MasterCraft Reports Fiscal 2016 Fourth-Quarter and Full-Year Results
Fiscal Fourth-Quarter Highlights:
- Gross margin rose to 26.3 percent for the fourth quarter, a 300 basis point improvement over the prior-year fourth quarter
- Fiscal 2016 fourth quarter net income totaled
$4.8 million , up from$2.5 million in the prior-year fourth quarter - Diluted earnings per share grew 23.8 percent to
$0.26 for the fourth quarter versus the prior-year period - Fully diluted pro forma adjusted net income per share, a non-GAAP measure, grew 50 percent to
$0.30 for the fourth quarter versus the prior-year period - The company unveiled the XT23 crossover model and the revolutionary Dockstar Handling System
- The company’s Board of Directors declared a special cash dividend of
$4.30 per share of common stock
Fiscal 2016 Highlights:
- Fiscal 2016 full-year net sales rose 3.4 percent to
$221.6 million ; excluding the terminated Hydra-Sports manufacturing contract, MasterCraft-only net sales increased 10.9 percent versus the prior fiscal year - Gross margin grew to 27.6 percent for fiscal 2016, a 370 basis point improvement over the prior fiscal year
- Fiscal 2016 net income totaled
$10.2 million , up from$5.5 million in the prior fiscal year - Fiscal 2016 adjusted EBITDA, a non-GAAP measure, increased 30.7 percent to
$41.2 million and adjusted EBITDA margin, a non-GAAP measure, increased to 18.6 percent, a 280 basis point improvement over the prior fiscal year - Fiscal 2016 fully diluted pro forma adjusted net income per share increased 57.0 percent versus the prior year to
$1.24
Fourth-Quarter Results
Net sales for the fourth quarter ended
Said McNew, “MasterCraft delivered continued revenue growth in the fourth quarter, driven by strong demand for our all new X23, X26, and NXT22 models. While international markets have been challenging, domestic demand for our boats remains solid and we continue to focus on delivering profitable, sustainable market share growth and dealer profitability across our product line.”
Gross profit for the fiscal 2016 fourth quarter increased
Selling and marketing expense was relatively stable at
Fiscal fourth-quarter net income totaled
During the fourth quarter, the company’s Board of Directors declared a special cash dividend of
Fiscal 2016 Results
Net sales for fiscal 2016 were up
Gross profit for fiscal 2016 increased
Selling and marketing expense for fiscal 2016 increased
Fiscal 2016 net income totaled
Key Milestones
During the quarter, MasterCraft announced its revolutionary new Dockstar Handling System. “Dockstar enables boat drivers of any ability to confidently drive in reverse and more easily navigate tight docks and crowded marinas,” said McNew. “The Dockstar system improves the on-water experience for boaters and gives the MasterCraft portfolio the exceptional slow speed handling characteristics previously only found on outboard and stern drive configurations.”
MasterCraft also unveiled the new XT23, the company’s latest multi-sport model. Designed to be a do-it-all crossover, the new XT23 will anchor MasterCraft’s new XT line of boats targeting the sweet spot between the company’s entry-level NXT line and its award-winning, premium X series.
McNew continued, “Embracing the idea that endless possibilities result in endless fun, the XT23’s intuitive digital dashboard interface instantly dials in the size and shape of the wake for any sport on the water: wakeboarding, waterskiing, wakesurfing, towsports or tubing. Equipped with MasterCraft’s award-winning Gen 2 Surf System, the XT23 can be loaded up with plenty of gear and up to sixteen friends for an action-packed day on the water.”
