MasterCraft Reports Fiscal 2017 Third-Quarter and Year-To-Date Results
Highlights:
- Net sales for the third quarter increased to
$58.5 million , up 2.6 percent from$57.0 million in the prior-year period, while net sales year-to-date rose to$170.3 million , up 1.2 percent from$168.2 million in the prior-year period. - Gross margin declined 230 basis points to 25.5 percent for the third quarter, down from 27.8 percent in the prior-year period, and decreased 40 basis points year-to date to 27.6 percent from 28.0 percent in the prior-year period.
- Net income for the third quarter totaled
$2.2 million , down from$4.9 million in the prior-year period. Net income totaled$13.3 million for the year-to-date period, up from$5.4 million in the prior-year period. - Diluted earnings per share declined to
$0.12 for the third quarter, from$0.26 in the prior-year period, and was up year-to-date to$0.71 per share compared to$0.30 in the prior-year period. - Adjusted EBITDA, a non-GAAP measure, decreased for the third quarter to
$9.6 million from$10.1 million in the prior-year period and increased year-to-date to$31.9 million from$31.3 million in the prior-year period. - Fully diluted pro forma Adjusted net income per share, a non-GAAP measure, declined to
$0.28 for the third quarter, versus$0.31 in the prior-year period and grew year-to-date to$0.95 per share compared to$0.94 in the prior-year period. - Third-quarter working capital management continued to be outstanding as evidenced by a cash conversion cycle of 4.8 days, improved from 5.4 days in the prior-year period.
- Exceptionally high retail demand in connection with the company’s winter sales program reduced dealer pipeline inventory, setting the stage for a strong fiscal 2018.
- MasterCraft settled its patent dispute with
Malibu Boats
Third-Quarter Results
Net sales for the third quarter ended
Gross profit for the third quarter, decreased
Said McNew, “Our winter sales program exceeded our expectations due to several factors. For the first time, we established nationally advertised pricing on selected models which drove increased traffic to our dealerships. Additional dealer training enhanced tracking of sales leads and improved the dealers’ “close ratio” significantly. Retail rebates also contributed to the success of retail demand during the quarter. Importantly, all these factors improved our dealer pipeline inventory setting the stage for a strong 2018 fiscal year.”
Selling and marketing expense increased
Fiscal third-quarter net income totaled
EBITDA was
Year-To-Date Third-Quarter 2017 Results
Net sales for the fiscal year-to-date period ended
Gross profit for the year-to-date period ended
Selling and marketing expense declined
Fiscal nine-month year-to-date net income totaled
In
EBITDA increased to
Key Milestones
MasterCraft was recently recognized again for its leadership in the towboat category at the Miami International Boat Show garnering its sixth innovation award in seven years.
Said McNew, “We’re thrilled to receive yet another innovation award from the NMMA recognizing that MasterCraft products are some of the most innovative in our industry. Our award-winning technologies are why many boat owners choose MasterCraft and the DockStar Handling System is a notable example of how our engineering can benefit consumers. DockStar not only simplifies navigating tight spaces like docks and marinas, it also improves the slow speed handling of MasterCraft boats.”
Litigation Settlement
MasterCraft and
Said McNew, “We are pleased to have this dispute behind us and look forward to building on MasterCraft’s legacy of award-winning products. While we felt strongly about our position in this dispute, we know there is significant cost and uncertainty associated with the judicial process, and as a result, we view this settlement as a positive outcome for MasterCraft. We look forward to MasterCraft’s continued role in advancing our market segment for the benefit of both MasterCraft and the entire industry.”
Outlook
Concluded McNew, “MasterCraft has delivered solid performance and we’re optimistic about prospects for our fiscal 2017 fourth quarter. Equally important, we continue to deliver best-in-class working capital management, which provides opportunities to enhance shareholder return in a variety of ways and is a hallmark of a well-managed company.
