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 |
For the quarterly period ended: April 4, October 3, 2021
OR
☐ | 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
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, TN 37885
(Address of Principal Executive Office) (Zip Code)
(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
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☑ 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
As of May 10,November 5, 2021, there were 18,950,40918,945,744 shares of the Registrant’s common stock, par value $0.01 per share, issued and outstanding.
TABLE OF CONTENTS
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PART I | FINANCIAL INFORMATION |
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Item 1. | Financial Statements |
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| 4 | |
| 5 | |
| Unaudited Condensed Consolidated Statements of Stockholders’ Equity | 6 |
| 7 | |
| Notes to Unaudited Condensed Consolidated Financial Statements | 8 |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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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. These 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 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 considering 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: the potential effects of supply chain disruptions and production inefficiencies as a result of the coronavirus (“COVID-19”) pandemic on the Company, general economic conditions, demand for our products, inflation, changes in consumer preferences, competition within our industry, our reliance on our network of independent dealers, our ability to manage our manufacturing levels and our fixed cost base, the successful introduction of our new products and the other important factors described under the caption “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended June 30, 2020,2021, filed with the Securities and Exchange Commission (“SEC”) on September 11, 20202, 2021 (our “2020“2021 Annual Report”). 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.
MASTERCRAFT BOAT HOLDINGS, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share amounts)
|
| Three Months Ended |
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| Nine Months Ended |
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| Three Months Ended |
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| April 4, |
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| March 29, |
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| April 4, |
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| March 29, |
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| October 3, |
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| October 4, |
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| 2021 |
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| 2020 |
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| 2021 |
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| 2020 |
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| 2021 |
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| 2020 |
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NET SALES |
| $ | 147,854 |
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| $ | 102,562 |
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| $ | 370,276 |
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| $ | 311,979 |
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| $ | 144,010 |
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| $ | 103,745 |
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COST OF SALES |
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| 110,627 |
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| 81,288 |
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| 277,546 |
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| 244,030 |
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| 113,888 |
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| 77,515 |
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GROSS PROFIT |
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| 37,227 |
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| 21,274 |
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| 92,730 |
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| 67,949 |
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| 30,122 |
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| 26,230 |
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OPERATING EXPENSES: |
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Selling and marketing |
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| 3,693 |
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| 4,933 |
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| 9,589 |
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| 13,340 |
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| 4,282 |
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| 2,907 |
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General and administrative |
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| 9,984 |
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| 6,094 |
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| 27,268 |
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| 19,356 |
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| 9,670 |
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| 8,932 |
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Amortization of other intangible assets |
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| 987 |
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| 987 |
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| 2,961 |
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| 2,961 |
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| 1,026 |
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| 987 |
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Goodwill and other intangible asset impairment |
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| - |
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| 56,437 |
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| - |
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| 56,437 |
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Goodwill impairment |
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| 1,100 |
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| - |
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Total operating expenses |
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| 14,664 |
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| 68,451 |
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| 39,818 |
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| 92,094 |
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| 16,078 |
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| 12,826 |
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OPERATING INCOME (LOSS) |
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| 22,563 |
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| (47,177 | ) |
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| 52,912 |
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| (24,145 | ) | ||||||||
OPERATING INCOME |
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| 14,044 |
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| 13,404 |
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OTHER EXPENSE: |
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Interest expense |
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| 755 |
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| 1,086 |
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| 2,644 |
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| 3,667 |
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| 382 |
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| 1,019 |
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INCOME (LOSS) BEFORE INCOME TAX EXPENSE |
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| 21,808 |
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| (48,263 | ) |
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| 50,268 |
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| (27,812 | ) | ||||||||
INCOME TAX EXPENSE (BENEFIT) |
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| 4,240 |
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| (11,550 | ) |
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| 10,632 |
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| (6,601 | ) | ||||||||
NET INCOME (LOSS) |
| $ | 17,568 |
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| $ | (36,713 | ) |
| $ | 39,636 |
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| $ | (21,211 | ) | ||||||||
INCOME BEFORE INCOME TAX EXPENSE |
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| 13,662 |
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| 12,385 |
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INCOME TAX EXPENSE |
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| 3,276 |
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| 2,818 |
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NET INCOME |
| $ | 10,386 |
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| $ | 9,567 |
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NET INCOME (LOSS) PER SHARE: |
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NET INCOME PER SHARE: |
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Basic |
| $ | 0.93 |
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| $ | (1.96 | ) |
| $ | 2.11 |
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| $ | (1.13 | ) |
| $ | 0.55 |
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| $ | 0.51 |
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Diluted |
| $ | 0.93 |
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| $ | (1.96 | ) |
| $ | 2.09 |
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| $ | (1.13 | ) |
| $ | 0.55 |
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| $ | 0.51 |
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WEIGHTED AVERAGE SHARES USED FOR COMPUTATION OF: |
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Basic earnings per share |
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| 18,817,975 |
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| 18,739,480 |
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| 18,799,875 |
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| 18,731,338 |
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| 18,850,301 |
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| 18,774,336 |
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Diluted earnings per share |
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| 18,989,629 |
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| 18,739,480 |
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| 18,928,288 |
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| 18,731,338 |
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| 19,004,119 |
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| 18,866,826 |
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Notes to Unaudited Condensed Consolidated Financial Statements form an integral part of the condensed consolidated financial statements.
MASTERCRAFT BOAT HOLDINGS, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share amounts)
|
| April 4, |
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| June 30, |
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| October 3, |
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| June 30, |
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| 2021 |
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| 2020 |
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| 2021 |
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| 2021 |
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ASSETS |
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CURRENT ASSETS: |
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Cash and cash equivalents |
| $ | 28,970 |
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| $ | 16,319 |
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| $ | 11,651 |
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| $ | 39,252 |
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Accounts receivable, net of allowances of $83 and $247, respectively |
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| 10,508 |
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| 6,145 |
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Accounts receivable, net of allowance of $212 and $115, respectively |
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| 19,105 |
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| 12,080 |
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Income tax receivable |
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| 671 |
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| 4,924 |
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| 935 |
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| 355 |
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Inventories, net (Note 3) |
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| 44,954 |
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| 25,636 |
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| 75,536 |
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| 53,481 |
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Prepaid expenses and other current assets |
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| 6,345 |
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| 3,719 |
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| 5,524 |
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| 5,059 |
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Total current assets |
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| 91,448 |
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| 56,743 |
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| 112,751 |
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| 110,227 |
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Property, plant and equipment, net (Note 4) |
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| 58,430 |
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| 40,481 |
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Goodwill (Note 5) |
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| 29,593 |
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| 29,593 |
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Other intangible assets, net (Note 5) |
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| 60,887 |
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| 63,849 |
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Property, plant and equipment, net |
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| 62,335 |
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| 60,495 |
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Goodwill (Note 4) |
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| 28,493 |
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| 29,593 |
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Other intangible assets, net (Note 4) |
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| 58,873 |
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| 59,899 |
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Deferred income taxes |
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| 15,061 |
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| 16,080 |
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| 15,379 |
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| 15,130 |
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Deferred debt issuance costs, net |
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| 327 |
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| 425 |
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| 482 |
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| 507 |
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Other long-term assets |
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| 677 |
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| 752 |
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| 551 |
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| 609 |
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Total assets |
| $ | 256,423 |
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| $ | 207,923 |
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| $ | 278,864 |
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| $ | 276,460 |
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LIABILITIES AND STOCKHOLDERS' EQUITY |
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CURRENT LIABILITIES: |
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Accounts payable |
| $ | 23,195 |
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| $ | 10,510 |
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| 28,642 |
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| 23,861 |
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Accrued expenses and other current liabilities (Note 6) |
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| 46,830 |
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| 35,985 |
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Current portion of long-term debt, net of unamortized debt issuance costs (Note 7) |
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| 10,537 |
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| 8,932 |
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Income tax payable |
|
| — |
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| 726 |
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Accrued expenses and other current liabilities (Note 5) |
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| 43,869 |
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| 46,836 |
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Current portion of long-term debt, net of unamortized debt issuance costs (Note 6) |
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| 2,868 |
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| 2,866 |
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Total current liabilities |
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| 80,562 |
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| 55,427 |
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| 75,379 |
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| 74,289 |
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Long-term debt, net of unamortized debt issuance costs (Note 7) |
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| 81,367 |
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| 99,666 |
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Long-term debt, net of unamortized debt issuance costs (Note 6) |
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| 81,559 |
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| 90,277 |
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Unrecognized tax positions |
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| 3,721 |
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| 3,683 |
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| 4,294 |
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| 3,830 |
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Other long-term liabilities |
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| 319 |
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| 277 |
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| 239 |
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| 276 |
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Total liabilities |
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| 165,969 |
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| 159,053 |
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| 161,471 |
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| 168,672 |
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COMMITMENTS AND CONTINGENCIES |
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STOCKHOLDERS' EQUITY: |
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Common stock, $.01 par value per share — authorized, 100,000,000 shares; issued and outstanding, 18,952,148 shares at April 4, 2021 and 18,871,637 shares at June 30, 2020 |
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| 189 |
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| 189 |
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Common stock, $.01 par value per share — authorized, 100,000,000 shares; issued and outstanding, 18,961,205 shares at October 3, 2021 and 18,956,719 shares at June 30, 2021 |
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| 189 |
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| 189 |
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Additional paid-in capital |
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| 118,130 |
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| 116,182 |
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| 118,149 |
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| 118,930 |
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Accumulated deficit |
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| (27,865 | ) |
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| (67,501 | ) |
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| (945 | ) |
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| (11,331 | ) |
Total stockholders' equity |
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| 90,454 |
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| 48,870 |
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| 117,393 |
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| 107,788 |
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Total liabilities and stockholders' equity |
| $ | 256,423 |
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| $ | 207,923 |
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| $ | 278,864 |
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| $ | 276,460 |
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Notes to Unaudited Condensed Consolidated Financial Statements form an integral part of the condensed consolidated financial statements.
MASTERCRAFT BOAT HOLDINGS, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Dollars in thousands)
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| Additional |
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| Additional |
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| Common Stock |
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| Paid-in |
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| Accumulated |
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| Common Stock |
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| Paid-in |
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| Accumulated |
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| Shares |
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| Amount |
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| Capital |
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| Deficit |
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| Total |
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| Shares |
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| Amount |
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| Capital |
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| Deficit |
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| Total |
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Balance at June 30, 2020 |
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| 18,871,637 |
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| $ | 189 |
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| $ | 116,182 |
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| $ | (67,501 | ) |
| $ | 48,870 |
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Balance at June 30, 2021 |
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| 18,956,719 |
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| $ | 189 |
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| $ | 118,930 |
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| $ | (11,331 | ) |
| $ | 107,788 |
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Share-based compensation activity |
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| 80,701 |
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|
| — |
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|
| 486 |
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| — |
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| 486 |
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| 62,865 |
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| 1 |
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|
| 705 |
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| — |
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| 706 |
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Repurchase and retirement of common stock |
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| (58,379 | ) |
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| (1 | ) |
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| (1,486 | ) |
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| — |
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| (1,487 | ) | ||||||||||||||||||||
Net income |
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| — |
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| — |
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| — |
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| 9,567 |
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| 9,567 |
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| — |
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| — |
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| — |
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|
| 10,386 |
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| 10,386 |
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Balance at October 4, 2020 |
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| 18,952,338 |
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|
| 189 |
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| 116,668 |
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| (57,934 | ) |
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| 58,923 |
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Share-based compensation activity |
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| (3,043 | ) |
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| — |
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|
| 577 |
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|
| — |
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| 577 |
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Net income |
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| — |
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| — |
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| — |
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|
| 12,501 |
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|
| 12,501 |
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Balance at January 3, 2021 |
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| 18,949,295 |
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| $ | 189 |
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| $ | 117,245 |
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| $ | (45,433 | ) |
| $ | 72,001 |
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Share-based compensation activity |
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| 2,853 |
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|
| — |
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|
| 885 |
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|
| — |
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|
| 885 |
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Net income |
|
| — |
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|
| — |
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|
| — |
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|
| 17,568 |
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|
| 17,568 |
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Balance at April 4, 2021 |
|
| 18,952,148 |
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| $ | 189 |
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| $ | 118,130 |
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| $ | (27,865 | ) |
| $ | 90,454 |
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Balance at October 3, 2021 |
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| 18,961,205 |
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| $ | 189 |
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| $ | 118,149 |
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| $ | (945 | ) |
| $ | 117,393 |
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| Additional |
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| Additional |
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| ||
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| Common Stock |
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| Paid-in |
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| Accumulated |
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| Common Stock |
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| Paid-in |
|
| Accumulated |
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| ||||||||||||||
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| Shares |
|
| Amount |
|
| Capital |
|
| Deficit |
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| Total |
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| Shares |
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| Amount |
|
| Capital |
|
| Deficit |
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| Total |
| ||||||||||
Balance at June 30, 2019 |
|
| 18,764,037 |
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| $ | 188 |
|
| $ | 115,582 |
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| $ | (43,454 | ) |
| $ | 72,316 |
| ||||||||||||||||||||
Balance at June 30, 2020 |
|
| 18,871,637 |
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| $ | 189 |
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| $ | 116,182 |
|
| $ | (67,501 | ) |
| $ | 48,870 |
| ||||||||||||||||||||
Share-based compensation activity |
|
| 74,960 |
|
|
| 1 |
|
|
| 169 |
|
|
| — |
|
|
| 170 |
|
|
| 80,701 |
|
|
| — |
|
|
| 486 |
|
|
| — |
|
|
| 486 |
|
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 8,623 |
|
|
| 8,623 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 9,567 |
|
|
| 9,567 |
|
Balance at September 29, 2019 |
|
| 18,838,997 |
|
|
| 189 |
|
|
| 115,751 |
|
|
| (34,831 | ) |
|
| 81,109 |
| ||||||||||||||||||||
Share-based compensation activity |
|
| 33,169 |
|
|
| — |
|
|
| (78 | ) |
|
| — |
|
|
| (78 | ) | ||||||||||||||||||||
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 6,879 |
|
|
| 6,879 |
| ||||||||||||||||||||
Balance at December 29, 2019 |
|
| 18,872,166 |
|
| $ | 189 |
|
| $ | 115,673 |
|
| $ | (27,952 | ) |
| $ | 87,910 |
| ||||||||||||||||||||
Share-based compensation activity |
|
| (47 | ) |
|
| — |
|
|
| 159 |
|
|
| — |
|
|
| 159 |
| ||||||||||||||||||||
Net loss |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (36,713 | ) |
|
| (36,713 | ) | ||||||||||||||||||||
Balance at March 29, 2020 |
|
| 18,872,119 |
|
| $ | 189 |
|
| $ | 115,832 |
|
| $ | (64,665 | ) |
| $ | 51,356 |
| ||||||||||||||||||||
Balance at October 4, 2020 |
|
| 18,952,338 |
|
| $ | 189 |
|
| $ | 116,668 |
|
| $ | (57,934 | ) |
| $ | 58,923 |
|
Notes to Unaudited Condensed Consolidated Financial Statements form an integral part of the condensed consolidated financial statements.
