MCBC Holdings, Inc. Reports Fiscal 2018 Third-Quarter and Year-To-Date Results
Highlights:
- Net sales for the third quarter increased to
$93.8 million , up 60.4 percent from$58.5 million in the prior-year period from improvements in MasterCraft’s core business and the inclusion of NauticStar. Net sales year-to-date rose to$237.3 million , up from$170.3 million . - Gross profit for the third quarter increased to
$24.4 million , up 63.4 percent from$14.9 million in the prior-year period. Gross profit year-to-date rose to$62.5 million , up from$47.0 million . - Third-quarter gross margin increased 50 basis points to 26.0 percent, from 25.5 percent in the prior-year period. MasterCraft’s standalone margin increase, mainly from reduced retail rebate activity, was partially offset by the inclusion of NauticStar. Year-to-date gross margin decreased 130 basis points.
- Net income totaled
$11.5 million for the 2018 third quarter, an increase of$9.3 million , or 411.1 percent, from the prior-year period. Year-to-date net income increased$13.3 million to $26.5 million . - Third-quarter diluted earnings per share increased by
$0.49 , to$0.61 , up from$0.12 in the prior-year period. Year-to-date diluted earnings per share increased to$1.42 , versus$0.71 in fiscal 2017. - Adjusted EBITDA, a non-GAAP measure, increased 79.4 percent to
$17.3 million from$9.6 million in the prior-year third quarter. Year-to-date Adjusted EBITDA rose to$43.8 million from$31.9 million . - Adjusted EBITDA margin, a non-GAAP measure, increased 200 basis points to 18.4 percent, from 16.4 percent in the prior-year third quarter period. Adjusted EBITDA margin year-to-date decreased 20 basis points to 18.5 percent, from 18.7 percent.
- Third-quarter fully diluted, pro forma Adjusted net income per share, a non-GAAP measure, increased by
$0.28 , a 100 percent increase, to$0.56 , up from$0.28 in the prior-year period, and year-to-date was up$0.47 , to$1.42 , versus$0.95 . - Year-to-date the company made debt payments of
$28.3 million enabled by its strong cash generation capability.
Third-Quarter Results
Net sales for the third quarter ended
Fiscal third-quarter gross profit increased
Said McNew, “Retail activity continues to gain momentum and we remain comfortable with our inventory levels, despite the effect of unseasonably cold and rainy weather and its effect on boat deliveries. We look forward to finishing fiscal year-end
Selling and marketing expense increased $0.9 million, or 32.9 percent, to
Third-quarter general and administrative expense declined by
Fiscal third-quarter net income totaled
EBITDA was
Fiscal Year-to-Date Results
Net sales for the fiscal year-to-date period ended
Year-to-date gross profit increased
Selling and marketing expense increased
General and administrative expense decreased by
Fiscal year-to-date net income totaled
Year-to-date EBITDA was
Market Milestones
NauticStar
Since acquiring NauticStar in
Said McNew, “In less than six months, we’ve helped NauticStar reconfigure their plant layout and increase daily production volume while improving both safety and quality. Additionally, we continue to add new NauticStar dealers with 18 dealer locations added this calendar year. We look forward to continuing to optimize NauticStar and driving their growth.”
MasterCraft
In February, the
Said McNew, “With the new XStar, validation came when ranks of pro wakeboarders outside of the MasterCraft team were raving about its versatility. It’s truly the first wakeboard boat in the world that enables progression for anyone from family riders to the world’s best. We’re thrilled and honored to receive our seventh innovation award in nine years from the NMMA. We recognize that so many owners buy MasterCraft because of our industry-leading innovation, and with the XStar, its innovations transcend even beyond its on-water performance.”
Two decades after changing the sport of wakeboarding with the first XStar, the first true performance wakeboard boat, the 2018 XStar was completely redesigned to debut as the highest performing, most technologically advanced wake-specific boat in the industry.
