MasterCraft Reports Fiscal 2016 Second-Quarter Results
Highlights:
- Net sales, excluding the terminated Hydra-Sports manufacturing contract, increased 12.2 percent versus the year-earlier period
- Total second-quarter net sales rose 4.5 percent over the prior-year second quarter to
$55.2 million - Fully diluted, pro forma, adjusted net income per share increased 57.1 percent to
$0.33 - Fiscal 2016 second-quarter adjusted EBITDA increased 31.3 percent to
$10.5 million compared to$8.0 million for the year-earlier period - Gross margin increased to 27.8 percent, a 380 basis point improvement versus the year-earlier period
- Adjusted EBITDA margin increased to 19.1 percent, a 280 basis point improvement versus the year-earlier period
MasterCraft launched the X26, our largest and most luxurious boat, and began ramping up production
Second-Quarter Results
“Domestically, demand for
Gross profit for the three months ended
Selling and marketing expense rose to
Net income for the fiscal 2016 second quarter was
Fiscal 2016 second-quarter adjusted EBITDA was
Fiscal 2016 second-quarter adjusted net income increased 59.0 percent to
Key Milestones
In the fiscal 2016 first quarter,
Said McNew, “Everything we’re hearing from both dealers and consumers about the X26 is overwhelmingly positive. The X26, since its release, has sold 150 percent more boats than the prior-year model it replaced. All production slots for this model are fully allocated for the remainder of the model year.”
On the operations front,
These positive results have recently been recognized with
“We continue to set new benchmarks for operational excellence and establish best practices in manufacturing,” said McNew. “Being awarded as the 2015 IndustryWeek Best Plant validates the operational excellence strategy that is embraced across our entire enterprise.”
Outlook
“MasterCraft has delivered a solid fiscal 2016 first half, and we expect to continue to drive strong organic growth for the remainder of fiscal 2016,” McNew said. “Additionally, we remain committed to our five-pronged growth strategy:
- 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 excellence.”
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 23534110. The audio replay will be available beginning at 8 p.m. ET on Thursday, Feb. 4, 2016, 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 often 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 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
Any such forward-looking statements represent management's estimates as of the date of this press release. These forward-looking statements should not be relied upon as representing our views as of any date subsequent to the date of this press release. We undertake no obligation (and we expressly disclaim any obligation) to update or supplement any forward-looking statements that may become untrue or cause our views to change, whether because of new information, future events, changes in assumptions or otherwise. Comparison of results for current and prior periods are not intended to express any future trends or indications of future performance, unless expressed as such, and should only be viewed as historical data.
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
Results of Operations for the Three and Six Months Ended December 27, 2015 | |||||||||||||
MCBC HOLDINGS, INC. AND SUBSIDIARIES | |||||||||||||
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS | |||||||||||||
(Dollars in thousands, except share and per share data) | |||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||
December 27, | December 28, | December 27, | December 28, | ||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||
(Unaudited) | |||||||||||||
Net sales | $ | 55,203 | $ | 52,827 | $ | 111,184 | $ | 105,251 | |||||
Cost of sales | 39,838 | 40,131 | 79,980 | 79,774 | |||||||||
Gross profit | 15,365 | 12,696 | 31,204 | 25,477 | |||||||||
Operating expenses: | |||||||||||||
Selling and marketing | 2,882 | 1,982 | 5,359 | 4,122 | |||||||||
General and administrative | 9,647 | 2,644 | 18,934 | 5,203 | |||||||||