MASTERCRAFT BOAT HOLDINGS, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
|
| Nine Months Ended |
|
| Three Months Ended |
| ||||||||||
|
| April 4, |
|
| March 29, |
|
| October 3, |
|
| October 4, |
| ||||
|
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
| ||||
CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
| $ | 39,636 |
|
| $ | (21,211 | ) | ||||||||
Adjustments to reconcile net income (loss) to net cash provided by operating activities: |
|
|
|
|
|
|
|
| ||||||||
Net income |
| $ | 10,386 |
|
| $ | 9,567 |
| ||||||||
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
|
| ||||||||
Depreciation and amortization |
|
| 8,547 |
|
|
| 7,686 |
|
|
| 3,354 |
|
|
| 2,739 |
|
Share-based compensation |
|
| 2,184 |
|
|
| 703 |
|
|
| 896 |
|
|
| 640 |
|
Unrecognized tax benefits |
|
| 38 |
|
|
| 219 |
|
|
| 464 |
|
|
| 458 |
|
Amortization of debt issuance costs |
|
| 469 |
|
|
| 420 |
|
|
| 59 |
|
|
| 159 |
|
Deferred income taxes |
|
| 1,019 |
|
|
| (7,552 | ) | ||||||||
Goodwill and other intangible asset impairment |
|
| — |
|
|
| 56,437 |
| ||||||||
Goodwill impairment |
|
| 1,100 |
|
|
| — |
| ||||||||
Changes in certain operating assets and liabilities |
|
| 1,454 |
|
|
| (13,657 | ) |
|
| (30,087 | ) |
|
| (6,737 | ) |
Other, net |
|
| 1,046 |
|
|
| 855 |
|
|
| 273 |
|
|
| 546 |
|
Net cash provided by operating activities |
|
| 54,393 |
|
|
| 23,900 |
| ||||||||
Net cash (used in) provided by operating activities |
|
| (13,555 | ) |
|
| 7,372 |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of property, plant and equipment |
|
| (23,779 | ) |
|
| (13,601 | ) |
|
| (3,618 | ) |
|
| (2,042 | ) |
Proceeds from disposal of property, plant and equipment |
|
| — |
|
|
| 25 |
| ||||||||
Net cash used in investing activities |
|
| (23,779 | ) |
|
| (13,576 | ) |
|
| (3,618 | ) |
|
| (2,042 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal payments on revolving credit facility |
|
| (32,500 | ) |
|
| — |
|
|
| (20,000 | ) |
|
| (10,000 | ) |
Borrowings on revolving credit facility |
|
| 22,500 |
|
|
| 35,000 |
|
|
| 12,000 |
|
|
| — |
|
Principal payments on long-term debt |
|
| (7,065 | ) |
|
| (10,647 | ) |
|
| (750 | ) |
|
| (2,355 | ) |
Repurchase and retirement of common stock |
|
| (1,487 | ) |
|
| — |
| ||||||||
Other, net |
|
| (898 | ) |
|
| 488 |
|
|
| (191 | ) |
|
| (436 | ) |
Net cash provided by (used in) financing activities |
|
| (17,963 | ) |
|
| 24,841 |
| ||||||||
Net cash used in financing activities |
|
| (10,428 | ) |
|
| (12,791 | ) | ||||||||
NET CHANGE IN CASH AND CASH EQUIVALENTS |
|
| 12,651 |
|
|
| 35,165 |
|
|
| (27,601 | ) |
|
| (7,461 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS — BEGINNING OF PERIOD |
|
| 16,319 |
|
|
| 5,826 |
|
|
| 39,252 |
|
|
| 16,319 |
|
CASH AND CASH EQUIVALENTS — END OF PERIOD |
| $ | 28,970 |
|
| $ | 40,991 |
|
| $ | 11,651 |
|
| $ | 8,858 |
|
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash payments for interest |
| $ | 2,147 |
|
| $ | 3,263 |
|
| $ | 282 |
|
| $ | 828 |
|
Cash payments for income taxes |
|
| 5,170 |
|
|
| 6,146 |
|
|
| 5,170 |
|
|
| 280 |
|
SIGNIFICANT NON-CASH INVESTING AND FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures in accounts payable and accrued expenses |
|
| 157 |
|
|
| 80 |
|
|
| 815 |
|
|
| 242 |
|
Notes to Unaudited Condensed Consolidated Financial Statements form an integral part of the condensed consolidated financial statements.
MASTERCRAFT BOAT HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unless stated otherwise dollars in thousands, except per share data)
1.ORGANIZATION, BASIS OF PRESENTATION, AND SIGNIFICANT ACCOUNTING POLICIES
Organization — MasterCraft Boat Holdings, Inc. (“Holdings”) was formed on January 28, 2000, as a Delaware holding company and operates primarily through its wholly owned subsidiaries, MasterCraft Boat Company, LLC; MasterCraft Services, LLC; MasterCraft Parts, Ltd.; MasterCraft International Sales Administration, Inc.; and Aviara LLC (collectively “MasterCraft”);Boats, LLC; Nautic Star, LLC andLLC; NS Transport, LLC (collectively “NauticStar”);LLC; and Crest Marine, LLC (“Crest”).LLC. Holdings and its subsidiaries collectively are referred to herein as the “Company.”
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 a calendar month.
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, 20202021 and, in the opinion of management, reflect all adjustments considered necessary to present fairly the Company’s financial position as of April 4,October 3, 2021, its results of operations for the three and nine months ended April 4,October 3, 2021 and March 29,October 4, 2020, its cash flows for the ninethree months ended April 4,October 3, 2021 and March 29,October 4, 2020, and its statements of stockholders’ equity for the three and nine months ended April 4,October 3, 2021 and March 29,October 4, 2020. 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 SEC for financial information have been condensed or omitted pursuant to such rules and regulations. The June 30, 20202021 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 20202021 Annual Report on Form 10-K.
Due to the seasonality of the Company’s business, the interim results are not necessarily indicative of the results that may be expected for the remainder of the fiscal year.
There were no significant changes in or changes into the application of the Company’s significant or critical accounting policies or estimation procedures for the three and nine months ended April 4,October 3, 2021 as compared with the significant accounting policiesthose described in the Company’s audited consolidated financial statements for the fiscal year ended June 30, 2020.2021.
Change in Reportable Segments — Beginning with the first quarter of fiscal 2022, our chief operating decision maker (“CODM”) began to manage our business, allocate resources, and evaluate performance based on the changes that have been made in the Company’s management structure in connection with the transition of Aviara production to our Merritt Island facility. As a result, the Company has realigned its reportable segments to MasterCraft, Crest, NauticStar, and Aviara. The Company has recast segment information for all prior periods presented. Refer to Note 10 – Segment Information for further information on the Company’s reportable segments.
Reclassifications — Certain historical amounts have been reclassified in these condensed consolidated financial statements and the accompanying notes herewith to conform to the current presentation.
Supply Chain Disruption — As we navigate the unprecedented confluence of demand and disruption precipitated by the COVID-19 pandemic, our production rates going forward will depend, in large part, on our suppliers’ capacity. Demand for raw materials and components used in the production of our products has surged. At the same time, severe and unprecedented events, including the February 2021 ice storm which impacted much of the United States, have recently disrupted the global supply chain. As a result, some of the materials and components that we use, including certain resins, fiberglass, and plywood, are in short supply.
NewRecently Adopted Accounting Pronouncements Issued But Not Yet AdoptedStandards
Income Taxes —In December 2019, the FASBFinancial Accounting Standards Board (the “FASB”) issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (Topic 740). ThisTaxes. ASU 2019-12 simplifies the accounting for income taxes by among other things, eliminatingremoving certain exceptions to general principles in Income Taxes (Topic 740). It also clarifies and amends existing exceptions relatedguidance to the general approach in ASC 740 relating to franchise taxes, reducing complexity in the interim-period accountingimprove consistent application. The guidance is effective for year-to-date loss limitations and changes in tax laws, and clarifying the accounting for transactions outside of business combination that result in a step-up in the
tax basis of goodwill. The transition requirements are primarily prospective, and the effective date is for interim and annual reporting periodsfiscal years beginning after December 15, 2020, with early adoption permitted. We are currently evaluating the impact of the new guidance on our consolidated financial statements.
Recently Adopted Accounting Standards
Fair Value Measurements —In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement. This guidance modifies the disclosure requirements on fair value measurements in Topic 820 by removing disclosures regarding transfers between Level 1 and Level 2 of the fair value hierarchy, by modifying the measurement uncertainty disclosure, and by requiring additional disclosures for Level 3 fair value measurements, among others. The Company adopted this guidance for its fiscal year beginning July 1, 2020. The adoption of this standard did not have an impact on the Company’s consolidated financial statements.
Current Expected Credit LossReference Rate Reform — In June 2016,March 2020, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326)2020-04, Reference Rate Reform (Topic 848): MeasurementFacilitation of Credit Lossesthe Effects of Reference Rate Reform on Financial Instruments, which updatedReporting. ASU 2020-04 provides optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships, and other transactions, subject to meeting certain criteria, that reference London Interbank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued because of reference rate reform. An entity may apply ASU 2020-04 as of any date from the ASCbeginning of an interim period that includes or is subsequent to use an impairment model that is based on expected losses rather than incurred losses. The Company adopted this guidance for its fiscal year beginning July 1, 2020.March 12, 2020 through December 31, 2022. The adoption of this standard did not have an impact on the Company’s consolidated financial statementsstatements..
2. | REVENUE RECOGNITION |
Consistent with the Company’s change in reportable segments described in Note 10—Segment Information, the Company has changed its presentation of disaggregated revenue to align with the new segment structure. The following tables present the Company’s revenue by major product category for each reportable segment.
|
| Three Months Ended April 4, 2021 |
|
| Three Months Ended March 29, 2020 |
|
| Three Months Ended October 3, 2021 |
| |||||||||||||||||||||||||||||||||||||||||||
|
| MasterCraft |
|
| NauticStar |
|
| Crest |
|
| Total |
|
| MasterCraft |
|
| NauticStar |
|
| Crest |
|
| Total |
|
| MasterCraft |
|
| Crest |
|
| NauticStar |
|
| Aviara |
|
| Total |
| |||||||||||||
Major Product Categories: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Boats and trailers |
| $ | 96,195 |
|
| $ | 17,913 |
|
| $ | 29,973 |
|
| $ | 144,081 |
|
| $ | 68,684 |
|
| $ | 14,053 |
|
| $ | 17,696 |
|
| $ | 100,433 |
|
| $ | 87,929 |
|
| $ | 32,369 |
|
| $ | 13,235 |
|
| $ | 5,855 |
|
| $ | 139,388 |
|
Parts |
|
| 2,973 |
|
|
| 129 |
|
|
| 274 |
|
|
| 3,376 |
|
|
| 1,705 |
|
|
| 103 |
|
|
| 136 |
|
|
| 1,944 |
|
|
| 3,828 |
|
|
| 236 |
|
|
| 120 |
|
|
| — |
|
|
| 4,184 |
|
Other revenue |
|
| 279 |
|
|
| 3 |
|
|
| 115 |
|
|
| 397 |
|
|
| 142 |
|
|
| — |
|
|
| 43 |
|
|
| 185 |
|
|
| 258 |
|
|
| 175 |
|
|
| 5 |
|
|
| — |
|
|
| 438 |
|
Total |
| $ | 99,447 |
|
| $ | 18,045 |
|
| $ | 30,362 |
|
| $ | 147,854 |
|
| $ | 70,531 |
|
| $ | 14,156 |
|
| $ | 17,875 |
|
| $ | 102,562 |
|
| $ | 92,015 |
|
| $ | 32,780 |
|
| $ | 13,360 |
|
| $ | 5,855 |
|
| $ | 144,010 |
|
|
| Nine Months Ended April 4, 2021 |
|
| Nine Months Ended March 29, 2020 |
|
| Three Months Ended October 4, 2020 |
| |||||||||||||||||||||||||||||||||||||||||||
|
| MasterCraft |
|
| NauticStar |
|
| Crest |
|
| Total |
|
| MasterCraft |
|
| NauticStar |
|
| Crest |
|
| Total |
|
| MasterCraft |
|
| Crest |
|
| NauticStar |
|
| Aviara |
|
| Total |
| |||||||||||||
Major Product Categories: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Boats and trailers |
| $ | 245,583 |
|
| $ | 44,986 |
|
| $ | 68,341 |
|
| $ | 358,910 |
|
| $ | 204,303 |
|
| $ | 47,372 |
|
| $ | 52,417 |
|
| $ | 304,092 |
|
| $ | 64,809 |
|
| $ | 17,610 |
|
| $ | 12,216 |
|
| $ | 3,773 |
|
| $ | 98,408 |
|
Parts |
|
| 9,244 |
|
|
| 340 |
|
|
| 803 |
|
|
| 10,387 |
|
|
| 6,411 |
|
|
| 349 |
|
|
| 437 |
|
|
| 7,197 |
|
|
| 4,545 |
|
|
| 391 |
|
|
| 123 |
|
|
| — |
|
|
| 5,059 |
|
Other revenue |
|
| 743 |
|
|
| 10 |
|
|
| 226 |
|
|
| 979 |
|
|
| 487 |
|
|
| 6 |
|
|
| 197 |
|
|
| 690 |
|
|
| 237 |
|
|
| 38 |
|
|
| 3 |
|
|
| — |
|
|
| 278 |
|
Total |
| $ | 255,570 |
|
| $ | 45,336 |
|
| $ | 69,370 |
|
| $ | 370,276 |
|
| $ | 211,201 |
|
| $ | 47,727 |
|
| $ | 53,051 |
|
| $ | 311,979 |
|
| $ | 69,591 |
|
| $ | 18,039 |
|
| $ | 12,342 |
|
| $ | 3,773 |
|
| $ | 103,745 |
|
Contract Liabilities
As of June 30, 2020,2021, the Company had $0.6$1.8 million of contract liabilities associated with customer deposits. During the ninethree months ended April 4,October 3, 2021, all$1.3 million of this amount was recognized as revenue. As of April 4,October 3, 2021, total contract liabilities associated with customer deposits were $1.9$4.3 million, were reported in Accrued expenses and other current liabilities on the condensed consolidated balance sheet, and are expected to be recognized as revenue during the remainder of the year ending June 30, 2021.2022.
3. | INVENTORIES |
Inventories consisted of the following:
|
| April 4, |
|
| June 30, |
|
| October 3, |
|
| June 30, |
| ||||
|
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2021 |
| ||||
Raw materials and supplies |
| $ | 30,428 |
|
| $ | 18,318 |
|
| $ | 52,438 |
|
| $ | 37,089 |
|
Work in process |
|
| 7,207 |
|
|
| 3,866 |
|
|
| 18,198 |
|
|
| 10,171 |
|
Finished goods |
|
| 9,793 |
|
|
| 4,876 |
|
|
| 7,344 |
|
|
| 8,362 |
|
Obsolescence reserve |
|
| (2,474 | ) |
|
| (1,424 | ) |
|
| (2,444 | ) |
|
| (2,141 | ) |
Total inventories |
| $ | 44,954 |
|
| $ | 25,636 |
|
| $ | 75,536 |
|
| $ | 53,481 |
|
Raw materials and supplies have increased to support higher production volumes and to increase safety stock to manage supply chain risk. Work in process has increased due to supply chain disruptions.
