Document and Entity Information
Document and Entity Information - shares | 6 Months Ended | |
Dec. 30, 2018 | Feb. 06, 2019 | |
Document and Entity Information | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Dec. 30, 2018 | |
Document Fiscal Year Focus | 2,019 | |
Document Fiscal Period Focus | Q2 | |
Entity Registrant Name | Mastercraft Boat Holdings, Inc. | |
Entity Central Index Key | 1,638,290 | |
Current Fiscal Year End Date | --06-30 | |
Entity Current Reporting Status | Yes | |
Entity Small Business | false | |
Entity Emerging Growth Company | true | |
Entity Ex Transition Period | true | |
Entity Filer Category | Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 18,727,902 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Dec. 30, 2018 | Dec. 31, 2017 | Dec. 30, 2018 | Dec. 31, 2017 | |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | ||||
Net Sales | $ 121,541 | $ 78,435 | $ 215,182 | $ 143,484 |
COST OF SALES | 94,467 | 58,501 | 164,905 | 105,387 |
GROSS PROFIT | 27,074 | 19,934 | 50,276 | 38,097 |
OPERATING EXPENSES: | ||||
Selling and marketing | 4,257 | 3,672 | 8,547 | 6,409 |
General and administrative | 7,108 | 4,955 | 13,880 | 9,290 |
Amortization of intangible assets | 987 | 525 | 1,517 | 552 |
Total operating expenses | 12,352 | 9,152 | 23,944 | 16,251 |
OPERATING INCOME | 14,722 | 10,782 | 26,333 | 21,846 |
OTHER EXPENSE: | ||||
Interest expense, net | 2,042 | 1,139 | 2,962 | 1,630 |
INCOME BEFORE INCOME TAX EXPENSE | 12,680 | 9,643 | 23,370 | 20,216 |
INCOME TAX EXPENSE | 2,492 | 1,634 | 4,718 | 5,161 |
NET INCOME | $ 10,188 | $ 8,009 | $ 18,652 | $ 15,055 |
EARNINGS PER COMMON SHARE: | ||||
Basic (in dollars per share) | $ 0.55 | $ 0.43 | $ 1 | $ 0.81 |
Diluted (in dollars per share) | $ 0.54 | $ 0.43 | $ 0.99 | $ 0.81 |
WEIGHTED AVERAGE SHARES USED FOR COMPUTATION OF: | ||||
Basic earnings per share (in shares) | 18,653,111 | 18,619,834 | 18,649,575 | 18,617,467 |
Diluted earnings per share (in shares) | 18,772,322 | 18,702,352 | 18,770,543 | 18,694,489 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Dec. 30, 2018 | Jun. 30, 2018 |
CURRENT ASSETS: | ||
Cash and cash equivalents | $ 18,494 | $ 7,909 |
Accounts receivable — net of allowances of $39 and $51, respectively | 6,394 | 5,515 |
Income tax receivable | 1,057 | |
Inventories, net | 27,685 | 20,467 |
Prepaid expenses and other current assets | 3,505 | 3,295 |
Total current assets | 57,135 | 37,186 |
Property, plant and equipment — net | 27,540 | 22,265 |
Intangible assets — net | 84,773 | 51,046 |
Goodwill | 101,389 | 65,792 |
Deferred debt issuance costs — net | 508 | 383 |
Other | 252 | 252 |
Total assets | 271,597 | 176,924 |
CURRENT LIABILITIES: | ||
Accounts payable | 13,945 | 17,266 |
Income tax payable | 705 | |
Accrued expenses and other current liabilities | 39,491 | 27,866 |
Current portion of long term debt, net of unamortized debt issuance costs | 10,645 | 5,069 |
Total current liabilities | 64,081 | 50,906 |
Long term debt, net of unamortized debt issuance costs | 135,520 | 70,087 |
Deferred income taxes | 977 | 1,427 |
Unrecognized tax positions | 2,294 | 1,982 |
Total liabilities | 202,872 | 124,402 |
COMMITMENTS AND CONTINGENCIES | ||
STOCKHOLDERS' EQUITY: | ||
Common stock, $.01 par value per share — authorized, 100,000,000 shares; issued and outstanding, 18,726,190 shares at December 30, 2018 and 18,682,338 shares at June 30, 2018 | 187 | 187 |
Additional paid-in capital | 114,694 | 114,052 |
Accumulated deficit | (46,156) | (61,717) |
Total stockholders' equity | 68,725 | 52,522 |
Total liabilities and stockholders' equity | $ 271,597 | $ 176,924 |
CONDENSED CONSOLIDATED BALANC_2
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands | Dec. 30, 2018 | Jun. 30, 2018 |
CONDENSED CONSOLIDATED BALANCE SHEETS | ||
Allowance for doubtful accounts | $ 164 | $ 51 |
Common stock, par value | $ 0.01 | $ 0.01 |
Common stock, authorized shares | 100,000,000 | 100,000,000 |
Common stock, issued shares | 18,726,190 | 18,682,338 |
Common stock, outstanding shares | 18,726,190 | 18,682,338 |
CONDENSED CONSOLIDATED STATEM_2
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - 6 months ended Dec. 30, 2018 - USD ($) $ in Thousands | Common Stock | Additional Paid-in Capital | Accumulated Deficit | Total |
Balance, beginning at Jun. 30, 2018 | $ 187 | $ 114,052 | $ (61,717) | $ 52,522 |
Balance, beginning (in shares) at Jun. 30, 2018 | 18,682,338 | |||
Increase (decrease) in stockholders' equity | ||||
Equity-based compensation activity | 642 | 642 | ||
Equity-based compensation activity (shares) | 43,852 | |||
Net income | 18,652 | 18,652 | ||
Balance, ending at Dec. 30, 2018 | $ 187 | $ 114,694 | (46,156) | 68,725 |
Balance, ending (in shares) at Dec. 30, 2018 | 18,726,190 | |||
Increase (decrease) in stockholders' equity | ||||
Adoption of accounting standards (Note 2) | ASU 14-09 | $ (3,091) | $ (3,091) |
CONDENSED CONSOLIDATED STATEM_3
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS $ in Thousands | 6 Months Ended | |
Dec. 30, 2018USD ($) | Dec. 31, 2017USD ($) | |
CASH FLOWS FROM OPERATING ACTIVITIES: | ||
Net income | $ 18,652 | $ 15,055 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation and amortization | 3,359 | 2,210 |
Inventory obsolescence reserve | 164 | (322) |
Amortization of debt issuance costs | 268 | 235 |
Stock-based compensation | 788 | 528 |
Change in interest rate cap fair value | 184 | |
Unrecognized tax benefits | 312 | 258 |
Deferred income taxes | 488 | (604) |
Net provision for doubtful accounts | 113 | (21) |
Loss on disposal of fixed assets | 8 | |
Changes in operating assets and liabilities: | ||
Accounts receivable | 4,280 | 3,377 |
Inventories | 2,546 | 101 |
Prepaid expenses and other current assets | (210) | (489) |
Income taxes | (1,762) | 1,633 |
Other assets | (11) | |
Accounts payable | (6,512) | (849) |
Accrued expenses and other current liabilities | 5,183 | 1,351 |
Net cash provided by operating activities | 27,861 | 22,452 |
CASH FLOWS FROM INVESTING ACTIVITIES: | ||
Disposal of equipment | 5 | 96 |
Payments for acquisitions, net of cash acquired | (81,729) | (79,128) |
Purchases of property and equipment | (6,022) | (1,474) |
Net cash used in investing activities | (87,746) | (80,506) |
CASH FLOWS FROM FINANCING ACTIVITIES: | ||
Proceeds from issuance of long-term debt | 80,000 | 80,832 |
Cash paid for withholding taxes on vested stock | (146) | (43) |
Principal payments on long-term debt | (8,656) | (19,201) |
Payments of debt issuance costs | (728) | (1,322) |
Net cash provided from financing activities | 70,470 | 60,266 |
NET CHANGE IN CASH AND CASH EQUIVALENTS | 10,585 | 2,212 |
CASH AND CASH EQUIVALENTS — BEGINNING OF PERIOD | 7,909 | 4,038 |
CASH AND CASH EQUIVALENTS — END OF PERIOD | 18,494 | 6,250 |
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: | ||
Cash payments for interest | 1,146 | 1,383 |
Cash payments for income taxes | $ 5,679 | 3,872 |
SIGNIFICANT NON-CASH INVESTING AND FINANCING ACTIVITIES: | ||
Accrued working capital adjustment - NauticStar acquisition | $ 1,383 |
ORGANIZATION AND NATURE OF BUSI
ORGANIZATION AND NATURE OF BUSINESS | 6 Months Ended |
Dec. 30, 2018 | |
ORGANIZATION AND NATURE OF BUSINESS | |
ORGANIZATION AND NATURE OF BUSINESS | 1. MasterCraft Boat Holdings, Inc. (the “Company”) was formed on January 28, 2000, as a Delaware holding company and operates primarily through its wholly owned subsidiaries, MasterCraft Boat Company, LLC (“MasterCraft”); Nautic Star, LLC (“NauticStar”); NS Transport, LLC; Crest Marine LLC (“Crest”); MasterCraft Services, LLC; MasterCraft Parts, Ltd.; and MasterCraft International Sales Administration, Inc. The Company and its subsidiaries collectively are referred to herein as the “Company”. On October 2, 2017, the Company acquired all of the outstanding membership interests and other equity securities of Nautic Star, LLC, a Mississippi limited liability company and its subsidiaries. On October 1, 2018, the Company acquired all of the outstanding membership interest of Crest Marine LLC, a Michigan limited liability company. As a result of the acquisitions, the Company consolidated the financial results of NauticStar and Crest. See Note 4. The Company is a leading innovator, designer, manufacturer and marketer of premium recreational powerboats that operates in three reportable segments: MasterCraft, NauticStar and Crest. The Company also leases a parts warehouse in the United Kingdom to expedite service, primarily to MasterCraft dealers and customers in Europe. |
BASIS OF PRESENTATION AND SIGNI
BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES | 6 Months Ended |
Dec. 30, 2018 | |
BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES | |
BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES | 2. The Company’s fiscal year begins July 1 and ends June 30, with the interim quarterly reporting periods consisting of 13 weeks. Therefore, the quarter end will not always coincide with the date of the end of the calendar month. The information furnished in the condensed consolidated financial statements includes normal recurring adjustments and reflects all adjustments, which are, in the opinion of management, necessary for a fair presentation of the results of operations and statements of financial position for the interim periods presented. Certain information and footnote disclosures normally included in annual consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and the applicable rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) for financial information have been condensed or omitted pursuant to such rules and regulations. The June 30, 2018 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 Annual Report on Form 10-K for the fiscal year ended June 30, 2018. 