ) |
|
Property, plant, and equipment — net |
|
| 79,593 |
|
| $ | 77,921 |
|
|
5. PREPAID
The following table presents the carrying amounts of goodwill as of March 31, 2024 and June 30, 2023 for each of the Company's reportable segments.
|
| Gross Amount |
|
| Accumulated Impairment Losses |
|
| Total |
| |||
MasterCraft |
| $ | 28,493 |
|
| $ | — |
|
| $ | 28,493 |
|
Crest |
|
| 36,238 |
|
|
| (36,238 | ) |
|
| — |
|
Aviara |
|
| 1,100 |
|
|
| (1,100 | ) |
|
| — |
|
Total |
| $ | 65,831 |
|
| $ | (37,338 | ) |
| $ | 28,493 |
|
11
The following table presents the carrying amounts of Other intangible assets, net:
|
| March 31, |
|
| June 30, |
| ||||||||||||||||||
|
| 2024 |
|
| 2023 |
| ||||||||||||||||||
|
| Gross Amount |
|
| Accumulated Amortization / Impairment |
|
| Other intangible assets, net |
|
| Gross Amount |
|
| Accumulated Amortization / Impairment |
|
| Other intangible assets, net |
| ||||||
Amortized intangible assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Dealer networks |
| $ | 19,500 |
|
| $ | (11,400 | ) |
| $ | 8,100 |
|
| $ | 19,500 |
|
| $ | (10,050 | ) |
| $ | 9,450 |
|
Software |
| 245 |
|
|
| (245 | ) |
|
| — |
|
| 245 |
|
|
| (233 | ) |
|
| 12 |
| ||
|
|
| 19,745 |
|
|
| (11,645 | ) |
|
| 8,100 |
|
|
| 19,745 |
|
|
| (10,283 | ) |
|
| 9,462 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Unamortized intangible assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Trade names |
|
| 33,000 |
|
|
| (7,000 | ) |
|
| 26,000 |
|
|
| 33,000 |
|
|
| (7,000 | ) |
|
| 26,000 |
|
Total other intangible assets |
| $ | 52,745 |
|
| $ | (18,645 | ) |
| $ | 34,100 |
|
| $ | 52,745 |
|
| $ | (17,283 | ) |
| $ | 35,462 |
|
Amortization expense related to Other intangible assets, net for each of the three months ended March 31, 2024 and April 2, 2023, was $0.5 million and for the nine months ended March 31, 2024 and April 2, 2023, was $1.4 million and $1.5 million, respectively. Estimated amortization expense for the fiscal year ending June 30, 2024 is $1.8 million.
Prepaid expenses and other current assets consisted of the following:
|
|
|
|
|
|
|
|
|
| December 31, 2017 |
| June 30, 2017 |
| ||
Prepaid photo shoot |
| $ | 682 |
| $ | 497 |
|
Insurance |
|
| 267 |
|
| 765 |
|
Trade show deposits |
|
| 413 |
|
| 73 |
|
Interest rate cap |
|
| 288 |
|
| 90 |
|
Other |
|
| 1,371 |
|
| 1,013 |
|
Total prepaid expenses and other current assets |
| $ | 3,021 |
| $ | 2,438 |
|
6.ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Accrued expenses and other current liabilities consisted of the following:
|
|
|
|
|
|
|
|
| March 31, |
|
| June 30, |
| ||
|
| December 31, 2017 |
| June 30, 2017 |
|
| 2024 |
|
| 2023 |
| ||||
Warranty |
| $ | 14,918 |
| $ | 12,237 |
|
| $ | 30,861 |
|
| $ | 31,780 |
|
Self-insurance |
|
| 725 |
|
| 763 |
| ||||||||
Dealer incentives |
|
| 21,452 |
|
|
| 24,987 |
| |||||||
Compensation and related accruals |
|
| 1,905 |
|
| 1,691 |
|
|
| 4,367 |
|
|
| 5,838 |
|
Inventory repurchase contingent obligation |
|
| 1,253 |
|
| 1,008 |
|
|
| 2,212 |
|
|
| 1,515 |
|
Interest |
|
| 2,021 |
|
| 1,008 |
| ||||||||
Dealer incentives |
|
| 2,489 |
|
| 2,755 |
| ||||||||
Working capital adjustment - NauticStar acquistion |
|
| 1,383 |
|
| — |
| ||||||||
Contract liabilities |
|
| 1,423 |
|
|
| 1,477 |
| |||||||
Self-insurance |
|
| 1,357 |
|
|
| 1,586 |
| |||||||
Liabilities retained associated with discontinued operations |
|
| 786 |
|
|
| 690 |
| |||||||
Other |
|
| 2,752 |
|
| 1,948 |
|
|
| 3,706 |
|
|
| 4,623 |
|
Total accrued expenses and other current liabilities |
| $ | 27,446 |
| $ | 21,410 |
|
| $ | 66,164 |
|
| $ | 72,496 |
|
The following table provides a roll forward of the accrued warranty liability:
|
|
|
|
|
|
|
|
Beginning balance - June 30, 2017 |
| $ | 12,237 |
Provisions |
|
| 2,807 |
Additions for NauticStar acquisition |
|
| 1,992 |
Payments made |
|
| (1,955) |
Adjustments to preexisting warranties |
|
| (163) |
Ending balance - December 31, 2017 |
| $ | 14,918 |
14Accrued warranty liability activity was as follows for the nine months ended:
|
| March 31, |
|
| April 2, |
| ||
|
| 2024 |
|
| 2023 |
| ||
Balance at the beginning of the period |
| $ | 31,780 |
|
| $ | 25,824 |
|
Provisions |
|
| 6,438 |
|
|
| 10,766 |
|
Payments made |
|
| (10,557 | ) |
|
| (9,069 | ) |
Changes for pre-existing warranties |
|
| 3,200 |
|
|
| 3,131 |
|
Balance at the end of the period |
| $ | 30,861 |
|
| $ | 30,652 |
|
Legal Proceedings
The Company is subject to various litigation, claims and proceedings, which have arisen in the ordinary course of business. The Company accrues for litigation, claims and proceedings when a liability is both probable and the amount can be reasonably estimated.
The Company’s accruals for litigation matters are not material. While these matters are subject to inherent uncertainties, management believes that current litigation, claims and proceedings, individually and in aggregate, and after considering expected insurance
12
reimbursements and other contract indemnifications, are not likely to have a material adverse impact on the Company’s financial position, results of operations or cash flows.
MCBC HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share data)
7. GOODWILL AND OTHER INTANGIBLE ASSETS
The changes in the carrying amount of goodwill for the six months ended December 31, 2017, were as follows:
|
|
|
|
Goodwill as of June 30, 2017 |
| $ | 29,593 |
Addition related to the acquisition of NauticStar |
|
| 37,225 |
Goodwill as of December 31, 2017 |
| $ | 66,818 |
As of December 31, 2017, and June 30, 2017, details of the Company’s intangible assets other than goodwill were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
| December 31, 2017 |
| |||||||
|
| Gross |
|
|
|
| Net |
| ||
|
| Carrying |
| Accumulated |
| Carrying |
| |||
|
| Amount |
| Amortization |
| Amount |
| |||
Dealer network |
| $ | 21,590 |
| $ | (1,500) |
| $ | 20,090 |
|
Total amortizable intangible assets |
|
| 21,590 |
|
| (1,500) |
|
| 20,090 |
|
Trade names |
|
| 32,000 |
|
| — |
|
| 32,000 |
|
Total intangible assets |
| $ | 53,590 |
| $ | (1,500) |
| $ | 52,090 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| June 30, 2017 |
| |||||||
|
| Gross |
|
|
| Net |
| |||
|
| Carrying | Accumulated |
| Carrying |
| ||||
|
| Amount | Amortization |
| Amount |
| ||||
Dealer network |
| $ | 1,590 |
| $ | (947) |
| $ | 643 |
|
Total amortizable intangible assets |
|
| 1,590 |
|
| (947) |
|
| 643 |
|
Trade names |
|
| 16,000 |
|
| — |
|
| 16,000 |
|
Total intangible assets |
| $ | 17,590 |
| $ | (947) |
| $ | 16,643 |
|
Amortization expense recognized on all amortizable intangibles was $552 and $54 for the six months ended December 31, 2017 and January 1, 2017, respectively.
The estimated future amortization of definite-lived intangible assetsLong-term debt is as follows:
|
|
|
|
|
Fiscal years ending June 30, |
|
|
|
|
Remainder of 2018 |
| $ | 1,054 |
|
2019 |
|
| 2,107 |
|
2020 |
|
| 2,107 |
|
2021 |
|
| 2,107 |
|
2022 |
|
| 2,107 |
|
and thereafter |
|
| 10,608 |
|
Total |
| $ | 20,090 |
|
|
| March 31, |
|
| June 30, |
| ||
|
| 2024 |
|
| 2023 |
| ||
Term loan |
| $ | 50,625 |
|
| $ | 54,000 |
|
Debt issuance costs on term loan |
|
| (272 | ) |
|
| (324 | ) |
Total debt |
|
| 50,353 |
|
|
| 53,676 |
|
Less current portion of long-term debt |
|
| 4,500 |
|
|
| 4,500 |
|
Less current portion of debt issuance costs on term loan |
|
| (129 | ) |
|
| (119 | ) |
Long-term debt, net of current portion |
| $ | 45,982 |
|
| $ | 49,295 |
|
15
MCBC HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share data)
8. FAIR VALUE MEASUREMENTS
Fair value is the exchange price that would be received for an asset or paid to transferThe Company has a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. There are three levelscredit agreement with a syndicate of inputs that may be used to measure fair values:
Level 1 — Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.
Level 2 — Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.
Level 3 — Significant unobservable inputs that reflect a company’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.
When determining the fair value measurements for assets or liabilities required or permitted to be recorded at and/or marked to fair value, the Company considers the principal or most advantageous market in which it would transact and considers assumptions that market participants would use when pricing the asset or liability. When possible, the Company looks to active and observable markets to price identical assets. When identical assets are not traded in active markets, the Company looks to market observable data for similar assets.
The following tables summarize the basis used to measure certain financial assets and liabilities at fair value on a recurring basis in the consolidated balance sheets:
|
|
|
|
|
|
|
|
|
|
|
|
| December 31, 2017 |
| |||||||
|
| Level 1 |
| Level 2 |
| Level 3 |
| |||
Asset — interest rate cap |
| $ | — |
| $ | 288 |
| $ | — |
|
|
|
|
|
|
|
|
|
|
|
|
|
| June 30, 2017 |
| |||||||
|
| Level 1 |
| Level 2 |
| Level 3 |
| |||
Asset — interest rate cap |
| $ | — |
| $ | 90 |
| $ | — |
|
The interest rate cap is valued utilizing pricing models taking into account inputs such as interest rates and notional amounts. In November 2017, the Company entered into an interest rate cap agreement with its existing lender to cap its London Interbank Offered Rate (“LIBOR”) rate at 2% for $34,594 of outstanding principal on its long-term debt. Fair value measurements for the Company’s interest rate cap are classified under Level 2 because such measurements are based on significant other observable inputs. There were no transfers of assets or liabilities between Level 1 and Level 2 during the six months ended December 31, 2017.
16
MCBC HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share data)
9. LONG-TERM DEBT
Long-term debt outstanding is as follows:
|
|
|
|
|
|
|
|
|
| December 31, 2017 |
| June 30, 2017 |
| ||
Revolving credit facility |
| $ | — |
| $ | — |
|
Senior secured term loan |
|
| 96,775 |
|
| 35,135 |
|
Debt issuance costs on term loan |
|
| (1,798) |
|
| (658) |
|
Total debt |
|
| 94,977 |
|
| 34,477 |
|
Less current portion of long-term debt |
|
| 5,513 |
|
| 3,904 |
|
Less current portion of debt issuance costs on term loan |
|
| (441) |
|
| (217) |
|
Long-term debt — less current portion |
| $ | 89,905 |
| $ | 30,790 |
|
On October 2, 2017, the Company entered into a Third Amended and Restated Credit and Guaranty Agreement with Fifth Third Bank, as the agent and letter of credit issuer, and the lenders party theretoinstitutions (the “Third Amended Credit Agreement”"Credit Agreement"). The Third Amended Credit Agreement replaced and paid off the Company’s Second Amended and Restated Credit Agreement, dated May 27, 2016. The Third Amended Credit Agreement that provides the Company with a $145,000$160.0 million senior secured credit facility, consisting of a $115,000$60.0 million term loan (the “Third Term Loan”"Term Loan") and a $30,000$100.0 million revolving credit facility (the “Revolving"Revolving Credit Facility”Facility").
The Third Amended Credit Agreement is secured by a first priority security interest in substantially all of the Company's assets.
The Credit Agreement contains a number of covenants that, among other things, restrict the Company’s ability to, subject to specified exceptions, incur additional debt; incur additional liens and contingent liabilities; sell or dispose of assets; merge with or acquire other companies; liquidate or dissolve; engage in businesses that are not in a related line of business; make loans, advances or guarantees; pay dividends or make other distributions; engage in transactions with affiliates; and make investments. The Company is also required to maintain a minimum fixed charge coverage ratio and a maximum net leverage ratio.
On August 31, 2022, the Company entered into the Second Amendment to the Credit Agreement to obtain the necessary consents and waivers related to the sale of the NauticStar segment on September 2, 2022, as discussed in Note 3.
On October 4, 2023, the Company entered into the Third Amendment to the Credit Agreement to exclude certain amounts of stock repurchases during the fiscal year ending June 30, 2024 from the calculation of the minimum required fixed charge coverage ratio.
The Credit Agreement, as amended, bears interest, at the Company’s option, at either the prime rate plus an applicable margin ranging from 0.75%0.25% to 1.75%1.00% or at an adjusted LIBORterm benchmark rate plus an applicable margin ranging from 1.75%1.25% to 2.75%2.00%, in each case based on the Company’s seniornet leverage ratio. BasedThe Company is also required to pay a commitment fee for any unused portion of the revolving credit facility ranging from 0.15% to 0.30% based on the Company’s current seniornet leverage ratio,ratio. Effective during both the three and nine months ended March 31, 2024, the applicable margin for loans accruing at the prime rate was 0.25% and the applicable margin for loans accruing interest at the primebenchmark rate is 1.25% andwas 1.25%. As of March 31, 2024, the applicable margin for loans accruing interest at LIBOR is 2.25%. In connection withrate on the Third AmendedCompany’s term loan was 6.68%.