4.PROPERTY, PLANT, AND EQUIPMENT
Property, plant, and equipment, net consisted of the following:
|
| April 4, |
|
| June 30, |
|
| ||
|
| 2021 |
|
| 2020 |
|
| ||
Land and improvements |
| $ | 5,633 |
|
| $ | 3,030 |
|
|
Buildings and improvements |
|
| 35,743 |
|
|
| 22,366 |
|
|
Machinery and equipment |
|
| 40,035 |
|
|
| 38,262 |
|
|
Furniture and fixtures |
|
| 2,744 |
|
|
| 2,229 |
|
|
Construction in progress |
|
| 6,300 |
|
|
| 1,312 |
|
|
Total property, plant, and equipment |
|
| 90,455 |
|
|
| 67,199 |
|
|
Less accumulated depreciation |
|
| (32,025 | ) |
|
| (26,718 | ) |
|
Property, plant, and equipment — net |
| $ | 58,430 |
|
| $ | 40,481 |
|
|
Merritt Island Facility
During October 2020 we completed the purchase of certain real property located in Merritt Island, Florida, including a boat manufacturing facility, for a purchase price of $14.2 million (the “Merritt Island Facility”). The new Merritt Island Facility provides a dedicated manufacturing center for our Aviara brand, and allows for increased capacity for our MasterCraft brand.
5.GOODWILL AND OTHER INTANGIBLE ASSETS
Beginning with the first quarter of fiscal 2022, the Company realigned its reportable segments to MasterCraft, Crest, NauticStar, and Aviara. Refer to Note 10 – Segment Information for further information on the Company’s reportable segments. As a result of the change in segments, in accordance with ASC 350, Intangibles-Goodwill and Other, the Company reallocated the goodwill recorded in the MasterCraft reporting unit to the two separate MasterCraft and Aviara reporting units using a relative fair value approach.
Prior to realigning our segments, we evaluated our goodwill for impairment and determined no impairment existed as the fair value of our MasterCraft reporting unit, which was the only reporting unit containing goodwill, was in excess of its carrying amount. In conjunction with the reallocation of goodwill, we tested the goodwill at our MasterCraft and Aviara reporting units for impairment using an income-based approach, specifically a discounted cash flow model. The cash flow model included significant judgements and assumptions related to revenue growth and discount rates. Near-term operating losses generated by start-up inefficiencies have negatively impacted the fair value of Aviara, causing the carrying value of the reporting unit to be in excess of the fair value. Consequently, a $1.1 million impairment charge was recognized in the three months ended October 3, 2021.
The carrying amounts of goodwill as of April 4, 2021 and June 30, 2020, attributable to each of the Company’s reportable segments, were as follows:
|
| Gross Amount |
|
| Accumulated Impairment Losses |
|
| Total |
| |||
MasterCraft |
| $ | 29,593 |
|
| $ | - |
|
| $ | 29,593 |
|
NauticStar |
|
| 36,199 |
|
|
| (36,199 | ) |
|
| - |
|
Crest |
|
| 36,238 |
|
|
| (36,238 | ) |
|
| - |
|
Total |
| $ | 102,030 |
|
| $ | (72,437 | ) |
| $ | 29,593 |
|
|
| MasterCraft |
|
| Crest |
|
| NauticStar |
|
| Aviara |
|
| Total |
| |||||
Balance at June 30, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill |
| $ | 29,593 |
|
| $ | 36,238 |
|
| $ | 36,199 |
|
| $ | - |
|
| $ | 102,030 |
|
Accumulated impairment losses |
|
| - |
|
|
| (36,238 | ) |
|
| (36,199 | ) |
|
| - |
|
|
| (72,437 | ) |
Goodwill, net at June 30, 2021 |
|
| 29,593 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 29,593 |
|
Goodwill reallocation |
|
| (1,100 | ) |
|
| - |
|
|
| - |
|
|
| 1,100 |
|
|
| - |
|
Impairment |
|
| - |
|
|
| - |
|
|
| - |
|
|
| (1,100 | ) |
|
| (1,100 | ) |
Goodwill, net at October 3, 2021 |
| $ | 28,493 |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | 28,493 |
|
The following table presents the carrying amount of Other intangible assets, net:
|
| April 4, |
|
| June 30, |
|
| October 3, |
|
| June 30, |
| ||||||||||||||||||||||||||||||||||||
|
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2021 |
| ||||||||||||||||||||||||||||||||||||
|
| Gross Amount |
|
| Accumulated Amortization / Impairment |
|
| Other intangible assets, net |
|
| Gross Amount |
|
| Accumulated Amortization / Impairment |
|
| Other intangible assets, net |
|
| Gross Amount |
|
| Accumulated Amortization / Impairment |
|
| Other intangible assets, net |
|
| Gross Amount |
|
| Accumulated Amortization / Impairment |
|
| Other intangible assets, net |
| ||||||||||||
Amortized intangible assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dealer networks |
| $ | 39,500 |
|
| $ | (12,736 | ) |
| $ | 26,764 |
|
| $ | 39,500 |
|
| $ | (9,810 | ) |
| $ | 29,690 |
|
| $ | 39,500 |
|
| $ | (14,725 | ) |
| $ | 24,775 |
|
| $ | 39,500 |
|
| $ | (13,711 | ) |
| $ | 25,789 |
|
Software |
|
| 245 |
|
|
| (122 | ) |
|
| 123 |
|
|
| 245 |
|
|
| (86 | ) |
|
| 159 |
|
|
| 245 |
|
|
| (147 | ) |
|
| 98 |
|
|
| 245 |
|
|
| (135 | ) |
|
| 110 |
|
|
|
| 39,745 |
|
|
| (12,858 | ) |
|
| 26,887 |
|
|
| 39,745 |
|
|
| (9,896 | ) |
|
| 29,849 |
|
|
| 39,745 |
|
|
| (14,872 | ) |
|
| 24,873 |
|
|
| 39,745 |
|
|
| (13,846 | ) |
|
| 25,899 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unamortized intangible assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade names |
|
| 49,000 |
|
|
| (15,000 | ) |
|
| 34,000 |
|
|
| 49,000 |
|
|
| (15,000 | ) |
|
| 34,000 |
|
|
| 49,000 |
|
|
| (15,000 | ) |
|
| 34,000 |
|
|
| 49,000 |
|
|
| (15,000 | ) |
|
| 34,000 |
|
Total other intangible assets |
| $ | 88,745 |
|
| $ | (27,858 | ) |
| $ | 60,887 |
|
| $ | 88,745 |
|
| $ | (24,896 | ) |
| $ | 63,849 |
|
| $ | 88,745 |
|
| $ | (29,872 | ) |
| $ | 58,873 |
|
| $ | 88,745 |
|
| $ | (28,846 | ) |
| $ | 59,899 |
|
Amortization expense related to Other intangible assets, net for both the three and nine months ended both April 4,October 3, 2021 and March 29,October 4, 2020 was $1.0 million and $3.0 million, respectively.million. Estimated amortization expense for the fiscal year endedending June 30, 20212022 is $4.0 million.
Prior Year Goodwill and Other Intangible Asset Impairment
The past economic environment, including the significant share price and market volatility, as well as disruptions to supply chains resulting from the COVID-19 pandemic, triggered an interim impairment analysis for the Company’s intangible assets including goodwill. As a result of this analysis, the Company recorded impairment charges totaling $56.4 million during the three months ended March 29, 2020 related to the NauticStar and Crest segments.
The impairment charges recorded for each segment are detailed below and are included in Goodwill and other intangible asset impairment on the condensed consolidated statement of operations. The impairment recorded in fiscal 2020 was principally a result of a decline, in the fiscal third quarter, in market conditions, including our share price, and the then current outlook for sales and operating performance relative to the Company’s acquisition plans and impairment test performed as of June 30, 2019.
Goodwill and other intangible asset impairment for the three and nine months ended March 29, 2020 was as follows:
|
| NauticStar |
|
| Crest |
|
| Consolidated |
| |||
Goodwill |
| $ | 8,199 |
|
| $ | 36,238 |
|
| $ | 44,437 |
|
Trade name |
|
| 5,000 |
|
|
| 7,000 |
|
|
| 12,000 |
|
Total |
| $ | 13,199 |
|
| $ | 43,238 |
|
| $ | 56,437 |
|
| ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES |
Accrued expenses and other current liabilities consisted of the following:
|
| April 4, |
|
| June 30, |
|
| October 3, |
|
| June 30, |
| ||||
|
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2021 |
| ||||
Warranty |
| $ | 21,969 |
|
| $ | 20,004 |
|
| $ | 23,088 |
|
| $ | 22,329 |
|
Dealer incentives |
|
| 10,702 |
|
|
| 9,180 |
|
|
| 6,275 |
|
|
| 10,634 |
|
Contract liabilities |
|
| 4,300 |
|
|
| 1,848 |
| ||||||||
Compensation and related accruals |
|
| 5,950 |
|
|
| 1,488 |
|
|
| 3,933 |
|
|
| 6,046 |
|
Contract liabilities |
|
| 1,897 |
|
|
| 559 |
| ||||||||
Freight |
|
| 997 |
|
|
| 778 |
| ||||||||
Self-insurance |
|
| 949 |
|
|
| 865 |
| ||||||||
Inventory repurchase contingent obligation |
|
| 934 |
|
|
| 1,132 |
|
|
| 602 |
|
|
| 471 |
|
Self-insurance |
|
| 702 |
|
|
| 704 |
| ||||||||
Other |
|
| 4,676 |
|
|
| 2,918 |
|
|
| 3,725 |
|
|
| 3,865 |
|
Total accrued expenses and other current liabilities |
| $ | 46,830 |
|
| $ | 35,985 |
|
| $ | 43,869 |
|
| $ | 46,836 |
|
Accrued warranty liability activity was as follows for the ninethree months ended:
|
| April 4, |
|
| March 29, |
|
| October 3, |
|
| October 4, |
| ||||
|
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
| ||||
Balance at the beginning of the period |
| $ | 20,004 |
|
| $ | 17,205 |
|
| $ | 22,329 |
|
| $ | 20,004 |
|
Provisions |
|
| 7,158 |
|
|
| 5,828 |
|
|
| 2,564 |
|
|
| 1,833 |
|
Payments made |
|
| (6,328 | ) |
|
| (5,921 | ) |
|
| (2,861 | ) |
|
| (2,103 | ) |
Aggregate changes for preexisting warranties |
|
| 1,135 |
|
|
| 2,206 |
|
|
| 1,056 |
|
|
| 799 |
|
Balance at the end of the period |
| $ | 21,969 |
|
| $ | 19,318 |
|
| $ | 23,088 |
|
| $ | 20,533 |
|
7.
6.LONG-TERM DEBT
Long-term debt is as follows:
|
| April 4, |
|
| June 30, |
|
| October 3, |
|
| June 30, |
| ||||
|
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2021 |
| ||||
Revolving credit facility |
| $ | - |
|
| $ | 10,000 |
|
| $ | 25,728 |
|
| $ | 33,728 |
|
Term loans |
|
| 92,928 |
|
|
| 99,993 |
|
|
| 59,250 |
|
|
| 60,000 |
|
Debt issuance costs on term loans |
|
| (1,024 | ) |
|
| (1,395 | ) |
|
| (551 | ) |
|
| (585 | ) |
Total debt |
|
| 91,904 |
|
|
| 108,598 |
|
|
| 84,427 |
|
|
| 93,143 |
|
Less current portion of long-term debt |
|
| 10,990 |
|
|
| 9,420 |
|
|
| 3,000 |
|
|
| 3,000 |
|
Less current portion of debt issuance costs on term loans |
|
| (453 | ) |
|
| (488 | ) |
|
| (132 | ) |
|
| (134 | ) |
Long-term debt, net of current portion |
| $ | 81,367 |
|
| $ | 99,666 |
|
| $ | 81,559 |
|
| $ | 90,277 |
|
On October 1, 2018,June 28, 2021, the Company entered into a Fourth Amended and Restated Credit and Guaranty Agreementcredit agreement with a syndicate of certain financial institutions (the “Fourth Amended Credit“Credit Agreement”). The Fourth Amended Credit Agreement provides the Company with a $190.0$160.0 million senior secured credit facility, consisting of a $75.0$60.0 million term loan and an $80.0 million term loan (together, the(the “Term Loans”Loan”), and a $35.0$100.0 million revolving credit facility (the “Revolving Credit Facility”). The Fourth AmendedCredit Agreement refinanced and replaced the previously existing credit agreement. The Credit Agreement is secured by a first priority security interest in substantially all the assets of the Company. Holdings is a guarantor on the Fourth Amended Credit Agreement and the Fourth AmendedCompany’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 Holdings’ subsidiariesassets; 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 make distributionsmaintain a minimum fixed charge coverage ratio and a maximum net leverage ratio.
The Credit Agreement bears interest, at the Company’s option, at either the prime rate plus an applicable margin ranging from 0.25% to Holdings.1.00% or at an adjusted LIBOR rate plus an applicable margin ranging from 1.25% to 2.00%, in each case based on the Company’s net leverage ratio. The Term LoansCompany 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 net leverage ratio. Effective during the quarter, the applicable margin for loans accruing at the prime rate was 0.25% and the applicable margin for loans accruing interest at LIBOR was 1.25%. As of October 3, 2021, the interest rate on the Company’s term loan and revolving credit facility was 1.38%.
The Credit Agreement will mature and all remaining amounts outstanding thereunder will be due and payable on October 1, 2023.
Amendment No. 3 to Fourth Amended Credit Agreement
On May 7, 2020, the Company entered into Amendment No. 3 to the Fourth Amended Credit Agreement (the “Amendment No. 3”). The changes effected by Amendment No. 3 included, among others, the temporary removal and replacement of the Company’s financial covenants, the addition of a 50 basis point floor on LIBOR, modifications to the range of applicable LIBOR and prime interest rate margins, and a revision of the Total Net Leverage Ratio calculation. Under Amendment No. 3, the Total Net Leverage Ratio covenant and Fixed Charge Coverage Ratio covenant of the Fourth Amended Credit Agreement were temporarily replaced with three separate covenants: (i) an Interest Coverage Ratio, (ii) a Minimum Liquidity threshold, and (iii) a Maximum Unfinanced Capital Expenditures limitation (the “Package of Financial Covenants”). The Package of Financial Covenants were in place through March 31, 2021, after which time the Total Net Leverage Ratio covenant and Fixed Charge Coverage Ratio covenant have been reinstated and the Package of Financial Covenants has sunset, and with the minimum liquidity covenant being tested on the last day of each fiscal month through May 31, 2021. In addition, the Total Net Leverage Ratio calculation was temporarily revised during this time to include all unrestricted cash balances, without limitation, until June 30, 2021.28, 2026. As of April 4,October 3, 2021, the Company was in compliance with all its financial covenants.
Pursuant to Amendment No. 3, the applicable interest, at the Company’s option, is at either the prime rate plus an applicable margin ranging from 0.5% to 2.25% or at a LIBOR rate, subject to a 50 basis point floor, plus an applicable margin ranging from 1.5% to 3.25%, in each case based on the Company’s Total Net Leverage Ratio. As of April 4, 2021 the applicable margin for loans accruing interest at the prime rate was 1.00% and the applicable margin for loans accruing interest at LIBOR was 2.00%.
Amendment No. 4 and Joinder to Fourth Amended Credit Agreement
On October 26, 2020, the Company entered into Amendment No. 4 and Joinder to the Fourth Amended Credit Ageement (the “Amendment No. 4”). In conjunction with the new Merritt Island Facility purchase (see Note 4), the assets were organized in a new wholly-owned subsidiary of the Company. The changes effected by Amendment No. 4 add this new subsidiary as a borrowercovenants under the Fourth Amended Credit Agreement.