Outlook
Concluded McNew, “Our year-to-date performance gives us confidence in our ability to deliver a strong finish to fiscal year-end
For full fiscal year-end
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 audience passcode 6986468. The audio replay will be available beginning at 8 p.m. ET on Thursday, May 10, 2018, through 11:59 p.m. ET on
About
Headquartered in
About MasterCraft
MasterCraft is a world-renowned innovator, designer, manufacturer and marketer of premium performance sport boats. Founded in 1968, the company has cultivated its iconic brand image through a rich history of industry-leading innovation, and more than four decades after the original MasterCraft made its debut the company’s goal remains the same – to continue building the world’s best ski, wakeboard, wakesurf and luxury performance powerboats. For more information, visit www.mastercraft.com.
About NauticStar
Founded in 2002, NauticStar is located on 17 acres 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 2018 outlook and key growth initiatives; the anticipated impact of the Tax Cuts and Jobs Act; 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, the successful integration of
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.
Contacts:
Chief Financial Officer
(423) 884-2221
Tim.Oxley@mastercraft.com
(612) 455-1709
Matt.Sullivan@padillaco.com
| Results of Operations for the Three and Nine Months Ended April 1, 2018 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 1, | April 2, | April 1, | April 2, | |||||||||
| 2018 | 2017 | 2018 | 2017 | |||||||||
| Net sales | $ | 93,811 | $ | 58,486 | $ | 237,295 | $ | 170,309 | ||||
| Cost of sales | 69,429 | 43,561 | 174,816 | 123,289 | ||||||||
| Gross profit | 24,382 | 14,925 | 62,479 | 47,020 | ||||||||
| Operating expenses: | ||||||||||||
| Selling and marketing | 3,560 | 2,678 | 9,969 | 7,176 | ||||||||
| General and administrative | 5,099 | 7,939 | 14,388 | 16,808 | ||||||||
| Amortization of intangible assets | 524 | 26 | 1,077 | 80 | ||||||||
| Total operating expenses | 9,183 | 10,643 | 25,434 | 24,064 | ||||||||
| Operating income | 15,199 | 4,282 | 37,045 | 22,956 | ||||||||
| Other expense: | ||||||||||||
| Interest expense | 897 | 561 | 2,527 | 1,684 | ||||||||
| Income before income tax expense | 14,302 | 3,721 | 34,518 | 21,272 | ||||||||
| Income tax expense | 2,848 | 1,480 | 8,009 | 8,017 | ||||||||
| Net income | $ | 11,454 | $ | 2,241 | $ | 26,509 | $ | 13,255 | ||||
| Earnings per common share: | ||||||||||||
| Basic | $ | 0.62 | $ | 0.12 | $ | 1.42 | $ | 0.71 | ||||
| Diluted | $ | 0.61 | $ | 0.12 | $ | 1.42 | $ | 0.71 | ||||
| Weighted average shares used for computation of: | ||||||||||||
| Basic earnings per share | 18,622,083 | 18,593,296 | 18,619,006 | 18,592,680 | ||||||||
| Diluted earnings per share | 18,728,424 | 18,625,904 | 18,705,801 | 18,607,862 | ||||||||
| MCBC HOLDINGS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS |
||||||||
| (Dollars in thousands, except share and per share data) | ||||||||
| April 1, | June 30, | |||||||
| 2018 | 2017 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| CURRENT ASSETS: | ||||||||
| Cash and cash equivalents | $ | 8,500 | $ | 4,038 | ||||
| Accounts receivable — net of allowances of $71 and $82, respectively | 5,975 | 3,500 | ||||||
| Income tax receivable | 61 | — | ||||||
| Inventories — net | 20,290 | 11,676 | ||||||
| Prepaid expenses and other current assets | 3,596 | 2,438 | ||||||
| Total current assets | 38,422 | 21,652 | ||||||
| Property, plant and equipment — net | 19,728 | 14,827 | ||||||
