MasterCraft Reports Fiscal 2017 Fourth-Quarter and Full-Year Results
MasterCraft (NASDAQ:MCFT) today announced financial results for its fiscal 2017 fourth quarter and full year ended
Highlights:
- Net sales for the fourth quarter increased to
$58.3 million , up 9.3 percent from$53.4 million in the prior-year period. Net sales for the fiscal year rose to$228.6 million , up 3.2 percent from$221.6 million in the prior year. - Gross margin in the fourth quarter increased 190 basis points to 28.2 percent, up from 26.3 percent in the prior-year period, and increased 20 basis points for the fiscal year to 27.8 percent from 27.6 percent in fiscal 2016.
- Net income for the fourth quarter totaled
$6.3 million , up from$4.8 million in the prior-year period. Net income totaled$19.6 million for the fiscal year, almost double from$10.2 million in the prior year. - Diluted earnings per share increased to
$0.34 for the fourth quarter, from$0.26 in the prior-year period. Diluted earnings per share were$1.05 for the fiscal year compared to$0.56 in the prior year. - Adjusted EBITDA, a non-GAAP measure, increased for the fourth quarter to
$11.5 million from$9.9 million in the prior-year period and rose for the fiscal year to$43.5 million from$41.2 million in the prior year. - Fully diluted pro forma Adjusted net income per share, a non-GAAP measure, increased to
$0.35 for the fourth quarter, versus$0.30 in the prior-year period and grew for the fiscal year to$1.30 per share compared to$1.24 in the prior year. - Fourth-quarter working capital management continued to be outstanding as evidenced by a cash conversion cycle of 6.5 days.
- The company paid down total debt by
$17.7 million during the fiscal year — reducing the balance from$52.2 million at the start of the fiscal year to$34.5 million at the end.
Fourth-Quarter Results
Net sales for the fourth quarter ended
Gross profit for the fourth quarter, increased
Said McNew, “Retail activity, up double digits, strengthened in fiscal 2017, resulting in improved dealer inventory turns. This sets the stage for healthy dealer inventory levels and activity in fiscal 2018. We look forward to working with our strong dealer network to maximize their opportunities moving forward.”
Selling and marketing expense increased
Fiscal fourth-quarter net income totaled
EBITDA was
Fiscal 2017 Results
Net sales for the fiscal year increased
Gross profit for the fiscal year increased
Selling and marketing expense for the fiscal year declined
Net income totaled
EBITDA for the fiscal year increased to
Market Milestones
During the fiscal fourth quarter, MasterCraft introduced the new XT22, a larger XT crossover boat designed with families in mind. The second largest do-everything XT boat, the 22-footer’s larger bow and sizeable wake provides more comfort and fun on the water. The new XT22 also showcases MasterCraft’s newest industry-first innovations that create a more intuitive and customizable experience through new digital driving and entertainment systems.
After studying customers’ usage habits and collaborating with leading technology partners, MasterCraft simplified and enhanced the on-board experience with technology that tunes the boat’s operations to three owner-favorite usage modes: drive, tow and chill. This first-ever “modal” operating software for towboats is enabled by MasterCraft’s new proprietary premium dual-screen dash that streamlines boat operation and improves helm styling and ergonomics.
With the most screen real estate on any towboat, the 10.1” new touch screen and 12” non-touch display simplify boat control, enable better organization, and display information changes on both screens based on customized settings for each mode. The system’s software maximizes the additional screens by also offering pre-loaded tutorial videos and maps of all global waterways. The software also integrates with users’ cellular phones, rear-facing cameras and navigation as well as enabling real-time integration with GoPro Cameras.
In the fourth quarter MasterCraft announced an exclusive partnership with world-class, premium audio equipment manufacturer Klipsch Audio to bring premium, concert-level sound on its new sport boats. Klipsch Audio has created its first-ever marine speakers and amplification solutions that are exclusively offered on MasterCraft boats. Heralded in the music industry for its pioneering achievements and the power of its audio systems, the new Klipsch Audio systems now create a heavy-hitting, customizable concert-style entertainment experience.
Said McNew, “We’re dedicated to providing the best experiences on the water for our customers, and our partnership with Klipsch enables MasterCraft to create an exclusive, first-ever audio experience on the water. We spend a lot of time focused on customizing boats to our owners’ needs – from the look and style of the boat to the wake behind it. Digitally controlled, custom, concert-level sound is an exciting new on-board entertainment option that people of all ages will enjoy.”
Outlook
Concluded McNew, “MasterCraft has delivered solid performance and we’re optimistic about prospects for our fiscal 2018. Equally important, we continue to deliver best-in-class working capital management, which provides opportunities to enhance shareholder return in a variety of ways.