Revolving Credit Facility
During October 2020 the Company borrowed $20.0 million under its $35.0 million Revolving Credit Facility to fund the purchase of the Merrit Island Facility. The Company subsequently repaid all outstanding amounts and, as of April 4, 2021, the availability under the Revolving Credit Facility was $35.0 million.
| INCOME TAXES |
The Company’s consolidated 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. The differences between the Company’s effective tax rates and the statutory federal tax rate of 21.0% primarily relate to the inclusion of the state tax rate in the overall effective rate, the benefit of federal and state credits, and a permanent benefit associated with the foreign derived intangible income deduction, partially offset by a permanent add-back for Section 162(m) limitations. During the three months ended April 4,October 3, 2021 and March 29,October 4, 2020, the Company’s effective tax rates were 19.4%24.0% and 23.9%, respectively. During the nine months ended April 4, 2021 and March 29, 2020, the Company’s effective tax rates were 21.2% and 23.7%22.8%, respectively. The Company’s effective tax rate for the three and nine months ended April 4,October 3, 2021 is lowerhigher compared to the effective tax rate for the three and nine months ended March 29,October 4, 2020, primarily due to an increase in the effective state tax rate, an increase in the tax impact of uncertain state tax positions and a reduction in the benefit of federal and state tax credits, a reduction in the effective state tax rate, andpartially offset by an increase in the Company’s net permanent benefits, largely driven by changes in the foreign derived intangible income due to an increase in forecasted taxable income, foreign sales and gross margin.
|
|
The following table sets forth the computation of the Company’s net income (loss) per share:
|
| Three Months Ended |
|
| Nine Months Ended |
| ||||||||||
|
| April 4, |
|
| March 29, |
|
| April 4, |
|
| March 29, |
| ||||
|
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
| ||||
Net income (loss) |
| $ | 17,568 |
|
| $ | (36,713 | ) |
| $ | 39,636 |
|
| $ | (21,211 | ) |
Weighted average shares — basic |
|
| 18,817,975 |
|
|
| 18,739,480 |
|
|
| 18,799,875 |
|
|
| 18,731,338 |
|
Dilutive effect of assumed exercises of stock options |
|
| 16,133 |
|
|
| — |
|
|
| 14,728 |
|
|
| — |
|
Dilutive effect of assumed restricted share awards/units |
|
| 155,521 |
|
|
| — |
|
|
| 113,685 |
|
|
| — |
|
Weighted average outstanding shares — diluted |
|
| 18,989,629 |
|
|
| 18,739,480 |
|
|
| 18,928,288 |
|
|
| 18,731,338 |
|
Basic net income (loss) per share |
| $ | 0.93 |
|
| $ | (1.96 | ) |
| $ | 2.11 |
|
| $ | (1.13 | ) |
Diluted net income (loss) per share |
| $ | 0.93 |
|
| $ | (1.96 | ) |
| $ | 2.09 |
|
| $ | (1.13 | ) |
For the three and nine months ended April 4, 2021, an immaterial number of shares were excluded from the computation of diluted earnings per share as the effect would have been anti-dilutive. The dilutive effect of 113,708 and 89,686 weighted average shares were excluded from the calculation of diluted net loss per share for the three and nine months ended March 29, 2020, respectively, as the effect would have been anti-dilutive because of the net loss for the periods.
| SHARE-BASED COMPENSATION |
The following table presents the components of share-based compensation expense by award type.
|
| Three Months Ended |
|
| Nine Months Ended |
|
| Three Months Ended |
| |||||||||||||||
|
| April 4, |
|
| March 29, |
|
| April 4, |
|
| March 29, |
|
| October 3, |
|
| October 4, |
| ||||||
|
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
| ||||||
Restricted stock awards |
| $ | 377 |
|
| $ | 378 |
|
| $ | 1,182 |
|
| $ | 898 |
|
| $ | 467 |
|
| $ | 417 |
|
Performance stock units |
|
| 525 |
|
|
| (219 | ) |
|
| 1,003 |
|
|
| (204 | ) |
|
| 429 |
|
|
| 223 |
|
Stock options |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 9 |
| ||||||||
Share-based compensation expense |
| $ | 902 |
|
| $ | 159 |
|
| $ | 2,185 |
|
| $ | 703 |
|
| $ | 896 |
|
| $ | 640 |
|
Restricted Stock Awards
During the ninethree months ended April 4,October 3, 2021, the Company granted 88,78672,677 restricted stock awards (“RSAs”) to the Company’s non-executive directors, officers and certain other key employees. Generally, the shares of restricted stock granted during the ninethree months ended April 4,October 3, 2021, 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 the shares awarded by using the close price of our common stock as of the date of grant. The weighted average grant date fair value of RSAs granted in the ninethree months ended April 4,October 3, 2021, was $20.06$26.04 per share.
The following table summarizes the status of nonvested RSAs as of April 4,October 3, 2021, and changes during the ninethree months then ended.
|
|
|
|
|
| Average |
|
|
|
|
|
| Average |
| ||
|
| Nonvested |
|
| Grant-Date |
|
| Nonvested |
|
| Grant-Date |
| ||||
|
| Restricted |
|
| Fair Value |
|
| Restricted |
|
| Fair Value |
| ||||
|
| Shares |
|
| (per share) |
|
| Shares |
|
| (per share) |
| ||||
Nonvested at June 30, 2020 |
|
| 106,894 |
|
| $ | 18.01 |
| ||||||||
Nonvested at June 30, 2021 |
|
| 118,193 |
|
| $ | 19.42 |
| ||||||||
Granted |
|
| 88,786 |
|
|
| 20.06 |
|
|
| 72,677 |
|
|
| 26.04 |
|
Vested |
|
| (53,831 | ) |
|
| 18.03 |
|
|
| (44,634 | ) |
|
| 19.73 |
|
Forfeited |
|
| (8,673 | ) |
|
| 19.29 |
|
|
| (2,200 | ) |
|
| 26.02 |
|
Nonvested at April 4, 2021 |
|
| 133,176 |
|
|
| 19.28 |
| ||||||||
Nonvested at October 3, 2021 |
|
| 144,036 |
|
|
| 22.57 |
|
As of April 4,October 3, 2021, there was $1.6$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 1.71.9 years.
Performance Stock Units
Performance stock units (“PSUs”) are a form of long-term incentive compensation awarded to executive officers and certain other key employees designed to directly align the interests of employees to the interests of the Company’s stockholders, and to create long-term stockholder value. The awards will be earned based on the Company’s achievement of certain performance criteria over a three-year performance period. The performance period for the awards commences on July 1 of the fiscal year in which they were granted and continue for a three-year period, ending on June 30 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 number of shares awarded is subject to further adjustment based on the application of a total shareholder return (“TSR”) modifier. The grant date fair value is determined based on both the probability assessment of the Company 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 likelihood of numerous possible outcomes of long-term market performance. Compensation expense related to nonvested PSUs is recognized ratably over the performance period.
Supplemental PSUs
On July 16, 2020, after consulting with outside compensation advisors and outside legal counsel, reviewing market data and benchmarking expected relative compensation to the market data, the Company’s Compensation Committee made the decision to grant additional PSUs under the Long-term Incentive Plan (“LTIP Program”) to certain of the Company’s officers, (the “Supplemental PSUs”). The “Performance Period” for the Supplemental PSUs is a two-year period commencing July 1, 2020 and ending June 30, 2022. The Supplemental PSUs were granted to attract and motivate key employees whose existing fiscal 2019 and fiscal 2020 PSU grants (the “Existing PSUs”) were unlikely to achieve minimum performance goals due to the unprecedented effects of the COVID-19 pandemic.
The number of Supplemental PSUs that a grantee earns for the performance period will be determined by multiplying the target award by the product of (i) the Composite Payout Percentage and (ii) the Relative TSR Modifier. The “Composite Payout Percentage” is calculated based on the Company’s Total Market Share Percentage, Total Consumer Satisfaction Index Percentage and Total Dealer Inventory Turnover Percentage (each as defined in the Supplemental PSU Award Agreement). Following the determination of the Company’s achievement with respect to the Composite Payout Percentage over the Performance Period, the vesting of each award will be subject to adjustment based upon the application of a Relative TSR Modifier. The Supplemental PSUs are capped at 90% of the Existing PSUs’ original fair value and would be reduced for any shares issuable upon satisfaction of the performance criteria pursuant to the Existing PSUs. As of April 4, 2021, the probability of achieving the performance goals for the Existing PSUs has improved, which would in turn reduce the potentially issuable shares under the Supplemental PSU to 0.
The following table summarizes the status of nonvested PSUs as of April 4,October 3, 2021, and changes during the ninethree months then ended.
|
|
|
|
|
| Average |
| |
|
| Nonvested |
|
| Grant-Date |
| ||
|
| Performance |
|
| Fair Value |
| ||
|
| Stock Units |
|
| (per share) |
| ||
Nonvested at June 30, 2020 |
|
| 67,404 |
|
| $ | 20.02 |
|
Granted |
|
| 123,096 |
|
|
| 22.11 |
|
Vested |
|
| - |
|
|
| - |
|
Forfeited |
|
| (15,588 | ) |
|
| 20.25 |
|
Nonvested at April 4, 2021 |
|
| 174,912 |
|
|
| 21.47 |
|
|
|
|
|
|
| Average |
| |
|
| Nonvested |
|
| Grant-Date |
| ||
|
| Performance |
|
| Fair Value |
| ||
|
| Stock Units |
|
| (per share) |
| ||
Nonvested at June 30, 2021 |
|
| 160,285 |
|
| $ | 21.03 |
|
Granted |
|
| 52,510 |
|
|
| 28.71 |
|
Forfeited |
|
| (1,917 | ) |
|
| 28.71 |
|
Nonvested at October 3, 2021 |
|
| 210,878 |
|
|
| 22.87 |
|
As of April 4,October 3, 2021, there was $1.4$3.2 million of total unrecognized compensation expense related to nonvested PSUs. The Company expects this expense to be recognized over a weighted average period of 2.02.1 years.
9. | EARNINGS PER SHARE AND COMMON STOCK |
The following table sets forth the computation of the Company’s net income per share:
|
| Three Months Ended |
| |||||
|
| October 3, |
|
| October 4, |
| ||
|
| 2021 |
|
| 2020 |
| ||
Net income |
| $ | 10,386 |
|
| $ | 9,567 |
|
|
|
|
|
|
|
|
|
|
Weighted average shares — basic |
|
| 18,850,301 |
|
|
| 18,774,336 |
|
Dilutive effect of assumed exercises of stock options |
|
| 14,242 |
|
|
| 14,099 |
|
Dilutive effect of assumed restricted share awards/units |
|
| 139,576 |
|
|
| 78,391 |
|
Weighted average outstanding shares — diluted |
|
| 19,004,119 |
|
|
| 18,866,826 |
|
Basic net income per share |
| $ | 0.55 |
|
| $ | 0.51 |
|
Diluted net income per share |
| $ | 0.55 |
|
| $ | 0.51 |
|
For the three months ended October 3, 2021 and October 4, 2021, an immaterial number of shares were excluded from the computation of diluted earnings per share as the effect would have been anti-dilutive.
Stock Repurchase Program
On June 24, 2021, the board of directors of the Company authorized a stock repurchase program that allows for the repurchase of up to $50.0 million of our common stock during the three-year period ending June 24, 2024. During the quarter ended October 3, 2021, the Company repurchased 58,379 shares of common stock for $1.5 million in cash, including related fees and expenses.
11.10.SEGMENT INFORMATION
The Company designs, manufactures,Change in Reportable Segments
Beginning with the first quarter of fiscal 2022 and markets recreationalas discussed in Note 1, our CODM began to manage our business, allocate resources, and evaluate performance sport boats, luxury day boats,based on the reportable segments of MasterCraft, Crest, NauticStar, and outboard boatsAviara.
Reportable Segments
Operating segments are identified as components of an enterprise about which discrete financial information is available for evaluation by the CODM in making decisions on how to allocate resources and assess performance. For the three months ended October 3, 2021, the Company’s CODM regularly assessed the operating performance of the Company’s boat brands under 34 operating and reportable segments: MasterCraft, NauticStar, and Crest. The Company’s segments are defined by the Company’s operational and reporting structures.
| • | The MasterCraft segment produces boats |
• | The Crest segment produces pontoon boats at its Owosso, Michigan facility. Crest’s boats are |
| • | The NauticStar segment produces boats at its Amory, Mississippi facility. NauticStar’s boats are primarily used for saltwater fishing and general recreational boating. |
| • | The |
Each segment distributes its products through its own independent dealer network. The Chief Operating Decision Maker (“CODM”), which is our Chief Executive Officer, regularly reviews the operating performance of eachEach segment including measures of performance based on operating income. Each segmentalso has its own management structure which is responsible for the operations of the segment and which is directly accountable to the CODM. CODM for the operating performance of the segment, which is regularly assessed by the CODM who allocates resources based on that performance, including using measures of performance based operating income.
The Company files a consolidated income tax return and does not allocate income taxes and other corporate-level expenses, including interest, to operating segments. All material corporate costs are included in the MasterCraft segment.
Selected financial information for the Company’s reportable segments was as follows:
|
| For the Three Months Ended April 4, 2021 |
|
| For the Three Months Ended October 3, 2021 |
| ||||||||||||||||||||||||||||||
|
| MasterCraft |
|
| NauticStar |
|
| Crest |
|
| Consolidated |
|
| MasterCraft |
|
| Crest |
|
| NauticStar |
|
| Aviara |
|
| Consolidated |
| |||||||||
Net sales |
| $ | 99,447 |
|
| $ | 18,045 |
|
| $ | 30,362 |
|
| $ | 147,854 |
|
| $ | 92,015 |
|
| $ | 32,780 |
|
| $ | 13,360 |
|
| $ | 5,855 |
|
| $ | 144,010 |
|
Operating income |
|
| 18,082 |
|
|
| 331 |
|
|
| 4,150 |
|
|
| 22,563 |
| ||||||||||||||||||||
Operating income (loss) |
|
| 16,180 |
|
|
| 3,799 |
|
|
| (2,336 | ) |
|
| (3,599 | ) |
|
| 14,044 |
| ||||||||||||||||
Depreciation and amortization |
|
| 1,505 |
|
|
| 817 |
|
|
| 626 |
|
|
| 2,948 |
|
|
| 1,289 |
|
|
| 694 |
|
|
| 895 |
|
|
| 476 |
|
|
| 3,354 |
|
Purchases of property, plant and equipment |
|
| 3,598 |
|
|
| 958 |
|
|
| 320 |
|
|
| 4,876 |
|
|
| 2,064 |
|
|
| 371 |
|
|
| 1,068 |
|
|
| 115 |
|
|
| 3,618 |
|
|
| For the Nine Months Ended April 4, 2021 |
|
| For the Three Months Ended October 4, 2020 |
| ||||||||||||||||||||||||||||||
|
| MasterCraft |
|
| NauticStar |
|
| Crest |
|
| Consolidated |
|
| MasterCraft |
|
| Crest |
|
| NauticStar |
|
| Aviara |
|
| Consolidated |
| |||||||||
Net sales |
| $ | 255,570 |
|
| $ | 45,336 |
|
| $ | 69,370 |
|
| $ | 370,276 |
|
| $ | 69,591 |
|
| $ | 18,039 |
|
| $ | 12,342 |
|
| $ | 3,773 |
|
| $ | 103,745 |
|
Operating income (loss) |
|
| 46,064 |
|
|
| (1,614 | ) |
|
| 8,462 |
|
|
| 52,912 |
|
|
| 14,366 |
|
|
| 1,662 |
|
|
| (1,619 | ) |
|
| (1,005 | ) |
|
| 13,404 |
|
Depreciation and amortization |
|
| 4,240 |
|
|
| 2,433 |
|
|
| 1,874 |
|
|
| 8,547 |
|
|
| 1,095 |
|
|
| 624 |
|
|
| 814 |
|
|
| 206 |
|
|
| 2,739 |
|
Purchases of property, plant and equipment |
|
| 21,718 |
|
|
| 1,717 |
|
|
| 344 |
|
|
| 23,779 |
|
|
| 1,726 |
|
|
| — |
|
|
| 243 |
|
|
| 73 |
|
|
| 2,042 |
|
|
| For the Three Months Ended March 29, 2020 |
| |||||||||||||
|
| MasterCraft |
|
| NauticStar |
|
| Crest |
|
| Consolidated |
| ||||
Net sales |
| $ | 70,531 |
|
| $ | 14,156 |
|
| $ | 17,875 |
|
| $ | 102,562 |
|
Operating income (loss) |
|
| 11,062 |
|
|
| (15,246 | ) |
|
| (42,993 | ) |
|
| (47,177 | ) |
Depreciation and amortization |
|
| 1,205 |
|
|
| 807 |
|
|
| 620 |
|
|
| 2,632 |
|
Purchases of property, plant and equipment |
|
| 1,289 |
|
|
| 799 |
|
|
| 10 |
|
|
| 2,098 |
|
|
| For the Nine Months Ended March 29, 2020 |
| |||||||||||||
|
| MasterCraft |
|
| NauticStar |
|
| Crest |
|
| Consolidated |
| ||||
Net sales |
| $ | 211,201 |
|
| $ | 47,727 |
|
| $ | 53,051 |
|
| $ | 311,979 |
|
Operating income (loss) |
|
| 33,869 |
|
|
| (15,892 | ) |
|
| (42,122 | ) |
|
| (24,145 | ) |
Depreciation and amortization |
|
| 3,383 |
|
|
| 2,532 |
|
|
| 1,771 |
|
|
| 7,686 |
|
Purchases of property, plant and equipment |
|
| 5,655 |
|
|
| 2,713 |
|
|
| 5,233 |
|
|
| 13,601 |
|
The following table presents total assets for the Company’s reportable segments.