Amortization of intangible assets | 56 | 57 | 111 | 112 | |||||||||
Total operating expenses | 12,585 | 4,683 | 24,404 | 9,437 | |||||||||
Operating income | 2,780 | 8,013 | 6,800 | 16,040 | |||||||||
Other expense: | |||||||||||||
Interest expense | 44 | 1,111 | 1,008 | 2,398 | |||||||||
Change in common stock warrant fair value | 55 | 2,882 | 3,401 | 5,765 | |||||||||
Income before income tax expense | 2,681 | 4,020 | 2,391 | 7,877 | |||||||||
Income tax expense | 811 | 2,546 | 1,844 | 4,985 | |||||||||
Net income | $ | 1,870 | $ | 1,474 | $ | 547 | $ | 2,892 | |||||
Earnings per common share | |||||||||||||
Basic | $ | 0.10 | $ | 0.13 | $ | 0.03 | $ | 0.26 | |||||
Diluted | $ | 0.10 | $ | 0.13 | $ | 0.03 | $ | 0.25 | |||||
Weighted average shares used for the computation of: | |||||||||||||
Basic earnings per share | 17,998,796 | 11,139,000 | 17,131,295 | 11,139,000 | |||||||||
Diluted earnings per share | 18,606,884 | 11,642,716 | 17,824,985 | 11,568,898 |
MCBC HOLDINGS, INC. AND SUBSIDIARIES | |||||||||||
CONDENSED CONSOLIDATED BALANCE SHEETS | |||||||||||
(Dollars in thousands, except share and per share data) | |||||||||||
December 27, | June 30, | ||||||||||
2015 | 2015 | ||||||||||
(Unaudited) | |||||||||||
ASSETS | |||||||||||
CURRENT ASSETS: | |||||||||||
Cash and cash equivalents | $ | 15,641 | $ | 1,167 | |||||||
Accounts receivable — net of allowances of $74 and $92, respectively | 1,753 | 2,653 | |||||||||
Income tax receivable | 474 | — | |||||||||
Inventories — net | 11,286 | 11,541 | |||||||||
Prepaid expenses and other current assets | 5,480 | 7,235 | |||||||||
Deferred income taxes | 8,331 | 6,733 | |||||||||
Total current assets | 42,965 | 29,329 | |||||||||
Property, plant and equipment — net | 13,188 | 13,233 | |||||||||
Intangible assets — net | 16,860 | 16,971 | |||||||||
Goodwill | 29,593 | 29,593 | |||||||||
Deferred debt issuance costs — net | 371 | 425 | |||||||||
Other | 125 | 125 | |||||||||
Total assets | $ | 103,102 | $ | 89,676 | |||||||
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) | |||||||||||
CURRENT LIABILITIES: | |||||||||||
Accounts payable | $ | 9,509 | $ | 14,808 | |||||||
Income tax payable | — | 224 | |||||||||
Accrued expenses and other current liabilities | 20,580 | 21,313 | |||||||||
Common stock warrant liability | 258 | 9,147 | |||||||||
Current portion of long term debt | — | 18,275 | |||||||||
Total current liabilities | 30,347 | 63,767 | |||||||||
Long-term debt | — | 60,487 | |||||||||
Unrecognized tax positions | 1,519 | 519 | |||||||||
Deferred income taxes | 6,661 | 7,156 | |||||||||
Total liabilities | 38,527 | 131,929 | |||||||||
COMMITMENTS AND CONTINGENCIES | |||||||||||
STOCKHOLDERS' EQUITY (DEFICIT): | |||||||||||
Common stock, $.01 par value per share — authorized, 100,000,000 shares; issued and outstanding, 17,999,244 shares at December 27, 2015 and 11,139,000 shares at June 30, 2015 | 180 | 111 | |||||||||
Additional paid-in capital | 115,053 | 8,841 | |||||||||
Accumulated deficit | (50,658 | ) | (51,205 | ) | |||||||
Total stockholders' equity (deficit) | 64,575 | (42,253 | ) | ||||||||
Total liabilities and stockholders' equity (deficit) | $ | 103,102 | $ | 89,676 |
Supplemental Operating Data
The following table sets forth certain supplemental operating data for the periods indicated:
Three Months Ended | Six Months Ended | |||||||||||||||||||
December 27, | December 28, | % | December 27, | December 28, | % | |||||||||||||||
2015 | 2014 | Variance | 2015 | 2014 | Variance | |||||||||||||||
(Unaudited) | ||||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||
Unit volume: | ||||||||||||||||||||
MasterCraft | 696 | 648 | 7.4 | % | 1,378 | 1,269 | 8.6 | % | ||||||||||||
Hydra-Sports | — | 12 | — | 24 | ||||||||||||||||
MasterCraft sales | $ | 55,203 | $ | 49,208 | 12.2 | % | $ | 111,184 | $ | 98,059 | 13.4 | % | ||||||||
Hydra-Sports sales | $ | — | $ | 3,619 | $ | — | $ | 7,192 | ||||||||||||
Consolidated sales | $ | 55,203 | $ | 52,827 | 4.5 | % | $ | 111,184 | $ | 105,251 | 5.6 | % | ||||||||
