MasterCraft Reports Fiscal 2016 Third-Quarter Results
Continued Demand for Performance Sport Boats and
Highlights:
- Net sales were
$57.0 million , an increase of 11.6 percent versus the year-earlier period excluding the terminated Hydra-Sports manufacturing contract - Total third-quarter net sales rose 5.1 percent versus prior-year third quarter net sales of
$54.3 million including Hydra-Sports - Gross margin rose to 27.8 percent, a 410 basis point improvement over the prior-year third quarter
- Adjusted EBITDA increased 35.3 percent to
$10.1 million and adjusted EBITDA margin increased to 17.7 percent, a 310 basis point improvement over the prior-year third quarter - Net income totaled
$4.9 million , up from $0.1 million in the year-earlier quarter - Fully diluted, pro forma, adjusted net income per share grew 82.4 percent to
$0.31 versus the prior-year third quarter
Third-Quarter Results
“Like most marine manufacturers, we saw international headwinds, particularly in
Gross profit for the fiscal 2016 third quarter increased
Selling and marketing expense was relatively flat at
Adjusted EBITDA margin rose 310 basis points to 17.7 percent from 14.6 percent in the prior year. Fiscal 2016 third-quarter adjusted EBITDA was
Fiscal 2016 third-quarter adjusted net income increased 84.8 percent to
Key Milestones
MasterCraft’s new X26, unveiled earlier in the fiscal year, continues to perform very well, with demand rising over fiscal 2016 second-quarter levels.
Said McNew, “Positive feedback on the new X26 continues to pour in from both dealers and consumers alike. Since its release,
Operationally,
“In addition to being named a 2015 IndustryWeek Best Plant in North America Recipient—the only boat manufacturer to receive that honor—we continue to set new benchmarks for operational excellence and establish best practices in manufacturing,” said McNew. “This commitment can be seen in our overall boat quality and in our strong margin improvement.”
During the fiscal third quarter, the company’s board of directors authorized share repurchase activities using a portion of the company’s growing cash balance. Under the program, up to
Outlook
“We continue to deliver solid performance, and we expect organic growth to remain strong in the fiscal 2016 fourth quarter,” McNew said. “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 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
For an audio replay of the conference call, dial (855) 859-2056 (domestic) or (404) 537-3406 (international) and enter 86847955. The audio replay will be available beginning at 8 p.m. ET on Thursday, May 5, 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 2016 outlook and key growth initiatives; and our anticipated financial performance for fiscal 2016.
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
Results of Operations for the Three and Nine Months Ended
MCBC HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(Dollars in thousands, except share and per share data)
Three Months Ended | Nine Months Ended | ||||||||||||||||
March 27, | March 29, | March 27, | March 29, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||||
(Unaudited) | |||||||||||||||||
Net sales | $ | 57,030 | $ | 54,282 | $ | 168,214 | $ | 159,533 | |||||||||
Cost of sales | 41,188 | 41,395 | 121,168 | 121,169 | |||||||||||||
Gross profit | 15,842 | 12,887 | 47,046 | 38,364 | |||||||||||||
Operating expenses: | |||||||||||||||||
Selling and marketing | 2,210 | 2,266 | 7,569 | 6,388 | |||||||||||||
General and administrative | 6,064 | 9,479 | 24,998 | 14,682 | |||||||||||||
Amortization of intangible assets | 55 | 54 | 166 | 166 | |||||||||||||
Total operating expenses | 8,329 | 11,799 | 32,733 | 21,236 | |||||||||||||
Operating income | 7,513 | 1,088 | 14,313 | 17,128 | |||||||||||||
Other expense: | |||||||||||||||||
Interest expense | 82 | 1,752 | 1,090 | 4,150 | |||||||||||||
Change in common stock warrant fair value | (27 | ) | (517 | ) | 3,374 | 5,248 | |||||||||||
Income before income tax expense | 7,458 | (147 | ) | 9,849 | 7,730 | ||||||||||||
Income tax expense (benefit) | 2,564 | (252 | ) | 4,408 | 4,733 | ||||||||||||
Net income | $ | 4,894 | $ | 105 | $ | 5,441 | $ | 2,997 | |||||||||
Earnings per common share | |||||||||||||||||
Basic | $ | 0.26 | $ | 0.01 | $ | 0.31 | $ | 0.27 | |||||||||
Diluted | $ | 0.26 | $ | 0.01 | $ | 0.30 | $ | 0.26 | |||||||||
Weighted average shares used for the computation of: | |||||||||||||||||
Basic earnings per share | 18,574,887 | 11,139,000 | 17,612,492 | 11,139,000 | |||||||||||||
Diluted earnings per share | 18,779,557 | 11,995,366 | 18,143,176 | 11,711,054 |
MCBC HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except share and per share data)
March 27, | June 30, | ||||||||||
2016 | 2015 | ||||||||||