| Intangible assets — net | 51,566 | 16,643 | ||||||
| Goodwill | 66,713 | 29,593 | ||||||
| Deferred debt issuance costs — net | 406 | 481 | ||||||
| Other | 297 | 125 | ||||||
| Total assets | $ | 177,132 | $ | 83,321 | ||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
| CURRENT LIABILITIES: | ||||||||
| Accounts payable | $ | 18,082 | $ | 11,008 | ||||
| Income tax payable | 1,280 | 780 | ||||||
| Accrued expenses and other current liabilities | 30,343 | 21,410 | ||||||
| Current portion of long term debt, net of unamortized debt issuance costs | 5,101 | 3,687 | ||||||
| Total current liabilities | 54,806 | 36,885 | ||||||
| Long term debt, net of unamortized debt issuance costs | 80,946 | 30,790 | ||||||
| Deferred income taxes | 172 | 953 | ||||||
| Unrecognized tax positions | 2,134 | 2,932 | ||||||
| Total liabilities | 138,058 | 71,560 | ||||||
| COMMITMENTS AND CONTINGENCIES | ||||||||
| STOCKHOLDERS' EQUITY: | ||||||||
| Common stock, $.01 par value per share — authorized, 100,000,000 shares; issued and outstanding, 18,683,678 shares at April 1, 2018 and 18,637,445 shares at June 30, 2017 | 187 | 186 | ||||||
| Additional paid-in capital | 113,748 | 112,945 | ||||||
| Accumulated deficit | (74,861 | ) | (101,370 | ) | ||||
| Total stockholders' equity | 39,074 | 11,761 | ||||||
| Total liabilities and stockholders' equity | $ | 177,132 | $ | 83,321 | ||||
Supplemental Operating Data
The following table sets forth certain supplemental operating data for the periods indicated:
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||
| April 1, | April 2, | % | April 1, | April 2, | % | ||||||||||||||||
| 2018 | 2017 | Variance | 2018 | 2017 | Variance | ||||||||||||||||
| (Unaudited) | |||||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||
| Unit volume: | |||||||||||||||||||||
| MasterCraft | 804 | 741 | 8.5 % | 2,254 | 2,090 | 7.8 % | |||||||||||||||
| NauticStar | 628 | — | 1,154 | — | |||||||||||||||||
| MasterCraft sales | $ | 69,257 | $ | 58,486 | 18.4 % | $ | 192,545 | $ | 170,309 | 13.1 % | |||||||||||
| NauticStar sales | $ | 24,554 | $ | — | $ | 44,750 | $ | — | |||||||||||||
| Consolidated sales | $ | 93,811 | $ | 58,486 | 60.4 % | $ | 237,295 | $ | 170,309 | 39.3 % | |||||||||||
| Per Unit: | |||||||||||||||||||||
| MasterCraft sales | $ | 86 | $ | 79 | 8.9 % | $ | 85 | $ | 81 | 4.9 % | |||||||||||
| NauticStar sales | $ | 39 | $ | — | $ | 39 | $ | — | |||||||||||||
| Consolidated sales | $ | 66 | $ | 79 | (17.0)% | $ | 70 | $ | 81 | (14.6)% | |||||||||||
| Gross margin | 26.0 | % | 25.5 | % | 26.3 | % | 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 fees and expenses related to the company’s follow-on offering, transaction expenses associated with the acquisition of NauticStar, acquisition related inventory step up adjustment and our stock-based compensation. We define Adjusted net income as net income adjusted to eliminate certain non-cash charges and other items that we do not consider to be indicative of our ongoing operations, including fees and expenses related to the company’s follow-on offering, transaction expenses associated with the acquisition of NauticStar, 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.
Furthermore, certain non-GAAP financial measures presented in this release have been provided for comparison purposes only and these non-GAAP financial measures may change in the future based on our calculations and forecasts regarding the interpretation of certain recent changes to U.S. federal income tax law and anticipated impacts on our financial results.