|
| April 4, 2021 |
|
| June 30, 2020 |
|
| October 3, 2021 |
|
| June 30, 2021 |
| ||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MasterCraft |
| $ | 336,693 |
|
| $ | 294,139 |
|
| $ | 147,269 |
|
| $ | 158,610 |
|
Crest |
|
| 47,908 |
|
|
| 42,204 |
| ||||||||
NauticStar |
|
| 40,668 |
|
|
| 36,720 |
|
|
| 50,857 |
|
|
| 44,181 |
|
Crest |
|
| 42,075 |
|
|
| 40,077 |
| ||||||||
Eliminations(a) |
|
| (163,013 | ) |
|
| (163,013 | ) | ||||||||
Aviara |
|
| 32,830 |
|
|
| 31,465 |
| ||||||||
Total assets |
| $ | 256,423 |
|
| $ | 207,923 |
|
| $ | 278,864 |
|
| $ | 276,460 |
|
|
|
ITEM 2.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 our expectations concerning 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 risks and uncertainties described in “Cautionary Note Regarding Forward-Looking Statements” above and in “Risk Factors” set forth in our 20202021 Annual Report on Form 10-K. Our actual results may differ materially from those contained in or implied by any forward-looking statements.
Certain statements in the following discussions are based on non-GAAP financial measures. A “non-GAAP financial measure” is a 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 presented in accordance with U.S. GAAP in the statements 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 by 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.
Overview
The COVID-19 Pandemicpandemic has facilitated strong marine retail demand as consumers have taken advantage of more flexible work schedules allowing for more leisure time and marine product usage. This strong retail demand has created historically low dealer inventory levels which, in turn, has increased wholesale demand for our products. Despite the rise in demand for our products, which led to a 38.8 percent increase in net sales year over year, supply chain disruption, production inefficiencies, and inflationary pressures impacted first quarter 2022 results.
Supply Chain Disruptions. Demand for raw materials and components used in the Company’sproduction of our products has been strongsurged. As a result, some of the materials and components that we use are in short supply. To reduce the impact of supply chain disruptions on production, we have increased our raw materials safety stock where possible. Additionally, work in process has increased as a result of supply chain shortages delaying our employee’s committed efforts, disruptionsability to the Company’sfinish production units.
Production Inefficiencies. Business processes have been minimal since resuming operationsaltered to address completion of boats waiting on parts while maintaining normal production lines, resulting in May 2020. However,increased labor costs. Absenteeism and implementing COVID-19 mitigating procedures also burdened our work force as we continue to focus on ramp-up of production to meet unprecedented demand.
Inflationary Pressures. Inflationary pressures have increased the costs of raw materials and components used to build our products, negatively impacting our margins during the first quarter of 2022. New model year price increases took effect for fiscal 2022; however, these price increases did not fully offset the increased material costs caused by inflation. In response to worsening inflationary pressures, we announced additional mid-cycle price increases that will be subjectimplemented during the second quarter and expect the price increases to risks and uncertainties as a result of the COVID-19 pandemic. The extent ofoffset the impact of the COVID-19 pandemic on our business remains uncertain and difficult to predict, as the response to the COVID-19 pandemic is still evolving in many countries, including the United States and other markets where we and our suppliers operate.
Impact to Operations
To balance wholesale production with the anticipated impacts to retail demand caused by the economic impacts of the COVID-19 pandemic, we reduced production in February 2020 and, in late March 2020, temporarily suspended manufacturing operations at all of our facilities to protect the health of our employees and comply with governmental mandates. We resumed operations at reduced production levels at our manufacturing facilities by mid-May 2020. Since that time, our facilities have increased production rates above their pre-COVID-19 levels. We achieved the highest wholesale unit volume in the history of the Company during the third quarter of fiscal 2021, and we are planning for further increases to production rates in order to meet the continuing strong retail demand.
MasterCraft, NauticStar and Crest have each achieved a steady increase in production during fiscal 2021. Although all of our segments made progress, NauticStar’s performance lagged behind our other brands during the first and second quarters of fiscal 2021. In August 2020, we announced that Scott Womack had been named President of NauticStar. NauticStar is benefiting from Mr. Womack’s years of executive leadership, manufacturing experience and proven dedication to operational excellence, as evidenced by NauticStar’s returning to profitabilityinflation for the third quarter of fiscal 2021, andfull year.
As we believe NauticStar’s operating performance will continue to improve.
Impact to Liquidity and Capital Resources
During March 2020, we drew $35.0 million on our Revolving Credit Facility as a precautionary measure in order to increase our cash position and preserve financial flexibility in light of uncertainty in the global markets resulting from the COVID-19 pandemic. Additionally, on May 7, 2020, we entered into Amendment No. 3 (the “Amendment”) to the Fourth Amended & Restated Credit and Guarantee Agreement (the “Credit Facility”) to strengthen our financial flexibility. Among other things, the changes effected by the Amendment provide temporary relief under our financial covenants. See Note 7 in Notes to Unaudited Condensed Consolidated Financial Statements for more information regarding these changes, including the sunsetting of the temporary relief provisions. The performance of the business and our cash management activities provided the flexibility to repay the entire Revolving Credit Facility as of October 4, 2020. Since that time, our strong operating performance has continued which has allowed our cash balance to build to $29.0 million as of April 4, 2021. In addition, we were in compliance with all of our financial covenants as of April 4, 2021.
Outlook
We believe strong marine retail demand, coupled with abnormally low retail inventory levels for all our brands have created a growth opportunity for fiscal 2021 and potentially into future years. Our facilitites are now running at production rates above their pre-COVID-19 levels, with further increases to production rates planned. We expect this ramp up phase to continue through fiscal 2021 in order to meet strong wholesale demand as our dealers seek to satisfy current retail order flow and replenish their stock inventory. As we navigate the unprecedented confluence of demand and disruption precipitated by the COVID-19 pandemic, our production rates and results going forward will depend, in large part, on our and our suppliers’ capacity. Demand for raw materialscapacity and components used in the production of our products has surged. At the same time, severe and unprecedented events, including the February 2021 ice storm, which impacted much of the United States, have recently disrupted the global supply chain. As a result, some of the materials and components that we use, including certain resins, fiberglass, and plywood, are in short supply. Additionally, our ability to growalleviate ongoing and retain a high-performing workforcechanging risks.
We will be criticalcontinue to meeting our production objectives.
Althoughactively monitor the consumer responses toimpact of the COVID-19 pandemic have thus far resulted in strong demand for our products, significant uncertainty existsand may take further actions to alter business operations as may be required by government authorities, or that are determined to be in the economy as a resultbest interest of the unpredictable outlook for the COVID-19 pandemic.our employees, dealers, suppliers, and stakeholders. The ultimatefull extent of the impact of the COVID-19 pandemic on our business, is uncertainoperations, and financial results will depend on evolving factors that we cannot predict. See “Risk Factors — Risks Relating to Our Business — Actual or potential public health emergencies, epidemics, or pandemics, such as the current coronavirus (“COVID-19”) pandemic, could have a number of factors, including the duration, spread and severity, the remedial action and stimulus measures adopted by local, state and federal governments, the effects of the pandemicmaterial adverse effect on our consumers, dealers, suppliers and workforce, and the extent to which normal economic and operating conditions can resume and be sustained within the general economy. Our futurebusiness, results of operations, cash flows, and liquidity could be adversely impacted by supply chain or workforce disruptions, uncertain demand, additional manufacturing suspensions, additional other intangible asset impairment charges, and the impact of any initiatives that we may undertake to address financial and operational challenges faced by us andcondition” set forth in our consumers, dealers, and suppliers.
Overview of Consolidated Results of Operations
Net sales were $147.9 million for the third quarter of 2021 which represented an increase of 44.2 percent as compared to the third quarter of 2020, which was impacted by, among other things, the COVID-19 pandemic. The increase was primarily a result of achieving the highest single quarter wholesale unit volume in the history of the Company and lower dealer incentives, partially offset by the impact of model mix.Annual Report on Form 10-K.
Net sales were $370.3 million for the nine months ended April 4, 2021, which represented an increase of 18.7 percent as compared to the COVID-19 impacted nine months ended March 29, 2020. The increase was primarily the result of higher sales volumes and lower dealer incentives, partially offset by the impact of model mix.
Gross margin increased by 450 basis points to 25.2 percent for the third quarter of 2021 from 20.7 percent for the prior year period primarily attributable to lower dealer incentives, favorable overhead absorption driven by higher sales volume, and higher prices, partially offset by costs associated with the transition of Aviara to our Merritt Island facility and higher labor costs.
Gross margin increased by 320 basis points to 25.0 percent for the nine months ended April 4, 2021 from 21.8 percent for the prior year period primarily due to lower dealer incentives, and higher prices, partially offset by costs associated with the transition of Aviara to our Merritt Island facility and higher labor costs.
Net income was $17.6 million for the third quarter of 2021, compared to net loss of $36.7 million for the third quarter of 2020. Diluted earnings per share was $0.93, compared to diluted loss per share of $(1.96) for the prior year period.
Net income was $39.6 million for the nine months ended April 4, 2021, compared to net loss of $21.2 million for the prior year period. Diluted earnings per share was $2.09, compared to diluted loss per share of $(1.13) for the prior year period.
Merritt Island Facility and Aviara Transition
On October 26, 2020, we completed the purchase of certain real property located in Merritt Island, Florida, including an approximately 140,000 sq. ft. boat manufacturing facility, (the “Merritt Island Facility”) for a purchase price of $14.2 million. We expanded our overall boat building capacity by moving all Aviara production to the Merritt Island Facility. While this additional capacity will help facilitate Aviara’s long-term growth, importantly, removing Aviara production from our Vonore, Tennessee facility provided for an immediate increase in capacity and productivity for our MasterCraft brand. We began producing Aviara in the Merritt Island Facility in December 2020 and shipments from the new facility commenced in the third quarter of fiscal 2021.
