UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended:
OR
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number
(Exact name of registrant as specified in its charter)
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(State or Other Jurisdiction |
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(I.R.S. Employer |
of Incorporation or Organization) |
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Identification No.) |
(Address of Principal Executive Office) (Zip Code)
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(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☑
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☑
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer |
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Non-accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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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.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
As of May 10, 2021, there were
TABLE OF CONTENTS
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PART I |
FINANCIAL INFORMATION |
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Item 1. |
Financial Statements |
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4 |
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5 |
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Unaudited Condensed Consolidated Statements of Stockholders’ Equity |
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7 |
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Notes to Unaudited Condensed Consolidated Financial Statements |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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34 |
2
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This quarterly report on Form 10-Q contains certain “forward-looking statements” within the meaning of the federal securities laws. These forward-looking statements can generally be identified by the use of statements that include words such as “could,” “may,” “might,” “will,” “expect,” “likely,” “believe,” “continue,” “anticipate,” “estimate,” “intend,” “plan,” “project” and other similar words or phrases. Forward-looking statements involve estimates and uncertainties that could cause actual results to differ materially from those expressed in the forward-looking statements.
The forward-looking statements contained in this quarterly report on Form 10-Q are based on assumptions that we have made considering our industry experience and our perceptions of historical trends, current conditions, expected future developments and other important factors we believe are appropriate under the circumstances. As you read and consider this quarterly report on Form 10-Q, you should understand that these statements are not guarantees of performance or results. They involve risks, uncertainties (many of which are beyond our control) and assumptions. Although we believe that these forward-looking statements are based on reasonable assumptions, you should be aware that many important factors could affect our actual operating and financial performance and cause our performance to differ materially from the performance anticipated in the forward-looking statements, including but not limited to the following: the potential effects of the coronavirus (“COVID-19”) pandemic on the Company, 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 fixed cost base, the successful introduction of our new products and the other important factors described under the caption “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended June 30, 2020, filed with the Securities and Exchange Commission (“SEC”) on September 11, 2020 (our “2020 Annual Report”). Should one or more of these risks or uncertainties materialize, or should any of these assumptions prove incorrect, our actual operating and financial performance may vary in material respects from the performance projected in these forward-looking statements.
Further, any forward-looking statement speaks only as of the date on which it is made, and except as required by law, we undertake no obligation to update any forward-looking statement contained in this quarterly report on Form 10-Q to reflect events or circumstances after the date on which it is made or to reflect the occurrence of anticipated or unanticipated events or circumstances. New important factors that could cause our business not to develop as we expect may emerge from time to time, and it is not possible for us to predict all of them.
3
MASTERCRAFT BOAT HOLDINGS, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share amounts)
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Three Months Ended |
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Nine Months Ended |
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April 4, |
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March 29, |
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April 4, |
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March 29, |
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2021 |
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2020 |
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2021 |
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2020 |
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NET SALES |
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$ |
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$ |
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$ |
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$ |
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COST OF SALES |
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GROSS PROFIT |
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OPERATING EXPENSES: |
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Selling and marketing |
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General and administrative |
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Amortization of other intangible assets |
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Goodwill and other intangible asset impairment |
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- |
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- |
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Total operating expenses |
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OPERATING INCOME (LOSS) |
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OTHER EXPENSE: |
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Interest expense |
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INCOME (LOSS) BEFORE INCOME TAX EXPENSE |
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INCOME TAX EXPENSE (BENEFIT) |
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NET INCOME (LOSS) |
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$ |
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$ |
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$ |
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$ |
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NET INCOME (LOSS) PER SHARE: |
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Basic |
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$ |
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$ |
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$ |
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$ |
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Diluted |
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$ |
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$ |
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$ |
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$ |
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WEIGHTED AVERAGE SHARES USED FOR COMPUTATION OF: |
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Basic earnings per share |
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Diluted earnings per share |
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Notes to Unaudited Condensed Consolidated Financial Statements form an integral part of the condensed consolidated financial statements.
4
MASTERCRAFT BOAT HOLDINGS, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share amounts)
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April 4, |
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June 30, |
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2021 |
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2020 |
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ASSETS |
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CURRENT ASSETS: |
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Cash and cash equivalents |
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$ |
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$ |
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Accounts receivable, net of allowances of $ |
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Income tax receivable |
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Inventories, net (Note 3) |
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Prepaid expenses and other current assets |
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Total current assets |
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Property, plant and equipment, net (Note 4) |
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Goodwill (Note 5) |
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Other intangible assets, net (Note 5) |
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Deferred income taxes |
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Deferred debt issuance costs, net |
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Other long-term assets |
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Total assets |
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$ |
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$ |
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LIABILITIES AND STOCKHOLDERS' EQUITY |
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CURRENT LIABILITIES: |
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Accounts payable |
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$ |
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$ |
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Accrued expenses and other current liabilities (Note 6) |
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Current portion of long-term debt, net of unamortized debt issuance costs (Note 7) |
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Total current liabilities |
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Long-term debt, net of unamortized debt issuance costs (Note 7) |
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Unrecognized tax positions |
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Other long-term liabilities |
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Total liabilities |
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COMMITMENTS AND CONTINGENCIES |
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STOCKHOLDERS' EQUITY: |
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Common stock, $ |
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Additional paid-in capital |
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Accumulated deficit |
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( |
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( |
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Total stockholders' equity |
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Total liabilities and stockholders' equity |
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$ |
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$ |
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Notes to Unaudited Condensed Consolidated Financial Statements form an integral part of the condensed consolidated financial statements.
5
MASTERCRAFT BOAT HOLDINGS, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Dollars in thousands)
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Additional |
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Common Stock |
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Paid-in |
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Accumulated |
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Shares |
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Amount |
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Capital |
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Deficit |
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Total |
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Balance at June 30, 2020 |
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$ |
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$ |
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$ |
( |
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$ |
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Share-based compensation activity |
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— |
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— |
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Net income |
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— |
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— |
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— |
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Balance at October 4, 2020 |
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( |
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Share-based compensation activity |
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( |
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— |
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— |
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Net income |
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— |
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— |
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— |
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Balance at January 3, 2021 |
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$ |
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$ |
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$ |
( |
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$ |
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Share-based compensation activity |
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— |
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— |
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Net income |
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— |
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— |
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— |
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Balance at April 4, 2021 |
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$ |
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$ |
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$ |
( |
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$ |
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Additional |
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Common Stock |
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Paid-in |
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Accumulated |
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Shares |
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Amount |
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Capital |
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Deficit |
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Total |
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Balance at June 30, 2019 |
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$ |
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$ |
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$ |
( |
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$ |
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Share-based compensation activity |
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— |
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Net income |
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— |
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— |
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— |
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Balance at September 29, 2019 |
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( |
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Share-based compensation activity |
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— |
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( |
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— |
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( |
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Net income |
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— |
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— |
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— |
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Balance at December 29, 2019 |
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$ |
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$ |
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$ |
( |
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$ |
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Share-based compensation activity |
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( |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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( |
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( |
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Balance at March 29, 2020 |
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$ |
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$ |
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$ |
( |
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$ |
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Notes to Unaudited Condensed Consolidated Financial Statements form an integral part of the condensed consolidated financial statements.
6
MASTERCRAFT BOAT HOLDINGS, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
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Nine Months Ended |
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April 4, |
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March 29, |
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2021 |
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2020 |
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CASH FLOWS FROM OPERATING ACTIVITIES: |
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Net income (loss) |
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$ |
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$ |
( |
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Adjustments to reconcile net income (loss) to net cash provided by operating activities: |
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Depreciation and amortization |
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Share-based compensation |
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Unrecognized tax benefits |
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Amortization of debt issuance costs |
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Deferred income taxes |
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( |
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Goodwill and other intangible asset impairment |
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— |
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Changes in certain operating assets and liabilities |
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( |
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Other, net |
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Net cash provided by operating activities |
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CASH FLOWS FROM INVESTING ACTIVITIES: |
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Purchases of property, plant and equipment |
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Proceeds from disposal of property, plant and equipment |
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— |
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Net cash used in investing activities |
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( |
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( |
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CASH FLOWS FROM FINANCING ACTIVITIES: |
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Principal payments on revolving credit facility |
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( |
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— |
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Borrowings on revolving credit facility |
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Principal payments on long-term debt |
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( |
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( |
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Other, net |
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( |
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Net cash provided by (used in) financing activities |
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( |
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NET CHANGE IN CASH AND CASH EQUIVALENTS |
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CASH AND CASH EQUIVALENTS — BEGINNING OF PERIOD |
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CASH AND CASH EQUIVALENTS — END OF PERIOD |
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$ |
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$ |
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SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: |
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Cash payments for interest |
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$ |
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$ |
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Cash payments for income taxes |
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SIGNIFICANT NON-CASH INVESTING AND FINANCING ACTIVITIES: |
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Capital expenditures in accounts payable and accrued expenses |
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Notes to Unaudited Condensed Consolidated Financial Statements form an integral part of the condensed consolidated financial statements.