(Unaudited) | |||||||||||
ASSETS | |||||||||||
CURRENT ASSETS: | |||||||||||
Cash and cash equivalents | $ | 21,571 | $ | 1,167 | |||||||
Accounts receivable — net of allowances of $142 and $92, respectively | 4,325 | 2,653 | |||||||||
Income tax receivable | 59 | — | |||||||||
Inventories — net | 11,851 | 11,541 | |||||||||
Prepaid expenses and other current assets | 5,203 | 7,235 | |||||||||
Deferred income taxes | 9,601 | 6,733 | |||||||||
Total current assets | 52,610 | 29,329 | |||||||||
Property, plant and equipment — net | 13,280 | 13,233 | |||||||||
Intangible assets — net | 16,805 | 16,971 | |||||||||
Goodwill | 29,593 | 29,593 | |||||||||
Deferred debt issuance costs — net | 326 | 425 | |||||||||
Other | 182 | 125 | |||||||||
Total assets | $ | 112,796 | $ | 89,676 | |||||||
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) | |||||||||||
CURRENT LIABILITIES: | |||||||||||
Accounts payable | $ | 13,135 | $ | 14,808 | |||||||
Income tax payable | 999 | 224 | |||||||||
Accrued expenses and other current liabilities | 23,150 | 21,313 | |||||||||
Common stock warrant liability | 217 | 9,147 | |||||||||
Current portion of long term debt | — | 18,275 | |||||||||
Total current liabilities | 37,501 | 63,767 | |||||||||
Long-term debt | — | 60,487 | |||||||||
Unrecognized tax positions | 2,262 | 519 | |||||||||
Deferred income taxes | 6,406 | 7,156 | |||||||||
Total liabilities | 46,169 | 131,929 | |||||||||
COMMITMENTS AND CONTINGENCIES | |||||||||||
STOCKHOLDERS' EQUITY (DEFICIT): | |||||||||||
Common stock, $.01 par value per share — authorized, 100,000,000 shares; issued and outstanding, 18,546,346 shares at March 27, 2016 and 11,139,000 shares at June 30, 2015 | 176 | 111 | |||||||||
Additional paid-in capital | 112,215 | 8,841 | |||||||||
Accumulated deficit | (45,764 | ) | (51,205 | ) | |||||||
Total stockholders' equity (deficit) | 66,627 | (42,253 | ) | ||||||||
Total liabilities and stockholders' equity (deficit) | $ | 112,796 | $ | 89,676 |
Supplemental Operating Data
The following table sets forth certain supplemental operating data for the periods indicated:
Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||||||||||
March 27, | March 29, | % | March 27, | March 29, | % | |||||||||||||||||||||||||||||
2016 | 2015 | Variance | 2016 | 2015 | Variance | |||||||||||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||||||||||||
Unit volume: | ||||||||||||||||||||||||||||||||||
MasterCraft | 701 | 652 | 7.5 | % | 2,079 | 1,921 | 8.2 | % | ||||||||||||||||||||||||||
Hydra-Sports | — | 12 | — | 36 | ||||||||||||||||||||||||||||||
MasterCraft sales | $ | 57,030 | $ | 51,099 | 11.6 | % | $ | 168,214 | $ | 149,158 | 12.8 | % | ||||||||||||||||||||||
Hydra-Sports sales | $ | — | $ | 3,183 | $ | — | $ | 10,375 | ||||||||||||||||||||||||||
Consolidated sales | $ | 57,030 | $ | 54,282 | 5.1 | % | $ | 168,214 | $ | 159,533 | 5.4 | % | ||||||||||||||||||||||
Per Unit: | ||||||||||||||||||||||||||||||||||
MasterCraft sales | $ | 81 | $ | 78 | 3.8 | % | $ | 81 | $ | 78 | 3.8 | % | ||||||||||||||||||||||
Hydra-Sports sales | $ | — | $ | 265 | $ | — | $ | 288 | ||||||||||||||||||||||||||
Consolidated sales | $ | 81 | $ | 82 | (1.2 | ) | % | $ | 81 | $ | 82 | (1.2 | ) | % | ||||||||||||||||||||
Gross margin | 27.8 | % | 23.7 | % | 28.0 | % | 24.0 | % |
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 unusual 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 unusual 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
- 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 | Nine Months Ended | ||||||||||||||||||
March 27, 2016 | March 29, 2015 | March 27, 2016 | March 29, 2015 | ||||||||||||||||
(Unaudited) | |||||||||||||||||||
(Dollars in thousands, except for share and per share amounts) | |||||||||||||||||||
Net income | $ | 4,894 | $ | 105 | $ | 5,441 | $ | 2,997 | |||||||||||
Income tax expense (benefit) | 2,564 | (252 | ) | 4,408 | 4,733 | ||||||||||||||
Interest expense | 82 | 1,752 | 1,090 | 4,150 | |||||||||||||||
Depreciation and amortization | 878 | 767 | 2,545 | 2,303 | |||||||||||||||
EBITDA | 8,418 | 2,372 | 13,484 | 14,183 | |||||||||||||||
Change in common stock warrant fair value(a) | (27 | ) | (517 | ) | 3,374 | 5,248 | |||||||||||||
Transaction expense(b) | — | 6,508 | 124 | 6,508 | |||||||||||||||
Litigation charge(c) | 397 | — | 773 | — | |||||||||||||||
Hydra-Sports(d) | — | (900 | ) | — | (2,430 | ) | |||||||||||||
Stock-based compensation | 1,310 | — | 13,539 | — | |||||||||||||||
Adjusted EBITDA | $ | 10,098 | $ | 7,463 | $ | 31,294 | $ | 23,509 | |||||||||||
Adjusted EBITDA margin(e) | 17.7 | % | 14.6 | % | 18.6 | % | 15.8 | % |
(a) Represents non-cash expense related to increases (decreases) in the fair market value of our common stock warrant.
