MCBC Holdings, Inc. Reports Fiscal 2018 First-Quarter Results
Net Sales Rise with Demand for Performance Sports Boats; Company Welcomes NauticStar, Further Expanding Product Portfolio
Highlights:
- Net sales for the first quarter increased to
$65.0 million , up 7.2 percent from$60.7 million in the prior-year period. - First-quarter gross margin decreased 140 basis points to 27.9 percent, from an exceptionally high 29.3 percent in the prior-year period.
- Net income totaled
$7.0 million for the 2018 first quarter and the prior-year period. - Diluted earnings per share remained flat year-over-year at
$0.38 . - Adjusted EBITDA, a non-GAAP measure, decreased to
$12.9 million from$13.3 million in the prior-year period. - Adjusted EBITDA Margin, a non-GAAP measure, decreased 200 basis points to 19.9 percent, from 21.9 percent in the prior-year period.
- For the full fiscal year 2018, we expect to see Adjusted EBITDA margins for MasterCraft, excluding NauticStar, to grow to the low 19 percent range, up slightly from the 19.0 percent margin experienced in fiscal year 2017. After taking the dilutive effect of the NauticStar acquisition, consolidated EBITDA margins for the full year 2018 are expected to be in the mid to high 17 percent range.
- Fully diluted pro forma Adjusted net income per share, a non-GAAP measure, declined slightly to
$0.40 for the first quarter, versus$0.41 in the year-earlier period. - First-quarter working capital management remained outstanding, as evidenced by a cash conversion cycle of 3.9 days.
- Full fiscal year 2018 net sales growth is expected to be in the 35 percent range including nine months of NauticStar’s projected net sales.
First-Quarter Results
The following 2018 first-quarter results reflect MasterCraft only.
Net sales for the first quarter ended
Gross profit for the first quarter, increased
Said McNew, “We continue to see solid retail activity and are comfortable with our current inventory levels. We remain optimistic about fiscal 2018 and we’re diligently working with our strong dealer network to maximize their opportunities moving forward.”
Selling and marketing expense increased
Net income totaled
EBITDA was
Market Milestones
In
Said McNew, “NauticStar provides us with a presence in two of the boating industry’s fastest growing segments: saltwater fishing and outboard propulsion. Additionally, NauticStar’s year-over-year unit growth is among the strongest in the 18 to 28-foot category and demand domestically currently exceeds supply. We look forward to leveraging our industry-leading strengths in operational excellence and financial management to further improve NauticStar’s output, quality and margin as we continue their rapid growth.”
Since acquiring NauticStar,
Said McNew, “We are very excited to welcome Tim as the new president of NauticStar. He is a seasoned marine industry veteran that has successfully run multiple well-known marine brands. Tim also brings keen financial, operational and dealer relationship experience. His expertise will be invaluable as we work to optimize NauticStar.”