The Credit Agreement the Company paid $1,322 of financing costs. The Third Term Loan will mature and all remaining amounts outstanding thereunder will be due and payable on October 2, 2022. On October 17, 2017, and December 1, 2017, the Company made voluntary payments on the Third Term Loan of $10,000 and $7,000, respectively, out of excess cash.June 28, 2026. As of DecemberMarch 31, 2017 and June 30, 2017,2024, the Company’s unamortized deferred financing costs were $2,226 and $1,139, respectively. These costs are being amortized over the term of the Third Amended Credit Agreement. The Company was in compliance with all of its debtfinancial covenants under its Third Amendedthe Credit Agreement.
Revolving Credit Facility
As of DecemberMarch 31, 2017 and June 30, 2017,2024, the Company had no borrowings amounts outstanding on its Revolving Credit Facility. Availability under the Revolving Credit Facility is reduced by lettersand had remaining availability of credit. There were specified letters of credit outstanding of $750 and $250 at December 31, 2017 and June 30, 2017, respectively. As of December 31, 2017 and June 30, 2017, availability under the Revolving Credit Facility was $29,250 and $29,750, respectively, and unamortized deferred financing costs were $428 and $481, respectively.
17
$100.0 million.
MCBC HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share data)
10. INCOME TAXES
The Company’s results for the three and six months ended December 31, 2017, reflect the impact of the enactment of the Tax Cuts and Jobs Act (“Tax Reform Act”), which was signed into law on December 22, 2017. The Tax Reform Act reduced federal corporate income tax rates and changed numerous other provisions. As we have a June 30 fiscal year-end, the lower corporate federal income tax rate will be phased in, resulting in a U.S. federal statutory tax rate of 28.1% for our fiscal year ending June 30, 2018, and 21.0% for subsequent fiscal years. The quarter and six months ended December 31, 2017 included a year-to-date provisional expense of approximately $171 to reflect federal deferred taxes at the lower blended effective tax rate. This adjustment to the provision was more than offset by a one-time discrete provisional benefit of approximately $651 as a result of applying the new lower federal income tax rates to the Company’s net deferred tax liabilities.
The changes included in the Tax Reform Act are broad and complex. The final transition impacts may differ from the above estimate, due to, among other things, changes in interpretations, any legislative action to address questions that arise because of the Tax Reform Act, any changes in accounting standards for income taxes or related interpretations in response to the Tax Reform Act, or any updates or changes to estimates we have utilized to calculate the transition impacts. The SEC issued guidance in Staff Accounting Bulletin 118 which allows the Company to record provisional amounts during a one-year measurement period. The Company has determined a reasonable estimate for the measurement and accounting for certain effects of the Tax Reform Act, including the re-measurement of the Company’s net deferred tax assets and liabilities, which have been reflected as provisional amounts in the December 31, 2017 financial statements. The amounts represent the Company’s best estimates based on records, information, and current guidance. Additional information and analysis is required to finalize the impact that the Tax Reform Act will have on the Company’s full year financial results. This includes filing the fiscal 2017 United States federal income tax return, which could impact the Company’s estimated deferred income tax assets and liabilities. Although the Company does not anticipate material adjustments to the provisional amounts, final results could vary from these provisional amounts. The Company currently anticipates finalizing and recording any resulting adjustments by the end of the fiscal year ending June 30, 2018.
The Company’sconsolidated interim effective tax rate is based on a current estimate of the annual effective income tax rate adjusted to reflect the impact of discrete items. During the six months ended December 31, 2017,The differences between the Company’s effective tax rates and the statutory federal tax rate was 25.5%. The rate was lower than the 28.1% statutory rateof 21.0% primarily duerelate to the impact of Tax Reform, and a permanent benefit associated with the domestic production activities deduction, which was partially offset by the inclusion of the state tax rate in the overall effective rate.
18
Tablerate, the benefit of Contents
MCBC HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except sharefederal and per share data)
11. EARNINGS PER SHARE
The following table sets forthstate credits, and a permanent add-back for Section 162(m) limitations, partially offset by a benefit associated with the computation of the Company’s earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended |
| Six Months Ended |
|
| ||||||||
|
| December 31, 2017 |
| January 1, 2017 |
| December 31, 2017 |
| January 1, 2017 |
|
| ||||
Net income |
| $ | 8,009 |
| $ | 4,031 |
| $ | 15,055 |
| $ | 11,014 |
|
|
Weighted average common shares — basic |
|
| 18,619,834 |
|
| 18,592,936 |
|
| 18,617,467 |
|
| 18,592,372 |
|
|
Dilutive effect of assumed exercises of stock options |
|
| 34,994 |
|
| 4,453 |
|
| 32,969 |
|
| 2,227 |
|
|
Dilutive effect of assumed restricted share awards\units |
|
| 47,524 |
|
| 7,689 |
|
| 44,054 |
|
| 4,242 |
|
|
Weighted average outstanding shares — diluted |
|
| 18,702,352 |
|
| 18,605,078 |
|
| 18,694,489 |
|
| 18,598,841 |
|
|
Basic earnings per share |
| $ | 0.43 |
| $ | 0.22 |
| $ | 0.81 |
| $ | 0.59 |
|
|
Diluted earnings per share |
| $ | 0.43 |
| $ | 0.22 |
| $ | 0.81 |
| $ | 0.59 |
|
|
Forforeign derived intangible income deduction. During the three months ended DecemberMarch 31, 2017,2024 and April 2, 2023, the weighted average shares that were anti-dilutive,Company's effective tax rate was 17.4% and therefore excluded from22.8%, respectively,
13
and for the computationnine months ended March 31, 2024 and April 2, 2023, the Company’s effective tax rate was 20.8% and 23.2%, respectively. The Company’s effective tax rates for the three and nine months ended March 31, 2024 are lower compared to the effective tax rate for the same prior-year periods, primarily due to a decrease in the effective state tax rate and an increase in the impact of diluted earnings per share included 24,847federal tax credits, partially offset by an increase in the tax impact of uncertain state tax positions.
The following table presents the components of share-based compensation expense by award type.
|
| Three Months Ended |
|
| Nine Months Ended |
|
| ||||||||||
|
| March 31, |
|
| April 2, |
|
| March 31, |
|
| April 2, |
|
| ||||
|
| 2024 |
|
| 2023 |
|
| 2024 |
|
| 2023 |
|
| ||||
Restricted stock awards |
| $ | 1,494 |
|
| $ | 587 |
|
| $ | 2,508 |
|
| $ | 1,723 |
|
|
Performance stock units |
|
| 89 |
|
|
| 439 |
|
|
| 23 |
|
|
| 1,169 |
|
|
Share-based compensation expense |
| $ | 1,583 |
|
| $ | 1,026 |
|
| $ | 2,531 |
|
| $ | 2,892 |
|
|
The increase in expense related to restricted stock awards. For ("RSAs") for the three months ended January 1, 2017,March 31, 2024 is primarily the weighted average shares thatresult of accelerated recognition of compensation expense associated with outstanding equity awards held by our former Chief Executive Officer, which were anti-dilutive, and therefore excluded frommodified at the computationtime of diluted earnings per share included 1,898 restricted stock awards and options to purchase 122,640 sharesthe March 2024 announcement of common stock.his retirement.
ForRestricted Stock Awards
During the sixnine months ended DecemberMarch 31, 2017, the weighted average shares that were anti-dilutive, and therefore excluded from the computation of diluted earnings per share included 37,905 restricted stock awards. For the six months ended January 1, 2017, the weighted average shares that were anti-dilutive, and therefore excluded from the computation of diluted earnings per share included 16,534 restricted stock awards and options to purchase 122,640 shares of common stock.
During fiscal year ended June 30, 2015 the Company adopted the Amended and Restated MCBC Holdings, Inc. 2015 Incentive Award Plan (“2015 Plan”) in order to facilitate the grant of cash and equity incentives to non-employee directors, employees, and consultants of the Company and certain of its affiliates and to enable the Company and certain of its affiliates to obtain and retain the services of these individuals, which is essential to our long-term success. In July 2015, the Board amended and restated the Company’s 2015 Plan which became effective just prior to the closing of the Company’s initial public offering to increase the shares available for issuance under the 2015 Plan. During the six months ended December 31, 2017 and January 1, 2017, the Company recognized $528 and $305, respectively in stock-based compensation expense.
In July 2017,2024, the Company granted 179,539 RSAs to the Company’s non-executive directors, officers and certain employees 23,932other key employees. Generally, the shares of restricted stock awards (“RSAs”) undergranted during the 2015 Plan at a per sharenine months ended March 31, 2024, vest pro-rata over three years for officers and certain other key employees and over one year for non-executive directors. The Company determined the fair value of $19.34, which is the market valueshares awarded by using the close price of our common stock as of the Company’s common stock on thedate of grant. The weighted average grant date. The RSAs will vest in three equal annual installments. In addition, the Company granted 17,064 RSAs under the 2015 Plan to certain non-employee directors for their annual equity award at a per sharedate fair value of $19.34. In November 2017,RSAs granted in the Company granted 5,578 of RSAs to certain employees under the 2015 Plan at anine months ended March 31, 2024, was $21.33 per share fair value of $22.31.
share.
19
TableThe following table summarizes the status of Contentsnonvested RSAs as of March 31, 2024, and changes during the nine months then ended.
MCBC HOLDINGS, INC. AND SUBSIDIARIES
|
|
|
|
| Average |
| ||
|
| Nonvested |
|
| Grant-Date |
| ||
|
| Restricted |
|
| Fair Value |
| ||
|
| Shares |
|
| (per share) |
| ||
Nonvested at June 30, 2023 |
|
| 91,907 |
|
| $ | 23.66 |
|
Granted |
|
| 179,539 |
|
|
| 21.33 |
|
Vested |
|
| (18,830 | ) |
|
| 20.00 |
|
Forfeited |
|
| (19,173 | ) |
|
| 23.09 |
|
Nonvested at March 31, 2024 |
|
| 233,443 |
|
|
| 22.21 |
|
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTSAs of March 31, 2024, there was $2.7 million of total unrecognized compensation expense related to nonvested RSAs. The Company expects this expense to be recognized over a weighted average period of 2.2 years.
(Dollars in thousands, except share and per share data)Performance Stock Units
In July 2017, the Company granted 23,929 performancePerformance stock units (“PSUs”) under its 2015 Planare a form of long-term incentive compensation awarded to executive officers and certain other key employees at a per share fair valuedesigned to directly align the interests of $19.34, which isemployees to the market valueinterests of the Company’s common stock on the grant date. In November 2017, the Company granted 2,306 PSUs under its 2015 Plan, at a per share fair value of $22.31.stockholders, and to create long-term stockholder value. The awards will be earned based uponon the Company’s attainmentachievement of certain performance criteria over a three-year performance period. The performance period for the awards arecommences on July 1 of the fiscal year in which they were granted and continue for a three-year period, commencing July 1, 2017 and ending on June 30 2020.of the applicable year. The probability of achieving the performance criteria is assessed quarterly. Following the determination of the Company’s achievement with respect to the performance criteria, the amountnumber of shares awarded will beis subject to further adjustment based uponon the application of a total shareholder return (“TSR”) modifier.
In July 2015, The grant date fair value is determined based on both the probability assessment of the Company granted 137,786 non-qualified stock options (“NSOs”)achieving the performance criteria and an estimate of the expected TSR modifier. The TSR modifier estimate is determined using a Monte Carlo Simulation model, which considers the
14
likelihood of numerous possible outcomes of long-term market performance. Compensation expense related to certain employees atnonvested PSUs is recognized ratably over the performance period.
The following table summarizes the status of nonvested PSUs as of March 31, 2024, and changes during the nine months then ended.
|
|
|
|
| Average |
| ||
|
| Nonvested |
|
| Grant-Date |
| ||
|
| Performance |
|
| Fair Value |
| ||
|
| Stock Units |
|
| (per share) |
| ||
Nonvested at June 30, 2023 |
|
| 122,971 |
|
| $ | 27.12 |
|
Granted |
|
| 86,555 |
|
|
| 21.62 |
|
Forfeited |
|
| (28,054 | ) |
|
| 25.65 |
|
Nonvested at March 31, 2024 |
|
| 181,472 |
|
|
| 24.73 |
|
As of March 31, 2024, there was $0.2 million of total unrecognized compensation expense related to nonvested PSUs. The Company expects this expense to be recognized over a weighted average period of 2.2 years.