7
MASTERCRAFT BOAT HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unless stated otherwise dollars in thousands, except per share data)
1.ORGANIZATION, BASIS OF PRESENTATION, AND SIGNIFICANT ACCOUNTING POLICIES
Organization — MasterCraft Boat Holdings, Inc. (“Holdings”) was formed on January 28, 2000, as a Delaware holding company and operates primarily through its wholly owned subsidiaries, MasterCraft Boat Company, LLC; MasterCraft Services, LLC; MasterCraft Parts, Ltd.; MasterCraft International Sales Administration, Inc.; and Aviara, LLC (collectively “MasterCraft”); Nautic Star, LLC and NS Transport, LLC (collectively “NauticStar”); and Crest Marine, LLC (“Crest”). Holdings and its subsidiaries collectively are referred to herein as the “Company.”
Basis of Presentation —
The unaudited condensed consolidated financial statements have been prepared on the same basis as the Company’s audited consolidated financial statements for the year ended June 30, 2020 and, in the opinion of management, reflect all adjustments considered necessary to present fairly the Company’s financial position as of April 4, 2021, its results of operations for the three and nine months ended April 4, 2021 and March 29, 2020, its cash flows for the nine months ended April 4, 2021 and March 29, 2020, and its statements of stockholders’ equity for the three and nine months ended April 4, 2021 and March 29, 2020. All adjustments are of a normal, recurring nature. Certain information and footnote disclosures normally included in annual consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and the applicable rules and regulations of the SEC for financial information have been condensed or omitted pursuant to such rules and regulations. The June 30, 2020 condensed consolidated balance sheet data was derived from the audited financial statements but does not include all disclosures required by U.S. GAAP for complete financial statements. However, management believes that the disclosures in these condensed consolidated financial statements are adequate to make the information presented not misleading. These condensed consolidated financial statements should be read in conjunction with the Company’s consolidated financial statements and notes thereto included in our 2020 Annual Report on Form 10-K.
Due to the seasonality of the Company’s business, the interim results are not necessarily indicative of the results that may be expected for the remainder of the fiscal year.
There were no significant changes in or changes in the application of the Company’s significant or critical accounting policies or estimation procedures for the three and nine months ended April 4, 2021 as compared with the significant accounting policies described in the Company’s audited consolidated financial statements for the fiscal year ended June 30, 2020.
Reclassifications — Certain historical amounts have been reclassified in these condensed consolidated financial statements and the accompanying notes herewith to conform to the current presentation.
Supply Chain Disruption — As we navigate the unprecedented confluence of demand and disruption precipitated by the COVID-19 pandemic, our production rates going forward will depend, in large part, on our suppliers’ capacity. Demand for raw materials and components used in the production of our products has surged. At the same time, severe and unprecedented events, including the February 2021 ice storm which impacted much of the United States, have recently disrupted the global supply chain. As a result, some of the materials and components that we use, including certain resins, fiberglass, and plywood, are in short supply.
New Accounting Pronouncements Issued But Not Yet Adopted
Income Taxes — In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes (Topic 740). This ASU simplifies the accounting for income taxes by, among other things, eliminating certain existing exceptions related to the general approach in ASC 740 relating to franchise taxes, reducing complexity in the interim-period accounting for year-to-date loss limitations and changes in tax laws, and clarifying the accounting for transactions outside of business combination that result in a step-up in the
8
tax basis of goodwill. The transition requirements are primarily prospective, and the effective date is for interim and annual reporting periods beginning after December 15, 2020, with early adoption permitted. We are currently evaluating the impact of the new guidance on our consolidated financial statements.
Recently Adopted Accounting Standards
Fair Value Measurements — In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement. This guidance modifies the disclosure requirements on fair value measurements in Topic 820 by removing disclosures regarding transfers between Level 1 and Level 2 of the fair value hierarchy, by modifying the measurement uncertainty disclosure, and by requiring additional disclosures for Level 3 fair value measurements, among others. The Company adopted this guidance for its fiscal year beginning
Current Expected Credit Loss — In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which updated the ASC to use an impairment model that is based on expected losses rather than incurred losses. The Company adopted this guidance for its fiscal year beginning
2. |
REVENUE RECOGNITION |
The following tables present the Company’s revenue by major product category for each reportable segment.
|
|
Three Months Ended April 4, 2021 |
|
|
Three Months Ended March 29, 2020 |
|
||||||||||||||||||||||||||
|
|
MasterCraft |
|
|
NauticStar |
|
|
Crest |
|
|
Total |
|
|
MasterCraft |
|
|
NauticStar |
|
|
Crest |
|
|
Total |
|
||||||||
Major Product Categories: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Boats and trailers |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Parts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
Total |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
Nine Months Ended April 4, 2021 |
|
|
Nine Months Ended March 29, 2020 |
|
||||||||||||||||||||||||||
|
|
MasterCraft |
|
|
NauticStar |
|
|
Crest |
|
|
Total |
|
|
MasterCraft |
|
|
NauticStar |
|
|
Crest |
|
|
Total |
|
||||||||
Major Product Categories: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Boats and trailers |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Parts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Contract Liabilities
As of June 30, 2020, the Company had $
9
3. |
INVENTORIES |
Inventories consisted of the following:
|
|
April 4, |
|
|
June 30, |
|
||
|
|
2021 |
|
|
2020 |
|
||
Raw materials and supplies |
|
$ |
|
|
|
$ |
|
|
Work in process |
|
|
|
|
|
|
|
|
Finished goods |
|
|
|
|
|
|
|
|
Obsolescence reserve |
|
|
( |
) |
|
|
( |
) |
Total inventories |
|
$ |
|
|
|
$ |
|
|
4.PROPERTY, PLANT, AND EQUIPMENT
Property, plant, and equipment, net consisted of the following:
|
|
April 4, |
|
|
June 30, |
|
|
||
|
|
2021 |
|
|
2020 |
|
|
||
Land and improvements |
|
$ |
|
|
|
$ |
|
|
|
Buildings and improvements |
|
|
|
|
|
|
|
|
|
Machinery and equipment |
|
|
|
|
|
|
|
|
|
Furniture and fixtures |
|
|
|
|
|
|
|
|
|
Construction in progress |
|
|
|
|
|
|
|
|
|
Total property, plant, and equipment |
|
|
|
|
|
|
|
|
|
Less accumulated depreciation |
|
|
( |
) |
|
|
( |
) |
|
Property, plant, and equipment — net |
|
$ |
|
|
|
$ |
|
|
|
Merritt Island Facility
During October 2020 we completed the purchase of certain real property located in Merritt Island, Florida, including a boat manufacturing facility, for a purchase price of $
5.GOODWILL AND OTHER INTANGIBLE ASSETS
The carrying amounts of goodwill as of April 4, 2021 and June 30, 2020, attributable to each of the Company’s reportable segments, were as follows:
|
|
Gross Amount |
|
|
Accumulated Impairment Losses |
|
|
Total |
|
|||
MasterCraft |
|
$ |
|
|
|
$ |
- |
|
|
$ |
|
|
NauticStar |
|
|
|
|
|
|
( |
) |
|
|
- |
|
Crest |
|
|
|
|
|
|
( |
) |
|
|
- |
|
Total |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
10
The following table presents the carrying amount of Other intangible assets, net:
|
|
April 4, |
|
|
June 30, |
|
||||||||||||||||||
|
|
2021 |
|
|
2020 |
|
||||||||||||||||||
|
|
Gross Amount |
|
|
Accumulated Amortization / Impairment |
|
|
Other intangible assets, net |
|
|
Gross Amount |
|
|
Accumulated Amortization / Impairment |
|
|
Other intangible assets, net |
|
||||||
Amortized intangible assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dealer networks |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
Software |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unamortized intangible assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade names |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
Total other intangible assets |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
Amortization expense related to Other intangible assets, net for the three and nine months ended both April 4, 2021 and March 29, 2020 was $
Prior Year Goodwill and Other Intangible Asset Impairment
The past economic environment, including the significant share price and market volatility, as well as disruptions to supply chains resulting from the COVID-19 pandemic, triggered an interim impairment analysis for the Company’s intangible assets including goodwill. As a result of this analysis, the Company recorded impairment charges totaling $
The impairment charges recorded for each segment are detailed below and are included in Goodwill and other intangible asset impairment on the condensed consolidated statement of operations. The impairment recorded in fiscal 2020 was principally a result of a decline, in the fiscal third quarter, in market conditions, including our share price, and the then current outlook for sales and operating performance relative to the Company’s acquisition plans and impairment test performed as of June 30, 2019.
