UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 8-K/A

Amendment No. 1

 

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(D) OF THE

SECURITIES EXCHANGE ACT OF 1934

 

Date of report (Date of earliest event reported): October 1, 2018

 

MasterCraft Boat Holdings, Inc.

(Exact Name of Registrant as Specified in its Charter)

 

 

 

 

(423) 884-2221

(Registrant’s telephone number, including area code)

 

Not applicable

(Former Name or Former Address, if Changed Since Last Report)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

☐     Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425).

 

☐     Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12).

 

☐     Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)).

 

☐     Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)).

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

 

Emerging growth company           ☒

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.            ☒

 

 

 

EXPLANATORY NOTE

 

On October 1, 2018, MasterCraft Boat Holdings, Inc., a Delaware corporation (the “Company” or the “Purchaser”) acquired all of the outstanding membership interests and other equity securities of Crest Marine LLC, a Michigan limited liability company (“Crest”) from its existing members (collectively, the “Sellers”) pursuant to a membership interest purchase agreement, dated as of September 10, 2018 (the “Membership Interest Purchase Agreement”), by and among the Purchaser, Crest, the Sellers and each of the other parties thereto (the “Acquisition”).

 

This Amendment No.1 to the Current Report on Form 8-K/A (“Amendment No. 1”) amends and supplements Item 9.01 of the original Current Report on Form 8-K filed by the Company on October 1, 2018 (the “Initial Form 8-K”) to provide certain historical financial statements for Crest and certain pro forma financial information in connection with the Acquisition. Any information required to be set forth in the Initial Form 8-K that is not being amended or supplemented pursuant to this Amendment No. 1 is hereby incorporated by reference. Except as set forth herein, no modifications have been made to the information contained in the Initial Form 8-K and the Company has not updated any information contained therein to reflect the events that have occurred since the date of the Initial Form 8-K. Accordingly, this Amendment No. 1 should be read in conjunction with the Initial Form 8-K.

 

Item 9.01 Financial Statements and Exhibits.

 

(a) Financial Statements of Businesses Acquired.

 

 

 

(b) Pro Forma Financial Information.

 

 

(d) Exhibits.

 

The following exhibits are being furnished as part of this report:

EXHIBIT INDEX

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

 

Exhibit 23.1

 

CONSENT OF INDEPENDENT AUDITOR

 

We hereby consent to the incorporation by reference in the Registration Statements on Form S-3 (No. 333-212812) and Form S-8 (No. 333-205825) of MasterCraft Boat Holdings, Inc. of our report dated October 18, 2018, relating to our review of the financial statements of Crest Marine, LLC. as of and for the years ended June 30, 2018 and 2017 and our report dated February 23, 2018, except as to Note F, which is October 18, 2018, relating to our audit of the financial statements of Crest Marine, LLC., as of and for the years ended December 31, 2017 and 2016 (Restated), included in this Current Report on Form 8-K/A.

 

 

FINANCIAL STATEMENTS AND REPORT OF

 

INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

 

Crest Marine, LLC

 

December 31, 2017 and 2016 (Restated)

 

 

CONTENTS

 

 

 

 

 

 

 

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

 

Board of Members

Crest Marine LLC

 

We have audited the accompanying balance sheets of Crest Marine, LLC (a Michigan limited liability company) as of December 31, 2017 and 2016 and the related statements of earnings, members’ equity and cash flows, and the supplemental information presented herein for the years then ended, and the related notes to the financial statements.

 

Management’s Responsibility for the Financial Statements

 

Management is responsible for the preparation and fair presentation of these financial statements in accordance with the accounting principles used and significant estimates made by management. Management is also responsible for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

 

Auditor’s Responsibility

 

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

 

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

 

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

 

Opinion

 

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Crest Marine, LLC as of December 31, 2017 and 2016, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

 

Emphasis of Matter

 

As more fully described in Note F, Crest Marine, LLC improperly recognized assets and liabilities during the years ended December 31, 2017 and 2016. Crest Marine, L LC has restated its 2017 and 2016 financial statements for the correction of these misstatements. Our opinions on the 2017 and 2016 financial statements are not modified with respect to this matter.