“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 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 7643288. The audio replay will be available beginning at 8 p.m. ET on Thursday, May 11, 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 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 Nine Months Ended April 2, 2017 | ||||||||||||||
MCBC HOLDINGS, INC. AND SUBSIDIARIES | ||||||||||||||
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS | ||||||||||||||
(Unaudited) | ||||||||||||||
(Dollars in thousands, except share and per share data) | ||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||
April 2, | March 27, | April 2, | March 27, | |||||||||||
2017 | 2016 |
2017 | 2016 | |||||||||||
Net sales | $ | 58,486 | $ | 57,030 | $ | 170,309 | $ | 168,214 | ||||||
Cost of sales | 43,561 | 41,188 | 123,289 | 121,168 | ||||||||||
Gross profit | 14,925 | 15,842 | 47,020 | 47,046 | ||||||||||
Operating expenses: | ||||||||||||||
Selling and marketing | 2,678 | 2,210 | 7,176 | 7,569 | ||||||||||
General and administrative | 7,939 | 6,064 | 16,808 | 24,998 | ||||||||||
Amortization of intangible assets | 26 | 55 | 80 | 166 | ||||||||||
Total operating expenses | 10,643 | 8,329 | 24,064 | 32,733 | ||||||||||
Operating income | 4,282 | 7,513 | 22,956 | 14,313 | ||||||||||
Other expense: | ||||||||||||||
Interest expense | 561 | 82 | 1,684 | 1,090 | ||||||||||
Change in common stock warrant fair value | — | (27 | ) | — | 3,374 | |||||||||
Income before income tax expense | 3,721 | 7,458 | 21,272 | 9,849 | ||||||||||
Income tax expense | 1,480 | 2,564 | 8,017 | 4,408 | ||||||||||
Net income | $ | 2,241 | $ | 4,894 | $ | 13,255 | $ | 5,441 | ||||||
Earnings per common share: | ||||||||||||||
Basic | $ | 0.12 | $ | 0.26 | $ | 0.71 | $ | 0.31 | ||||||
Diluted | $ | 0.12 | $ | 0.26 | $ | 0.71 | $ | 0.30 | ||||||
Weighted average shares used for computation of: | ||||||||||||||
Basic earnings per share | 18,593,296 | 18,574,887 | 18,592,680 | 17,612,492 | ||||||||||
Diluted earnings per share | 18,625,904 | 18,779,557 | 18,607,862 | 18,143,176 |
MCBC HOLDINGS, INC. AND SUBSIDIARIES | ||||||||
CONDENSED CONSOLIDATED BALANCE SHEETS | ||||||||
(Dollars in thousands, except share and per share data) | ||||||||
April 2, | June 30, | |||||||
2017 | 2016 | |||||||
(Unaudited) | ||||||||
ASSETS | ||||||||
CURRENT ASSETS: | ||||||||
Cash and cash equivalents | $ | 12,567 | $ | 73 | ||||
Accounts receivable — net of allowances of $122 and $65, respectively | 6,666 | 2,966 | ||||||
Income tax receivable | 1,264 | 5 | ||||||
Inventories | 11,886 | 13,268 | ||||||
Prepaid expenses and other current assets | 2,367 | 1,780 | ||||||
Total current assets | 34,750 | 18,092 | ||||||
Property, plant and equipment — net | 13,179 | 13,826 | ||||||
Intangible assets — net | 16,670 | 16,750 | ||||||
Goodwill | 29,593 | 29,593 | ||||||
Deferred debt issuance costs — net | 511 | 601 | ||||||
Deferred income taxes | 224 | 3,501 | ||||||
Other | 80 | 170 | ||||||
Total assets | $ | 95,007 | $ | 82,533 | ||||
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) | ||||||||
CURRENT LIABILITIES: | ||||||||
Accounts payable | $ | 13,771 | $ | 13,112 | ||||
Income tax payable | 412 | 1,108 | ||||||
Accrued expenses and other current liabilities | 27,378 | 22,276 | ||||||
Current portion of long term debt, net of unamortized debt issuance costs | 4,778 | 7,885 | ||||||
Total current liabilities | 46,339 | 44,381 | ||||||
Long term debt, net of unamortized debt issuance costs | 40,757 | 44,342 | ||||||
Unrecognized tax positions | 2,653 | 2,189 | ||||||
Total liabilities | 89,749 | 90,912 | ||||||
COMMITMENTS AND CONTINGENCIES | ||||||||
STOCKHOLDERS' EQUITY (DEFICIT): | ||||||||
Common stock, $.01 par value per share — authorized, 100,000,000 shares; issued and outstanding, 18,638,509 shares at April 2, 2017 and 18,591,808 shares at June 30, 2016 | 186 | 186 | ||||||
Additional paid-in capital | 112,757 | 112,375 | ||||||