“Looking ahead, we remain committed to our five-pronged growth strategy: developing new and innovative products; further penetrating the entry-level and mid-line 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 year ending
Conference Call and Webcast Information
MasterCraft will host a live conference call and webcast to discuss fiscal fourth-quarter results today,
For an audio replay of the conference call, dial (855) 859-2056 (domestic) or (404) 537-3406 (international) and enter audience passcode 68516887. The audio replay will be available beginning at 8 p.m. ET on Thursday, September 7, 2017, through 11:59 p.m. ET on
About
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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 2018 outlook and key growth initiatives; and our anticipated financial performance for fiscal 2018.
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 MasterCraft's financial results prepared in accordance with GAAP.
| Results of Operations for the Fourth Quarter and Fiscal Year Ended June 30, 2017 MCBC HOLDINGS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS |
|||||||||||||||
| (Dollars in thousands, except share and per share data) | |||||||||||||||
| Fourth Quarter Ended | Fiscal Year Ended | ||||||||||||||
| June 30, | June 30, | June 30, | June 30, | ||||||||||||
| 2017 | 2016 | 2017 | 2016 | ||||||||||||
| Net sales | $ | 58,325 | $ | 53,386 | $ | 228,634 | $ | 221,600 | |||||||
| Cost of sales | 41,869 | 39,353 | 165,158 | 160,521 | |||||||||||
| Gross profit | 16,456 | 14,033 | 63,476 | 61,079 | |||||||||||
| Operating expenses: | |||||||||||||||
| Selling and marketing | 2,204 | 2,116 | 9,380 | 9,685 | |||||||||||
| General and administrative | 3,666 | 4,164 | 20,474 | 29,162 | |||||||||||
| Amortization of intangible assets | 27 | 55 | 107 | 221 | |||||||||||
| Total operating expenses | 5,897 | 6,335 | 29,961 | 39,068 | |||||||||||
| Operating income | 10,559 | 7,698 | 33,515 | 22,011 | |||||||||||
| Other expense (income): | |||||||||||||||
| Interest expense | 538 | 190 | 2,222 | 1,280 | |||||||||||
| Change in common stock warrant fair value | — | 51 | — | 3,425 | |||||||||||
| Other income | — | (1,212 | ) | — | (1,212 | ) | |||||||||
| Income before income tax expense | 10,021 | 8,669 | 31,293 | 18,518 | |||||||||||
| Income tax expense | 3,706 | 3,900 | 11,723 | 8,308 | |||||||||||
| Net income | $ | 6,315 | $ | 4,769 | $ | 19,570 | $ | 10,210 | |||||||
| Earnings per common share: | |||||||||||||||
| Basic | $ | 0.34 | $ | 0.26 | $ | 1.05 | $ | 0.57 | |||||||
| Diluted | $ | 0.34 | $ | 0.26 | $ | 1.05 | $ | 0.56 | |||||||
| Weighted average shares used for computation of: | |||||||||||||||
| Basic earnings per share | 18,593,501 | 18,559,800 | 18,592,885 | 17,849,319 | |||||||||||
| Diluted earnings per share | 18,659,246 | 18,598,505 | 18,620,708 | 18,257,007 | |||||||||||
| MCBC HOLDINGS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS |
||||||||
| (Dollars in thousands, except share and per share data) | ||||||||
| June 30, | June 30, | |||||||
| 2017 | 2016 | |||||||
| ASSETS | ||||||||
| CURRENT ASSETS: | ||||||||
| Cash and cash equivalents | $ | 4,038 | $ | 73 | ||||
| Accounts receivable — net of allowances of $82 and $65, respectively | 3,500 | 2,966 | ||||||
| Income tax receivable | — | 5 | ||||||
| Inventories | 11,676 | 13,268 | ||||||
| Prepaid expenses and other current assets | 2,438 | 1,780 | ||||||
| Total current assets | 21,652 | 18,092 | ||||||
| Property, plant and equipment — net | 14,827 | 13,826 | ||||||
| Intangible assets — net | 16,643 | 16,750 | ||||||
| Goodwill | 29,593 | 29,593 | ||||||
| Deferred debt issuance costs — net | 481 | 601 | ||||||
| Deferred income taxes | — | 3,501 | ||||||
| Other | 125 | 170 | ||||||
| Total assets | $ | 83,321 | $ | 82,533 | ||||
| LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) | ||||||||
| CURRENT LIABILITIES: | ||||||||
| Accounts payable | $ | 11,008 | $ | 13,112 | ||||
| Income tax payable | 780 | 1,108 | ||||||
