MasterCraft Boat Holdings, Inc. Reports Fiscal 2020 First Quarter Results
First Quarter Highlights:
- Net sales increased to
$109.8 million , up 17.2 percent from$93.6 million in the prior-year period. - GAAP net income was
$8.6 million , up slightly from$8.5 million in the prior-year period. - GAAP diluted earnings per share increased in the first quarter by
$0.01 , up 2.2 percent to$0.46 , from the prior year period. - Diluted Adjusted Net Income per share, a non-GAAP measure, was
$0.53 compared to$0.54 in the prior-year period. - Adjusted EBITDA, a non-GAAP measure, rose 5.7 percent to
$15.9 million from$15.0 million in the prior-year period. - New luxury day boat brand, Aviara, began selling during the first quarter and is included in our MasterCraft segment results.
“As I assume the role of interim CEO, I look forward to working alongside the long-tenured, industry-veteran leadership team and seasoned and dedicated employees at MasterCraft, Aviara, NauticStar and Crest to support them in executing the strategic objectives currently underway,” Brightbill concluded.
First Quarter Results
Net Sales for the first quarter were
- the inclusion of Crest, acquired during the second quarter of 2019, which contributed incremental net sales of
$18.9 million ; - a
$0.6 million increase for NauticStar driven by higher wholesale average selling prices due to a greater mix of larger products and price increases, partially offset by lower unit sales volumes; and - a
$3.3 million decrease for the MasterCraft segment, primarily due to lower unit sales volumes for our MasterCraft brand as we work to right-size our dealer inventory levels after the weather-impacted summer selling season, partially offset by a richer mix of higher-priced and higher-contented models. The decrease for the MasterCraft brand was partially offset by the start of sales for our new Aviara brand.
Gross profit increased
Consolidated gross margin percentage decreased primarily due to the inclusion of Crest, as Crest generates a lower gross margin percentage than our MasterCraft segment. This dilutive effect on consolidated gross margin percentage was partially offset by margin improvement at our MasterCraft segment, driven by price increases, lower discounts and lower materials cost relative to gross sales at our MasterCraft brand, and at NauticStar, primarily driven by price increases and operational efficiencies.
Operating expenses increased
- the inclusion of Crest which added
$2.2 million ; partially offset by - a
$1.1 million decrease at our MasterCraft segment due to lower acquisition-related costs and lower selling and marketing costs partially offset by higher legal and professional fees.
Net Income for the first quarter was
Adjusted EBITDA was
See “Non-GAAP Measures” below for a reconciliation of Adjusted EBITDA, Adjusted EBITDA margin, Adjusted Net Income, and Adjusted Net Income per share to the most directly comparable financial measures presented in accordance with GAAP.
Outlook
Said Brightbill, “We are bullish on the long-term prospects of both the markets we serve and the brands we own, despite any near-term fluctuations. The launch of our new Aviara brand is being extremely well received by our dealer partner,
Given the above-mentioned factors, the company’s consolidated fiscal 2020 outlook remains as follows:
- Net Sales – down low-single digit percent
- Adjusted EBITDA Margin – down 50 to 100 basis points
- Adjusted Earnings per Share – down high-single digit percent
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 4536166. The audio replay will be available beginning at 12 p.m. EST on Thursday, November 7, 2019, through 11:59 p.m. EST 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 2020 outlook and key growth initiatives; and our anticipated financial performance for fiscal 2020.
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, recent changes to U.S. federal income tax law, the overall impact and interpretation of which remain uncertain, 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 the Company’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 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 the Company’s financial results prepared in accordance with GAAP.