Accumulated deficit | (107,685 | ) | (120,940 | ) | ||||
Total stockholders' equity (deficit) | 5,258 | (8,379 | ) | |||||
Total liabilities and stockholders' equity (deficit) | $ | 95,007 | $ | 82,533 | ||||
Supplemental Operating Data
The following table sets forth certain supplemental operating data for the periods indicated:
Three Months Ended | Nine Months Ended | |||||||||||||||||||
April 2, | March 27, | % | April 2, | March 27, | % | |||||||||||||||
2017 | 2016 | Variance | 2017 | 2015 | Variance | |||||||||||||||
(Unaudited) | ||||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||
Unit volume: | ||||||||||||||||||||
MasterCraft | 741 | 701 | 5.7 | % | 2,090 | 2,079 | 0.5 | % | ||||||||||||
Net sales | $ | 58,486 | $ | 57,030 | 2.6 | % | $ | 170,309 | $ | 168,214 | 1.2 | % | ||||||||
Net sales per unit | $ | 79 | $ | 81 | (3.0 | ) | % | $ | 81 | $ | 81 | 0.7 | % | |||||||
Gross margin | 25.5 | % | 27.8 | % | 27.6 | % | 28.0 | % | ||||||||||||
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 | Nine Months Ended | ||||||||||||||||
April 2, 2017 | March 27, 2016 | April 2, 2017 | March 27, 2016 | ||||||||||||||
(Unaudited) | |||||||||||||||||
(Dollars in thousands) | |||||||||||||||||
Net income | $ | 2,241 | $ | 4,894 | $ | 13,255 | $ | 5,441 | |||||||||
Income tax expense | 1,480 | 2,564 | 8,017 | 4,408 | |||||||||||||
Interest expense | 561 | 82 | 1,684 | 1,090 | |||||||||||||
Depreciation and amortization | 821 | 878 | 2,442 | 2,545 | |||||||||||||
EBITDA | 5,103 | 8,418 | 25,398 | 13,484 | |||||||||||||
Change in common stock warrant fair value(a) | — | (27 | ) | — | 3,374 | ||||||||||||
Transaction expense(b) | 4 | — | 63 | 124 | |||||||||||||
Litigation charge(c) | 4,295 | 397 | 5,948 | 773 | |||||||||||||
Stock-based compensation | 215 | 1,310 | 520 | 13,539 | |||||||||||||
Adjusted EBITDA | $ | 9,617 | $ | 10,098 | $ | 31,929 | $ | 31,294 | |||||||||
Adjusted EBITDA margin(d) | 16.4% | 17.7% | 18.7% | 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 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 | Nine Months Ended | ||||||||||||
April 2, 2017 | March 27, 2016 | April 2, 2017 | March 27, 2016 | ||||||||||
(Unaudited) | |||||||||||||
(Dollars in thousands, except for share and per share amounts) | |||||||||||||
Net income | $ | 2,241 | $ | 4,894 | $ | 13,255 | $ | 5,441 | |||||
Income tax expense | 1,480 | 2,564 | 8,017 | 4,408 | |||||||||
Change in common stock warrant fair value(a) | - | (27 | ) | - | 3,374 | ||||||||
Transaction expense(b) | 4 | - | 63 | 124 | |||||||||
Litigation charge(c) | 4,295 | 397 | 5,948 | 773 | |||||||||
Stock-based compensation | 215 | 1,310 | 520 | 13,539 | |||||||||
Adjusted net income before income taxes | 8,235 | 9,138 | 27,803 | 27,659 | |||||||||
Adjusted income tax expense(d) | 2,965 | 3,290 | 10,009 | 9,957 | |||||||||
Adjusted net income | $ | 5,270 | $ | 5,848 | $ | 17,794 | $ | 17,702 | |||||
Pro-forma Adjusted net income per common share | |||||||||||||
Basic | $ | 0.28 | $ | 0.32 | $ | 0.96 | $ | 0.97 | |||||
Diluted | $ | 0.28 | $ | 0.31 | $ | 0.95 | $ | 0.94 | |||||
Pro-forma weighted average shares used for the computation of: | |||||||||||||
Basic Adjusted net income per share(e) | 18,593,296 | 18,546,346 | 18,593,296 | 18,181,071 | |||||||||
Diluted Adjusted net income per share(e) | 18,722,582 | 18,603,487 | 18,704,546 | 18,832,561 |
(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, which includes settling the Malibu patent case.
(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 45,213 shares of restricted stock awards, the 42,586 performance stock units granted under the 2015 Incentive Award Plan during the three months ended April 2, 2017 and 41,487 shares for the dilutive effect of stock options. The average of the prior quarters is used for computation of the nine month ended periods.
Contacts:Tim Oxley Chief Financial Officer (423) 884-2221 Tim.Oxley@mastercraft.comMatt Sullivan (612) 455-1709 Matt.Sullivan@padillaco.com