The following table sets forth a reconciliation of net income as determined in accordance with GAAP to Adjusted EBITDA for the periods indicated:
| Three Months Ended | Nine Months Ended | ||||||||||||||||
| April 1, 2018 | April 2, 2017 | April 1, 2018 | April 2, 2017 | ||||||||||||||
| (Unaudited) | |||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||
| Net income | $ | 11,454 | $ | 2,241 | $ | 26,509 | $ | 13,255 | |||||||||
| Income tax expense | 2,848 | 1,480 | 8,009 | 8,017 | |||||||||||||
| Interest expense | 897 | 561 | 2,527 | 1,684 | |||||||||||||
| Depreciation and amortization | 1,456 | 821 | 3,665 | 2,442 | |||||||||||||
| EBITDA | 16,655 | 5,103 | 40,710 | 25,398 | |||||||||||||
| Transaction expense(a) | 247 | 4 | 1,733 | 63 | |||||||||||||
| Inventory step-up adjustment – acquisition related(b) | — | — | 501 | — | |||||||||||||
| Litigation charge(c) | — | 4,295 | — | 5,948 | |||||||||||||
| Stock-based compensation | 353 | 215 | 881 | 520 | |||||||||||||
| Adjusted EBITDA | $ | 17,255 | $ | 9,617 | $ | 43,825 | $ | 31,929 | |||||||||
| Adjusted EBITDA margin(d) | 18.4% | 16.4% | 18.5% | 18.7% | |||||||||||||
| (a) | Represents fees, expenses and integration costs associated with our acquisition of NauticStar and our follow-on offering and secondary offering in the prior-year period. |
| (b) | Represents post-acquisition adjustment to cost of goods sold for the fair value step up of inventory acquired all of which was sold during the second quarter of fiscal 2018. |
| (c) | Represents fees and expenses related to our litigation with Malibu Boats, LLC, which was settled during the fourth quarter of fiscal 2017. |
| (d) | We define Adjusted EBITDA margin as Adjusted EBITDA expressed as a percentage of net sales. |
The following table sets forth a reconciliation of net income as determined in accordance with GAAP to Adjusted net income for the periods indicated:
| Three Months Ended | Nine Months Ended | ||||||||||||
| April 1, 2018 | April 2, 2017 | April 1, 2018 | April 2, 2017 | ||||||||||
| (Unaudited) | |||||||||||||
| (Dollars in thousands, except for share and per share amounts) | |||||||||||||
| Net income | $ | 11,454 | $ | 2,241 | $ | 26,509 | $ | 13,255 | |||||
| Income tax expense | 2,848 | 1,480 | 8,009 | 8,017 | |||||||||
| Transaction expense(a) | 247 | 4 | 1,733 | 63 | |||||||||
| Inventory step-up adjustment – acquisition related(b) | — | — | 501 | — | |||||||||
| Litigation charge(c) | — | 4,295 | — | 5,948 | |||||||||
| Stock-based compensation | 353 | 215 | 881 | 520 | |||||||||
| Adjusted net income before income taxes(d) | 14,902 | 8,235 | 37,633 | 27,803 | |||||||||
| Adjusted income tax expense(e) | 4,322 | 2,965 | 10,914 | 10,009 | |||||||||
| Adjusted net income | $ | 10,580 | $ | 5,270 | $ | 26,719 | $ | 17,794 | |||||
| Pro-forma Adjusted net income per common share | |||||||||||||
| Basic | $ | 0.57 | $ | 0.28 | $ | 1.43 | $ | 0.96 | |||||
| Diluted | $ | 0.56 | $ | 0.28 | $ | 1.42 | $ | 0.95 | |||||
| Pro-forma weighted average shares used for the computation of: | |||||||||||||
| Basic Adjusted net income per share(f) | 18,624,381 | 18,593,296 | 18,621,350 | 18,593,296 | |||||||||
| Diluted Adjusted net income per share(f) | 18,803,396 | 18,722,582 | 18,797,949 | 18,704,546 | |||||||||
| (a) | Represents fees, expenses and integration costs associated with our acquisition of NauticStar and our follow-on offering and secondary offering in the prior-year period. |