 

 

Troy, Michigan

February 23, 2018, except as to Note F,  which is October 18, 2018

 

 

Crest Marine, LLC

 

BALANCE SHEETS

 

December 31, (Restated)

 

 

The accompanying notes are an integral part of these statements.

Crest Marine, LLC

 

STATEMENTS OF EARNINGS

 

Years ended December 31, (Restated)

 

 

The accompanying notes are an integral part of these statements.

Crest Marine, LLC

 

STATEMENTS OF MEMBERS' EQUITY

 

Years ended December 31, (Restated)

 

 

The accompanying notes are an integral part of these statements.

Crest Marine, LLC

 

STATEMENTS OF CASH FLOWS

 

Years ended December 31, (Restated)

 

 

The accompanying notes are an integral part of these statements.

 

 

 

NOTE A – SUMMARY OF ACCOUNTING POLICIES

 

A summary of the significant accounting policies consistently applied in the preparation of the accompanying financial statements follows.

 

1.Business Activity and Revenue Recognition

 

The Company’s principal business activity is the manufacturing and sale of pontoon boats to retailers throughout the United States.

 

The Company’s revenue is derived primarily from the sale of boats, marine parts, and accessories. Revenue is recognized in accordance with the terms of the sale, primarily upon shipment to customers, once the sales price is fixed or determinable and collectability is reasonably assured.

 

2.Cash and Cash Equivalents

 

Cash and cash equivalents include all cash balances and highly liquid investments with a maturity of one year or less. The company places its temporary cash investments with high credit quality financial institutions. At times these investments are not entirely FDIC insured; however, the company does not believe it is exposed to any significant credit risk on cash and cash equivalents. At December 31, 2017 and 2016, there was $1,972,825 and $872,123 of cash that was not FDIC insured.

 

3.Receivables and Concentration of Credit Risk

 

The Company considers its receivables to be fully collectible; accordingly, no allowance for doubtful accounts is required. If amounts become uncollectible, they will be charged to operations when that determination is made. At December 31, 2017, the accounts receivable from two customers in the boat financing industry totaled $2,373,283. At December 31, 2016, the accounts receivable from two customers in the boat financing industry totaled $1,691,086. The company does not generally require collateral on its accounts receivable.

 

4.Inventories

 

Inventories are valued at the lower of cost or market and are shown net of an inventory allowance on the balance sheet. Inventory cost includes material, labor, and manufacturing overhead and is determined based on the first-in, first-out (FIFO) method. Provisions are made as necessary to reduce inventory amounts to their net realizable value or to provide for obsolete products.

 

Inventory consists of the following for the years ended December 31:

 

 

Activity in the obsolescence reserve was as follows for the years ended December 31:

 

 

5.Depreciation and Amortization

 

Depreciation and amortization is provided for in amounts sufficient to relate the cost of property and equipment to operations over their estimated service lives using the straight-line and accelerated methods.

 

6.Product Warranties

 

The Company provides a warranty with each manufactured boat sold.  There exists a possible loss as a result of future warranty service claims. The Company records an accrual for estimated future claims. Such accruals are based upon historical experience and management’s estimates of the level of future claims, and are subject to adjustment as actual claims are determined or as changes in the obligations become reasonably estimable. Warranty expense for the year ended December 31, 2017 and 2016 was $158,147 and $221,934, respectively.

 

Activity in the product warranty reserve was as follows for the years ended December 31:

 

 

7.Accounting Estimates

 

Management uses estimates and assumptions in preparing financial statements in accordance with generally accepted accounting principles. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosures of contingent assets and liabilities, and the reported revenues and expenses. Actual results could vary from the estimates that were assumed in preparing the financial statements.