Results of Operations for the Three Months Ended
MASTERCRAFT BOAT HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share data)
Three Months Ended | ||||||||
September 29, | September 30, | |||||||
2019 | 2018 | |||||||
Net sales | $ | 109,789 | $ | 93,641 | ||||
Cost of sales | 84,256 | 70,438 | ||||||
Gross profit | 25,533 | 23,203 | ||||||
Operating expenses: | ||||||||
Selling and marketing | 4,064 | 4,290 | ||||||
General and administrative | 7,785 | 6,772 | ||||||
Amortization of other intangible assets | 987 | 530 | ||||||
Total operating expenses | 12,836 | 11,592 | ||||||
Operating income | 12,697 | 11,611 | ||||||
Other expense: | ||||||||
Interest expense | 1,344 | 920 | ||||||
Income before income tax expense | 11,353 | 10,691 | ||||||
Income tax expense | 2,730 | 2,226 | ||||||
Net income | $ | 8,623 | $ | 8,465 | ||||
Earnings per common share: | ||||||||
Basic | $ | 0.46 | $ | 0.45 | ||||
Diluted | $ | 0.46 | $ | 0.45 | ||||
Weighted average shares used for computation of: | ||||||||
Basic earnings per share | 18,723,845 | 18,646,039 | ||||||
Diluted earnings per share | 18,770,756 | 18,768,764 | ||||||
MASTERCRAFT BOAT HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share data)
September 29, | June 30, | |||||||||
2019 | 2019 | |||||||||
ASSETS | ||||||||||
CURRENT ASSETS: | ||||||||||
Cash and cash equivalents | $ | 6,411 | $ | 5,826 | ||||||
Accounts receivable, net of allowances of $248 and $281, respectively | 9,287 | 12,463 | ||||||||
Income tax receivable | 1,415 | 951 | ||||||||
Inventories, net | 34,914 | 30,660 | ||||||||
Prepaid expenses and other current assets | 4,560 | 4,464 | ||||||||
Total current assets | 56,587 | 54,364 | ||||||||
Property, plant and equipment, net | 35,982 | 33,636 | ||||||||
Goodwill | 74,030 | 74,030 | ||||||||
Other intangible assets, net | 78,811 | 79,799 | ||||||||
Deferred income taxes | 6,090 | 6,240 | ||||||||
Deferred debt issuance costs, net | 424 | 451 | ||||||||
Finance lease assets | 4,115 | — | ||||||||
Operating lease assets | 942 | — | ||||||||
Other long-term assets | 253 | 253 | ||||||||
Total assets | $ | 257,234 | $ | 248,773 | ||||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||||
CURRENT LIABILITIES: | ||||||||||
Accounts payable | $ | 16,974 | $ | 17,974 | ||||||
Income tax payable | — | 426 | ||||||||
Accrued expenses and other current liabilities | 41,581 | 41,421 | ||||||||
Current portion of long-term debt, net of unamortized debt issuance costs | 8,734 | 8,725 | ||||||||
Total current liabilities | 67,289 | 68,546 | ||||||||
Long-term debt, net of unamortized debt issuance costs | 105,121 | 105,016 | ||||||||
Operating lease liabilities | 613 | — | ||||||||
Unrecognized tax positions | 3,102 | 2,895 | ||||||||
Total liabilities | 176,125 | 176,457 | ||||||||
COMMITMENTS AND CONTINGENCIES | ||||||||||
STOCKHOLDERS' EQUITY: | ||||||||||
Common stock, $.01 par value per share — authorized, 100,000,000 shares; issued and outstanding, 18,838,997 shares at September 29, 2019 and 18,764,037 shares at June 30, 2019 | 189 | 188 | ||||||||
Additional paid-in capital | 115,751 | 115,582 | ||||||||
Accumulated deficit | (34,831 | ) | (43,454 | ) | ||||||
Total stockholders' equity | 81,109 | 72,316 | ||||||||
Total liabilities and stockholders' equity | $ | 257,234 | $ | 248,773 | ||||||
Supplemental Operating Data
The following table presents certain supplemental operating data for the periods indicated:
Three Months Ended | ||||||||||||||
September 29, | September 30, | |||||||||||||
2019 | 2018 | Change | ||||||||||||
(Dollars in thousands) | ||||||||||||||
Unit sales volume: | ||||||||||||||
MasterCraft | 741 | 848 | (12.6 | ) | % | |||||||||
NauticStar | 396 | 426 | (7.0 | ) | % | |||||||||
Crest | 526 | — | ||||||||||||
Consolidated unit sales volume | 1,663 | 1,274 | 30.5 | % | ||||||||||
Net Sales: | ||||||||||||||
MasterCraft | $ | 72,913 | $ | 76,234 | (4.4 | ) | % | |||||||
NauticStar | 17,995 | 17,407 | 3.4 | % | ||||||||||
Crest | 18,881 | — | ||||||||||||
Consolidated net sales | $ | 109,789 | $ | 93,641 | 17.2 | % | ||||||||
Net sales per unit: | ||||||||||||||
MasterCraft | $ | 98 | $ | 90 | 8.9 | % | ||||||||
NauticStar | 45 | 41 | 9.8 | % | ||||||||||
Crest | 36 | — | ||||||||||||
Consolidated net sales per unit | 66 | 74 | (10.8 | ) | % | |||||||||
Gross margin percentage | 23.3 | % | 24.8 | % | -150 bpts | |||||||||
Non-GAAP Measures
EBITDA, Adjusted EBITDA, and Adjusted EBITDA Margin
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 or other items that we do not consider to be indicative of our core and/or ongoing operations. For the periods presented herein, these adjustments include non-cash share-based compensation, transaction expenses associated with acquisitions, and Aviara (new brand) startup costs. We define Adjusted EBITDA Margin as Adjusted EBITDA expressed as a percentage of Net sales.