Outlook
“We continue to deliver solid performance, and we target continued organic growth in fiscal 2017,” McNew concluded. “As a company, we are steadfast in our five-pronged growth strategy: developing new and innovative products in core markets; 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 62595353. The audio replay will be available beginning at 8 p.m. ET on Thursday, Sept. 8, 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 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 Fourth Quarter and Fiscal Year 2016
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, | ||||||||||||||
| 2016 | 2015 | 2016 | 2015 | ||||||||||||||
| Net sales | $ | 53,386 | $ | 54,853 | $ | 221,600 | $ | 214,386 | |||||||||
| Cost of sales | 39,353 | 42,051 | 160,521 | 163,220 | |||||||||||||
| Gross profit | 14,033 | 12,802 | 61,079 | 51,166 | |||||||||||||
| Operating expenses: | |||||||||||||||||
| Selling and marketing | 2,116 | 2,164 | 9,685 | 8,552 | |||||||||||||
| General and administrative | 4,164 | 3,790 | 29,162 | 18,472 | |||||||||||||
| Amortization of intangible assets | 55 | 56 | 221 | 222 | |||||||||||||
| Total operating expenses | 6,335 | 6,010 | 39,068 | 27,246 | |||||||||||||
| Operating income | 7,698 | 6,792 | 22,011 | 23,920 | |||||||||||||
| Other expense (income): | |||||||||||||||||
| Interest expense | 190 | 1,021 | 1,280 | 5,171 | |||||||||||||
| Change in common stock warrant fair value | 51 | 1,373 | 3,425 | 6,621 | |||||||||||||
| Other income | (1,212 | ) | — | (1,212 | ) | — | |||||||||||
| Income before income tax expense | 8,669 | 4,398 | 18,518 | 12,128 | |||||||||||||
| Income tax expense (benefit) | 3,900 | 1,861 | 8,308 | 6,594 | |||||||||||||
| Net income | $ | 4,769 | $ | 2,537 | $ | 10,210 | $ | 5,534 | |||||||||
| Earnings per common share | |||||||||||||||||
| Basic | $ | 0.26 | $ | 0.23 | $ | 0.57 | $ | 0.50 | |||||||||
| Diluted | $ | 0.26 | $ | 0.21 | $ | 0.56 | $ | 0.47 | |||||||||
| Weighted average shares used for the computation of: | |||||||||||||||||
| Basic earnings per share | 18,559,800 | 11,139,000 | 17,849,319 | 11,139,000 | |||||||||||||
| Diluted earnings per share | 18,598,505 | 11,954,984 | 18,257,007 | 11,862,699 | |||||||||||||
MCBC HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except share and per share data)
| June 30, | June 30, | |||||||||
| 2016 | 2015 | |||||||||
| ASSETS | ||||||||||
| CURRENT ASSETS: | ||||||||||
| Cash and cash equivalents | $ | 73 | $ | 1,167 | ||||||
| Accounts receivable — net of allowances of $65 and $92, respectively | 2,966 | 2,653 | ||||||||
| Income tax receivable | 5 | — | ||||||||
| Inventories — net | 13,268 | 11,541 | ||||||||
| Prepaid expenses and other current assets | 1,780 | 7,235 | ||||||||
| Deferred income taxes | — | 6,733 | ||||||||
| Total current assets | 18,092 | 29,329 | ||||||||
| Property, plant and equipment — net | 13,826 | 13,233 | ||||||||
| Intangible assets — net | 16,750 | 16,971 | ||||||||
| Goodwill | 29,593 | 29,593 | ||||||||
| Deferred debt issuance costs — net | 601 | 425 | ||||||||
| Deferred income taxes | 3,501 | — | ||||||||
| Other | 170 | 125 | ||||||||
| Total assets | $ | 82,533 | $ | 89,676 | ||||||
| LIABILITIES AND STOCKHOLDERS' DEFICIT | ||||||||||
| CURRENT LIABILITIES: | ||||||||||
| Accounts payable | $ | 13,112 | $ | 14,808 | ||||||
| Income tax payable | 1,108 | 224 | ||||||||
| Accrued expenses and other current liabilities | 22,276 | 21,313 | ||||||||