The following table sets forth the computation of the Company’s net income per share:
|
| Three Months Ended |
|
| Nine Months Ended |
|
| ||||||||||
|
| March 31, |
|
| April 2, |
|
| March 31, |
|
| April 2, |
|
| ||||
|
| 2024 |
|
| 2023 |
|
| 2024 |
|
| 2023 |
|
| ||||
Net income from continuing operations |
| $ | 3,826 |
|
| $ | 22,782 |
|
| $ | 16,829 |
|
| $ | 67,400 |
|
|
Loss from discontinued operations, net of tax |
|
| (71 | ) |
|
| (272 | ) |
|
| (993 | ) |
|
| (21,139 | ) |
|
Net income |
| $ | 3,755 |
|
| $ | 22,510 |
|
| $ | 15,836 |
|
| $ | 46,261 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Weighted average shares — basic |
|
| 16,844,440 |
|
|
| 17,559,920 |
|
|
| 17,003,616 |
|
|
| 17,725,208 |
|
|
Dilutive effect of assumed exercises of stock options |
|
| — |
|
|
| 4,816 |
|
|
| — |
|
|
| 7,028 |
|
|
Dilutive effect of assumed restricted share awards/units |
|
| 121,184 |
|
|
| 184,174 |
|
|
| 90,342 |
|
|
| 119,419 |
|
|
Weighted average outstanding shares — diluted |
|
| 16,965,624 |
|
|
| 17,748,910 |
|
|
| 17,093,958 |
|
|
| 17,851,655 |
|
|
Basic net income (loss) per share |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Continuing operations |
| $ | 0.23 |
|
| $ | 1.30 |
|
| $ | 0.99 |
|
| $ | 3.80 |
|
|
Discontinued operations |
|
| (0.01 | ) |
|
| (0.02 | ) |
|
| (0.06 | ) |
|
| (1.19 | ) |
|
Net income |
| $ | 0.22 |
|
| $ | 1.28 |
|
| $ | 0.93 |
|
| $ | 2.61 |
|
|
Diluted net income (loss) per share |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Continuing operations |
| $ | 0.23 |
|
| $ | 1.28 |
|
| $ | 0.98 |
|
| $ | 3.78 |
|
|
Discontinued operations |
|
| (0.01 | ) |
|
| (0.01 | ) |
|
| (0.05 | ) |
|
| (1.19 | ) |
|
Net income |
| $ | 0.22 |
|
| $ | 1.27 |
|
| $ | 0.93 |
|
| $ | 2.59 |
|
|
For the three and nine months ended March 31, 2024 and April 2, 2023, an option price equalimmaterial number of shares were excluded from the computation of diluted earnings per share as the effect would have been anti-dilutive.
Share Repurchase Program
On June 24, 2021, the board of directors of the Company authorized a share repurchase program that allowed for the repurchase of up to the $15.00 per share$50.0 million of the Company’s common stock whichduring the three-year period ending June 24, 2024. While having $1.6 million of availability as of June 30, 2023, this program was fully utilized during the initial public offering price, which will vest in 25% increments annually on eachfirst quarter ended October 1, 2023.
On July 24, 2023, the board of directors of the first four anniversariesCompany authorized a new share repurchase program under which the Company may repurchase up to $50.0 million of its outstanding shares of common stock. The new authorization became effective upon the completion of the grant date. In June 2016,Company's existing $50.0 million stock repurchase authorization.
15
During the three months ended March 31, 2024 and April 2, 2023, the Company reducedrepurchased 73,562 shares and 210,150 shares of common stock for $1.6 million and $7.0 million, respectively, in cash, excluding related fees and expenses. During the exercise pricenine months ended March 31, 2024 and April 2, 2023, the Company repurchased 529,545 shares and 625,794 shares of these optionscommon stock for $11.7 million and $16.0 million, respectively, in cash, excluding related fees and expenses. As of March 31, 2024, $39.9 million remained available under the program.
Reportable Segments
Operating segments are identified as components of an enterprise about which discrete financial information is available for evaluation by $4.30 per share, which was the amountCODM in making decisions on how to allocate resources and assess performance. For the three and nine months ended March 31, 2024, the Company’s CODM regularly assessed the operating performance of the special cash dividend paid in June 2016. Therefore, the exercise price of the options is $10.70 per share. The other terms of the options remained unchanged. We estimated the grant date fair value of stock options using the Black-Scholes pricing model assuming a risk-free interest rate of 1.93%, an expected term of 6.25 years, no dividend yield and a volatility rate of 56.7%.
13.SEGMENT INFORMATION
The Company designs, manufactures, and markets recreational sport boats and has twoCompany’s boat brands under three operating and reportable segments: MasterCraft and NauticStar. The Company’s segments are defined by management’s reporting structure, product brands, and distribution channels.
Each segment distributes the NauticStar product brandits products through its own independent dealer network. The Company’s chief operating decision maker (“CODM”) regularly reviewsEach segment also has its own management structure which is responsible for the operations of the segment and is directly accountable to the CODM for the operating performance of each product brand including measures of performancethe segment, which is regularly assessed by the CODM who allocates resources based on income from operations. The Company considers each of the product brands to be an operating segment and has further concluded that presenting disaggregated information of these two operating segments provides meaningful information as certain economic characteristics are dissimilar as well as the characteristics of the customer base served.performance.
Management evaluates performance based on business segment operating income. The Company files a consolidated income tax return and does not allocate income taxes and other corporate levelcorporate-level expenses, including interest, to operating segments.
All material corporate costs are included in the MasterCraft segment.
20
MCBC HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share data)
The following tables presentSelected financial information for the Company’s reportable segments was as follows:
|
| For the Three Months Ended March 31, 2024 |
| |||||||||||||
|
| MasterCraft |
|
| Crest |
|
| Aviara |
|
| Consolidated |
| ||||
Net sales |
| $ | 69,783 |
|
| $ | 14,194 |
|
| $ | 11,731 |
|
| $ | 95,708 |
|
Operating income (loss) |
|
| 7,616 |
|
|
| (864 | ) |
|
| (2,756 | ) |
|
| 3,996 |
|
Depreciation and amortization |
|
| 1,288 |
|
|
| 817 |
|
|
| 737 |
|
|
| 2,842 |
|
Purchases of property, plant and equipment |
|
| 2,591 |
|
|
| 584 |
|
|
| 1,329 |
|
|
| 4,504 |
|
|
| For the Nine Months Ended March 31, 2024 |
| |||||||||||||
|
| MasterCraft |
|
| Crest |
|
| Aviara |
|
| Consolidated |
| ||||
Net sales |
| $ | 218,319 |
|
| $ | 49,713 |
|
| $ | 31,374 |
|
| $ | 299,406 |
|
Operating income (loss) |
|
| 28,202 |
|
|
| (133 | ) |
|
| (8,502 | ) |
|
| 19,567 |
|
Depreciation and amortization |
|
| 3,872 |
|
|
| 2,440 |
|
|
| 2,015 |
|
|
| 8,327 |
|
Purchases of property, plant and equipment |
|
| 6,207 |
|
|
| 1,761 |
|
|
| 4,654 |
|
|
| 12,622 |
|
|
| For the Three Months Ended April 2, 2023 |
| |||||||||||||
|
| MasterCraft |
|
| Crest |
|
| Aviara |
|
| Consolidated |
| ||||
Net sales |
| $ | 117,630 |
|
| $ | 36,369 |
|
| $ | 12,777 |
|
| $ | 166,776 |
|
Operating income (loss) |
|
| 25,298 |
|
|
| 4,962 |
|
|
| (1,234 | ) |
|
| 29,026 |
|
Depreciation and amortization |
|
| 1,386 |
|
|
| 701 |
|
|
| 535 |
|
|
| 2,622 |
|
Purchases of property, plant and equipment |
|
| 3,151 |
|
|
| 2,089 |
|
|
| 1,716 |
|
|
| 6,956 |
|
16
|
| For the Nine Months Ended April 2, 2023 |
| |||||||||||||
|
| MasterCraft |
|
| Crest |
|
| Aviara |
|
| Consolidated |
| ||||
Net sales |
| $ | 339,315 |
|
| $ | 116,595 |
|
| $ | 39,570 |
|
| $ | 495,480 |
|
Operating income (loss) |
|
| 72,269 |
|
|
| 17,576 |
|
|
| (2,136 | ) |
|
| 87,709 |
|
Depreciation and amortization |
|
| 4,132 |
|
|
| 2,104 |
|
|
| 1,597 |
|
|
| 7,833 |
|
Purchases of property, plant and equipment |
|
| 8,434 |
|
|
| 6,292 |
|
|
| 4,145 |
|
|
| 18,871 |
|
The following table presents total assets for the three and six months ended December 31, 2017 and January 1, 2017, respectively, and the Company’s financial position at December 31, 2017 and June 30, 2017, respectively.reportable segments.
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended December 31, 2017 |
| |||||||
|
| MasterCraft |
| NauticStar |
| Consolidated |
| |||
Net sales |
| $ | 58,239 |
| $ | 20,196 |
| $ | 78,435 |
|
Cost of sales |
|
| 41,856 |
|
| 16,645 |
|
| 58,501 |
|
Operating income |
|
| 9,113 |
|
| 1,669 |
|
| 10,782 |
|
Depreciation and amortization |
|
| 876 |
|
| 602 |
|
| 1,478 |
|
|
| March 31, 2024 |
|
| June 30, 2023 |
| ||
Assets: |
|
|
|
|
|
| ||
MasterCraft |
| $ | 251,297 |
|
| $ | 259,201 |
|
Crest |
|
| 48,299 |
|
|
| 53,435 |
|
Aviara |
|
| 41,286 |
|
|
| 41,340 |
|
Total assets |
| $ | 340,882 |
|
| $ | 353,976 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended January 1, 2017 |
| |||||||
|
| MasterCraft |
| NauticStar |
| Consolidated |
| |||
Net sales |
| $ | 51,134 |
| $ | — |
| $ | 51,134 |
|
Cost of sales |
|
| 36,848 |
|
| — |
|
| 36,848 |
|
Operating income |
|
| 7,039 |
|
| — |
|
| 7,039 |
|
Depreciation and amortization |
|
| 825 |
|
| — |
|
| 825 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Six Months Ended December 31, 2017 |
| |||||||
|
| MasterCraft |
| NauticStar |
| Consolidated |
| |||
Net sales |
| $ | 123,288 |
| $ | 20,196 |
| $ | 143,484 |
|
Cost of sales |
|
| 88,742 |
|
| 16,645 |
|
| 105,387 |
|
Operating income |
|
| 20,177 |
|
| 1,669 |
|
| 21,846 |
|
Depreciation and amortization |
|
| 1,608 |
|
| 602 |
|
| 2,210 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Six Months Ended January 1, 2017 |
| |||||||
|
| MasterCraft |
| NauticStar |
| Consolidated |
| |||
Net sales |
| $ | 111,823 |
| $ | — |
| $ | 111,823 |
|
Cost of sales |
|
| 79,728 |
|
| — |
|
| 79,728 |
|
Operating income |
|
| 18,674 |
|
| — |
|
| 18,674 |
|
Depreciation and amortization |
|
| 1,622 |
|
| — |
|
| 1,622 |
|
|
|
|
|
|
|
|
|
|
| As of December 31, 2017 |
|
| As of June 30, 2017 |
Assets |
|
|
|
|
|
|
MasterCraft |
| $ | 82,978 |
| $ | 83,321 |
NauticStar |
|
| 85,664 |
|
| — |
Total Assets(a) |
| $ | 168,642 |
| $ | 83,321 |
|
|
2117
ITEM 2.MANAGEMENT’S2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
The following discussion and analysis should be read together with the unaudited condensed consolidated financial statements and notes thereto included elsewhere in this Quarterly Report on Form 10-Q. In addition, the statements in this discussion and analysis regarding industry outlook, our expectations regardingconcerning the performance of our business, anticipated financial results, liquidity and the other non-historical statements are forward-looking statements. These forward-looking statements are subject to numerous risks and uncertainties, including, but not limited to, the successful integration of Nautic Star, LLC into our business and the risks and uncertainties described in “Cautionary Note Regarding Forward-Looking Statements” above and in “Risk Factors” set forth in our 2023 Annual Report on Form 10-K for the fiscal year ended June 30, 2017 and in ourthis Quarterly Report on Form 10-Q for the fiscal quarter ended October 1, 2017.10-Q. Our actual results may differ materially from those contained in or implied by any forward-looking statements.
Overview
We are a world-renowned innovator, designer, manufacturer, and marketer of recreational sport boats, including performance sport boats, salt water fishing and general recreational boats. We have a leading market positionCertain statements in the U.S.,following discussions are based on non-GAAP financial measures. A “non-GAAP financial measure” is a strong international presence,numerical measure of a registrant’s historical or future financial performance, financial position or cash flows that excludes amounts, or is subject to adjustments that have the effect of excluding amounts, that are included in the most directly comparable measure calculated and dealers aroundpresented in accordance with U.S. GAAP in the world. Our boatsstatements of operations, balance sheets or statements of cash flows of the issuer; or includes amounts, or is subject to adjustments that have the effect of including amounts, that are excluded from the most directly comparable measure so calculated and presented. Non-GAAP financial measures do not include operating and statistical measures. The Company includes non-GAAP financial measures in Management’s Discussion and Analysis, as the Company’s management believes that these measures and the information they provide are useful to users of the financial statements, including investors, because they permit users of the financial statements to view the Company’s performance using the same tools that management utilizes and to better evaluate the Company’s ongoing business performance. In order to better align the Company’s reported results with the internal metrics used for water skiing, wakeboarding, wake surfing, and salt water fishingby the Company's management to evaluate business performance as well as to provide better comparisons to prior periods and peer data, non-GAAP measures exclude the impact of purchase accounting amortization related to business acquisitions.
Discontinued Operations
The Company's results for all periods presented, as discussed in Management's Discussion and Analysis, are presented on a continuing operations basis. Results related to our former NauticStar business that was sold on September 2, 2022 are reported as discontinued operations for all periods presented. See Note 3 in Notes to Unaudited Condensed Consolidated Financial Statements for more information on Discontinued Operations.
Overview
As anticipated, general recreational boating. Our robust product portfolio is manufacturedmarket volatility and economic headwinds continue to create uncertainty and softness in the highest standards of quality, performance, and styling.
We sell our boats through an extensive network of independent dealers in North America and internationally. Through our MasterCraft segment, we partner with 96 North American dealers with 160 locations and 50 international dealers with 82 locations throughout the restretail environment. As previously disclosed, because of the world. Through our NauticStar segment, we partner with 80 North American dealers with 84 locations. For the six months ended December 31, 2017, 91.1% of our net sales were generated from North America and 8.9% of our net sales were generated from outside of North America.
Outlook
Our sales are impacted by general economic conditions, which affect theanticipated softness in retail demand, for our products, the demand for optional features, the availability of credit for our dealers and retail consumers, and overall consumer confidence. While the performance sport boat, salt water fishing and general recreational categories have grown in recent years, new unit sales remain significantly below historical peaks. While there is no guarantee that our market will continue to grow, we believe that increased consumer demand, limited used boat inventory and the superior quality, performance, styling, and value proposition of our recently released boats present a long runway for future growth. Our revamped manufacturing and product development processes have led to operational efficiencies which we expect will continue to drive margin expansion.