Adjusted Net Income and Adjusted Net Income per share
We define Adjusted Net Income and Adjusted Net Income per share as net income adjusted to eliminate certain non-cash charges or other items that we do not consider to be indicative of our core and/or ongoing operations. For the periods presented herein, these adjustments include non-cash other intangible asset amortization, non-cash share-based compensation, transaction expenses associated with acquisitions, and Aviara (new brand) startup costs.
EBITDA, Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Net Income, and Adjusted Net Income per share, which we refer to collectively as the Non-GAAP Measures, 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, Adjusted Net Income per share, and Adjusted EBITDA do not reflect the impact of earnings or charges resulting from matters we do not consider to be indicative of our core and/or 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, Adjusted Net Income, and Adjusted Net Income per share may not be comparable to similarly titled measures of other companies, including companies in our industry.
We do not provide forward-looking guidance for certain financial measures on a U.S. GAAP basis because we are unable to predict certain items contained in the U.S. GAAP measures without unreasonable efforts.
The following table presents a reconciliation of net income as determined in accordance with U.S. GAAP to EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin for the periods indicated:
Three Months Ended | |||||||||
September 29, 2019 |
September 30, 2018 |
||||||||
(Dollars in thousands) | |||||||||
Net income | $ | 8,623 | $ | 8,465 | |||||
Income tax expense | 2,730 | 2,226 | |||||||
Interest expense | 1,344 | 920 | |||||||
Depreciation and amortization | 2,371 | 1,435 | |||||||
EBITDA | 15,068 | 13,046 | |||||||
Transaction expense(a) | — | 1,318 | |||||||
Aviara start-up costs(b) | 308 | 280 | |||||||
Share-based compensation | 512 | 384 | |||||||
Adjusted EBITDA | $ | 15,888 | $ | 15,028 | |||||
Adjusted EBITDA margin | 14.5 | % | 16.0 | % |
(a) | Represents fees and expenses associated with our acquisition of Crest in fiscal 2019. |
(b) | Represents start-up costs associated with Aviara, a completely new boat brand in an industry category previously not served by the Company. We began selling the brand’s first model, the AV32, during the first quarter of 2020 and we expect to begin selling two more models, the AV36 and the AV40, late in fiscal 2020. Start-up costs for the first quarter of 2020 are related to the AV36 and AV40 models. Start-up costs for the first quarter of 2019 are related to the launch of the Aviara brand and the three initial Aviara models which had not yet begun selling. We expect to adjust EBITDA for Aviara start-up costs through fiscal 2020. |
The following table presents a reconciliation of net income as determined in accordance with U.S. GAAP to Adjusted Net Income for the periods indicated:
Three Months Ended | ||||||||
September 29, 2019 |
September 30, 2018 |
|||||||
(Dollars in thousands, except for share and per share amounts) | ||||||||
Net income | $ | 8,623 | $ | 8,465 | ||||
Income tax expense | 2,730 | 2,226 | ||||||
Transaction expense(a) | - | 1,318 | ||||||
Amortization of acquisition intangibles | 960 | 503 | ||||||
Aviara start-up costs(b) | 308 | 280 | ||||||
Share-based compensation | 512 | 384 | ||||||
Adjusted Net Income before income taxes | 13,133 | 13,176 | ||||||
Adjusted income tax expense(c) | 3,021 | 2,965 | ||||||
Adjusted Net Income | $ | 10,112 | $ | 10,211 | ||||
Adjusted net income per common share | ||||||||
Basic | $ | 0.54 | $ | 0.55 | ||||
Diluted | $ | 0.53 | $ | 0.54 | ||||
Weighted average shares used for the computation of: | ||||||||
Basic Adjusted net income per share | 18,723,845 | 18,646,039 | ||||||
Diluted Adjusted net income per share(d) | 18,960,678 | 18,874,494 |
(a) | Represents fees and expenses associated with our acquisition of Crest in fiscal 2019. |