Goodwill and other intangible asset impairment for the three and nine months ended March 29, 2020 was as follows:
|
|
NauticStar |
|
|
Crest |
|
|
Consolidated |
|
|||
Goodwill |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Trade name |
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
11
6. |
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES |
Accrued expenses and other current liabilities consisted of the following:
|
|
April 4, |
|
|
June 30, |
|
||
|
|
2021 |
|
|
2020 |
|
||
Warranty |
|
$ |
|
|
|
$ |
|
|
Dealer incentives |
|
|
|
|
|
|
|
|
Compensation and related accruals |
|
|
|
|
|
|
|
|
Contract liabilities |
|
|
|
|
|
|
|
|
Inventory repurchase contingent obligation |
|
|
|
|
|
|
|
|
Self-insurance |
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
Total accrued expenses and other current liabilities |
|
$ |
|
|
|
$ |
|
|
Accrued warranty liability activity was as follows for the nine months ended:
|
|
April 4, |
|
|
March 29, |
|
||
|
|
2021 |
|
|
2020 |
|
||
Balance at the beginning of the period |
|
$ |
|
|
|
$ |
|
|
Provisions |
|
|
|
|
|
|
|
|
Payments made |
|
|
( |
) |
|
|
( |
) |
Aggregate changes for preexisting warranties |
|
|
|
|
|
|
|
|
Balance at the end of the period |
|
$ |
|
|
|
$ |
|
|
7.LONG-TERM DEBT
Long-term debt is as follows:
|
|
April 4, |
|
|
June 30, |
|
||
|
|
2021 |
|
|
2020 |
|
||
Revolving credit facility |
|
$ |
- |
|
|
$ |
|
|
Term loans |
|
|
|
|
|
|
|
|
Debt issuance costs on term loans |
|
|
( |
) |
|
|
( |
) |
Total debt |
|
|
|
|
|
|
|
|
Less current portion of long-term debt |
|
|
|
|
|
|
|
|
Less current portion of debt issuance costs on term loans |
|
|
( |
) |
|
|
( |
) |
Long-term debt, net of current portion |
|
$ |
|
|
|
$ |
|
|
On October 1, 2018, the Company entered into a Fourth Amended and Restated Credit and Guaranty Agreement with a syndicate of certain financial institutions (the “Fourth Amended Credit Agreement”). The Fourth Amended Credit Agreement provides the Company with a $
Amendment No. 3 to Fourth Amended Credit Agreement
12
Pursuant to Amendment No. 3, the applicable interest, at the Company’s option, is at either the prime rate plus an applicable margin ranging from
Amendment No. 4 and Joinder to Fourth Amended Credit Agreement
Revolving Credit Facility
During October 2020 the Company borrowed $
8. |
INCOME TAXES |
The Company’s consolidated interim effective tax rate is based on a current estimate of the annual effective income tax rate adjusted to reflect the impact of discrete items. The differences between the Company’s effective tax rates and the statutory federal tax rate of
13
9. |
NET INCOME (LOSS) PER SHARE |
The following table sets forth the computation of the Company’s net income (loss) per share:
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
April 4, |
|
|
March 29, |
|
|
April 4, |
|
|
March 29, |
|
||||
|
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
||||
Net income (loss) |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
( |
) |
Weighted average shares — basic |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dilutive effect of assumed exercises of stock options |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
— |
|
Dilutive effect of assumed restricted share awards/units |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
— |
|
Weighted average outstanding shares — diluted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic net income (loss) per share |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
( |
) |
Diluted net income (loss) per share |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
( |
) |
For the three and nine months ended April 4, 2021, an immaterial number of shares were excluded from the computation of diluted earnings per share as the effect would have been anti-dilutive. The dilutive effect of
10. |
SHARE-BASED COMPENSATION |
The following table presents the components of share-based compensation expense by award type.
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
April 4, |
|
|
March 29, |
|
|
April 4, |
|
|
March 29, |
|
||||
|
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
||||
Restricted stock awards |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Performance stock units |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
( |
) |
Stock options |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
Share-based compensation expense |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Restricted Stock Awards
During the nine months ended April 4, 2021, the Company granted
The following table summarizes the status of nonvested RSAs as of April 4, 2021, and changes during the nine months then ended.
|
|
|
|
|
|
Average |
|
|
|
|
Nonvested |
|
|
Grant-Date |
|
||
|
|
Restricted |
|
|
Fair Value |
|
||
|
|
Shares |
|
|
(per share) |
|
||
Nonvested at June 30, 2020 |
|
|
|
|
|
$ |
|
|
Granted |
|
|
|
|
|
|
|
|
Vested |
|
|
( |
) |
|
|
|
|
Forfeited |
|
|
( |
) |
|
|
|
|
Nonvested at April 4, 2021 |
|
|
|
|
|
|
|
|
14
As of April 4, 2021, there was $
Performance Stock Units
Performance stock units (“PSUs”) are a form of long-term incentive compensation awarded to executive officers and certain other key employees designed to directly align the interests of employees to the interests of the Company’s stockholders, and to create long-term stockholder value. The awards will be earned based on the Company’s achievement of certain performance criteria over a
performance period. The performance period for the awards commences on July 1 of the fiscal year in which they were granted and continue for a three-year period, ending on June 30 of the applicable year. The probability of achieving the performance criteria is assessed quarterly. Following the determination of the Company’s achievement with respect to the performance criteria, the number of shares awarded is subject to further adjustment based on the application of a total shareholder return (“TSR”) modifier. The grant date fair value is determined based on both the probability assessment of the Company achieving the performance criteria and an estimate of the expected TSR modifier. The TSR modifier estimate is determined using a Monte Carlo Simulation model, which considers the likelihood of numerous possible outcomes of long-term market performance. Compensation expense related to nonvested PSUs is recognized ratably over the performance period.Supplemental PSUs
On July 16, 2020, after consulting with outside compensation advisors and outside legal counsel, reviewing market data and benchmarking expected relative compensation to the market data, the Company’s Compensation Committee made the decision to grant additional PSUs under the Long-term Incentive Plan (“LTIP Program”) to certain of the Company’s officers, (the “Supplemental PSUs”). The “Performance Period” for the Supplemental PSUs is a The Supplemental PSUs were granted to attract and motivate key employees whose existing fiscal 2019 and fiscal 2020 PSU grants (the “Existing PSUs”) were unlikely to achieve minimum performance goals due to the unprecedented effects of the COVID-19 pandemic.
period commencing July 1, 2020 and ending June 30, 2022.The number of Supplemental PSUs that a grantee earns for the performance period will be determined by multiplying the target award by the product of (i) the Composite Payout Percentage and (ii) the Relative TSR Modifier. The “Composite Payout Percentage” is calculated based on the Company’s Total Market Share Percentage, Total Consumer Satisfaction Index Percentage and Total Dealer Inventory Turnover Percentage (each as defined in the Supplemental PSU Award Agreement). Following the determination of the Company’s achievement with respect to the Composite Payout Percentage over the Performance Period, the vesting of each award will be subject to adjustment based upon the application of a Relative TSR Modifier. The Supplemental PSUs are capped at
The following table summarizes the status of nonvested PSUs as of April 4, 2021, and changes during the nine months then ended.
|
|
|
|
|
|
Average |
|
|
|
|
Nonvested |
|
|
Grant-Date |
|
||
|
|
Performance |
|
|
Fair Value |
|
||
|
|
Stock Units |
|
|
(per share) |
|
||
Nonvested at June 30, 2020 |
|
|
|
|
|
$ |
|
|
Granted |
|
|
|
|
|
|
|
|
Vested |
|
|
- |
|
|
|
- |
|
Forfeited |
|
|
( |
) |
|
|
|
|
Nonvested at April 4, 2021 |
|
|
|
|
|
|
|
|
As of April 4, 2021, there was $
15
11.SEGMENT INFORMATION
The Company designs, manufactures, and markets recreational performance sport boats, luxury day boats, and outboard boats under
|
• |
The MasterCraft segment produces boats under two product brands, MasterCraft and Aviara. MasterCraft boats are produced at its Vonore, Tennessee facility. These are premium recreational performance sport boats primarily used for water skiing, wakeboarding, wake surfing, and general recreational boating. Aviara boats are luxury day boats primarily used for general recreational boating. Production of Aviara boats began during the year ended June 30, 2019 and the Company began selling these boats in July 2019. The Company has transitioned Aviara production from the Vonore facility to the Merritt Island Facility as of the end of March, allowing for increased production capacity for our MasterCraft branded products. |
|
• |
The NauticStar segment produces boats at its Amory, Mississippi facility. NauticStar’s boats are primarily used for saltwater fishing and general recreational boating. |
|
• |
The Crest segment produces pontoon boats at its Owosso, Michigan facility. Crest’s boats are primarily used for general recreational boating. |
Each segment distributes its products through its own dealer network. The Chief Operating Decision Maker (“CODM”), which is our Chief Executive Officer, regularly reviews the operating performance of each segment including measures of performance based on operating income. Each segment has its own management structure which is responsible for the operations of the segment and which is directly accountable to the CODM. The Company files a consolidated income tax return and does not allocate income taxes and other corporate-level expenses, including interest, to operating segments. All material corporate costs are included in the MasterCraft segment.
Selected financial information for the Company’s reportable segments was as follows:
|
|
For the Three Months Ended April 4, 2021 |
|
|||||||||||||
|
|
MasterCraft |
|
|
NauticStar |
|
|
Crest |
|
|
Consolidated |
|
||||
Net sales |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Operating income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of property, plant and equipment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Nine Months Ended April 4, 2021 |
|
|||||||||||||
|
|
MasterCraft |
|
|
NauticStar |
|
|
Crest |
|
|
Consolidated |
|
||||
Net sales |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Operating income (loss) |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of property, plant and equipment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended March 29, 2020 |
|
|||||||||||||
|
|
MasterCraft |
|
|
NauticStar |
|
|
Crest |
|
|
Consolidated |
|
||||
Net sales |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Operating income (loss) |
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Depreciation and amortization |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of property, plant and equipment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16
|
|
For the Nine Months Ended March 29, 2020 |
|
|||||||||||||
|
|
MasterCraft |
|
|
NauticStar |
|
|
Crest |
|
|
Consolidated |
|
||||
Net sales |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Operating income (loss) |
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Depreciation and amortization |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of property, plant and equipment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table presents total assets for the Company’s reportable segments.
|
|
April 4, 2021 |
|
|
June 30, 2020 |
|
||
Assets: |
|
|
|
|
|
|
|
|
MasterCraft |
|
$ |
|
|
|
$ |
|
|
NauticStar |
|
|
|
|
|
|
|
|
Crest |
|
|
|
|
|
|
|
|
Eliminations(a) |
|
|
( |
) |
|
|
( |
) |
Total assets |
|
$ |
|
|
|
$ |
|
|
(a) |
Represents the Company’s initial investment in NauticStar and Crest, which is included in total assets attributed to the MasterCraft segment. |
17
ITEM 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
The following discussion and analysis should be read together with the unaudited condensed consolidated financial statements and notes thereto included elsewhere in this Quarterly Report on Form 10-Q. In addition, the statements in this discussion and analysis regarding our expectations concerning the performance of our business, anticipated financial results, liquidity and the other non-historical statements are forward-looking statements. These forward-looking statements are subject to numerous risks and uncertainties, including, but not limited to, the risks and uncertainties described in “Cautionary Note Regarding Forward-Looking Statements” above and in “Risk Factors” set forth in our 2020 Annual Report on Form 10-K. Our actual results may differ materially from those contained in or implied by any forward-looking statements.
