MasterCraft Reports Fiscal 2016 First-Quarter Results
Highlights:
- Fiscal 2016 first-quarter net sales rose 7 percent over the prior-year first quarter to
$56.0 million - Net sales, excluding the terminated Hydra-Sports manufacturing contract, increased 15 percent compared to the prior-year first quarter
- Fully diluted, pro forma adjusted net income per share totaled
$0.30 MasterCraft unit volume grew 10 percent from the fiscal 2015 first quarter to 682 units- Fiscal 2016 first-quarter adjusted EBITDA increased 34 percent from the prior-year three months to
$10.7 million - Fiscal 2016 first-quarter gross margin improved by 390 basis points versus the year-earlier period
MasterCraft launched the X26 and began ramping up production
“As a company we continue to realize the benefits of our focus on operational excellence and continuous improvement, increasing gross margins and adjusted EBITDA over the first quarter of the prior year. Additionally, our
First-Quarter Results
Net sales for the three months ended
Said McNew, “Once again, favorable macroeconomic conditions in
Gross profit for the three months ended
Selling and marketing expense rose $0.4 million to
Net loss for fiscal 2016 first quarter was
Fiscal 2016 first quarter adjusted EBITDA was
Fiscal 2016 first quarter adjusted net income increased 50.0 percent to
Key Milestones
In the fiscal 2016 first quarter,
Said McNew, “As we’ve stated before, the X26 is handcrafted in our manufacturing facility in
In addition to new product launches,
Said McNew, “Over the last few years,
Outlook
“MasterCraft is off to a great start in fiscal 2016 and we’re optimistic about the future,” McNew said. “Our growth strategy for the year remains consistent and centers on five key initiatives:
- Developing new and innovative products in core markets;
- Further penetrating the entry-level segment of the performance sport boat category;
- Capturing share from adjacent boating categories;
- Strengthening our dealer network; and
- Driving margin expansion through continuous operational improvement.
“We remain steadfast in our belief that through solid execution of these initiatives and the continued success of our highly differentiated product portfolio, we can drive strong organic growth in fiscal 2016,” McNew concluded.
For the fiscal 2016 year ending
Conference Call and Webcast Information
For an audio replay of the conference call, dial (855) 859-2056 (domestic) or (404) 537-3406 (international) and enter 54757562. The audio replay will be available beginning at 8 p.m. ET on Thursday, Nov. 5, 2015, through 11:59 p.m. ET on
About
Headquartered in
Forward-Looking Statements
This press release includes forward-looking statements (as such term is defined in the Private Securities Litigation Reform Act of 1995). Forward-looking statements can be identified by such words and phrases as “believes,” “anticipates,” “expects,” “intends,” “estimates,” “may,” “will,” “should,” “continue” and similar expressions, comparable terminology or the negative thereof, and include statements in this press release concerning an exciting pipeline of launches; our ability to continue our operating momentum, capture additional market share and deliver continued growth; expectations regarding driving margin expansion, sales increases and organic growth; our fiscal 2016 outlook and key growth initiatives; and our anticipated financial performance for fiscal 2016.