Furthermore, the
Outlook
Concluded McNew, “Looking ahead we’re optimistic about prospects for our fiscal 2018 with the sales and profit growth opportunities we have for both NauticStar and MasterCraft. And 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 full fiscal year 2018 guidance,
For the fiscal 2018 second quarter,
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 99156704. The audio replay will be available beginning at 8 p.m. ET on Thursday, November 9, 2017, 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; 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 First Quarter Fiscal Year 2018
MCBC HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
(Dollars in thousands, except share and per share data)
First Quarter Ended | |||||||
October 1, | October 2, | ||||||
2017 | 2016 | ||||||
Net sales | $ | 65,049 | $ | 60,689 | |||
Cost of sales | 46,886 | 42,880 | |||||
Gross profit | 18,163 | 17,809 | |||||
Operating expenses: | |||||||
Selling and marketing | 2,737 | 2,054 | |||||
General and administrative | 4,335 | 4,093 | |||||
Amortization of intangible assets | 27 | 27 | |||||
Total operating expenses | 7,099 | 6,174 | |||||
Operating income | 11,064 | 11,635 | |||||
Other expense: | |||||||
Interest expense | 491 | 611 | |||||
Income before income tax expense | 10,573 | 11,024 | |||||
Income tax expense | 3,527 | 4,041 | |||||
Net income | $ | 7,046 | $ | 6,983 | |||
Earnings per common share: | |||||||
Basic | $ | 0.38 | $ | 0.38 | |||
Diluted | $ | 0.38 | $ | 0.38 | |||
Weighted average shares used for computation of: | |||||||
Basic earnings per share | 18,615,100 | 18,591,808 | |||||
Diluted earnings per share | 18,686,626 | 18,592,603 | |||||
MCBC HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except share and per share data)
October 1, | June 30, | |||||||
2017 | 2017 | |||||||
(Unaudited) | ||||||||
ASSETS | ||||||||
CURRENT ASSETS: | ||||||||
Cash and cash equivalents | $ | 12,680 | $ | 4,038 | ||||
Accounts receivable — net of allowances of $112 and $82, respectively | 6,705 | 3,500 | ||||||
Inventories | 11,569 | 11,676 | ||||||
Prepaid expenses and other current assets | 2,624 | 2,438 | ||||||
Total current assets | 33,578 | 21,652 | ||||||
Property, plant and equipment — net | 14,627 | 14,827 | ||||||
Intangible assets — net | 16,616 | 16,643 | ||||||
Goodwill | 29,593 | 29,593 | ||||||
Deferred debt issuance costs — net | 451 | 481 | ||||||
Other | 125 | 125 | ||||||
Total assets | $ | 94,990 | $ | 83,321 | ||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
CURRENT LIABILITIES: | ||||||||
Accounts payable | $ | 15,678 | $ | 11,008 | ||||
Income tax payable | 2,777 | 780 | ||||||
Accrued expenses and other current liabilities | 20,368 | 21,410 | ||||||
Current portion of long term debt, net of unamortized debt issuance costs | 4,182 | 3,687 | ||||||
Total current liabilities | 43,005 | 36,885 | ||||||
Long term debt, net of unamortized debt issuance costs | 29,376 | 30,790 | ||||||
Deferred income taxes | 361 | 953 | ||||||
Unrecognized tax positions | 3,220 | 2,932 | ||||||
Total liabilities | 75,962 | 71,560 | ||||||
COMMITMENTS AND CONTINGENCIES | ||||||||
STOCKHOLDERS' EQUITY: | ||||||||
Common stock, $.01 par value per share — authorized, 100,000,000 shares; issued and outstanding, 18,678,441 shares at October 1, 2017 and 18,637,445 shares at June 30, 2017 | 186 | 186 | ||||||
Additional paid-in capital | 113,166 | 112,945 | ||||||
Accumulated deficit | (94,324 | ) | (101,370 | ) | ||||
Total stockholders' equity | 19,028 | 11,761 | ||||||
Total liabilities and stockholders' equity | $ | 94,990 | $ | 83,321 | ||||
Supplemental Operating Data
The following table sets forth certain supplemental operating data for the periods indicated:
First Quarter Ended | |||||||||||
October 1, | October 2, | % | |||||||||
2017 | 2016 | Variance | |||||||||
(Unaudited) | |||||||||||
(Dollars in thousands) | |||||||||||
Unit volume: | |||||||||||
MasterCraft | 775 | 718 | 7.9 | % | |||||||
Net sales | $ | 65,049 | $ | 60,689 | 7.2 | % | |||||
Net sales per unit | $ | 84 | $ | 85 | (0.7 | )% | |||||
Gross margin | 27.9 | % | 29.3 | % | |||||||
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 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.