Results of Operations
The table below presents our consolidated results of operations for the three months ended:
|
| Three Months Ended |
|
|
|
|
| Three Months Ended |
|
|
|
| ||||||||||||||||||||
|
| April 4, |
|
| March 29, |
|
| 2021 vs. 2020 |
|
| October 3, |
|
| October 4, |
|
| 2022 vs. 2021 |
| ||||||||||||||
|
| 2021 |
|
| 2020 |
|
| Change | % Change |
|
| 2021 |
|
| 2020 |
|
| Change | % Change |
| ||||||||||||
|
| (Dollars in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Consolidated statements of operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET SALES |
| $ | 147,854 |
|
| $ | 102,562 |
|
| $ | 45,292 |
|
|
| 44.2 | % |
| $ | 144,010 |
|
| $ | 103,745 |
|
| $ | 40,265 |
|
|
| 38.8 | % |
COST OF SALES |
|
| 110,627 |
|
|
| 81,288 |
|
|
| 29,339 |
|
|
| 36.1 | % |
|
| 113,888 |
|
|
| 77,515 |
|
|
| 36,373 |
|
|
| 46.9 | % |
GROSS PROFIT |
|
| 37,227 |
|
|
| 21,274 |
|
|
| 15,953 |
|
|
| 75.0 | % |
|
| 30,122 |
|
|
| 26,230 |
|
|
| 3,892 |
|
|
| 14.8 | % |
OPERATING EXPENSES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling and marketing |
|
| 3,693 |
|
|
| 4,933 |
|
|
| (1,240 | ) |
|
| (25.1 | %) |
|
| 4,282 |
|
|
| 2,907 |
|
|
| 1,375 |
|
|
| 47.3 | % |
General and administrative |
|
| 9,984 |
|
|
| 6,094 |
|
|
| 3,890 |
|
|
| 63.8 | % |
|
| 9,670 |
|
|
| 8,932 |
|
|
| 738 |
|
|
| 8.3 | % |
Amortization of other intangible assets |
|
| 987 |
|
|
| 987 |
|
|
| - |
|
|
| 0.0 | % |
|
| 1,026 |
|
|
| 987 |
|
|
| 39 |
|
|
| 4.0 | % |
Goodwill and other intangible asset impairment |
|
| — |
|
|
| 56,437 |
|
|
| (56,437 | ) |
|
|
|
| ||||||||||||||||
Goodwill impairment |
|
| 1,100 |
|
|
| — |
|
|
| 1,100 |
|
|
| — |
| ||||||||||||||||
Total operating expenses |
|
| 14,664 |
|
|
| 68,451 |
|
|
| (53,787 | ) |
|
| (78.6 | %) |
|
| 16,078 |
|
|
| 12,826 |
|
|
| 3,252 |
|
|
| 25.4 | % |
OPERATING INCOME (LOSS) |
|
| 22,563 |
|
|
| (47,177 | ) |
|
| 69,740 |
|
|
| (147.8 | %) | ||||||||||||||||
OPERATING INCOME |
|
| 14,044 |
|
|
| 13,404 |
|
|
| 640 |
|
|
| 4.8 | % | ||||||||||||||||
OTHER EXPENSE: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
| 755 |
|
|
| 1,086 |
|
|
| (331 | ) |
|
| (30.5 | %) |
|
| 382 |
|
|
| 1,019 |
|
|
| (637 | ) |
|
| (62.5 | %) |
INCOME (LOSS) BEFORE INCOME TAX EXPENSE |
|
| 21,808 |
|
|
| (48,263 | ) |
|
| 70,071 |
|
|
| (145.2 | %) | ||||||||||||||||
INCOME TAX EXPENSE (BENEFIT) |
|
| 4,240 |
|
|
| (11,550 | ) |
|
| 15,790 |
|
|
| (136.7 | %) | ||||||||||||||||
NET INCOME (LOSS) |
| $ | 17,568 |
|
| $ | (36,713 | ) |
| $ | 54,281 |
|
|
| (147.9 | %) | ||||||||||||||||
INCOME BEFORE INCOME TAX EXPENSE |
|
| 13,662 |
|
|
| 12,385 |
|
|
| 1,277 |
|
|
| 10.3 | % | ||||||||||||||||
INCOME TAX EXPENSE |
|
| 3,276 |
|
|
| 2,818 |
|
|
| 458 |
|
|
| 16.3 | % | ||||||||||||||||
NET INCOME |
| $ | 10,386 |
|
| $ | 9,567 |
|
| $ | 819 |
|
|
| 8.6 | % | ||||||||||||||||
Additional financial and other data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unit sales volume: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MasterCraft |
|
| 941 |
|
|
| 713 |
|
|
| 228 |
|
|
| 32.0 | % |
|
| 783 |
|
|
| 640 |
|
|
| 143 |
|
|
| 22.3 | % |
Crest |
|
| 716 |
|
|
| 453 |
|
|
| 263 |
|
|
| 58.1 | % | ||||||||||||||||
NauticStar |
|
| 426 |
|
|
| 313 |
|
|
| 113 |
|
|
| 36.1 | % |
|
| 291 |
|
|
| 286 |
|
|
| 5 |
|
|
| 1.7 | % |
Crest |
|
| 731 |
|
|
| 461 |
|
|
| 270 |
|
|
| 58.6 | % | ||||||||||||||||
Aviara |
|
| 19 |
|
|
| 13 |
|
|
| 6 |
|
|
| 46.2 | % | ||||||||||||||||
Consolidated unit sales volume |
|
| 2,098 |
|
|
| 1,487 |
|
|
| 611 |
|
|
| 41.1 | % |
|
| 1,809 |
|
|
| 1,392 |
|
|
| 417 |
|
|
| 30.0 | % |
Net sales: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MasterCraft |
| $ | 99,447 |
|
| $ | 70,531 |
|
| $ | 28,916 |
|
|
| 41.0 | % |
| $ | 92,015 |
|
| $ | 69,591 |
|
| $ | 22,424 |
|
|
| 32.2 | % |
Crest |
|
| 32,780 |
|
|
| 18,039 |
|
|
| 14,741 |
|
|
| 81.7 | % | ||||||||||||||||
NauticStar |
|
| 18,045 |
|
|
| 14,156 |
|
|
| 3,889 |
|
|
| 27.5 | % |
|
| 13,360 |
|
|
| 12,342 |
|
|
| 1,018 |
|
|
| 8.2 | % |
Crest |
|
| 30,362 |
|
|
| 17,875 |
|
|
| 12,487 |
|
|
| 69.9 | % | ||||||||||||||||
Aviara |
|
| 5,855 |
|
|
| 3,773 |
|
|
| 2,082 |
|
|
| 55.2 | % | ||||||||||||||||
Consolidated net sales |
| $ | 147,854 |
|
| $ | 102,562 |
|
| $ | 45,292 |
|
|
| 44.2 | % |
| $ | 144,010 |
|
| $ | 103,745 |
|
| $ | 40,265 |
|
|
| 38.8 | % |
Net sales per unit: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MasterCraft |
| $ | 106 |
|
| $ | 99 |
|
| $ | 7 |
|
|
| 7.1 | % |
| $ | 118 |
|
| $ | 109 |
|
| $ | 9 |
|
|
| 8.3 | % |
Crest |
|
| 46 |
|
|
| 40 |
|
|
| 6 |
|
|
| 15.0 | % | ||||||||||||||||
NauticStar |
|
| 42 |
|
|
| 45 |
|
|
| (3 | ) |
|
| (6.7 | %) |
|
| 46 |
|
|
| 43 |
|
|
| 3 |
|
|
| 7.0 | % |
Crest |
|
| 42 |
|
|
| 39 |
|
|
| 3 |
|
|
| 7.7 | % | ||||||||||||||||
Aviara |
|
| 308 |
|
|
| 290 |
|
|
| 18 |
|
|
| 6.2 | % | ||||||||||||||||
Consolidated net sales per unit |
|
| 70 |
|
|
| 69 |
|
|
| 1 |
|
|
| 1.4 | % |
|
| 80 |
|
|
| 75 |
|
|
| 5 |
|
|
| 6.7 | % |
Gross margin |
|
| 25.2 | % |
|
| 20.7 | % |
| 450 bps |
|
|
|
|
|
|
| 20.9 | % |
|
| 25.3 | % |
| (440) bps |
|
|
|
|
|
Three Months Ended April 4,October 3, 2021 Compared to the Three Months Ended March 29,October 4, 2020
Consolidated Results
Net Sales. Net Salessales were $144.0 million for the thirdfirst quarter were $147.9 million,2022, which represented an increase of $45.3 million, or 44.238.8 percent as compared to $102.6first quarter 2021. Net sales in each segment benefited from increased volume as our dealers look to restock their inventories, which have been depleted by strong consumer demand for boats. Higher prices, favorable model mix, and higher option sales were also favorable compared to the prior period.
Gross margin declined 440 basis points to 20.9 percent when compared to first quarter 2021 as supply chain disruption and inflationary pressures drove materials and labor costs higher, and overhead from the new Aviara facility created unfavorable overhead absorption. Higher prices from model year changeover partially offset these headwinds.
Operating expenses were $16.1 million for the prior-year period. The increase was primarily due to:
|
|
|
|
|
|
Gross Profit and Gross Margin. Gross profit increased $16.0 million, or 75.0 percent, to $37.2 million compared to $21.3 million for the prior-year period. The increase was primarily a resultSelling and marketing expense increased due to the timing of higher sales volumes, lower dealer incentives, and higher prices at each reportable segment and favorable options at MasterCraft and Crest. The increase was partially offsetprior year expenses being impacted by the impact of model mix, Aviara transition costsand higher labor costs at each reportable segment. We expect to realize higher laborCOVID-19 pandemic, resulting in lower costs for the fullfirst quarter of fiscal year due2021. General and administrative expense increased as we continued to changes implementedmake investments in research and development and information technology. Additionally, an impairment charge related to the allocated goodwill associated with the Aviara segment was recorded in the first quarter of fiscal 2021 to our production employee compensation packages.
Gross margin increased due to lower dealer incentives, favorable overhead absorption driven by higher sales volume, and higher prices, partially offset by Aviara transition costs and higher labor costs.
Operating Expenses.2022, as discussed in Note 4 Operating expenses decreased $53.8 million, or 78.6 percent, compared to the prior-year period primarily driven by the recognition of $56.4 million of goodwill and other intangible asset impairment charges in the prior-year and lower selling and marketing costs primarily due to the impacts of the COVID-19 pandemic. This decrease was partially offset by higher general and administrative expenses resulting from higher incentive compensation costs and additional investment related to product development and information technology.Unaudited Condensed Consolidated Financial Statements.
Interest Expense.Interest expense decreased $0.3$0.6 million or 30.5 percent due to lower effective interest rates and lower average outstanding debt balances during the quarter compared to the prior-year period.
Income Tax Expense (Benefit). Our consolidated interim effective income tax rate decreased to 19.4 percent for the third quarter of 2021 from 23.9 percent for the prior-year period.Segment Results
|
| Nine Months Ended |
|
|
|
| ||||||||||
|
| April 4, |
|
| March 29, |
|
| 2021 vs. 2020 |
| |||||||
|
| 2021 |
|
| 2020 |
|
| Change | % Change |
| ||||||
|
| (Dollars in thousands) |
|
|
|
|
|
|
|
|
| |||||
Consolidated statements of operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET SALES |
| $ | 370,276 |
|
| $ | 311,979 |
|
| $ | 58,297 |
|
|
| 18.7 | % |
COST OF SALES |
|
| 277,546 |
|
|
| 244,030 |
|
|
| 33,516 |
|
|
| 13.7 | % |
GROSS PROFIT |
|
| 92,730 |
|
|
| 67,949 |
|
|
| 24,781 |
|
|
| 36.5 | % |
OPERATING EXPENSES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling and marketing |
|
| 9,589 |
|
|
| 13,340 |
|
|
| (3,751 | ) |
|
| (28.1 | %) |
General and administrative |
|
| 27,268 |
|
|
| 19,356 |
|
|
| 7,912 |
|
|
| 40.9 | % |
Amortization of other intangible assets |
|
| 2,961 |
|
|
| 2,961 |
|
|
| - |
|
|
| 0.0 | % |
Goodwill and other intangible asset impairment |
|
| — |
|
|
| 56,437 |
|
|
| (56,437 | ) |
|
|
|
|
Total operating expenses |
|
| 39,818 |
|
|
| 92,094 |
|
|
| (52,276 | ) |
|
| (56.8 | %) |
OPERATING INCOME (LOSS) |
|
| 52,912 |
|
|
| (24,145 | ) |
|
| 77,057 |
|
|
| (319.1 | %) |
OTHER EXPENSE: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
| 2,644 |
|
|
| 3,667 |
|
|
| (1,023 | ) |
|
| (27.9 | %) |
INCOME (LOSS) BEFORE INCOME TAX EXPENSE |
|
| 50,268 |
|
|
| (27,812 | ) |
|
| 78,080 |
|
|
| (280.7 | %) |
INCOME TAX EXPENSE (BENEFIT) |
|
| 10,632 |
|
|
| (6,601 | ) |
|
| 17,233 |
|
|
| (261.1 | %) |
NET INCOME (LOSS) |
| $ | 39,636 |
|
| $ | (21,211 | ) |
| $ | 60,847 |
|
|
| (286.9 | %) |
Additional financial and other data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unit sales volume: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MasterCraft |
|
| 2,378 |
|
|
| 2,170 |
|
|
| 208 |
|
|
| 9.6 | % |
NauticStar |
|
| 1,067 |
|
|
| 1,046 |
|
|
| 21 |
|
|
| 2.0 | % |
Crest |
|
| 1,759 |
|
|
| 1,407 |
|
|
| 352 |
|
|
| 25.0 | % |
Consolidated unit sales volume |
|
| 5,204 |
|
|
| 4,623 |
|
|
| 581 |
|
|
| 12.6 | % |
Net sales: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MasterCraft |
| $ | 255,570 |
|
| $ | 211,201 |
|
| $ | 44,369 |
|
|
| 21.0 | % |
NauticStar |
|
| 45,336 |
|
|
| 47,727 |
|
|
| (2,391 | ) |
|
| (5.0 | %) |
Crest |
|
| 69,370 |
|
|
| 53,051 |
|
|
| 16,319 |
|
|
| 30.8 | % |
Consolidated net sales |
| $ | 370,276 |
|
| $ | 311,979 |
|
| $ | 58,297 |
|
|
| 18.7 | % |
Net sales per unit: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MasterCraft |
| $ | 107 |
|
| $ | 97 |
|
| $ | 10 |
|
|
| 10.3 | % |
NauticStar |
|
| 42 |
|
|
| 46 |
|
|
| (4 | ) |
|
| (8.7 | %) |
Crest |
|
| 39 |
|
|
| 38 |
|
|
| 1 |
|
|
| 2.6 | % |
Consolidated net sales per unit |
|
| 71 |
|
|
| 67 |
|
|
| 4 |
|
|
| 6.0 | % |
Gross margin |
|
| 25.0 | % |
|
| 21.8 | % |
| 320 bps |
|
|
|
|
|
Nine Months Ended April 4, 2021 Compared to the Nine Months Ended March 29, 2020
Net Sales. Net Sales for the nine months ended April 4, 2021 were $370.3 million, an increase of $58.3 million, or 18.7 percent, compared to $312.0 million for the prior-year period. The increase was primarily due to:
|
|
|
|
|
|
Gross Profit and Gross Margin. Gross profit increased $24.8 million, or 36.5 percent, to $92.7 million compared to $67.9 million for the prior-year period. The increase was primarily a result of lower dealer incentives, higher unit volume, higher prices, favorable options mix and higher parts sales volume. These increases were partially offset by higher labor costs for each reportable segment, and higher incentive compensation costs and costs associatedBeginning with the transition of Aviara to our Merritt Island facility. We expect to realize higher labor costs for the full fiscal year due to changes implemented in the first quarter of fiscal 20212022 and as discussed in Note 1, our CODM began to manage our production employee compensation packages.business, allocate resources, and evaluate performance based on the reportable segments of MasterCraft, Crest, NauticStar, and Aviara.
Gross marginMasterCraft Segment
The following table sets forth MasterCraft segment results for the three months ended:
|
| Three Months Ended |
|
|
|
| ||||||||||
|
| October 3, |
|
| October 4, |
|
| 2022 vs. 2021 |
| |||||||
|
| 2021 |
|
| 2020 |
|
| Change | % Change |
| ||||||
Net sales |
| $ | 92,015 |
|
| $ | 69,591 |
|
| $ | 22,424 |
|
|
| 32.2 | % |
Operating income |
|
| 16,180 |
|
|
| 14,366 |
|
|
| 1,814 |
|
|
| 12.6 | % |
Purchases of property, plant and equipment |
|
| 2,064 |
|
|
| 1,726 |
|
|
| 338 |
|
|
| 19.6 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unit sales volume |
|
| 783 |
|
|
| 640 |
|
|
| 143 |
|
|
| 22.3 | % |
Net sales per unit |
| $ | 118 |
|
| $ | 109 |
|
| $ | 9 |
|
|
| 8.3 | % |
Net sales increased due$22.4 million, or 32.2 percent, to lower dealer incentives$92.0 million for first quarter 2022 compared to $69.6 million for the prior year period, primarily driven by an increase in sales volume. Additionally, net sales benefited from higher prices, favorable model mix, and higher prices,options sales.
Operating income for first quarter 2022 was $16.2 million, an increase of $1.8 million, compared to $14.4 million for first quarter 2021 driven by higher net sales, partially offset by Aviara transition coststhe production inefficiencies from supply chain disruption, inflationary pressures, and higher labor costs.sales and marketing costs compared to the COVID-impacted first quarter 2021.
Crest Segment
The following table sets forth Crest segment results for the three months ended:
|
| Three Months Ended |
|
|
|
| ||||||||||
|
| October 3, |
|
| October 4, |
|
| 2022 vs. 2021 |
| |||||||
|
| 2021 |
|
| 2020 |
|
| Change | % Change |
| ||||||
Net sales |
| $ | 32,780 |
|
| $ | 18,039 |
|
| $ | 14,741 |
|
|
| 81.7 | % |
Operating income |
|
| 3,799 |
|
|
| 1,662 |
|
|
| 2,137 |
|
|
| 128.6 | % |
Purchases of property, plant and equipment |
|
| 371 |
|
|
| — |
|
|
| 371 |
|
|
| — |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unit sales volume |
|
| 716 |
|
|
| 453 |
|
|
| 263 |
|
|
| 58.1 | % |
Net sales per unit |
| $ | 46 |
|
| $ | 40 |
|
| $ | 6 |
|
|
| 15.0 | % |
Net sales were $32.8 million for first quarter 2022, compared to $18.0 million for first quarter 2021, an increase of $14.7 million, or 81.7 percent as a result of higher sales volumes and higher prices.