Certain statements in the following discussions are based on non-GAAP financial measures. A “non-GAAP financial measure” is a numerical measure of a registrant’s historical or future financial performance, financial position or cash flows that excludes amounts, or is subject to adjustments that have the effect of excluding amounts, that are included in the most directly comparable measure calculated and presented in accordance with U.S. GAAP in the statements of operations, balance sheets or statements of cash flows of the issuer; or includes amounts, or is subject to adjustments that have the effect of including amounts, that are excluded from the most directly comparable measure so calculated and presented. Non-GAAP financial measures do not include operating and statistical measures. The Company includes non-GAAP financial measures in Management’s Discussion and Analysis, as the Company’s management believes that these measures and the information they provide are useful to users of the financial statements, including investors, because they permit users of the financial statements to view the Company’s performance using the same tools that management utilizes and to better evaluate the Company’s ongoing business performance. In order to better align the Company’s reported results with the internal metrics used by the Company's management to evaluate business performance as well as to provide better comparisons to prior periods and peer data, non-GAAP measures exclude the impact of purchase accounting amortization related to business acquisitions.
COVID-19 Pandemic
Demand for the Company’s products has been strong and, as a result of our employee’s committed efforts, disruptions to the Company’s production have been minimal since resuming operations in May 2020. However, we continue to be subject to risks and uncertainties as a result of the COVID-19 pandemic. The extent of the impact of the COVID-19 pandemic on our business remains uncertain and difficult to predict, as the response to the COVID-19 pandemic is still evolving in many countries, including the United States and other markets where we and our suppliers operate.
Impact to Operations
To balance wholesale production with the anticipated impacts to retail demand caused by the economic impacts of the COVID-19 pandemic, we reduced production in February 2020 and, in late March 2020, temporarily suspended manufacturing operations at all of our facilities to protect the health of our employees and comply with governmental mandates. We resumed operations at reduced production levels at our manufacturing facilities by mid-May 2020. Since that time, our facilities have increased production rates above their pre-COVID-19 levels. We achieved the highest wholesale unit volume in the history of the Company during the third quarter of fiscal 2021, and we are planning for further increases to production rates in order to meet the continuing strong retail demand.
MasterCraft, NauticStar and Crest have each achieved a steady increase in production during fiscal 2021. Although all of our segments made progress, NauticStar’s performance lagged behind our other brands during the first and second quarters of fiscal 2021. In August 2020, we announced that Scott Womack had been named President of NauticStar. NauticStar is benefiting from Mr. Womack’s years of executive leadership, manufacturing experience and proven dedication to operational excellence, as evidenced by NauticStar’s returning to profitability for the third quarter of fiscal 2021, and we believe NauticStar’s operating performance will continue to improve.
18
Impact to Liquidity and Capital Resources
During March 2020, we drew $35.0 million on our Revolving Credit Facility as a precautionary measure in order to increase our cash position and preserve financial flexibility in light of uncertainty in the global markets resulting from the COVID-19 pandemic. Additionally, on May 7, 2020, we entered into Amendment No. 3 (the “Amendment”) to the Fourth Amended & Restated Credit and Guarantee Agreement (the “Credit Facility”) to strengthen our financial flexibility. Among other things, the changes effected by the Amendment provide temporary relief under our financial covenants. See Note 7 in Notes to Unaudited Condensed Consolidated Financial Statements for more information regarding these changes, including the sunsetting of the temporary relief provisions. The performance of the business and our cash management activities provided the flexibility to repay the entire Revolving Credit Facility as of October 4, 2020. Since that time, our strong operating performance has continued which has allowed our cash balance to build to $29.0 million as of April 4, 2021. In addition, we were in compliance with all of our financial covenants as of April 4, 2021.
Outlook
We believe strong marine retail demand, coupled with abnormally low retail inventory levels for all our brands have created a growth opportunity for fiscal 2021 and potentially into future years. Our facilitites are now running at production rates above their pre-COVID-19 levels, with further increases to production rates planned. We expect this ramp up phase to continue through fiscal 2021 in order to meet strong wholesale demand as our dealers seek to satisfy current retail order flow and replenish their stock inventory. As we navigate the unprecedented confluence of demand and disruption precipitated by the COVID-19 pandemic, our production rates going forward will depend, in large part, on our suppliers’ capacity. Demand for raw materials and components used in the production of our products has surged. At the same time, severe and unprecedented events, including the February 2021 ice storm, which impacted much of the United States, have recently disrupted the global supply chain. As a result, some of the materials and components that we use, including certain resins, fiberglass, and plywood, are in short supply. Additionally, our ability to grow and retain a high-performing workforce will be critical to meeting our production objectives.
Although the consumer responses to the COVID-19 pandemic have thus far resulted in strong demand for our products, significant uncertainty exists in the economy as a result of the unpredictable outlook for the COVID-19 pandemic. The ultimate impact of the COVID-19 pandemic on our business is uncertain and will depend on a number of factors, including the duration, spread and severity, the remedial action and stimulus measures adopted by local, state and federal governments, the effects of the pandemic on our consumers, dealers, suppliers and workforce, and the extent to which normal economic and operating conditions can resume and be sustained within the general economy. Our future results of operations, cash flows, and liquidity could be adversely impacted by supply chain or workforce disruptions, uncertain demand, additional manufacturing suspensions, additional other intangible asset impairment charges, and the impact of any initiatives that we may undertake to address financial and operational challenges faced by us and our consumers, dealers, and suppliers.
Overview of Consolidated Results of Operations
Net sales were $147.9 million for the third quarter of 2021, which represented an increase of 44.2 percent as compared to the third quarter of 2020, which was impacted by, among other things, the COVID-19 pandemic. The increase was primarily a result of achieving the highest single quarter wholesale unit volume in the history of the Company and lower dealer incentives, partially offset by the impact of model mix.
Net sales were $370.3 million for the nine months ended April 4, 2021, which represented an increase of 18.7 percent as compared to the COVID-19 impacted nine months ended March 29, 2020. The increase was primarily the result of higher sales volumes and lower dealer incentives, partially offset by the impact of model mix.
Gross margin increased by 450 basis points to 25.2 percent for the third quarter of 2021 from 20.7 percent for the prior year period primarily attributable to lower dealer incentives, favorable overhead absorption driven by higher sales volume, and higher prices, partially offset by costs associated with the transition of Aviara to our Merritt Island facility and higher labor costs.
19
Gross margin increased by 320 basis points to 25.0 percent for the nine months ended April 4, 2021 from 21.8 percent for the prior year period primarily due to lower dealer incentives, and higher prices, partially offset by costs associated with the transition of Aviara to our Merritt Island facility and higher labor costs.
Net income was $17.6 million for the third quarter of 2021, compared to net loss of $36.7 million for the third quarter of 2020. Diluted earnings per share was $0.93, compared to diluted loss per share of $(1.96) for the prior year period.
Net income was $39.6 million for the nine months ended April 4, 2021, compared to net loss of $21.2 million for the prior year period. Diluted earnings per share was $2.09, compared to diluted loss per share of $(1.13) for the prior year period.
Merritt Island Facility and Aviara Transition
On October 26, 2020, we completed the purchase of certain real property located in Merritt Island, Florida, including an approximately 140,000 sq. ft. boat manufacturing facility, (the “Merritt Island Facility”) for a purchase price of $14.2 million. We expanded our overall boat building capacity by moving all Aviara production to the Merritt Island Facility. While this additional capacity will help facilitate Aviara’s long-term growth, importantly, removing Aviara production from our Vonore, Tennessee facility provided for an immediate increase in capacity and productivity for our MasterCraft brand. We began producing Aviara in the Merritt Island Facility in December 2020 and shipments from the new facility commenced in the third quarter of fiscal 2021.