| Common stock warrant liability | — | 9,147 | ||||||||
| Current portion of long term debt, net of unamortized debt issuance costs | 7,885 | 18,275 | ||||||||
| Total current liabilities | 44,381 | 63,767 | ||||||||
| Long term debt, net of unamortized debt issuance costs | 44,342 | 60,487 | ||||||||
| Unrecognized tax positions | 2,189 | 519 | ||||||||
| Deferred income taxes | — | 7,156 | ||||||||
| Total liabilities | 90,912 | 131,929 | ||||||||
| COMMITMENTS AND CONTINGENCIES | ||||||||||
| STOCKHOLDERS' DEFICIT: | ||||||||||
| Common stock, $.01 par value per share — authorized, 100,000,000 shares; issued and outstanding, 18,591,808 shares at June 30, 2016, and 11,139,000 shares at June 30, 2015 | 186 | 111 | ||||||||
| Additional paid-in capital | 112,375 | 8,841 | ||||||||
| Accumulated deficit | (120,940 | ) | (51,205 | ) | ||||||
| Total stockholders' deficit | (8,379 | ) | (42,253 | ) | ||||||
| Total liabilities and stockholders' deficit | $ | 82,533 | $ | 89,676 | ||||||
Supplemental Operating Data
The following table sets forth certain supplemental operating data for the periods indicated:
| Fourth Quarter Ended | Fiscal Years Ended | ||||||||||||||||||||||
| June 30, | June 30, | % | June 30, | June 30, | % | ||||||||||||||||||
| 2016 | 2015 | Variance | 2016 | 2015 | Variance | ||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||||
| Unit volume: | |||||||||||||||||||||||
| MasterCraft | 663 | 626 | 5.9 | % | 2,742 | 2,547 | 7.7 | % | |||||||||||||||
| Hydra-Sports | — | 9 | — | 45 | |||||||||||||||||||
| MasterCraft sales | $ | 53,386 | $ | 50,749 | 5.2 | % | $ | 221,600 | $ | 199,907 | 10.9 | % | |||||||||||
| Hydra-Sports sales | $ | — | $ | 4,104 | $ | — | $ | 14,479 | |||||||||||||||
| Consolidated sales | $ | 53,386 | $ | 54,853 | (2.7 | ) | % | $ | 221,600 | $ | 214,386 | 3.4 | % | ||||||||||
| Per Unit: | |||||||||||||||||||||||
| MasterCraft sales | $ | 81 | $ | 81 | — | % | $ | 81 | $ | 78 | 3.8 | % | |||||||||||
| Hydra-Sports sales | $ | — | $ | 456 | $ | — | $ | 322 | |||||||||||||||
| Consolidated sales | $ | 81 | $ | 86 | (5.8 | ) | % | $ | 81 | $ | 83 | (2.4 | ) | % | |||||||||
| Gross margin | 26.3 | % | 23.3 | % | 27.6 | % | 23.9 | % | |||||||||||||||
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, 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 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, 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 MasterCraft 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, 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 | Fiscal Year Ended | ||||||||||||||||||||
| June 30, 2016 | June 30, 2015 | June 30, 2016 | June 30, 2015 | ||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||
| Net income | $ | 4,769 | $ | 2,537 | $ | 10,210 | $ | 5,534 | |||||||||||||
| Income tax expense | 3,900 | 1,861 | 8,308 | 6,594 | |||||||||||||||||
| Interest expense | 190 | 1,021 | 1,280 | 5,171 | |||||||||||||||||
| Depreciation and amortization | 899 | 975 | 3,444 | 3,278 | |||||||||||||||||
| EBITDA | 9,758 | 6,394 | 23,242 | 20,577 | |||||||||||||||||
| Change in common stock warrant fair value(a) | 51 | 1,373 | 3,425 | 6,621 | |||||||||||||||||
| Transaction expense(b) | 355 | 560 | 479 | 7,068 | |||||||||||||||||
| Litigation charge(c) | 833 | 539 | 1,606 | 539 | |||||||||||||||||
| Litigation settlement(d) | (1,212 | ) | — | (1,212 | ) | — | |||||||||||||||
| Hydra-Sports(e) | — | (835 | ) | — | (3,265 | ) | |||||||||||||||