Forward-looking statements are subject to risks, uncertainties and other important factors that could cause actual results to differ materially from those expressed or implied in the forward-looking statements, including, but not limited to: general economic conditions, demand for our products, 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 large fixed cost base, and the successful introduction of our new products. These and other important factors discussed under the caption “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended
Use of Non-GAAP Financial Measures
To supplement MasterCraft’s condensed consolidated financial statements prepared in accordance with U.S. generally accepted accounting principles (GAAP), the company uses certain non-GAAP financial measures in this release. Reconciliations of the non-GAAP financial measures used in this release to the most comparable U.S. GAAP measures for the respective periods can be found in tables immediately following the condensed consolidated statements of operations. Non-GAAP financial measures have limitations as analytical tools and should not be considered in isolation or as a substitute for
MCBC HOLDINGS, INC. AND SUBSIDIARIES | |||||||||
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS | |||||||||
(Dollar amounts in thousands, except share and per share data) | |||||||||
Three Months Ended | |||||||||
September 27, | September 28, | ||||||||
2015 | 2014 | ||||||||
(Unaudited) | |||||||||
Net sales | $ | 55,981 | $ | 52,424 | |||||
Cost of sales | 40,142 | 39,643 | |||||||
Gross profit | 15,839 | 12,781 | |||||||
Operating expenses: | |||||||||
Selling and marketing | 2,477 | 2,140 | |||||||
General and administrative | 9,287 | 2,559 | |||||||
Amortization of intangible assets | 55 | 55 | |||||||
Total operating expenses | 11,819 | 4,754 | |||||||
Operating income | 4,020 | 8,027 | |||||||
Other expense: | |||||||||
Interest expense | 964 | 1,287 | |||||||
Change in common stock warrant fair value | 3,346 | 2,883 | |||||||
(Loss) income before income tax expense | (290 | ) | 3,857 | ||||||
Income tax expense | 1,033 | 2,439 | |||||||
Net (loss) income | $ | (1,323 | ) | $ | 1,418 | ||||
(Loss) earnings per common share | |||||||||
Basic | $ | (0.08 | ) | $ | 0.13 | ||||
Diluted | $ | (0.08 | ) | $ | 0.12 | ||||
Weighted average shares used for the computation of: | |||||||||
Basic (loss) earnings per share | 16,263,793 | 11,139,000 | |||||||
Diluted (loss) earnings per share | 16,263,793 | 11,495,079 | |||||||
MCBC HOLDINGS, INC. AND SUBSIDIARIES | ||||||||
CONDENSED CONSOLIDATED BALANCE SHEETS | ||||||||
(Dollar amounts in thousands, except share and per share data) | ||||||||
September 27, | June 30, | |||||||
2015 | 2015 | |||||||
(Unaudited) | ||||||||
ASSETS | ||||||||
CURRENT ASSETS: | ||||||||
Cash and cash equivalents | $ | 7,838 | $ | 1,167 | ||||
Accounts receivable — net of allowances of $135 and $92, respectively | 4,060 | 2,653 | ||||||
Inventories — net | 12,701 | 11,541 | ||||||
Prepaid expenses and other current assets | 6,487 | 7,235 | ||||||
Deferred income taxes | 7,340 | 6,733 | ||||||
Total current assets | 38,426 | 29,329 | ||||||
Property, plant and equipment — net | 13,090 | 13,233 | ||||||
Intangible assets — net | 16,916 | 16,971 | ||||||
Goodwill | 29,593 | 29,593 | ||||||
Deferred debt issuance costs — net | 371 | 425 | ||||||
Other | 125 | 125 | ||||||
Total assets | $ | 98,521 | $ | 89,676 | ||||
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) | ||||||||
CURRENT LIABILITIES: | ||||||||
Accounts payable | $ | 13,250 | $ | 14,808 | ||||
Income tax payable | 1,531 | 224 | ||||||
Accrued expenses and other current liabilities | 20,048 | 21,313 | ||||||
Common stock warrant liability | 225 | 9,147 | ||||||
Current portion of long term debt | — | 18,275 | ||||||
Total current liabilities | 35,054 | 63,767 | ||||||
OTHER LIABILITIES: | ||||||||
Long-term debt | — | 60,487 | ||||||
Unrecognized tax positions | 543 | 519 | ||||||
Deferred income taxes | 7,045 | 7,156 | ||||||
Total liabilities | 42,642 | 131,929 | ||||||