20
Results of Operations
The table below presents our consolidated results of operations for the three months ended:
|
|
Three Months Ended |
|
|
|
|
||||||||||
|
|
April 4, |
|
|
March 29, |
|
|
2021 vs. 2020 |
|
|||||||
|
|
2021 |
|
|
2020 |
|
|
Change |
% Change |
|
||||||
|
|
(Dollars in thousands) |
|
|
|
|
|
|
|
|
|
|||||
Consolidated statements of operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET SALES |
|
$ |
147,854 |
|
|
$ |
102,562 |
|
|
$ |
45,292 |
|
|
|
44.2 |
% |
COST OF SALES |
|
|
110,627 |
|
|
|
81,288 |
|
|
|
29,339 |
|
|
|
36.1 |
% |
GROSS PROFIT |
|
|
37,227 |
|
|
|
21,274 |
|
|
|
15,953 |
|
|
|
75.0 |
% |
OPERATING EXPENSES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling and marketing |
|
|
3,693 |
|
|
|
4,933 |
|
|
|
(1,240 |
) |
|
|
(25.1 |
%) |
General and administrative |
|
|
9,984 |
|
|
|
6,094 |
|
|
|
3,890 |
|
|
|
63.8 |
% |
Amortization of other intangible assets |
|
|
987 |
|
|
|
987 |
|
|
|
- |
|
|
|
0.0 |
% |
Goodwill and other intangible asset impairment |
|
|
— |
|
|
|
56,437 |
|
|
|
(56,437 |
) |
|
|
|
|
Total operating expenses |
|
|
14,664 |
|
|
|
68,451 |
|
|
|
(53,787 |
) |
|
|
(78.6 |
%) |
OPERATING INCOME (LOSS) |
|
|
22,563 |
|
|
|
(47,177 |
) |
|
|
69,740 |
|
|
|
(147.8 |
%) |
OTHER EXPENSE: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
|
755 |
|
|
|
1,086 |
|
|
|
(331 |
) |
|
|
(30.5 |
%) |
INCOME (LOSS) BEFORE INCOME TAX EXPENSE |
|
|
21,808 |
|
|
|
(48,263 |
) |
|
|
70,071 |
|
|
|
(145.2 |
%) |
INCOME TAX EXPENSE (BENEFIT) |
|
|
4,240 |
|
|
|
(11,550 |
) |
|
|
15,790 |
|
|
|
(136.7 |
%) |
NET INCOME (LOSS) |
|
$ |
17,568 |
|
|
$ |
(36,713 |
) |
|
$ |
54,281 |
|
|
|
(147.9 |
%) |
Additional financial and other data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unit sales volume: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MasterCraft |
|
|
941 |
|
|
|
713 |
|
|
|
228 |
|
|
|
32.0 |
% |
NauticStar |
|
|
426 |
|
|
|
313 |
|
|
|
113 |
|
|
|
36.1 |
% |
Crest |
|
|
731 |
|
|
|
461 |
|
|
|
270 |
|
|
|
58.6 |
% |
Consolidated unit sales volume |
|
|
2,098 |
|
|
|
1,487 |
|
|
|
611 |
|
|
|
41.1 |
% |
Net sales: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MasterCraft |
|
$ |
99,447 |
|
|
$ |
70,531 |
|
|
$ |
28,916 |
|
|
|
41.0 |
% |
NauticStar |
|
|
18,045 |
|
|
|
14,156 |
|
|
|
3,889 |
|
|
|
27.5 |
% |
Crest |
|
|
30,362 |
|
|
|
17,875 |
|
|
|
12,487 |
|
|
|
69.9 |
% |
Consolidated net sales |
|
$ |
147,854 |
|
|
$ |
102,562 |
|
|
$ |
45,292 |
|
|
|
44.2 |
% |
Net sales per unit: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MasterCraft |
|
$ |
106 |
|
|
$ |
99 |
|
|
$ |
7 |
|
|
|
7.1 |
% |
NauticStar |
|
|
42 |
|
|
|
45 |
|
|
|
(3 |
) |
|
|
(6.7 |
%) |
Crest |
|
|
42 |
|
|
|
39 |
|
|
|
3 |
|
|
|
7.7 |
% |
Consolidated net sales per unit |
|
|
70 |
|
|
|
69 |
|
|
|
1 |
|
|
|
1.4 |
% |
Gross margin |
|
|
25.2 |
% |
|
|
20.7 |
% |
|
450 bps |
|
|
|
|
|
Three Months Ended April 4, 2021 Compared to the Three Months Ended March 29, 2020
Net Sales. Net Sales for the third quarter were $147.9 million, an increase of $45.3 million, or 44.2 percent, compared to $102.6 million for the prior-year period. The increase was primarily due to:
|
• |
a $28.9 million increase for the MasterCraft segment driven by a 32.0 percent increase in sales volume, lower dealer incentives, higher prices, and options favorablility, partially offset by the impact of model mix. |
|
• |
a $12.5 million increase for the Crest segment resulting from a 58.6 percent increase in sales volume, lower dealer incentives, higher prices and options favorability, and |
21
|
• |
a $3.9 million increase for the NauticStar segment primarily due to a 36.1 percent increase in sales volume, partially offset by the impact of model mix. In addition, NauticStar’s sales volume during the quarter was constrained as a result of the February 2021 ice storm which impacted much of the United States and caused NauticStar to lose approximately one week of production. |
Gross Profit and Gross Margin. Gross profit increased $16.0 million, or 75.0 percent, to $37.2 million compared to $21.3 million for the prior-year period. The increase was primarily a result of higher sales volumes, lower dealer incentives, and higher prices at each reportable segment and favorable options at MasterCraft and Crest. The increase was partially offset by the impact of model mix, Aviara transition costs and higher labor costs at each reportable segment. We expect to realize higher labor costs for the full fiscal year due to changes implemented in the first quarter of fiscal 2021 to our production employee compensation packages.
Gross margin increased due to lower dealer incentives, favorable overhead absorption driven by higher sales volume, and higher prices, partially offset by Aviara transition costs and higher labor costs.
Operating Expenses. Operating expenses decreased $53.8 million, or 78.6 percent, compared to the prior-year period primarily driven by the recognition of $56.4 million of goodwill and other intangible asset impairment charges in the prior-year and lower selling and marketing costs primarily due to the impacts of the COVID-19 pandemic. This decrease was partially offset by higher general and administrative expenses resulting from higher incentive compensation costs and additional investment related to product development and information technology.
Interest Expense. Interest expense decreased $0.3 million, or 30.5 percent due to lower effective interest rates and lower average outstanding debt balances during the quarter compared to the prior-year period.
Income Tax Expense (Benefit). Our consolidated interim effective income tax rate decreased to 19.4 percent for the third quarter of 2021 from 23.9 percent for the prior-year period.
22
|
|
Nine Months Ended |
|
|
|
|
||||||||||
|
|
April 4, |
|
|
March 29, |
|
|
2021 vs. 2020 |
|
|||||||
|
|
2021 |
|
|
2020 |
|
|
Change |
% Change |
|
||||||
|
|
(Dollars in thousands) |
|
|
|
|
|
|
|
|
|
|||||
Consolidated statements of operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET SALES |
|
$ |
370,276 |
|
|
$ |
311,979 |
|
|
$ |
58,297 |
|
|
|
18.7 |
% |
COST OF SALES |
|
|
277,546 |
|
|
|
244,030 |
|
|
|
33,516 |
|
|
|
13.7 |
% |
GROSS PROFIT |
|
|
92,730 |
|
|
|
67,949 |
|
|
|
24,781 |
|
|
|
36.5 |
% |
OPERATING EXPENSES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling and marketing |
|
|
9,589 |
|
|
|
13,340 |
|
|
|
(3,751 |
) |
|
|
(28.1 |
%) |
General and administrative |
|
|
27,268 |
|
|
|
19,356 |
|
|
|
7,912 |
|
|
|
40.9 |
% |
Amortization of other intangible assets |
|
|
2,961 |
|
|
|
2,961 |
|
|
|
- |
|
|
|
0.0 |
% |
Goodwill and other intangible asset impairment |
|
|
— |
|
|
|
56,437 |
|
|
|
(56,437 |
) |
|
|
|
|
Total operating expenses |
|
|
39,818 |
|
|
|
92,094 |
|
|
|
(52,276 |
) |
|
|
(56.8 |
%) |
OPERATING INCOME (LOSS) |
|
|
52,912 |
|
|
|
(24,145 |
) |
|
|
77,057 |
|
|
|
(319.1 |
%) |
OTHER EXPENSE: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
|
2,644 |
|
|
|
3,667 |
|
|
|
(1,023 |
) |
|
|
(27.9 |
%) |
INCOME (LOSS) BEFORE INCOME TAX EXPENSE |
|
|
50,268 |
|
|
|
(27,812 |
) |
|
|
78,080 |
|
|
|
(280.7 |
%) |
INCOME TAX EXPENSE (BENEFIT) |
|
|
10,632 |
|
|
|
(6,601 |
) |
|
|
17,233 |
|
|
|
(261.1 |
%) |
NET INCOME (LOSS) |
|
$ |
39,636 |
|
|
$ |
(21,211 |
) |
|
$ |
60,847 |
|
|
|
(286.9 |
%) |
Additional financial and other data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unit sales volume: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MasterCraft |
|
|
2,378 |
|
|
|
2,170 |
|
|
|
208 |
|
|
|
9.6 |
% |
NauticStar |
|
|
1,067 |
|
|
|
1,046 |
|
|
|
21 |
|
|
|
2.0 |
% |
Crest |
|
|
1,759 |
|
|
|
1,407 |
|
|
|
352 |
|
|
|
25.0 |
% |
Consolidated unit sales volume |
|
|
5,204 |
|
|
|
4,623 |
|
|
|
581 |
|
|
|
12.6 |
% |
Net sales: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MasterCraft |
|
$ |
255,570 |
|
|
$ |
211,201 |
|
|
$ |
44,369 |
|
|
|
21.0 |
% |
NauticStar |
|
|
45,336 |
|
|
|
47,727 |
|
|
|
(2,391 |
) |
|
|
(5.0 |
%) |
Crest |
|
|
69,370 |
|
|
|
53,051 |
|
|
|
16,319 |
|
|
|
30.8 |
% |
Consolidated net sales |
|
$ |
370,276 |
|
|
$ |
311,979 |
|
|
$ |
58,297 |
|
|
|
18.7 |
% |
Net sales per unit: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MasterCraft |
|
$ |
107 |
|
|
$ |
97 |
|
|
$ |
10 |
|
|
|
10.3 |
% |
NauticStar |
|
|
42 |
|
|
|
46 |
|
|
|
(4 |
) |
|
|
(8.7 |
%) |
Crest |
|
|
39 |
|
|
|
38 |
|
|
|
1 |
|
|
|
2.6 |
% |
Consolidated net sales per unit |
|
|
71 |
|
|
|
67 |
|
|
|
4 |
|
|
|
6.0 |
% |
Gross margin |
|
|
25.0 |
% |
|
|
21.8 |
% |
|
320 bps |
|
|
|
|
|
Nine Months Ended April 4, 2021 Compared to the Nine Months Ended March 29, 2020
Net Sales. Net Sales for the nine months ended April 4, 2021 were $370.3 million, an increase of $58.3 million, or 18.7 percent, compared to $312.0 million for the prior-year period. The increase was primarily due to:
|
• |
a $44.4 million increase for the MasterCraft segment driven by a 9.6 percent increase in sales volume, a favorable mix of higher-priced and higher-contented models, lower dealer incentives, and higher parts sales volume, |
|
• |
a $16.3 million increase for the Crest segment resulting from a 25.0 percent increase in sales volume, lower dealer incentives, higher prices, and options favorability, and |
23
|
• |
a $2.4 million decrease for the NauticStar segment primarily due to model mix and partially offset by higher volume and prices. NauticStar’s sales volume during the nine months ended April 4, 2021 was constrained as a result of the February 2021 ice storm which impacted much of the United States and caused NauticStar to lose approximately one week of production. |
Gross Profit and Gross Margin. Gross profit increased $24.8 million, or 36.5 percent, to $92.7 million compared to $67.9 million for the prior-year period. The increase was primarily a result of lower dealer incentives, higher unit volume, higher prices, favorable options mix and higher parts sales volume. These increases were partially offset by higher labor costs for each reportable segment, and higher incentive compensation costs and costs associated with the transition of Aviara to our Merritt Island facility. We expect to realize higher labor costs for the full fiscal year due to changes implemented in the first quarter of fiscal 2021 to our production employee compensation packages.
