MasterCraft Reports Fiscal 2017 Second-Quarter and Year-To-Date Results
Highlights:
- Company launches XT21, an agile new mid-sized multi-purpose crossover boat
- Net sales for the second quarter declined 7.4 percent compared to the prior-year, while net sales year-to-date rose slightly to
$111.8 million , up from$111.2 million in the prior-year period in line with the Company’s guidance - Gross margin rose 10 basis points to 27.9 percent for the second quarter, up from 27.8 percent in the prior-year period, and up 60 basis points year-to-date to 28.7 percent from a year earlier
- Net income for the second quarter totaled
$4.0 million , up from$1.9 million in the prior-year period; net income totaled$11.0 million for the year-to-date period up from$0.6 million a year earlier - Diluted and basic earnings per share grew to
$0.22 for the second quarter, up from$0.10 a year earlier and up year-to-date to$0.59 per share compared to$0.03 in the prior-year period - Adjusted EBITDA, a non-GAAP measure, decreased for the second quarter to
$9.0 million from$10.5 million and increased year-to-date to$22.3 million from$21.2 million a year earlier - Fully diluted pro forma Adjusted net income per share, a non-GAAP measure, declined to
$0.26 for the second quarter, down from$0.33 a year earlier and grew year-to-date to$0.67 per share compared to$0.63 in the prior-year period - Second-quarter cash conversion cycle was 5.7 days, improved from 6.2 in the year-earlier period
Second-Quarter Results
Net sales for the second quarter ended
Gross profit for the second quarter, decreased
Said McNew, “We continued to grow our gross margin delivering second-quarter gains for the sixth quarter in a row. While international markets continue to present challenges—an industry-wide trend that’s not unique to MasterCraft—domestic demand for our boats remains solid. Across the organization, we’re intently focused on delivering profitable, sustainable market share growth, and driving efficiency in every area of the business.”
Selling and marketing expense decreased
Fiscal second-quarter net income totaled
EBITDA increased to
Year-To-Date Second-Quarter 2017 Results
Net sales for the fiscal year-to-date ended
Gross profit for the fiscal year-to-date ended
Selling and marketing expense decreased
Fiscal year-to-date net income totaled
EBITDA increased to
In
Key Milestones
MasterCraft continued to advance its strong product introduction pipeline, unveiling the all-new XT21, an agile, mid-sized, multi-purpose crossover boat. Building on the success of the recently released XT20 model, the XT21 is MasterCraft’s latest addition to its new do-everything XT crossover boats that deliver premium comfort and performance at a more affordable price.
The new XT21 is a middleweight crossover boat that is easy to transport and operate and can accommodate a crew of 14. The all-new hull on the XT21 delivers responsive handling with minimum bow rise and improves performance in every on-water activity—from large wakes, to endless waves and smooth skiing.
Said McNew, “Like all MasterCraft boats, the optional award-winning Gen 2 Surf System has been custom designed for the new hull to create three zones of perfectly sculpted and sizeable curling surf waves. The XT21 also can be outfitted with the revolutionary Dockstar Handling System, an innovative flanking rudder system that makes maneuvering in tight spots and crowded marinas a breeze. Moreover, customers have the option of adding our new ‘Cool Feel’ vinyl that stays cool to the touch even after extended exposure to direct sunlight—which is an industry first.”
Continued McNew, “In terms of financial discipline, we continue to deliver best-in-class working capital management. Our combined balance of trade receivables and inventories was
Outlook
Concluded McNew, “MasterCraft has delivered a solid fiscal 2017 first half with net sales and EBITDA growth in line with our expectations and we’re optimistic about the future. 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 second-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 56842472. The audio replay will be available beginning at 8 p.m. ET on Thursday, February 9, 2017, 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 2017 outlook and key growth initiatives; and our anticipated financial performance for fiscal 2017.