Recent Transactions
Acquisition of Nautic Star, LLC
On October 2, 2017, we completed the acquisition of Nautic Star, LLC. The aggregate purchase price was $80.5 million, including customary adjustments for the amount of working capital in the acquired business at the closing date. A portion of the purchase price was deposited into an escrow account in order to secure certain post-closing obligations of the
22
former members of NauticStar. Due to the timing of the acquisition, the Company has not completed the valuation of assets acquired or liabilities assumed.
Third Amended and Restated Credit Agreement
On October 2, 2017, we entered into a Third Amended and Restated Credit and Guaranty Agreement with Fifth Third Bank, as the agent and letter of credit issuer, and the lenders party thereto (the “Third Amended Credit Agreement”). The Third Amended Credit Agreement replaced and paid off our Second Amended and Restated Credit Agreement, dated May 27, 2016. The Third Amended Credit Agreement provides usapproached its wholesale production plan for fiscal 2024 with a $145 million senior secured credit facility, consistingprudent level of caution and a $115 million term loan (the “Third Term Loan”focus on rebalancing dealer inventories consistent with the expected retail demand. As a result, net sales decreased and gross margin declined as a result of lower cost absorption due to decreased sales volumes.
On March 4, 2024, Frederick Brightbill, Chief Executive Officer ("CEO") and Chairman of the Board of Directors announced his retirement as CEO of the Company, effective March 18, 2024, and as Chairman of the Company’s Board of Directors (the “Board”), effective June 30, 2024, at which time, Mr. Brightbill will serve as a $30 million revolving credit facility. On October 17, 2017,consultant through June 30, 2025. In connection with Mr. Brightbill’s retirement, the Company appointed Brad Nelson as CEO, effective March 18, 2024. Mr. Nelson also joined the Board at that time, with the size of the Board increasing from eight members to nine. Rock Lambert, the Company’s Lead Independent Director, will assume the role of Chairman of the Board, effective July 1, 2024.
During the three and December 1, 2017,nine months ended March 31, 2024, we made voluntary payments on the Third Term Loan of $10.0recognized $1.2 million and $7.0$1.7 million, respectively, out of excess cash.
Seasonality and Other Factors That Affect Our Business
Our operating results are subject to annual and seasonal fluctuations resulting from a variety of factors, including:
|
|
|
|
|
|
|
|
|
|
|
|
Key Performance Measures
From time to time we use certain key performance measures in evaluating our business and results of operations and we may refer to one or more of these key performance measures in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” These key performance measures include:
|
|
|
|
|
|
|
|
|
|
23
|
Components of Results of Operations
Net Sales
We generate sales from the sale of boats, trailers, and accessories to our dealers. The substantial majority of our net sales are derived from the sale of boats, including optional features included at the time of the initial wholesale purchase of the boat. Net sales consist of the following:
|
|
|
|
|
|
|
|
|
|
Cost of Sales
Our cost of sales includes all of the costs to manufacture our products, including raw materials, components, supplies, direct labor, and factory overhead. For components and accessories manufactured by third-party vendors, our costs are the amounts invoiced to us by the vendors. Cost of sales includes shipping and handling costs, depreciation expense related to manufacturing equipment and facilities, and warranty costs associated with the repair or replacement of our boats under warranty.
Operating Expenses
Our operating expenses include selling and marketing costs, general and administrative costs, and amortization costs. These items include personnel and related expenses, non-manufacturing overhead, and various other operating expenses. Further, selling and marketing expenditures include the cost of advertising and marketing materials. General and administrative expenses include, among other things, salaries, benefits, and other personnel related expenses for employees engaged in product development, engineering, finance, information technology, human resources, and executive management. Otherexpense within the condensed consolidated statements of operations. CEO transition costs include outsideamounts paid to the former CEO under the terms of his retirement and consulting agreement and related legal fees. Also included are recruiting and accounting fees, acquisition or integrationrelocation costs related expenses, investor relations, risk management (insurance), and other administrative costs.to the new CEO.
Other Expense
Other expense includes interest expense. Interest expense consists of interest charged under our credit facilities, including deferred financing fees and debt issuance costs written off in connection with the pay down of amounts owed on our credit facilities.
2418
Income Tax Expense
Our accounting for income tax expense reflects management’s assessment of future tax assets and liabilities based on assumptions and estimates for timing, likelihood of realization, and tax laws existing at the time of evaluation. We record a valuation allowance, when appropriate, to reduce deferred tax assets to an amount that is more likely than not to be realized.
Results of Continuing Operations
Consolidated Results
The table below sets forthpresents our consolidated results of operations for the periods presented. Our financial results for these periods are not necessarily indicative of the financial results that we will achieve in future periods.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended |
| Six Months Ended |
| ||||||||
|
| December 31, 2017 |
| January 1, 2017 |
| December 31, 2017 |
| January 1, 2017 |
| ||||
|
| (Unaudited) |
| (Unaudited) |
| ||||||||
|
| (Dollars in thousands) |
| (Dollars in thousands) |
| ||||||||
Consolidated statement of operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales |
| $ | 78,435 |
| $ | 51,134 |
| $ | 143,484 |
| $ | 111,823 |
|
Cost of sales |
|
| 58,501 |
|
| 36,848 |
|
| 105,387 |
|
| 79,728 |
|
Gross profit |
|
| 19,934 |
|
| 14,286 |
|
| 38,097 |
|
| 32,095 |
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling and marketing |
|
| 3,672 |
|
| 2,444 |
|
| 6,409 |
|
| 4,498 |
|
General and administrative |
|
| 4,955 |
|
| 4,776 |
|
| 9,290 |
|
| 8,869 |
|
Amortization of intangible assets |
|
| 525 |
|
| 27 |
|
| 552 |
|
| 54 |
|
Total operating expenses |
|
| 9,152 |
|
| 7,247 |
|
| 16,251 |
|
| 13,421 |
|
Operating income |
|
| 10,782 |
|
| 7,039 |
|
| 21,846 |
|
| 18,674 |
|
Other expense: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
| 1,139 |
|
| 512 |
|
| 1,630 |
|
| 1,123 |
|
Income before income tax expense |
|
| 9,643 |
|
| 6,527 |
|
| 20,216 |
|
| 17,551 |
|
Income tax expense |
|
| 1,634 |
|
| 2,496 |
|
| 5,161 |
|
| 6,537 |
|
Net income |
| $ | 8,009 |
| $ | 4,031 |
| $ | 15,055 |
| $ | 11,014 |
|
Additional financial and other data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Unit volume: |
|
|
|
|
|
|
|
|
|
|
|
|
|
MasterCraft |
|
| 675 |
|
| 631 |
|
| 1,450 |
|
| 1,349 |
|
NauticStar |
|
| 526 |
|
| — |
|
| 526 |
|
| — |
|
MasterCraft sales |
| $ | 58,239 |
| $ | 51,134 |
| $ | 123,288 |
| $ | 111,823 |
|
NauticStar sales |
| $ | 20,196 |
| $ | — |
| $ | 20,196 |
| $ | — |
|
Consolidated sales |
| $ | 78,435 |
| $ | 51,134 |
| $ | 143,484 |
| $ | 111,823 |
|
Per Unit: |
|
|
|
|
|
|
|
|
|
|
|
|
|
MasterCraft sales |
| $ | 86 |
| $ | 81 |
| $ | 85 |
| $ | 83 |
|
NauticStar sales |
| $ | 38 |
| $ | — |
| $ | 38 |
| $ | — |
|
Consolidated sales |
| $ | 65 |
| $ | 81 |
| $ | 73 |
| $ | 83 |
|
Gross margin |
|
| 25.4 | % |
| 27.9 | % |
| 26.6 | % |
| 28.7 | % |
Threethree and nine months ended December 31, 2017 Compared to Three months ended January 1, 2017ended:
|
| Three Months Ended |
|
| 2024 vs. 2023 |
|
| Nine Months Ended |
|
| 2024 vs. 2023 |
| ||||||||||||||||||||
|
| March 31, |
|
| April 2, |
|
|
|
|
| % |
|
| March 31, |
|
| April 2, |
|
|
|
|
| % |
| ||||||||
|
| 2024 |
|
| 2023 |
|
| Change |
|
| Change |
|
| 2024 |
|
| 2023 |
|
| Change |
|
| Change |
| ||||||||
(Dollar amounts in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Consolidated statements of operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
NET SALES |
| $ | 95,708 |
|
| $ | 166,776 |
|
| $ | (71,068 | ) |
|
| (42.6 | %) |
| $ | 299,406 |
|
| $ | 495,480 |
|
| $ | (196,074 | ) |
|
| (39.6 | %) |
COST OF SALES |
|
| 77,360 |
|
|
| 124,178 |
|
|
| (46,818 | ) |
|
| (37.7 | %) |
|
| 240,493 |
|
|
| 368,682 |
|
|
| (128,189 | ) |
|
| (34.8 | %) |
GROSS PROFIT |
|
| 18,348 |
|
|
| 42,598 |
|
|
| (24,250 | ) |
|
| (56.9 | %) |
|
| 58,913 |
|
|
| 126,798 |
|
|
| (67,885 | ) |
|
| (53.5 | %) |
OPERATING EXPENSES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Selling and marketing |
|
| 3,924 |
|
|
| 3,927 |
|
|
| (3 | ) |
|
| (0.1 | %) |
|
| 10,538 |
|
|
| 10,748 |
|
|
| (210 | ) |
|
| (2.0 | %) |
General and administrative |
|
| 9,978 |
|
|
| 9,156 |
|
|
| 822 |
|
|
| 9.0 | % |
|
| 27,446 |
|
|
| 26,874 |
|
|
| 572 |
|
|
| 2.1 | % |
Amortization of other intangible assets |
|
| 450 |
|
|
| 489 |
|
|
| (39 | ) |
|
| (8.0 | %) |
|
| 1,362 |
|
|
| 1,467 |
|
|
| (105 | ) |
|
| (7.2 | %) |
Total operating expenses |
|
| 14,352 |
|
|
| 13,572 |
|
|
| 780 |
|
|
| 5.7 | % |
|
| 39,346 |
|
|
| 39,089 |
|
|
| 257 |
|
|
| 0.7 | % |
OPERATING INCOME |
|
| 3,996 |
|
|
| 29,026 |
|
|
| (25,030 | ) |
|
| (86.2 | %) |
|
| 19,567 |
|
|
| 87,709 |
|
|
| (68,142 | ) |
|
| (77.7 | %) |
OTHER INCOME (EXPENSE): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Interest expense |
|
| (762 | ) |
|
| (695 | ) |
|
| (67 | ) |
|
| 9.6 | % |
|
| (2,494 | ) |
|
| (1,923 | ) |
|
| (571 | ) |
|
| 29.7 | % |
Interest income |
|
| 1,398 |
|
|
| 1,195 |
|
|
| 203 |
|
|
| 17.0 | % |
|
| 4,164 |
|
|
| 1,967 |
|
|
| 2,197 |
|
|
| 111.7 | % |
INCOME BEFORE INCOME TAX EXPENSE |
|
| 4,632 |
|
|
| 29,526 |
|
|
| (24,894 | ) |
|
| (84.3 | %) |
|
| 21,237 |
|
|
| 87,753 |
|
|
| (66,516 | ) |
|
| (75.8 | %) |
INCOME TAX EXPENSE |
|
| 806 |
|
|
| 6,744 |
|
|
| (5,938 | ) |
|
| (88.0 | %) |
|
| 4,408 |
|
|
| 20,353 |
|
|
| (15,945 | ) |
|
| (78.3 | %) |
NET INCOME FROM CONTINUING OPERATIONS |
| $ | 3,826 |
|
| $ | 22,782 |
|
| $ | (18,956 | ) |
|
| (83.2 | %) |
| $ | 16,829 |
|
| $ | 67,400 |
|
| $ | (50,571 | ) |
|
| (75.0 | %) |
Additional financial and other data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Unit sales volume: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
MasterCraft |
|
| 468 |
|
|
| 900 |
|
|
| (432 | ) |
|
| (48.0 | %) |
|
| 1,453 |
|
|
| 2,457 |
|
|
| (1,004 | ) |
|
| (40.9 | %) |
Crest |
|
| 298 |
|
|
| 722 |
|
|
| (424 | ) |
|
| (58.7 | %) |
|
| 1,025 |
|
|
| 2,344 |
|
|
| (1,319 | ) |
|
| (56.3 | %) |
Aviara |
|
| 39 |
|
|
| 34 |
|
|
| 5 |
|
|
| 14.7 | % |
|
| 92 |
|
|
| 100 |
|
|
| (8 | ) |
|
| (8.0 | %) |
Consolidated unit sales volume |
|
| 805 |
|
|
| 1,656 |
|
|
| (851 | ) |
|
| (51.4 | %) |
|
| 2,570 |
|
|
| 4,901 |
|
|
| (2,331 | ) |
|
| (47.6 | %) |
Net sales: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
MasterCraft |
| $ | 69,783 |
|
| $ | 117,630 |
|
| $ | (47,847 | ) |
|
| (40.7 | %) |
| $ | 218,319 |
|
| $ | 339,315 |
|
| $ | (120,996 | ) |
|
| (35.7 | %) |
Crest |
|
| 14,194 |
|
|
| 36,369 |
|
|
| (22,175 | ) |
|
| (61.0 | %) |
|
| 49,713 |
|
|
| 116,595 |
|
|
| (66,882 | ) |
|
| (57.4 | %) |
Aviara |
|
| 11,731 |
|
|
| 12,777 |
|
|
| (1,046 | ) |
|
| (8.2 | %) |
|
| 31,374 |
|
|
| 39,570 |
|
|
| (8,196 | ) |
|
| (20.7 | %) |
Consolidated net sales |
| $ | 95,708 |
|
| $ | 166,776 |
|
| $ | (71,068 | ) |
|
| (42.6 | %) |
| $ | 299,406 |
|
| $ | 495,480 |
|
| $ | (196,074 | ) |
|
| (39.6 | %) |
Net sales per unit: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
MasterCraft |
| $ | 149 |
|
| $ | 131 |
|
| $ | 18 |
|
|
| 13.7 | % |
| $ | 150 |
|
| $ | 138 |
|
| $ | 12 |
|
|
| 8.7 | % |
Crest |
|
| 48 |
|
|
| 50 |
|
|
| (2 | ) |
|
| (4.0 | %) |
|
| 49 |
|
|
| 50 |
|
|
| (1 | ) |
|
| (2.0 | %) |
Aviara |
|
| 301 |
|
|
| 376 |
|
|
| (75 | ) |
|
| (19.9 | %) |
|
| 341 |
|
|
| 396 |
|
|
| (55 | ) |
|
| (13.9 | %) |
Consolidated net sales per unit |
|
| 119 |
|
|
| 101 |
|
|
| 18 |
|
|
| 17.8 | % |
|
| 117 |
|
|
| 101 |
|
|
| 16 |
|
|
| 15.8 | % |
Gross margin |
|
| 19.2 | % |
|
| 25.5 | % |
| (630) bps |
|
|
|
|
|
| 19.7 | % |
|
| 25.6 | % |
| (590) bps |
|
|
|
|
Net Sales.Net sales fordecreased $71.1 million and $196.1 million during the threethird quarter and first nine months ended December 31, 2017, increased 53.4%, or $27.3 million to $78.4 millionof fiscal 2024 when compared to $51.1 million forwith the three months ended January 1, 2017.same prior-year periods. The increase was primarilydecreases in net sales were due to the inclusion of NauticStar which increased net sales by 39.5%, or $20.2 million. The remaining increase of 13.9%, or $7.1 million, was attributable to an increase in MasterCraftlower unit sales volume favorable product mix and price increases.