Gross margin increased due to lower dealer incentives and higher prices, partially offset by Aviara transition costs and higher labor costs.
Operating Expenses. Operating expenses decreased $52.3 million, or 56.8 percent, compared to the prior-year period due to the same reasons described above for the quarterly period.
Interest Expense. Interest expense decreased $1.0 million, or 27.9 percent primarily due to the same reasons described above for the quarterly period.
Income Tax Expense (Benefit). Our consolidated interim effective income tax rate decreased to 21.2 percent for the nine months ended April 4, 2021 from 23.7 percent for the prior-year period.
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 goodwill and other intangible asset impairment, COVID-19 shutdown costs, Aviara transition costs, Aviara (new brand) startup costs, and non-cash share-based compensation. 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 (loss) 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 and adjusted for the impact to income tax expense related to non-GAAP adjustments. For the periods presented herein, these adjustments include goodwill and other intangible asset impairment, COVID-19 shutdown costs, Aviara transition costs, Aviara (new brand) startup costs, and certain non-cash items including other intangible asset amortization and share-based compensation.
24
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 (loss) or operating income (loss) as determined under accounting principles generally accepted in the United States, or U.S. GAAP. The Non-GAAP Measures are not measures of performance in accordance with U.S. GAAP and should not be considered as an alternative to net income, net income per share, or operating cash flows determined in accordance with U.S. GAAP. Additionally, Adjusted EBITDA is not intended to be a measure of cash flow. We believe that the inclusion of the Non-GAAP Measures is appropriate to provide additional information to investors because securities analysts and investors use the Non-GAAP Measures to assess our operating performance across periods on a consistent basis and to evaluate the relative risk of an investment in our securities. We use Adjusted Net Income and Adjusted Net Income per share to facilitate a comparison of our operating performance on a consistent basis from period to period that, when viewed in combination with our results prepared in accordance with U.S. GAAP, provides a more complete understanding of factors and trends affecting our business than does U.S. GAAP measures alone. We believe Adjusted Net Income and Adjusted Net Income per share assists our board of directors, management, investors, and other users of the financial statements in comparing our net income on a consistent basis from period to period because it removes certain non-cash items and other items that we do not consider to be indicative of our core and/or ongoing operations and adjusts for the impact to income tax expense (benefit) related to non-GAAP adjustments. The Non-GAAP Measures have limitations as an analytical tool and should not be considered in isolation or as a substitute for analysis of our results as reported under U.S. GAAP. Some of these limitations are:
|
• |
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 the Non-GAAP Measures may not be comparable to similarly titled measures of other companies, including companies in our industry.
25
The following table presents a reconciliation of net income (loss) as determined in accordance with U.S. GAAP to EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin for the periods indicated:
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||||||||||||||||
|
|
April 4, |
|
|
|
|
|
March 29, |
|
|
|
|
|
April 4, |
|
|
|
|
|
|
March 29, |
|
|
|
|
|
||||
|
|
2021 |
|
% of sales |
|
|
2020 |
|
% of sales |
|
|
2021 |
|
|
% of sales |
|
|
2020 |
|
|
% of sales |
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
17,568 |
|
11.9% |
|
|
$ |
(36,713 |
) |
-35.8% |
|
|
$ |
39,636 |
|
|
10.7% |
|
|
$ |
(21,211 |
) |
|
-6.8% |
|
||||
Income tax expense (benefit) |
|
|
4,240 |
|
|
|
|
|
|
(11,550 |
) |
|
|
|
|
|
10,632 |
|
|
|
|
|
|
|
(6,601 |
) |
|
|
|
|
Interest expense |
|
|
755 |
|
|
|
|
|
|
1,086 |
|
|
|
|
|
|
2,644 |
|
|
|
|
|
|
|
3,667 |
|
|
|
|
|
Depreciation and amortization |
|
|
2,948 |
|
|
|
|
|
|
2,632 |
|
|
|
|
|
|
8,547 |
|
|
|
|
|
|
|
7,686 |
|
|
|
|
|
EBITDA |
|
|
25,511 |
|
17.3% |
|
|
|
(44,545 |
) |
-43.4% |
|
|
|
61,459 |
|
|
16.6% |
|
|
|
(16,459 |
) |
|
-5.3% |
|
||||
Goodwill and other intangible asset impairment(a) |
|
|
- |
|
|
|
|
|
|
56,437 |
|
|
|
|
|
|
- |
|
|
|
|
|
|
|
56,437 |
|
|
|
|
|
COVID-19 shut-down costs(b) |
|
|
- |
|
|
|
|
|
|
1,506 |
|
|
|
|
|
|
- |
|
|
|
|
|
|
|
1,506 |
|
|
|
|
|
Aviara start-up costs(c) |
|
|
- |
|
|
|
|
|
|
398 |
|
|
|
|
|
|
- |
|
|
|
|
|
|
|
1,213 |
|
|
|
|
|
Share-based compensation |
|
|
902 |
|
|
|
|
|
|
159 |
|
|
|
|
|
|
2,185 |
|
|
|
|
|
|
|
703 |
|
|
|
|
|
Aviara transition costs(d) |
|
|
1,125 |
|
|
|
|
|
|
- |
|
|
|
|
|
|
2,149 |
|
|
|
|
|
|
|
- |
|
|
|
|
|
Adjusted EBITDA |
|
$ |
27,538 |
|
18.6% |
|
|
$ |
13,955 |
|
13.6% |
|
|
$ |
65,793 |
|
|
17.8% |
|
|
$ |
43,400 |
|
|
13.9% |
|
(a) |
Represents non-cash charges recorded in the NauticStar and Crest segments for impairments of goodwill and trade name. See Note 5 in Notes to Unaudited Condensed Consolidated Financial Statements for more information regarding these impairment charges. |
(b) |
Represents costs associated with the COVID-19 pandemic. Costs include lump sum severance payments and temporary continuation of healthcare benefits for laid off employees. |
(c) |
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 two models, the AV32 and the AV36, during the first and second quarters of fiscal 2020, respectively. We expect to begin selling one additional model, the AV40, after the Aviara transition of production to the new Merritt Island Facility in Florida. Start-up costs presented for fiscal 2020 are related to the AV36 and AV40 models. |
(d) |
Represents costs to transition production of the Aviara brand from Vonore, Tennessee to Merritt Island, Florida. Costs include duplicative overhead costs and costs not indicative of ongoing operations (such as training and facility preparation). We expect to incur such costs until Aviara production is fully transitioned, which we expect will be completed during fiscal 2021. |
26
The following table presents a reconciliation of net income (loss) as determined in accordance with U.S. GAAP to Adjusted Net Income for the periods indicated:
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
April 4, |
|
|
March 29, |
|
|
April 4, |
|
|
March 29, |
|
||||
|
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
||||
|
|
(Dollars in thousands) |
|
|||||||||||||
Net income (loss) |
|
$ |
17,568 |
|
|
$ |
(36,713 |
) |
|
$ |
39,636 |
|
|
$ |
(21,211 |
) |
Income tax expense (benefit) |
|
|
4,240 |
|
|
|
(11,550 |
) |
|
|
10,632 |
|
|
|
(6,601 |
) |
Goodwill and other intangible asset impairment(a) |
|
|
- |
|
|
|
56,437 |
|
|
|
- |
|
|
|
56,437 |
|
COVID-19 shut-down costs(b) |
|
|
- |
|
|
|
1,506 |
|
|
|
- |
|
|
|
1,506 |
|
Amortization of acquisition intangibles |
|
|
960 |
|
|
|
960 |
|
|
|
2,882 |
|
|
|
2,882 |
|
Aviara start-up costs(c) |
|
|
- |
|
|
|
398 |
|
|
|
- |
|
|
|
1,213 |
|
Share-based compensation |
|
|
902 |
|
|
|
159 |
|
|
|
2,185 |
|
|
|
703 |
|
Aviara transition costs(d) |
|
|
1,125 |
|
|
|
- |
|
|
|
2,149 |
|
|
|
- |
|
Adjusted Net Income before income taxes |