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 Three and Six Months Ended January 1, 2017 | |||||||||||||
| MCBC HOLDINGS, INC. AND SUBSIDIARIES | |||||||||||||
| CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS | |||||||||||||
| (Unaudited) | |||||||||||||
| (Dollars in thousands, except share and per share data) | |||||||||||||
| Three Months Ended | Six Months Ended | ||||||||||||
| January 1, | December 27, | January 1, | December 27, | ||||||||||
| 2017 | 2015 | 2017 | 2015 | ||||||||||
| Net sales | $ | 51,134 | $ | 55,203 | $ | 111,823 | $ | 111,184 | |||||
| Cost of sales | 36,848 | 39,838 | 79,728 | 79,980 | |||||||||
| Gross profit | 14,286 | 15,365 | 32,095 | 31,204 | |||||||||
| Operating expenses: | |||||||||||||
| Selling and marketing | 2,444 | 2,882 | 4,498 | 5,359 | |||||||||
| General and administrative | 4,776 | 9,647 | 8,869 | 18,934 | |||||||||
| Amortization of intangible assets | 27 | 56 | 54 | 111 | |||||||||
| Total operating expenses | 7,247 | 12,585 | 13,421 | 24,404 | |||||||||
| Operating income | 7,039 | 2,780 | 18,674 | 6,800 | |||||||||
| Other expense: | |||||||||||||
| Interest expense | 512 | 44 | 1,123 | 1,008 | |||||||||
| Change in common stock warrant fair value | — | 55 | — | 3,401 | |||||||||
| Income before income tax expense | 6,527 | 2,681 | 17,551 | 2,391 | |||||||||
| Income tax expense | 2,496 | 811 | 6,537 | 1,844 | |||||||||
| Net income | $ | 4,031 | $ | 1,870 | $ | 11,014 | $ | 547 | |||||
| Earnings per common share: | |||||||||||||
| Basic | $ | 0.22 | $ | 0.10 | $ | 0.59 | $ | 0.03 | |||||
| Diluted | $ | 0.22 | $ | 0.10 | $ | 0.59 | $ | 0.03 | |||||
| Weighted average shares used for computation of: | |||||||||||||
| Basic earnings per share | 18,592,936 | 17,998,796 | 18,592,372 | 17,131,295 | |||||||||
| Diluted earnings per share | 18,605,078 | 18,606,884 | 18,598,841 | 17,824,985 | |||||||||
| MCBC HOLDINGS, INC. AND SUBSIDIARIES | ||||||||
| CONDENSED CONSOLIDATED BALANCE SHEETS | ||||||||
| (Dollars in thousands, except share and per share data) | ||||||||
| January 1, | June 30, | |||||||
| 2017 | 2016 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| CURRENT ASSETS: | ||||||||
| Cash and cash equivalents | $ | 6,366 | $ | 73 | ||||
| Accounts receivable — net of allowances of $95 and $65, respectively | 2,464 | 2,966 | ||||||
| Income tax receivable | 581 | 5 | ||||||
| Inventories | 11,365 | 13,268 | ||||||
| Prepaid expenses and other current assets | 2,022 | 1,780 | ||||||
| Total current assets | 22,798 | 18,092 | ||||||
| Property, plant and equipment — net | 13,318 | 13,826 | ||||||
| Intangible assets — net | 16,696 | 16,750 | ||||||
| Goodwill | 29,593 | 29,593 | ||||||
| Deferred debt issuance costs — net | 542 | 601 | ||||||
| Deferred income taxes | 1,399 | 3,501 | ||||||
| Other | 170 | 170 | ||||||
| Total assets | $ | 84,516 | $ | 82,533 | ||||
| LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) | ||||||||
| CURRENT LIABILITIES: | ||||||||
| Accounts payable | $ | 11,685 | $ | 13,112 | ||||
| Income tax payable | 359 | 1,108 | ||||||
| Accrued expenses and other current liabilities | 20,433 | 22,276 | ||||||
| Current portion of long term debt, net of unamortized debt issuance costs | 4,772 | 7,885 | ||||||
| Total current liabilities | 37,249 | 44,381 | ||||||
| Long term debt, net of unamortized debt issuance costs | 41,954 | 44,342 | ||||||
| Unrecognized tax positions | 2,496 | 2,189 | ||||||
| Total liabilities | 81,699 | 90,912 | ||||||
| COMMITMENTS AND CONTINGENCIES | ||||||||
| STOCKHOLDERS' EQUITY (DEFICIT): | ||||||||
| Common stock, $.01 par value per share — authorized, 100,000,000 shares; issued and outstanding, 18,636,541 shares at January 1, 2017 and 18,591,808 shares at June 30, 2016 | 186 | 186 | ||||||
| Additional paid-in capital | 112,557 | 112,375 | ||||||
| Accumulated deficit | (109,926 | ) | (120,940 | ) | ||||
| Total stockholders' equity (deficit) | 2,817 | (8,379 | ) | |||||
| Total liabilities and stockholders' equity (deficit) | $ | 84,516 | $ | 82,533 | ||||
Supplemental Operating Data
The following table sets forth certain supplemental operating data for the periods indicated:
| Three Months Ended | Six Months Ended | ||||||||||||||||||||
| January 1, | December 27, | % | January 1, | December 27, | % | ||||||||||||||||