(b) | Represents start-up costs associated with Aviara, a completely new boat brand in an industry category previously not served by the Company. We began selling the brand’s first model, the AV32, during the first quarter of 2020 and we expect to begin selling two more models, the AV36 and the AV40, late in fiscal 2020. Start-up costs for the first quarter of 2020 are related to the AV36 and AV40 models. Start-up costs for the first quarter of 2019 are related to the launch of the Aviara brand and the three initial Aviara models which had not yet begun selling. We expect to adjust EBITDA for Aviara start-up costs through fiscal 2020. |
(c) | Reflects income tax expense at an estimated annual effective income tax rate of 23.00% for the current period and 22.50% for the prior-year period. |
(d) | See table below for reconciliation of weighted average shares used for computation of Basic earnings per share to weighted average shares used for Dilutive Adjusted Net Income per share. |
The following table presents the reconciliation of weighted average shares used for computation of Basic earnings per share to weighted average shares used for Diluted Adjusted Net income per share:
Three Months Ended | ||||||
September 29, 2019 |
September 30, 2018 |
|||||
Weighted average shares used for computation of Basic earnings per share | 18,723,845 | 18,646,039 | ||||
Dilutive effect of outstanding stock options(a) | 22,202 | 65,354 | ||||
Dilutive effect of outstanding restricted share awards/units(b) | 214,631 | 163,101 | ||||
Weighted average shares used for the computation of Diluted Adjusted Net Income per share |
18,960,678 | 18,874,494 |
(a) | Represents the dilutive effect of stock options calculated using the treasury stock method, but instead of using the average market price, the market price on the last business day of the period is used. |
(b) | Represents the dilutive effect of restricted stock awards (“RSAs”) and performance share units (“PSUs”) assuming the total outstanding awards/unit at each period end are fully dilutive. |
The following table presents the reconciliation of net income per diluted share to Adjusted net income per diluted weighted average share for the periods presented:
Three Months Ended | ||||||||||
September 29, 2019 |
September 30, 2018 |
|||||||||
Net income per diluted share | $ | 0.46 | $ | 0.45 | ||||||
Impact of adjustments: | ||||||||||
Income tax expense | 0.15 | 0.12 | ||||||||
Transaction expense(a) | — | 0.07 | ||||||||
Amortization of acquisition intangibles | 0.05 | 0.03 | ||||||||
Aviara startup costs(b) | 0.02 | 0.01 | ||||||||
Share-based compensation | 0.03 | 0.02 | ||||||||
Adjusted Net income per diluted share before income taxes | 0.71 | 0.70 | ||||||||
Impact of adjusted income tax expense on net income per diluted share before income taxes(c) | (0.16 | ) | (0.16 | ) | ||||||
Impact of increased share count(d) | (0.02 | ) | — | |||||||
Adjusted Net Income per diluted weighted average share | $ | 0.53 | $ | 0.54 |
(a) | Represents fees and expenses associated with our acquisition of Crest in fiscal 2019. |
(b) | Represents start-up costs associated with Aviara, a completely new boat brand in an industry category previously not served by the Company. We began selling the brand’s first model, the AV32, during the first quarter of 2020 and we expect to begin selling two more models, the AV36 and the AV40, late in fiscal 2020. Start-up costs for the first quarter of 2020 are related to the AV36 and AV40 models. Start-up costs for the first quarter of 2019 are related to the launch of the Aviara brand and the three initial Aviara models which had not yet begun selling. We expect to adjust EBITDA for Aviara start-up costs through fiscal 2020. |
(c) | Reflects income tax expense at an estimated annual effective income tax rate of 23.00% for the current period and 22.50% for the prior-year period. |
(d) | Reflects the impact of increased share counts giving effect to the exchange of all RSAs, the vesting of all PSUs and for the dilutive effect of stock options included in outstanding shares and rounding. |
Investor Contacts:
Vice President, Business Development
(423) 884-7141
George.Steinbarger@mastercraft.com
Padilla
(612) 455-1709
Matt.Sullivan@padillaco.com
Source: MasterCraft Boat Holdings, Inc.