| Stock-based compensation | 147 | — | 13,687 | — | |||||||||||||||||
| Adjusted EBITDA | $ | 9,932 | $ | 8,031 | $ | 41,227 | $ | 31,540 | |||||||||||||
| Adjusted EBITDA margin(f) | 18.6 | % | 15.8 | % | 18.6 | % | 15.8 | % | |||||||||||||
(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, 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) 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 in
(f) We define adjusted EBITDA margin as adjusted EBITDA expressed as a percentage of MasterCraft 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 | Fiscal Year Ended | |||||||||||||||||||
| June 30, 2016 | June 30, 2015 | June 30, 2016 | June 30, 2015 | |||||||||||||||||
| (Dollars in thousands, except for share and per share amounts) | ||||||||||||||||||||
| Net income | $ | 4,769 | $ | 2,537 | $ | 10,210 | $ | 5,534 | ||||||||||||
| Income tax expense | 3,900 | 1,861 | 8,308 | 6,594 | ||||||||||||||||
| Change in common stock warrant fair value(a) | 51 | 1,373 | 3,425 | 6,621 | ||||||||||||||||
| Transaction expense(b) | 355 | 560 | 479 | 7,068 | ||||||||||||||||
| Litigation charge(c) | 833 | 539 | 1,606 | 539 | ||||||||||||||||
| Litigation settlement(d) | (1,212 | ) | — | (1,212 | ) | — | ||||||||||||||
| Hydra-Sports(e) | — | (835 | ) | — | (3,265 | ) | ||||||||||||||
| Stock-based compensation | 147 | — | 13,687 | — | ||||||||||||||||
| Adjusted net income before income taxes | 8,843 | 6,035 | 36,503 | 23,091 | ||||||||||||||||
| Adjusted income tax expense(f) | 3,183 | 2,173 | 13,141 | 8,313 | ||||||||||||||||
| Adjusted net income | $ | 5,660 | $ | 3,862 | $ | 23,362 | $ | 14,778 | ||||||||||||
| Pro-forma adjusted net income per common share | ||||||||||||||||||||
| Basic | $ | 0.30 | $ | 0.22 | $ | 1.28 | $ | 0.86 | ||||||||||||
| Diluted | $ | 0.30 | $ | 0.20 | $ | 1.24 | $ | 0.79 | ||||||||||||
| Pro-forma weighted average shares used for the computation of: | ||||||||||||||||||||
| Basic adjusted net income per share(g) | 18,591,808 | 17,210,429 | 18,283,755 | 17,210,429 | ||||||||||||||||
| Diluted adjusted net income per share(g) | 18,591,808 | 18,915,143 | 18,772,373 | 18,822,858 | ||||||||||||||||
(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, payment of a special cash dividend in
(c) Represents legal and advisory fees for our litigation with Malibu Boats, LLC for fiscal 2016 and settlement of a litigation matter for fiscal 2015.
(d) Represents receipt of a one-time payment to settle certain litigation matters.
(e) 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 in June 2012, 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.
(f) Reflects income tax expense at an estimated normalized annual effective income tax rate of 36.0 percent for the periods presented.
(g) The weighted average shares used for computation of fiscal 2016 pro-forma basic and diluted earnings per common share gives effect to the 6,071,429 shares sold in our initial public offering, which closed on July 22, 2015, the 894,850 shares of restricted stock granted under the 2015 Incentive Award Plan and the 864,946 shares issued in exchange and exercise of options and common stock warrants, less 378,417 shares repurchased through June 30, 2016. The average of the prior quarters is used for computation of the fiscal year ended period.
Contacts:Tim Oxley Chief Financial Officer (423) 884-2221 Tim.Oxley@mastercraft.comMatt Sullivan (612) 455-1709 Matt.Sullivan@padillacrt.com