 

8.Advertising

 

Advertising costs are charged to operations when incurred. Advertising expense for the years ended December 31, 2017 and 2016 was $310,610 and $369,407, respectively.

 

9.Income Taxes

 

The Company is treated as a partnership for income tax purposes; therefore, the profit or loss of Crest Marine LLC is included in the income tax returns of the Members. Accordingly, no recognition has been given to income taxes in the accompanying statements. As of December 31, 2017, the tax returns for the years ended December 31, 2016, 2015, and 2014 are open for audit by the taxing authorities.

 

NOTE B – RELATED PARTY TRANSACTIONS

 

The accounts receivable (payable) with related parties at years ended December 31 are as follows:

 

 

The accounts receivable (payable) with affiliates is with limited liability companies related through common ownership. The related party accounts are non-interest bearing, unsecured and without specific payment terms; however, management anticipates the balance to be paid within the next year.

 

The following is a summary of the activity on the accounts for the years ended December 31:

 

 

In addition, the Company purchases materials and tooling supplies from one of the affiliates related through common ownership. The expense charged to operations for these materials and tooling supplies for the years ended December 31, 2017 and 2016 was $2,788,743 and $1,719,723, respectively. For the year ended December 31, 2017, the company received $60,000 for an administrative fee from this affiliate.

 

NOTE C – LONG-TERM DEBT

 

Long-term debt consists of a note payable to a bank in monthly principal payments of $8,928 plus interest at 4.25% with final payment April 2020. The note is collateralized by substantially all assets of the company and by real estate held by a company related through common ownership. The agreement with the bank contains covenants which, among other things, require a minimum net worth and debt coverage ratio. At December 31, 2017 and 2016, there was $258,823 and $365,957 outstanding on this loan, respectively.

 

The Company has available a bank draw down line of credit loan which provides for borrowings up to $250,000 for purchase of business property and equipment. This is a multiple advance note with final payment due in September 2017. Advances on the note bear interest at 1% over the bank’s prime rate with a minimum rate of 4.5% (total rate of 4.75% at December 31, 2016). The note is payable in monthly installments of $5,708, which includes principal and interest. The note is collateralized by substantially all assets of the company. The note contains covenants which, among other things, require a minimum net worth and debt service coverage ratio. At December 31, 2016, there was $46,062 outstanding on this line of credit loan.

 

The Company has available a bank draw down line of credit loan which provides for borrowings up to $500,000 for purchase of business property and equipment. Advances on the note bear interest at the bank’s prime rate (4.5% at December 31, 2017) and is collateralized by substantially all assets of the company. At December 31, 2017 and 2016, there was $322,570 and $63,820 outstanding on this line of credit, respectively.

 

The Company also has notes payable to the bank which provided borrowings for the purchase of company vehicles. Monthly installments of $1,863 are required through October 2020 at interest rates varying from 2.29% to 2.99%. The notes are collateralized by vehicles with a cost of $114,941. At December 31, 2017 and 2016, there was $41,609 and $62,676 outstanding on these bank notes, respectively.

 

The following is a schedule, by years, of the principal payments required for long-term debt:

 

 

 

NOTE D – COMMITMENT

 

The Company conducts its operations in facilities leased from a company related through common ownership (note B). The facility is leased under an operating lease on a month to month basis which provides for monthly payments of $17,103 per month, plus payment by the company of real estate taxes, operating and maintenance expenses. Rent expense charged to operations for the years ended December 31, 2017 and 2016 was $205,235 and $155,235, respectively.

 

In connection with its dealers’ wholesale floor-plan financing of boats, the Company has entered into repurchase agreements with various lending institutions. The repurchase commitment is on an individual unit basis with a term from the date it is financed by the lending institution through payment date by the dealer, generally not exceeding three years. Such agreements are customary in the industry and the Company’s exposure to loss under such agreements is limited by contractual caps and the resale value of the inventory which is required to be repurchased. The company records an accrual for estimated future repurchase commitments based on historical experience of amount of boats repurchased and losses experienced.