COMMITMENTS AND CONTINGENCIES | ||||||||
STOCKHOLDERS' EQUITY (DEFICIT): | ||||||||
Common stock, $0.01 par value per share — authorized, 100,000,000 shares; issued and outstanding, 17,997,622 shares at September 27, 2015 and 11,139,000 shares at June 30, 2015 | 180 | 111 | ||||||
Additional paid-in capital | 108,227 | 8,841 | ||||||
Accumulated deficit | (52,528 | ) | (51,205 | ) | ||||
Total stockholders' equity (deficit) | 55,879 | (42,253 | ) | |||||
Total liabilities and stockholders' equity (deficit) | $ | 98,521 | $ | 89,676 | ||||
Supplemental Operating Data
The following table sets forth certain supplemental operating data for the periods indicated:
Three Months Ended | ||||||||||||
September 27, | September 28, | % | ||||||||||
2015 | 2014 | Variance | ||||||||||
(Unaudited) | ||||||||||||
(Dollars in thousands) | ||||||||||||
Unit volume: | ||||||||||||
MasterCraft | 682 | 621 | 9.8 | % | ||||||||
Hydra-Sports | — | 12 | ||||||||||
MasterCraft sales | $ | 55,981 | $ | 48,851 | 14.6 | % | ||||||
Hydra-Sports sales | $ | — | $ | 3,573 | ||||||||
Consolidated sales | $ | 55,981 | $ | 52,424 | 6.8 | % | ||||||
Per Unit: | ||||||||||||
MasterCraft sales | $ | 82 | $ | 79 | 3.8 | % | ||||||
Hydra-Sports sales | $ | — | $ | 298 | ||||||||
Consolidated sales | $ | 82 | $ | 83 | (1.2 | ) | % | |||||
Gross margin | 28.3 | % | 24.4 | % | ||||||||
Non-GAAP Measures
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 and unusual items that we do not consider to be indicative of our ongoing operations, including change in common stock warrant fair value, fees and expenses related to the Company’s initial public offering, our stock-based compensation and the results of operations of our terminated Hydra-Sports manufacturing contract. We define adjusted net income as net (loss) income adjusted to eliminate certain non-cash charges and unusual items that we do not consider to be indicative of our ongoing operations, including change in common stock warrant fair value, fees and expenses related to the Company’s initial public offering, our stock-based compensation and the results of operations of our terminated Hydra-Sports manufacturing contract and an adjustment for income tax expense at a normalized annual effective tax rate. We define adjusted EBITDA margin as adjusted EBITDA expressed as a percentage of
- 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 and adjusted EBITDA do not reflect the impact of earnings or charges resulting from matters we do not consider to be indicative of our ongoing operations, but may nonetheless have a material impact on our results of operations, including the operations related to our Hydra-Sports manufacturing contract for periods prior to its termination.
In addition, because not all companies use identical calculations, our presentation of adjusted EBITDA and adjusted net income may not be comparable to similarly titled measures of other companies, including companies in our industry.
The following table sets forth a reconciliation of adjusted EBITDA to net (loss) income as determined in accordance with GAAP for the periods indicated:
Three Months Ended | |||||||
September 27, | September 28, | ||||||
2015 | 2014 | ||||||
(Unaudited) | |||||||
(Dollars in thousands) | |||||||
Net (loss) income | $ | (1,323 | ) | $ | 1,418 | ||
Income tax expense | 1,033 | 2,439 | |||||
Interest expense | 964 | 1,287 | |||||
Depreciation and amortization | 825 | 748 | |||||
EBITDA | 1,499 | 5,892 | |||||
Change in common stock warrant fair value(a) | 3,346 | 2,883 | |||||
Transaction expense(b) | 124 | — | |||||
Litigation charge(c) | 274 | — | |||||
Hydra-Sports(d) | — | (761 | ) | ||||
Stock-based compensation | 5,425 | — | |||||
Adjusted EBITDA | $ | 10,668 | $ | 8,014 | |||
Adjusted EBITDA margin(e) | 19.1 | % | 16.4 | % | |||
a. Represents non-cash expense related to increases in the fair market value of the Company’s common stock warrant. | |||||||
b. Represents fees and expenses related to the Company’s initial public offering. | |||||||
c. Represents legal and advisory fees related to our litigation with Malibu Boats, LLC. | |||||||