| Accrued expenses and other current liabilities | 21,410 | 22,276 | ||||||
| Current portion of long term debt, net of unamortized debt issuance costs | 3,687 | 7,885 | ||||||
| Total current liabilities | 36,885 | 44,381 | ||||||
| Long term debt, net of unamortized debt issuance costs | 30,790 | 44,342 | ||||||
| Deferred income taxes | 953 | — | ||||||
| Unrecognized tax positions | 2,932 | 2,189 | ||||||
| Total liabilities | 71,560 | 90,912 | ||||||
| COMMITMENTS AND CONTINGENCIES | ||||||||
| STOCKHOLDERS' EQUITY (DEFICIT): | ||||||||
| Common stock, $.01 par value per share — authorized, 100,000,000 shares; issued and outstanding, 18,637,445 shares at June 30, 2017 and 18,591,808 shares at June 30, 2016 | 186 | 186 | ||||||
| Additional paid-in capital | 112,945 | 112,375 | ||||||
| Accumulated deficit | (101,370 | ) | (120,940 | ) | ||||
| Total stockholders' equity (deficit) | 11,761 | (8,379 | ) | |||||
| Total liabilities and stockholders' equity (deficit) | $ | 83,321 | $ | 82,533 | ||||
Supplemental Operating Data
The following table sets forth certain supplemental operating data for the periods indicated:
| Fourth Quarter Ended | Fiscal Year Ended | ||||||||||||||||||
| June 30, | June 30, | % | June 30, | June 30, | % | ||||||||||||||
| 2017 | 2016 | Variance | 2017 | 2015 | Variance | ||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||
| Unit volume: | |||||||||||||||||||
| MasterCraft | 700 | 663 | 5.6 | % | 2,790 | 2,742 | 1.8 | % | |||||||||||
| Net sales | $ | 58,325 | $ | 53,386 | 9.3 | % | $ | 228,634 | $ | 221,600 | 3.2 | % | |||||||
| Net sales per unit | $ | 83 | $ | 81 | 3.5 | % | $ | 82 | $ | 81 | 1.4 | % | |||||||
| Gross margin | 28.2 | % | 26.3 | % | 27.8 | % | 27.6 | % | |||||||||||
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 other 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 and follow-on offering and our stock-based compensation. We define Adjusted net income as net (loss) income adjusted to eliminate certain non-cash charges and other 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 and follow-on offering, our stock-based compensation 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 sales. Adjusted EBITDA, Adjusted net income and Adjusted EBITDA margin are not measures of net income or operating income as determined under accounting principles generally accepted in
- 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.
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:
| Fourth Quarter Ended | Fiscal Year Ended | ||||||||||||||||
| June 30, 2017 | June 30, 2016 | June 30, 2017 | June 30, 2016 | ||||||||||||||
| (Dollars in thousands) | |||||||||||||||||
| Net income | $ | 6,315 | $ | 4,769 | $ | 19,570 | $ | 10,210 | |||||||||
| Income tax expense | 3,706 | 3,900 | 11,723 | 8,308 | |||||||||||||
| Interest expense | 538 | 190 | 2,222 | 1,280 | |||||||||||||
| Depreciation and amortization | 789 | 899 | 3,231 | 3,444 | |||||||||||||
| EBITDA | 11,348 | 9,758 | 36,746 | 23,242 | |||||||||||||
| Change in common stock warrant fair value(a) | — | 51 | — | 3,425 | |||||||||||||
| Transaction expense(b) | 8 | 355 | 71 | 479 | |||||||||||||
| Litigation charge(c) | — | 833 | 5,948 | 1,606 | |||||||||||||
| Litigation settlement(d) | — | (1,212 | ) | — | (1,212 | ) | |||||||||||
| Stock-based compensation | 191 | 147 | 711 | 13,687 | |||||||||||||
| Adjusted EBITDA | $ | 11,547 | $ | 9,932 | $ | 43,476 | $ | 41,227 | |||||||||
| Adjusted EBITDA margin(e) | 19.8 | % | 18.6 | % | 19.0 | % | 18.6 | % | |||||||||
(a) Represents non-cash expense related to changes in the fair market value of our common stock warrant.
(b) Represents fees and expenses related to our secondary offering, follow-on offering and initial public offering and payment of a special cash dividend in
(c) Represents legal and advisory fees for our litigation with
(d) Represents receipt of a one-time payment to settle certain litigation matters.
(e) We define Adjusted EBITDA margin as Adjusted EBITDA expressed as a percentage of net sales.