|
|
24,795 |
|
|
|
11,197 |
|
|
|
57,484 |
|
|
|
34,929 |
|
Adjusted income tax expense(e) |
|
|
5,703 |
|
|
|
2,575 |
|
|
|
13,221 |
|
|
|
8,034 |
|
Adjusted Net Income |
|
$ |
19,092 |
|
|
$ |
8,622 |
|
|
$ |
44,263 |
|
|
$ |
26,895 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Net Income per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
1.01 |
|
|
$ |
0.46 |
|
|
$ |
2.35 |
|
|
$ |
1.44 |
|
Diluted |
|
$ |
1.01 |
|
|
$ |
0.46 |
|
|
$ |
2.34 |
|
|
$ |
1.44 |
|
Weighted average shares used for the computation of: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic Adjusted Net Income per share |
|
|
18,817,975 |
|
|
|
18,739,480 |
|
|
|
18,799,875 |
|
|
|
18,731,338 |
|
Diluted Adjusted Net Income per share |
|
|
18,989,629 |
|
|
|
18,739,480 |
|
|
|
18,928,288 |
|
|
|
18,731,338 |
|
(a) |
Represents non-cash charges recorded in the NauticStar and Crest segments for impairments of goodwill and trade name. See Note 5 in Notes to Unaudited Condensed Consolidated Financial Statements for more information regarding these impairment charges. |
(b) |
Represents costs associated with the COVID-19 pandemic. Costs include lump sum severance payments and temporary continuation of healthcare benefits for laid off employees. |
(c) |
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 two models, the AV32 and the AV36, during the first and second quarters of fiscal 2020, respectively. We expect to begin selling one additional model, the AV40, after the Aviara transition of production to the new Merritt Island Facility in Florida. Start-up costs presented for fiscal 2020 are related to the AV36 and AV40 models. |
(d) |
Represents costs to transition production of the Aviara brand from Vonore, Tennessee to Merritt Island, Florida. Costs include duplicative overhead costs and costs not indicative of ongoing operations (such as training and facility preparation). We expect to incur such costs until Aviara production is fully transitioned, which we expect will be completed during fiscal 2021. |
(e) |
Reflects income tax expense at an income tax rate of 23.0% for each period presented. |
27
The following table presents the reconciliation of net income (loss) per diluted share to Adjusted Net Income per diluted share for the periods presented:
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
April 4, |
|
|
March 29, |
|
|
April 4, |
|
|
March 29, |
|
||||
|
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
||||
Net income (loss) per diluted share |
|
$ |
0.93 |
|
|
$ |
(1.96 |
) |
|
$ |
2.09 |
|
|
$ |
(1.13 |
) |
Impact of adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense (benefit) |
|
|
0.22 |
|
|
$ |
(0.61 |
) |
|
|
0.57 |
|
|
|
(0.34 |
) |
Goodwill and other intangible asset impairment(a) |
|
|
- |
|
|
$ |
3.01 |
|
|
|
- |
|
|
|
3.01 |
|
COVID-19 shut-down costs(b) |
|
|
- |
|
|
$ |
0.08 |
|
|
|
- |
|
|
|
0.08 |
|
Amortization of acquisition intangibles |
|
|
0.05 |
|
|
$ |
0.05 |
|
|
|
0.15 |
|
|
|
0.15 |
|
Aviara start-up costs(c) |
|
|
- |
|
|
$ |
0.02 |
|
|
|
- |
|
|
|
0.06 |
|
Share-based compensation |
|
|
0.05 |
|
|
$ |
0.01 |
|
|
|
0.12 |
|
|
|
0.04 |
|
Aviara transition costs(d) |
|
|
0.06 |
|
|
$ |
- |
|
|
|
0.11 |
|
|
|
- |
|
Adjusted Net Income per diluted share before income taxes |
|
$ |
1.31 |
|
|
$ |
0.60 |
|
|
$ |
3.04 |
|
|
$ |
1.87 |
|
Impact of adjusted income tax expense on net income per diluted share before income taxes(e) |
|
|
(0.30 |
) |
|
$ |
(0.14 |
) |
|
|
(0.70 |
) |
|
|
(0.43 |
) |
Adjusted Net Income per diluted share |
|
$ |
1.01 |
|
|
$ |
0.46 |
|
|
$ |
2.34 |
|
|
$ |
1.44 |
|
(a) |
Represents non-cash charges recorded in the NauticStar and Crest segments for impairments of goodwill and trade name. See Note 5 in Notes to Unaudited Condensed Consolidated Financial Statements for more information regarding these impairment charges. |
(b) |
Represents costs associated with the COVID-19 pandemic. Costs include lump sum severance payments and temporary continuation of healthcare benefits for laid off employees. |
(c) |
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 two models, the AV32 and the AV36, during the first and second quarters of fiscal 2020, respectively. We expect to begin selling one additional model, the AV40, after the Aviara transition of production to the new Merritt Island Facility in Florida. Start-up costs presented for fiscal 2020 are related to the AV36 and AV40 models. |
(d) |
Represents costs to transition production of the Aviara brand from Vonore, Tennessee to Merritt Island, Florida. Costs include duplicative overhead costs and costs not indicative of ongoing operations (such as training and facility preparation). We expect to incur such costs until Aviara production is fully transitioned, which we expect will be completed during fiscal 2021. |
(e) |
Reflects income tax expense at an income tax rate of 23.0% for each period presented. |
Change in Non-GAAP Financial Measure
Prior to fiscal year-end 2020, the Company’s calculation of a diluted per share amount of Adjusted Net Income included an adjustment to fully dilute this non-GAAP measure for all outstanding share-based compensation grants. This additional dilution was incorporated by adjusting the GAAP measure, Weighted Average Shares Used for the Computation of Basic earnings per share, as presented on the Consolidated Statements of Operations, to include a dilutive effect for all outstanding RSAs, PSUs, and stock options. Beginning with the fiscal year-end 2020 presentation and for all subsequent periods, the Company will no longer include this additional dilution impact in its calculation of Adjusted Net Income per diluted share. The Company has instead utilized the Weighted Average Shares Used for the Computation of Basic and Diluted earnings per share as presented on the Consolidated Statements of Operations to calculate Adjusted Net Income per diluted share for all periods presented herein.
The Company believes that, because its outstanding share-based compensation grants no longer result in a material amount of dilution of its earnings as was the case nearer to the date of our IPO, the adjustment methodology previously used no longer provides meaningful information to management or other users of its financial statements. This change resulted in an increase of $0.02 in the nine months ended March 29, 2020 in the amount of Adjusted Net Income per diluted share from what was previously reported.
28
Liquidity and Capital Resources
Our primary liquidity and capital resource needs are to finance working capital, fund capital expenditures, and service our debt. Our principal sources of liquidity are our cash balance, cash generated from operating activities, our Revolving Credit Facility and the refinancing and/or new issuance of long-term debt. As of April 4, 2021, we had a cash balance of $29.0 million in addition to $35.0 million of available borrowing capacity under the Revolving Credit Facility. During October 2020, the Company completed the purchase of the Merritt Island Facility for a purchase price of $14.2 million. See Note 11 in Notes to Unaudited Condensed Consolidated Financial Statements for additional information regarding this transaction.
We believe our cash balance, cash from operations, and availability under the Revolving Credit Facility will be sufficient to provide for our liquidity and capital resource needs. However, we are continuing to monitor the COVID-19 pandemic and its impact on our business, dealers, consumers and industry as a whole.