| (b) | Represents post-acquisition adjustment to cost of goods sold for the fair value step up of inventory acquired all of which was sold during the second quarter of fiscal 2018. |
| (c) | Represents legal and advisory fees related to our litigation with Malibu Boats, LLC, which was settled during the fourth quarter of fiscal 2017. |
| (d) | Prior periods presented exclude amortization charges for acquired intangible assets incurred during the third quarter of fiscal 2018 and the year to date period of $0.5 million and $1.0 million, respectively. |
| (e) |
Reflects income tax expense at an estimated annual effective income tax rate of 29% for all current-year periods presented and 36% for all prior-year periods presented. We expect our estimated annual effective income tax rate to be reduced to about 24% for fiscal 2019. |
| (f) |
The weighted average shares used for computation of pro-forma diluted earnings per common share gives effect to 59,297 shares of restricted stock awards, 66,134 performance stock units and 53,584 shares for the dilutive effect of stock options. The average of the prior quarters is used for computation of the nine months ended periods. |
The following table shows the reconciliation of diluted net income per share to diluted pro forma Adjusted net income per share for the periods presented:
| Three Months Ended | Nine Months Ended | ||||||||||||||||
| April 1, 2018 | April 2, 2017 | April 1, 2018 | April 2, 2017 | ||||||||||||||
| (Unaudited) | |||||||||||||||||
| Net income per diluted share | $ | 0.61 | $ | 0.12 | $ | 1.42 | $ | 0.71 | |||||||||
| Impact of adjustments: | |||||||||||||||||
| Income tax expense | 0.15 | 0.08 | 0.43 | 0.43 | |||||||||||||
| Transaction expense(a) | 0.01 | — | 0.09 | — | |||||||||||||
| Inventory step-up adjustment – acquisition related(b) | — | — | 0.03 | — | |||||||||||||
| Litigation charge(c) | — | 0.23 | — | 0.32 | |||||||||||||
| Stock-based compensation | 0.02 | 0.01 | 0.05 | 0.03 | |||||||||||||
| Net income per diluted share before income taxes(d) | 0.79 | 0.44 | 2.02 | 1.49 | |||||||||||||
| Impact of adjusted income tax expense on net income per diluted share before income taxes(e) | (0.23 | ) | (0.16 | ) | (0.58 | ) | (0.54 | ) | |||||||||
| Impact of increased share count(f) | — | — | (0.02 | ) | — | ||||||||||||
| Adjusted Net Income per diluted pro-forma weighted average share | 0.56 | 0.28 | 1.42 | 0.95 | |||||||||||||
| (a) | Represents fees, expenses and integration costs associated with our acquisition of NauticStar and our follow-on offering and secondary offering in the prior-year period. |
| (b) | Represents post-acquisition adjustment to cost of goods sold for the fair value step up of inventory acquired all of which was sold during the second quarter of fiscal 2018. |
| (c) | Represents legal and advisory fees related to our litigation with Malibu Boats, LLC, which was settled during the fourth quarter of fiscal 2017. |
| (d) | Prior periods presented exclude amortization charges for acquired intangible assets incurred during the third quarter of fiscal 2018 and the year to date period of $0.5 million and $1.0 million, respectively. |
| (e) | Reflects income tax expense at an estimated annual effective income tax rate of 29% for all current-year periods presented and 36% for all prior-year periods presented. We expect our estimated annual effective income tax rate to be reduced to about 24% for fiscal 2019. |
| (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. |
Source: MCBC Holdings, Inc.