d. Represents the operating income attributable to the operations of our Hydra-Sports business and the related manufacturing agreement, adjusted to exclude depreciation and amortization related to Hydra-Sports. We previously divested the Hydra-Sports business, but continued to manufacture Hydra-Sports boats for the purchaser of the business pursuant to an agreement that expired on June 30, 2015 (and which was not renewed). This adjustment was calculated by identifying the applicable cost of sales and operating expenses directly attributable to the Hydra-Sports business for such period, excluding any corporate overhead or other shared costs. | |||||||
e. We define adjusted EBITDA margin as adjusted EBITDA expressed as a percentage of MasterCraft sales. | |||||||
The following table sets forth a reconciliation of adjusted net income to net (loss) income as determined in accordance with GAAP for the periods indicated:
Three Months Ended | ||||||||
September 27, | September 28, | |||||||
2015 | 2014 | |||||||
(Unaudited) | ||||||||
(Dollars in thousands, except for | ||||||||
shares and per share amounts) | ||||||||
Net (loss) income | $ | (1,323 | ) | $ | 1,418 | |||
Income tax expense | 1,033 | 2,439 | ||||||
Change in common stock warrant fair value(a) | 3,346 | 2,883 | ||||||
Transaction expense(b) | 124 | — | ||||||
Litigation charge(c) | 274 | — | ||||||
Hydra-Sports(d) | — | (761 | ) | |||||
Stock-based compensation | 5,425 | — | ||||||
Adjusted net income before income taxes | 8,879 | 5,979 | ||||||
Adjusted income tax expense(e) | 3,196 | 2,152 | ||||||
Adjusted net income | $ | 5,683 | $ | 3,827 | ||||
Pro-forma adjusted net income per common share | ||||||||
Basic | $ | 0.32 | $ | 0.21 | ||||
Diluted | $ | 0.30 | $ | 0.20 | ||||
Pro-forma weighted average shares used for the computation of: | ||||||||
Basic adjusted net income per share(f) | 17,997,622 | 17,997,622 | ||||||
Diluted adjusted net income per share(g) | 18,946,145 | 18,946,145 | ||||||
a. Represents non-cash expense related to increases in the fair market value of the Company’s common stock warrant. | ||||||||
b. Represents fees and expenses related to the Company’s initial public offering. | ||||||||
c. Represents legal and advisory fees related to our litigation with Malibu Boats, LLC. | ||||||||
d. Represents the operating income attributable to the operations of our Hydra-Sports business and the related manufacturing agreement, adjusted to exclude depreciation and amortization related to Hydra-Sports. We previously divested the Hydra-Sports business, but continued to manufacture Hydra-Sports boats for the purchaser of the business pursuant to an agreement that expired on June 30, 2015 (and which was not renewed). This adjustment was calculated by identifying the applicable cost of sales and operating expenses directly attributable to the Hydra-Sports business for such period, excluding any corporate overhead or other shared costs. | ||||||||
e. Reflects income tax expense at an estimated normalized annual effective income tax rate of 36.0 percent for the periods presented. | ||||||||
f. The weighted average shares used for computation of pro-forma basic earnings per common share gives effect to the 6,071,429 shares sold in the Company’s initial public offering, which closed on July 22, 2015 and gives effect for the 787,193 shares issued in exchange of common stock warrants during the three months ended September 27, 2015. | ||||||||
g. The weighted average shares used for computation of pro-forma diluted earnings per common share gives effect to the 6,071,429 shares sold in the Company’s initial public offering, the 787,193 shares issued during the three months ended September 27, 2015 in exchange of common stock warrants, 59,792 shares for the dilutive effect of stock options and the 888,731 shares of restricted stock granted under the 2015 Incentive Award Plan which vest in January 2016. | ||||||||
Contacts:Tim Oxley Chief Financial Officer (423) 884-2221 Tim.Oxley@mastercraft.comMatt Sullivan (612) 455-1709 Matt.Sullivan@padillacrt.com