(b) Represents fees and expenses related to our initial public offering.
(c) Represents legal and advisory fees related to our litigation with
(d) 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, 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.
(e) We define adjusted EBITDA margin as adjusted EBITDA expressed as a percentage of
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 | ||||||||||||||||||
March 27, 2016 | March 29, 2015 | March 27, 2016 | March 29, 2015 | ||||||||||||||||
(Unaudited) | |||||||||||||||||||
(Dollars in thousands, except for share and per share amounts) | |||||||||||||||||||
Net income | $ | 4,894 | $ | 105 | $ | 5,441 | $ | 2,997 | |||||||||||
Income tax expense (benefit) | 2,564 | (252 | ) | 4,408 | 4,733 | ||||||||||||||
Change in common stock warrant fair value(a) | (27 | ) | (517 | ) | 3,374 | 5,248 | |||||||||||||
Transaction expense(b) | - | 6,508 | 124 | 6,508 | |||||||||||||||
Litigation charge(c) | 397 | — | 773 | — | |||||||||||||||
Hydra-Sports(d) | — | (900 | ) | — | (2,430 | ) | |||||||||||||
Stock-based compensation | 1,310 | - | 13,539 | - | |||||||||||||||
Adjusted net income before income taxes | 9,138 | 4,944 | 27,659 | 17,056 | |||||||||||||||
Adjusted income tax expense(e) | 3,290 | 1,780 | 9,957 | 6,140 | |||||||||||||||
Adjusted net income | $ | 5,848 | $ | 3,164 | $ | 17,702 | $ | 10,916 | |||||||||||
Pro-forma adjusted net income per common share | |||||||||||||||||||
Basic | $ | 0.32 | $ | 0.17 | $ | 0.97 | $ | 0.60 | |||||||||||
Diluted | $ | 0.31 | $ | 0.17 | $ | 0.94 | $ | 0.58 | |||||||||||
Pro-forma weighted average shares used for the computation of: | |||||||||||||||||||
Basic adjusted net income per share(f) | 18,546,346 | 18,546,346 | 18,181,071 | 18,181,071 | |||||||||||||||
Diluted adjusted net income per share(g) | 18,603,487 | 18,603,487 | 18,832,561 | 18,832,561 |
(a) Represents non-cash expense related to increases (decreases) in the fair market value of our common stock warrant.
(b) Represents fees and expenses related to our initial public offering.
(c) Represents legal and advisory fees related to our litigation with Malibu Boats, LLC.
(d) 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, 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.
(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 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 888,730 shares of restricted stock granted under the 2015 Incentive Award Plan which vested in January 2016 and the 813,271 shares issued in exchange of options and common stock warrants less 366,084 shares repurchased. The average of the prior quarters is used for computation of the nine month ended periods.
(g) The weighted average shares used for computation of pro-forma diluted earnings per common share gives effect to effect to the 6,071,429 shares sold in our initial public offering, which closed on July 22, 2015, the 888,730 shares of restricted stock granted under the 2015 Incentive Award Plan which vested in January 2016 and the 813,271 shares issued in exchange of options and common stock warrants less 366,084 shares repurchased and 57,141 shares for the dilutive effect of stock options. The average of the prior quarters is used for computation of the nine month ended periods.
Tim Oxley Chief Financial Officer (423) 884-2221 Tim.Oxley@mastercraft.comMatt Sullivan (612) 455-1709 Matt.Sullivan@padillacrt.com