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, 2018 and, in the opinion of management, reflect all adjustments considered necessary to present fairly the Company’s financial position as of December 30, 2018, its results of its operations for the three and six months ended December 30, 2018 and December 31, 2017, its cash flows for the six months ended December 30, 2018 and December 31, 2017, and its statement of shareholders’ equity for the three and six months ended December 30, 2018. All adjustments are of a normal recurring nature. The Company’s interim operating results for the six months ended December 30, 2018 and December 31, 2017 are not necessarily indicative of the results to be expected in future operating quarters. With the exception of Accounting Standards Update (“ASU”) 2014-09 discussed below, there were no significant changes in or changes in the application of the Company’s critical accounting policies or estimation procedures for the six months ended December 30, 2018 as compared with the significant accounting policies described in the Company’s audited consolidated financial statements for the fiscal year ended June 30, 2018. Recently Adopted Accounting Standards — In May 2014, the Financial Accounting Standards Board (the “FASB”) and International Accounting Standards Board jointly issued ASU 2014-09 , Revenue from Contracts with Customers (Topic 606) , which provides a principle-based accounting guidance for revenue recognition. ASU 2014-09, as amended, became effective for public companies for annual and interim periods beginning after December 15, 2017. Effective July 1, 2018, the Company adopted the new revenue standard using the modified retrospective transition approach by recognizing a cumulative adjustment to the opening balance of retained earnings. Due to the implementation of ASU 2014-09, the Company has changed the timing of when it records retail promotions and rebates. The cumulative effect of the changes made to the Company’s Condensed Consolidated Balance Sheets as of July 1, 2018 for the adoption of the new revenue standard was as follows: Balance as of Adjustments Balance as of June 30, 2018 Due to ASC 606 July 1, 2018 Accrued expenses and other current liabilities $ 27,866 $ 4,029 $ 31,895 Deferred income taxes 1,427 (938) 489 Accumulated deficit (61,717) (3,091) (64,808) The following table summarizes the impact of ASU 2014-09 on the Company’s Condensed Consolidated Statement of Operations for the three and six months ended December 30, 2018, respectively: Three Months Ended December 30, 2018 Balances without Statement of Operations As Reported Effect of Change adoption of ASC 606 Net sales $ 121,541 $ 825 $ 122,366 Income before income tax expense 12,680 825 13,505 Income tax expense 2,492 167 2,659 Net income 10,188 658 10,846 Six Months Ended December 30, 2018 Balances without Statement of Operations As Reported Effect of Change adoption of ASC 606 Net sales $ 215,182 $ 1,342 $ 216,524 Income before income tax expense 23,370 1,342 24,712 Income tax expense 4,718 271 4,989 Net income 18,652 1,071 19,723 The following table summarizes the impact of ASU 2014-09 on the Company’s Condensed Consolidated Balance Sheet as of December 30, 2018: Balances without Balance Sheet As Reported Effect of Change adoption of ASC 606 Accrued expenses and other current liabilities $ 39,491 $ (5,210) $ 34,281 Income taxes 2,214 1,209 3,423 Accumulated deficit (46,156) 4,001 (42,155) Recently Issued Accounting Standards — 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 amendments are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The Company is currently evaluating the effect that the adoption of this new guidance is expected to have on our financial position or results of operations and related disclosures. In June 2018, the FASB issued ASU 2018-07 , Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting . This guidance provides clarity and reduces complexity when applying the guidance in Topic 718, Compensation—Stock Compensation to the term or condition of share-based payments to nonemployees. ASU 2018-07 is effective for annual reporting periods, and interim periods therein, beginning after December 15, 2018. The Company is currently evaluating the effect that the adoption of this new guidance is expected to have on our financial position or results of operations and related disclosures. This guidance will be adopted for the fiscal year beginning July 1, 2019. In January 2017, the FASB issued ASU 2017-04 , Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. This guidance eliminates Step 2 from the goodwill impairment test. Instead, an entity should recognize an impairment charge for the amount by which the carrying value exceeds the reporting unit’s fair value, not to exceed the total amount of goodwill allocated to that reporting unit. ASU 2017-04 is effective for annual reporting periods, and interim periods therein, beginning after December 15, 2019. The Company is currently evaluating the effect that the adoption of this new guidance is expected to have on its financial position or results of operations and related disclosures. In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) . The new standard establishes a right-of-use (“ROU”) model that requires a lessee to record an ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the statement of operations. The new standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. In July 2018, the FASB issued ASU 2018-11, Targeted Improvements , providing for an additional transition method by allowing entities to initially apply the new leases standard at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings. The Company expects to adopt the new standard on July 1, 2019 and use the effective date as the date of initial application. The new standard provides a number of optional practical expedients in transition. The Company expects to elect the ‘package of practical expedients’, which permits it not to reassess under the new standard the Company’s prior conclusions about lease identification, lease classification and initial direct costs. The Company does not expect to elect the use-of-hindsight or the practical expedient pertaining to land easements; the latter not being applicable to the Company. The Company expects that this standard will have a material effect on our financial statements. However, the Company is still in the process of assessing the impact of the new standard, and, therefore, the full quantitative impact cannot be reasonably estimated at this time. While the Company continues to assess all of the effects of adoption, it currently believes the most significant effects relate to the recognition of the new ROU assets and lease liabilities on the Company’s balance sheet for its building and equipment operating leases and providing significant new disclosures about its leasing activities. |
REVENUE RECOGNITION
REVENUE RECOGNITION | 6 Months Ended |
Dec. 30, 2018 | |
REVENUE RECOGNITION | |
REVENUE RECOGNITION | 3. The following table presents the Company’s revenue by major product categories for the three and six months ended December 30, 2018: Three Months Ended December 30, 2018 MasterCraft NauticStar Crest Total Major Product Categories Boats and trailers $ 74,976 $ 19,182 $ 25,754 $ 119,912 Parts 1,101 14 86 1,201 Other revenue 320 — 108 428 Total $ 76,397 $ 19,196 $ 25,948 $ 121,541 Six Months Ended December 30, 2018 MasterCraft NauticStar Crest Total Major Product Categories Boats and trailers $ 147,352 $ 36,305 $ 25,754 $ 209,411 Parts 4,682 294 86 5,062 Other revenue 597 4 108 709 Total $ 152,631 $ 36,603 $ 25,948 $ 215,182 The Company recognizes revenue when obligations under the terms of a contract are satisfied and control over promised goods is transferred to a customer. For the majority of sales, this occurs when the product is released to the carrier responsible for transporting it to a customer. The Company typically receives payment within 5 days of shipment. Revenue is measured as the amount of consideration it expects to receive in exchange for a product. The consideration recognized represents the amount specified in a contract with a customer, net of estimated dealer and retail sales incentives the Company reasonably expects to pay. The estimated liability and reduction in revenue for sales incentives is recorded at the time of sale. The Company estimates the amount of sales incentives based on historical data for specific boat models adjusted for forecasted sales volume, product mix, customer behavior and assumptions concerning market conditions. Subsequent adjustments to incentive estimates are possible as facts and circumstances change over time. A contract liability is created when customers prepay for goods prior to the Company transferring those goods to the customer. The contract liability is reduced once control of the goods is transferred to the customer. The difference between the opening and closing balances of the Company’s contract liabilities primarily results from the timing difference between the Company’s performance and the point at which it receives pre-payment from the customer. The Company’s contract liabilities were $956 and $2,194 as of December 30, 2018 and June 30, 2018, respectively and are classified as “Accrued expenses and other current liabilities” in its Condensed Consolidated Balance Sheets. The Company has excluded sales and other taxes assessed by a governmental authority in connection with revenue-producing activities from the determination of the transaction price for all contracts. The Company has elected to account for shipping and handling costs associated with outbound freight after control over a product has transferred to a customer as a fulfillment cost that are included in cost of sales. As contracts are fulfilled within one year from the date of the contract, revenue adjustments for a potential financing component or the costs to obtain the contract are not made. The Company applied the practical expedient in ASU 2014-09 and has not disclosed information about remaining performance obligations that have original expected durations of 12 months or less. |
ACQUISITION
ACQUISITION | 6 Months Ended |
Dec. 30, 2018 | |
ACQUISITION | |
ACQUISITION | 4. Crest Acquisition: On October 1, 2018, the Company completed its acquisition of Crest, a manufacturer of premium pontoon boats, providing the Company with additional product diversification. With the acquisition of Crest, the Company expanded its product portfolio and now operates in three segments of the powerboat industry – performance sport boats, outboard saltwater fishing boats and pontoon boats. T he purchase price was $81,729 , including customary adjustments for the amount of working capital in the acquired business at the closing date. A portion of the purchase price was deposited into an escrow account in order to secure certain post-closing obligations of the former members of Crest. The Company accounted for the transaction using the acquisition method in accordance with ASC 805, Business Combinations . The total consideration has been allocated to the assets acquired and liabilities assumed based on preliminary estimates of their fair values as of the date of acquisition. Because of the complexities involved with performing the valuation, the Company has recorded the tangible and intangible assets acquired and liabilities assumed based on their preliminary fair values as of October 1, 2018. The preliminary measurements of fair value were based upon estimates utilizing the assistance of third-party valuation specialists and are subject to change. The Company expects the valuation of tangible and intangible assets and working capital adjustments to be finalized during the second half of fiscal 2019. The following table summarizes the preliminary purchase price allocation based on the estimated fair values of the assets acquired and liabilities assumed of Crest at the acquisition date: Purchase