Operating Expenses. Operating expenses decreased $52.3 million, or 56.8income increased 128.6 percent as compared to the prior-yearprior year primarily as a result of higher net sales, partially offset by higher costs from supply chain disruption and inflationary pressures.
NauticStar Segment
The following table sets forth NauticStar segment results for the three months ended:
|
| Three Months Ended |
|
|
|
| ||||||||||
|
| October 3, |
|
| October 4, |
|
| 2022 vs. 2021 |
| |||||||
|
| 2021 |
|
| 2020 |
|
| Change | % Change |
| ||||||
Net sales |
| $ | 13,360 |
|
| $ | 12,342 |
|
| $ | 1,018 |
|
|
| 8.2 | % |
Operating loss |
|
| (2,336 | ) |
|
| (1,619 | ) |
|
| (717 | ) |
|
| 44.3 | % |
Purchases of property, plant and equipment |
|
| 1,068 |
|
|
| 243 |
|
|
| 825 |
|
|
| 339.5 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unit sales volume |
|
| 291 |
|
|
| 286 |
|
|
| 5 |
|
|
| 1.7 | % |
Net sales per unit |
| $ | 46 |
|
| $ | 43 |
|
| $ | 3 |
|
|
| 7.0 | % |
Net sales increased by $1.0 million, or 8.2 percent, to $13.4 million for first quarter 2022 compared to $12.3 million for first quarter 2021 due to higher option sales, higher prices, and increased volume.
Operating loss was $2.3 million for first quarter 2022 compared to an operating loss of $1.6 million for the prior year period. Higher costs from inflationary pressures, supply chain disruptions, and labor challenges offset higher net sales.
Aviara Segment
The following table sets forth Aviara segment results for the three months ended:
|
| Three Months Ended |
|
|
|
| ||||||||||
|
| October 3, |
|
| October 4, |
|
| 2022 vs. 2021 |
| |||||||
|
| 2021 |
|
| 2020 |
|
| Change | % Change |
| ||||||
Net sales |
| $ | 5,855 |
|
| $ | 3,773 |
|
| $ | 2,082 |
|
|
| 55.2 | % |
Operating loss |
|
| (3,599 | ) |
|
| (1,005 | ) |
|
| (2,594 | ) |
|
| 258.1 | % |
Purchases of property, plant and equipment |
|
| 115 |
|
|
| 73 |
|
| �� | 42 |
|
|
| 57.5 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unit sales volume |
|
| 19 |
|
|
| 13 |
|
|
| 6 |
|
|
| 46.2 | % |
Net sales per unit |
| $ | 308 |
|
| $ | 290 |
|
| $ | 18 |
|
|
| 6.2 | % |
Net sales increased $2.1 million, or 55.2 percent to $5.9 million for first quarter 2022 compared to $3.8 million for the prior year period due to an increase in unit sales volume attributed to increased capacity from the same reasons described above for the quarterly period.new Merritt Island facility.
Interest Expense.Interest expense decreasedDuring first quarter 2022, all Aviara boats were manufactured in our 140,000 square foot Merritt Island, Florida facility, which we purchased in October 2020 for $14.2 million. During first quarter 2021, Aviara boats were produced in our MasterCraft facility in Vonore, Tennessee. As a result of this transition to Merritt Island, overhead costs attributable to Aviara increased significantly which creates a dilutive near-term impact on Aviara’s margins and profitability.
Operating loss was $3.6 million for first quarter 2022 compared to an operating loss of $1.0 million or 27.9 percent primarily duefor first quarter 2021 as a result of ramp up related inefficiencies in the Merritt Island facility, including higher overhead costs associated with the new facility and a goodwill impairment charge. See Note 4 in Notes to Unaudited Condensed Consolidated Financial Statements for more information on the same reasons described above for the quarterly period.
Income Tax Expense (Benefit). Our consolidated interim effective income tax rate decreased to 21.2 percent for the nine months ended April 4, 2021 from 23.7 percent for the prior-year period.impairment charge.
Non-GAAP Measures
EBITDA, Adjusted EBITDA, and Adjusted EBITDA Margin
We define EBITDA as earnings before interest expense, income taxes, depreciation and amortization. We define Adjusted EBITDA as EBITDA further adjusted to eliminate certain non-cash charges or other items that we do not consider to be indicative of our core and/or ongoing operations. For the periods presented herein, these adjustments include goodwill and other intangible asset impairment, COVID-19 shutdown costs, Aviara transition costs Aviara (new brand) startup costs, and certain non-cash items including goodwill impairment and share-based compensation. We define Adjusted EBITDA margin as Adjusted EBITDA expressed as a percentage of Net sales.
Adjusted Net Income and Adjusted Net Income Per Share
We define Adjusted Net Income and Adjusted Net Income per share as net income (loss) adjusted to eliminate certain non-cash charges or other items that we do not consider to be indicative of our core and/or ongoing operations and adjusted for the impact to income tax expense related to non-GAAP adjustments. For the periods presented herein, these adjustments include goodwill and other intangible asset impairment, COVID-19 shutdown costs, Aviara transition costs, Aviara (new brand) startup costs and certain non-cash items including goodwill impairment, other intangible asset amortization, and share-based compensation.
EBITDA, Adjusted EBITDA, Adjusted EBITDA margin, Adjusted Net Income, and Adjusted Net Income per share, which we refer to collectively as the Non-GAAP Measures, are not measures of net income (loss) or operating income (loss) as determined under accounting principles generally accepted in the United States, or U.S. GAAP. The 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. We believe that the inclusion of the Non-GAAP Measures is appropriate to provide additional information to investors because securities analysts and investors use the Non-GAAP Measures to assess our operating performance across periods on a consistent basis and to evaluate the relative risk of an investment in our securities. We use Adjusted Net 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 measures alone. We believe Adjusted Net Income and Adjusted Net Income per share assists our board of directors, management, investors, and other 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 other items that we do not consider to be indicative of our core and/or ongoing operations and adjusts for the impact to income tax expense (benefit) related to non-GAAP adjustments. 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:
| • | Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future and Adjusted EBITDA does not reflect any cash requirements for such replacements; |
| • | Adjusted EBITDA does not reflect our cash expenditures, or future requirements for capital expenditures or contractual commitments; |
| • | Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs; |
| • | Adjusted EBITDA does not reflect our tax expense or any cash requirements to pay income taxes; |
| • | Adjusted EBITDA does not reflect interest expense, or the cash requirements necessary to service interest payments on our indebtedness; and |
| • | Adjusted Net Income, Adjusted Net Income per share, and Adjusted EBITDA do not reflect the impact of earnings or charges resulting from matters we do not consider to be indicative of our core and/or ongoing operations, but may nonetheless have a material impact on our results of operations. |
In addition, because not all companies use identical calculations, our presentation of the Non-GAAP Measures may not be comparable to similarly titled measures of other companies, including companies in our industry.
The following table presents a reconciliation of net income (loss) as determined in accordance with U.S. GAAP to EBITDA, and Adjusted EBITDA, and net income margin (expressed as a percentage of net sales) to Adjusted EBITDA Margin (expressed as a percentage of net sales) for the periods indicated:
|
| Three Months Ended |
|
| Nine Months Ended |
| ||||||||||||||||||||||||
|
| April 4, |
|
|
|
|
| March 29, |
|
|
|
|
| April 4, |
|
|
|
|
|
| March 29, |
|
|
|
|
| ||||
|
| 2021 |
| % of sales |
|
| 2020 |
| % of sales |
|
| 2021 |
|
| % of sales |
|
| 2020 |
|
| % of sales |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
| $ | 17,568 |
| 11.9% |
|
| $ | (36,713 | ) | -35.8% |
|
| $ | 39,636 |
|
| 10.7% |
|
| $ | (21,211 | ) |
| -6.8% |
| ||||
Income tax expense (benefit) |
|
| 4,240 |
|
|
|
|
|
| (11,550 | ) |
|
|
|
|
| 10,632 |
|
|
|
|
|
|
| (6,601 | ) |
|
|
|
|
Interest expense |
|
| 755 |
|
|
|
|
|
| 1,086 |
|
|
|
|
|
| 2,644 |
|
|
|
|
|
|
| 3,667 |
|
|
|
|
|
Depreciation and amortization |
|
| 2,948 |
|
|
|
|
|
| 2,632 |
|
|
|
|
|
| 8,547 |
|
|
|
|
|
|
| 7,686 |
|
|
|
|
|
EBITDA |
|
| 25,511 |
| 17.3% |
|
|
| (44,545 | ) | -43.4% |
|
|
| 61,459 |
|
| 16.6% |
|
|
| (16,459 | ) |
| -5.3% |
| ||||
Goodwill and other intangible asset impairment(a) |
|
| - |
|
|
|
|
|
| 56,437 |
|
|
|
|
|
| - |
|
|
|
|
|
|
| 56,437 |
|
|
|
|
|
COVID-19 shut-down costs(b) |
|
| - |
|
|
|
|
|
| 1,506 |
|
|
|
|
|
| - |
|
|
|
|
|
|
| 1,506 |
|
|
|
|
|
Aviara start-up costs(c) |
|
| - |
|
|
|
|
|
| 398 |
|
|
|
|
|
| - |
|
|
|
|
|
|
| 1,213 |
|
|
|
|
|
Share-based compensation |
|
| 902 |
|
|
|
|
|
| 159 |
|
|
|
|
|
| 2,185 |
|
|
|
|
|
|
| 703 |
|
|
|
|
|
Aviara transition costs(d) |
|
| 1,125 |
|
|
|
|
|
| - |
|
|
|
|
|
| 2,149 |
|
|
|
|
|
|
| - |
|
|
|
|
|
Adjusted EBITDA |
| $ | 27,538 |
| 18.6% |
|
| $ | 13,955 |
| 13.6% |
|
| $ | 65,793 |
|
| 17.8% |
|
| $ | 43,400 |
|
| 13.9% |
|
|
| Three Months Ended |
| |||||||||||||
|
| October 3, |
|
| % of Net |
|
| October 4, |
|
| % of Net |
| ||||
|
| 2021 |
|
| sale |
|
| 2020 |
|
| sale |
| ||||
Net income |
| $ | 10,386 |
|
| 7.2% |
|
| $ | 9,567 |
|
| 9.2% |
| ||
Income tax expense |
|
| 3,276 |
|
|
|
|
|
|
| 2,818 |
|
|
|
|
|
Interest expense |
|
| 382 |
|
|
|
|
|
|
| 1,019 |
|
|
|
|
|
Depreciation and amortization |
|
| 3,354 |
|
|
|
|
|
|
| 2,739 |
|
|
|
|
|
EBITDA |
|
| 17,398 |
|
| 12.1% |
|
|
| 16,143 |
|
| 15.6% |
| ||
Goodwill impairment(a) |
|
| 1,100 |
|
|
|
|
|
|
| - |
|
|
|
|
|
Share-based compensation |
|
| 896 |
|
|
|
|
|
|
| 640 |
|
|
|
|
|
Aviara transition costs(b) |
|
| - |
|
|
|
|
|
|
| 178 |
|
|
|
|
|
Adjusted EBITDA |
| $ | 19,394 |
|
| 13.5% |
|
| $ | 16,961 |
|
| 16.3% |
|
(a) | Represents a non-cash |
(b) |
|
|
|
| Represents costs to transition production of the Aviara brand from Vonore, Tennessee to Merritt Island, Florida. Costs include duplicative overhead costs and costs not indicative of ongoing operations (such as training and facility preparation). |
The following table presents a reconciliation of net income (loss) as determined in accordance with U.S. GAAP to Adjusted Net Income for the periods indicated:
|
| Three Months Ended |
|
| Nine Months Ended |
|
| Three Months Ended |
| |||||||||||||||
|
| April 4, |
|
| March 29, |
|
| April 4, |
|
| March 29, |
|
| October 3, |
|
| October 4, |
| ||||||
|
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
| ||||||
|
| (Dollars in thousands) |
|
| (Dollars in thousands, except per share data) |
| ||||||||||||||||||
Net income (loss) |
| $ | 17,568 |
|
| $ | (36,713 | ) |
| $ | 39,636 |
|
| $ | (21,211 | ) | ||||||||
Income tax expense (benefit) |
|
| 4,240 |
|
|
| (11,550 | ) |
|
| 10,632 |
|
|
| (6,601 | ) | ||||||||
Goodwill and other intangible asset impairment(a) |
|
| - |
|
|
| 56,437 |
|
|
| - |
|
|
| 56,437 |
| ||||||||
COVID-19 shut-down costs(b) |
|
| - |
|
|
| 1,506 |
|
|
| - |
|
|
| 1,506 |
| ||||||||
Net income |
| $ | 10,386 |
|
| $ | 9,567 |
| ||||||||||||||||
Income tax expense |
|
| 3,276 |
|
|
| 2,818 |
| ||||||||||||||||
Goodwill impairment(a) |
|
| 1,100 |
|
|
| - |
| ||||||||||||||||
Amortization of acquisition intangibles |
|
| 960 |
|
|
| 960 |
|
|
| 2,882 |
|
|
| 2,882 |
|
|
| 999 |
|
|
| 960 |
|
Aviara start-up costs(c) |
|
| - |
|
|
| 398 |
|
|
| - |
|
|
| 1,213 |
| ||||||||
Share-based compensation |
|
| 902 |
|
|
| 159 |
|
|
| 2,185 |
|
|
| 703 |
|
|
| 896 |
|
|
| 640 |
|
Aviara transition costs(d) |
|
| 1,125 |
|
|
| - |
|
|
| 2,149 |
|
|
| - |
| ||||||||
Aviara transition costs(b) |
|
| - |
|
|
| 178 |
| ||||||||||||||||
Adjusted Net Income before income taxes |
|
| 24,795 |
|
|
| 11,197 |
|
|
| 57,484 |
|
|
| 34,929 |
|
|
| 16,657 |
|
|
| 14,163 |
|
Adjusted income tax expense(e) |
|
| 5,703 |
|
|
| 2,575 |
|
|
| 13,221 |
|
|
| 8,034 |
| ||||||||
Adjusted income tax expense(c) |
|
| 3,831 |
|
|
| 3,257 |
| ||||||||||||||||
Adjusted Net Income |
| $ | 19,092 |
|
| $ | 8,622 |
|
| $ | 44,263 |
|
| $ | 26,895 |
|
| $ | 12,826 |
|
| $ | 10,906 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Net Income per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
| $ | 1.01 |
|
| $ | 0.46 |
|
| $ | 2.35 |
|
| $ | 1.44 |
|
| $ | 0.68 |
|
| $ | 0.58 |
|
Diluted |
| $ | 1.01 |
|
| $ | 0.46 |
|
| $ | 2.34 |
|
| $ | 1.44 |
|
| $ | 0.67 |
|
| $ | 0.58 |
|
Weighted average shares used for the computation of: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic Adjusted Net Income per share |
|
| 18,817,975 |
|
|
| 18,739,480 |
|
|
| 18,799,875 |
|
|
| 18,731,338 |
|
|
| 18,850,301 |
|
|
| 18,774,336 |
|
Diluted Adjusted Net Income per share |
|
| 18,989,629 |
|
|
| 18,739,480 |
|
|
| 18,928,288 |
|
|
| 18,731,338 |
|
|
| 19,004,119 |
|
|
| 18,866,826 |
|
(a) | Represents a non-cash |
(b) |
|
|
|
| Represents costs to transition production of the Aviara brand from Vonore, Tennessee to Merritt Island, Florida. Costs include duplicative overhead costs and costs not indicative of ongoing operations (such as training and facility preparation). |
| Reflects income tax expense at an income tax rate of 23.0% for each period presented. |
The following table presents the reconciliation of net income (loss) per diluted share to Adjusted Net Income per diluted share for the periods presented:
|
| Three Months Ended |
|
| Nine Months Ended |
| ||||||||||
|
| April 4, |
|
| March 29, |
|
| April 4, |
|
| March 29, |
| ||||
|
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
| ||||
Net income (loss) per diluted share |
| $ | 0.93 |
|
| $ | (1.96 | ) |
| $ | 2.09 |
|
| $ | (1.13 | ) |
Impact of adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense (benefit) |
|
| 0.22 |
|
| $ | (0.61 | ) |
|
| 0.57 |
|
|
| (0.34 | ) |
Goodwill and other intangible asset impairment(a) |
|
| - |
|
| $ | 3.01 |
|
|
| - |
|
|
| 3.01 |
|
COVID-19 shut-down costs(b) |
|
| - |
|
| $ | 0.08 |
|
|
| - |
|
|
| 0.08 |
|
Amortization of acquisition intangibles |
|
| 0.05 |
|
| $ | 0.05 |
|
|
| 0.15 |
|
|
| 0.15 |
|
Aviara start-up costs(c) |
|
| - |
|
| $ | 0.02 |
|
|
| - |
|
|
| 0.06 |
|
Share-based compensation |
|
| 0.05 |
|
| $ | 0.01 |
|
|
| 0.12 |
|
|
| 0.04 |
|
Aviara transition costs(d) |
|
| 0.06 |
|
| $ | - |
|
|
| 0.11 |
|
|
| - |
|
Adjusted Net Income per diluted share before income taxes |
| $ | 1.31 |
|
| $ | 0.60 |
|
| $ | 3.04 |
|
| $ | 1.87 |
|
Impact of adjusted income tax expense on net income per diluted share before income taxes(e) |
|
| (0.30 | ) |
| $ | (0.14 | ) |
|
| (0.70 | ) |
|
| (0.43 | ) |
Adjusted Net Income per diluted share |
| $ | 1.01 |
|
| $ | 0.46 |
|
| $ | 2.34 |
|
| $ | 1.44 |
|
|
| Three Months Ended |
| |||||
|
| October 3, |
|
| October 4, |
| ||
|
| 2021 |
|
| 2020 |
| ||
Net income per diluted share |
| $ | 0.55 |
|
| $ | 0.51 |
|
Impact of adjustments: |
|
|
|
|
|
|
|
|
Income tax expense |
|
| 0.17 |
|
|
| 0.15 |
|
Goodwill impairment(a) |
|
| 0.06 |
|
|
| - |
|
Amortization of acquisition intangibles |
|
| 0.05 |
|
|
| 0.05 |
|
Share-based compensation |
|
| 0.05 |
|
|
| 0.03 |
|
Aviara transition costs(b) |
|
| - |
|
|
| 0.01 |
|
Adjusted Net Income per diluted share before income taxes |
| $ | 0.88 |
|
| $ | 0.75 |
|
Impact of adjusted income tax expense on net income per diluted share before income taxes(c) |
|
| (0.21 | ) |
|
| (0.17 | ) |
Adjusted Net Income per diluted share |
| $ | 0.67 |
|
| $ | 0.58 |
|
(a) | Represents a non-cash |
(b) |
|
|
|
| Represents costs to transition production of the Aviara brand from Vonore, Tennessee to Merritt Island, Florida. Costs include duplicative overhead costs and costs not indicative of ongoing operations (such as training and facility preparation). |