| 2017 | 2015 | Variance | 2017 | 2015 | Variance | ||||||||||||||||
| (Unaudited) | |||||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||
| Unit volume: | |||||||||||||||||||||
| MasterCraft | 631 | 696 | (9.3) | % | 1,349 | 1,378 | (2.1) | % | |||||||||||||
| Net sales | $ | 51,134 | $ | 55,203 | (7.4) | % | $ | 111,823 | $ | 111,184 | 0.6 |
% | |||||||||
| Net sales per unit | $ | 81 | $ | 78 | 2.2 |
% | $ | 83 | $ | 81 | 2.7 |
% | |||||||||
| Gross margin | 27.9 | % | 27.8 | % | 28.7 | % | 28.1 | % | |||||||||||||
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 (loss) 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:
| Three Months Ended | Six Months Ended | ||||||||||||||||
| January 1, 2017 | December 27, 2015 | January 1, 2017 | December 27, 2015 | ||||||||||||||
| (Unaudited) | |||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||
| Net income | $ | 4,031 | $ | 1,870 | $ | 11,014 | $ | 547 | |||||||||
| Income tax expense | 2,496 | 811 | 6,537 | 1,844 | |||||||||||||
| Interest expense | 512 | 44 | 1,123 | 1,008 | |||||||||||||
| Depreciation and amortization | 825 | 842 | 1,622 | 1,667 | |||||||||||||
| EBITDA | 7,864 | 3,567 | 20,296 | 5,066 | |||||||||||||
| Change in common stock warrant fair value(a) | — | 55 | — | 3,401 | |||||||||||||
| Transaction expense(b) | 5 | — | 59 | 124 | |||||||||||||
| Litigation charge(c) | 944 | 102 | 1,653 | 376 | |||||||||||||
| Stock-based compensation | 186 | 6,805 | 305 | 12,229 | |||||||||||||
| Adjusted EBITDA | $ | 8,999 | $ | 10,529 | $ | 22,313 | $ | 21,196 | |||||||||
| Adjusted EBITDA margin(d) | 17.6 | % | 19.1 | % | 20.0 | % | 19.1 | % | |||||||||
(a) Represents non-cash expense related to changes in the fair market value of our common stock warrant.
(b) Represents fees and expenses associated with our secondary offering, follow-on offering and initial public offering.
(c) Represents legal and advisory fees related to our litigation with
(d) 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:
| Three Months Ended | Six Months Ended | |||||||||||
| January 1, 2017 | December 27, 2015 | January 1, 2017 | December 27, 2015 | |||||||||
| (Unaudited) | ||||||||||||
| (Dollars in thousands, except for share and per share amounts) | ||||||||||||
| Net income | $ | 4,031 | $ | 1,870 | $ | 11,014 | $ | 547 | ||||
| Income tax expense | 2,496 | 811 | 6,537 | 1,844 | ||||||||
| Change in common stock warrant fair value(a) | - | 55 | - | 3,401 | ||||||||
| Transaction expense(b) | 5 | - | 59 | 124 | ||||||||
| Litigation charge(c) | 944 | 102 | 1,653 | 376 | ||||||||
| Stock-based compensation | 186 | 6,805 | 305 | 12,229 | ||||||||
| Adjusted net income before income taxes | 7,662 | 9,643 | 19,568 | 18,521 | ||||||||
| Adjusted income tax expense(d) | 2,758 | 3,471 | 7,044 | 6,668 | ||||||||
| Adjusted net income | $ | 4,904 | $ | 6,172 | $ | 12,524 | $ | 11,853 | ||||
| Pro-forma Adjusted net income per common share | ||||||||||||
| Basic | $ | 0.26 | $ | 0.34 | $ | 0.67 | $ | 0.66 | ||||
| Diluted | $ | 0.26 | $ | 0.33 | $ | 0.67 | $ | 0.63 | ||||
| Pro-forma weighted average shares used for the computation of: | ||||||||||||
| Basic Adjusted net income per share(e) | 18,593,296 | 17,999,244 | 18,593,296 | 17,999,244 | ||||||||
| Diluted Adjusted net income per share(e) | 18,711,764 | 18,948,050 | 18,695,528 | 18,948,050 | ||||||||
(a) Represents non-cash expense related to changes in the fair market value of our common stock warrant.
(b) Represents fees and expenses associated with our secondary offering, follow-on offering and initial public offering.
(c) Represents legal and advisory fees related to our litigation with Malibu Boats, LLC.
(d) Reflects income tax expense at an estimated normalized annual effective income tax rate of 36.0 percent for the periods presented.
(e) The weighted average shares used for computation of pro-forma diluted earnings per common share gives effect to the 43,245 shares of restricted stock awards, the 42,586 performance stock units granted under the 2015 Incentive Award Plan during the three months ended January 1, 2017 and 32,637 shares for the dilutive effect of stock options. The average of the prior quarters is used for computation of the six month ended periods.
Contacts:Tim Oxley Chief Financial Officer (423) 884-2221 Tim.Oxley@mastercraft.comMatt Sullivan (612) 455-1709 Matt.Sullivan@padillacrt.com