Price: Cash paid, net of cash acquired $ 81,729 Recognized preliminary amounts of identifiable assets acquired and (liabilities assumed), at fair value: Accounts receivable $ 5,272 Inventories 9,928 Other current assets 185 Property, plant and equipment 1,840 Identifiable intangible assets 35,245 Current liabilities (6,338) Fair value of assets acquired and liabilities assumed 46,132 Goodwill 35,597 $ 81,729 The preliminary fair value estimates for the Company’s identifiable intangible assets acquired as part of the acquisition are as follows: Estimates of Fair Value Estimated Useful Life (in years) Definite-lived intangible: Dealer network $ 18,000 Software 245 Indefinite-lived intangible: Trade name 17,000 Total identifiable intangible assets $ 35,245 The value allocated to inventories reflect the estimated fair value of the acquired inventory based on the expected sales price of the inventory, less an estimated cost to complete and a reasonable profit margin. The value allocated to accounts receivable represents the estimated fair value of the acquired receivables based on the expected collection of those receivables, less an estimated allowance for bad debts. The fair value of the identifiable intangible assets were determined based on the following approaches: · Dealer Network – The value associated with Crest’s dealer network is attributed to its long-standing dealer relationships. The estimate of fair value assigned to this asset was determined using the income approach, which requires an estimate or forecast of the expected future cash flows from the dealer network through the application of the multi-period excess earnings approach. The estimated remaining useful life of dealer network is approximately ten years. · Software – The value attributed to Crests’ software was determined using the replacement cost method, a variation of cost approach, which requires an estimate of the replacement cost and incorporates an obsolescence factor and a developer’s profit margin. · Trade Name – The value attributed to Crest’s trade name was determined using the relief from royalty method, a variation of the income approach, which requires an estimate or forecast of the expected future cash flows. The trade name has an indefinite life. The fair value of the definite-lived intangible asset is being amortized using the straight-line method to amortization of intangible assets expense over the estimated useful life. Indefinite-lived intangible assets are not amortized, but instead are evaluated for potential impairment on an annual basis in accordance with the provision of ASC Topic 350, Intangibles—Goodwill and Other. The weighted average useful life of identifiable definite-lived intangible assets acquired was 9.9 years. Goodwill of $35,597 arising from the acquisition consists of future growth prospects including dealer expansion into new geographic markets and capacity expansion as well as intangible assets that do not qualify for separate recognition. The indefinite-lived intangible assets and goodwill acquired are expected to be deductible for income tax purposes. Acquisition related costs of $2,017, which were incurred by the Company during the first half of fiscal 2019, were expensed in the period incurred, and are included in general and administrative expenses in the consolidated statement of operations and comprehensive income for the three and six months ended December 30, 2018. NauticStar Acquisition: On October 2, 2017, the Company completed its acquisition of NauticStar which unites two leading and complementary boat brands and adds to its product diversity. T he purchase price was $80,511 , including customary adjustments for the amount of working capital in the acquired business at the closing date. A portion of the purchase price was deposited into an escrow account in order to secure certain post-closing obligations of the former members of NauticStar. The Company accounted for the transaction using the acquisition method in accordance with ASC 805, Business Combinations . The total consideration has been allocated to the assets acquired and liabilities assumed based on estimates of their fair values as of the date of acquisition. The Company has recorded the tangible and intangible assets acquired and liabilities assumed based on their fair values as of October 2, 2017. The measurements of fair value were based upon estimates utilizing the assistance of third party valuation specialists. The following table summarizes the purchase price allocation based on the estimated fair values of the assets acquired and liabilities assumed of NauticStar at the acquisition date: Purchase Price: Cash paid, net of cash acquired $ 80,511 Recognized amounts of identifiable assets acquired and (liabilities assumed), at fair value: Accounts receivable $ 1,773 Inventories 6,358 Other current assets 94 Indemnification asset 166 Deferred income taxes 83 Property, plant and equipment 4,945 Identifiable intangible assets 36,000 Current liabilities (4,858) Unrecognized tax positions (249) Fair value of assets acquired and liabilities assumed 44,312 Goodwill 36,199 $ 80,511 Pro Forma Financial Information: The following unaudited pro forma consolidated results of operations for the three and six months ended December 30, 2018 and three and six months ended December 31, 2017, assumes that the acquisitions of NauticStar and Crest occurred as of July 1, 2017, the beginning of the comparable prior annual reporting period presented. The unaudited pro forma financial information combines historical results of MasterCraft, NauticStar and Crest, with adjustments for depreciation and amortization expense based upon the fair value step-up and estimated useful lives of depreciable fixed assets and definite-life amortizable assets acquired. Adjustments also include an increase of interest expense as if the Company’s debt obtained in connection with the acquisitions had been outstanding since July 1, 2017. The unaudited pro forma financial results include non-recurring adjustments for transaction costs directly attributable to the acquisitions and costs associated with the fair value step-up of inventory. The provision for income taxes has also been adjusted for all periods, based upon the foregoing adjustments to historical results. The unaudited pro forma financial information is presented for informational purposes only and is not indicative of the results of operations that would have been achieved if the acquisition had taken place at the beginning of fiscal year 2018 or the results that may occur in the future: Three Months Ended Six Months Ended December 30, 2018 December 31, 2017 December 30, 2018 December 31, 2017 Net sales $ 121,541 $ 94,342 $ 236,175 $ 189,507 Net income $ 11,026 $ 8,773 $ 20,819 $ 13,398 Basic earnings per share $ 0.59 $ 0.47 $ 1.12 $ 0.72 Diluted earnings per share $ 0.59 $ 0.47 $ 1.11 $ 0.72 Effective October 1, 2018, in connection with the purchase of Crest, the Company entered into a lease agreement with Crest Marine Real Estate LLC (“Real Estate”) for a manufacturing facility, storage and office building. The ten-year lease expires September 30, 2028, subject to four consecutive five year extension periods. The annual rent is $330 for the first five years of the lease term and will increase to $425 for the remaining five years. Additionally, during the option terms the rent will be adjusted every five years based upon the increase in the Consumer Price Index. One of the minority owners of Real Estate is a member of the Crest management team. Crest purchases fiberglass component parts from a supplier whose minority owner is the same member of the Crest management team that has a minority ownership in Real Estate. During the three months ended December 30, 2018, the Company purchased $942 of products from the supplier. As of December 30, 2018, the outstanding balance due to the supplier is $120. |
INVENTORIES
INVENTORIES | 6 Months Ended |
Dec. 30, 2018 | |
INVENTORIES | |
INVENTORIES | 5. Inventories consisted of the following: December 30, 2018 June 30, 2018 Raw materials and supplies $ 19,404 $ 9,587 Work in process 3,276 2,822 Finished goods 6,137 9,026 Obsolescence reserve (1,132) (968) Total inventories $ 27,685 $ 20,467 |
PREPAID EXPENSES AND OTHER CURR
PREPAID EXPENSES AND OTHER CURRENT ASSETS | 6 Months Ended |
Dec. 30, 2018 | |
PREPAID EXPENSES AND OTHER CURRENT ASSETS | |
PREPAID EXPENSES AND OTHER CURRENT ASSETS | 6. Prepaid expenses and other current assets consisted of the following: December 30, 2018 June 30, 2018 Prepaid photo shoot $ 1,027 $ 273 Insurance 515 974 Trade show deposits 429 111 Interest rate cap 341 525 Other 1,193 1,412 Total prepaid expenses and other current assets $ 3,505 $ 3,295 |
ACCRUED EXPENSES AND OTHER CURR
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES | 6 Months Ended |
Dec. 30, 2018 | |
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES | |
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES | 7. Accrued expenses and other current liabilities consisted of the following: December 30, 2018 June 30, 2018 Warranty $ 15,964 $ 13,077 Self-insurance 667 703 Compensation and related accruals 2,692 2,995 Inventory repurchase contingent obligation 2,139 1,274 Floor plan interest 3,376 1,228 Debt interest 1,714 244 Dealer incentives 9,842 4,628 Other 3,097 3,717 Total accrued expenses and other current liabilities $ 39,491 $ 27,866 The following table provides a roll forward of the accrued warranty liability: Beginning balance - June 30, 2018 $ 13,077 Provisions 3,621 Additions for Crest acquisition 681 Payments made (3,657) Adjustments to preexisting warranties 2,242 Ending balance - December 30, 2018 $ 15,964 During the second quarter of fiscal 2019, the Company identified errors in how accrued warranty was calculated that resulted in a net out-of-period adjustment that decreased earnings for the three months ended December 30, 2018 and increased accrued expenses and other current liabilities as of December 30, 2018 by $225. The Company determined that inaccurate data on the cost of parts was used to estimate the warranty liability. The impact of this adjustment resulted in a $1,125 increase in earnings for the three months ended December 30, 2018, with a corresponding decrease in accrued expenses and other current liabilities on the consolidated balance sheet as of December 30, 2018. The Company also determined that faulty assumptions were used when estimating costs for warranty periods impacted by the change to a five-year warranty. The adjustment resulted in a $1,350 decrease in earnings for the three months ended December 30, 2018, with a corresponding increase in accrued expenses and other current liabilities on the consolidated balance sheet as of December 30, 2018. Management evaluated the effect of the adjustments on the Company’s financial statements under the provision of ASC 250: Accounting Changes and Error Corrections and Staff Accounting Bulletin No. 108: Considering the Effects of Prior Year Misstatements When Quantifying Misstatements in Current Year Financial Statements and concluded that the were immaterial to the current year and prior year’s annual and quarterly financial statements. |