The following table summarizes our cash flows from operating, investing, and financing activities:
|
|
Nine Months Ended |
|
|
|
|
|
|||||
|
|
April 4, |
|
|
March 29, |
|
|
|
|
|
||
|
|
2021 |
|
|
2020 |
|
|
Change |
|
|||
|
|
(Dollars in thousands) |
|
|
|
|
|
|||||
Total cash provided by (used in): |
|
|
|
|
|
|
|
|
|
|
|
|
Operating activities |
|
$ |
54,393 |
|
|
$ |
23,900 |
|
|
$ |
30,493 |
|
Investing activities |
|
|
(23,779 |
) |
|
|
(13,576 |
) |
|
|
(10,203 |
) |
Financing activities |
|
|
(17,963 |
) |
|
|
24,841 |
|
|
|
(42,804 |
) |
Net change in cash |
|
$ |
12,651 |
|
|
$ |
35,165 |
|
|
$ |
(22,514 |
) |
Cash Flows
Net cash provided by operating activities increased primarily due to higher operating income and more cash provided by working capital usage. Working capital is defined as Accounts receivable, Income tax receivable, Inventories, and Prepaid expenses and other current assets net of Accounts payable, Income tax receivable, and Accrued expenses and other current liabilities as presented in the unaudited condensed consolidated balance sheets. Cash flows from working capital changes increased $14.8 million compared to the prior year period and included:
|
• |
a $16.0 million increase attributable to Accounts payable driven by increasing production rates during the nine months ended April 4, 2021; |
|
• |
a $11.3 million increase related to Accrued expenses and other current liabilities largely from lower cash used for variable compensation, higher customer deposits, and lower cash used for dealer incentives for the nine months ended April 4, 2021 compared to the nine months ended March, 29, 2020; |
|
• |
a $9.4 million increase related to Income tax receivable primarily as a result of the receipt of a tax refund associated with fiscal 2020; |
|
• |
a $13.3 million decrease attributable to Inventories mainly as a result of an increase in raw materials and work-in-process driven by increasing production during the nine months ended April 4, 2021; and |
|
• |
a $6.6 million decrease related to Accounts receivable primarily due to an improved collection cycle at Crest during the nine months ended March 29, 2020 as compared to the prior period, which has been sustained during the nine months ended April 4, 2021. |
29
Net cash used in investing activities increased $10.2 million due to higher capital expenditures, primarily related to the purchase of the Merritt Island Facility.
Financing cash flow decreased primarily as the result of lower net borrowing from our Revolving Credit Facility during the nine months ended April 4, 2021 compared to the nine months ended March, 29, 2020. On March 20, 2020, the Company borrowed all available funds under its Revolving Credit Facility, $35.0 million, a precautionary measure in order to increase its cash position and preserve financial flexibility in light of the uncertainty in the global markets resulting from the COVID-19 pandemic. The Company repaid $25.0 million of this amount before the end of fiscal 2020. In addition, the Company repaid net borrowings of $10.0 million on its Revolving Credit Facility and $7.0 million of scheduled principal repayments on its term loans during the nine months ended April 4, 2021, compared to $10.6 million of scheduled repayments during the nine months ended March, 29, 2020.
Off Balance Sheet Arrangements
The Company did not have any off balance sheet financing arrangements as of April 4, 2021.
Emerging Growth Company
We are currently an emerging growth company, as defined in the JOBS Act. We will continue to be an emerging growth company until June 30, 2021, which is the last day of our fiscal year following the fifth anniversary of the date of completion of our initial public offering. As a result, beginning with our annual reporting requirements related to fiscal 2021, we may no longer take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies, including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding stockholder advisory “say-on-pay” votes on executive compensation and stockholder advisory votes on golden parachute compensation.
The JOBS Act also provides that an emerging growth company can utilize the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. Pursuant to Section 107 of the JOBS Act, we have irrevocably chosen to opt out of such extended transition period and, as a result, we will comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for companies that are not “emerging growth companies.”
Critical Accounting Policies
As of April 4, 2021 there were no significant changes in or changes in the application of our critical accounting policies or estimation procedures from those presented in our Annual Report on Form 10-K for the fiscal year ended June 30, 2020, which was filed with the SEC on September 11, 2020.
ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Refer to our 2020 Annual Report for a complete discussion of the Company’s market risk. There have been no material changes in market risk from those disclosed therein.
ITEM 4.CONTROLS AND PROCEDURES.
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act) that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosures. Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.
As of the end of the period covered by this Quarterly Report, we carried out an evaluation under the supervision and with the participation of our management, including our chief executive officer and chief financial officer, of the effectiveness of our disclosure controls and
30
procedures. Based upon this evaluation, our chief executive officer and chief financial officer have concluded that our disclosure controls and procedures were effective at a reasonable assurance level as of April 4, 2021.
Changes in Internal Control Over Financial Reporting
There have been no changes in our internal control over financial reporting during the quarter ended April 4, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
31
PART II – OTHER INFORMATION
ITEM 1. |
LEGAL PROCEEDINGS. |
None.
ITEM 1A. |
RISK FACTORS. |
During the three months ended April 4, 2021, there were no material changes to the risk factors disclosed in “Part I, Item 1A. Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended June 30, 2020.
ITEM 2. |
UNREGISTERED SALES OF SECURITIES AND USE OF PROCEEDS. |
None.
ITEM 3. |
DEFAULTS UPON SENIOR SECURITIES. |
None.
ITEM 4. |
MINE SAFETY DISCLOSURES. |
None.
ITEM 5. |
OTHER INFORMATION. |
None.
32
ITEM 6.EXHIBITS, FINANCIAL STATEMENT SCHEDULES.
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Incorporated by Reference |
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||||||||
Exhibit |
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Description |
|
Form |
|
File No. |
|
Exhibit |
|
Filing Date |
|
Filed |
|
3.1 |
|
Amended and Restated Certificate of Incorporation of MCBC Holdings, Inc. |
|
10-K |
|
001-37502 |
|
3.1 |
|
9/18/15 |
|
|
|
3.2 |
|
|
10-Q |
|
001-37502 |
|
3.2 |
|
11/9/18 |
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|
|
|
3.3 |
|
|
8-K |
|
001-37502 |
|
3.1 |
|
10/25/19 |
|
|
|
|
3.4 |
|
Fourth Amended and Restated By-laws of MasterCraft Boat Holdings, Inc. |
|
8-K |
|
001-37502 |
|
3.2 |
|
10/25/19 |
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|
|
31.1 |
|
Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer |
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|
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* |
|
31.2 |
|
Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer |
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* |
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32.1 |
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** |
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32.2 |
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** |
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101.INS |
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Inline XBRL Instance Document |
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* |
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101.SCH |
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Inline XBRL Taxonomy Extension Schema Document |
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* |
|
101.CAL |
|
Inline XBRL Taxonomy Extension Calculation Linkbase Document |
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|
* |
|
101.LAB |
|
Inline XBRL Taxonomy Extension Label Linkbase Document |
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|
* |
|
101.PRE |
|
Inline XBRL Taxonomy Extension Presentation Linkbase Document |
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|
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|
|
|
|
* |
|
101.DEF |
|
Inline XBRL Taxonomy Extension Definition Linkbase Document |
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|
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|
|
|
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|
|
* |
|
104 |
|
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
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|
|
|
|
|
* |
|
* |
Filed herewith. |
** |
Furnished herewith. |
33
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 thereunto duly authorized.
|
|
MASTERCRAFT BOAT HOLDINGS, INC. |
|
|
|
(Registrant) |
|
|
|
|
|
Date: |
May 12, 2021 |
By: |
/s/ FREDERICK A. BRIGHTBILL |
|
|
|
Frederick A. Brightbill |
|
|
|
Chief Executive Officer (Principal Executive Officer) and Chairman of the Board |
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|
|
Date: |
May 12, 2021 |
By: |
/s/ TIMOTHY M. OXLEY |
|
|
|
Timothy M. Oxley |
|
|
|
Chief Financial Officer (Principal Financial and Accounting Officer), |
|
|
|
Treasurer and Secretary |
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|
|
34
Exhibit 31.1
CERTIFICATIONS
I, Frederick A. Brightbill, certify that:
1.I have reviewed this Quarterly Report on Form 10-Q for the fiscal quarter ended April 4, 2021 of MasterCraft Boat Holdings, Inc.;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: May 12, 2021 |
|
/s/ FREDERICK A. BRIGHTBILL |
|
|
Frederick A. Brightbill |
|
|
Chief Executive Officer (Principal Executive Officer) and Chairman of the Board |
Exhibit 31.2
CERTIFICATIONS
I, Timothy M. Oxley, certify that:
1.I have reviewed this Quarterly Report on Form 10-Q for the fiscal quarter ended April 4, 2021 of MasterCraft Boat Holdings, Inc.;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: May 12, 2021 |
|
/s/ TIMOTHY M. OXLEY |
|
|
Timothy M. Oxley |
|
|
Chief Financial Officer, Treasurer and Secretary (Principal Financial and Accounting Officer) |
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, Frederick A. Brightbill, Interim Chief Executive Officer of MasterCraft Boat Holdings, Inc. (the “Company”), hereby certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:
|
(1) |
The Quarterly Report on Form 10-Q of the Company for the fiscal quarter ended April 4, 2021 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and |
|
(2) |
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
May 12, 2021 |
|
|
|
/s/ FREDERICK A. BRIGHTBILL |
|
|
|
|
Frederick A. Brightbill |
|
|
|
|
Chief Executive Officer (Principal Executive Officer) and Chairman of the Board |
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, Timothy M. Oxley, Chief Financial Officer of MasterCraft Boat Holdings, Inc. (the “Company”), hereby certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:
|
(1) |
The Quarterly Report on Form 10-Q of the Company for the fiscal quarter ended April 4, 2021 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and |
|
(2) |
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
May 12, 2021 |
|
|
|
/s/ TIMOTHY M. OXLEY |
|
|
|
|
Timothy M. Oxley |
|
|
|
|
Chief Financial Officer, Treasurer and Secretary (Principal Financial and Accounting Officer) |