Cost of Sales. Our cost of sales increased $21.7 million, or 58.8%, to $58.5 million for the three months ended December 31, 2017 compared to $36.8 million for the three months ended January 1, 2017. The increase in cost of sales resulted primarily
25
from the inclusion of NauticStar, which increased cost of sales by 45.2%, or $16.7 million. The remaining increase was primarily due to higher material and shipping costs and a 7.0% increase in MasterCraft unit volume.
Gross Profit. For the three months ended December 31, 2017, our gross profit increased $5.6 million, or 39.5%, to $19.9 million compared to $14.3 million for the three months ended January 1, 2017. The inclusion of NauticStar contributed $3.5 million to gross profit. An increase in MasterCraft unit sales volume, a favorable product mix and price increases, offset by higher material and shipping costs accounted for the remaining increase in gross profit. Gross margin decreased to 25.4% for the three months ended December 31, 2017 compared to 27.9% for the three months ended January 1, 2017. The decrease in gross margin was primarily due to the dilutive effect from the inclusion of NauticStar’s gross margin which is in the high-teens.
Operating Expenses. Selling and marketing expense increased $1.3 million, or 50.2%, to $3.7 million for the three months ended December 31, 2017 compared to $2.4 million for the three months ended January 1, 2017. This increase resulted mainly from the inclusion of NauticStar, which increased selling and marketing expenses by $0.6 million, an increase in dealer meeting costsincentives, partially offset by higher prices and an increase in promotion activities. Generalfavorable model mix and administrative expenseoptions. Dealer incentives include measures taken by the Company to assist dealers as the retail environment remains competitive.
Gross margin percentage declined 630 basis points and 590 basis points during the third quarter and first nine months of fiscal 2024, respectively, when compared with the same prior-year periods. Lower margins were the result of lower cost absorption due to planned decreased unit volume and higher dealer incentives, partially offset by higher prices and favorable model mix and options.
Operating expenses increased by $0.2 million, or 3.7%, to $5.0 million for the three months ended December 31, 2017 compared to $4.8 million for the three months ended January 1, 2017. This increase resulted mainly from the inclusion of NauticStar, which increased general and administrative expenses by $0.8 million and an increase of $0.5$0.3 million for legal and advisory fees related to our acquisition of NauticStar. Increases in general and administrative expenses due to NauticStar were partially offset by a decrease of $0.9 million for legal and advisory fees related to our litigation with Malibu Boats, which was subsequently settled during the fourththird quarter and first nine months of fiscal 2017. Operating expenses as a percentage of net sales was 11.7% during the three months ended December 31, 2017 compared to 14.2% for the three months ended January 1, 2017. This favorable impact resulted from leverage experienced through significant net sales increases compared to increases in selling and marketing expenses and general and administrative expenses.
Other Expense. Interest expense increased for the three months ended December 31, 2017 compared to the three months ended January 1, 2017. The increase is due to an increase in our term loan balance2024, respectively, when compared to the principal balance owed on our term loansame prior-year periods. The increases in operating expenses were a result of CEO transition and related
19
share-based compensation costs, which were $1.9 million and $2.4 million during the threethird quarter and first nine months ended January 1, 2017.of fiscal 2024, respectively.
Segment Results
Income Tax Expense. OurMasterCraft Segment
The following table sets forth MasterCraft segment results for the three and nine months ended December 31, 2017 reflectended:
|
| Three Months Ended |
|
| 2024 vs. 2023 |
|
| Nine Months Ended |
|
| 2024 vs. 2023 |
| ||||||||||||||||||||
|
| March 31, |
|
| April 2, |
|
|
|
|
| % |
|
| March 31, |
|
| April 2, |
|
|
|
|
| % |
| ||||||||
(Dollar amounts in thousands) |
| 2024 |
|
| 2023 |
|
| Change |
|
| Change |
|
| 2024 |
|
| 2023 |
|
| Change |
|
| Change |
| ||||||||
Net sales |
| $ | 69,783 |
|
| $ | 117,630 |
|
| $ | (47,847 | ) |
|
| (40.7 | %) |
| $ | 218,319 |
|
| $ | 339,315 |
|
| $ | (120,996 | ) |
|
| (35.7 | %) |
Operating income |
|
| 7,616 |
|
|
| 25,298 |
|
|
| (17,682 | ) |
|
| (69.9 | %) |
|
| 28,202 |
|
|
| 72,269 |
|
|
| (44,067 | ) |
|
| (61.0 | %) |
Purchases of property, plant and equipment |
|
| 2,591 |
|
|
| 3,151 |
|
|
| (560 | ) |
|
| (17.8 | %) |
|
| 6,207 |
|
|
| 8,434 |
|
|
| (2,227 | ) |
|
| (26.4 | %) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Unit sales volume |
|
| 468 |
|
|
| 900 |
|
|
| (432 | ) |
|
| (48.0 | %) |
|
| 1,453 |
|
|
| 2,457 |
|
|
| (1,004 | ) |
|
| (40.9 | %) |
Net sales per unit |
| $ | 149 |
|
| $ | 131 |
|
| $ | 18 |
|
|
| 13.7 | % |
| $ | 150 |
|
| $ | 138 |
|
| $ | 12 |
|
|
| 8.7 | % |
Net sales decreased $47.8 million during the impactthird quarter of fiscal 2024 when compared with the enactment of the Tax Cutssame prior-year period. The decrease was driven by lower unit volume and Jobs Act (“Tax Reform Act”), which was signed into law on December 22, 2017. The Tax Reform Act reduced federal corporate income tax rates and changed numerous other provisions. As we have a June 30 fiscal year-end, the lower corporate federal income tax rate will be phased in, resulting in a U.S. federal statutory tax rate of 28.1% for our fiscal year ending June 30, 2018, and 21% for subsequent fiscal years. The quarter ended December 31, 2017 included a year-to-date provisional expense of approximately $171 to reflect federal deferred taxes at the lower blended effective tax rate. This adjustment to the provision was more thanincreased dealer incentives, partially offset by a one-time discrete provisional benefitfavorable model mix and options and higher prices. Dealer incentives include rebate programs and other measures taken by the Company to assist dealers as the retail environment remains competitive.
Net sales decreased $121.0 million during the first nine months of approximately $651fiscal 2024 when compared with the same prior-year period. The decrease was driven by lower unit volume and increased dealer incentives, partially offset by higher prices and favorable model mix and options. Dealer incentives include higher floor plan financing costs as a result of applyingincreased dealer inventories and interest rates, and other incentives as the new lower federalretail environment remains competitive.
Operating income tax ratesdecreased $17.7 million and $44.1 million during third quarter and first nine months of fiscal 2024, respectively, when compared with the same prior-year periods. The decreases were driven by decreased sales volume, higher dealer incentives, and CEO transition and related share-based compensation costs, partially offset by higher prices and favorable model mix and options.
Crest Segment
The following table sets forth Crest segment results for the three and nine months ended:
|
| Three Months Ended |
|
| 2024 vs. 2023 |
|
| Nine Months Ended |
|
| 2024 vs. 2023 |
| ||||||||||||||||||||
|
| March 31, |
|
| April 2, |
|
|
|
|
| % |
|
| March 31, |
|
| April 2, |
|
|
|
|
| % |
| ||||||||
(Dollar amounts in thousands) |
| 2024 |
|
| 2023 |
|
| Change |
|
| Change |
|
| 2024 |
|
| 2023 |
|
| Change |
|
| Change |
| ||||||||
Net sales |
| $ | 14,194 |
|
| $ | 36,369 |
|
| $ | (22,175 | ) |
|
| (61.0 | %) |
| $ | 49,713 |
|
| $ | 116,595 |
|
| $ | (66,882 | ) |
|
| (57.4 | %) |
Operating income (loss) |
|
| (864 | ) |
|
| 4,962 |
|
|
| (5,826 | ) |
|
| (117.4 | %) |
|
| (133 | ) |
|
| 17,576 |
|
|
| (17,709 | ) |
|
| (100.8 | %) |
Purchases of property, plant and equipment |
|
| 584 |
|
|
| 2,089 |
|
|
| (1,505 | ) |
|
| (72.0 | %) |
|
| 1,761 |
|
|
| 6,292 |
|
|
| (4,531 | ) |
|
| (72.0 | %) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Unit sales volume |
|
| 298 |
|
|
| 722 |
|
|
| (424 | ) |
|
| (58.7 | %) |
|
| 1,025 |
|
|
| 2,344 |
|
|
| (1,319 | ) |
|
| (56.3 | %) |
Net sales per unit |
| $ | 48 |
|
| $ | 50 |
|
| $ | (2 | ) |
|
| (4.0 | %) |
| $ | 49 |
|
| $ | 50 |
|
| $ | (1 | ) |
|
| (2.0 | %) |
Net sales decreased $22.2 million and $66.9 million during the third quarter and first nine months of fiscal 2024, respectively, when compared to our net deferred tax liabilities.
The changes included in the Tax Reform Act are broad and complex. The final transition impacts may differ from the above estimate,same prior-year periods, due to among other things, changes in interpretations, any legislative action to address questions that arise becausedecreased volume and unfavorable model mix and options, partially offset by higher prices.
Operating income for the third quarter of the Tax Reform Act, any changes in accounting standards for income taxes or related interpretations in responsefiscal 2024 decreased $5.8 million when compared to the Tax Reform Act, or any updates or changes to estimates we have utilized to calculatesame prior-year period. The decrease was primarily the transition impacts. The SEC issued guidance in Staff Accounting Bulletin 118 which allows us to record provisional amounts during a one-year measurement period. We have determined a reasonable estimateresult of decreased net sales, as discussed above.
20
Operating income for the measurement and accounting for certain effectsfirst nine months of the Tax Reform Act, including the re-measurement of our net deferred tax assets and liabilities, which have been reflected as provisional amounts in the December 31, 2017 financial statements. The amounts represent our best estimates based on records, information, and current guidance. Additional information and analysis is required to finalize the impact that the Tax Reform Act will have on our full year financial results. This includes filing the fiscal 2017 United States
26
federal income tax return, which could impact our estimated deferred income tax assets and liabilities. Although we do not anticipate material adjustments2024 decreased $17.7 million when compared to the provisional amounts, finalsame prior-year period. The decrease was primarily the result of decreased net sales, as discussed above, and increased dealer incentives.
Aviara Segment
The following table sets forth Aviara segment results could vary from these provisional amounts. We currently anticipate finalizingfor the three and recording any resulting adjustmentsnine months ended:
|
| Three Months Ended |
|
| 2024 vs. 2023 |
|
| Nine Months Ended |
|
| 2024 vs. 2023 |
| ||||||||||||||||||||
|
| March 31, |
|
| April 2, |
|
|
|
|
| % |
|
| March 31, |
|
| April 2, |
|
|
|
|
| % |
| ||||||||
(Dollar amounts in thousands) |
| 2024 |
|
| 2023 |
|
| Change |
|
| Change |
|
| 2024 |
|
| 2023 |
|
| Change |
|
| Change |
| ||||||||
Net sales |
| $ | 11,731 |
|
| $ | 12,777 |
|
| $ | (1,046 | ) |
|
| (8.2 | %) |
| $ | 31,374 |
|
| $ | 39,570 |
|
| $ | (8,196 | ) |
|
| (20.7 | %) |
Operating loss |
|
| (2,756 | ) |
|
| (1,234 | ) |
|
| (1,522 | ) |
|
| 123.3 | % |
|
| (8,502 | ) |
|
| (2,136 | ) |
|
| (6,366 | ) |
|
| 298.0 | % |
Purchases of property, plant and equipment |
|
| 1,329 |
|
|
| 1,716 |
|
|
| (387 | ) |
|
| (22.6 | %) |
|
| 4,654 |
|
|
| 4,145 |
|
|
| 509 |
|
|
| 12.3 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Unit sales volume |
|
| 39 |
|
|
| 34 |
|
|
| 5 |
|
|
| 14.7 | % |
|
| 92 |
|
|
| 100 |
|
|
| (8 | ) |
|
| (8.0 | %) |
Net sales per unit |
| $ | 301 |
|
| $ | 376 |
|
| $ | (75 | ) |
|
| (19.9 | %) |
| $ | 341 |
|
| $ | 396 |
|
| $ | (55 | ) |
|
| (13.9 | %) |
Net sales decreased $1.0 million during the third quarter of fiscal 2024 when compared to the same prior-year period, due to unfavorable model mix and options, partially offset by the end of our current fiscal year ending June 30, 2018.favorable volume and higher prices.