GOODWILL AND OTHER INTANGIBLE A
GOODWILL AND OTHER INTANGIBLE ASSETS | 6 Months Ended |
Dec. 30, 2018 | |
GOODWILL AND OTHER INTANGIBLE ASSETS | |
GOODWILL AND OTHER INTANGIBLE ASSETS | 8. The changes in the carrying amount of goodwill for the six months ended December 30, 2018, were as follows: Goodwill as of June 30, 2018 $ 65,792 Addition related to the acquisition of Crest 35,597 Goodwill as of December 30, 2018 $ 101,389 As of December 30, 2018, and June 30, 2018, details of the Company’s intangible assets other than goodwill were as follows: December 30, 2018 Gross Net Carrying Accumulated Carrying Amount Amortization Amount Dealer network $ 39,500 $ (3,959) $ 35,541 Software 245 (13) 232 Total amortizable intangible assets 39,745 (3,972) 35,773 Trade names 49,000 — 49,000 Total intangible assets $ 88,745 $ (3,972) $ 84,773 June 30, 2018 Gross Net Carrying Accumulated Carrying Amount Amortization Amount Dealer network $ 21,590 $ (2,544) $ 19,046 Total amortizable intangible assets 21,590 (2,544) 19,046 Trade names 32,000 — 32,000 Total intangible assets $ 53,590 $ (2,544) $ 51,046 Amortization expense recognized on all amortizable intangibles was $987 and $1,517 for the three months and six months ended December 30, 2018, respectively. Amortization expense recognized on all amortizable intangibles was $525 and $552 for the three months and the six months ended December 31, 2017, respectively. The estimated future amortization of definite-lived intangible assets is as follows: Fiscal years ending June 30, Remainder of 2019 $ 2,440 2020 3,956 2021 3,956 2022 3,956 2023 3,956 and thereafter 17,510 Total $ 35,773 |
FAIR VALUE MEASUREMENTS
FAIR VALUE MEASUREMENTS | 6 Months Ended |
Dec. 30, 2018 | |
FAIR VALUE MEASUREMENTS | |
FAIR VALUE MEASUREMENTS | 9. Fair value is the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. There are three levels of inputs that may be used to measure fair values: Level 1 — Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date. Level 2 — Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data. Level 3 — Significant unobservable inputs that reflect a company’s own assumptions about the assumptions that market participants would use in pricing an asset or liability. When determining the fair value measurements for assets or liabilities required or permitted to be recorded at and/or marked to fair value, the Company considers the principal or most advantageous market in which it would transact and considers assumptions that market participants would use when pricing the asset or liability. When possible, the Company looks to active and observable markets to price identical assets. When identical assets are not traded in active markets, the Company looks to market observable data for similar assets. The following tables summarize the basis used to measure certain financial assets and liabilities at fair value on a recurring basis in the consolidated balance sheets: December 30, 2018 Fair Value Measurements Using Level 1 Level 2 Level 3 Asset — interest rate cap $ — $ 341 $ — June 30, 2018 Fair Value Measurements Using Level 1 Level 2 Level 3 Asset — interest rate cap $ — $ 525 $ — The interest rate cap is valued utilizing pricing models taking into account inputs such as interest rates and notional amounts. In November 2017, the Company entered into an interest rate cap agreement with its existing lender to cap its London Interbank Offered Rate (“LIBOR”) at 2% for $34,594 of outstanding principal on its long-term debt. Fair value measurements for the Company’s interest rate cap are classified under Level 2 because such measurements are based on significant other observable inputs. There were no transfers of assets or liabilities between Level 1 and Level 2 during the six months ended December 30, 2018. |
LONG-TERM DEBT
LONG-TERM DEBT | 6 Months Ended |
Dec. 30, 2018 | |
LONG-TERM DEBT | |
LONG-TERM DEBT | 10. Long-term debt outstanding is as follows: December 30, 2018 June 30, 2018 Revolving credit facility $ — $ — Senior secured term loan 148,000 76,656 Debt issuance costs on term loan (1,835) (1,500) Total debt 146,165 75,156 Less current portion of long-term debt 11,100 5,475 Less current portion of debt issuance costs on term loan (455) (406) Long-term debt — less current portion $ 135,520 $ 70,087 On October 1, 2018, the Company entered into a Fourth Amended and Restated Credit and Guaranty Agreement with Fifth Third Bank, as the agent and letter of credit issuer, and the lenders party thereto (the “Fourth Amended Credit Agreement”). The Fourth Amended Credit Agreement replaced the Company’s Third Amended and Restated Credit Agreement, dated October 2, 2017. The Fourth Amended Credit Agreement provides the Company with a $190,000 senior secured credit facility, consisting of a $75,000 term loan and an $80,000 term loan (together, the “Term Loans”) and a $35,000 revolving credit facility (the “Revolving Credit Facility”). Proceeds from the $80,000 term loan went to pay for the Crest acquisition. The Fourth Amended Credit Agreement bears interest, at the Company’s option, at either the prime rate plus an applicable margin ranging from 0.5% to 1.5% or at an adjusted LIBOR rate plus an applicable margin ranging from 1.5% to 2.5%, in each case based on the Company’s senior leverage ratio. Based on the Company’s current senior leverage ratio, the applicable margin for loans accruing interest at the prime rate is 1.00% and the applicable margin for loans accruing interest at LIBOR is 2.00%. The Term Loans will mature and all remaining amounts outstanding thereunder will be due and payable on October 1, 2023. During the three months ended December 30, 2018, the Company made voluntary payments on the Term Loans of $7,000 out of excess cash. As of December 30, 2018 and June 30, 2018, the Company’s unamortized debt issuance costs related to the Term Loans were $1,835 and $1,499, respectively. These costs are being amortized over the term of the Fourth Amended Credit Agreement. As of December 30, 2018, the Company was in compliance with all of its debt covenants under its Fourth Amended Credit Agreement. As of December 30, 2018, the Company had no borrowings outstanding on its Revolving Credit Facility. As of December 30, 2018 and June 30, 2018, availability under the Revolving Credit Facility was $35,000 and $30,000, respectively. The Company’s unamortized debt issuance costs on its Revolving Credit Facility were $508 and $383 as of December 30, 2018 and June 30, 2018, respectively. |
INCOME TAXES
INCOME TAXES | 6 Months Ended |
Dec. 30, 2018 | |
INCOME TAXES | |
INCOME TAXES | 11. 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. During the six months ended December 30, 2018, the Company’s effective tax rate was 20.2%. The differences in the Company’s effective tax rate in comparable historical periods presented and the statutory federal tax rate of 21% primarily relate to a permanent benefit associated with the foreign derived intangible income deduction and the inclusion of the state tax rate in the overall effective rate. The Company’s consolidated interim effective tax rate for the six months ended December 30, 2018 is lower compared to the 25.5% effective tax rate for the six months ended December 31, 2017, primarily due to the enactment of the Tax Cuts and Jobs Act. |
EARNINGS PER SHARE
EARNINGS PER SHARE | 6 Months Ended |
Dec. 30, 2018 | |
EARNINGS PER SHARE | |
EARNINGS PER SHARE | 12. The following table sets forth the computation of the Company’s earnings per share: Three Months Ended Six Months Ended December 30, 2018 December 31, 2017 December 30, 2018 December 31, 2017 Net income $ 10,188 $ 8,009 $ 18,652 $ 15,055 Weighted average common shares — basic 18,653,111 18,619,834 18,649,575 18,617,467 Dilutive effect of assumed exercises of stock options 50,261 34,994 51,307 32,969 Dilutive effect of assumed restricted share awards/units 68,950 47,524 69,661 44,054 Weighted average outstanding shares — diluted 18,772,322 18,702,352 18,770,543 18,694,489 Basic earnings per share $ 0.55 $ 0.43 $ 1.00 $ 0.81 Diluted earnings per share $ 0.54 $ 0.43 $ 0.99 $ 0.81 For the three and six months ended December 30, 2018 and December 31, 2017, the weighted average shares that were anti-dilutive, and therefore excluded from the computation of diluted earnings per share, included 1,559 restricted stock awards and 2,925 performance stock units. |
STOCK-BASED COMPENSATION
STOCK-BASED COMPENSATION | 6 Months Ended |
Dec. 30, 2018 | |
STOCK-BASED COMPENSATION | |
STOCK-BASED COMPENSATION | 13. During fiscal year ended June 30, 2015 the Company adopted the Amended and Restated MasterCraft Boat Holdings, Inc. 2015 Incentive Award Plan (“2015 Plan”) in order to facilitate the grant of cash and equity incentives to non-employee directors, employees, and consultants of the Company and certain of its affiliates and to enable the Company and certain of its affiliates to obtain and retain the services of these individuals, which is essential to our long-term success. In July 2015, the Board amended and restated the Company’s 2015 Plan which became effective just prior to the closing of the Company’s initial public offering to increase the shares available for issuance under the 2015 Plan. In July 2018, the Company granted to certain employees 31,207 shares of restricted stock awards (“RSAs”) under the 2015 Plan at a per share fair value of $26.59. The RSAs will vest in three equal annual installments. In July 2018, the Company granted 12,414 RSAs under the 2015 Plan to certain non-employee directors for their annual equity award at a per share fair value of $26.59. The RSAs vest on June 30, 2019. In August 2018, the Company granted 262 of RSAs to certain employees under the 2015 Plan at a per share fair value of $25.27. The RSAs will vest in three equal installments. In October 2018, the Company granted to a certain employee 1,559 RSAs under the 2015 Plan at a per share fair value of $36.10. The RSAs will vest in three equal annual installments. In October 2018, the Company granted 1,801 RSAs under the 2015 Plan to a newly elected non-employee director at a per share fair value of $33.22. The RSAs vest on June 30, 2019. In November 2018, the Company granted to certain employees 1,072 RSAs under the 2015 Plan at a per share fair value of $27.66. The RSAs will vest on the first anniversary of the grant date. The per share value for each of the above RSA grants is equal to the market value of the Company’s common stock on the grant date. In August 2018, the Company granted to certain employees 33,082 performance stock units (“PSUs”) under its 2015 Plan at a per share fair value of $31.60. In October 2018, the Company granted 1,559 performance stock units (“PSUs”) under its 2015 Plan to a certain employee at a per share fair value of $31.60. The fair value was estimated based on long-term market performance targets using a Monte Carlo Simulation model, which considers the likelihood of all possible outcomes and determines the number of shares expected to vest under each simulation and the expected stock price at that level. The awards will be earned based upon the Company’s attainment of certain performance criteria over a three-year period. The performance period for the awards is a three-year period commencing July 1, 2018 and ending June 30, 2021. Following the determination of the Company’s achievement with respect to the performance criteria, the number of shares awarded will be subject to adjustment based upon the application of a total shareholder return (“TSR”) modifier. During the six months ended December 30, 2018 and December 31, 2017, the Company recognized $788 and $528, respectively in stock-based compensation expense. |