Per Unit: | ||||||||||||||||||||
MasterCraft sales | $ | 79 | $ | 76 | 3.9 | % | $ | 81 | $ | 77 | 5.2 | % | ||||||||
Hydra-Sports sales | $ | — | $ | 302 | $ | — | $ | 300 | ||||||||||||
Consolidated sales | $ | 79 | $ | 80 | (1.3 | ) | % | $ | 81 | $ | 81 | — | % | |||||||
Gross margin | 27.8 | % | 24.0 | % | 28.1 | % | 24.2 | % |
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 income as determined in accordance with GAAP for the periods indicated:
Three Months Ended | Six Months Ended | ||||||||||||||||
December 27, 2015 | December 28, 2014 | December 27, 2015 | December 28, 2014 | ||||||||||||||
(Unaudited) | |||||||||||||||||
(Dollars in thousands, except share and per share amounts) | |||||||||||||||||
Net income | $ | 1,870 | $ | 1,474 | $ | 547 | $ | 2,892 | |||||||||
Income tax expense | 811 | 2,546 | 1,844 | 4,985 | |||||||||||||
Interest expense | 44 | 1,111 | 1,008 | 2,398 | |||||||||||||
Depreciation and amortization | 842 | 787 | 1,667 | 1,536 | |||||||||||||
EBITDA | 3,567 | 5,918 | 5,066 | 11,811 | |||||||||||||
Change in common stock warrant fair value(a) | 55 | 2,882 | 3,401 | 5,765 | |||||||||||||
Transaction expense(b) | — | — | 124 | — | |||||||||||||
Litigation charge(c) | 102 | — | 376 | — | |||||||||||||
Hydra-Sports(d) | — | (769 | ) | — | (1,530 | ) | |||||||||||
Stock-based compensation | 6,805 | — | 12,229 | — | |||||||||||||
Adjusted EBITDA | $ | 10,529 | $ | 8,031 | $ | 21,196 | $ | 16,046 | |||||||||
Adjusted EBITDA margin(e) | 19.1 | % | 16.3 | % | 19.1 | % | 16.4 | % |
(a) Represents non-cash expense related to increases in the fair market value of our common stock warrant.
(b) Represents fees and expenses related to our initial public offering.
(c) Represents legal and advisory fees related to our litigation with
(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
The following table sets forth a reconciliation of Adjusted net income to net income as determined in accordance with GAAP for the periods indicated:
Three Months Ended | Six Months Ended | ||||||||||||||||
December 27, 2015 | December 28, 2014 | December 27, 2015 | December 28, 2014 | ||||||||||||||
(Unaudited) | |||||||||||||||||
(Dollars in thousands, except share and per share amounts) | |||||||||||||||||
Net income | $ | 1,870 | $ | 1,474 | $ | 547 | $ | 2,892 | |||||||||
Income tax expense | 811 | 2,546 | 1,844 | 4,985 | |||||||||||||
Change in common stock warrant fair value(a) | 55 | 2,882 | 3,401 | 5,765 | |||||||||||||
Transaction expense(b) | — | — | 124 | — | |||||||||||||
Litigation charge(c) | 102 | — | 376 | — | |||||||||||||
Hydra-Sports(d) | — | (769 | ) | — | (1,530 | ) | |||||||||||
Stock-based compensation | 6,805 | — | 12,229 | — | |||||||||||||
Adjusted net income before income taxes | 9,643 | 6,133 | 18,521 | 12,112 | |||||||||||||
Adjusted income tax expense(e) | 3,471 | 2,208 | 6,668 | 4,360 | |||||||||||||
Adjusted net income | $ | 6,172 | $ | 3,925 | $ | 11,853 | $ | 7,752 | |||||||||
Pro-forma adjusted net income per common share | |||||||||||||||||
Basic | $ | 0.34 | $ | 0.22 | $ | 0.66 | $ | 0.43 | |||||||||
Diluted | $ | 0.33 | $ | 0.21 | $ | 0.63 | $ | 0.41 | |||||||||
Pro-forma weighted average shares used for the computation of: | |||||||||||||||||
Basic adjusted net income per share(f) | 17,999,244 | 17,999,244 | 17,999,244 | 17,999,244 | |||||||||||||
Diluted adjusted net income per share(g) | 18,948,050 | 18,948,050 | 18,948,050 | 18,948,050 |
(a) Represents non-cash expense related to increases in the fair market value of our common stock warrant.
(b) Represents fees and expenses related to our 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 our initial public offering, which closed on July 22, 2015 and gives effect for the 788,815 shares issued in exchange of common stock warrants during the six months ended December 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 our initial public offering, the 788,815 shares issued during the six months ended December 27, 2015 in exchange of common stock warrants, 60,075 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