Our income tax expense was $1.6Net sales decreased $8.2 million for the threefirst nine months ended December 31, 2017, reflecting an effective tax rate of 16.9%. Our effective tax rate duringfiscal 2024 when compared to the three months ended December 31, 2017 was lower than the 28.1% statutory rate primarilysame prior-year period, due to the impact of the Tax Reform Act,unfavorable model mix and a permanent benefit associated with the domestic production activities deduction, which wasoptions, decreased volume and higher dealer incentives, partially offset by the inclusion of the state tax rate in the overall effective rate.higher prices.
Six months ended December 31, 2017 Compared to Six months ended January 1, 2017
Net Sales. Net sales for the six months ended December 31, 2017,Operating losses increased 28.3%, or $31.7 million to $143.5 million compared to $111.8$1.5 million for the six months ended January 1, 2017. The increase was primarily due to the inclusion of NauticStar which increased net sales by 18.1%, or $20.2 million. The remaining increase of 10.2%, or $11.5 million, was attributable to MasterCraft primarily due to an increase in unit sales volume, favorable product mix and price increases.
Cost of Sales. Our cost of sales increased $25.7 million, or 32.2%, to $105.4 million for the six months ended December 31, 2017 compared to $79.7 million for the six months ended January 1, 2017. The increase in cost of sales resulted primarily from the inclusion of NauticStar, which increased cost of sales by 20.9%, or $16.6 million. The remaining increase was primarily due to higher material and shipping costs, a 7.5% increase in MasterCraft unit volume and an increase in cost over the prior year due to our model year change over that occurred during the firstthird quarter of fiscal 2018.
Gross Profit. For the six months ended December 31, 2017, our gross profit increased $6.0 million, or 18.7%, to $38.1 million2024 when compared to $32.1 million for the six months ended January 1, 2017. The inclusion of NauticStar contributed $3.5 million to gross profit. The remaining increase wassame prior-year period, due to an increase in MasterCraft unit sales volume unfavorable model mix and favorable pricing,options and inefficiencies related to the ramp up of new product launches, partially offset by higher materialprices and shipping costs. Gross margin decreased to 26.6% for the six months ended December 31, 2017 compared to 28.7% for the six months ended January 1, 2017. The decrease in gross margin was primarily due to the dilutive effect from the inclusion of NauticStar’s gross margin which is in the high-teens.favorable volume.
Operating Expenses. Selling and marketing expenselosses increased $1.9 million, or 42.5%, to $6.4 million for the sixfirst nine months ended December 31, 2017 compared to $4.5 million for the six months ended January 1, 2017. This increase resulted mainly from the inclusion of NauticStar, which increased selling and marketing expenses by $0.6 million, an increase in dealer training costs, an increase in dealer meeting costs and increased promotion activities related to the introduction of the redesigned 2018 MasterCraft XStar. General and administrative expense increased by $0.4 million, or 4.7%, to $9.3 million for the six months ended December 31, 2017 compared to $8.9 million for the six months ended January 1, 2017. This increase resulted mainly from the inclusion of NauticStar, which increased general and administrative expenses by $0.8 million, and an increase of $1.4 million for legal and advisory fees related to our acquisition of NauticStar. Increases in general and administrative expenses due to NauticStar were partially offset by a decrease of $1.7 million for legal and advisory fees related to our litigation with Malibu Boats, which was subsequently settled during the fourth quarter of fiscal 2017. Operating expenses as a percentage of net sales was 11.3% during the six months ended December 31, 2017 compared to 12.0% for the six months ended January 1, 2017. This favorable impact resulted from leverage experienced through significant net sales increases compared to increases in selling and marketing expenses and general and administrative expenses.
Other Expense. Interest expense increased for the six months ended December 31, 2017 compared to the six months ended January 1, 2017. The increase is due to an increase in our term loan balance2024 when compared to the principal balance owed on our term loan during the six months ended January 1, 2017.
27
Income Tax Expense. Our results for the six months ended December 31, 2017 reflect the impact of the enactment of the Tax Cuts and Jobs Act (“Tax Reform Act”), which was signed into law on December 22, 2017. The Tax Reform Act reduced federal corporate income tax rates and changed numerous other provisions. As we have a June 30 fiscal year-end, the lower corporate federal income tax rate will be phased in, resulting in a U.S. federal statutory tax rate of 28.1% for our fiscal year ending June 30, 2018, and 21% for subsequent fiscal years. The six months ended December 31, 2017 included a year-to-date provisional expense of approximately $171same prior-year period, due to reflect federal deferred taxes at the lower blended effective tax rate. This adjustmentinefficiencies related to the provision was more than offset by a one-time discrete provisional benefitramp up of approximately $651 as a result of applying the new lower federal income tax rates to our net deferred tax liabilities.
The changes included in the Tax Reform Act are broadproduct launches, higher dealer incentives, unfavorable model mix and complex. The final transition impacts may differ from the above estimate, due to, among other things, changes in interpretations, any legislative action to address questions that arise because of the Tax Reform Act, any changes in accounting standards for income taxes or related interpretations in response to the Tax Reform Act, or any updates or changes to estimates we have utilized to calculate the transition impacts. The SEC issued guidance in Staff Accounting Bulletin 118 which allows us to record provisional amounts during a one-year measurement period. We have determined a reasonable estimate for the measurementoptions and accounting for certain effects of the Tax Reform Act, including the re-measurement of our net deferred tax assets and liabilities, which have been reflected as provisional amounts in the December 31, 2017 financial statements. The amounts represent our best estimates based on records, information, and current guidance. Additional information and analysis is required to finalize the impact that the Tax Reform Act will have on our full year financial results. This includes filing the fiscal 2017 United States federal income tax return, which could impact our estimated deferred income tax assets and liabilities. Although we do not anticipate material adjustments to the provisional amounts, final results could vary from these provisional amounts. We currently anticipate finalizing and recording any resulting adjustments by the end of our current fiscal year ending June 30, 2018.
Our income tax expense was $5.2 million for the six months ended December 31, 2017, reflecting an effective tax rate of 25.5%. Our effective tax rate during the six months ended December 31, 2017 was lower than the 28.1% statutory rate primarily due to the impact of the Tax Reform Act, and a permanent benefit associated with the domestic production activities deduction, which wasdecreased volume, partially offset by the inclusion of the state tax rate in the overall effective rate.higher prices and reduced warranty costs.
Non-GAAP Measures
EBITDA, Adjusted EBITDA, EBITDA margin, and Adjusted EBITDA margin
We define EBITDA as earningsnet income from continuing operations, before interest, expense, income taxes, depreciation and amortization. We define Adjusted EBITDA as EBITDA further adjusted to eliminate certain non-cash charges and unusualor other items that we do not consider to be indicative of our core and/or ongoing operations, including feesoperations. For the periods presented herein, these adjustments include share-based compensation, business development consulting costs, and expenses related to our follow-on offering, transaction expenses associated with the acquisitionCEO transition costs. We define EBITDA margin and Adjusted EBITDA margin as EBITDA and Adjusted EBITDA, respectively, each expressed as a percentage of NauticStar, acquisition related inventory step up adjustmentNet sales.
Adjusted Net Income and our stock-based compensation expense. Adjusted Net Income per share
We define Adjusted net incomeNet Income and Adjusted Net Income per share as net income from continuing operations, adjusted to eliminate certain non-cash charges and unusualor other items that we do not consider to be indicative of our core and/or ongoing operations including fees and expenses related to our follow-on offering, transaction expenses associated with the acquisition of NauticStar, our stock-based compensation expense, and an adjustment forreflecting income tax expense on adjusted net income before income taxes at a normalizedour estimated annual effective tax rate. We defineFor the periods presented herein, these adjustments include other intangible asset amortization, share-based compensation, business development consulting costs, and CEO transition costs.
EBITDA, Adjusted EBITDA, EBITDA margin, Adjusted EBITDA margin, as Adjusted EBITDA expressed as a percentage of sales. Adjusted EBITDA, Adjusted net incomeNet Income, and Adjusted EBITDA marginNet Income per share, which we refer to collectively as the Non-GAAP Measures, are not measures of net income or operating income as determined under accounting principles generally accepted in the United States, which we refer to asor U.S. GAAP. Adjusted EBITDA and Adjusted net incomeThe Non-GAAP Measures are not measures of performance in accordance with U.S. GAAP and should not be considered as an alternative to net income, net income per share, or operating cash flows determined in accordance with U.S. GAAP. Additionally, Adjusted EBITDA is not intended to be a measure of cash flow for management’s discretionary use.flow. We believe that the inclusion of EBITDA, Adjusted EBITDA, Adjusted EBITDA margin and Adjusted net incomethe Non-GAAP Measures is appropriate to provide additional information to investors
21
because securities analysts noteholders and other investors use these non GAAP financial measuresthe Non-GAAP Measures to assess our operating performance across periods
28
on a consistent basis and to evaluate the relative risk of an investment in our securities. We use Adjusted net incomeNet Income and Adjusted Net Income per share to facilitate a comparison of our operating performance on a consistent basis from period to period that, when viewed in combination with our results prepared in accordance with U.S. GAAP, provides a more complete understanding of factors and trends affecting our business than does U.S. GAAP alone measures.measures alone. We believe Adjusted net incomeNet Income and Adjusted Net Income per share assists our board of directors, management, investors, and investorsother users of the financial statements in comparing our net income on a consistent basis from period to period because it removes certain non-cash items and non-recurring items. Adjusted EBITDAother items that we do not consider to be indicative of our core and/or ongoing operations and Adjustedreflecting income tax expense on adjusted net income before income taxes at our estimated annual effective tax rate. The Non-GAAP Measures have limitations as an analytical tool and should not be considered in isolation or as a substitute for analysis of our results as reported under U.S. GAAP. Some of these limitations are:
|
|
|
|
|
|
|
|
|
|
|
|
In addition, because not all companies use identical calculations, our presentation of Adjusted EBITDA and Adjusted net incomethe Non-GAAP Measures may not be comparable to similarly titled measures of other companies, including companies in our industry. Furthermore, certain non-GAAP financial measures presented have been provided for comparison purposes only and these non-GAAP financial measures may change in the future based on our calculations and forecasts regarding the interpretation of certain recent changes to U.S. federal income tax law and anticipated impacts on our financial results.