SEGMENT INFORMATION
SEGMENT INFORMATION | 6 Months Ended |
Dec. 30, 2018 | |
SEGMENT INFORMATION | |
SEGMENT INFORMATION | 14. The Company designs, manufactures, and markets recreational premium performance sport boats and outboard boats under three operating and reportable segments: MasterCraft, NauticStar and Crest. The Company’s segments are defined by management’s reporting structure and distribution channels. The MasterCraft segment consists of recreational performance sport boats primarily used for water skiing, wakeboarding, wake surfing, and general recreational boating. The NauticStar segment consists of outboard boats primarily used for salt water fishing, and general recreational boating. Crest manufactures premium outboard pontoon boats. The Company distributes the MasterCraft, NauticStar and Crest products through its dealer network. Company management regularly reviews the operating performance of each segment including measures of performance based on income from operations. The Company files a consolidated income tax return and does not allocate income taxes and certain other corporate level expenses, including interest, to operating segments. The following tables present financial information for the Company’s reportable segments for the three and six months ended December 30, 2018 and December 31, 2017, respectively, and the Company’s financial position at December 30, 2018 and June 30, 2018, respectively. Three Months Ended December 30, 2018 MasterCraft NauticStar Crest Consolidated Net sales $ 76,397 $ 19,196 $ 25,948 $ 121,541 Cost of sales 56,852 16,187 21,428 94,467 Operating income 11,414 1,072 2,235 14,722 Depreciation and amortization 732 654 537 1,923 Three Months Ended December 31, 2017 MasterCraft NauticStar Crest Consolidated Net sales $ 58,239 $ 20,196 $ — $ 78,435 Cost of sales 41,856 16,645 — 58,501 Operating income 9,113 1,669 — 10,782 Depreciation and amortization 876 602 — 1,478 Six Months Ended December 30, 2018 MasterCraft NauticStar Crest Consolidated Net sales $ 152,631 $ 36,603 $ 25,948 $ 215,182 Cost of sales 111,875 31,602 21,428 164,905 Operating income 22,944 1,153 2,235 26,333 Depreciation and amortization 1,537 1,285 537 3,359 Six Months Ended December 31, 2017 MasterCraft NauticStar Crest Consolidated Net sales $ 123,288 $ 20,196 $ — $ 143,484 Cost of sales 88,742 16,645 — 105,387 Operating income 20,177 1,669 — 21,846 Depreciation and amortization 1,608 602 — 2,210 As of December 30, 2018 As of June 30, 2018 Assets MasterCraft $ 263,715 $ 170,218 NauticStar 83,168 87,866 Crest 87,727 — Eliminations (163,013) (81,160) Total Assets $ 271,597 $ 176,924 As of December 30, 2018 As of June 30, 2018 Goodwill MasterCraft $ 29,593 $ 29,593 NauticStar 36,199 36,199 Crest 35,597 — Total Goodwill $ 101,389 $ 65,792 |
BASIS OF PRESENTATION AND SIG_2
BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES (Policies) | 6 Months Ended |
Dec. 30, 2018 | |
BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES | |
Fiscal Period | The Company’s fiscal year begins July 1 and ends June 30, with the interim quarterly reporting periods consisting of 13 weeks. Therefore, the quarter end will not always coincide with the date of the end of the calendar month. |
Principles of Consolidation | The information furnished in the condensed consolidated financial statements includes normal recurring adjustments and reflects all adjustments, which are, in the opinion of management, necessary for a fair presentation of the results of operations and statements of financial position for the interim periods presented. Certain information and footnote disclosures normally included in annual consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and the applicable rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) for financial information have been condensed or omitted pursuant to such rules and regulations. The June 30, 2018 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 Annual Report on Form 10-K for the fiscal year ended June 30, 2018. |
Basis of Accounting | 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, 2018 and, in the opinion of management, reflect all adjustments considered necessary to present fairly the Company’s financial position as of December 30, 2018, its results of its operations for the three and six months ended December 30, 2018 and December 31, 2017, its cash flows for the six months ended December 30, 2018 and December 31, 2017, and its statement of shareholders’ equity for the three and six months ended December 30, 2018. All adjustments are of a normal recurring nature. The Company’s interim operating results for the six months ended December 30, 2018 and December 31, 2017 are not necessarily indicative of the results to be expected in future operating quarters. |
New Accounting Pronouncements Issued, Adopted and Not Yet Adopted | Recently Adopted Accounting Standards — In May 2014, the Financial Accounting Standards Board (the “FASB”) and International Accounting Standards Board jointly issued ASU 2014-09 , Revenue from Contracts with Customers (Topic 606) , which provides a principle-based accounting guidance for revenue recognition. ASU 2014-09, as amended, became effective for public companies for annual and interim periods beginning after December 15, 2017. Effective July 1, 2018, the Company adopted the new revenue standard using the modified retrospective transition approach by recognizing a cumulative adjustment to the opening balance of retained earnings. Due to the implementation of ASU 2014-09, the Company has changed the timing of when it records retail promotions and rebates. The cumulative effect of the changes made to the Company’s Condensed Consolidated Balance Sheets as of July 1, 2018 for the adoption of the new revenue standard was as follows: Balance as of Adjustments Balance as of June 30, 2018 Due to ASC 606 July 1, 2018 Accrued expenses and other current liabilities $ 27,866 $ 4,029 $ 31,895 Deferred income taxes 1,427 (938) 489 Accumulated deficit (61,717) (3,091) (64,808) The following table summarizes the impact of ASU 2014-09 on the Company’s Condensed Consolidated Statement of Operations for the three and six months ended December 30, 2018, respectively: Three Months Ended December 30, 2018 Balances without Statement of Operations As Reported Effect of Change adoption of ASC 606 Net sales $ 121,541 $ 825 $ 122,366 Income before income tax expense 12,680 825 13,505 Income tax expense 2,492 167 2,659 Net income 10,188 658 10,846 Six Months Ended December 30, 2018 Balances without Statement of Operations As Reported Effect of Change adoption of ASC 606 Net sales $ 215,182 $ 1,342 $ 216,524 Income before income tax expense 23,370 1,342 24,712 Income tax expense 4,718 271 4,989 Net income 18,652 1,071 19,723 The following table summarizes the impact of ASU 2014-09 on the Company’s Condensed Consolidated Balance Sheet as of December 30, 2018: Balances without Balance Sheet As Reported Effect of Change adoption of ASC 606 Accrued expenses and other current liabilities $ 39,491 $ (5,210) $ 34,281 Income taxes 2,214 1,209 3,423 Accumulated deficit (46,156) 4,001 (42,155) Recently Issued Accounting Standards — 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 amendments are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The Company is currently evaluating the effect that the adoption of this new guidance is expected to have on our financial position or results of operations and related disclosures. In June 2018, the FASB issued ASU 2018-07 , Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting . This guidance provides clarity and reduces complexity when applying the guidance in Topic 718, Compensation—Stock Compensation to the term or condition of share-based payments to nonemployees. ASU 2018-07 is effective for annual reporting periods, and interim periods therein, beginning after December 15, 2018. The Company is currently evaluating the effect that the adoption of this new guidance is expected to have on our financial position or results of operations and related disclosures. This guidance will be adopted for the fiscal year beginning July 1, 2019. In January 2017, the FASB issued ASU 2017-04 , Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. This guidance eliminates Step 2 from the goodwill impairment test. Instead, an entity should recognize an impairment charge for the amount by which the carrying value exceeds the reporting unit’s fair value, not to exceed the total amount of goodwill allocated to that reporting unit. ASU 2017-04 is effective for annual reporting periods, and interim periods therein, beginning after December 15, 2019. The Company is currently evaluating the effect that the adoption of this new guidance is expected to have on its financial position or results of operations and related disclosures. In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) . The new standard establishes a right-of-use (“ROU”) model that requires a lessee to record an ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the statement of operations. The new standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. In July 2018, the FASB issued ASU 2018-11, Targeted Improvements , providing for an additional transition method by allowing entities to initially apply the new leases standard at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings. The Company expects to adopt the new standard on July 1, 2019 and use the effective date as the date of initial application. The new standard provides a number of optional practical expedients in transition. The Company expects to elect the ‘package of practical expedients’, which permits it not to reassess under the new standard the Company’s prior conclusions about lease identification, lease classification and initial direct costs. The Company does not expect to elect the use-of-hindsight or the practical expedient pertaining to land easements; the latter not being applicable to the Company. The Company expects that this standard will have a material effect on our financial statements. However, the Company is still in the process of assessing the impact of the new standard, and, therefore, the full quantitative impact cannot be reasonably estimated at this time. While the Company continues to assess all of the effects of adoption, it currently believes the most significant effects relate to the recognition of the new ROU assets and lease liabilities on the Company’s balance sheet for its building and equipment operating leases and providing significant new disclosures about its leasing activities. |