 

Activity in the repurchase boats reserve was as follows for the years ended December 31:

 

 

 

NOTE E – CONTINGENCIES

 

At December 31, 2017 and 2016, the company had a third party guarantee outstanding of approximately $127,692 and $180,578, respectively. The guarantee is the liability of the company related through common ownership that owns the building in which the company conducts its operations. No loss is anticipated as a result of the guarantee.

 

NOTE F – RESTATEMENT OF FINANCIAL STATEMENTS

 

The Company is restating its financial statements for the years ended December 31, 2017 and 2016 to correct various account balances as summarized below. The restatements are being made in accordance with ASC 250

“Accounting Changes and Error Corrections”. The effects of the adjustments on the Company’s previously issued financial statements are summarized as follows:

 

Balance sheet as of December 31, 2017:

 

 

Income statement year ended December 31, 2017:

 

 

Balance sheet as of December 31, 2016:

 

 

Income statement year ended December 31, 2016:

 

 

The company reevaluated the methodology originally used to estimate the liabilities and receivables associated with warranty, repurchase boat agreements, obsolete inventory, and customer and vendor rebates.

 

NOTE G – SUBSEQUENT EVENTS

 

In preparing the financial statements, management has evaluated for potential recognition or disclosure, significant events or transactions that occurred during the period subsequent to December 31, 2017, the most recent statement of financial position presented herein, through February 23, 2018, except as to Note F, which is October 18, 2018, the date the financial statements were issued. No such significant events or transactions were identified.

 

 

 

 

 

SUPPLEMENTAL INFORMATION

 

 

 

 

 

Crest Marine, LLC

 

COST OF SALES

 

Years ended December 31, (Restated)

 

 

 

Crest Marine, LLC

 

OPERATING EXPENSES

 

Years ended December 31, (Restated)

 

 

 

 

FINANCIAL STATEMENTS AND REPORT OF

 

INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

 

Crest Marine, LLC

 

June 30, 2018 and 2017

 

 

 

CONTENTS

 

 

 

 

 

 

 

INDEPENDENT ACCOUNTANTS’ REVIEW REPORT

 

Board of Members

Crest Marine, LLC

Owosso, Michigan

 

We have reviewed the accompanying interim financial statements of Crest Marine, LLC (a Michigan limited liability company), which comprises the balance sheets as of June 30, 2018 and 2017, and the related statements of earnings, members’ equity and cash flows for the six months then ended, and the related notes to the interim financial statements. A review includes primarily applying analytical procedures to management’s financial data and making inquiries of company management. A review is substantially less in scope than an audit, the objective of which is the expression of an opinion regarding the interim financial statements as a whole. Accordingly, we do not express such an opinion.

 

Management’s Responsibility for the Financial Statements

 

Management is responsible for the preparation and fair presentation of these interim financial statements in accordance with the accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of interim financial statements that are free from material misstatement, whether due to fraud or error.

 

Accountants’ Responsibility

 

Our responsibility is to conduct the review engagement in accordance with Statement on Standards for Accounting and Review Services promulgated by the Accounting and Review Services Committee of the AICPA. Those standards require us to perform procedures to obtain limited assurance as a basis for reporting whether we are aware of any material modifications that should be made to the interim financial statements for them to be in accordance with accounting principles generally accepted in the United States of America. We believe that the results of our procedures provide a reasonable basis for our conclusion.

 

Accountants’ Conclusion

 

Based on our review, we are not aware of any material modifications that should be made to the accompanying interim financial statements in order for them to be in accordance with accounting principles generally accepted in the United States of America.

 

 

Troy, Michigan

October 18, 2018

 

 

Crest Marine, LLC

 

BALANCE SHEETS

 

June 30,

 

 

The accompanying notes are an integral part of these statements.