| Reflects income tax expense at an income tax rate of 23.0% for each period presented. |
Change in Non-GAAP Financial Measure
Prior to fiscal year-end 2020, the Company’s calculation of a diluted per share amount of Adjusted Net Income included an adjustment to fully dilute this non-GAAP measure for all outstanding share-based compensation grants. This additional dilution was incorporated by adjusting the GAAP measure, Weighted Average Shares Used for the Computation of Basic earnings per share, as presented on the Consolidated Statements of Operations, to include a dilutive effect for all outstanding RSAs, PSUs, and stock options. Beginning with the fiscal year-end 2020 presentation and for all subsequent periods, the Company will no longer include this additional dilution impact in its calculation of Adjusted Net Income per diluted share. The Company has instead utilized the Weighted Average Shares Used for the Computation of Basic and Diluted earnings per share as presented on the Consolidated Statements of Operations to calculate Adjusted Net Income per diluted share for all periods presented herein.
The Company believes that, because its outstanding share-based compensation grants no longer result in a material amount of dilution of its earnings as was the case nearer to the date of our IPO, the adjustment methodology previously used no longer provides meaningful information to management or other users of its financial statements. This change resulted in an increase of $0.02 in the nine months ended March 29, 2020 in the amount of Adjusted Net Income per diluted share from what was previously reported.
Liquidity and Capital Resources
Our primary liquidity and capital resource needs are to finance working capital, fund capital expenditures, and service our debt.debt, and fund our stock repurchase program. Our principal sources of liquidity are our cash balance, cash generated from operating activities, our Revolving Credit Facilityrevolving credit agreement and the refinancing and/or new issuance of long-term debt.
Cash and cash equivalents totaled $11.7 million as of October 3, 2021, a decrease of $27.6 from $39.3 million as of June 30, 2021. Total debt as of October 3, 2021 and June 30, 2021 was $84.4 million and $93.1 million, respectively.
Our working capital was impacted by the $22.1 million increase in inventory during the first quarter of fiscal 2022 mainly due to an increase in raw materials to support higher production volumes and to increase safety stock to manage supply chain risk. Work in process has increased due to supply chain disruptions.
As of April 4,October 3, 2021, we had a cash balance of $29.0$25.7 million in addition to $35.0 million of available borrowing capacityoutstanding under the Revolving Credit Facility. During October 2020,Facility, leaving $74.3 of available borrowing capacity. Refer to Note 6—Long Term Debt in the Company completed the purchase of the Merritt Island Facility for a purchase price of $14.2 million. See Note 11 in Notes to Unaudited Condensed Consolidated Financial Statements for additional information regarding this transaction. further details.
On June 24, 2021, the board of directors of the Company authorized a stock repurchase program that allows for the repurchase of up to $50.0 million of our common stock during the three-year period ending June 24, 2024. During the quarter ending October 3, 2021, the Company repurchased 58,379 shares of common stock for $1.5 million in cash, including related fees and expenses.
We are continuing to monitor the impact of supply chain disruptions, production inefficiencies, and inflationary pressures on our business. However, we believe our cash balance, cash from operations, and availability under the Revolving Credit Facilityour ability to borrow will be sufficient to provide for our liquidity and capital resource needs. However, we are continuing to monitor the COVID-19 pandemic and its impact on our business, dealers, consumers and industry as a whole.needs, including authorized stock repurchases.
The following table summarizes our cash flows from operating, investing, and financing activities:
|
| Nine Months Ended |
|
|
|
|
|
| Three Months Ended |
| ||||||||||
|
| April 4, |
|
| March 29, |
|
|
|
|
|
| October 3, |
|
| October 4, |
| ||||
|
| 2021 |
|
| 2020 |
|
| Change |
|
| 2021 |
|
| 2020 |
| |||||
|
| (Dollars in thousands) |
|
|
|
|
|
| (Dollars in thousands) |
| ||||||||||
Total cash provided by (used in): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating activities |
| $ | 54,393 |
|
| $ | 23,900 |
|
| $ | 30,493 |
|
| $ | (13,555 | ) |
| $ | 7,372 |
|
Investing activities |
|
| (23,779 | ) |
|
| (13,576 | ) |
|
| (10,203 | ) |
|
| (3,618 | ) |
|
| (2,042 | ) |
Financing activities |
|
| (17,963 | ) |
|
| 24,841 |
|
|
| (42,804 | ) |
|
| (10,428 | ) |
|
| (12,791 | ) |
Net change in cash |
| $ | 12,651 |
|
| $ | 35,165 |
|
| $ | (22,514 | ) |
| $ | (27,601 | ) |
| $ | (7,461 | ) |
First Quarter 2022 Cash FlowsFlow
Net cash used in operating activities for first quarter 2022 was $13.6 million mainly due to working capital usage, partially offset by net income. Working capital usage primarily consisted of an increase in inventory, accounts receivable, and a decrease in accrued expenses and other current liabilities. Partially offsetting the working capital usage was an increase in accounts payable. As discussed above, inventory increased $22.1 million for first quarter 2022. Accounts receivables increased as a result of timing in customer payments. Accrued expenses and other current liabilities decreased because of continued strong retail demand without the need for rebates and higher payments related to variable compensation costs. Accounts payable increased mainly due to the increase in inventory safety stock.
Net cash used for investing activities was $3.6 million, which included capital expenditures. Our capital spending was focused on expanding our capacity and maintenance capital.
Net cash used for financing activities was $10.4 and related to net payments of long-term debt of $8.8 million and funding of the stock repurchase program totaling $1.5 million.
First Quarter 2021 Cash Flow
Net cash provided by operating activities increasedin first quarter 2021 totaled $7.3 million primarily due to higher operatingnet income and more cash providedan increase in accounts payable, partially offset by working capital usage. Working capital is defined asan increase in inventory and accounts receivable. Accounts receivable, Income tax receivable, Inventories,payables and Prepaid expenses and other current assets net ofinventory increased due to increased production. Accounts payable, Income tax receivable, and Accrued expenses and other current liabilities as presentedreceivables increased due to an increase in the unaudited condensed consolidated balance sheets. Cash flows from working capital changes increased $14.8 million compared to the prior year period and included:
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sales.
Net cash used infor investing activities increased $10.2was $2.0 million, duewhich consisted of capital expenditures.
Net cash used for financing activities was $12.8 million and related primarily to higher capital expenditures, primarily related to the purchasepayments of the Merritt Island Facility.
Financing cash flow decreased primarily as the result of lower net borrowing from our Revolving Credit Facility during the nine months ended April 4, 2021 compared to the nine months ended March, 29, 2020. On March 20, 2020, the Company borrowed all available funds under its Revolving Credit Facility, $35.0 million, a precautionary measure in order to increase its cash position and preserve financial flexibility in light of the uncertainty in the global markets resulting from the COVID-19 pandemic. The Company repaid $25.0 million of this amount before the end of fiscal 2020. In addition, the Company repaid net borrowings of $10.0 million on its Revolving Credit Facility and $7.0 million of scheduled principal repayments on its term loans during the nine months ended April 4, 2021, compared to $10.6 million of scheduled repayments during the nine months ended March, 29, 2020.long-term debt.
Off Balance Sheet Arrangements
The Company did not have any off balance sheet financing arrangements as of April 4,October 3, 2021.
Emerging Growth Company
We are currently an emerging growth company, as defined in the JOBS Act. We will continue to be an emerging growth company until June 30, 2021, which is the last day of our fiscal year following the fifth anniversary of the date of completion of our initial public offering. As a result, beginning with our annual reporting requirements related to fiscal 2021, we may no longer 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.”
Critical Accounting Policies
As of April 4,October 3, 2021 there were no significant changes in or changes in the application of our critical accounting policies or estimation procedures from those presented in our Annual Report on Form 10-K for the fiscal year ended June 30, 2020,2021, which was filed with the SEC on September 11, 20202, 2021.
ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Refer to our 20202021 Annual Report for a complete discussion of the Company’s market risk. There have been no material changes in market risk from those disclosed therein.
ITEM 4.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 April 4,October 3, 2021.
Changes in Internal Control Over Financial Reporting
There have been no changes in our internal control over financial reporting during the quarter ended April 4,October 3, 2021 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. |
None.
ITEM 1A. | RISK FACTORS. |
During the three months ended April 4,October 3, 2021, there were no material changes to the risk factors disclosed in “Part I, Item 1A. Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended June 30, 2020.2021.
ITEM 2. | UNREGISTERED SALES OF SECURITIES AND USE OF PROCEEDS. |
None.
Stock Repurchase Program
On June 24, 2021, the board of directors of the Company authorized a stock repurchase program that allows for the repurchase of up to $50.0 million of our common stock during the three-year period ending June 24, 2024. During the first quarter of 2022, we repurchased approximately $1.5 million of common stock. The remaining authorization under the program was approximately $48.5 million.
During the three months ended October 3, 2021, the Company repurchased the following shares of common stock:
Period |
| Total Number of Shares Purchased |
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| Average Price Paid Per Share(a) |
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| Total Number of Shares Purchased as part of Publicly Announced Program |
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| Approximate Dollar Value of Shares that May Yet be Purchased Under the Plan (dollars in thousands) |
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July 1, 2021 - August 1, 2021 |
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| - |
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| $ | - |
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| - |
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| $ | 50,000 |
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August 2, 2021 - August 29, 2021 |
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| - |
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| - |
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| - |
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| 50,000 |
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August 30, 2021 - October 3, 2021 |
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| 58,379 |
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| 25.45 |
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| 58,379 |
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| 48,513 |
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Total |
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| 58,379 |
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| $ | 25.45 |
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| 58,379 |
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| $ | 48,513 |
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(a) | Represents weighted average price paid per share excluding commissions paid. |
ITEM 3. | DEFAULTS UPON SENIOR SECURITIES. |
None.
ITEM 4. | MINE SAFETY DISCLOSURES. |
None.
ITEM 5. | OTHER INFORMATION. |
None.
ITEM 6.EXHIBITS, FINANCIAL STATEMENT SCHEDULES.
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| Incorporated by Reference |
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Exhibit |
| Description |
| Form |
| File No. |
| Exhibit |
| Filing Date |
| Filed |
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3.1 |
| Amended and Restated Certificate of Incorporation of MCBC Holdings, Inc. |
| 10-K |
| 001-37502 |
| 3.1 |
| 9/18/15 |
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3.2 |
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| 10-Q |
| 001-37502 |
| 3.2 |
| 11/9/18 |
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3.3 |
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| 8-K |
| 001-37502 |
| 3.1 |
| 10/25/19 |
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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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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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| ** |
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32.2 |
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| ** |
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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 Document |
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| * |
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101.CAL |
| Inline XBRL Taxonomy Extension Calculation Linkbase Document |
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| * |
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101.LAB |
| Inline XBRL Taxonomy Extension Label Linkbase Document |
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| * |
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101.PRE |
| Inline XBRL Taxonomy Extension Presentation Linkbase Document |
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| * |
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101.DEF |
| Inline XBRL Taxonomy Extension Definition Linkbase Document |
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| * |
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104 |
| Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
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| * |
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* | Filed herewith. |
** | Furnished herewith. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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| MASTERCRAFT BOAT HOLDINGS, INC. | |
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| (Registrant) | |
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Date: |
| By: | /s/ FREDERICK A. BRIGHTBILL |
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| Frederick A. Brightbill |
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| Chief Executive Officer (Principal Executive Officer) and Chairman of the Board |
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Date: |
| By: | /s/ TIMOTHY M. OXLEY |
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| Timothy M. Oxley |
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| Chief Financial Officer (Principal Financial and Accounting Officer), |
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| Treasurer and Secretary |
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