BASIS OF PRESENTATION AND SIG_3
BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES (Tables) | 6 Months Ended |
Dec. 30, 2018 | |
ASU 14-09 | |
Cumulative Effect of Adoption | |
Summary of cumulative effect of the changes made to the Company’s Consolidated Balance Sheets and Statement of Operations | The cumulative effect of the changes made to the Company’s Condensed Consolidated Balance Sheets as of July 1, 2018 for the adoption of the new revenue standard was as follows: Balance as of Adjustments Balance as of June 30, 2018 Due to ASC 606 July 1, 2018 Accrued expenses and other current liabilities $ 27,866 $ 4,029 $ 31,895 Deferred income taxes 1,427 (938) 489 Accumulated deficit (61,717) (3,091) (64,808) The following table summarizes the impact of ASU 2014-09 on the Company’s Condensed Consolidated Statement of Operations for the three and six months ended December 30, 2018, respectively: Three Months Ended December 30, 2018 Balances without Statement of Operations As Reported Effect of Change adoption of ASC 606 Net sales $ 121,541 $ 825 $ 122,366 Income before income tax expense 12,680 825 13,505 Income tax expense 2,492 167 2,659 Net income 10,188 658 10,846 Six Months Ended December 30, 2018 Balances without Statement of Operations As Reported Effect of Change adoption of ASC 606 Net sales $ 215,182 $ 1,342 $ 216,524 Income before income tax expense 23,370 1,342 24,712 Income tax expense 4,718 271 4,989 Net income 18,652 1,071 19,723 The following table summarizes the impact of ASU 2014-09 on the Company’s Condensed Consolidated Balance Sheet as of December 30, 2018: Balances without Balance Sheet As Reported Effect of Change adoption of ASC 606 Accrued expenses and other current liabilities $ 39,491 $ (5,210) $ 34,281 Income taxes 2,214 1,209 3,423 Accumulated deficit (46,156) 4,001 (42,155) |
REVENUE RECOGNITION (Tables)
REVENUE RECOGNITION (Tables) | 6 Months Ended |
Dec. 30, 2018 | |
REVENUE RECOGNITION | |
Summary of revenues by categories | Three Months Ended December 30, 2018 MasterCraft NauticStar Crest Total Major Product Categories Boats and trailers $ 74,976 $ 19,182 $ 25,754 $ 119,912 Parts 1,101 14 86 1,201 Other revenue 320 — 108 428 Total $ 76,397 $ 19,196 $ 25,948 $ 121,541 Six Months Ended December 30, 2018 MasterCraft NauticStar Crest Total Major Product Categories Boats and trailers $ 147,352 $ 36,305 $ 25,754 $ 209,411 Parts 4,682 294 86 5,062 Other revenue 597 4 108 709 Total $ 152,631 $ 36,603 $ 25,948 $ 215,182 |
ACQUISITION (Tables)
ACQUISITION (Tables) | 6 Months Ended |
Dec. 30, 2018 | |
Schedule of pro forma financial information | Three Months Ended Six Months Ended December 30, 2018 December 31, 2017 December 30, 2018 December 31, 2017 Net sales $ 121,541 $ 94,342 $ 236,175 $ 189,507 Net income $ 11,026 $ 8,773 $ 20,819 $ 13,398 Basic earnings per share $ 0.59 $ 0.47 $ 1.12 $ 0.72 Diluted earnings per share $ 0.59 $ 0.47 $ 1.11 $ 0.72 |
Crest | |
Schedule of purchase price allocation based on the estimated fair values of assets acquired and liabilities assumed as of the acquisition date | Purchase Price: Cash paid, net of cash acquired $ 81,729 Recognized preliminary amounts of identifiable assets acquired and (liabilities assumed), at fair value: Accounts receivable $ 5,272 Inventories 9,928 Other current assets 185 Property, plant and equipment 1,840 Identifiable intangible assets 35,245 Current liabilities (6,338) Fair value of assets acquired and liabilities assumed 46,132 Goodwill 35,597 $ 81,729 |
Schedule of fair value estimates of identifiable intangible assets acquired | Estimates of Fair Value Estimated Useful Life (in years) Definite-lived intangible: Dealer network $ 18,000 Software 245 Indefinite-lived intangible: Trade name 17,000 Total identifiable intangible assets $ 35,245 |
NauticStar | |
Schedule of purchase price allocation based on the estimated fair values of assets acquired and liabilities assumed as of the acquisition date | Purchase Price: Cash paid, net of cash acquired $ 80,511 Recognized amounts of identifiable assets acquired and (liabilities assumed), at fair value: Accounts receivable $ 1,773 Inventories 6,358 Other current assets 94 Indemnification asset 166 Deferred income taxes 83 Property, plant and equipment 4,945 Identifiable intangible assets 36,000 Current liabilities (4,858) Unrecognized tax positions (249) Fair value of assets acquired and liabilities assumed 44,312 Goodwill 36,199 $ 80,511 |
INVENTORIES (Tables)
INVENTORIES (Tables) | 6 Months Ended |
Dec. 30, 2018 | |
INVENTORIES | |
Schedule of inventories | December 30, 2018 June 30, 2018 Raw materials and supplies $ 19,404 $ 9,587 Work in process 3,276 2,822 Finished goods 6,137 9,026 Obsolescence reserve (1,132) (968) Total inventories $ 27,685 $ 20,467 |
PREPAID EXPENSES AND OTHER CU_2
PREPAID EXPENSES AND OTHER CURRENT ASSETS (Tables) | 6 Months Ended |
Dec. 30, 2018 | |
PREPAID EXPENSES AND OTHER CURRENT ASSETS | |
Schedule of prepaid expenses and other current assets | December 30, 2018 June 30, 2018 Prepaid photo shoot $ 1,027 $ 273 Insurance 515 974 Trade show deposits 429 111 Interest rate cap 341 525 Other 1,193 1,412 Total prepaid expenses and other current assets $ 3,505 $ 3,295 |
ACCRUED EXPENSES AND OTHER CU_2
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES (Tables) | 6 Months Ended |
Dec. 30, 2018 | |
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES | |
Schedule of accrued expenses and other current liabilities | December 30, 2018 June 30, 2018 Warranty $ 15,964 $ 13,077 Self-insurance 667 703 Compensation and related accruals 2,692 2,995 Inventory repurchase contingent obligation 2,139 1,274 Floor plan interest 3,376 1,228 Debt interest 1,714 244 Dealer incentives 9,842 4,628 Other 3,097 3,717 Total accrued expenses and other current liabilities $ 39,491 $ 27,866 |
Schedule of roll forward of the accrued warranty liability | Beginning balance - June 30, 2018 $ 13,077 Provisions 3,621 Additions for Crest acquisition 681 Payments made (3,657) Adjustments to preexisting warranties 2,242 Ending balance - December 30, 2018 $ 15,964 |
GOODWILL AND OTHER INTANGIBLE_2
GOODWILL AND OTHER INTANGIBLE ASSETS (Tables) | 6 Months Ended |
Dec. 30, 2018 | |
GOODWILL AND OTHER INTANGIBLE ASSETS | |
Schedule of carrying amounts of goodwill | Goodwill as of June 30, 2018 $ 65,792 Addition related to the acquisition of Crest 35,597 Goodwill as of December 30, 2018 $ 101,389 |
Schedule of intangible assets other than goodwill | December 30, 2018 Gross Net Carrying Accumulated Carrying Amount Amortization Amount Dealer network $ 39,500 $ (3,959) $ 35,541 Software 245 (13) 232 Total amortizable intangible assets 39,745 (3,972) 35,773 Trade names 49,000 — 49,000 Total intangible assets $ 88,745 $ (3,972) $ 84,773 June 30, 2018 Gross Net Carrying Accumulated Carrying Amount Amortization Amount Dealer network $ 21,590 $ (2,544) $ 19,046 Total amortizable intangible assets 21,590 (2,544) 19,046 Trade names 32,000 — 32,000 Total intangible assets $ 53,590 $ (2,544) $ 51,046 |
Schedule of estimated amortization expense | Fiscal years ending June 30, Remainder of 2019 $ 2,440 2020 3,956 2021 3,956 2022 3,956 2023 3,956 and thereafter 17,510 Total $ 35,773 |
FAIR VALUE MEASUREMENTS (Tables
FAIR VALUE MEASUREMENTS (Tables) | 6 Months Ended |
Dec. 30, 2018 | |
FAIR VALUE MEASUREMENTS | |
Assets measured at fair value on a recurring basis | December 30, 2018 Fair Value Measurements Using Level 1 Level 2 Level 3 Asset — interest rate cap $ — $ 341 $ — June 30, 2018 Fair Value Measurements Using Level 1 Level 2 Level 3 Asset — interest rate cap $ — $ 525 $ — |
LONG-TERM DEBT (Tables)
LONG-TERM DEBT (Tables) | 6 Months Ended |
Dec. 30, 2018 | |
LONG-TERM DEBT | |
Schedule of long-term debt outstanding | December 30, 2018 June 30, 2018 Revolving credit facility $ — $ — Senior secured term loan 148,000 76,656 Debt issuance costs on term loan (1,835) (1,500) Total debt 146,165 75,156 Less current portion of long-term debt 11,100 5,475 Less current portion of debt issuance costs on term loan (455) (406) Long-term debt — less current portion $ 135,520 $ 70,087 |
EARNINGS PER SHARE (Tables)
EARNINGS PER SHARE (Tables) | 6 Months Ended |
Dec. 30, 2018 | |
EARNINGS PER SHARE | |
Factors used in the earnings per share computation | Three Months Ended Six Months Ended December 30, 2018 December 31, 2017 December 30, 2018 December 31, 2017 Net income $ 10,188 $ 8,009 $ 18,652 $ 15,055 Weighted average common shares — basic 18,653,111 18,619,834 18,649,575 18,617,467 Dilutive effect of assumed exercises of stock options 50,261 34,994 51,307 32,969 Dilutive effect of assumed restricted share awards/units 68,950 47,524 69,661 44,054 Weighted average outstanding shares — diluted 18,772,322 18,702,352 18,770,543 18,694,489 Basic earnings per share $ 0.55 $ 0.43 $ 1.00 $ 0.81 Diluted earnings per share $ 0.54 $ 0.43 $ 0.99 $ 0.81 |
SEGMENT INFORMATION (Tables)
SEGMENT INFORMATION (Tables) | 6 Months Ended |
Dec. 30, 2018 | |
SEGMENT INFORMATION | |
Schedule of operating information for reportable segments | Three Months Ended December 30, 2018 MasterCraft NauticStar Crest Consolidated Net sales $ 76,397 $ 19,196 $ 25,948 $ 121,541 Cost of sales 56,852 16,187 21,428 94,467 Operating income 11,414 1,072 2,235 14,722 Depreciation and amortization 732 654 537 1,923 Three Months Ended December 31, 2017 MasterCraft NauticStar Crest Consolidated Net sales $ 58,239 $ 20,196 $ — $ 78,435 Cost of sales 41,856 16,645 — 58,501 Operating income 9,113 1,669 — 10,782 Depreciation and amortization 876 602 — 1,478 Six Months Ended December 30, 2018 MasterCraft NauticStar Crest Consolidated Net sales $ 152,631 $ 36,603 $ 25,948 $ 215,182 Cost of sales 111,875 31,602 21,428 164,905 Operating income 22,944 1,153 2,235 26,333 Depreciation and amortization 1,537 1,285 537 3,359 Six Months Ended December 31, 2017 MasterCraft NauticStar Crest Consolidated Net sales $ 123,288 $ 20,196 $ — $ 143,484 Cost of sales 88,742 16,645 — 105,387 Operating income 20,177 1,669 — 21,846 Depreciation and amortization 1,608 602 — 2,210 As of December 30, 2018 As of June 30, 2018 Assets MasterCraft $ 263,715 $ 170,218 NauticStar 83,168 87,866 Crest 87,727 — Eliminations (163,013) (81,160) Total Assets $ 271,597 $ 176,924 As of December 30, 2018 As of June 30, 2018 Goodwill MasterCraft $ 29,593 $ 29,593 NauticStar 36,199 36,199 Crest 35,597 — Total Goodwill $ 101,389 $ 65,792 |