The following table sets forth a reconciliation of Adjusted net income to net income as determined in accordance with GAAP for the periods indicated:
| Fourth Quarter Ended | Fiscal Year Ended | |||||||||||||
| June 30, 2017 | June 30, 2016 | June 30, 2017 | June 30, 2016 | |||||||||||
| (Dollars in thousands, except for share and per share amounts) | ||||||||||||||
| Net income | $ | 6,315 | $ | 4,769 | $ | 19,570 | $ | 10,210 | ||||||
| Income tax expense | 3,706 | 3,900 | 11,723 | 8,308 | ||||||||||
| Change in common stock warrant fair value(a) | — | 51 | — | 3,425 | ||||||||||
| Transaction expense(b) | 8 | 355 | 71 | 479 | ||||||||||
| Litigation charge(c) | — | 833 | 5,948 | 1,606 | ||||||||||
| Litigation settlement(d) | — | (1,212 | ) | — | (1,212 | ) | ||||||||
| Stock-based compensation | 191 | 147 | 711 | 13,687 | ||||||||||
| Adjusted net income before income taxes | 10,220 | 8,843 | 38,023 | 36,503 | ||||||||||
| Adjusted income tax expense(e) | 3,679 | 3,183 | 13,688 | 13,141 | ||||||||||
| Adjusted net income | $ | 6,541 | $ | 5,660 | $ | 24,335 | $ | 23,362 | ||||||
| Pro-forma Adjusted net income per common share | ||||||||||||||
| Basic | $ | 0.35 | $ | 0.30 | $ | 1.31 | $ | 1.28 | ||||||
| Diluted | $ | 0.35 | $ | 0.30 | $ | 1.30 | $ | 1.24 | ||||||
| Pro-forma weighted average shares used for the computation of: | ||||||||||||||
| Basic Adjusted net income per share(f) | 18,611,028 | 18,591,808 | 18,597,357 | 18,283,755 | ||||||||||
| Diluted Adjusted net income per share(f) | 18,730,717 | 18,591,808 | 18,711,089 | 18,772,373 | ||||||||||
(a) Represents non-cash expense related to changes in the fair market value of our common stock warrant.
(b) Represents fees and expenses related to our secondary offering, follow-on offering and initial public offering and payment of a special cash dividend in
(c) Represents legal and advisory fees for our litigation with
(d) Represents receipt of a one-time payment to settle certain litigation matters.
(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 and diluted earnings per common share gives effect to the 26,417 shares of restricted stock awards, the 40,612 performance stock units granted under the 2015 Incentive Award Plan during the fiscal year ended
The following table shows the reconciliation of diluted earnings per share to diluted pro forma Adjusted net income per share for the periods presented:
| Fourth Quarter Ended | Fiscal Year Ended | |||||||||||||||
| June 30, 2017 | June 30, 2016 | June 30, 2017 | June 30, 2016 | |||||||||||||
| Net income per diluted share | $ | 0.34 | $ | 0.26 | $ | 1.05 | $ | 0.56 | ||||||||
| Impact of adjustments: | ||||||||||||||||
| Income tax expense | 0.20 | 0.21 | 0.63 | 0.46 | ||||||||||||
| Change in common stock warrant fair value(a) | - | - | - | 0.19 | ||||||||||||
| Transaction expense(b) | - | 0.02 | - | 0.03 | ||||||||||||
| Litigation charge(c) | - | 0.05 | 0.32 | 0.09 | ||||||||||||
| Litigation settlement(d) | - | (0.07 | ) | - | (0.07 | ) | ||||||||||
| Stock-based compensation | 0.01 | 0.01 | 0.04 | 0.75 | ||||||||||||
| Net income per diluted share before income taxes | 0.55 | 0.48 | 2.04 | 2.01 | ||||||||||||
| Impact of adjusted income tax expense on net income per diluted share before income taxes(e) | (0.20 | ) | (0.17 | ) | (0.73 | ) | (0.72 | ) | ||||||||
| Impact of increased share count(f) | - | (0.01 | ) | (0.01 | ) | (0.05 | ) | |||||||||
| Adjusted Net Income per diluted pro-forma weighted average share | 0.35 | 0.30 | 1.30 | 1.24 | ||||||||||||
(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 secondary offering, follow-on offering and initial public offering and payment of a special cash dividend in
(c) Represents legal and advisory fees for our litigation with Malibu Boats, LLC, which includes settling the Malibu patent case.
(d) Represents receipt of a one-time payment to settle certain litigation matters.
(e) Reflects income tax expense at an estimated normalized annual effective income tax rate of 36.0% for the periods presented.
(f) Reflects impact of increased share counts giving effect to the exchange of all restricted stock awards, the vesting of all performance stock units and for the dilutive effect of stock options included in outstanding shares.
Contacts:Tim Oxley Chief Financial Officer (423) 884-2221 Tim.Oxley@mastercraft.comMatt Sullivan (612) 455-1709 Matt.Sullivan@padillaco.com