29
The following table sets forthpresents a reconciliation of net income from continuing operations as determined in accordance with U.S. GAAP to EBITDA, and Adjusted EBITDA, and net income from continuing operations margin (expressed as a percentage of net sales) to EBITDA margin and Adjusted EBITDA margin (each expressed as a percentage of net sales) for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended |
| Six Months Ended |
| ||||||||
|
| December 31, 2017 |
| January 1, 2017 |
| December 31, 2017 |
| January 1, 2017 |
| ||||
|
| (Unaudited) |
| (Unaudited) |
| ||||||||
|
| (Dollars in thousands) |
| (Dollars in thousands) |
| ||||||||
Net income |
| $ | 8,009 |
| $ | 4,031 |
| $ | 15,055 |
| $ | 11,014 |
|
Income tax expense |
|
| 1,634 |
|
| 2,496 |
|
| 5,161 |
|
| 6,537 |
|
Interest expense |
|
| 1,139 |
|
| 512 |
|
| 1,630 |
|
| 1,123 |
|
Depreciation and amortization |
|
| 1,478 |
|
| 825 |
|
| 2,210 |
|
| 1,622 |
|
EBITDA |
|
| 12,260 |
|
| 7,864 |
|
| 24,056 |
|
| 20,296 |
|
Transaction expense(a) |
|
| 605 |
|
| 5 |
|
| 1,486 |
|
| 59 |
|
Inventory step-up adjustment – acquisition related(b) |
|
| 501 |
|
| — |
|
| 501 |
|
| — |
|
Litigation charge(c) |
|
| — |
|
| 944 |
|
| — |
|
| 1,653 |
|
Stock-based compensation |
|
| 264 |
|
| 186 |
|
| 528 |
|
| 305 |
|
Adjusted EBITDA |
| $ | 13,630 |
| $ | 8,999 |
| $ | 26,571 |
| $ | 22,313 |
|
Adjusted EBITDA Margin(d) |
|
| 17.4% |
|
| 17.6% |
|
| 18.5% |
|
| 20.0% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended |
| Nine Months Ended |
| ||||||||||||||||||||
|
| March 31, |
|
| % of Net |
| April 2, |
|
| % of Net |
| March 31, |
|
| % of Net |
| April 2, |
|
| % of Net |
| ||||
(Dollar amounts in thousands) |
| 2024 |
|
| sales |
| 2023 |
|
| sales |
| 2024 |
|
| sales |
| 2023 |
|
| sales |
| ||||
Net income from continuing operations |
| $ | 3,826 |
|
| 4.0% |
| $ | 22,782 |
|
| 13.7% |
| $ | 16,829 |
|
| 5.6% |
| $ | 67,400 |
|
| 13.6% |
|
Income tax expense |
|
| 806 |
|
|
|
|
| 6,744 |
|
|
|
|
| 4,408 |
|
|
|
|
| 20,353 |
|
|
|
|
Interest expense |
|
| 762 |
|
|
|
|
| 695 |
|
|
|
|
| 2,494 |
|
|
|
|
| 1,923 |
|
|
|
|
Interest income |
|
| (1,398 | ) |
|
|
|
| (1,195 | ) |
|
|
|
| (4,164 | ) |
|
|
|
| (1,967 | ) |
|
|
|
Depreciation and amortization |
|
| 2,842 |
|
|
|
|
| 2,622 |
|
|
|
|
| 8,327 |
|
|
|
|
| 7,833 |
|
|
|
|
EBITDA |
|
| 6,838 |
|
| 7.1% |
|
| 31,648 |
|
| 19.0% |
|
| 27,894 |
|
| 9.3% |
|
| 95,542 |
|
| 19.3% |
|
Share-based compensation(a) |
|
| 1,583 |
|
|
|
|
| 1,026 |
|
|
|
|
| 2,531 |
|
|
|
|
| 2,892 |
|
|
|
|
Business development consulting costs(b) |
|
| — |
|
|
|
|
| 312 |
|
|
|
|
| — |
|
|
|
|
| 312 |
|
|
|
|
CEO transition costs(c) |
|
| 1,241 |
|
|
|
|
| — |
|
|
|
|
| 1,677 |
|
|
|
|
| — |
|
|
|
|
Adjusted EBITDA |
| $ | 9,662 |
|
| 10.1% |
| $ | 32,986 |
|
| 19.8% |
| $ | 32,102 |
|
| 10.7% |
| $ | 98,746 |
|
| 19.9% |
|
|
|
|
|
|
|
|
|
30
The following table sets forthpresents a reconciliation of net income from continuing operations as determined in accordance with U.S. GAAP to Adjusted net incomeNet Income for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended |
| Six Months Ended |
| |||||||||||
| December 31, 2017 |
| October 1, 2017 |
| January 1, 2017 |
| December 31, 2017 |
| January 1, 2017 |
| |||||
| (Unaudited) |
| (Unaudited) |
| |||||||||||
| (Dollars in thousands, except share and per share amounts) |
| (Dollars in thousands, except share and per share amounts) |
| |||||||||||
Net income | $ | 8,009 |
| $ | 7,046 |
| $ | 4,031 |
| $ | 15,055 |
| $ | 11,014 |
|
Income tax expense |
| 1,634 |
|
| 3,527 |
|
| 2,496 |
|
| 5,161 |
|
| 6,537 |
|
Transaction expense(a) |
| 605 |
|
| 881 |
|
| 5 |
|
| 1,486 |
|
| 59 |
|
Inventory step-up adjustment – acquisition related(b) |
| 501 |
|
| — |
|
| — |
|
| 501 |
|
| — |
|
Litigation charge(c) |
| — |
|
| — |
|
| 944 |
|
| — |
|
| 1,653 |
|
Stock-based compensation |
| 264 |
|
| 264 |
|
| 186 |
|
| 528 |
|
| 305 |
|
Adjusted net income before income taxes(d) |
| 11,013 |
|
| 11,718 |
|
| 7,662 |
|
| 22,731 |
|
| 19,568 |
|
Adjusted income tax expense(e) |
| 3,194 |
|
| 3,398 |
|
| 2,758 |
|
| 6,592 |
|
| 7,044 |
|
Adjusted net income | $ | 7,819 |
| $ | 8,320 |
| $ | 4,904 |
| $ | 16,139 |
| $ | 12,524 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro-forma Adjusted net income per common share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
| 0.42 |
|
| 0.45 |
|
| 0.26 |
|
| 0.87 |
|
| 0.67 |
|
Diluted |
| 0.42 |
|
| 0.44 |
|
| 0.26 |
|
| 0.86 |
|
| 0.67 |
|
Pro-forma weighted average shares used for the computation of: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic Adjusted net income per share(f) |
| 18,619,834 |
|
| 18,619,834 |
|
| 18,593,296 |
|
| 18,619,834 |
|
| 18,593,296 |
|
Diluted Adjusted net income per share(f) |
| 18,792,214 |
|
| 18,798,236 |
|
| 18,711,764 |
|
| 18,795,225 |
|
| 18,695,528 |
|
|
|
|
|
|
|
|
|
|
|
|
|
3122
| Three Months Ended |
|
| Nine Months Ended |
|
| ||||||||||
| March 31, |
|
| April 2, |
|
| March 31, |
|
| April 2, |
|
| ||||
(Dollar amounts in thousands, except per share data) | 2024 |
|
| 2023 |
|
| 2024 |
|
| 2023 |
|
| ||||
Net income from continuing operations | $ | 3,826 |
|
| $ | 22,782 |
|
| $ | 16,829 |
|
| $ | 67,400 |
|
|
Income tax expense |
| 806 |
|
|
| 6,744 |
|
|
| 4,408 |
|
|
| 20,353 |
|
|
Amortization of acquisition intangibles |
| 450 |
|
|
| 462 |
|
|
| 1,362 |
|
|
| 1,386 |
|
|
Share-based compensation(a) |
| 1,583 |
|
|
| 1,026 |
|
|
| 2,531 |
|
|
| 2,892 |
|
|
Business development consulting costs(b) |
| — |
|
|
| 312 |
|
|
| — |
|
|
| 312 |
|
|
CEO transition costs(c) |
| 1,241 |
|
|
| — |
|
|
| 1,677 |
|
|
| — |
|
|
Adjusted Net Income before income taxes |
| 7,906 |
|
|
| 31,326 |
|
|
| 26,807 |
|
|
| 92,343 |
|
|
Adjusted income tax expense(d) |
| 1,581 |
|
|
| 7,205 |
|
|
| 5,361 |
|
|
| 21,239 |
|
|
Adjusted Net Income | $ | 6,325 |
|
| $ | 24,121 |
|
| $ | 21,446 |
|
| $ | 71,104 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Adjusted Net Income per share: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Basic | $ | 0.38 |
|
| $ | 1.37 |
|
| $ | 1.26 |
|
| $ | 4.01 |
|
|
Diluted | $ | 0.37 |
|
| $ | 1.36 |
|
| $ | 1.25 |
|
| $ | 3.98 |
|
|
Weighted average shares used for the computation of(e): |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Basic Adjusted Net Income per share |
| 16,844,440 |
|
|
| 17,559,920 |
|
|
| 17,003,616 |
|
|
| 17,725,208 |
|
|
Diluted Adjusted Net Income per share |
| 16,965,624 |
|
|
| 17,748,910 |
|
|
| 17,093,958 |
|
|
| 17,851,655 |
|
|
The following table showspresents the reconciliation of net income from continuing operations per diluted share to Adjusted net incomeNet Income per diluted pro-forma weighted average share for the periods presented:indicated:
|
| Three Months Ended |
|
| Nine Months Ended |
| ||||||||||
|
| March 31, |
|
| April 2, |
|
| March 31, |
|
| April 2, |
| ||||
|
| 2024 |
|
| 2023 |
|
| 2024 |
|
| 2023 |
| ||||
Net income from continuing operations per diluted share |
| $ | 0.23 |
|
| $ | 1.28 |
|
| $ | 0.98 |
|
| $ | 3.78 |
|
Impact of adjustments: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Income tax expense |
|
| 0.05 |
|
|
| 0.38 |
|
|
| 0.26 |
|
|
| 1.14 |
|
Amortization of acquisition intangibles |
|
| 0.03 |
|
|
| 0.03 |
|
|
| 0.08 |
|
|
| 0.08 |
|
Share-based compensation(a) |
|
| 0.10 |
|
|
| 0.06 |
|
|
| 0.15 |
|
|
| 0.16 |
|
Business development consulting costs(b) |
|
| — |
|
|
| 0.02 |
|
|
| — |
|
|
| 0.02 |
|
CEO transition costs(c) |
|
| 0.07 |
|
|
| — |
|
|
| 0.10 |
|
|
| — |
|
Adjusted Net Income per diluted share before income taxes |
| $ | 0.48 |
|
| $ | 1.77 |
|
| $ | 1.57 |
|
| $ | 5.18 |
|
Impact of adjusted income tax expense on net income per diluted share before income taxes(d) |
|
| (0.11 | ) |
|
| (0.41 | ) |
|
| (0.32 | ) |
|
| (1.20 | ) |
Adjusted Net Income per diluted share |
| $ | 0.37 |
|
| $ | 1.36 |
|
| $ | 1.25 |
|
| $ | 3.98 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended |
| Six Months Ended | |||||||||||
|
| December 31, 2017 |
| October 1, 2017 |
| January 1, 2017 |
| December 31, 2017 |
| January 1, 2017 | |||||
|
| (Unaudited) |
| (Unaudited) | |||||||||||
Net income per diluted share |
|
| 0.43 |
|
| 0.38 |
|
| 0.22 |
|
| 0.81 |
|
| 0.59 |
Impact of adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense |
|
| 0.09 |
|
| 0.19 |
|
| 0.14 |
|
| 0.28 |
|
| 0.35 |
Transaction expense(a) |
|
| 0.03 |
|
| 0.05 |
|
| - |
|
| 0.08 |
|
| - |
Inventory step-up adjustment – acquisition related(b) |
|
| 0.03 |
|
| - |
|
| - |
|
| 0.03 |
|
| - |
Litigation charge(c) |
|
| - |
|
| - |
|
| 0.05 |
|
| - |
|
| 0.09 |
Stock-based compensation |
|
| 0.01 |
|
| 0.01 |
|
| 0.01 |
|
| 0.03 |
|
| 0.02 |
Adjusted net income per diluted share before income taxes(d) |
|
| 0.59 |
|
| 0.63 |
|
| 0.42 |
|
| 1.23 |
|
| 1.05 |
Impact of adjusted income tax expense on net income per diluted share before income taxes(e) |
|
| (0.17) |
|
| (0.18) |
|
| (0.15) |
|
| (0.35) |
|
| (0.38) |
Impact of increased share count(f) |
|
| - |
|
| (0.01) |
|
| (0.01) |
|
| (0.02) |
|
| - |
Adjusted net income per diluted pro-forma weighted average share |
|
| 0.42 |
|
| 0.44 |
|
| 0.26 |
|
| 0.86 |
|
| 0.67 |
|
|
|
|
|
|
|
|
|
|
|
|
32
Liquidity and Capital Resources
Our primary liquidity and capital resource needs are to finance working capital, fund capital expenditures, service our debt, fund potential acquisitions, and fund capital expenditures.our share repurchase program. Our principal sourcesources of funds isliquidity are our cash balance, held-to-maturity securities, cash generated from operating activities. As of December 31, 2017, we had borrowing availability of $29.3 million underactivities, our revolving credit facility.agreement and the refinancing and/or new issuance of long-term debt. We believe our cash balance, held-to-maturity securities, cash from operations, along with borrowings underand our revolving credit facility,ability to borrow will be sufficient to provide for our working capitalliquidity and capital expendituresresource needs.
23
Cash and cash equivalents totaled $22.5 million as of March 31, 2024, an increase of $2.7 million from $19.8 million as of June 30, 2023. Held-to-maturity securities totaled $83.2 million as of March 31, 2024, a decrease of $8.4 million from $91.6 million as of June 30, 2023. Total debt as of March 31, 2024 and June 30, 2023, was $50.4 million and $53.7 million, respectively.
As of March 31, 2024, we had no amounts outstanding under the Revolving Credit Facility, leaving $100.0 million of available borrowing capacity. Refer to Note 10 — Long Term Debt in the Notes to Unaudited Condensed Consolidated Financial Statements for at leastfurther details.
On June 24, 2021, the next 12 months. board of directors of the Company authorized a share repurchase program that allowed for the repurchase of up to $50.0 million of our common stock during the three-year period ending June 24, 2024. While having $1.6 million of availability as of June 30, 2023, this program was fully utilized during the first quarter ended October 1, 2023.
On July 24, 2023, the board of directors of the Company authorized a new share repurchase program under which the Company may repurchase up to $50 million of its outstanding shares of common stock. The new authorization became effective upon the completion of the Company's prior $50 million stock repurchase authorization.
During the nine months ended March 31, 2024, the Company repurchased 529,545 shares of common stock for $11.7 million in cash, excluding related fees and expenses under both plans.
The following table summarizes theand discussion below relate to our cash flows from continuing operations from operating, investing, and financing activities:
|
|
|
|
|
|
|
| |||||||||
|
| December 31, 2017 |
| January 1, 2017 |
|
| Nine Months Ended |
|
| |||||||
|
| (Unaudited) |
| March 31, |
| April 2, |
|
| ||||||||
|
| (Dollars in thousands) | ||||||||||||||
(Dollar amounts in thousands) |
| 2024 |
|
| 2023 |
|
| |||||||||
Total cash provided by (used in): |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Operating activities |
| $ | 22,452 |
| $ | 12,921 |
|
| $ | 22,923 |
|
| $ | 107,365 |
|
|
Investing activities |
|
| (80,506) |
|
| (1,060) |
|
|
| (2,841 | ) |
|
| (92,380 | ) |
|
Financing activities |
|
| 60,266 |
|
| (5,568) |
|
|
| (16,787 | ) |
|
| (18,831 | ) |
|
Net increase in cash |
| $ | 2,212 |
| $ | 6,293 |
| |||||||||
Net change in cash and cash equivalents from continuing operations |
| $ | 3,295 |
|
| $ | (3,846 | ) |
|
Nine Months Ended March 31, 2024 Cash Flows from Continuing Operations
Operating Activities
Our netNet cash provided by operating activities increased by $9.5 million, or 73.8%, for the sixnine months ended DecemberMarch 31, 2017 compared to the six months ended January 1, 2017, to $22.42024 was $22.9 million, from $12.9 million. This increase was primarily due to an increase in net income, an increase due to the change inpartially offset by working capital usage. Working capital is defined as accounts receivable, income tax receivable, inventories, and prepaid expenses and other current assets net of accounts payable, income tax payable, and accrued expenses and other current liabilities as presented in the condensed consolidated balance sheets. Working capital usage primarily consisted of a decrease in cash paid for taxes and an increase due to the change in accrued expenses and other current liabilities. These increases wereliabilities, accounts payable and income tax payable and an increase in prepaid expenses and other current assets. Partially offsetting the working capital usage was a decrease in inventories. Inventories decreased as we continue to rebalance inventory levels to align with lower production levels, partially offset by increased materials costs from inflation. Accrued expenses and other current liabilities decreased primarily due to payment of dealer incentives and lower compensation related accruals, partially offset by an increase in cash payments for interest relatedrepurchase obligations. Accounts payable decreased as a result of decreased production levels. Income tax payable decreased due to an increase in our term loan balance whenthe lower earnings compared to the principal balance owed on our term loan during the six months ended January 1, 2017.prior year.