ORGANIZATION AND NATURE OF BU_2
ORGANIZATION AND NATURE OF BUSINESS (Details) | 6 Months Ended |
Dec. 30, 2018segment | |
ORGANIZATION AND NATURE OF BUSINESS | |
Number of reportable segments | 3 |
BASIS OF PRESENTATION AND SIG_4
BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES - Interim Quarterly Reporting Periods (Details) - USD ($) $ in Thousands | 6 Months Ended | |||
Dec. 30, 2018 | Jul. 02, 2018 | Jul. 01, 2018 | Jun. 30, 2018 | |
Cumulative Effect of Adoption | ||||
Interim quarterly reporting periods | 91 days | |||
Cumulative effect of the changes | ||||
Accrued expenses and other current liabilities | $ 39,491 | $ 31,895 | $ 27,866 | |
Deferred income taxes | 977 | 489 | 1,427 | |
Accumulated deficit | (46,156) | $ (64,808) | $ (61,717) | |
Adjustments Due to ASC 606 | ||||
Cumulative effect of the changes | ||||
Accrued expenses and other current liabilities | (5,210) | $ 4,029 | ||
Deferred income taxes | (938) | |||
Accumulated deficit | $ 4,001 | $ (3,091) |
BASIS OF PRESENTATION AND SIG_5
BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES - Impact of ASU (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | |||||
Dec. 30, 2018 | Dec. 31, 2017 | Dec. 30, 2018 | Dec. 31, 2017 | Jul. 02, 2018 | Jul. 01, 2018 | Jun. 30, 2018 | |
Statement of Operations | |||||||
Net Sales | $ 121,541 | $ 78,435 | $ 215,182 | $ 143,484 | |||
Income before income tax expense | 12,680 | 9,643 | 23,370 | 20,216 | |||
Income tax expense | 2,492 | 1,634 | 4,718 | 5,161 | |||
Net income | 10,188 | $ 8,009 | 18,652 | $ 15,055 | |||
Balance Sheet | |||||||
Accrued expenses and other current liabilities | 39,491 | 39,491 | $ 31,895 | $ 27,866 | |||
Income taxes | 2,214 | 2,214 | |||||
Accumulated deficit | (46,156) | (46,156) | $ (64,808) | $ (61,717) | |||
Adjustments Due to ASC 606 | |||||||
Statement of Operations | |||||||
Net Sales | 825 | 1,342 | |||||
Income before income tax expense | 825 | 1,342 | |||||
Income tax expense | 167 | 271 | |||||
Net income | 658 | 1,071 | |||||
Balance Sheet | |||||||
Accrued expenses and other current liabilities | (5,210) | (5,210) | $ 4,029 | ||||
Income taxes | 1,209 | 1,209 | |||||
Accumulated deficit | 4,001 | 4,001 | $ (3,091) | ||||
Balances without adoption of ASC 606 | |||||||
Statement of Operations | |||||||
Net Sales | 122,366 | 216,524 | |||||
Income before income tax expense | 13,505 | 24,712 | |||||
Income tax expense | 2,659 | 4,989 | |||||
Net income | 10,846 | 19,723 | |||||
Balance Sheet | |||||||
Accrued expenses and other current liabilities | 34,281 | 34,281 | |||||
Income taxes | 3,423 | 3,423 | |||||
Accumulated deficit | $ (42,155) | $ (42,155) |
REVENUE RECOGNITION (Details)
REVENUE RECOGNITION (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | |||
Dec. 30, 2018 | Dec. 31, 2017 | Dec. 30, 2018 | Dec. 31, 2017 | Jun. 30, 2018 | |
Revenue by Categories | |||||
Revenue | $ 121,541 | $ 78,435 | $ 215,182 | $ 143,484 | |
Revenue practical expedients | |||||
Revenue, Practical Expedient, Financing Component | true | ||||
Revenue, Practical Expedient, Initial Application and Transition, Nondisclosure of Transaction Price Allocation to Remaining Performance Obligation | true | ||||
Accrued Expenses and Other Current Liabilities | |||||
Contract liabilities | |||||
Customer contract liabilities | 956 | $ 956 | $ 2,194 | ||
MasterCraft | |||||
Revenue by Categories | |||||
Revenue | 76,397 | 58,239 | 152,631 | 123,288 | |
NauticStar | |||||
Revenue by Categories | |||||
Revenue | 19,196 | $ 20,196 | 36,603 | $ 20,196 | |
Crest | |||||
Revenue by Categories | |||||
Revenue | 25,948 | 25,948 | |||
Boats and trailers | |||||
Revenue by Categories | |||||
Revenue | 119,912 | 209,411 | |||
Boats and trailers | MasterCraft | |||||
Revenue by Categories | |||||
Revenue | 74,976 | 147,352 | |||
Boats and trailers | NauticStar | |||||
Revenue by Categories | |||||
Revenue | 19,182 | 36,305 | |||
Boats and trailers | Crest | |||||
Revenue by Categories | |||||
Revenue | 25,754 | 25,754 | |||
Parts | |||||
Revenue by Categories | |||||
Revenue | 1,201 | 5,062 | |||
Parts | MasterCraft | |||||
Revenue by Categories | |||||
Revenue | 1,101 | 4,682 | |||
Parts | NauticStar | |||||
Revenue by Categories | |||||
Revenue | 14 | 294 | |||
Parts | Crest | |||||
Revenue by Categories | |||||
Revenue | 86 | 86 | |||
Other | |||||
Revenue by Categories | |||||
Revenue | 428 | 709 | |||
Other | MasterCraft | |||||
Revenue by Categories | |||||
Revenue | 320 | 597 | |||
Other | NauticStar | |||||
Revenue by Categories | |||||
Revenue | 4 | ||||
Other | Crest | |||||
Revenue by Categories | |||||
Revenue | $ 108 | $ 108 |
ACQUISITION - Purchase Price Al
ACQUISITION - Purchase Price Allocation (Details) $ in Thousands | Oct. 01, 2018USD ($)item | Oct. 02, 2017USD ($) | Dec. 30, 2018USD ($) | Dec. 31, 2017USD ($) | Jun. 30, 2018USD ($) |
Acquisition | |||||
Number of boat brands | item | 3 | ||||
Purchase Price: | |||||
Cash paid, net of cash acquired | $ 81,729 | $ 79,128 | |||
Recognized preliminary amounts of identifiable assets acquired and (liabilities assumed), at fair value: | |||||
Goodwill | $ 101,389 | $ 65,792 | |||
Crest | |||||
Purchase Price: | |||||
Cash paid, net of cash acquired | $ 81,729 | ||||
Recognized preliminary amounts of identifiable assets acquired and (liabilities assumed), at fair value: | |||||
Accounts receivable | 5,272 | ||||
Inventories | 9,928 | ||||
Other current assets | 185 | ||||
Property, plant and equipment | 1,840 | ||||
Identifiable intangible assets | 35,245 | ||||
Current liabilities | (6,338) | ||||
Fair value of assets acquired and liabilities assumed | 46,132 | ||||
Goodwill | 35,597 | ||||
Total purchase price allocation | $ 81,729 | ||||
NauticStar | |||||
Purchase Price: | |||||
Cash paid, net of cash acquired | $ 80,511 | ||||
Recognized preliminary amounts of identifiable assets acquired and (liabilities assumed), at fair value: | |||||
Accounts receivable | 1,773 | ||||
Inventories | 6,358 | ||||
Other current assets | 94 | ||||
Indemnification asset | 166 | ||||
Deferred income taxes | 83 | ||||
Property, plant and equipment | 4,945 | ||||
Identifiable intangible assets | 36,000 | ||||
Current liabilities | (4,858) | ||||
Unrecognized tax positions | (249) | ||||
Fair value of assets acquired and liabilities assumed | 44,312 | ||||
Goodwill | 36,199 | ||||
Total purchase price allocation | $ 80,511 |
ACQUISITION - Fair Value Estima
ACQUISITION - Fair Value Estimates of Intangible Assets Acquired (Details) - USD ($) $ in Thousands | Oct. 01, 2018 | Dec. 30, 2018 | Jun. 30, 2018 |
Identifiable intangible assets | |||
Goodwill | $ 101,389 | $ 65,792 | |
Crest | |||
Identifiable intangible assets | |||
Total identifiable intangible assets | $ 35,245 | ||
Weighted average useful life | 9 years 10 months 24 days | ||
Goodwill | $ 35,597 | ||
Crest | General and Administrative Expense | |||
Identifiable intangible assets | |||
Acquisition related costs | $ 2,017 | ||
Crest | Trade names | |||
Identifiable intangible assets | |||
Indefinite-lived intangible | 17,000 | ||
Crest | Dealer network | |||
Identifiable intangible assets | |||
Definite-lived intangible | $ 18,000 | ||
Estimated useful life | 10 years | ||
Crest | Software | |||
Identifiable intangible assets | |||
Definite-lived intangible | $ 245 | ||
Estimated useful life | 5 years |
ACQUISITION - Pro Forma Informa
ACQUISITION - Pro Forma Information (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Dec. 30, 2018 | Dec. 31, 2017 | Dec. 30, 2018 | Dec. 31, 2017 | |
Pro Forma financial information | ||||
Net sales | $ 121,541 | $ 94,342 | $ 236,175 | $ 189,507 |
Net income | $ 11,026 | $ 8,773 | $ 20,819 | $ 13,398 |
Basic earnings per share | $ 0.59 | $ 0.47 | $ 1.12 | $ 0.72 |
Diluted earnings per share | $ 0.59 | $ 0.47 | $ 1.11 | $ 0.72 |
ACQUISITION - Related Party (De
ACQUISITION - Related Party (Details) $ in Thousands | Oct. 01, 2018USD ($)item | Dec. 30, 2018USD ($) |
Lease Agreement | ||
Lease term | 10 years | |
Number of consecutive lease extensions available | item | 4 | |
Term of extension | 5 years | |
Annual rent, first five years | $ 330 | |
Annual rent, remaining five years | $ 425 | |
Period of time, during option periods, after which rent will be adjusted | 5 years | |
Parts Supplier | ||
Lease Agreement | ||
Product purchases | $ 942 | |
Outstanding balance due | $ 120 |
INVENTORIES - Components (Detai
INVENTORIES - Components (Details) - USD ($) $ in Thousands | Dec. 30, 2018 | Jun. 30, 2018 |
INVENTORIES | ||
Raw materials and supplies | $ 19,404 | $ 9,587 |
Work in process | 3,276 | 2,822 |
Finished goods | 6,137 | 9,026 |
Obsolescence reserve | (1,132) | (968) |
Total inventories | $ 27,685 | $ 20,467 |
PREPAID EXPENSES AND OTHER CU_3
PREPAID EXPENSES AND OTHER CURRENT ASSETS - Components (Details) - USD ($) $ in Thousands | Dec. 30, 2018 | Jun. 30, 2018 |
PREPAID EXPENSES AND OTHER CURRENT ASSETS | ||
Prepaid photo shoot | $ 1,027 | $ 273 |
Insurance | 515 | 974 |
Trade show deposits | 429 | 111 |
Interest rate cap | 341 | 525 |
Other | 1,193 | 1,412 |
Total prepaid expenses and other current assets | $ 3,505 | $ 3,295 |
ACCRUED EXPENSES AND OTHER CU_3
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES - Components (Details) - USD ($) $ in Thousands | Dec. 30, 2018 | Jul. 02, 2018 | Jun. 30, 2018 |
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES | |||
Warranty | $ 15,964 | $ 13,077 | |
Self-insurance | 667 | 703 | |
Compensation and related accruals | 2,692 | 2,995 | |
Inventory repurchase contingent obligation | 2,139 | 1,274 | |
Floor plan interest | 3,376 | 1,228 | |
Debt interest | 1,714 | 244 | |
Dealer incentives | 9,842 | 4,628 | |
Other | 3,097 | 3,717 | |
Total accrued expenses and other current liabilities | $ 39,491 | $ 31,895 | $ 27,866 |
ACCRUED EXPENSES AND OTHER CU_4
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES - Warranty Liability (Details) $ in Thousands | 6 Months Ended |
Dec. 30, 2018USD ($) | |
Roll forward of the accrued warranty liability | |
Beginning balance | $ 13,077 |
Provisions | 3,621 |
Additions for Crest acquisition | 681 |
Payments made | (3,657) |
Adjustments to preexisting warranties | 2,242 |
Ending balance | $ 15,964 |
ACCRUED EXPENSES AND OTHER CU_5
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES - Correction of Errors to Accrued Warranty Liability (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||||