The following table sets forth a reconciliation of Adjusted EBITDA to net income as determined in accordance with GAAP for the periods indicated:
First Quarter Ended | |||||||||
October 1, 2017 | October 2, 2016 | ||||||||
(Unaudited) | |||||||||
(Dollars in thousands) | |||||||||
Net income | $ | 7,046 | $ | 6,983 | |||||
Income tax expense | 3,527 | 4,041 | |||||||
Interest expense | 491 | 611 | |||||||
Depreciation and amortization | 732 | 797 | |||||||
EBITDA | 11,796 | 12,432 | |||||||
Transaction expense(a) | 881 | 54 | |||||||
Litigation charge(b) | — | 709 | |||||||
Stock-based compensation | 264 | 119 | |||||||
Adjusted EBITDA | $ | 12,941 | $ | 13,314 | |||||
Adjusted EBITDA margin(c) | 19.9 | % | 21.9 | % |
(a) | Represents fees and expenses associated with our acquisition of NauticStar, LLC and our follow-on offering. |
(b) | Represents fees and expenses related to our litigation with Malibu Boats, LLC, which was settled during the fourth quarter of fiscal 2017. |
(c) | 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:
First Quarter Ended | ||||||||
October 1, 2017 | October 2, 2016 | |||||||
(Unaudited) | ||||||||
(Dollars in thousands, except for share and per share amounts) | ||||||||
Net income | $ | 7,046 | $ | 6,983 | ||||
Income tax expense | 3,527 | 4,041 | ||||||
Transaction expense(a) | 881 | 54 | ||||||
Litigation charge(b) | — | 709 | ||||||
Stock-based compensation | 264 | 119 | ||||||
Adjusted net income before income taxes | 11,718 | 11,906 | ||||||
Adjusted income tax expense(c) | 4,218 | 4,286 | ||||||
Adjusted net income | $ | 7,500 | $ | 7,620 | ||||
Pro-forma Adjusted net income per common share | ||||||||
Basic | $ | 0.40 | $ | 0.41 | ||||
Diluted | $ | 0.40 | $ | 0.41 | ||||
Pro-forma weighted average shares used for the computation of: | ||||||||
Basic Adjusted net income per share(d) | 18,619,834 | 18,591,808 | ||||||
Diluted Adjusted net income per share(d) | 18,798,236 | 18,679,292 |
(a) | Represents fees and expenses associated with our acquisition of NauticStar, LLC and our follow-on offering. |
(b) | Represents legal and advisory fees related to our litigation with Malibu Boats, LLC, which was settled during the fourth quarter of fiscal 2017. |
(c) | Reflects income tax expense at an estimated normalized annual effective income tax rate of 36.0% for the periods presented. |
(d) | The weighted average shares used for computation of pro-forma diluted earnings per common share gives effect to 58,607 shares of restricted stock awards, 64,542 performance stock units and 55,253 shares for the dilutive effect of stock options. |
The following table shows the reconciliation of diluted earnings per share to diluted pro forma Adjusted net income per share for the periods presented:
Three Months Ended | ||||||||||
October 1, 2017 | October 2, 2016 | |||||||||
(Unaudited) | ||||||||||
Net income per diluted share | $ | 0.38 | $ | 0.38 | ||||||
Impact of adjustments: | ||||||||||
Income tax expense | 0.19 | 0.22 | ||||||||
Transaction expense(a) | 0.05 | — | ||||||||
Litigation charge(b) | — | 0.04 | ||||||||
Stock-based compensation | 0.01 | 0.01 | ||||||||
Net income per diluted share before income taxes | 0.63 | 0.65 | ||||||||
Impact of adjusted income tax expense on net income per diluted share before income taxes(c) | (0.23 | ) | (0.23 | ) | ||||||
Impact of increased share count(d) | — | (0.01 | ) | |||||||
Adjusted Net Income per diluted pro-forma weighted average share | 0.40 | 0.41 |
(a) | Represents fees and expenses associated with our acquisition of NauticStar, LLC and our follow-on offering. |
(b) | Represents legal and advisory fees related to our litigation with Malibu Boats, LLC, which was settled during the fourth quarter of fiscal 2017. |
(c) | Reflects income tax expense at an estimated normalized annual effective income tax rate of 36.0% for the periods presented. |
(d) | 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.