Investing Activities
Net cash used in investing activities increasedwas $2.8 million, which included $12.6 million in net capital expenditures, partially offset by $79.4net changes of $9.8 million in held-to maturity securities. Our capital spending was primarily focused on tooling, facility enhancements and information technology.
Net cash used in financing activities was $16.8 million, which included net payments of $3.4 million on long-term debt and stock repurchases totaling $11.7 million.
Nine Months Ended April 2, 2023 Cash Flows from Continuing Operations
Net cash provided by operating activities for the sixnine months ended December 31, 2017April 2, 2023 was $107.4 million, primarily due to net income and cash provided by favorable changes in working capital. Working capital is defined as accounts receivable, income tax receivable,
24
inventories, and prepaid expenses and other current assets net of accounts payable, income tax payable, and accrued expenses and other current liabilities as presented in the condensed consolidated balance sheets, excluding the impact of acquisitions and non-cash adjustments. Favorable changes in working capital primarily consisted of an increase in accrued expenses and other current liabilities and accounts payable, and a decrease in accounts receivable and inventories. Partially offsetting favorable changes in working capital was an increase in prepaid expenses and other current assets. Accrued expenses and other current liabilities primarily increased due to increased warranty, floor plan interest, and retail rebate costs. Accounts payable increased mainly due to increased payables related to capital spending. Accounts receivable decreased primarily as a result of lower sales at the end of the period compared to the six months ended January 1, 2017, to $80.5 millionend of the prior-year period. Inventories decreased as we maintain rebalanced inventory levels after the prior summer selling season, partially offset by increased materials costs from $1.1 million. This increase was primarilyinflation. Prepaid expenses and other current assets increased due to payment of annual general insurance premiums which have increased since the acquisitionprior-year period.
Net cash used in investing activities was $92.4 million, due to net investments in held-to-maturity securities of NauticStar$73.5 million and an increase in$18.9 million of capital expenditures. Our capital spending was focused on maintenance capital, which includes tooling, expanding our capacity, and information technology.
Financing Activities
Net cash used in financing activities was a source of cash for the six months ended December 31, 2017 of $60.3 million. Net financing activities for the six months ended January 1, 2017 was a use of cash of $5.6 million. The change in net financing activities was a source of cash of $65.9 million. Cash provided by financing activities for the six months ended December 31, 2017 increased primarily from proceeds from issuance of long term debt of $80.8$18.8 million, which was partially offset by deferred financing costsincluded net payments of $1.3$2.3 million on long-term debt and payments on our term loan$16.0 million of $19.2 million, which was an increase of $13.6 million over the six months ended January 1, 2017, and payments on our term loan and repayment of our revolving credit facility were $5.6 million.stock repurchases.
Third Amended and Restated Credit Agreement
On October 2, 2017, we entered into a Third Amended and Restated Credit and Guaranty Agreement with Fifth Third Bank, as the agent and letter of credit issuer, and the lenders party thereto (the “Third Amended Credit Agreement”). The
3325
Third Amended Credit Agreement replaced and paid off our Second Amended and Restated Credit Agreement, dated May 27, 2016. The Third Amended Credit Agreement provides us with a $145 million senior secured credit facility, consisting of a $115 million term loan (the “Third Term Loan”) and a $30 million revolving credit facility. On October 17, 2017, and December 1, 2017, we made voluntary payments on the Third Term Loan of $10.0 million and $7.0 million, respectively, out of excess cash.
Off-BalanceOff Balance Sheet Arrangements
As of December 31, 2017, weThe Company did not have any off-balanceoff balance sheet financings.financing arrangements as of March 31, 2024.
Emerging Growth Company
We are an emerging growth company, as defined in the JOBS Act. For as long as we are an emerging growth company, we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies, including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding stockholder advisory “say-on-pay” votes on executive compensation and stockholder advisory votes on golden parachute compensation.
The JOBS Act also provides that an emerging growth company can utilize the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. Pursuant to Section 107 of the JOBS Act, we have irrevocably chosen to opt out of such extended transition period and, as a result, we will comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for companies that are not “emerging growth companies.”
We will continue to be an emerging growth company until the earliest to occur of (i) the last day of fiscal year during which we had total annual gross revenues of at least $1 billion (as indexed for inflation), (ii) the last day of fiscal year following the fifth anniversary of the closing of the IPO, (iii) the date on which we have, during the previous three-year period, issued more than $1 billion in non-convertible debt, or (iv) the date on which we are deemed to be a “large accelerated filer,” as defined under the Exchange Act.
Critical Accounting PoliciesEstimates
As of DecemberMarch 31, 2017,2024, there were no significant changes in or changes into the application of our critical accounting policies or estimation procedures from those presented in our 2023 Annual ReportReport.
SEC Climate Disclosure Rule
In March 2024, the SEC issued its final climate disclosure rule, which requires the disclosure of material Scope 1 and Scope 2 greenhouse gas emissions and other climate-related topics in annual reports and registration statements. For accelerated filers, disclosure requirements will begin phasing in for fiscal years beginning on Form 10-K.or after January 1, 2026, or fiscal 2027 for the Company. On April 4, 2024, the SEC announced to voluntarily delay the implementation of climate disclosure regulations while going through certain legal challenges filed to vacate the proposed rules. The Company is currently evaluating the impact these rules will have on its consolidated financial statements and related disclosures.
ITEM 3.QUANTITATIVE3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Refer to our 2023 Annual Report on Form 10-K for a complete discussion onof the Company’s market risk. There have been no material changes in market risk from those disclosed therein.
34
ITEM 4.CONTROLS4. CONTROLS AND PROCEDURES.
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures (as defined in Rule 13a-15(e) ofand 15d-15(e) (of the Exchange Act) that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’sSEC's rules and forms, and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosures. Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.
As of the end of the period covered by this Quarterly Report on Form 10-Q, we carried out an evaluation under the supervision and with the participation of our management, including our chief executive officer and chief financial officer, of the effectiveness of our disclosure controls and procedures. Based upon this evaluation, our chief executive officer and chief financial officer have concluded that our disclosure controls and procedures were effective at a reasonable assurance level as of DecemberMarch 31, 2017.2024.
Changes in Internal Control Over Financial Reporting
During the second quarter ended December 31, 2017, we completed the acquisition of NauticStar. Prior to the acquisition, NauticStar was a privately-held company and was not subject to the Sarbanes-Oxley Act of 2002, the rules and regulations of the SEC, or other corporate governance requirements applicable to public reporting companies. As part of our ongoing integration activities, we are continuing to incorporate our controls and procedures into NauticStar and to augment our company-wide controls to reflect the risks that may be inherent in acquisitions of privately-held companies.
Other than our integration of NauticStar, thereThere have been no changes in our internal control over financial reporting during the quarter ended DecemberMarch 31, 20172024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II – OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
ITEM 1.LEGAL PROCEEDINGS.For a discussion of the Company’s legal proceedings, see Part I – Item 1. – Note 9 – Commitments and Contingencies to the Company’s unaudited condensed consolidated financial statements.
Legal Proceedings
None.
ITEM 1A. RISK FACTORS.
During the quarter ended December 31, 2017,Except as noted below, there werehave been no material changes to the risk factors disclosed in “Part I, Item 1A. Risk Factors” in our Annual Report filed on Form 10-K.10-K for the fiscal year ended June 30, 2023.
Our financial results could be adversely affected if we are unable to maintain effective distribution.
35
TableWe rely on third-party dealers to sell our products. Maintaining a reliable network of Contentsdealers is essential to our success. We face competition from other manufacturers in attracting and retaining independent boat dealers. A significant deterioration in the number or effectiveness of our dealers could have a material adverse effect on our financial results.
Weakening demand for marine products could hurt our dealers’ financial performance. In particular, reduced cash flow from decreases in sales and tightening credit markets could impair dealers' ability to fund operations. Inability to fund operations can force dealers to cease business, and we may be unable to obtain alternate distribution in the vacated market. An inability to obtain alternate distribution could unfavorably affect our net sales through reduced market presence. If economic conditions deteriorate, we anticipate that dealer failures or voluntary market exits would increase, especially if overall retail demand materially declines. Additionally, the deterioration in the health of competitors' dealers can negatively impact the marketplace, including our dealers, by causing boat inventories at those dealers to be deeply discounted or relocated to other geographical areas, resulting in elevated inventories our dealers are competing against.
ITEM 2.UNREGISTERED2. UNREGISTERED SALES OF SECURITIES AND USE OF PROCEEDS.
Share Repurchase Program
None.On June 24, 2021, the board of directors of the Company authorized a share repurchase program that allowed for the repurchase of up to $50.0 million of our common stock during the three-year period ending June 24, 2024. While having $1.6 million of availability as of June 30, 2023, this program was fully utilized during the first quarter ended October 1, 2023.
On July 24, 2023, the board of directors of the Company authorized a new share repurchase program under which the Company may repurchase up to $50.0 million of its outstanding shares of common stock. The new authorization became effective upon the completion of the Company's prior $50.0 million stock repurchase authorization.
During the first nine months of fiscal 2024, we repurchased approximately $11.7 million of our common stock, including approximately $1.6 million during the three months ended March 31, 2024. As of March 31, 2024, the remaining authorization under the new program was approximately $39.9 million.
During the three months ended March 31, 2024, the Company repurchased the following shares of common stock:
Period |
| Total Number of Shares Purchased |
|
| Average Price Paid Per Share(a)(b) |
|
| Total Number of Shares Purchased as part of Publicly Announced Program |
|
| Approximate Dollar Value of Shares that May Yet be Purchased Under the Plan (dollars in thousands) |
| ||||
January 1, 2024 - January 28, 2024 |
|
| — |
|
| $ | — |
|
|
| — |
|
| $ | 41,471 |
|
January 29, 2024 - February 25, 2024 |
|
| 5,600 |
|
|
| 21.89 |
|
|
| 5,600 |
|
|
| 41,348 |
|
February 26, 2024 - March 31, 2024 |
|
| 67,962 |
|
|
| 21.05 |
|
|
| 67,962 |
|
|
| 39,918 |
|
Total |
|
| 73,562 |
|
|
|
|
|
| 73,562 |
|
|
|
|
27
ITEM 3.DEFAULTS3. DEFAULTS UPON SENIOR SECURITIES.
None.
Not applicable.
ITEM 4.MINE4. MINE SAFETY DISCLOSURES.
None.
None.
ITEM 5.OTHER5. OTHER INFORMATION.
During the three months ended March 31, 2024, none of our directors or "officers" (as defined in Rule 16a-1(f) under the Exchange Act) adopted, modified or terminated "Rule 10b5-1 trading arrangements" or "non-Rule 10b5-1 trading arrangements" (each as defined in Item 408 of Regulation S-K).
None.
3628
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| Incorporated by Reference |
| ||||||||
Exhibit |
| Description |
| Form |
| File No. |
| Exhibit |
| Filing Date |
| Filed |
|
3.1 |
| Amended and Restated Certificate of Incorporation of MCBC Holdings, Inc. |
| 10-K |
| 001-37502 |
| 3.1 |
| 9/18/15 |
|
|
|
3.2 |
|
| 10-Q |
| 001-37502 |
| 3.2 |
| 11/9/18 |
|
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| |
3.3 |
|
| 8-K |
| 001-37502 |
| 3.1 |
| 10/25/19 |
|
|
| |
3.4 |
| Fourth Amended and Restated By-laws of MasterCraft Boat Holdings, Inc. |
| 8-K |
| 001-37502 |
| 3.2 |
| 10/25/19 |
|
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|
10.1† |
|
| 8-K |
| 001-37502 |
| 10.1 |
| 3/4/24 |
|
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| |
10.2† |
|
| 8-K |
| 001-37502 |
| 10.2 |
| 3/4/24 |
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| |
31.1 |
| Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer |
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| * |
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31.2 |
| Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer |
|
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| * |
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32.1 |
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| ** |
| |
32.2 |
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| ** |
| |
101.INS |
| Inline XBRL Instance Document |
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| * |
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101.SCH |
| Inline XBRL Taxonomy Extension Schema With Embedded Linkbases Document |
|
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| * |
|
104 |
| Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
|
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| * |
|
37
10.21† |
| Form of Performance Stock Unit Award Agreement under 2015 Incentive Award Plan |
|
| 8-K |
| 001-37502 |
| 10.1 |
| 8/26/16 |
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10.22 |
|
|
| 8-K |
| 001-37502 |
| 2.1 |
| 10/2/17 |
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| |
10.23 |
|
|
| 8-K |
| 001-37502 |
| 10.1 |
| 10/2/17 |
|
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| |
31.1 |
| Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer |
|
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| * |
|
31.2 |
| Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer |
|
|
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|
|
|
|
|
|
| * |
|
32.1 |
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| ** |
| |
32.2 |
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| ** |
| |
101.INS |
| XBRL Instance Document |
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| * |
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101.SCH |
| XBRL Taxonomy Extension Schema Document |
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| * |
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101.CAL |
| XBRL Taxonomy Extension Calculation Linkbase Document |
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| * |
|
101.LAB |
| XBRL Taxonomy Extension Label Linkbase Document |
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| * |
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101.PRE |
| XBRL Taxonomy Extension Presentation Linkbase Document |
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| * |
|
101.DEF |
| XBRL Taxonomy Extension Definition Linkbase Document |
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| * |
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†Indicates management contract or compensatory plan.
*Filed herewith.
**Furnished herewith.
3829
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report has beento be signed belowon its behalf by the following persons on behalf of the registrant and in the capacities and on the dates indicated.undersigned thereunto duly authorized.
MASTERCRAFT BOAT HOLDINGS, INC. | |||||
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| |||
| May 8, 2024 |
| /s/ BRADLEY M. NELSON | ||
Bradley M. Nelson | |||||
Chief Executive Officer (Principal Executive Officer) and Director | |||||
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Date: | May 8, 2024 | By: | |||
/s/ TIMOTHY M. OXLEY | |||||
Timothy M. Oxley | |||||
Chief Financial Officer (Principal Financial and Accounting Officer), | |||||
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| ||||
3930