Dec. 30, 2018 | Dec. 31, 2017 | Dec. 30, 2018 | Dec. 31, 2017 | Jul. 02, 2018 | Jun. 30, 2018 | |
Out-of-period adjustments | ||||||
Revenue | $ 121,541 | $ 78,435 | $ 215,182 | $ 143,484 | ||
Accrued expenses and other current liabilities | $ 39,491 | 39,491 | $ 31,895 | $ 27,866 | ||
Product warranty term | 5 years | |||||
Correction of Error in Accrued Warranty Calculation, Net | ||||||
Out-of-period adjustments | ||||||
Revenue | $ (225) | |||||
Accrued expenses and other current liabilities | 225 | 225 | ||||
Correction of Error in Accrued Warranty Calculation, Inaccurate Data on Cost of Parts | ||||||
Out-of-period adjustments | ||||||
Revenue | 1,125 | |||||
Accrued expenses and other current liabilities | (1,125) | (1,125) | ||||
Correction of Error in Accrued Warranty Calculation, Assumptions Used In Change in Warranty Period | ||||||
Out-of-period adjustments | ||||||
Revenue | (1,350) | |||||
Accrued expenses and other current liabilities | $ 1,350 | $ 1,350 |
GOODWILL AND OTHER INTANGIBLE_3
GOODWILL AND OTHER INTANGIBLE ASSETS - Goodwill (Details) $ in Thousands | 6 Months Ended |
Dec. 30, 2018USD ($) | |
Goodwill | |
Goodwill, beginning balance | $ 65,792 |
Addition related to the acquisition of Crest | 35,597 |
Goodwill, ending balance | 101,389 |
MasterCraft | |
Goodwill | |
Goodwill, beginning balance | 29,593 |
Goodwill, ending balance | 29,593 |
NauticStar | |
Goodwill | |
Goodwill, beginning balance | 36,199 |
Goodwill, ending balance | $ 36,199 |
GOODWILL AND OTHER INTANGIBLE_4
GOODWILL AND OTHER INTANGIBLE ASSETS - Intangible Assets Other Than Goodwill (Details) - USD ($) $ in Thousands | Dec. 30, 2018 | Jun. 30, 2018 |
Amortizable intangible assets | ||
Gross Carrying Amount | $ 39,745 | $ 21,590 |
Accumulated Amortization | (3,972) | (2,544) |
Total | 35,773 | 19,046 |
Indefinite-lived intangible assets | ||
Trade names | 49,000 | 32,000 |
Total intangible assets | ||
Gross Carrying Amount | 88,745 | 53,590 |
Net Carrying Amount | 84,773 | 51,046 |
Dealer network | ||
Amortizable intangible assets | ||
Gross Carrying Amount | 39,500 | 21,590 |
Accumulated Amortization | (3,959) | (2,544) |
Total | 35,541 | $ 19,046 |
Software | ||
Amortizable intangible assets | ||
Gross Carrying Amount | 245 | |
Accumulated Amortization | (13) | |
Total | $ 232 |
GOODWILL AND OTHER INTANGIBLE_5
GOODWILL AND OTHER INTANGIBLE ASSETS - Future Amortization (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | |||
Dec. 30, 2018 | Dec. 31, 2017 | Dec. 30, 2018 | Dec. 31, 2017 | Jun. 30, 2018 | |
Finite-lived intangible assets | |||||
Amortization of intangible assets | $ 987 | $ 525 | $ 1,517 | $ 552 | |
Estimated amortization expense | |||||
Remainder of 2019 | 2,440 | 2,440 | |||
2,020 | 3,956 | 3,956 | |||
2,021 | 3,956 | 3,956 | |||
2,022 | 3,956 | 3,956 | |||
2,023 | 3,956 | 3,956 | |||
and thereafter | 17,510 | 17,510 | |||
Total | $ 35,773 | $ 35,773 | $ 19,046 |
FAIR VALUE MEASUREMENTS - Asset
FAIR VALUE MEASUREMENTS - Assets and Liabilities at Fair Value (Details) - USD ($) $ in Thousands | Dec. 30, 2018 | Jun. 30, 2018 | Nov. 26, 2017 |
Assets and liabilities measured at fair value | |||
Asset | $ 341 | $ 525 | |
Recurring | |||
Assets and liabilities measured at fair value | |||
Transfers of assets between Level 1 and Level 2 | 0 | ||
Transfers of liabilities between Level 1 and Level 2 | 0 | ||
Interest rate cap | |||
Assets and liabilities measured at fair value | |||
Outstanding principal of long-term debt | $ 34,594 | ||
Interest rate cap | LIBOR | |||
Assets and liabilities measured at fair value | |||
Interest rate cap | 2.00% | ||
Level 2 | Interest rate cap | Recurring | |||
Assets and liabilities measured at fair value | |||
Asset | $ 341 | $ 525 |
LONG-TERM DEBT - Components (De
LONG-TERM DEBT - Components (Details) - USD ($) $ in Thousands | Dec. 30, 2018 | Jun. 30, 2018 |
Long-term debt | ||
Long-term debt, net of unamortized debt issuance costs | $ 146,165 | $ 75,156 |
Less current portion of long-term debt | 11,100 | 5,475 |
Long-term debt - less current portion | 135,520 | 70,087 |
Senior Secured Term Loans | ||
Long-term debt | ||
Long-term debt | 148,000 | 76,656 |
Debt issuance costs on term loan | (1,835) | (1,500) |
Less current portion of debt issuance costs on term loan | $ (455) | $ (406) |
LONG-TERM DEBT - Senior Secured
LONG-TERM DEBT - Senior Secured Credit Facility (Details) - USD ($) $ in Thousands | Oct. 01, 2018 | Dec. 30, 2018 | Jun. 30, 2018 |
Long-term debt | |||
Unamortized debt issuance costs | $ 508 | $ 383 | |
Senior Secured Term Loans | |||
Long-term debt | |||
Unamortized debt issuance costs | 1,835 | 1,499 | |
Revolving Credit Facility | |||
Long-term debt | |||
Outstanding borrowings | 0 | ||
Net availability under facility | 35,000 | 30,000 | |
Unamortized debt issuance costs | 508 | $ 383 | |
Fourth Amended Credit Agreement | |||
Long-term debt | |||
Maximum borrowing capacity | $ 190,000 | ||
Fourth Amended Credit Agreement | Senior Secured Term Loans | |||
Long-term debt | |||
Voluntary payments | $ 7,000 | ||
Fourth Amended Credit Agreement | Term Loan One | |||
Long-term debt | |||
Loan commitment | 75,000 | ||
Fourth Amended Credit Agreement | Term Loan Two | |||
Long-term debt | |||
Loan commitment | 80,000 | ||
Fourth Amended Credit Agreement | Revolving Credit Facility | |||
Long-term debt | |||
Maximum borrowing capacity | $ 35,000 | ||
Fourth Amended Credit Agreement | Prime Rate | |||
Long-term debt | |||
Effective interest rate | 1.00% | ||
Fourth Amended Credit Agreement | Prime Rate | Minimum | |||
Long-term debt | |||
Variable margin rate | 0.50% | ||
Fourth Amended Credit Agreement | Prime Rate | Maximum | |||
Long-term debt | |||
Variable margin rate | 1.50% | ||
Fourth Amended Credit Agreement | LIBOR | |||
Long-term debt | |||
Effective interest rate | 2.00% | ||
Fourth Amended Credit Agreement | LIBOR | Minimum | |||
Long-term debt | |||
Variable margin rate | 1.50% | ||
Fourth Amended Credit Agreement | LIBOR | Maximum | |||
Long-term debt | |||
Variable margin rate | 2.50% |
INCOME TAXES (Details)
INCOME TAXES (Details) | 6 Months Ended | |
Dec. 30, 2018 | Dec. 31, 2017 | |
INCOME TAXES | ||
Effective tax rate | 20.20% | 25.50% |
Statutory income tax rate | 21.00% |
EARNINGS PER SHARE - Factors (D
EARNINGS PER SHARE - Factors (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Dec. 30, 2018 | Dec. 31, 2017 | Dec. 30, 2018 | Dec. 31, 2017 | |
Factors used in the earnings per share computation | ||||
Net income | $ 10,188 | $ 8,009 | $ 18,652 | $ 15,055 |
Weighted average common shares - basic | 18,653,111 | 18,619,834 | 18,649,575 | 18,617,467 |
Weighted average outstanding shares - diluted | 18,772,322 | 18,702,352 | 18,770,543 | 18,694,489 |
Basic earnings per share (in dollars per share) | $ 0.55 | $ 0.43 | $ 1 | $ 0.81 |
Diluted earnings per share (in dollars per share) | $ 0.54 | $ 0.43 | $ 0.99 | $ 0.81 |
Stock options | ||||
Factors used in the earnings per share computation | ||||
Dilutive effect of assumed exercises of stock options and restricted share awards\units | 50,261 | 34,994 | 51,307 | 32,969 |
Restricted stock awards | ||||
Factors used in the earnings per share computation | ||||
Dilutive effect of assumed exercises of stock options and restricted share awards\units | 68,950 | 47,524 | 69,661 | 44,054 |
EARNINGS PER SHARE - Anti-dilut
EARNINGS PER SHARE - Anti-dilutive Securities (Details) - shares | 3 Months Ended | 6 Months Ended | ||
Dec. 30, 2018 | Dec. 31, 2017 | Dec. 30, 2018 | Dec. 31, 2017 | |
Restricted stock awards | ||||
Other disclosures | ||||
Anti-dilutive securities excluded from computation of earning per share | 1,559 | 1,559 | 1,559 | 1,559 |
Performance stock units | ||||
Other disclosures | ||||
Anti-dilutive securities excluded from computation of earning per share | 2,925 | 2,925 | 2,925 | 2,925 |
STOCK-BASED COMPENSATION - RSAs
STOCK-BASED COMPENSATION - RSAs and PSUs (Details) - USD ($) $ / shares in Units, $ in Thousands | 1 Months Ended | 6 Months Ended | ||||
Nov. 25, 2018 | Oct. 28, 2018 | Aug. 26, 2018 | Jul. 29, 2018 | Dec. 30, 2018 | Dec. 31, 2017 | |
Stock-Based Compensation | ||||||
Stock-based compensation | $ 788 | $ 528 | ||||
Certain employees | Restricted stock awards | 2015 Plan | ||||||
Stock-Based Compensation | ||||||
Granted | 1,072 | 1,559 | 262 | 31,207 | ||
Grant date market price | $ 27.66 | $ 36.10 | $ 25.27 | $ 26.59 | ||
Vesting period (in years) | 3 years | 3 years | 3 years | |||
Certain employees | Performance stock units | 2015 Plan | ||||||
Stock-Based Compensation | ||||||
Granted | 1,559 | 33,082 | ||||
Grant date market price | $ 31.60 | $ 31.60 | ||||
Vesting period (in years) | 3 years | |||||
Non-employee directors | Restricted stock awards | 2015 Plan | ||||||
Stock-Based Compensation | ||||||
Granted | 1,801 | 12,414 | ||||
Grant date market price | $ 33.22 | $ 26.59 |
SEGMENT INFORMATION - Operating
SEGMENT INFORMATION - Operating Information (Details) $ in Thousands | 3 Months Ended | 6 Months Ended | |||
Dec. 30, 2018USD ($) | Dec. 31, 2017USD ($) | Dec. 30, 2018USD ($)segment | Dec. 31, 2017USD ($) | Jun. 30, 2018USD ($) | |
Segment reporting information | |||||
Number of operating segments | segment | 3 | ||||
Number of reportable segments | segment | 3 | ||||
Net Sales | $ 121,541 | $ 78,435 | $ 215,182 | $ 143,484 | |
Cost of sales | 94,467 | 58,501 | 164,905 | 105,387 | |
Operating income | 14,722 | 10,782 | 26,333 | 21,846 | |
Depreciation and amortization | 1,923 | 1,478 | 3,359 | 2,210 | |
Assets | 271,597 | 271,597 | $ 176,924 | ||
Goodwill | 101,389 | 101,389 | 65,792 | ||
MasterCraft | |||||
Segment reporting information | |||||
Net Sales | 76,397 | 58,239 | 152,631 | 123,288 | |
Cost of sales | 56,852 | 41,856 | 111,875 | 88,742 | |
Operating income | 11,414 | 9,113 | 22,944 | 20,177 | |
Depreciation and amortization | 732 | 876 | 1,537 | 1,608 | |
Goodwill | 29,593 | 29,593 | 29,593 | ||
NauticStar | |||||
Segment reporting information | |||||
Net Sales | 19,196 | 20,196 | 36,603 | 20,196 | |
Cost of sales | 16,187 | 16,645 | 31,602 | 16,645 | |
Operating income | 1,072 | 1,669 | 1,153 | 1,669 | |
Depreciation and amortization | 654 | $ 602 | 1,285 | $ 602 | |
Goodwill | 36,199 | 36,199 | 36,199 | ||
Crest | |||||
Segment reporting information | |||||
Net Sales | 25,948 | 25,948 | |||
Cost of sales | 21,428 | 21,428 | |||
Operating income | 2,235 | 2,235 | |||
Depreciation and amortization | 537 | 537 | |||
Goodwill | 35,597 | 35,597 | |||
Operating Segments | MasterCraft | |||||
Segment reporting information | |||||
Assets | 263,715 | 263,715 | 170,218 | ||
Operating Segments | NauticStar | |||||
Segment reporting information | |||||
Assets | 83,168 | 83,168 | 87,866 | ||
Operating Segments | Crest | |||||
Segment reporting information | |||||
Assets | 87,727 | 87,727 | |||
Eliminations | |||||
Segment reporting information | |||||
Assets | $ (163,013) | $ (163,013) | $ (81,160) |